Booming China Devouring Raw Materials

Between 1999 and 2003, for example, China's annual exports of thermal coal to produce electricity more than doubled, to 80 million tons, according to Greg Dean-Jones, an analyst at AME Mineral Economics in Sydney. That pushed down global prices and cut demand for Newcastle coal, skewering a $220 million port expansion. But last year, energy shortages in China forced authorities to ration power in key industrial areas, and Beijing abruptly halted exports. Worldwide shortages resulted, and the price of coal roughly tripled.

Coates, the Xstrata Coal chief, calculates that if China's economy slows to 7 percent growth a year, its demand for thermal coal would still swell by about 70 million tons per year. At that rate, in less than a decade its appetite for coal would grow by an amount greater than what the United States now uses in a year.

Red Desert Bottleneck

On the opposite coast of Australia, on a remote stretch of the Indian Ocean, China's cravings have encouraged the mining giant Rio Tinto Group to pour $1.25 billion into port, rail and mine improvements to try to head off similar problems in its iron ore business.

Last year, Rio Tinto's two western Australia iron ore divisions produced more than 118 million tons, a jump of 14 percent over 2002. Still, it was not enough to satisfy China. In 2003, China doubled its investment in new steel mills and its iron ore imports jumped by a third. So far this year, they've surged an additional 45 percent.

Rio Tinto's two ports are not terribly congested, but that is because the company sends spot buyers away to control the queue, said Julie Richardson, an analyst at Rio Tinto's wholly owned Hamersley Iron Pty Ltd., which last year sent more than a third of its product to China. Much of the remainder went to Japan and Korea, whose mills export finished steel to China. "We knew at the end of last year that any piece of ore we could get on the ground and on a ship we could sell," Richardson said. "We're pushing the mines; we're pushing the system."

The biggest bottleneck is the port at Dampier, a town of 1,200 carved into the red desert that defines much of the empty continent.

On a hillside overlooking ore stockpiles, 280 construction workers occupy a temporary camp outfitted with the accoutrements needed to keep people willing to labor every day of the week and at all hours on a lonely patch of dry dust where temperatures regularly reach 118 degrees. Modular homes with satellite TV encircle a swimming pool, a gym, a pub and a mess hall that serves steaks and cappuccino. Air conditioners hum ceaselessly.

Below the camp, excavators pull limestone and granite boulders from a pit and deposit them in the bay, adding storage space for ore. A wharf expansion will allow two ships to be filled simultaneously.

At the center of Rio Tinto's expansion plans is a mound of earth 170 miles inland: the Eastern Range mine. Officially opened in April, it is a joint venture between Rio Tinto's Hamersley Iron and one of China's largest steelmakers, Shanghai Baosteel Group Corp., which will take all of its output -- about 10 million tons a year.

For two decades, Rio Tinto knew what lay buried within the Eastern Range, a ridge overlooking a plain of eucalyptus trees. But only China's emergence provided the impetus to develop the site.