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1. Project Summary and Relationship to China's Agenda 21

The goal of this project is to improve enterprise management and technology, and accelerate the change of local economic growth from an extensive to an intensive mode. Specifically, it seeks to expand and increase the utilisation of vanadium and titanium resources, reduce waste of resources, control environmental pollution and bring economic benefits to the enterprises involved.

This project is based on programme areas 12B and 14A of China's Agenda 21, and related to programme areas 2B, 6D, 12C, 14G and 19A.

2. Background

The Panzhihua area of Southwest China's Sichuan province is very rich in resources. Its mineral resources include paragenesis vanadium (V) and titanium (Ti) with magnetite. The vanadium and titanium reserves account respectively for 6.7% and 35.17% of world totals. Hydropower, coal and metal ores are abundant. The area is the largest steel and energy base in south-west China.

In the early 1970's, China organised a large scale research project on the comprehensive utilisation of ferro-vanadium and titanium magnetite in the Panzhihua area. Much has been achieved since then, including: the technology of ferro-vanadium and titanium magnetite smelting in conventional blast furnaces; a new process of atomised vanadium extraction; a unique process of extracting titanium from abandoned tailings and vanadium from steel slag. Environmental pollution was reduced while the resource utilisation rate was increased. The production capacity of vanadium slag accounts for 75% of China's total, and that of titanium concentrates for 25%-30% .

Due to several factors, including insufficient technical capability and capital, the utilisation rate of many of the resources is still low. For example, for paragenesis V-Ti magnetite containing more than 20 kinds of rare metals, the utilisation rates of iron, vanadium, titanium and cobalt are only 68%, 20%, 5% and 13% respectively. The remaining non-ferrous metals, such as Cr, Ni, Sc and Ga are all discharged or dumped with abandoned wastes. Calculated on the basis of monetary value, the effective utilisation rate of these resources is only 8%. The full utilisation and further exploitation of vanadium and titanium resources is therefore the key to improving the utilisation of V-Ti magnetite, changing the local pattern of economic growth and reducing the cost of environmental protection. Panzhihua municipal government and the implementing agency of this project, Panzhihua Iron and Steel (Group) Company, have decided to take positive measures to accelerate the change of the pattern of economic growth and the implementation of China's Agenda 21. In the following years, the scale of steel production will not be further enlarged. Rather, economic development will focus on more effective utilisation of the various mineral resources, thereby benefiting the economy, the environment and society at large.

The development of Panzhihua is very important for the economic growth of Sichuan province. The comprehensive utilisation of Panzhihua's V-Ti magnetite has an especially important, strategic role in the development of southwest China and China's overall production distribution. Incorporated into the National Key Projects of the Seventh and Eighth Five-Year Plans, the comprehensive use of Panzhihua's vanadium and titanium resources continues to be listed as a National Key Project in the Ninth Five-Year Plan. China's central government and Sichuan provincial government have paid much attention to this project. The State Planning Commission (SPC) has mobilised scientific and technical power all over the country to speed up the progress of the project. Sichuan province has established a pilot zone, formulated favourable policies, increased investment, and established a special office for the comprehensive development of resources development in the Panzhihua and Xichang areas. An important part of the Overall Development plan of Panzhihua Iron & Steel (Group) Co., this project has been reviewed by the Ministry of Metallurgical Industry of China (MMI) and approved by the SPC.

Panzhihua Iron & Steel (Group) Co. has 10 billion RMB of fixed assets. Its annual sales revenue is 7.5 billion RMB and import & export trading volume is 190 million US dollars. The company has invested 700 million RMB and achieved an annual production capacity of 110,000 tons of vanadium slag, 2,000 tons of bi-vanadium pentoxide, 3,000 tons of Ferro-vanadium, 100,000 tons of titanium concentrate, 4,000 tons of titanium dioxide, with corresponding capacities for titanium alloys and fine chemical products. The installed capacity of the coal-fired power plant in Panzhihua city is 700 MW. The 3.3 GW Ertan hydropower station, currently under construction, will be put into operation in 1998 and provide sufficient energy to support further development of the comprehensive utilisation of V-Ti resources. With 20,000 technical staff, the Research Institute of the Panzhihua Iron & Steel (Group) Co. is a world leader in the field of vanadium and titanium resource development.

In order to implement this project, feasibility studies, project design and budget calculations have been made for several sub-projects. These sub-projects are expansion of the Sulphuric Acid Production Plant, the Alkali and Chloride Production Plant, the bi-Vanadium Pentoxide Plant and the Ferro-vanadium Plant, and Comprehensive Utilisation of Waste. Some of these sub-projects have started. An advantage for this project is that the production of titanium concentrates and vanadium slag is supported by favourable national tax policies on waste reclamation.

3. Objectives

3.1 Long-term Objectives

To reduce waste of resources and pollutant emissions by improving technologies and production capacities so as to achieve a complete and effective use of all mineral resources. To establish a development model for China and other developing countries by introducing and experiencing a new development mode in a resource-rich area.

3.2 Immediate Objectives

• Through scientific research, technical development and international technical co-operation, to improve the technical level of comprehensive resources utilisation and master the techniques of effective use and intensive processing of resources;
• To achieve a V-Ti magnetite utilisation rate of 40% by establishing a process line or production plant for extracting vanadium and titanium and comprehensively using the slag and liquid wastes;
• To establish a management system for resource utilisation and environmental protection. This system will monitor the use of resources and environmental protection, and thereby promote resources conservation and reduce pollutant emissions.

4. Outputs and Activities

4.1 Improve the level of titanium resources utilisation

• Build a new titanium concentrate production line with a capacity of 100,000 tons per year;
• Carry out research and development and establish a production line for recovering fine grained of titanium concentrate so as to increase output of titanium concentrate by 100,000 tons per year;
• Build a production line for extracting useful elements from tailings and produce 100,000 tons of ferrous concentrates and 80,000 tons of titanium concentrates per year;
• Produce 10,000 tons annually of titanium tetra-chloride from blast furnace iron slag.

Monitoring Indicators: increased annual output of titanium concentrate by 280,000 tons and titanium tetra-chloride by 10,000 tons; increased resources utilisation rate from 5% to 20%.

Implementing Agency: Panzhihua Iron & Steel (Group) Co.

Time Schedule: January 1997 - December 1998

4.2 Increasing the production of high quality titanium raw material and titanium dioxide products

• Introduce or jointly design a large-scale enclosed electric furnace and its process control technology, and build a production plant with an annual output of 100,000 tons high titanium content products;
• Introduce or jointly design a process of waste acid condensation and futile and potassium fertiliser production from waste acid so as to meet the requirement of consuming over 200,000 tons of waste acid per year, and build a titanium dioxide production plant with an annual output of 40,000 tons by the sulphuric acid process;
• Introduce or jointly design a chloride process for producing titanium dioxide, and construct a titanium dioxide production plant with an annual output of 60,000 tons.

Monitoring Indicators: completion of the project; all processes running smoothly; production targets being met.

Implementing Agency: Panzhihua Iron & Steel (Group) Co.

Time Schedule: January 1997 - December 2002

4.3 Developing vanadium products with the aim of energy and material saving

• Construct a V2O3 plant with annual output of 2,500 tons per year.

Monitoring Indicators: Completion of plant construction; plant meeting annual production target of 2,500t V2O3.

Implementing Agency: Panzhihua Iron & Steel (Group) Co.

Time Schedule: January 1997 - December 1998

4.4 Capability building

• Set up a resource management information system for the production of vanadium and titanium products;
• Improve the environmental management system;
• Carry out cleaner production auditing;
• Conduct training for the managerial and technical staff of Panzhihua Iron & Steel (Group) Co.

Monitoring Indicators: finish cleaner production auditing on main production processes in Panzhihua Iron & Steel (Group) Co.; all the high level managerial and technical staff have received training.

Implementing Agency: Panzhihua Iron & Steel (Group) Co.

Time Schedule: January 1997 - December 2000

5. Inputs

5.1 Chinese Inputs

Chinese inputs mainly include land, equipment and raw materials for project construction; transportation, office and communications facilities, and accommodation for project implementation personnel; the existing domestic technical documentation and monitoring data; Chinese specialists and engineering personnel; partial funding of the project.

5.2 International Inputs

International inputs mainly include: production and process control technology of titanium slag smelting equipment; process control technology for titanium dioxide production with chloride process; technology for waste acid condensation, futile production from waste acid, and potassium fertiliser production; training of technical personnel; part of investment for high-quality vanadium slag plant, titanium dioxide plant with sulphuric acid process, titanium dioxide plant with chloride process and V2O3 workshop. (The implementing agency will be responsible for paying back the loan, with interest)

5.3 Budget

The total capital needed for this project is US$ 294.05 million. The Chinese partners will raise US$ 213.42 million, while foreign aid and investment will cover the other US$ 80.63 million.

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Table 1. Budget by Item (in million US dollars)

Table 2. Budget by Output (in million US dollars)

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6. Benefits

This project will benefit the economy, the environment and society at large. By introducing comprehensive utilisation of resources, estimated production value will be US$ 310 million with annual profits of about US$ 88.3 million. The payback period of the main sub-projects will be from 6.5 to 8 years. On completion the project, the operation and production of Panzhihua Iron & Steel (Group) Co. will have greatly improved, the company will be well able to meet the demands of the market, and a major step will have been achieved in changing the Panzhihuaís mode of economic growth from extensive to intensive. The implementation of this project will provide a good example of increasing job opportunities, eliminating poverty and improving the economy of a region of ethnic minorities. By greatly increasing the utilisation level of resources, reducing waste emissions, and speeding up the implementation of cleaner production, the project will contribute to environmental protection.

7. Risks

The project faces three main problems. First, the market for titanium dioxide produced with the sulphuric acid process is very competitive and the product price is likely to fluctuate. The way out is to improve the product quality and reduce production costs to make the product more competitive. Second, the market might not be able to fully satisfy the projectís intensive demands for electric power, oxygen and sulphuric acid. To help overcome this potential problem, the auxiliary projects will maximise self-sufficiency in the production of these three inputs. Finally, the technology for developing paragenesis V-Ti magnetite is much more difficult than that for common mineral resources, so technology research and development must be accelerated.

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