Results tagged “copper” from The China Sourcing Blog

There are a few outstanding similarities between the African countries of Angola and Zambia, yet the most glaring one is probably the fact that both these countries have their economic stars hitched to a single commodity: oil in the case of Angola, and copper in the case of Zambia. If you look at a map of the state of transport infrastructure in the region, you could certainly also say that another thing these countries have in common is that they can both count the number of railway lines they have on one hand, so to speak. 

THE BEIJING AXIS just completed a southern African market entry project for a large foreign manufacturer, and if you would excuse me for just slightly taking the spotlight off China in this posting, I'm going to briefly look at the similarity of the sheer lack of diversity in the economies of Angola and Zambia. But of course, like almost everything else these days, you'll still see a lot on China below, I mean, how else?

The Only Show in Town
If most people think Angola and Zambia today, they think oil and copper - there's just no two ways about it. Not least anyone in China, who is the largest consumer in the world of Angolan oil and the second-largest consumer of Zambian copper. To give you an idea of the sheer scale of Angola's 'only show in town,' in 2008 a full 98% of its exports consisted of mineral fuels, oil and products, and China was taking the largest share of Angola's exports (32% - mind you the US was not far behind at 29%). On the back of rising oil exports, Angola's economy has been riding a high wave since the end of its almost 30-year civil war in 2002, with average GDP growth of 13.4% between 2002 and 2009. Its no surprise then that Angola's one-horse economy suffered greatly in 2009 with the drop in commodity prices, and GDP growth for this year fell to about zero, yet growth is expected to return to 7-8% for 2010.

As another economy dominated by commodity exports, Zambia weathered the global financial crisis remarkably well. That Zambia could register 5.3% GDP growth in 2009 was mostly due to contributions from its wholesale and retail sector (which contributed 16.4% to GDP); agriculture, forestry and fishing (12.5%), and construction (11.4%). Indeed, strong contributions from sectors other than mining in 2009 illustrates the value for Zambia's economy in being a little more diversified than Angola's. In 2009, copper exports made up 67.5% of Zambia's total exports, and the only other significant category was ores, slag and ash, which constituted 11.2%. China was Zambia second-largest trade partner, consuming 11% of Zambian exports (interestingly enough, Switzerland was Zambia's largest trade partner, taking a full 48%).    

Only One Way to Get There
While Angola and Zambia have much in common in the way a single commodity dominates their economies, they also share the consequences of this lack of diversity. Outside Angola's oil sector and Zambia's copper industry, both countries face immense development challenges. One could say a lot more about developmental problems in these countries, but here I will focus only on transport infrastructure (and especially the lack of it). The following image can illustrate just how under-developed transport infrastructure in Angola and Zambia still is:
Africa Railways.jpg
This illustration contrasts the extent of railways in Angola (far left) and Zambia (middle) with the MAJOR railways in South Africa (right). You can see that comparison between Angola and Zambia on the one hand and South Africa on the other is very striking. While South Africa has about 20 000 km of railways, Angola has only 3 000 km and Zambia has only one major railway line. To make matters worse, as much as 80% of Angola's transport infrastructure is reportedly not operational. What this means in practice is that getting from one place to another, or getting goods from one place to basically any other, is no small feat, and many places in Angola and Zambia are simply inaccessible. 

Desperate for Diversity
Attempting to break the stranglehold of oil, diamond mining is being encouraged in Angola, although the contribution of the mining sector is still only 5% of GDP. A range of exploration activities were cancelled in Angola in 2009, and foreign mining firms are purportedly having a hard time with bureaucratic hurdles and 'not knowing the right people' in Angola. The potential is there, however, and it is estimated that around 50% of Angola's confirmed diamond reserves have not been touched yet. As things stand, Angola does produce 7-9% of the world's diamonds. Yet Angola is still 169th on the World Bank's Ease of Doing Business ranking, and in the Trading Across Borders sub-section it is ranked 171st. 

Exploration is ongoing in Zambia for minerals other than copper, like gemstones, gold and nickel, and Zambia's government has proclaimed its Fifth National Development Programme with which it aims to turn Zambia into a middle-income country by 2030. The programme focuses on poverty reduction as well as health, education and infrastructure, yet spending for the plan is likely to keep Zambia dependent on foreign loans and aid over the near term. For the time being, however, subsistence farming remains the largest source of jobs in Zambia. 

For Angola and Zambia to comprehensively escape the problems of long-standing under-development, the answer will have to come from oil and copper AND something else, although in both cases it is not quite certain exactly what yet. In the meantime, a few more railways should surely help matters along. 
Asia News Network recently profiled Zheng Xiaoqiong, an acclaimed poet and rural migrant worker whose works strongly feature images of iron. Life, she says, feels just like a piece of iron; working iron machines in Guangdong 'left physical and mental scars on her and her co-workers', and Zheng now utilizes iron's sense of 'shrillness and toughness' in her poetry. A former clinic assistant from Sichuan, Zheng made the trek to Guangdong and after a few months of 'hideous experiences' finally settled in a factory making metal tools. Writing her first poem while recovering from losing a fingernail on the assembly line, Zheng subsequently published volumes depicting the hardships of migrant workers. While being criticized by some for 'coarse language, naïve devices and disorderly arrangement',  Zheng says she draws inspiration from the 'rhythm of her heart' and from a force none other than rock 'n' roll, paying 'close attention to the beats.'

Iron and metals are quintessential images of how China's landscape has been made to dance to the tune of industrialization. In its recent investigative series on China entitled Choking on Growth, the New York Times outlined how China, intending to re-create the West's industrial revolution, has not only become the world's factory but also its smokestack, absorbing
most of the major industries that once made the West dirty. Spurred by strong state support, Chinese companies have become the dominant makers of steel, coke, aluminum, cement, chemicals, leather, paper and other goods that faced high costs, including tougher environmental rules, in other parts of the world.
Yet while the mass shift of industrial production has brought environmental and public health concerns to the fore in China, its factories produce and export many of the goods once made in the West, enabling many wealthy countries to decrease their carbon emissions. Emphasizing the unsustainale nature of conventional models of development in China, Dale Wen at China Dialogue this month drew attention to the way China's desire to attract industries has resulted in highly-polluting Western companies receiving special treatment in China, while the environment is played off against maintaining cost advantage. This situation, she says,
has directly led to the environmental crisis that we now see in China. It also enables developed countries to plunder these late-developers [i.e. China]... (R)esource-intensive, highly-polluting manufacturing industries have been transferred to China by developed countries, China is not just the workshop of the world - it has become its kitchen, sewer and rubbish tip.
The countries of the west, according to Wen, are the real 'bad guys', as are large corporations damaging China's environment in their pursuit for wealth.

And with high demand there's a lot of wealth to be had in China's mining sector. In the words of The Economist,
In recent years, thanks to China's rapid industrialisation and its voracious appetite for metals, mining companies have also produced mammoth profits, boasted gigantic valuations and undergone a series of outsized mergers and acquisitions.
The mining sector has recently been drastically altered, however, with the emergence of a major Chinese player, the state-owned Chinalco, which bought a stake in leading Anglo-Australian mining company Rio Tinto. In the estimation of Reuters, the new Chinese upstart is likely to do business very differently from the established companies, 'increasing supply by rushing through riskier projects to feed China's voracious appetite for raw materials.'  One of these is copper, of which China is the world's largest consumer, using an estimated 4.5 million tonnes of the metal a year, or about a quarter of global production. During China's pre-Olympic building boom, high demand has led to organised gangs in Australia stealing copper cabling worth millions of dollars and selling it to China, resulting in train delays and pilfered power cables and phone lines. A large part of copper in China is used domestically as China develops its power infrastructure, yet a lot of it is also exported in products like power cables and air-conditioners. China's copper imports fell 5% in February, however, and on the back of the slowdown in U.S. export orders, Chinese metal fabricators face a lackluster outlook for the second half of 2008.

As China ultimately faces the prospect of being the world's factory, its smokestack, its kitchen, sewer AND its rubbish tip, it resembles Zheng Xiaoqiong's estimation of life as no more exciting than a piece of iron. And while reciting her lines over some rock 'n' roll beats (always a light in dark times), Zheng might well have come across this song by Chinese rock band Second Hand Rose (二手玫瑰),

They've driven me to be a model worker
They've driven me to be a businessman
They've driven me to be a poet
They've driven be to be a worthless man

Let the farmers be the first to strike it rich
Let my pretty people be the next in line
Let my servants be the first to strike it rich
Let my artists be the next in line


A crowd of pigs take to the sky
A mob of pirates drown on a beach
They've turned my son into cold hard cash
Flowers bloom, then wither on the river bank


(Thanks to paper-republic.org).
[For continued coverage on the mining sector see the Metal Miner blog]