Expansion has flipped to contraction for Chinese miners as the global commodities glut overwhelms demand and the ability of the mainly state-owned companies to pay.
From Africa to Australia there is evidence of retreat as mining projects are abandoned in a rush to go home which is almost as hectic as the rush to expand during the commodities boom.
The flip from expansion to contraction is likely to force heavy losses on the companies involved, especially when the time comes to write-down asset values.
Iron And Copper Melting
But it is also costing foreign workers and foreign governments dearly as work ends especially in the once red-hot iron ore sector which is feeling the heat of a collapse in Chinese demand for steel caused by a slowdown in the construction industry.
Countries with big copper mining industries in a region of southern Africa dubbed the copper belt are also being hurt by mine closures.
Zambia is being especially hard hit because copper accounts for 70% of its foreign-currency earnings which have plunged as the price of copper has fallen by 55% over the past five years from $4.50 a pound to its latest price of $2/lb.
But it is in iron ore that the retreat is most noticeable, perhaps because the expansion was so rapid during the years when Chinese demand for steel seemed to be insatiable.
In the west African country of Cameroon the once highly-rated Mbalam-Nabeda iron ore project this week became the latest to be hit by a Chinese withdrawal when the state-owned China Gezhouba Group delayed signing an engineering and construction contract for port and rail services.
A similar picture is emerging in Australia with three China-backed iron ore projects in different stages of doubt.
Late last year China’s biggest steel maker, Baosteel, said it would not invest additional funds in the proposed $3 billion West Pilbara iron ore mining project.
Baosteel’s decision was followed earlier this week by a decision from another Chinese steel maker, Ansteel, to warn that it might not invest additional funds in the loss-making Karara iron ore processing project in which it has already sunk $2 billion.
The third Chinese iron ore project being watched carefully is Sino Iron, a development led by the Citic group but one which is years behind its construction completion and with $12 billion already spent close to 200% over budget.
The Sino project has always been closely watched because of its political links via a deal between Citic and an Australian businessman turned member of the national Parliament, Clive Palmer.
A bitter legal dispute between Palmer and Citic has been running for more than three years over his claim for unpaid royalties, income he needs to meet demands in other parts of his group, especially a hard-hit nickel refinery which has also been buffeted by lower mineral prices.
The next few months promise to be a testing time for Citic and its Sino project, as well as for Palmer who once ranked among Australia’s richest people but who is now facing financial pressure in a number of areas.
Read more from original source: http://www.forbes.com