Against the Financial Crisis: Research on Circular Economy of China Aluminum Industry LI Hao, DENG Jun School of Earth Sciences and Resources, China University of Geosciences, Beijing, P. R. China, 100083 [email protected] Abstract: Bauxite is one of the most important mineral resources; aluminum industry plays an important role in China's industrial economy. The non-renewability and the sustainability of development of mineral recourse require us to minimize energy consumption and achieve the maximization of the economic development, which allows the resource-based circular economy as the strategic choice in the sustainable development. A better utilization of mineral resource, developing circular economy is the key to comprehensively implement the scientific concept of development and achieve the sustainable development of industrial economy. This paper takes aluminum industry as an example, analyzes the condition and the status quo of the aluminum industry against the financial crisis, put forward countermeasures for the development of aluminum industry as well as suggestions for developing a mineral circular economy pattern that suitable for China's own national conditions. Keywords: Bauxite, circular economy, mineral resources, financial crisis, sustainable development

1 Introduction In recent years, China's mineral consumption has taken a rapid growth. According to statistics, the demand for minerals has stabilized when a country’s per capita GDP is fewer than 800 U.S. dollars, as well as more than 3.5 thousand U.S. dollars; the demand for mineral resources will rapidly increase in the period when the per capita GDP is between 800-3500 U.S. dollars. China’s industrialization is undergoing a period of accelerated development, in 2008, China's per capita GDP is 2520 U.S. dollars, and economic growth will continue relying on a large consumption of mineral resources. Aluminum resources is an important mineral resources, in recent years, China’s aluminum industry has developed rapidly in the recent 20 years. According to China nonferrous metals industry statistics yearbook, in 2001, China's refined aluminum production reached 3,371,400 tons, accounted for 13.79% of the world’s total. China replaced Russia and became the world's largest producer of refined aluminum. In 2004, China's consumption of refined aluminum reached 6,190,900 tons, accounted for 20.98% of the world’s total, exceeded the United States as the world's largest consumer of refined aluminum. In 2005, China's refined aluminum production and consumption were 7,806,000 tons and 7,118,600 tons, accounted for 24.47% and 22.51% of the world’s total production and consumption respectively over the same period [1]. China’s bauxite resource ranks sixth in the world, the amount of which accounts for only 2.4% of the world's total reserves. Reserves for exploitation with economic significance only accounted for 21.5% of the identified reserves. The level of protection resources is limited in China, and bauxite is a relatively rare resources. Bauxite resources are mainly distributed in Shanxi, Guangxi, Guizhou and Henan provinces, which account for more than 90% of the total. Most of the deposits types are sedimentary. 38% of the total is suitable for open pit mining; more than 60% were suitable for pit mining. Exploitation of each year accounts for 8% of the world’s total production [2].

2 State Quo of China's Aluminum Industry Development 2.1 The Exploitation of China's Bauxite Ore According to statistics from China nonferrous metals industry association, China's bauxite mining capacity keeps a low increasing in recent years. During the years from 2002 to 2006, domestic bauxite production capacity increases by 7.7% annually. Until the end of 2006, the exploitation capacity of bauxite is 16.86 million tons / year within the scope of national statistics. Taking into account the 347

non-governmental mining capacity, domestic bauxite mining capacity is greater than the actual statistics. Domestic bauxite mining statistical data shows that the amount of mining is in a rapid growth. It reaches 21.52 million tons in 2006, 1.5 times of that in 2002. It is mainly due to the rapid growth of alumina production, which leads to the expanding of bauxite resources exploitation. China's bauxite resources are insufficient and mostly in poor quality, requiring a large number of imports to make up for the shortfall. In recent years, China's alumina production keeps an accelerated growth; the demands for bauxite are very strong in the domestic market, insufficient raw materials supply and strong demands poses tensions. In particular, most of the new alumina projects are in use of Bayer alumina production, which require higher quality bauxite, exacerbated the demands for high-Al-Si ore, and promote a sharp increase in price. China's bauxite imports in 2006 reached 9,680,000 tons, an increase of 346.9% than the previous year. Bauxite imports in 2007 reached 23.28 million tons, an increase of 140.5%. 2003-2007, average unit price of China's imports of bauxite in Figure 1. (Source: China Customs Statistics Yearbook)

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Figure 1: Average Unit Price of China's Bauxite Imports, 2003-2007

2.2 China's Alumina Production Until the end of 2007, China's alumina production capacity reaches 28 million tons / year. New capacity increased by 10.94 million tons / year in 2007, an increase of 64.1% than the previous year, with a lower growth rate but the biggest increase ever. Since 2003, China's alumina production capacity expanded dramatically, with an average annual growth rate of 33.8%, domestic alumina production capacity in 2007 was 5.37 times than 2003, and the pace of development is rarely seen. At the end of 2007, there are 24 domestic alumina plants, with an average production capacity of 1,160,000 tons/year. China Aluminum Company has the largest alumina production capacity of about 11.5 million tons / year, accounts for 41% of the total national capacity. Shandong Chiping Huayu Aluminum Industry Company has the largest single-plant production capacity; annual production capacity reaches five million tons. China's alumina production capacity has been ranked first in the world [3]. According to statistics from China nonferrous metals industry association department of information, in 2006 the domestic alumina production reached 13.7 million tons, increased 60.5% compared to 2005, posed a net increase of 5,164,000 tons, ranked second in the world for five consecutive years. Domestic alumina production in 2007 took a further rise to 19.457 million tons, an increase of 42%, a net increase of 5,757,000 tons, which allows China as the world's largest producer of alumina. During 2003-2007, the average annual growth rate of China's alumina production is 26%, alumina production in 2007 was 3.18 times than that in 2003. The rapid alumina growth is mainly due to the rapid growth of domestic electrolytic aluminum production. High alumina prices in domestic and international market, high alumina profits, formed a domestic investment boom. During 2006 and 2007, a number of new alumina projects go into operation, lead to a growth in output. However, the growth rate is fastest in 2006, in 2007 the production started to decline. China's alumina production in 2002-2008 is in Figure 2. 348

Production volume(million tons)

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Figure 2: China's Alumina Production and Growth, 2002-2008

In 2008, China's alumina output is 22.79 million tons, an increase by 17.1%, alumina imports is 4.59 million tons, fell by 10.51%. Henan Province continues to maintain the first place with 8.56 million tons of alumina production. Guangxi’s alumina output growth by 160.38% after the operation of Huayin Aluminum Company of Guangxi Zhuang Autonomous Region (1600kt/a), Aluminum Co., Ltd. Pingguo (900kt/a), Jingxi alumina project (400kt/a). Due to most of the alumina enterprises in Shandong Province rely on imports, the decline in alumina prices drive to a reduction of output, production of alumina in Shandong Province only increase by a slight of 3.08%. Alumina productions in several regions in 2008 are in Figure 3.

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Figure 3: Alumina Production in Province, Municipality and District, 2008

2.3 Situation of China's Aluminum Industry against the Financial Crisis China’s aluminum output is 3,539,000 tons in January-April, 2009, the production in the same period previous year is 4,209,000 tons, and 670,000 tons were reduced, with a decline of 15.9%. China started to reduce costs by large-scale imports of bauxite since 2006. In 2008 China imported 25.79 million tons of bauxite; from 2006 to 2008, China's average annual growth rate of bauxite has been 178%. January to April, 2009, China's bauxite import are 4.091 million tons, with a reduction of 53.14%. It is mainly due to the price fell below the cost at the beginning of the year, domestic smelting enterprises reduced 349

production, the demands of upstream alumina business declined. The production of alumina enterprises fell down, led to a significant reduction in bauxite imports. China’s annual net exports of aluminum remained a strong capacity since 2004 due to the rapid growth of aluminum production. Most of the exports are in low-prices. However, in January-April, 2009, China's aluminum showed a rare situation of net imports. Domestic capacity have been limited because of low aluminum production prices, coincides with the financial crisis when aluminum prices abroad are lower than domestic prices, the situation led to the emergence of net imports. Shanxi has China's largest bauxite reserves, after the financial crisis, effects by production capacity and price, aluminum production in the first half of 2009 as Figure 4: 350000 300000 250000 200000 150000 100000 50000 0

Febuary

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Cumulative production ended this month（ton） Production this month (ton) Figure 4: Aluminum Production in the First Half of 2009, Shanxi

After the global financial crisis, the issue of mineral resources has become a significant problem which impedes China's economic growth. China's economic growth must not be built on the basis of high consumption of resources, the development of China's economic industrialization and modernization will face serious difficulties caused by excessive consumption of resources. We must practice thrift and utilization, develop circular economy of mineral industry. The national economic development will show great needs for mineral resources in a long period of time, we must take comprehensive and economical utilization of mineral resources, strengthen the comprehensive utilization of resources and protection, promote the reduction, efficient use and recycling of mineral resources consumption, development circular economy and build a resource-saving and environment-friendly society [4].

3 Cycle of Resource-based Economy Since the 1990s, the development of knowledge-based economy and circular economy became the two major trends in the international community. China brought in the idea of circular economy from the 1990s. Since then the theoretic study and practice of circular economy continued to develop. In 1998, brought in the concept of circular economy from Germany, "3R" principle has been established. In 1999, China integrated the development model of circular economy from the sustainable production perspective. In 2002, realizing the meaning of circular economy from the new industrialization perspective; in 2003, circular economy was incorporated into the scientific development concept, China established the development strategies of material reduction; in 2004, and China put forward developing circular economy in different spatial scale which is urban, regional and national levels. Circular economy is an economic model which aimed at the efficient use of resources and recycling, principled as "reduce, reuse and recycling", characterized by closed circulation of material and energy echelon use, ran in accordance with the natural-ecosystem’s material cycle and energy flow. The core of circular economy are resource recycling and conservation, increase the maximum efficient use of resources, reach the goal of saving resources, improving efficiency and reducing environmental 350

pollution. Circular economy has obvious advantages compared to traditional economy: First, it saves natural material and energy, raises the utilization rate of resources sufficiently, maximizes the reduction of waste discharge, protects ecological environment. Secondly, resource conservation protects the environment and enables the harmonious development of society, economy and environment, which allows social production to upgrade from the material growth by quantitative to the service growth by quality, perfectly consistent with the spirit of the scientific concept of development. Thirdly, circular economy not only achieved sustainable development in the production aspect, but also let the consumption into the framework of sustainable development. Fourthly, as the circular economy simulates "food chain" form in organizing production, which lengthens the production chain, cultivates new economic growth points, as well as environmental protection industry and other new industries, all of which are conducive to industrial restructuring, expands the level of employment. Circular economic model brings a qualitative change in human economic development, natural capital has been considered more seriously, ecological threshold has also been widely concerned [5].

4 Development Trend and Countermeasures of China's Aluminum Industry 4.1 Development Trend of Alumina Industry The high alumina bauxite resources is about to dry up due to the mining destruction for more than three decades in Henan, Shanxi, Guizhou and other provinces. China's alumina industry will develop in the following directions: 1. Improve beneficiation process, upgrade A / S of ores, meet the requirements of downstream processes; 2. Make full use of gibbsite bauxite resources in neighboring countries and make up for deficiencies in China; 3. Enhance the exploitation of potential high-quality bauxite in the coverage of coal-bearing formation, develop new access to bauxite resources; 4. Advance open pit mining technology towards the direction of efficient mining equipment, improve underground mining technology gradually, mining production will be increased year by year, and ultimately account for a dominant position; 5. Enhance the operation of alternative technologies, carry out fly ash extraction of alumina technology research, realize industrialization step by step, alleviate the scarcity of alumina. 4.2 Strategies and Suggestions We must give prominence to building a resource-conserving, environment-friendly society in our strategy for industrialization and modernization. Those include the basic formation of the economic growth mode under the conditions of optimizing the structure, improving efficiency, reducing consumption and protecting the environment. From a long-term concern, we should draw up the strategy of aluminum industry circular economy in order to protect the sustainable development of China's aluminum industry. Rational planning and layout, implement protective bauxite resources exploitation strategies, further enhance the development and utilization level of China's bauxite resources, increase exploration efforts. Firstly, implement protective exploitation of bauxite, improve the efficiency of bauxite mining, protect non-renewable bauxite resources; strictly prohibit illegal mining activities such as indiscriminate digging, dry up rich mines and abandon poor ones, destruction of resources, extend the life of mines. Secondly, control the size of the domestic bauxite mining; maintain a reasonable level of reserves of mineral resources, in order to meet the demand for mineral resources by existing alumina industries in a long period of time. Thirdly, increase exploration and exploitation of bauxite resources, increase bauxite resources reserves. Improve the existing technology, improve resource utilization. Considering the features of China's bauxite resources, China must take the road of scientific and technological development. Aiming at raising the utilization rate of resources, increase research and development efforts of alumina processing and high-efficiency equipments. Combination of information and control technology, promote 351

homogenization of raw materials, processes modular, intelligent process operations in order to achieve efficient use of limited resources. Increase scientific and technological development; improve the utilization levels of bauxite. Strengthen the comprehensive utilization of bauxite resources, which prevent or reduce the waste of valuable resources as well as improve the economic efficiency of enterprises significantly, in order to achieve the best economic results in the use of mineral resources [6]. Strengthen geological exploration, speed up land reclamation in mining areas, strengthen the rational use of mining resources, make relevant policies and take measures in order to support the development of aluminum industry, implement the "going out" strategy, make full use of domestic and foreign "two resources and two markets ", increase the supply capacity of bauxite resources, expedite the legislative process of renewable resources, improve relevant laws and regulations, ensure the sustainable use of bauxite resources [7].

5 Conclusion The development of circular economy of China's aluminum industry is a systematic process. Attention should be given to the protection of the earth's natural environment when developing domestic bauxite resources and making use of foreign resources. Including environmental protection in the process of ore mining and alumina production, we must avoid treatment after pollution. In the circular economy of mineral industry, except for reduction, reuse, recycling, which was called "3R" principle, the authors suggest that the re-organizational principle in the management level, re-thinking principle in the consciousness level, re-use principle in tailings select manufacturing and re-fixing principle in improving industrial smelting technology. They should be taken seriously as the "3R" principle, become the basic principles in the circular economy model and be widely recognized and promoted. Author in brief and Contact information Hao Li, (1984- ), male, China University of Geosciences (Beijing), Candidate for Resource Economics Ph.D. Email: [email protected]; Jun Deng, (1958- ), male, Ph.D., professor, Ph.D. adviser, China University of Geosciences (Beijing) vi ce-president, Dean of Graduate School.

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