China Country Market
Insights and Opportunities
Mining Equipment Sector
Overview: China is heavily reliant on coal, which accounts for 69% of the energy mix. This is the result of an abundance of coal reserves in China, estimated at 115 billion metric tons. Shanxi and Shandong are particularly rich in coal and account for some 50% of overall coal production. In 2006, China’s verified exploitable reserves accounted for 13% of the world total, ranking China third globally. China is the world’s largest coal producer, accounting for nearly 28% of the world’s annual production. In 2007, China’s coal production reached 2.37 billion metric tons, an 8% increase.
About 90% of coal mining equipment used in China is produced domestically. Chinese companies are developing the capacity to manufacture high-tech mining equipment, such as super-power electric haulage shearers, hydraulic support systems, and armored face conveyers. Nevertheless, most of the mining equipment produced in China still remains 10 to 15 years behind that of other countries with respect to mining efficiency, equipment quality, environmental protection of mines, and safety. U.S. coal mining equipment manufacturers and coal mine investors have prospects for long-term opportunities in China’s coal industry.
Opportunities: Due to an insufficient supply of electricity, China will continue to invest heavily in coal production. Many analysts predict that China will need to invest over USD151 billion in coal infrastructure by 2020. The investment will cover the following areas: Construction of new coal mines and coal bases; Improvement of coal mine safety; Clean coal processing technology; Coal conversion technology (including coal liquefaction and coal gasification) and
Coal bed methane development and utilization.
U.S. companies enjoy their greatest competitive advantage in supplying heavy coal mining machines and systems. For underground mining, U.S. firms compete well in the following categories: longwall shearers, stageloaders, continuous miners, batch haulage vehicles, road headers, hydraulic roof support systems, and armored face conveyors. For open-pit mining, U.S. firms compete well in the following categories: electric mining shovels, walking draglines, blast hole drills, and heavy mining trucks.
Coal mine safety remains a critical issue in China. In 2007, China saw 3,786 coal mine accidents deaths. In order to address the issue of safety, the Chinese government closed 2,969 small coal mines in 2007 (below 30,000 tons of production capacity) that the government felt were unsafe. According to the State Administration of Coal Mine Safety Supervision, China will invest USD 6 billion over the next several years to purchase safety equipment for large state-owned coal mines. This investment will create significant opportunities for foreign companies to export safety equipment to China. Best prospects include: coal mining safety equipment, security equipment, gas control systems, and fire monitoring and control equipment.
In order to improve mine management and increase coal production, the Chinese government has established new policies to encourage foreign investment in the sector. This shift in policy has included granting foreign companies the rights for the mineral geological exploitation.