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The prospect of China’s magnesite mining sector coming under state ownership accompanied by consolidation of major players into one entity is looking increasingly likely to come to fruition this year.

The Huaziyu magnesite mine, Haicheng, the second largest magnesite mine in Liaoning province. This magnesite source and others like it are soon to be part of one huge part state-owned entity, China Magnesite Mining Co. Ltd, in an effort to modernise and stabilise the Chinese magnesite industry.

Further to our recent report on Chinese mineral supply shortages (see Newsfile 28 July 2017: China minerals supply squeeze: hangover to 2018 likely), on Monday 31 July, the State Owned Assets Supervision and Administration (SASAC) of Haicheng, Liaoning announced plans to establish China Magnesite Mining Co. Ltd.

According to Adam Zhang of the Northeast Asia Non-metallic Materials Exchange, “This is a major matter for China’s refractory industry, since it is expected to control 80% of the national production”.

China Magnesite Mining Co. will be 51% owned by Haicheng Magnesite Factory (owned by SASAC Haicheng). The remaining 49% will belong to other partner companies which appear to still be in the process of pledging their participation.

Among those confirmed, include Haicheng Linli Mining Co. Ltd (wholly owned subsidiary of Puyang Refractories Group Co. Ltd) and Beijing LIRR High Temperature Materials Co. Ltd.

With a reported total registered capital of RMB2bn, China Magnesite Mining is aimed at accelerating the effective integration of magnesite mineral resources in Haicheng, encouraging green, intensive, efficient and sustainable development, as well as enhancing the magnesite industry’s dominance in domestic and overseas markets.

“In the past, due to dispersion of magnesite mining rights, irregular mining, some environmental problems in magnesia processing enterprises, the price of magnesite and magnesia has been at a relatively low level in recent years.” said Zhang.

It is hoped that if China Magnesite Mining succeeds, it will effectively change China’s traditional magnesite resources supply scene, stabilise magnesia raw materials supply and demand expectations, and promote the development of the entire supply chain of refractories.

Whether this new organisation concludes before or after the 19th National Congress in October is unclear, as are other aspects of the general situation regarding changes in China’s mineral supply sector.

What is clear is that:

  1. Environmental inspection teams are due to return to Liaoning in August, and processing facilities are unlikely to re-open unless they meet MEP standards.
  2. Mineral supply shortages, as a result of 1. and ongoing mining explosives control will continue: for fused minerals, such as fused magnesia and fused alumina, there is an additional reported problem of an acute shortage of graphite electrodes, with a consequent price increase of 400% to 500+%. (learn the latest trends in graphite supply at Graphite Supply Chain 2017, 5-7 November, Newport Beach.)
  3. There is a definite move to state control and consolidation of China’s magnesite sector.

By Mike O’Driscoll

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