The Ministry of Industry and Information Technology Drafts“Precious Metal Management Regulation” This Year

Last year the nonferrous metal (excluding gold,rare earth enterprises) smelting industry recorded a profit of 39.3 billion yuan, down sharply by 34% on Y-o-Y basis, in which aluminum smelting profit dropped by 92.7% on Y-o-Y basis (compared with last year), recording the largest decline among major smelting varieties,the whole year only fulfilled a profit of 930 million yuan.

On February 16, The Ministry of Industry and Information Technology (MIIT) promulgated“Analysis of Nonferrous Metal Industry Operation in 2012 and Outlook for 2013” on its official website which disclosed the above data.

The MIIT specially mentioned that, at present most domestic smelting industries have capacity surplus, especially aluminum. At the end of 2012, domestic aluminum capacity is 27.65 million tonnes, the capacity utilization rate is only 72%; the capacity of aluminum industry with self-owned power supply only accounts for 45% of total capacity, aluminum enterprises using grid power experienced heavy loss, some aluminum enterprises in central and eastern China regions where there is high electricity price have suspended production.

The Ministry of Industry and Information Technology alleged that in 2013 it would regard diffusing aluminum surplus capacity as

work highlight, amend copper, aluminum,lead&zinc industries access conditions as soon as possible, study and draft access conditions for titanium sponge and zirconium smelting industries. Meanwhile, it plans to “actively cooperate with related departments to drive forward compilation and submission of ‘Precious Metal Management Regulation’”, “speed up to drive forward the work process to submit the “Strategic Plan for Precious Metal Industry Development” to the State Council.”

Some analysts considered that at present a key problem of the aluminum industry is capacity surplus problem, and this pattern is temporarily“very difficult to adjust”. “At present newly added capacity of aluminum continues to grow,the quantity of phase-out backward capacity is limited, so (total capacity) is always growing.”According to analysts, overseas anti-dumping investigations on Chinese aluminum profiles and aluminum wheel hub, aluminum plate, strip and foil also have huge impact. “(These products) account for high percentage in overall consumption of overseas market. If antidumping is confirmed, then domestic aluminum products will lose price advantage, it would certainly affect total export.”

Against the background of global economic downturn, in recent years a number of countries have kicked off anti-dumping investigation on copper tube, aluminum profile, aluminum plate& strip & foil, aluminum wheel hub, and metal magnesium exported from China, including the U.S., Canada, and developed countries in EU,and also developing countries such as India and Argentina.

According to statistics of the China Nonferrous Metals Industry Association, in 2012,China’s total nonferrous metal import/export trade volume is USD 166.4 billion, up by 3.7%on Y-o-Y basis, the growth margin dropped by 24.4 percentage points, in which export amount is USD 51.5billion, up by 19.4%, the growth margin declined by 33.3 percentage points.Judging from variety, excluding copper product export amount which showed slight increase,export amount of aluminum, lead, and zinc products all declined to certain degree.

High financial cost is another difficult problem facing today’s nonferrous metal industry. According to data of the Ministry of Industry and Information Technology, in 2012 the main business cost of nonferrous industry increased by 16.7%, sales expense and management fee respectively grew by 11% and 12%, but financial cost increased by 27.8%.