Surging Chinese Metals Demand Seen As Plus For Miners
By Lynne Olver
Of DOW JONES NEWSWIRES
VANCOUVER (Dow Jones)--The Canadian mining industry got a few reminders this
week about China's sizeable influence as both a consumer and producer of
metals.
On Tuesday, Noranda Inc. (NRD) said it was shutting down its new, 80%-owned
Magnola magnesium plant in Quebec and is taking a C$630 million charge to 2002
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results. Noranda, Toronto, said an unexpectedly big increase in Chinese
production of magnesium put downward pressure on prices, so the plant will
remain shut until magnesium pricing improves.
The same day, mining financier Robert Friedland, president and chief
executive of Ivanhoe Capital Corp. and chairman of Ivanhoe Mines Ltd. (T.IVN),
outlined to a Vancouver exploration audience why China is becoming the
so-called workshop of the world, and why the implications are positive for the
mining industry.
On Wednesday, Teck Cominco Ltd. (TEK.B) chairman Norman Keevil cited China's
emergence as a major demand center for metals, such as zinc and copper, as one
of several key industry trends that will be relevant for the next 20 years.
The long-term growth trend in global consumption of zinc and copper is about
1.5% and 2.5%, respectively. Assuming double-digit growth from China is
augmented by strong demand from India, "growth in consumption of the major
metals should be at least as strong as the long-term trend lines for the next
decade or more, and could easily be higher," he said.
Keevil told reporters after a speech that his company isn't active in any
Chinese mining projects but would like to be involved with Friedland's large
Turquoise Hill (Oyu Tolgoi) copper-gold exploration project in Mongolia.
"So far, his aspirations and ours haven't matched, other than we would both
like to be involved with each other," Keevil said, calling Turquoise Hill the
biggest exploration play in the world and probably the next major copper-gold
deposit to be developed.
Ivanhoe Mines is due to release a new resource estimate for Turquoise Hill
by the end of January.
Costs In China Substantially Lower
Friedland is well-known in mining circles for selling the Voisey's Bay
nickel project to Inco in 1996 for C$4.3 billion, among other endeavors. Aside
from exploring in Mongolia, Ivanhoe Mines also has a large interest in Pacific
Minerals Inc. (V.PMZ), a junior company actively exploring for gold and copper
in China.
In his speech, Friedland didn't mention any of his Asian projects directly.
Instead he noted that China has an enormous young population, with 18 million
people entering the labor force every year, and it's fast becoming a consuming
society.
Physical construction materials such as concrete and structural steel in
China cost a fraction of what they cost in Australia, Europe or the U.S., he
said. A new, integrated copper smelter was just built in Yunnan province for
about US$130 million, but would have cost four or five times as much in Europe
or the U.S., Friedland said.
There are 110 copper smelters in China, eight of them "world-class," and the
smelters are "screaming for feed," hence the huge annual increases in Chinese
imports of copper concentrate, Friedland said.
As for gold, individual Chinese investors can now own the precious metal, so
there are 1.3 billion potential new buyers for gold, he said. "If that isn't
bullish, I don't know what is," Friedland added.
China is a big player in all commodities, even in metals where it doesn't
have indigenous sources, said David Davidson, a managing director with Beacon
Group Advisors in Toronto.
Magnesium producers such as Noranda are getting "hammered" now because of
Chinese supplies, the same way that many zinc producers were hammered by net
Chinese exports in the late 1990s, Davidson noted. And the aluminum industry
is concerned about China's recent turnaround from being a net importer of
aluminum to a net exporter, Davidson noted.
But China's key economic advantages, including cheap power sources and cheap
labor, are also prompting western companies, such as aluminum producers Alcoa
Inc. (AA) and Alcan Inc. (AL), to look at investments there, Davidson said.
-Lynne Olver, Dow Jones Newswires; 604-669-1595
lynne.olver@dowjones.com
(END) Dow Jones Newswires
01-30-03 1034ET
End of News |
