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Strategic resources are the king's way - protect these 10 types of minerals to avoid being choked

2023-05-1272

Strategic resources are king! Protect these 10 minerals so they won't be choked!

Xinjiang Geology and Mineral Resources April 16, 2024 22:56 Xinjiang

Although the total amount of global mineral resources is abundant and the supply is abundant, under the unprecedented changes in a century, more and more countries are paying more attention to the supply of primary raw materials for minerals, especially in the context of "regionalization" and "groupization" of global resource governance, as well as some countries implementing anti globalization mining policies to increase mining profits. Coupled with the influence of financial capital, the global mineral resource market is experiencing intensified volatility. As a major global consumer of mineral resources, China needs to pay special attention to the combination of supply methods for minerals with large import volumes or involving agricultural production, as well as minerals that have a significant impact on infrastructure construction and manufacturing development in the national economy and have universality.

1、 Global mineral resources are abundant, and overall supply is abundant

The overall global mineral resource reserves are increasing year by year. Although the consumption of major mineral products has been increasing year by year in the past 20 years, with the innovative application of mineral exploration technology and the continuous promotion of exploration investment and exploration work, new mineral deposits are constantly being discovered worldwide, which not only effectively supplements the consumed mineral resource reserves in a timely manner, but also maintains a growth trend in the total amount of resource reserves. According to statistics from BP and the US Geological Survey, global reserves of minerals such as iron, manganese, chromium, copper, aluminum, lead, zinc, nickel, potassium, and phosphorus have all increased to varying degrees by the end of 2021 compared to 2001. Among them, the reserves of iron, aluminum, zinc, potassium and other minerals have increased by about 30%, the reserves of lead, nickel and other minerals have increased by about 40% to 60%, and the reserves of manganese, copper, phosphorus and other minerals have increased by more than 100%.

The global supply of major mineral products is relatively loose

According to statistics from institutions such as the US Geological Survey and the International Iron and Steel Association, compared to 2001, the global production of coal, crude oil, natural gas, iron ore, manganese ore, chromite, copper concentrate, bauxite, lead concentrate, zinc concentrate, nickel concentrate, potassium salt, phosphate ore and other mineral products has shown an increasing trend in 2021 (except for a few minerals such as manganese, chromium, nickel, etc., China's production growth rate is higher than the global level, with potassium salt growth rate equivalent to more than 10 times the global level). Moreover, the overall supply and demand balance of global mineral products can be achieved. For example, in the past 10 years, more than 70% of the years had a slight surplus of supply, with steel, crude oil, natural gas and other products having a supply surplus rate of 1% to 7%. Only a few products such as copper had a slight shortage of supply, but the average supply shortage rate in the past 10 years was also within 1%. The supply gap can be adjusted through inventory.

2、 Mineral resources are increasingly valued by more and more countries

After the end of the Cold War, many countries in the United States and Europe sold off their mineral reserves established during the Cold War. It seemed that all mineral products could be bought in the market, but this relatively stable period only lasted for about 20 years of relative calm. Now, some early industrialized countries such as the United States, the European Union, and Japan have reintroduced terms related to strategic minerals and key minerals, which frequently appear in their strategic or planning documents, indicating that mineral resource supply is still a major issue that countries in today's society need to focus on solving. From the actual situation, in recent years, the United States, the European Union, Japan, Canada, Australia, South Korea, the United Kingdom, India and other countries have all released new versions of key mineral inventory lists and implemented strategic measures for resource protection. The most typical example is the United States, the European Union, and Japan, which continuously establish multilateral or bilateral cooperation mechanisms with relevant resource rich countries in the field of mineral resources industry to establish a strong and responsible key mineral supply chain, hoping to enhance the resilience of the mineral resources industry chain supply chain through cooperation. For example, the United States has led the establishment of multilateral cooperation mechanisms such as the Energy and Resource Governance Initiative and the Mineral Security Partnership, making the global resource geopolitics and resource governance system more complex.

3、 The supply of primary products of mineral resources should focus on ten types of minerals

Referring to the new key mineral inventory lists of countries such as the United States and the European Union, combined with the actual demand for mineral resources in China's modern economic system construction, and based on data released by authoritative institutions, among the 28 mineral resources that can be counted or calculated for demand in 2021, China's consumption of over 100 million tons of minerals includes 5 types such as coal, crude oil, natural gas, iron ore, and phosphate ore, over 10 million tons includes 5 types such as copper, aluminum, manganese, chromium, and potassium salt, over 1 million tons includes 3 types such as fluorite, nickel, and crystalline graphite, and under 1 million tons includes 15 types such as rare earth, tin, and molybdenum. Among them, under 1 million tons, there are 6 types such as indium, gallium, beryllium, germanium, tantalum, and rhenium, especially beryllium and rhenium. The consumption is less than 100 tons.

In principle, universal minerals related to agricultural production, energy supply, and those that affect infrastructure construction and manufacturing development in the national economy, as well as minerals that are crucial for energy transition under the "dual carbon" goal, can be identified as key targets for ensuring supply.

However, from the actual situation, in 2021, the total import value of eight mineral products including crude oil, natural gas, coal, iron ore, copper concentrate, bauxite, manganese ore, and chromite accounted for nearly 90% of the total import value of mineral products in China. On the other hand, these 8 types of mineral products have a large import volume, and the vast majority of them have an external dependence of over 50%. In addition, the potassium salt and phosphate ore required for agricultural production are also affected, making these 10 types of minerals a key focus for ensuring supply at present. Under the "dual carbon" target, although domestic minerals such as nickel, cobalt, and lithium with small supply and demand are also in short supply, these minerals have achieved fruitful results in "going global" in recent years and should not be considered as a key source of supply guarantee for the time being.

4、 There is no unified "panacea" for stabilizing the supply of ten types of minerals, and they need to be treated differently

Ten types of minerals, including crude oil, natural gas, coal, iron ore, copper concentrate, bauxite, manganese ore, chromite, potassium salt, and phosphate ore, have different factors affecting the improvement of supply capacity. Among them, three types of minerals, namely oil, natural gas, and copper, are mainly constrained by insufficient domestic resource exploration and development capabilities. Three types of minerals, namely iron ore, bauxite, and potassium salt, are mainly constrained by poor resource quality or technological limitations in brine potassium extraction, which limits production growth. Two types of minerals, namely coal and phosphate, are mainly due to regional imbalances in supply and demand. Two types of minerals, namely manganese ore and chromite, are mainly due to the scarcity of domestic resources leading to insufficient supply. In addition, the incomplete recycling and utilization system of secondary resources such as scrap steel, scrap copper, and scrap aluminum also affects the release of supply guarantee capacity.

Three types of minerals, including oil, natural gas, and copper, need to strengthen their exploration and supply guarantee

Supported by innovation in deep Earth exploration technology and equipment, guaranteed by innovative exploration mechanisms and enhanced exploration market vitality, we will increase financial exploration investment, intensify mineral exploration efforts, consolidate and add a batch of mineral resource bases, and continuously strengthen the foundation of resource security. Among them, oil and gas should accelerate the increase of reserves and production in the western region, promote the construction of offshore production bases, increase the development of unconventional oil and gas, and strive to form more new areas for increasing oil and gas production. In terms of copper mines, we need to accelerate the solution to the problem of insufficient supply in new exploration blocks, provide new exploration space for breakthroughs in mineral exploration, increase reserves in mineral exploration, ensure stable and increased production of copper concentrates, and provide resource reserve guarantees for the construction of core areas of development bases.

Two types of minerals, coal and phosphate, require policy coordination to ensure supply

In terms of coal, China has a good resource advantage and production capacity foundation, and the key to ensuring supply lies in the stability and continuity of policies. In terms of phosphate ore, although there is a slight surplus in domestic supply, the production of phosphate fertilizer and the development of phosphate ore resources in the country are not fully matched in space. In the first half of 2022, the domestic phosphate ore market supply was extremely tight, and prices soared, leading some listed phosphate fertilizer production companies to reduce phosphate ore procurement and operating rates to avoid risks, which in turn affects the demand for phosphate fertilizer during the peak season of agricultural production. It is necessary to cancel the flow restriction policy of phosphate ore "not leaving the province and not leaving the market" in accordance with the requirements of building a unified national market, and promote the free flow of the market.

Three types of minerals, including iron ore, bauxite, and potassium salt, need to strengthen technological innovation to ensure supply

China has abundant iron ore, bauxite, and potassium salt resources, but the quality of these resources is poor, which affects the economic and ecological benefits of resource development and utilization. For example, iron ore faces the problem of low grade leading to the production of a large amount of tailings during development and utilization, the problem of red mud pollution from bauxite has not been solved, and potassium salt also faces the problem of releasing a large amount of bitter brine from brine extraction, which affects the environment. On the other hand, the development of high sulfur bauxite under coal in China is difficult due to technical and technological issues, and there are currently no successful cases of large-scale industrial development of aluminum under coal in China. Similar to these technological weaknesses, it is necessary to adhere to innovation driven approaches and expand resource security space by addressing technological bottlenecks in development.

Special policies are needed to support and ensure the supply of minerals such as iron, copper, and aluminum

The recycling and reuse of waste resources is an important measure to enhance supply capacity. For example, in the United States, crude steel production reached 87 million tons in 2021, of which 46 million tons were produced from scrap steel, accounting for approximately 53% of the demand for steelmaking raw materials. With the increasing accumulation of waste metal resources in China, the overall scale of recycled metal production is constantly improving. However, its contribution to raw material supply is still only 20% to 25%, which is less than 50% of the level of developed countries such as the United States. The incomplete policy system for the recycling and utilization of waste resources affects the substitution of recycled metals for primary ores. It is necessary for the state to strengthen special policy support in taxation, finance, and other aspects for the recycling of waste resources such as scrap steel, scrap copper, and scrap aluminum, in order to alleviate the pressure on the supply of primary ores. For example, scrap copper, a copper consuming product in China around 2020, will enter the scrap period around 2035, generating approximately 4 million tons/year of copper substitute raw materials, which is expected to meet about 30% of China's copper demand.

Strengthening international mining cooperation to ensure supply

In terms of oil and gas, in 2021, Russia's crude oil and natural gas production accounted for 12.7% and 17.4% of the world's total, and 15.5% and 9.9% of China's total imports, respectively. It is recommended to strengthen exchanges and cooperation between the two sides to promote the stable and upward position of Russia's oil and gas imports in China's energy sector. In terms of non oil and gas mineral resources, attention should be paid to resource rich countries such as Brazil, Chile, Peru, Guinea, South Africa, Gabon, the Democratic Republic of Congo, Kazakhstan, Indonesia, etc., accurately matching the localization requirements of resource rich country industry chains, promoting deep integration and interest binding with resource rich country industry chains, and striving to reduce overseas investment risks. At the same time, we focus on promoting sustainable and responsible mineral development, proactively releasing reliable and transparent data information, reducing resistance from community environment, labor, safety, and social governance, and effectively enhancing the ability of enterprises to timely convert overseas equity resources into actual production capacity, output, and product supply.

In addition, it is necessary to accurately assess the international situation, dynamically evaluate supply and price risks, improve the policy pool toolbox, and strengthen emergency response capabilities for major international conflicts and resource events. We need to strengthen the construction of reserve capacity, establish a reserve system that connects products, production capacity, and origin reserves with the participation of the government and enterprises, improve the national reserve system and policies for products, production capacity, and origin, and enhance risk prevention and control capabilities.

Source: China Academy of Natural Resources Economics


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