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Saturday, December 16, 2017

No philanthropism as China locks in access to minerals

Posted to Far East Maritime (by on May 6, 2011

China is looking to Chile to bolster mainland copper reserves and has whipped out its giant checkbook.

China recently overtook the US to become Chile’s largest trading partner. Trade consists mostly of exports, and the main commodity being shipped from Chile to the mainland is copper.

China’s hunger for copper is immense. It is the world’s largest user, consuming about 40 percent, with copper going into the rapidly growing electricity grid and into various pipes and wires used in infrastructure projects.

The mainland imported 595,963 tonnes of refined copper in the first quarter, which was 21 percent less than last year, according to customs agency figures. Local copper output reached a record 470,600 tonnes in March and the country holds 30 percent of all known copper reserves

Still, the mainland needs to secure access to additional copper resources, and is looking to Chile to boost that supply.

In 2005, China and Chile signed a free trade agreement. That ignited trade between the two countries and now the Chinese investment is starting to ramp up.

It was reported this week that Chinese companies are negotiating deals worth about US$1 billion that involve investments in mining, energy and infrastructure projects. And when a China company invests in a mine, it generally looks to buy up a controlling interest.

That mainland companies have expressed interest in investing in electricity generating projects in Chile, as well as road and rail infrastructure, is more self-serving than philanthropic. Copper and iron ore mining requires a reliable electricity supply and it also needs a solid transport system to get the raw materials from the remote and rugged mining areas to the ports.

If you want a job done properly, you have to do it yourself, and China’s state-owned mining and power companies are working vigorously at controlling the entire supply and delivery process. Citic Pacific Mining, for instance, has bought 12 dry bulk carriers to collect ore from the Citic-owned mine in Western Australia and ferry the cargo to China for refining.

Shenhua Group is one of China’s top five power companies and owns rail and ports in the mainland, as well as a fleet of ships.

Projects in Africa are also designed to ensure the mainland enjoys a steady and secure supply of raw materials vital to China’s economic growth.

Despite criticism from the west, projects such as the China-Chile deal are too lucrative to turn down for developing nations. And as long as money is no object to China’s giant state-owned enterprises, with no pesky shareholders to please, the mainland will continue to buy up the world’s raw materials until it owns everything.

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