BMI View: China's mining sector will see positive growth from 2018 onwards due to improving commodity prices. Government-led consolidation will rumble on, however , with depleting reserves, falling ore grades and the relatively short life span of domestic mines further driving outward Chinese investment.
|e/f = BMI estimate/forecast. Source: National sources, BMI|
|Mining Industry Value, USDbn||249.80||217.40||208.70||213.60||220.40||229.20|
|Mining Industry Value, USDbn, % y-o-y||-20.00||-13.00||-4.00||2.00||3.00||4.00|
Latest Updates & Structural Trends
While cooling Chinese economic growth will adversely impact mining operations, we expect the impact to vary across different mineral segments. Tin will do best while copper and iron ore will perform worst.
China's structural shortfall in domestic production combined with the government's desire for resource security will continue to spur overseas mining deals. Although China's reliance on imports will increase due to the country's depleting reserves, falling ore grades and the relatively short life span of mines, outbound investment will face more caution, as Chinese projects are increasingly faced with rising costs and project delays. As a result, Chinese firms' 2015 mining merger and acquisition activity (M&A) in Latin America slowed to USD2.1bn, a 72.8% y-o-y decrease from 2014. Chinese mining M&A activity in the Middle East and Africa also fell significantly, by 46.0% y-o-y, to USD135mn in 2015. Chinese metal investment in Sub Saharan Africa also dropped in 2015 to USD1.2bn, significantly lower than USD4.0bn in 2014 and USD8.4bn in 2013.
We forecast Chinese iron ore production to decline by 10.0% and 5.0% in 2016 and 2017, respectively. Chinese iron ore output will average an annual contraction of 3.8% during 2016-2020 on the back of low iron ore prices and weak steel consumption growth. In addition, a rising environmental regulatory burden will reduce demand from steel mills for low-grade iron ore. This will limit domestic output, as Chinese ore grades declined from 66% in 2004 to 17% in 2014.
Chinese nickel mine production will face significant challenges from slowing growth in fixed-asset investment, despite additional government stimulus measures in the short term, which will drag down demand for steel products over the long term, and by extension, refined nickel given its use in stainless steel production. Additionally, the availability of cheaper nickel pig iron, created through environmentally polluting processes, from Indonesian smelters starting 2017 will hugely reduce demand for more expensive refined nickel. We forecast Chinese nickel ore output to average an annual growth of 2.0% during 2016-2020, compared to 5.2% during 2011-2015, with smelters pledging to reduce output by at least 20% in 2016.
We forecast China's lead mine production growth to stagnate, averaging an annual growth rate of 0.3% during 2016-2020. This would represent a significant slow-down compared to average annual growth of 6.0% during 2011-2015. Lead mine production in China will reach 2.3 million tonnes (mnt) in 2020. Despite our significant downbeat forecast on lead production growth, we expect China to remain the largest lead producer for the coming years, accounting for an estimated 43.6% of global lead production in 2016.
We forecast Chinese tin production to reach 118.8 thousand tonnes per annum by 2020, increasing at an average rate of 3.5% per annum during 2016-2020, compared to -1.6% in the previous five years. Despite the downshift in the Chinese economy, output growth in the tin sector will remain supported by the usage of refined tin in the electronics industry.
|e/f= BMI estimate/forecast. Source: USGS, BMI calculation|
|Copper Ore Production (% of global)||5.2||7.5||9.2||8.5|
|Refined Copper Production (% of global)||15.8||24.5||34.9||36.9|
|Refined Copper Consumption (% of global)||23.6||39.8||47.9||50.5|
|Refined Copper Balance (kt)||-1143||-2944||-2,424||-3,068|
|Tin Ore Production (% of global)||41.3||46.6||41.4||44.1|
|Refined Tin Production (% of global)||35.5||44.1||46.4||52.7|
|Refined Tin Consumption (% of global)||36.9||47.3||49.7||53.5|
|Refined Tin Balance (kt)||-2.8||-17.8||-8.6||-11.9|
|Bauxite Mine Production (% of global)||12.3||18.7||24.3||18.5|
|Aluminium Production (% of global)||24.5||38.2||55.9||57.1|
|Aluminium Consumption (% of global)||22.5||38.6||48.1||49.8|
|Aluminium Balance (kt)||682||389||5,000||4,360|
|GOLD: Gold mine production, moz, % of global||9.1||13.4||16.3||15.1|
|Iron Ore Production (% of global)||27.3||41.3||42.4||34.6|
|Steel Production (% of global)||30.8||44.5||50.6||47.4|
|Steel Consumption (% of global)||31.8||43.5||43.6||40.1|
|Steel Balance (kt)||-8,710||25,170||116,369||116,023|
|Nickel Ore Production (% of global)||na||5.2||4.4||4.4|
|Refined Nickel Production (% of global)||7.7||11.6||11.0||11.3|
|Refined Nickel Consumption (% of global)||13.6||20.1||16.4||15.6|
|Refined Nickel Balance (kt)||-75||-128||-100||-96|
|Lead Ore Production (% of global)||32.4||44.5||43.5||42.1|
|Refined Lead Production (% of global)||31.3||42.6||37.7||36.4|
|Refined Lead Consumption (% of global)||25.7||43.2||39.4||37.8|
|Refined Lead Balance (kt)||406||-37||-139||-186|
|Zinc Ore Production (% of global)||25.7||30.3||36.4||35.7|
|Refined Zinc Production (% of global)||26.7||40.5||44.9||45.3|
|Refined Zinc Consumption (% of global)||30.5||45.3||48.1||48.4|
|Refined Zinc Balance (kt)||-474||-435||-386||-627|
The China Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.
BMI's China Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in China.
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BMI Industry View
Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.
Industry SWOT analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
- Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
- Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
- Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.
BMI’s Mining Risk Reward Index
BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Competitive Landscape Tables & Analysis
Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.