The Chinese government issued a statement in January calling for the consolidation of the country's mining sector. The joint proposal was put forward by China’s Ministry of Land and Resources and the National Development and Reform Commission, and says that by the end of 2008 each mining area should only receive a single mining permit.
This new restriction will force mining enterprises to merge and to reorganise their assets. But the government is now facing strong resistance from China’s manganese-mining sector.
The manganese triangle
The counties of Xiushan, in Chongqing municipality, Huayuan, in Hunan province and Songtao, in Guizhou province, are the three points that mark out China's “manganese triangle”, which has the world’s largest known reserves of the metal, mostly used in iron and steel production for its sulphur-fixing, deoxidising and alloying properties. The triangle’s reserves are thought to total 80 million tonnes, and the industry is vital to the area, accounting for more than half of local government income in the area.
Decentralisation and technological inefficiency are holding back China’s manganese industry, which produced only five million tonnes in 2006, a figure that shows little sign of increasing. But demand is being spurred by a buoyant steel industry, and the country is importing more manganese at ever-higher prices. China is already the world’s largest importer of manganese.
The government is desperate to turn this situation around, and this effort has focused on Xiushan county, known as the “world manganese capital”.
China’s manganese boom led to the setting up of over 90 mining firms in Xiushan, of which 45 are currently operational. The industry provides an income for local government and has created a number of wealthy mine bosses. But it is based around a number of small-scale operations, and has been criticised for wasting resources, ruining the local environment and causing industrial accidents.
Xiao Youfu, general manager of Xiushan Fuhua Mining, said that in the early years of the manganese boom, the county encouraged private capital to invest in the mining industry. But when it was combined with a lack of regulation, the policy led to disorder.
“The mining sector needs to be consolidated, and resistance from the bosses is to be expected,” affirmed Ai Daliang, head of the Xiushan Land and Resources Bureau. Ten of the 45 companies currently operating in the region will need to be shut down, said Ai, but it will be a difficult task.
“For the mine owners, the reorganisation means a reallocation of resources,” Ai noted, “and some are bound to lose out.” They also have another reason to resist the plans. “The new, larger companies are going to have to cover the cost of problems associated with the firms they absorb.”
A survey in 2005 by China’s State Environmental Protection Administration (SEPA) found 13 firms in the manganese triangle had breached targets on the release of hexavalent chromium and ammonia-nitrogen – in the worst case, by a factor of 180.
A villager from Huayuan county described one consequence of the mining. “When you walked barefoot by the river, your feet started to itch.”
In August 2005, government leaders demanded an investigation into the pollution, and a plan to deal with the problem. In March 2006, SEPA and the Ministry of Supervision started to take action.
As a result, one of the 41 manganese operations in the triangle has been shut down permanently, 30 have been closed temporarily pending improvement, and 10 have been given targets to improve. These actions came to a total cost of 219 million yuan.
Xiushan suffers from the unregulated nature of the mining industry. Many small operators took ore from wherever they could, with completely inadequate investment in safety and environmental measures, said Xiao Youfu. This adds to reluctance in the face of consolidation measures. “If I take over someone else's mine, I will be responsible for their safety measures, and there is no way I can accept that. I will be paying for the safety issues they have covered up,” he said. “As soon as there's an accident the boss ends up being arrested. How would I sleep at night?”
Xiao is not in favour of the changes to the industry. He says that an unavoidable fact is that the mines are scattered, sometimes tens of kilometres apart. Being in the same mining area does not mean that mines are adjacent. “How can you issue one mining permit for two mines on opposite sides of a mountain?”
Ai Daliang also points out that due to “incompatible” safety systems, the mine owners all have their own interests.
On paper, Xiushan can produce 1.63 million tonnes of manganese per year. In 2006, the actual figure was 1.24 million, mainly from five areas. The single largest firm can extract 90,000 tonnes, with most firms extracting around 30,000 tonnes. Their capacity is more or less equal, but none are willing to admit to being the smallest – or dare to claim to be the biggest.
“There's no way I would let them merge us with another mine,” said one boss. But at the same time, he is aware his firm is not big enough to absorb anyone else’s.
“There are going to be problems consolidating the operations, but it's still got to be done,” says an official at Xiushan Manganese Mining Office.
In the two months since the government statement, the authorities in Xiushan have been holding discussions about how to proceed. To go ahead will harm company bosses in the region, and there are worries about the repercussions.
Xiao suggests a compromise. “If there have to be mergers, but we also want to keep companies in business, why not have all separate the firms in one area invest in a single company that will be awarded the single mining permit? The actual work can be split up between the existing companies. It would stop them having to shut down."
There is precedent for this idea. In Xiushan, one permit holder is responsible for four mines. The advantage is that the cost of safety deposits – funds held by the government to cover the costs of dealing with accidents – can be divided across the mines, with the permit holder not having to pay.
Yu Hua is a Chongqing-based reporter.
Homepage photo by Chihsun Tsai