Lanka-China bilateral trade hits $2.6 billion

In the wake of the successful visit of the Chinese biz delegation to Sri Lanka, is the newest development that packs impact on a strategic Sri Lankan supply to the world-the country’s mineral sands & rare earth element sector.

“Sri Lanka wants to upgrade its mineral sector. Specially our mineral export production so that our exports integrate high value addition rather than exiting as mere raw material. We warmly welcome keen Chinese firms in these industries for joint ventures here,” said Rishad Bathiudeen, Minister of Industry and Commerce recently in Colombo.

Minister Bathiudeen was addressing Wu Jianghao, Chinas Ambassador in Sri Lanka recently when Jianghao called on Minister Bathiudeen at the Ministry of Industry and Commerce premises in Colombo 03. A Chinese trade and business delegation led by Ding Shaoxiang, the Vice Governor of Yunnan Province visited Sri Lanka only a week earlier, which was the first high level Chinese team to arrive here since the appointment of China’s new Premier Li Keqiang and in less than two weeks’ of Keqiang’s ascension on March 15.

“There is considerable scope for partnership for Chinese firms in this sector here,” said Minister Bathiudeen and added: “Lankan produced graphite, crystals, and ilmenite are of international standards. In 2012, China exported $ 2.56 billion goods to Sri Lanka which is highest in trade history. But Sri Lanka’s exports to China were only $ 108 million, about 1% of Sri Lanka’s total exports. This shows that there is yet unrealised export potential at our end which we can explore jointly. We now believe that boosting mineral sands & rare earth exports from Sri Lanka, among others, is a good first step in changing our bilateral trade imbalance.”

Sri Lanka’s mineral sands and rare earth exports to China (alone) which stood at a mere $4.47 mn in 2008 rose by a huge 239% in 2012 (to $ 15.14 mn). ‘Mineral Sands’ is the dominating element among the five types of Minerals exported from Sri Lanka to China. In 2012, Sri Lanka’s overall rare earth & mineral exports to the world totalled $ 42.7 mn, rising by a strong 30% from 2011’s $ 32.86 mn. 65% of Y2012 exports consisted of Mineral Sands followed by Silica & Quarts (20%), Graphite (10%), Mica (3%) and other Natural Sands (2%). China was the lead buyer of Lankan Mineral Sands in 2012.

The lead buyer of ‘Other Natural Sands’ was India. Zircon is the other well-known Rare Earth Element (REE) found in Sri Lanka, but due to its diamond-like quality, instead of being exported as a metal, is exchanged as a precious stone, fetching premium prices abroad. A former Sri Lankan economic affairs officer with ESCAP suggested: “The Government of Sri Lanka should obtain the assistance of the Ministry of Land Resources in China to assist in carrying out surveys in target areas for REE. Assistance should also be sought from The Ministry of Industry and Information Technology (MIIT) in China on the application of REE for manufacture of high tech products.”

An activity of the Geological Survey & Mines Bureau of Sri Lanka is advising prospective investors on matters concerning mineral exploration, establishment of industries and exports in Sri Lanka -including graphite. In addition to be the lead buyer of Sri Lanka’s Silica, Quarts and Mica, Japan was the lead buyer of Lankan Graphite in Y2012.

Graphite (which is a well-known Sri Lankan export due to Sri Lanka’s unique graphites) is considered as ‘the next big thing among future elements.’ Two Professors of University of Manchester were awarded the 2010 Nobel Prize in Physics for their work with graphene, the single layer graphite. Sri Lanka annually produces around 4000 M-tonnes of graphite. As the demand for modern technologies (including mobile phones, laptops, consumer electronics-driven by lithium-ion batteries as well as fuel efficient automotives) continue to increase by leaps and bounds, so is the demand for commercial Graphite which is a key ingredient in such applications.

The global market for Graphite is now projected at $ 7.5 billion by 2015 and $9 Bn by 2018 with an estimated annual growth rate of 20% by 2020. According to Global Industry Analysts Inc, China leads the ‘emerging market’ for Graphite, acting as the biggest importer. Meanwhile, the once ‘innocent commercial graphite’ suddenly received prominence in the global strategic frontlines due to Graphite’s strong resistance to high heat -making it a sought after input in nuclear technology as well as fabrication of missile war heads (Graphite and diamonds are the only two natural polymers of carbon. Both are very strong, can withstand extreme heat, and resist attack from chemicals and corrosion). Use of high grade and quality graphite in uranium-graphite reactors and Rocket Expansion Nozzles are now very common.

In the global graphite supply map, Sri Lanka has a strong reputation as a rare supplier of vein graphite in Commercial scale. Sri Lankan made vein graphite has high purity levels (ranging from 80-99% carbon). Kahatagaha Graphite Lanka Limited (KGLL), a graphite firm in Sri Lanka, operating under Minister Bathiudeen’s Industry and Commerce Ministry, mines graphite through several mines that have proven deposit reserves.