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LAWRIE WILLIAMS: China’s H1 gold output falls 7.9%, but demand rises

China is comfortably the worlds’ No. 1 gold producer at present, but production has been turning down for the past couple of years, and this year’s total looks to be falling again – quite sharply.  Last year, according to precious metals consultancy, Metals Focus, China produced around 429 tonnes of gold- a reduction of  7.9% from its output in 2016 – but even so this was some 140 tonnes more than second placed Australia and 157 tonnes more than third-placed Russia, both of which are currently seeing output increases.  But in H1 2018 the country's gold output is reported as down by another 7.9% to 190.3 tonnes.

China produces its gold from its own mines, plus a substantial additional amount from smelting and refining bought-in base metals concentrates and doré bullion.  But so far this year the country’s mines have only produced  161.62 tonnes – around 9.4% lower  than the 2017 total – according to the latest figures released by the China Gold Association.  The fall in domestiv new mined production seems to be largely due to the country’s increasing crackdown on environmental pollution which remains a major problem with many of the country’s industrial centres seemingly almost permanently smog-bound.

Even so, by-product gold from the country’s huge smelting and refining sector came to 28.66 tonnes, up 2.1% year on year.

Top 10 Gold Producing Nations 2016/2017 (Tonnes)

Rank

Country

2017 Output

20 16 Output

1

China

429

464

2

Australia

289

288

3

Russia

272

253

4

USA

244

229

5

Canada

171

163

6

Peru

167

166

7

South Africa

157

163

8

Ghana

130

131

9

Mexico

122

128

10

Indonesia

114

109

Thus according also to the China Gold Association, the nation’s government's environmental policies have included withdrawal of mining rights in natural reserves as well as reforms on mining rights' transfer and royalty payment, which has led gold producers to reduce output.

The Association puts gold demand in China as rising 0.31% in the half year to 541.22 tonnes, led by an increase in jewellery manufacture (up 6.4%) and in industrial demand in the electronics sector (up 13.8%), but demand for gold bullion is reported as falling by 15.7%.    It also, somewhat puzzlingly, is reported as putting gold imports in the half year to 61.133 tonnes – a 74% rise on the 2017 H1 figure, but we hugely doubt the reporting of these particular statistics (perhaps it should be 611.33 tonnes) given gold imports into mainland China from Switzerland alone have totalled around 275 tonnes according to official Swiss export figures.  If we add Hong Kong gold imports into the mix, the Swiss gold export total alone to ‘Greater China’  in H1 is around 400 tonnes (See: China imports 400 tonnes of Swiss gold in H1) while there will also be substantial additional imports from other nations which export gold directly to the Chinese mainland - primarily from Hong Kong itself, the U.K., Australia, Canada and the USA.  

25 Jul 2018

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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