China's mining investment to pay off

Latin American output expected to surge as production gets underway

China's mining projects in Latin America will see an output boom over the next several years, but the country's investment in the region's resources industry will slow down, analysts said.

Chang Xingguo, project director of international minerals and the finance department of the China Mining Association, said China has invested in many copper and iron ore projects in Latin America since 2005, when commodity prices were high.

"Those projects will gradually start production this year," Chang said.

Most of the investments in the region are copper mines in countries such as Peru, a major copper producer, and Brazil.

Affected by China's economic slowdown, commodity prices, especially iron ore, have been declining in recent months. Chang said that when copper projects start operation in the next several years, China will likely have a bigger say in the international cooper market.

China has about 23 overseas cooper projects with a total reserve of about 59 million metric tons, according to data from the China Mining Association. Those projects have an overall annual production capacity of 1.7 million tons, but the operation timetable is uncertain due to factors in foreign countries such as environmental issues, approvals from both authorities and local communities and infrastructure construction.

"The period of large-scale investment in Latin America's mining business has gone," Chang said. "The energy sector such as crude oil and gas will play a key role in the next round of China's investments in the region."

Wei Zengmin, an analyst with industrial consultancy Mysteel, said investment in Latin American refining plants and steel mills will become more common in the future. China has invested in some steel projects in southeastern Asia and crude refineries in Africa, which has brought technology to energy-rich areas and helped to boost local economies.

Globally, China's outbound mining investment has been increased rapidly in the past 10 years.

According to the Ministry of Commerce, China's outward foreign direct investment in the mining sector including energy exploration reached 20.2 billion yuan ($3.26 billion) by the end of 2013 while the figure was only 1.8 billion yuan in 2004.

"It is positive change in China's overseas mining investment that the companies are shifting from the investment stage to the sustainable development stage," said Liu Xiaobai, senior analyst with commodity data firm CRU International Ltd.

China's demand for iron ore, copper, aluminum and nickel will continue to increase, and CRU predicted that China's reliance on foreign supplies of raw materials will not decline in the next 10 years.

According to the Heritage Foundation, a Washington-based research think tank, China's outbound investment in copper ranks third among the country's top overseas mining assets, following iron ore and bauxite.

From 2005 to 2013, China invested $34.5 billion in overseas iron ore assets, $33.3 billion in bauxite and $26.5 billion in copper, according to the think tank.