Miners chase a slice of China’s growth
China’s need for raw materials to feed its fast-growing economy will result in more tie-ups with large, international mining houses, senior industry executives said at Reuters Mining Summit this week.
Suppliers such as Phelps Dodge Corp. (PD.N) and Inco Ltd. N.TO, respectively the world’s second-largest copper and nickel producers, have held talks with Chinese users desperate for metal to fuel economic growth set to top 9 percent this year.
“The Chinese are already concerned about sourcing raw materials. They are looking worldwide for opportunities to invest,” said Steve Whisler, chairman, and CEO of Phelps Dodge.
This could lead to conflict with Japanese metals producers also keen to participate in a booming world market that has seen prices race to their highest levels in several years, he said.
“They are going to be competing for the same raw materials throughout other parts of the world,” Whisler said. “The Chinese aggressiveness in this sector has resulted in the Japanese rethinking how aggressive they need to be.” China consumes about a fifth of the world supply of copper, which rose to a record high MCU3 of $3,336 a tonne in April.
Minmetals Corp., China’s largest metals trader, last week agreed to a deal worth up to $2 billion to secure copper from Chile’s Codelco, the world’s largest producer of the metal — a deal that Codelco’s chief executive, Juan Villarzu, said has sparked interest from other companies.
STAINLESS STEEL
Peter Jones, Inco’s president and chief operating officer, said his company had recently been approached by three stainless steel producers, including one large Chinese player.
About two-thirds of the world’s nickel is used to add sparkle and shine to stainless steel, although in China, only about 40 percent of nickel is used for this purpose.
“One of the biggest worries in the stainless steel industry right now is access to supply,” Jones said at the summit, held at Reuters offices in New York.
“It makes sense for us to have some sort of tie-up with major consumers,” Jones said.
He added Inco was considering investing in a Chinese plant to process stainless steel scrap, which he said accounted for between 46 percent and 47 percent of the nickel used in stainless steel worldwide.
“We have a recycling business in Pittsburgh and we’re looking very hard at whether doing something in China like that, to service the stainless steel industry, makes sense.”
POWER SHORTAGES
China’s production of some metals will be limited in the short term by the country’s power shortages, some executives said, offering opportunities for foreign suppliers to meet rising consumption.
“China has a lot of challenges on the energy side. They need a lot of energy for their growth,” said Bernt Reitan, group president for global primary products for Alcoa Inc. (AA.N), the world’s top aluminum producer.
Donald Lindsay, president and CEO of Teck Cominco Ltd. TEKsvb.TO, the world’s largest zinc miner, noted that China last year became a net importer of the anti-corrosive metal.
“The zinc refining industry consumes a lot of power, and there are power shortages in China, so there might be a period of time when they don’t devote their scarce power to that,” he said, but added the country had the resources to eventually supply its own zinc needs.
RUSAL, the Russian company that ranks as the world’s No. 3 aluminum maker, is also seeking to grow supplies to China, but the company wants only to pursue long-term supply deals.
Bruce Markowitz, president of RUSAL America Corp., said the often volatile Chinese market was better suited to traders.
“In China, we have a few key customers, where we have business month-in, month-out, year-in, year-out. We’re looking for more of that ilk of business,” Markowitz said_Reuters