China always exhibits fast adaptability to the periodic fluctuations of the current situation. The strategies once finalised are implemented without any delay to reap maximum benefits. A case in point is the import of iron ore.
When increasing dependence on imported Indian fines for the last 3-4 years faced the high risks of illegal mining ban, hike in rail freight and additional taxes on exports making Indian prices little prohibitive, Chinese buyers quickly expanded the supply coverage.
In the first 8 months of the current year, China imported around 526 million tones of iron ore.
The primary sources remained two: Australia (50.4%) and Brazil (18.5%).
The new sources are: South Africa (5.4 %), Iran (3.0%), Indonesia (2.1%), Ukraine (2.1%), Canada (1.7%), Russia (1.4%), Malaysia (1.4%), Peru (1.3%) and India (1.3%).
China is similarly importing coking coal from divergent sources. Around 47.5 million tonnes of coking coal in the January-August period has been imported from Australia (38.7%), Mongolia (16.4%), Canada (15.4%), Russia (12.4 %), USA (10.3%) and Indonesia (4.8 %).
It may be noted that India is the primary importer of coke from China, having imported around 42% of the total export by China. Two lessons can thus be learnt from these events.
In the current volatile raw material market, it is prudent to have wider import sources so that policy restrictions in the exporting country do not adversely affect the operation of the domestic plants.
Also, the primary dependence on a particular source much reduces the bargaining power and subjects the importing country to the utter helplessness arising out of the force majeure escape route of the exporter.
Secondly, export of value added products is patently preferable. At least 4-5 times more foreign exchange is earned from the same volume of exports. Also an attitude of preserving and properly utilising the precious natural resources is cultivated among the producers, policy makers and the politicians.
These two things can only happen if the downstream facilities to process the raw materials, each with different grade and quality sourced from various sources, are adequately available in the country. Our mineral policy drawn up a few decades earlier is also reviewed periodically. But the development of downstream facilities (beneficiation, agglomeration, pelletisation, blending etc) was not in-built in the allocation of mine leases or granting of captive mines.
Neither any positive encouragement was given to the entrepreneurs in these new areas.
China has exhibited the long term advantages of pursuing a firm mineral policy which is not bullied by petty political considerations. And today it is proclaiming to the outside world that value added exports would be steadfastly followed in lieu of export of unprocessed raw materials even if that violates the WTO norm of fair trade or the terms of its accession to the celebrated club.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal