Chinese mining consolidation will continue over the coming quarters due to weak global minerals prices and government supporting consolidation.
We expect China's mining sector to become increasingly consolidated in the coming quarters for the following reasons.
First, weak mineral prices will price-out high-cost producers. We believe weak mineral prices will continue to pressure Chinese high-cost producing miners over the coming quarters. While state-owned firms are generally more insulated from the weakness in commodity prices, the economic slowdown in China will diminish the financial resources of these firms, forcing them to cut-back capital expenditures over the coming quarters.
Second, government-supported industry consolidation. Beijing's pledge to instil more supply discipline in heavy industry will reduce the number of miners operating within the country. For instance, China's target is to eliminate 97.2mnt of coal over the next five years through the closure of 2,791 small coal mines. Similarly, Chinese policy makers are attempting to tame excess production in the steel sector through a series of forced closures and consolidation.
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Third, stricter governmental environmental regulations. The government's attempt to curb pollution will put pressure on small-scale low grade ore miners operating within China.
While cooling Chinese economic growth will adversely impact mining operations, we expect the impact to vary across different mineral segments. Lead and tin mining production growth will decline less strongly than iron ore and copper, due to continued, albeit moderate demand growth for these metals. We expect iron ore and copper production growth will decline significantly due to their heavy usage in the construction industry.
The China Mining Report has been researched at source and features Business Monitor International (BMI)'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.
* Use BMI's independent industry forecasts on China to test other views - a key input for successful budgeting and planning in this mining market.
* Target business opportunities and risks in China's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in China.
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