NATURAL RESOURCES IN CHINA
NATURAL RESOURCES IN CHINA
Mineral resources include large reserves of coal and iron ore, plus adequate to abundant supplies of nearly all other industrial minerals. Besides being a major coal producer, China is one of the world’s largest producers of gold and the world’s largest producer of antimony, natural graphite, aluminum, steel, rare earths, barite, zinc and tungsten; and the third largest producer in the world of iron ore. Other major minerals are bauxite, coal, crude petroleum, diamonds, gold, iron ore, lead, magnetite, manganese, mercury, molybdenum, natural gas, phosphate rock, tin, uranium, and vanadium. China also exports large amounts of tin, coals and a number of industrial minerals and is the world’s largest consumer of steel.
China is one of the world’s largest exporters of magnesium. This quite an achievement, considering that in the early 1980s it produced hardly any. One expert on China said: "Much of China's mineral potential is unexploited because of inadequate technology." Outdated mining and ore-processing technologies are being replaced with modern techniques, but China’s rapid industrialization requires imports of minerals from abroad. In particular, iron ore imports from Australia and the United States have soared in the early 2000s as steel production rapidly outstripped domestic iron ore production. The mining sector accounted for less than 0.9 percent of total employment in 2002 but produced about 5.3 percent of total industrial production.
The major areas of production in 2004 were coal (nearly 2 billion tons), iron ore (310 million tons), crude petroleum (175 million tons), natural gas (41 million cubic meters), antimony ore (110,000 tons), tin concentrates (110,000 tons), nickel ore (64,000 tons), tungsten concentrates (67,000 tons), unrefined salt (37 million tons), vanadium (40,000 tons), and molybdenum ore (29,000 tons). In order of magnitude, bauxite, gypsum, barite, magnesite, talc and related minerals, manganese ore, fluorspar, and zinc also were important. In addition, China produced 2,450 tons of silver and 215 tons of gold in 2004.
China accounts for 30 percent of the world’s supply of phosphates, essential for fertilizer. In December 2010 it began severely restricting imports and increased tariffs in fertilizers made with phosphates from 7 percent to 110 percent. China is also a major producer of pine resin, or rosin, an agent that prevents bleeding in paper and is indispensable in products such as printing ink and tires for motor vehicles.
In July 2011, the WTO ruled that China was improperly protecting its companies by limiting exports of nine materials used in the steel, aluminum and chemical industries. The case did not mention rare earths. The WTO rejected Chinese arguments that export duties and quotas served to protect the environment and scarce resources. See WTO
China’s Demand for Resources
China is more remarkable as a consumer of minerals than a producer of them. It is now one of the world’s largest consumers of metals. As of 2005, China is the world’s largest consumer of copper (3,084,000 tons); zinc (2,318, 000 tons); tin (71,700 tons); aluminum, lead, platinum, steel, iron ore and many other resources.
Consumption of copper increased 21 percent in 2001, 13 percent in 2002 and 10 percent in 2003. China accounted for two thirds of the global increase in nickel in 2002. In 2003, demand from China doubled the world price for alumina, the raw material for aluminum.
China’s hunger for raw materials to make cars and appliances, build railroads and high rises has created higher prices around the globe as demand has increased. Prices for lead, copper and nickel more than tripled in just a few years. The increased in prices for raw materials in turn has caused the prices of other things likes appliances to rise
The hunger for resources has created shortages of cargo ship and cargo trains to carry them and this has caused the price of transporting bulk freight to double. At any given time one fifth of the world’s freighters carry resources for China. Shipyards across the world have enough orders created by Chinese demand to keep them busy for several years. Even shipyards in Vietnam are busy taking raw materials for China.
China faces severe resource shortages despite aggressive efforts to increase production at home and purchases resources overseas. Its hunger for resources is tied to growth of industries that use a lot of resources such and appliance making and automobile manufacturing and to the shift from light industry to heavy industry. What is particularly alarming is that China’s appetite for resources is increasing and will increases even more in the future,
China has been accused of turning its back on human rights and coddling to dictators in its pursuit of resources.
Impact of China’s Demand for Resources
Chinese hunger for resources has been great for poor cash crop farmers in Africa and Latin American and mineral-rich countries like Australia and Chile. The windfall for miners, oilmen and farmers has been so big that the term “bull market” falls short and a new word “supercycle” has been coined. Chinese demand for resources is expected to do more to life people out of poverty than Western aid schemes.
The high prices for copper, iron and other raw materials caused by increased demand from China has created boom markets in producing nations such as Brazil, Australia and Chile and forced producers in these countries to work over time to meet the demand. Chinese demand for steel and has played a major role in lifting Japan steel industry out of its economic slump.
Scrap metal dealers scour junk wards and warehouses across the country for heaps of metal measures in tons, One man describe in the Los Angeles Times often traveled hundreds of kilometers from his home to secure scrap in everything from old typewriters to spent missile casings. He then sends the scrap home to his wife, who sorts it and sells it to processors. They earn around $25,000 a year, more than many Chinese doctors and lawyers. One of the main centers for scrap collectors in Yongkang, home to 10,000 hardware businesses and a legendary haven for tinkers who mended pots and pans, in Zhejiang Province.
The demand has also created a market for stolen scrap. In China, metal is taken from houses and public buildings. In Buenos Aires bronze plaques are taken from historic buildings and copper wires are taken from utility companies. India, Japan, Russia and Malaysia are among the countries suffering from this problem. See Russia and Japan.
During the global recession in 2008 and 2009 China tried to use its position as world’s biggest steelmaker and consumer of iron ore to win deals for iron ore price cuts following two hikes of more than 100 percent. Iron ore producers gave Japanese and South Korean mills a 33 percent cut but the Chinese wanted deeper reductions than that.
Chinese Mining Deals
China has made deals with a number of mineral-producing nations and companies to make sure its has steady, reliable resource supplies. China’s state-owned Minmetals bid $5.5 billion for Canada-based Noranda, the world’s 3rd largest zinc producer and 9th largest copper producer. China has invested billions in Argentina and Brazil and other countries to build roads, pipelines, railways, energy explorations and other infrastructure to help it secure mineral resources and energy. Many say China is paying too much.
In April 2009, the Chinese company Minmetals bought most of the assets of troubled Australian mining company Oz Minerals for $1.2 billion. The deal had been stalled over concerns about foreign ownership of an Australian mining company. Oz, one the world’s largest zinc miners, was in danger of defaulting on its debts at the time the deal was made. A few days later the Australian government approved a $438 million Chinese investment in iron ore miner Fortescue Metals Group.
In 2009, a little-known Chinese mining company — China International Fund (CIF) — signed a $7 billion deal with the military regime of West African country of Guinea to mine a huge a bauxite (aluminum) deposit and other minerals in the country and build infrastructure such as airports, railways and ports. CIF is a private company but its ownership is unclear. It also deeply involved in projects in Angola, where it is building housing, highways and an airport. Many think CIF was negotiating with Guinea’s regime leader before they pulled off the coup that brought them to power. Defenders of the deal pointed out that investors from the West, Japan and India were involved in projects with less-than-democratic African countries and that Alcoa of the U.S. and Rio Tinto of Australia have been major players in the Guinea bauxite business.
Rio Tinto and China
London-based and Australia-owned Rio Tinto is one of the world’s largest mining companies. It is world’s largest aluminum producer, the second largest iron miner and one of top five copper producers. In 2008, the Aluminum Corporation of China bought a stake in Rio Tinto.
In February 2009, China’s state-owned Chinalco, announced it was going to inject $19.5 billion into Rio Tinto with the deal involving stakes of 15 percent to 50 percent in nine Rio-Tinto-owned assets and the purchase of $7.2 billion of Rio Tinto bonds. The deal would have doubled China’s stake of the company to 18 percent. There was public and political objections to the deal and having Chinese or any foreigner take such large stakes in an Australian company. In June 2009, Rio Tinto said that it was scrapping the Chinalco deal and would instead raise $15 billion in share sales and a tie up with BHP.
In August 2009, Chinese authorities arrested four Rio Tinto employees in China — Australian Stern Hu and three Chinese staff — on charges of bribery and illegally obtaining commercial secrets. A Chinese security agency accused Rio Tinto of engaging in commercial spying on China for six years to gain information on China’s steel industry and its negotiating strategies in talks over iron ore prices.
The whole affair raised questions as to exactly what a state secret is. Often it seems that even the Chinese government is not sure. As it stands now, according to the 1989 Guarding State Secrets law, a state secret concerns “the safety and interests of the country” with an additional umbrella cause covering “any other secretive matters” as defined by the National State Secrets Bureau.” The Guarding State Secrets law in the eyes of many is out of date in the digital age. In any case, if one is accused of spying there us little one can do to fight it as there are no trials for such crimes.
In March 2010, four Rio Tinto executives were sentenced to between 7 and 14 years in jail for taking bribes and stealing commercial secrets by a Shanghai court. China-born Australian citizen Stern Hu — the head of Rio Tinto’s iron ore operations in China — was given 10 years (7 years for taking bribes and 5 years for stealing commercial secrets, with parts served concurrently) and was fined about $75,000 and had $75,000 worth of assets seized. The other three were Chinese citizens employed by Rio Tinto. The sentences were tougher than expected.
All four Rio employees pleaded guilty to receiving kickbacks but their lawyers said they took less than they were accused of taking. Bloomberg reported that Hu pleaded guilty to taking bribes worth $879,000. Leaked testimony described steel mills handing over piles of money in boxes and plastic bags to secure cheap iron ore. Rio Tinto fired the employees but objected to charges of commercial spying. The Australian government complained about a lack of transparency at the trial,
Since the incident Riot Tinto has been trying to improve relations with China, its largest customer.
China to Explore Indian Ocean Seabed
In August 2011, AFP reported: “China has won the right to explore for minerals in part of the Indian Ocean as the energy-hungry country scours the world for resources to fuel its fast-growing economy. The International Seabed Authority has approved China's application to look for polymetallic sulphides -- rich in copper, iron, lead, zinc, gold and silver -- in the Southwest Indian Ocean Ridge, the China Daily said. [Source: AFP, August 3, 2011]
China is the first country to win such approval in the area that divides the ocean between Africa and Antarctica, it said, citing the government-backed China Ocean Mineral Resources Research and Development Association (COMRRDA). "The refined metals from the deposit will help China meet the increasing demand for mineral resources from rapid economic development," Jin Jiancai, secretary-general of COMRRDA, was quoted as saying.
China will be allowed to explore an area measuring 10,000 square kilometres (3,800 square miles) for 15 years and will be given priority mining rights. The International Seabed Authority, a United Nations' body, said it approved China's application for deep seabed exploration last month along with others from Russia and the Pacific Island nations of Nauru and Tongo. COMRRDA also has a similar agreement to explore for polymetallic nodules -- small nuggets containing metal ore -- in an area of the northeastern Pacific where a Chinese submersible conducted the country's deepest manned dive.
The Jiaolong undersea craft -- named after a mythical sea dragon -- reached 5,057 metres (16,591 feet) below sea level in a test dive in July 2011, the State Oceanic Administration said. China has pushed hard in recent years to obtain oil, minerals and other resources needed to fuel its growth, and has said its submersible programme is aimed at scientific research, peaceful exploration and the use of natural resources. Scientists say the oceans' floors contain rich deposits of potentially valuable minerals, but the extreme depths pose technical difficulties in harvesting them on a wide scale.
Dangerous Chinese Mines
In 2006, more than 7,000 people were killed in floods, explosions and accidents in Chinese mines, most of them in coal mines, China has over 5,300 mining areas are more that 13,200 companies exploiting them along with many illegal mines operations. Accidents and pollution are serious problems. The government plans to overhaul the system by reducing the number of companies to one mining company at each mining area.
In November 2003, 11 people were killed in an illegal sand mine when a villager blew up gunpowder in the mine, causing a sand wall to collapse on him. Ten of the men were killed when a sand wall collapsed on top of them as they attempted to rescue the first man. In November 2005, a cave in at the Kangle Gypsum Mine in Hebei Province killed 33 people. One miner was rescued after 11 days in a collapsed shaft.
In November 2005, a cave in at a mine in Xingpai near Beijing that produces stone too make plaster killed 18 and trapped 22 others. In January 2007, 20 miners were trapped in a flooded iron ore pit in Inner Mongolia. Rescue efforts involved drilling holes to deliver food and oxygen to the men, who were trapped for several days,
In August 2006, the Chinese government said that it would spend $60 billion over the next five years to reduce deaths in dangerous mines and other workplaces. In June 2006, the government approved tougher penalties for companies and people blamed for accidents in the workplace. The maximum term for people who cause accidents by forcing people to work in dangerous situation was raised from 7 to 15 years. The changes was prompted by a series of mine disasters.
See Gold, Tin, Iron, Other Mines Below. Also See Coal Mines, Education, Health Energy and Transportation
Gold and Platinum in China
China is the world's largest producer of gold. It overtook South Africa in 2007. Production in 2009 increased 10 percent to 310 tons, compared to 282 tons in 2008. Consolidation and foreign investment in China's mining industry produced larger, technologically sophisticated players. The result — The nation's gold production has nearly doubled in the last decade to 360 metric tons last year. [Source: David Pierson, Los Angeles Times, February 26, 2012]
Demand from China was one of the main forces that pushes gold to record highs of almost $2,000 an ounce in 2011. In China, gold jewelry has traditionally been a sign of wealth (See Consumer Customs)The sale of gold reached a record high of 302.2 tons in 2007, up 34 percent from the previous year. Gold consumption in 2004 was 224 tons. In 1993, China become the world's largest consumer of gold with purchases of more than 250 tons. In 2002, 235 tons of gold changed hands. Gold makes up 1.1 percent of national reserves.
In 2010 the price of platinum rose sharply due to demand from China for use of the metal in jewelry and industry. Speculators expecting industrial demand to rise even further bought up the metal, driving prices up even more.
Platinum demand in China in 2009 was 63 tons, triple the figure in 1998, and about one third of global demand. About 90 percent of the platinum used in China that year was for jewelry. Many Chinese brides demand platinum wedding bands as the believe that rings with the metal go better with Western-style white wedding dresses, which these days are preferred by many women over traditional red Chinese-style wedding dresses.
China to Overtake India as Top Gold Market
In February 2012, AP reported: China is poised to overtake India to become the world's biggest gold market this year as rising incomes fuel demand for the precious metal and a weak rupee diminishes Indian purchases, an industry group said Thursday. The amount of gold bought in China rose 20 percent in 2011 over the year before to 770 metric tons, the World Gold Council said in its annual report. That put China behind only first-place India, where 933 metric tons were bought. Worldwide, the amount of gold purchased rose 0.4 percent to 4,0671 metric tons worth $205.5 billion.[Source: Kelvin Chan, AP Business Writer, Associated Press, February 16, 2012]
Desire for gold is so strong that China is buying record amounts from abroad because its mines can't keep pace. China imported more gold than India in the fourth quarter of 2011. "There's no doubt that China will eventually be No. 1," Jeff Clark, a senior precious metals analyst for Casey Research, told the Los Angeles Times. "Our jaws have been dropping at the volumes being imported for over a year now."
The World Gold Council said it's "likely that China will emerge" as the world's largest gold market for the first time in 2012. Rising incomes in China, which is the world's No. 2 economy, have resulted in a surge in demand for gold jewelry and other luxury goods. China became the world's largest market for gold jewelry in the second half of 2011 as demand rose in every quarter, the report said.
The spree is fueled partly by the government as it boosts its reserves but mostly by consumers seeking a hedge against inflation or to show off their wealth. Gold bars, coins and other gold-backed products are also popular because of a lack of other investment options in China. The long-term rise in the price of gold has also made it a popular hedge against inflation. The poor performance of China's stock and property markets — the other two main choices for Chinese with money to invest — is boosting the popularity of gold as an investment, said Albert Cheng, a managing director at the London-based World Gold Council.
Gold hit a record nominal high of $1,891.90 an ounce in August 2011. The Shanghai Composite Index is down 20 percent over the past year while house prices are starting to fall after authorities put in place curbs to cool an overheated market. Strong Chinese demand for gold also helped sales leap 33.5 percent last year in Hong Kong, a popular destination for wealthy mainland shoppers because of lower taxes in the semiautonomous Chinese territory.
Demand for gold jewelry in India, meanwhile, fell in the second half of 2011 because of the weakening rupee, which made gold more expensive. Indians also grappled with high inflation last year that ate away their purchasing power, so they bought smaller amounts of gold, Cheng said.
China’s Emergence as a Major Player in the Global Gold Market
David Pierson wrote in the Los Angeles Times, “A bit player only a decade ago, China has emerged as one of the most important forces in the global gold market, helping fuel the rising value of the precious metal. Gold for centuries has been a store of wealth and a symbol of good fortune in China. But China's heavyweight status in the gold market is more recent. In 2002 the central government lifted controls and set up the Shanghai Gold Exchange, allowing the metal to be priced by market forces. [Source: David Pierson, Los Angeles Times, February 26, 2012]
In addition, Chinese consumers eventually were allowed to purchase bullion through commercial banks. Today China accounts for 26 percent of global gold demand, up from 6 percent a decade ago. "Chinese demand has traded positions with the U.S. in the last decade," said Albert Cheng, Far East managing director of the World Gold Council. "It's very clear the gold market is moving east."
No group has welcomed China's liberalization of gold more than the country's middle class. Rising incomes have whetted consumers' appetite for jewelry and other luxury goods. But it's also about security. With the real estate and stock markets gyrating and banks paying minimal interest rates on savings accounts, many Chinese view gold as the best vehicle to protect their savings from inflation. "Gold in China is always about safety," said Andy Xie, an independent economist in Shanghai and the former chief Asia Pacific economist for Morgan Stanley. "It's the preferred asset when the world is in chaos. China has failed to give people a sense of security."
Although international gold prices have retreated from their peak of $1,891 an ounce in August 2011, analysts expect values to be partly buoyed by demand from central banks in emerging markets, including China. China's government is suspected of quietly stockpiling more gold to diversify its $3.2-trillion holdings of foreign reserves and reduce its reliance on the U.S. dollar. China rarely discloses its purchases. But it's assumed the central bank holds a little more than 1,000 metric tons of gold — still a small fraction of government holdings in the U.S. and Eurozone. Add in strong demand from gold-crazy consumers and "it's safe to say demand still has a long way to go in China," said Clark at Casey Research.
Chinese Gold Consumers and Retailers
David Pierson wrote in the Los Angeles Times: Chinese consumers are snapping up jewelry, coins and bars as a hedge against inflation and to flaunt their rising wealth. To witness the frenzy firsthand, head to Beijing's Caishikou Department Store, a four-story gold emporium that rang up sales of $1.5 billion last year. Visitors be warned: sharpen your elbows and be ready to push. David Pierson wrote in the Los Angeles Times
To buy a necklace, shopper Wang Li recently fought her way through a scrum of cash-waving customers hanging over a glass counter loaded with gold chains, Mao pins, pendants of Christ on the cross and more. "I thought about buying Swarovski crystal, but I don't think it will ever be as valuable as gold," said Wang, a 24-year-old teacher who treats herself to a new piece of yellow-metal jewelry about once a month. "Besides, I like how feminine gold makes me feel." On another floor, customer Zhang Li waited in line to purchase gold bars, an investment he describes as the only safe bet left for ordinary Chinese. "If I had invested in stocks or property last year, I would have lost money," said Zhang, 36.
The strong demand for gold has created a huge opportunity for retailers. Hong Kong's Chow Tai Fook plans to open 2,000 stores in China. The luxury brand already boasts revenue greater than Tiffany & Co. and raised $2 billion in an initial stock offering in Hong Kong in December 2011. But no gold merchant is better known in Beijing than Caishikou, whose core customers are working-class Chinese. Formerly a traditional department store selling clothes and other goods, Caishikou now specializes in gold. It sells a dazzling array of ornaments and jewelry at prices that range from $63 chains to an elaborately detailed $135,000 dragon encased in glass. Everything is 24 karat, a prerequisite for Chinese buyers.
Fighting her way through the aisles recently was Li Jinfeng, a 45-year-old chicken farmer who had traveled from neighboring Hebei province to buy jewelry for her daughter's dowry. Business has been good, and Li didn't think twice about tapping her savings. "In the old days, only the rich people in my village could have gold," said Li, whose pierced ears were adorned with flower-shaped gold earrings. Nearby, Li Lei, a 49-year-old retiree, was picking out a pair of bright gold rings to give her parents on their 50th wedding anniversary. "I feel obliged to buy something nice for them," Li said. "Money may lose its value, but gold will not."
Before the London Olympics in 2012 Chinese visitors to British stocked up on Olympic gold coins and brought them back home givig them away as exxpensibe gifts or seling them 1½ times what they paid them. There was also a large secondary market for gold coins during the Beijing Olympics in 2008.
Dangerous Gold Mines in China
In June 2002, the owners of a gold mine in Shanxi reported that two workers were killed in an explosion fire and four were injured four. Later police found 36 bodies — apparent victims of the same blast — in caves, gullies and other locations. Police were alerted by relatives of missing miners and newspaper reporters. Many died after the explosion because their employers demanded that they keep working.
In 2001, 21 people were killed at gold mine when a tunnel collapsed.
Dozens of men died from silicosis and hundreds more were made very sick by disease after working in a gold mine In Jiangxi Province The miners were mostly peasants who were so poor they jumped at the chance of earning $25 a month to work at the mine.
In April 2008, there was a report of two people being shot by police during a confrontation in Yunnan Province between villagers and workers for a gold company over plans by the gold company to take over small gold mines worked by the villagers and pay them a pittance in compensation.
In September 2009, 13 people were killed, including miners and rescue personnel, when a fire broke out in a gold mine in Sanmenxia in Henan Province after a partial cave in caused some electrical wires to short circuit.
In August 2010, a fire at a gold mine near Zhaoyuan city in Shandong in Province killed 16 workers, most of whom died from inhaling toxic fumes. About 300 miners were in the mine when the fire started.
Diamonds in China
Most diamonds are cut in India, China, and Thailand, where skilled labor is cheap
Diamond producers (mine production in carats in 1997): 1) Australia (40,200,000); 2) Russia (19,100,000); 3) Botswana (16,000,000); 4) Congo (15,000,000); 5) South Africa (10,170,00); 6) Namibia (1,500,000); 7) Angola (1,234,000); 8) China (1,130,000); 9) Brazil (900,000); 10) Ghana (700,000); 11) Central African Republic (500,000); 12) Zimbabwe (450,000); 13) Guinea (200,000); 14) Sierra Leone (200,000); 15) Liberia (150,000); 16) Venezuela (150,000); 17) Rest of the World (386,000).
Many diamonds come from Tibet.
China is the 8th largest diamond market in the world. If Taiwan and Hong Kong were added it would No. 3 after the United States and Japan. Sales of diamonds soared 300 percent between 1993 and 1996 and exceeded $1 billion in 1997.
The domestic market for diamonds is not large partly because there is 33 percent surcharge — tariff, consumption tax and value-added tax — on the sale of diamonds.
Titanium, Lead, Uranium and Zinc in China
China is a major producer of titanium along with Ukraine, Russia, Kazakstan, Japan, the U.S., aand the United Kingdom. Titanium is an expensive metal prized for its strength and lightness. It is used mostly in jet engines, air frames, and space and missile applications.
China is the world’s leading producer and consumer of lead. There have been reports of severe lead poisoning in Hunan, Henan, Yunnan and Shanxii Provinces. Henan Yugang Gold and Lead Co., the largest lead producer in Asia. In the U.S. about 75 of the lead consumed is used in transportation (batteries, gasoline additives, and other issues). It is also used in batteries, emergency power supply, construction sheeting, sporting ammunition, and TV tubes. The U.S. consumes and uses more than 20 percent of the world production of lead.
China is the world’s largest producer and user of zinc. In the mid-2000s world’s it consumed 2,318, 000 tons of zinc but was a net exporter of refined zinc metal, exporting 7,000 metric tons more of the metal in 2006 than it imported.
Zinc is mined in over 50 countries. The leading world producers are 1) Canada, 2) Australia, 3) the former U.S.S.R., 4) Peru, 5) China and 6) the U.S. Zinc is used as a protective coating on steel, as diecastings, as alloying agent with copper to make brass, and as a component of chemical compounds in rubber and paints.
Uranium sales to China from Australia began in early 2007. Australia is expected to capture about a third of China’s uranium market. The deal was made only after nuclear safeguards agreement were signed in April 2006 that ensured the uranium would be put to use in nuclear power stations not nuclear weapons. China also has a uranium deal with Kazakhstan. China has some uranium but its stocks are dwindling, not very rich and difficult to extract
China plans to establish a “strategic uranium reserve” and is buildings spent-fuel recycling plants and a fast-breeder reactor so that it can efficiently use its supply of uranium.
China is the world’s leading consumer of copper (3,084,000 tons). In 2002, it surpassed the United States as the No. 1 importer and consumer of copper. In 2008 China spent 21 times more on copper than it did in 1999 and has eaten uo four fifths of the increase in the world’s copper supply since 2000.
The main uses for copper in the U.S. are in building and construction (41 percent), electrical and electronic products (24 percent), industrial machinery and products (13 percent), transportation (12 percent) and consumer and general goods.
The leading copper producers are: 1) Chile, 2) the U.S., 3) Poland, 4) Russia, 5) Peru, 6) Kazakstan, 7) Australia and 8) China. In 1988, the largest exporters were 1) Chile, 2) Zambia, 3) Canada, 4) Zaire and 5) Peru.
Copper imports rose 27 percent between 2001 and 2004. China is buying large amounts of cooper for its car and electronics factories and for houses, dams and telecommunications systems.
The largest copper mine in China is in Jiangxi Province. There are large copper deposit in Yulong in Tibet and the Pulang and Yulong regions of Yunnan.
In 2005, a Liu Qibing, a copper trader employed by the Chinese State Regulation Centre, made wrong-way commodity bets on copper and lost $300 million of the Chinese government’s money. He short-sold between 150,000 and 200,000 tons of copper on the London Mercantile exchange, thinking that the price would fall. Instead it hit record highs. By the time the losses were recognized Liu had disappeared (he was believed to have been in government custody at a secret location). There were many questions surrounding the scandal. Many believe his superiors had to know what was going on. If they didn’t then there was a serious lack of controls.
In 2007, China Metallurgical Group won the right to develop the Aynak copper field south of Kabul in Afghanistan. Part of the $3 billion deal was a promise to build a coal power plant and the nation’s first freight railway. It appears that China was able to win the deal and get a jump on its rivals because of willingness to put up with security risks.
Aluminum in China
China is the world’s largest producer and consumer of aluminum. It makes a third of the world’s aluminum and consumes a quarter of it. In 2004, China produced so much aluminum it sucked up almost 5 percent of all power used nationwide. Demand for aluminum as been rising by as much as 20 percent a year reaching 8.3 million tons in 2006, and is predicted to rise to 10.5 million tons in 2010 and 14.3 million tons in 2020.
The price of aluminum rose in after the Chinese government announced it was going to reduce production to save energy. China has 23 smelters. Forty-one smelters were closed down in 2005 because of high energy costs and efforts by the government to control pollution.
Chalco (Aluminum Corporation of China) is China’s largest aluminum maker. It planned to produce $1.33 million metric tons in 2005. The same year it made a bid to acquire China’s No.2 aluminum maker Lanzhou Aluminum Corp.
According to Research and Markets: The aluminum industry in China expanded by 66.8 percent in 2011, making China the largest single producer and consumer of aluminum in the world. It is expected that China will produce about 17 million tons in 2012, a hike of 20 percent from the previous year. But that record comes at a steep price. Aluminum production not only consumes about 8 percent of all electric power in China, but is also responsible for large amounts of carbon dioxide (CO2) emissions. And the electricity needed to power the industry has a multiplier effect on pollution problems because 70 percent of China's electricity comes from coal, a major contributor of CO2 emissions.
Aluminum is used in a wide range of markets such as aerospace, automotive, construction, electrical and packaging. Additionally, industry players are able to offer additional services such as fabricated products like alloys made from
Aluminum. This means that industry players are less reliant on revenues from one specific market, which weakens buyer power somewhat.
Major players in the Chinese market include Aluminum Corporation of China (Chalco), Qingtongxia Aluminum Plant, Yichuan Yugang Longquan Aluminum Co and Yunnan Aluminum Plant. Xinjiang is becoming the new primary aluminum production base. Rivalry within the aluminum industry has increased further during the economic downturn. In 2011, the price of aluminum rose. An increase in usage in China coincided with an improvement in the US automobile and aerospace industries, causing an increase in demand for aluminum, meaning competition between industry players decreased somewhat.
Iron in China
China is the world’s largest user of iron ore: about 400 million tons a year. In 2005 it imported half the world’s iron ore. In 2004, it imported 40 percent of the world’s total (185 million tons), up from 36 percent in 2003
Minmetal, a Beijing-based company that was formally a metal trading enterprise, grew powerful and rich enough to buy mines and iron and steel operations. In 2004, it began taking over Noranda, Canada’s largest mining company. There has been a lot of resistance to the deal.
China is increasingly seeking deals with smaller iron ore producers and is investment in iron projects in Africa in part to wrestle free from the domination of Vale, Rio Tinto and BHP Billiton.
In February 2009, Hunan Valin Iron & Steel purchased a $771 million share in the Australian iron ore exporter Fotresce Metals, giving the Chinese company and 16 percent stake in the Australian mining company.
Chinese steelmakers have struck deals with major iron ore producers such as Brazil’s Companhia Vale do Rio Dice S.A., the world’s largest iron ore producer, for reliable supples of iron ore.
Major iron producers include China as well as the former, U.S.S.R., Brazil, and Australia. An estimated reserves of 760 million tons of high-grade iron ore have been found in the Kunlun Mountains in western Qinghai and southern Xinjiang.
On November 2004, at least 58 miners were killed in a massive fire at an iron mine complex in Shahe in Hebei Province in northern China. The fire began when an electronics cable inside a mine caught fire. In June 2009, 26 people were killed and dozens were missing after a massive landslide buried an iron ore plant and the entrances to a mine 150 kilometers from Chongqing in central China.
Sludge from a Shanxi Iron Mine Death Kills Over 150
In September 2010, a rain-soaked reservoir of an unlicensed mine is in Xiangfen County, in Shanxi Province in central China collapsed, unleashing a cascade of iron-ore waste and mud on a village that killed at least 151 people. The China Daily newspaper warned that several hundred more people might be missing under the dense sludge, but the official Xinhua news agency was more cautious and said that the number of missing could not yet be determined. [Source: Keith Bradsher, New York Times, September 11, 2008]
According to news reports the retaining wall of the holding pond for the mine, on a hillside, collapsed after torrential rains, sending a wall of sludge and mud hurtling down into the village of Yunhe. China Daily said the entire village was inundated, along with an outdoor market crowded with customers, news agencies reported.
Workers at the mine were mostly farmers from the area and migrants, and estimates ranged widely on how many people might have been swept under the sea of sludge. All that was left after the mudslide was a handful of two-story buildings on the fringe of the sludge, which spanned an area the size of four football fields, according to The Associated Press.
The Chinese government assembled 1,550 rescuers equipped with 160 bulldozers, excavators and other machines to comb through the sludge for survivors.
In May 2010, two policemen were sentenced to five years in prison for taking bribes from the owner of an iron mine, where a dam collapse triggered a landslide that buried a village in Xiangfen County in Shanxi Province in September 2008. Former county head of police Han Chuxi was sentenced to five years in prison for taking almost $6,000 in bribes from the mine owner and for asking police under his supervision to stop inspecting the mine.
Tin and Dangerous Tin Mines in China
China is the world’s leading consumer of tin (71,700 tons). The main produces of tin are Brazil, Bolivia, China, Indonesia and Malaysia. Tin is a metal used primarily in cans and electrical construction.
In August 2001, 81 workers were killed in a tin mine in Gaungxi Province in southern China after careless blasting at 3:40am punctured a hole in a water-filled shaft, causing water to spill into tunnels where miners were working. After the disaster mine officials offered money to relatives of dead miners to stay quiet.
Eleven mine officials and four county officials were arrested in connection with the disaster and an attempt to cover it up. Investigators reported the disaster was a "direct result of mismanagement, illegal extraction, chaotic digging and explosions contrary to regulations." The story behind the disaster was uncovered by investigative journalists who found the mine was run by gangsters who bribed local officials with cash and free cars.
Other Minerals in China
China has 90 percent of global supply of antimony, a material used in the making of semiconductors. An accident at an antimony mine in China in October 2009 killed 26 workers.
China also possesses 60 percent of the world’s supply of magnesium and flurospar reserves of at least 21 million tons. It also has large amounts of vanadium. The world's major sources of fluorspar (used in metallurgical and chemical industries) are: Mexico, South Africa, China and Canada. The U.S. imports 87 percent of its fluorspar.
Barite is an important mineral used in oil drilling fluids, flares, paint and medicine. The main producers are China, India, Mexico and Morocco.
The world's major sources of graphite (used in metallurgical processes) are: Mexico, China, Brazil, and Madagascar. The U.S. doesn't have any. In August 2009, 15 people were killed after inhaling poison gas in the Jicai graphite mine near Chenzhou city in Hunan Province.
Freshwater Pearls in China
China leads the world in the production of freshwater pearls.
In 2007, China produced 1,600 tons of pearls, 95 percent of the world’s total. Most are cultivated freshwater pearls with rough-edges and elongated shapes that are threaded onto cheap necklaces. The worldwide saltwater production is only 60 tons. China produced only 80 tons of freshwater pearls in the mid-1980s.
Freshwater pearls come from mussels. In nature they are small, weirdly-shaped, and oddly-colored. They tend to grow in clusters and often end up looking like Rice Krispies. Even the cultured ones used in jewelry are not usually round or white.
The earliest forms of cultivated pearls were pearl Buddhas first produced around A.D. 800 by the Chinese. These tiny figurines were created by attaching a small Buddha carving of ivory, wood, stone or metal onto the inside of a freshwater mussel shell. After a couple of years they were coated with nacre to produce a pearl Buddha. [Source: Fred Ward, National Geographic, August 1985]
Freshwater Pearl Market in China
In recent years producers have figured out how to make freshwater pearls bigger, rounder and more like saltwater pearls. Retailers are now offering jewelry made with freshwater pearls at a fraction of the price of similar jewelry made with saltwater pearls. A triple strand of pearls from the First Asia Jewelry shop in Shanghai cost 85 yuan (about $12). Tiffany sells oval freshwater pearl bracelets for $250 and necklaces for $375.
Overproduction of cultivated freshwater pearls has caused the bottom of the market to fall out, resulting in sales of strings of pearls for less than $1.50 at jewelry stores and prices earned by pearl farms less than 2,000 yuan per kilogram in 2008, down from 20,000 yuan per kilogram in 1998.
In the old days, there was virtually no market within China for pearls, except for medicines and cosmetics. Pearls raised by farmers were often traded to Hong Kong smugglers for televisions, watches and radios.
Freshwater pearls have been used in jewelry worn by Diamond Li Russell at the turn of the 20th century and in multi strand toussades designed by Paloma Picasso. But for the most part they were not taken seriously. A market for them was created in early 1990s when Japanese pearl production declined as a result of an oyster diseases and Chinese scientists figured out how to make quality freshwater pearls.
A 9.4-millimeter-in-diameter freshwater pearl from sells for $125 while a 9.2-millimeter-in-diameter Akoya saltwater pearl from Japan sells for $350. To the untrained eye they look almost the same. Small off-white, oval-shaped freshwater pearls are very cheap, often cheaper than imitations.
Freshwater Pearl Production in China
Freshwater pearls are farmed in rivers, streams and rice paddies. The Chinese were able to improve the quality of freshwater pearls by changing the mussel species from Cristaria plicata to Hyriopris, the Chinese triangle mussel, and injecting material into the mantle tissue when the mussels are 2½ years old rather than one year as was the case before.
Around Shanghai, pearl-bearing oysters are raised in fish ponds and irrigation canals. The pearls are cultured with a piece of mantle from another mussel. As the Chinese have improved cultivation methods, the quality has not only improved but production costs have dropped. Pearls processed in China for export are often drilled with twine and primitive bows by teenage girls working for 16 U.S. cents an hour.
The Chinese government encourages the harvesting of pearls as a means of raising hard currency and most of the shells raised by farmers have been implanted by the government and given to farmers who raise them for two years and then sell them back to the government.
Pearl production is being cut over concerns about environmental damage to lakes and reservoirs and hopes of restoring high prices. Manufactures are aiming to produce lower quantities and higher quality pearls.