New Market Report Now Available: China Mining Report Q4 2013

The changes and reforms enacted in 2012 will continue over the course of 2013 with smaller and less efficient mines being closed, while mid-sized miners will be merged and production consolidated into giant vertically integrated state-owned outfits. Overall, we forecast China's mining industry value to increase from approximately US$340bn in 2012 to US$432bn by 2017, marking a healthy growth rate of 4.9% per annum.

As 2013 ushers in the third year of China's 12th Five-Year Plan (2011-2015), we expect the changes and reforms enacted in 2012 to continue. In a bid to curb overcapacity and reduce environmental pollution, the government plans to close smaller and less efficient mines, while mid-sized miners will be merged and production consolidated into giant vertically integrated state-owned outfits. Overall, we forecast China's mining industry value to increase from approximately US$340bn in 2012 to US$432bn by 2017, marking a healthy growth rate of 4.9% per annum.

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The small production losses that will inevitably occur with the closure of smaller mines will give way to production gains down the road due to the efficiency gains of bigger, more integrated mining companies.

This comes as industry-wide energy efficiency and consolidation measures continue in 2013 as part of China's Five-Year Plan, improving efficiency and boosting productivity across the industry.

We expect increasing tax burdens on the Chinese mining industry as part of the plan. China's twice-delayed resource tax was implemented nationwide on November 1 2011. In February 2012, additional taxes were imposed on the mining of tin, iron ore and other minor metals. Significant progress has been made in the crackdown on illegal mining, with the government pledging to do more to improve safety. There is an increasing emphasis on the negative environmental impact of mining activities, with the imposition of an environmental tax on certain industries and the introduction of a 'green standard' for the rare earths sector to curb emissions. Cases of smelters, lead plants, or mines that are not up to environmental standards being closed are commonplace.

The government suspended new prospecting and mining licences for the coking coal and rare earths sectors in a bid to prevent over-exploitation. Additionally, the Institute of Geological Environmental Monitoring plans to build 10 state-level geological environment monitoring demonstration zones in the north-east, north-west, north and Yangtze River regions by the end of the 12th Five-Year Plan.

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