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Fueling the Engines of Change

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Jalainur open-cast coal mine
TARBOAT/FLICKR

Everything about China is larger than life—the world’s most populous nation, the third largest country, the third biggest economy. Everything in billions and trillions.

In January 2007, for instance, China’s economy grew its fastest in 11 years. GDP grew by 10.7% to reach US$2.68 trillion. Last November, China reported a trade surplus of US$26.6 billion, with exports accounting for 40% of the economy.

What’s more, China envisions an industrial economy for itself by 2015, approaching that of developed countries. With the increased need for energy to power the manufacturing sector and materials to feed the construction boom, China is also experiencing great demand for its mineral resources.

Feeding a Hungry Giant

China has the world’s third largest known mineral reserves and is the world’s largest producer (and consumer) of mineral products. Much of China’s production is for domestic use.

As of last year, it had 80,000 state-owned mining enterprises and 200,000 collectively owned mines. It also had 140,000 non-state-owned mining companies, which includes 132 firms with investors from Hong Kong, Macao, and Taiwan, as well as 160 firms with foreign investors.

Surveys and developments over the past 50 years have yielded 171 different kinds of minerals, 158 proved reserves, and 18,000 mineral deposits. Of these reserves, 10 are energy-related and 54 are metallic.

China is sixth in the world in terms of pipelines with 80,000 km of oil and gas combined.

The Good Earth Cries Out

By China’s sheer size, the momentum towards industrialization has put heavy pressure on both the domestic and global environment. China has 16 of the world’s most polluted cities. It is the largest source of carbon dioxide emissions after the United States and is expected to surpass US greenhouse emissions soon.

Coal, which will be China’s main source of energy until 2020, is a major pollutant. The increased use of coal for manufacturing is a natural consequence of the worldwide increase in demand for inexpensive Chinese products.

Acid rain from China has reportedly destroyed 30% of its cropland and damaged forests in the Korean Peninsula and Japan. One-third of California’s fine particulates pollution originates in Asia, and researchers allege particulate pollutants in Lake Tahoe come from China.

Coal mines in China also are reportedly the deadliest in the world with 4,700 fatalities in 2006 or an average of 13 deaths per day. Another way of looking at it is two deaths per million tons of coal—150 times higher than the US average and nine times higher than India’s.

Last month alone, 105 coal miners were reported to have died when a mine collapsed in Shanxi. The best of China’s state-owned mines now approach safety levels similar to the West, so most casualties happen in small operations. Coal mining, however, is dangerous anywhere in the world for so long as human labor is used.

3 Ways to Tame the Tiger

As China’s mining boom provides employment to millions and helps whip local government economies into shape, the central government is now actively taking steps to ensure safe, rational, and efficient exploration and mining of its resources. After all, it wants to continue using local resources for its modernization program. The country aims to reduce its energy consumption per unit of GDP by 20% in 2010.

1. Consolidation. China intends to merge the many industry players into a few huge companies. This will help it respond to rising international prices and to implement standards more strictly. Affected industries are those in coal, iron, manganese, copper, bauxite, lead, zinc, molybdenum, gold, tungsten, tin, antimony, rare earths, phosphorus, and potassium.

2. Limiting operators, raising standards. Although demand for coal is on the rise, the government has stopped processing bids for coal-prospecting rights. Only state-approved coal operations can continue to set up new prospecting operations. The government also will not approve coal mines with less than 300,000 tons capacity.

China also cut down iron ore importers from 118 to 90 last year in view of soaring international prices. This affects 70 steel mills and 48 trading companies. Importers must now have double the minimum registered capital or 20 million yuan. They must also have an annual minimum capacity of one million tons of crude steel and should comply with environment and safety standards. Outmoded steel mills were closed down by the end of last year.

Export rights for molybdenum and indium are now limited to those who meet output and export criteria. But producers say that the domestic market cannot absorb the rising demand.

3. Cracking down on illegals. From 2005 to June 2006, China reported 70,000 illegal mining cases. Violations included mining without a license, illegal prospecting and mining rights, and mining beyond boundaries. Some 2,660 civil servants were punished and 1,647 explorations and mining licenses were revoked.

Meanwhile, China has also drawn up policies that ensure adherence to WTO agreements and a fair playing field for all industry players.

It’s all systems go for the industrialization dreams of 2015. Will the juggernaut of progress tread gently on China’s bounty? The Chinese hope this journey of a thousand miles will march in the right direction.

Steel

China is the world’s largest producer-consumer of steel, bringing imports of iron ore to a record 325 million tonnes last year or an increase of 18.2%. To produce steel, one needs manganese. China is the world’s largest consumer of manganese and sets the pace for it in the world market.

But the increased capacity of steel mills is expected to exceed domestic demand. China was estimated to produce over 6 million tonnes of stainless steel last year, the total capacity of which will exceed 10 million tonnes.

In 2006, China discovered rich iron ore mines in Tibet and in the Uygur Autonomous Region with 763 million tonnes in proven reserves and two billion tonnes, potential.

Oil

China is the world’s third largest net importer of oil behind the US and Japan. Official estimates show that China may have 65 billion tons of oil reserves and 25 trillion cubic meters of natural gas.

In 2005, China produced 3.631 million barrels of oil (1 bbl = 42 gallons) per day, but consumed 6.534 million bbl/day. And while oil exports were at 443,300 bbl/day, imports totaled 3.181 million bbl/day.

In May 2006, China announced the discovery of the Jidong Nanpu Oilfield. With reserves of one billion tons, it was the largest discovery in 40 years. The country expects an annual output of 200 million tons of oil by 2010, and 220 million tons by 2020 from total oil resources.

Natural Gas

China has 1.448 trillion cubic meters of proven natural gas reserves, enough for both domestic use and export. In 2005, it exported approximately 2.944 billion cubic meters and imported none.

Consumption of natural gas reached 44.93 billion cubic meters in 2005, almost equaling production for the same year, which was 47.88 billion. Natural gas now forms a good part of China’s energy mix. Officials project an annual output of 100 billion cubic meters of natural gas by 2010 and 170 billion cubic meters by 2020.

Coal

The world’s third largest coal reserves are found in China. The country has 12.6% of the world’s coal or 126.2 billion short tons of recoverable coal, just behind those of the US and Russia. Coal production was projected at 2.6 billion tons by the end of last year, which accounts for 69% of China’s primary energy consumption. By 2012, the country will have 562 new coal-fired power stations.

Coal is the fastest growing energy source worldwide. The use of coal is projected to increase from 26% in 2004 to 28% by 2030. China’s industrial sector is expected to account for 78% of the total net increase in industrial coal use around the globe.

print ed: 01/08

 

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