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December 29, 2021updated 07 Jan 2022 6:28am

China’s gold output to fall by 4.7% in 2021 due to lower grades and strict regulations

The production of gold in China is expected to see a decrease in 2021, mainly because of the depletion of resources and environmental regulations in the country.

By GlobalData

Continuing the recent trend, gold production in China is expected to fall by 4.7% to 12,251koz (thousand ounces) in 2021. The fall will be mainly due to the depletion of the country’s gold resources and strict environmental regulations, which has led to the closure of many small and inefficient mines. In H1 2021, China’s output fell by 10.2% y-o-y to 5,386.3koz, partly due to a safety-related stoppage at the Hushan Gold mine in Shandong province in Q1 2021, which continued to disrupt operations in the second quarter of the year.

Previously, in 2020, China’s production fell by 3.9% to 12,850.7koz. The country has been tackling issues related to frequent policy changes and depleting ore reserves, to which the pandemic became an additional challenge in 2020. Strict environmental regulations related to gold and other minerals are is leading to a rise in the number of international partnerships and joint ventures to enable these mines to meet both domestic and international standards. For example, according to China’s 13th Five-Year plan (2016–2020), the Ministry of Environmental Protection (MEP) mandated for miners to treat 85% of their wastewater and tailing/solid waste by 2020. Mining companies are also required to implement measures for reducing emissions while mines are operating, rather than taking measures after the mine has closed. The strict environmental regulations are leading to cost increases and lower profits for domestic mining companies, specifically artisan and small-scale companies.

Over the forecast period (2021–2025), the country’s gold output is expected to grow at a CAGR of 1.1%, to reach 12,821koz by 2025. GlobalData is tracking nine upcoming projects which are under construction with a combined gold production capacity of more than 60koz and are expected to start production by 2022. The Fuwan Silver, Hushan Gold and Caodi Gold are the largest of these.

In terms of demand, China has maintained its position as the world’s largest gold-consuming nation since 2012. In 2020, the country’s gold imports fell by 78.5% to 7,513.4koz, mainly due to lower demand for gold jewellery, coupled with the restrictions imposed by the Chinese government. The trend continued during the first quarter of 2021, where imports fell to 22,027koz, compared to 23,347koz in the same period in 2020. In April 2021, the Chinese government, however, eased restrictions on imports and exports of gold, relaxing the government’s control over the precious metal trade. The government has allowed domestic and international banks which are members of the Shanghai Gold Exchange and companies with more than 352.7koz of annual output to apply for licenses for imports and exports, albeit with a quota, which is expected to help reverse the declining trade.

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