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Reliance on imports risky

Industry watchers Monday warned of potential risks to the economy as a result of China's heavy reliance on imports for major mineral resources.

The government has announced that last year over half of the country's petroleum, iron ore, refined aluminum, refined copper and leopoldite came in from abroad.

"China is vulnerable to price fluctuations in the international market and faces the risk of supply disruption in case of heavy reliance on overseas markets," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, explained to the Global Times Monday. 

"Our price of petroleum, for instance, goes up and down because of the international market and we have little say in its pricing, posing an uncontrollable risk to our economy," he explained.

According to data from the Ministry of Land and Resources in October 2011, imported petroleum, iron ore, refined aluminum, refined copper and leopoldite respectively accounted for 54.8, 53.6, 52.9, 69 and 52.4 percent of total Chinese consumption.

Xu Shaoshi, minister of Land and Resources, told media Sunday that China is heading toward serious shortage of mineral resources by 2020 amid its industrialization, urbanization and agricultural modernization drive.

Over the past 15 years, the country has experienced double-digit growth in the consumption of mineral resources, Xu said. 

The current reliance on overseas markets is expected to remain high and may climb in the coming years. 

The share of imports in domestic consumption of iron ore is likely to stay as high as up to 55 percent, according to Hu Kai, an iron ore analyst with Straits Financial LLC. 

Imports of crude oil are expected to go up. According to January data from the China Petroleum and Chemical Industry Association, China's demand for crude oil in 2012 is expected to grow at 5 percent compared with a 1.5 percent domestic output expected.

China has rich metallic mineral resources but many of its important metallic minerals such as iron, aluminum and copper are of poor quality, with ores lean and difficult to smelt, one of the reasons why the country needs to import large volumes of these resources, analysts said.  

Because of its dependence on imports, China has been encouraging domestic enterprises to expand overseas since 2001. Some businesses like Chalco have run projects abroad and buy shares of foreign mining giants. 

However, many overseas projects in the mineral resources sector have not had a smooth sailing. 

Besides, as the hunt for mineral resources intensifies globally, the costs and risks of overseas mining are also climbing, Xu said.

"It is both infeasible and unsafe to rely on overseas supplies for long. China needs to make more effort to tap its domestic mineral resources," he said.