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BMI View: China's mining sector will continue to be pressurised by low
mineral prices over the coming years. Government-led consolidation will support
production growth by state-owned enterprises as smaller miners shut operations,
however, depleting reserves, falling ore grades and the relatively short life
span of domestic mines will further drive outward Chinese investment.
Latest Updates & Structural Trends
■ While cooling Chinese economic growth will adversely impact mining operations,
we expect the impact to vary across different mineral segments. Copper and tin
will do better due to the better price outlook for these minerals than iron ore
■ China's structural shortfall in domestic production combined with the
government's desire for resource security will continue to spur overseas mining
deals. Although China's reliance on imports will increase due to the country's
depleting reserves, falling ore grades and the relatively short life span of
mines, outbound investment will face more caution, as Chinese projects are
increasingly faced with rising costs and project delays. As a result, Chinese
firms' 2015 mining merger and acquisition activity (M&A) in Latin America slowed
to USD2.1bn, a 72.8% y-o-y decrease from 2014. Chinese mining M&A activity in
the Middle East and Africa also fell significantly, by 46.0% y-o-y, to USD135mn
in 2015. Chinese metal investment in Sub Saharan Africa also dropped in 2015 to
USD1.2bn, significantly lower than USD4.0bn in 2014 and USD8.4bn in 2013.