You may recall that I presented on China's 'uranium gap' and their increasing foreign relations with Africa to secure strategic resources. Same thing applies with rare earth metals on the African continent.
http://www.africa-asia-confidential.com/article/id/274/The-race-for-strategic-minerals
August 2009
Africa's mineral reserves are drawing interest from Asian and Western states determined to secure supplies and counter wild price fluctuations
Demand for these minerals is rising again after a sharp fall at the start of the global slowdown, and Africa offers some of the richest pickings for the commercial rivals. Asian economies - which are securing uranium for nuclear reactors and investing in copper, iron and manganese mines for traditional industries - are the biggest spenders and Africa's best chance for a turn-around.
Meanwhile, with inventories full and falling demand for finished products, the Africa-Asia minerals trade slumped badly this year. Beijing's Commerce Ministry reports that China-Africa trade has already dropped more than 30% in the first half of 2009.
'Since most imports from Africa consist of natural resources such as metals and oil', the lower prices for those commodities lowers the value of trade. Chinese officials said that China-Africa trade fell to US$37.1 billion for the first half of 2009 compared to $48 bn. for the same period last year. Although trade shrunk, China's investment in Africa increased by 81% to $552 mn. for the first half of the year, compared with 2008.
Demand for metals is slowly recovering after last year's collapse, driven partly by the prospect of buying supplies at historic lows: as the construction business picks up, copper prices are back near 2008 prices. By mid-August, copper prices in London hit an eleven-month high at $6,425 a metric tonne following a doubling of Chinese imports in early 2009.
By June, zinc prices had risen enough to tempt some Chinese companies to re-export their recently acquired stocks. In July, China's imports of oil and iron ore hit record levels. While short-term prospects may still be shaded by gloom, Germany's Deutsche Bank forecasts that China's demand for iron, copper and manganese will grow 10% a year for the next decade, while demand for oil and coal demand will rise by 20% a year. Adding more heat to global resource competition is talk of 'peak' oil and 'peak' minerals production. Supporters of those controversial arguments suggest that production may already be in terminal decline, with supplies of certain minerals set to dry up within decades.
Mind the mergers
Industry analysts predict that Chinese-financed mergers and acquisitions this year will double their level of $52.1 bn. in 2008. China is also targeting oil and mining companies: its state-owned companies completed the purchase of Switzerland's Addax Petroleum this month and are bidding for Britain's Emerald Energy and Argentina's Respol YPF.
Aluminium company Chinalco's failed bid to increase its stake in Rio Tinto, which holds a substantial portfolio in Africa, is unlikely to deter other Chinese companies from buying into existing entities, but they are looking more seriously at smaller companies in Africa to buy up unexploited iron-ore deposits in order to avoid dependence on supplies from the biggest iron producers: Rio Tinto, BHP Billiton and Brazil's Vale.
Several companies sitting on substantial mineral resources are talking to Asian financiers: for example, Australia's Sundance Resources is seeking investors from South Korea and India to help finance the massive mine development costs of its multi-billion dollar Mbalam iron ore project in Cameroon.
At the top end of the market, Chinalco is among those - such as Vale and Swiss-based Xstrata - manoeuvering to take over South African conglomerate Anglo American, which controls one of the most diversified range of mineral assets.
Asia's search for strategic minerals is more than a shopping spree: for India, securing uranium for power and armaments has become a priority. In July, France's Areva offered the state-owned Nuclear Power Corporation of India a stake in several uranium mines in Niger, Namibia and Central African Republic. Discussions continue but Delhi is likely to agree; acquiring uranium has been more difficult since its refusal to sign the Nuclear Non-proliferation Treaty.
China's demand for Africa's minerals outstrips that of India and Japan (see Map) and it has the foreign reserves to finance its ambitions. Following the consolidation of the state-owned mining sector, Chinese companies are better equipped to bid for international assets (AAC Vol 2 No 8).
Giving new impetus, in August, China's Land and Resources Ministry confirmed plans for a strategic mineral stockpile to guard against swings in commodity demand and pricing. Beijing is to launch a 'reserve and protection system' for coal, copper, oil, tin and tungsten, and to build a huge underground oil reservoir.
In June, the China Development Bank-backed China-Africa Development Fund announced a new mineral-focused investment project with the defence industries-focused China Poly Group. The new China-Africa Investment Development Co., which is 55% controlled by CDB and 45% by Poly Group, is targeting iron, gold and oil exploration for its initial investments.
Asia-Africa trade shows a strong dependence on the trade in resources other than hydrocarbons. In 2008, about $2 bn. of India-South Africa trade was in gold. China (the biggest consumer of copper and cobalt) buys 75-90% of its cobalt from Congo-Kinshasa; Gabon, South Africa and Ghana are among China's top five manganese suppliers.
With China-Africa trade relations, resource dependency leads to strong political ties. How much leverage does this give Asia's biggest customer? South Africa exports 40% of its iron ore, 72% of its cobalt and 20% of its manganese to China, and its government infuriated human rights advocates when it refused a visa to the Dalai Lama (AAC Vol 2 No 6).
Countries housing China's multi-billion dollar mining deals, like Congo-Kinshasa, have gone to battle with the World Bank and International Monetary Fund to defend the deals in the face of threats to future debt relief (see Congo-K Briefing). China's promise of billions of investment dollars has helped the government toughen its stance against the Bank and the IMF. The $5 bn. China-Zimbabwe platinum deal (AAC Vol 2 No 9) could have a similar effect or pre-empt negotiations with the IMF.
Asian buyers have been waiting for the bottom of the market to get the best deals. When Kimberley Consolidated Mining had cash flow problems in May, China National Geological and Mining Corporation offered finance in a deal to be finalised soon. Also in South Africa, the China-Africa Development Fund offered to support the ailing Pamodzi Gold with 626 mn. rand ($80 mn.) financing in exchange for an equity stake.
Most Asian companies prefer, like their Western counterparts, to buy minerals in Africa and process them elsewhere, but they all face growing African pressure to invest in beneficiation and transfer skills and technology. Those small-scale Chinese smelters in eastern Congo-Kinshasa were among the first to close when the recession began to bite but larger Asian outfits know that they will have to invest in processing operations in Africa as part of the necessary cost of their search for strategic minerals.
No comments:
Post a Comment