China's bauxite & other non-ferrous mining industry FA investment drops in Jan-Feb 2017

According to the General Customs of China, fixed asset investment of the country's non-ferrous metal mining and dressing industry, which includes bauxite mining, fell sharply by 15.4 per cent year-on-year in January-February 2017. The drop at 5.5 billion yuan widened 5.4 percentage points from 2016 whole-year level. Private fixed-asset investment in the non-ferrous metal mining and dressing industry declined 12 per cent YoY to reach 3.5 billion yuan, widening the gap by 5.8 percentage points from the previous year.

In the first two months of 2017, total non-ferrous metal output including aluminium output in China totalled 8.92 million tonnes, up 11.7 per cent YoY.

Investment in bauxite and other non-ferrous metal ore mining and dressing primarily includes underground and ground excavation, overall mine operation, and ancillary works, such as crushing and grinding the ore compound, dressing, disposing and finally, readying it for selling. Water harvesting, purification and distribution, geological exploration and construction works are categorically excluded from the purview of this sectoral investment.

A survey by Shanghai Metals Market shows that China's total nonferrous metal ore output increased significantly in Jan.-Feb. 2017. Bauxite output, though not high metallurgical-grade, also rose significantly in the period under review.

SMM believes, large and qualified mines still have sufficient room to enhance their output despite the recent capacity reduction policy and anti-pollution inspections.

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Notwithstanding the increasing trend in bauxite mining and other mineral ore production, falling investment indicates that the mines still doubt if non-ferrous metal prices, espcially that of aluminium, will stay high in the future. Aluminium prices had a low to moderately high run through 2016. 2017 too has started on a volatile note with the metal cfrossing US$1,900 band only once in the past three months.

Besides, there is risk for mines to increase investment with financial strain and stricter polution control inspections.

SMM expects bauxite mines and other non-ferrous metal to increase their fixed asset investments in the future with rising nonferrous metal demand at those industries.