Mining to China
(Last updated: 12 Sep 2013)
Trends and opportunities
The market
China’s mining industry has experienced rapid development and growth over the past decade, driven by increasing demand from the energy, manufacturing and construction sectors. Despite a recent easing in economic growth compared with the pre-Global Financial Crisis period, China remains the world's largest consumer of minerals and the world’s largest producer of coal, steel, cement, aluminum, lead, zinc, tin, magnesium, tungsten, antimony, mercury and rare earth metals.
China’s mining industry is highly diverse and geographically expansive. China has proven reserves of 159 different resource types, among which there are 10 categories of energy resources, 54 types of metals, and 91 non-metal minerals. Non-oil and gas mining and production is dominated by coal (67 per cent), iron ore (9 per cent), non-ferrous metals (7 per cent), sands and aggregates (10 per cent), with other types of mining and processing making up the remaining 7 per cent.
While China has significant minerals resources with proven reserves ranking third in the world by volume, China’s production of energy resources (coal, oil and gas) and key ferrous and non-ferrous metals (high-grade iron ores, copper, aluminum, phosphorus and potassium) is significantly outweighed by growing demand.
Compounding this issue, energy resources and key ferrous and non-ferrous metal reserves are in many cases low-grade and hard to extract, making mine development costly and the smelting process more energy intensive and polluting. Mineral resources are often located long distances away from the high demand urban areas in eastern China, resulting in transportation challenges, which also contribute to environmental impacts.
Historically, the mining industry has been fragmented, with many companies operating in the same mining sectors. Consolidation has been encouraged in an effort to increase efficiency and to improve safety and environmental performance. Chinese State Owned Enterprises (SOEs) are also increasingly aiming to ensure that they are operating at international standards.
Please refer to the Clean energy and environmental opportunities in the Chinese mining and minerals sector report in order to understand more about the market and opportunities available.
Opportunities
In addition to the strong demand for imported minerals, China also presents opportunities for mining equipment, advanced technologies and services.
China’s 5 year plan provides a blue-print for the economy’s future direction. As part of this, the Chinese Government’s future plans for the mining sector are significant and include a change towards a more sustainable and safe industry. For example:
- The government continues to consolidate coal mining companies with about 11,000 coal enterprises planned to be reduced to 4,000, including large SOEs merging with small-to-medium size operations. The aim is to ensure best practice in the industry with scaled-up production.
- Increased funding has been allocated to investments in IT, environmental protection and scientific research.
- Sustainable development of China’s western regions is a high priority under the Plan. This includes protecting the environment and improving energy efficiency. Western regions include north and south-western regions. The former includes Shanxi, Shaanxi, Ningxia, Gansu, Qinghai and Xinjiang. The latter includes Sichuan, Yunnan, Guizhou, Chongqing and Tibet. Energy and resource recycling zones have been built or will be built in some of these areas.
- A target of increasing non-fossil fuel use to 11.4 per cent by 2015, reaching 15 per cent by 2020 has been established. Part of this will include an increased focus on coal-bed-methane and shale gas projects, mainly constructed by key SOEs.
Upgrading technology, comprehensive utilisation of resources and an increasing focus on environmental protection are the medium to long-term goals of China’s mining industry. Priority government support will be specifically given to the following fields:
- Technologies to increase extraction/beneficiation recovery rate and comprehensive utilisation rate
- Deep penetration, maximising extraction and deep mining technology
- Energy saving equipment and technology
- Environmental protection technology and equipment, especially waste water and SO2 recycling equipment and technology
- High end mining rescue equipment and technologies
- Mine site rehabilitation
- Tailings and other solid disposals recycling
China is a strong and growing manufacturer of mining equipment and generally, the local pricing is low (often lower than foreign equipment) due to low labour costs and local tax incentives. Mining equipment manufactured in China has also been exported to countries like the USA, Australia, Japan and South Korea. Market reforms are also driving Chinese mining and processing companies to seek productivity-enhancing capital investments, resulting in a fresh look at foreign capabilities and leading-edge technologies. Demand for such equipment is expected to remain strong. This poses opportunities for high value-added Australian METS sector.
China’s coal sector provides one of the biggest markets for mining equipment. China’s coal industry, accounted for almost half of the total revenue of China’s mining equipment industry in 2011.
With the global slow-down of coal mining industry, non-coal mining is another important market to consider. There has been a significant growth in the non-coal mining industry in China over the last five years. Areas of demand for METS companies include advanced technologies for upgrading existing mines and building new digital mines.
China is engaging in direct investment in the overseas resources industry. The Chinese government encourages domestic enterprises to invest offshore and make the best use of foreign resources. This offers opportunities to Australian mining services and consulting companies to help ambitious Chinese companies to become successful investors abroad by operating in accordance with international standards and best practices.
China is also opening its mining industry to foreign investment. With the improvement of the mining investment environment, foreign investment in the mining industry covers multiple areas including prospecting and mineral exploitation.
Tariffs, regulations and customs
The Chinese Government has reduced the import tariff many times and adjusted some tariff rates in compliance with its industry policies.
Import tariff rates for mining equipment vary from 4 per cent to about 30 per cent. The present average import tariff rate for minerals is 4.13 per cent. The tariff for the import of iron ore in particular is zero.
For stainless steel and its products, the tariff rate ranges from 2 to 10 per cent depending on the different product types. Other tariffs include:
- Coal – 3 to 6 per cent
- Copper – 2 to 7 per cent
- Nickel – 3 per cent
- Aluminum – 5 to 7 per cent
- Refined lead – 3 per cent
- Unwrought zinc – 3 per cent
- Unwrought tin – 3 per cent
- Cobalt mattes and other intermediate product, unwrought cobalt – 4 per cent
- Other cobalt – 8 per cent
Marketing your products and services
Market entry
There are a number of important considerations when entering the Chinese market. For years, government policy has limited foreign involvement in resource extraction, though the authorities are gradually opening the sector to foreign investment. There are a number of government bodies administrating the mining industry, including the Ministry of Land and Resources who administer prospecting, exploitation and utilisation of natural resources.
The Chinese market is extremely complex, with a multitude of governing bodies and industry players. It is crucial to understand how these networks operate, who the key players are and how you can gain access to them. At times, quotas and import permits are enforced in an arbitrary and non-transparent manner.
Australian companies can consider several possible options for market entry depending on the type of export:
- Export via local agents or distributors
- Local investment – joint venture, partnership, wholly owned
- Manufacturing localisation, including technology transfer
- Development of a strong in-market presence is important to support market development, particularly where products and technologies require service support
- For supply to large projects, local governments sometimes require the establishment of a locally based service team
- Chinese design institutes often play a critical role in the approval, recommendation and assessment of new products for infrastructure projects
Australia is well known in China as a supplier of raw materials, but there is a need to increase the recognition of Australian mining technology and equipment in the Chinese industry. The establishment of an initial market presence in a major urban center is recommended. Other markets within China can then be ‘rolled out’ from this entry point over the longer term. It is important to:
- Visit the market regularly and/or have a local presence in China
- Provide promotional, technical and service support to distributors and customers
- Stage commercial and technical seminars for potential customers, associations and local authorities
- Participate in industry specific trade shows
- Make close contact with industry associations
Distribution channels
After China’s World Trade Organization entry, it is now easier for Australian companies to do business directly with the end users from a legal perspective. However, many foreign companies find it more effective to work through local distributors with a strong in-market service support and network.
Links and industry contacts
Mining–related resources
Central Coal Research Institute – www.ccri.com.cn
China Mining Industry Association – www.chinamining.com.cn/cma
China Non-ferrous Metals Industry Association – www.chinania.org.cn/web/website/index.htm
State Administration of Coal Mine Safety Supervision (State Administration of Work Safety) – www.chinasafety.gov.cn
Government, business and trade resources for China
Ministry of Land and Resource – www.mlr.gov.cn
National Development and Reform Commission – www.sdpc.gov.cn
Media
Asian Metal – www.asianmetal.cn
There are also a number of local industry newspapers in Chinese that provide up-to-date information of the Chinese mining industry.
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.