Mining to China
(Last updated: 31 Jul 2012)
Trends and opportunities
The market
The Chinese mining industry has been experiencing strong growth, driven by increasing demand from the power, manufacturing and construction industries. Despite the slowdown of economic growth, China is still the world largest consumer of minerals. It is also the world’s largest producer of coal, steel, cement, aluminium, lead, zinc, tin, magnesium, tungsten, antimony mercury, rare earth, and fluorspar. The mining industry as a whole has about 80,000 state-owned mining companies and approximately 200,000 collectively-owned mines.
China has 158 recognised minerals with proven reserves, among which, there are 10 identified energy minerals, 54 metal minerals, 91 non-metal minerals, and three water and gas minerals. Reserves of major minerals such as iron, manganese, aluminium, copper, lead, zinc, sulphur and phosphorus are limited, mainly low-grade and less competitive in the international market place. However, rare earth minerals which are of competitive and high quality include: tungsten, tin, molybdenum, niobium, magnesite, fluorite, barite, bentonite, graphite, talcum, Glauber's salt, and gypsum.
Mineral asset distribution:
- Oil – north-eastern, northern and north-western regions
- Coal – north-western and northern regions
- Iron – north-eastern, northern and south-western regions
- Copper – medium-lower reaches of the Yangtze River
- Phosphorus – south-western and south-middle areas
- Manganese, tin and antimony – Hunan, Jiangxi, Yunnan and Guizhou provinces (municipalities)
- Some unexploited large or super-large mineral deposits are located in China's western remote regions
China's proven mineral resources make up about 12 per cent of the world's total in volume, and ranks number three in the world, just behind the USA and Russia. The main characteristics of China's mineral resources are as follows:
- Rich in total volume, but deficient in per capita volume
- Most mineral resources are associated ones which are hard-beneficiated and have very low synergy utilization rate
- Pivotal minerals (eg. oil, natural gas, high-grade iron ores) are lacking in reserves, low-grade, hard exploited and hard-beneficiated
- Some narrow-use, rare earth minerals are of high grade
- Mostly medium-small sized mineral deposits
- Resource distribution does not match the distribution of refineries and production
The Clean energy and environmental opportunities in the Chinese mining and minerals sector report is available to assist Australian companies to understand the market.
Opportunities
In addition to the strong demand of imported minerals, China also presents prospects for advanced technologies and equipment in mining industry.
Prospects for Australian suppliers are emerging as a result of:
- New exploration projects, particularly in the western development region.
- Further exploration in the existing mines requiring deep penetration and high resolution exploration technology and deep mining technology.
- Restructuring of the industry gives new powers to trading companies and makes importing less restrictive.
- Stricter requirements for mine health and safety, especially in the coal mining industry.
- Increasing need to incorporate environment protection, such as clean coal technology and tailings treatment.
China’s 12th Five-Year Plan (2011-2015) stipulates energy efficiency, productivity and environmental standards for the mining industry, aiming to create more efficient, more productive, more environment-friendly and safer industry. Smaller mines will be merged, acquired by the big mining companies or closed if they still remain inefficient and unsafe.
Upgrading technology, rational utilisation of resources and becoming more environmentally friendly will be the medium to long-term goals of China’s mining industry. The priority and government support will be given to the following fields:
- Technologies to increase mining/beneficiation recovery rate and synergy utilisation rate.
- Deep penetration and high resolution exploration technology and deep mining technology.
- Energy saving equipment and technology.
- Environmental protection technology and equipment especially waste water and SO2 recycling equipment and technology.
- Mine site rehabilitation.
- Tailings and other solid disposals recycling.
As in many sectors in China, locally manufactured equipment is increasing and prices are generally lower than foreign equipment. 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.
Currently the average mechanisation rate of China mining industry is around 50 per cent. Given the ongoing efforts of the Chinese industry to increase productivity and reduce environmental impact, there are opportunities for the supply of more efficient and modern mining equipment and processing technology, as well as related environmental technology and expertise. Energy-saving policies have raised the demand for advanced technologies and energy-saving washing and screening equipment. Consolidation of large mining companies will also generate new demand for advanced and large-scale equipment from this industry.
The largest market segment for mining equipment demand in China is China’s coal mining industry which accounted for almost half of the total revenue of China’s mining equipment industry in 2011. Mining equipment manufactured in China has also been exported to countries like America, Australia, Japan and South Korea. Medium and low-end products manufactured in China have competitive advantages. But most high-end and advanced technology products related to production efficiency, quality, environmental protection and safety still rely on imports from countries such as Japan and Germany.
Import of mining equipment (2011)
(Source: China Customs)
China is engaging in direct investment overseas in the 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 in way of operating in accordance with international standard and best practices.
China is also opening its mining industry to overseas investment. With the improvement of 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. For minerals import tariff, the present average rate 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 various product types. Other tariffs:
- Coal – 3 to 6 per cent
- Copper – 2 to 7 per cent
- Nickel – 3 per cent
- Aluminium – 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 background issues that need to be considered when entering the Chinese market. For years, government policy had 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 for prospecting, exploitation and utilisation for 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 as well as 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:
- Direct 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 local presence.
- The 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 centre is recommended. Other markets within China can then be ‘rolled out’ from this entry point. It is important that you:
- Visit the market regularly
- 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
Distribution channels
After China’s World Trade Organization entry, it is easy now for Australian companies to do business directly with the end users, but trading companies are still important and sometimes the first choice because some Chinese end users are still lacking international trade experiences.
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.
Sources
- Business Monitor International, China Metal Report Q2 2012 Vol. 4 Issue 2. (2012)
- IBIS World Mining Equipment Manufacturing in China – Industry Report (2011)
- Chinamining.org – www.chinamining.org
- Marketline, Industry Profile: Mining Equipment in China (2011)
- U.S. Commercial Service, China Industry Information: Coal and Mining Equipment (2011)
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.