Emerson’s Director of the Mining and Power industries, Alan Novak, provides an update on China’s mining investments outside its borders.
An article in the 26 August Wall Street Journal, China Rethinks Deals for Resources highlights how China may be rethinking its investment in large foreign natural resources projects due to challenges faced by Chinese owner Citic Pacific on the Sino Iron project in Pilbara, Australia.
The project is currently three years late, approximately $6B over its original $2.5B budget, and recently ran into problems while commissioning gearless drive motors on the autogenous grinding (AG) mills, further delaying start up. For perspective, these are the largest mills in the world with each of the AG mills (there will eventually be six) 12.2 m in diameter and 10.3 m long, each with a 26 MW gearless drive.
Sino Iron AG mill being unloaded:
So why is China interested in securing foreign sources of iron ore? Mainly because domestic production falls far short of demand:Source: Citic Pacific Mining, Mills reach Australia, http://jimc.me/13WsiQV
While Chinese steel demand remains strong:Source: Market Realist, Why China’s interbank rates have an impact on dry bulk shipping companies, http://jimc.me/13Wu4S9
In fact, China annually consumes approximately 1/3 of the world’s steel.Source: Financial Times, How China Can Keep Urbanising with Flat Steel Demand, http://jimc.me/1fgGBQg
Will the problems encountered on the Sino Iron project dampen Chinese enthusiasm for investing in foreign mines? Only time will tell.
