China Nonferrous Metals Monthly



China Nonferrous Metals Monthly

China’s Total Copper Consumption May Enter Stagnation Stage

It is public knowledge that, in recent years China’s copper consumption ranked firmly at the top of the world, and nearly accounted for half of global total copper consumption. Over the past 10 years, driven by rapid growth of macro economy, China’s copper consumption always maintained 10% above rapid growth, either in growth speed or growth increment, it maintained leading position worldwide. Since 2013, as China’s economic structure entered transition, economic growth began to slow down, the growth of China’s copper consumption also experienced obvious slowdown, its annual growth dropped to about 5%～7%. According to estimate made by British research institution CRU (Commodity Research Unit), in 2015 the global total refined copper consumption was about 21.589 million tonnes, up by only 0.04% on Y-o-Y basis. On the other hand, in the same year China’s total consumption was about 9.9056 million tonnes (accounting for 45.88% of global consumption in the current year), up by only 3.28%. In the face of sluggish growth in China’s copper consumption, obviously there are different views in the market today. The mainstream opinion considers that in the next several years though China’s copper consumption growth will present a declining trend, total consumption volume will still maintain moderate growth, the peak era of China’s copper consumption has not yet arrived. Nevertheless, some market insiders consider that the year 2015 might be the peak year of China’s total copper consumption, the golden age of China’s copper consumption has become a thing of the past, since then China’s total copper consumption might enter stagnation or slow decline period. The author tends to agree with the second view, namely China’s total copper consumption has reached peak value in 2015, future total consumption will hardly experience any growth, whose reasons can be found in the following five aspects.

Firstly, from the perspective of economic development stages, as China’s economic structure continued to make transition, the dependence of China’s economic growth on primary industry (industrial industry) is gradually diminishing, therefore the demand for bulk raw materials as industrial goods including copper will also gradually decrease. According to data from the National Bureau of Statistics, in 2013 added value of China’s tertiary industry accounted for 46.9% of GDP, for the first time overtook secondary industry, in 2014 it further rose to 48.1%. By the first half of 2015, added value of tertiary industry accounted for up to 49.5% of GDP, to become the “half pillar” for supporting economic growth. According to forecast by the China Institute for Reform and Development, after 2020 China will develop economic structure dominated by service industry. The transition of economic structure will directly affect the growth trend of copper consumption. German economist Hoffman once put forward the famous Hoffman Theorem, which divides industrialization development into four stages, the first stage will witness rapid development of consumption material industries (e.g. food industry, textile industry etc). The second stage will witness rapid development of capital material industries (e.g. metallurgy industry, machinery industry etc). In the third stage bothwill be equivalent in terms of scale. In the fourth stage, capital material industry will have rising percentage in the manufacture industry, and gradually stabilize after reaching certain level. The industrialization process will also be completed in the late period of the fourth stage, the economy will enter a development stage dominated by consumption, the demand for industrial materials will naturally decrease. At present, judging from the perspective of industrialization development, China has enter the fourth stage. As the growth model of economy dominated by consumption gradually takes shape, China’s demand for industrial goods such as copper will gradually decrease. Secondly, judging from statistical data, according to data from the World Bureau of Metal Statistics and other institutions, at the stage when per capita GDP is between USD 7000 and USD 10000, copper consumption in developed countries reached peak. In 2014, China’s per capita GDP topped USD 7000, signaling it has entered this peak zone. Furthermore, judging from per capita consumption intensity, in 2015 China’s copper consumption was 9.90 million tonnes, which can be converted to annual per capita consumption of 7.3 kg. Based on 1 tonne of copper consumption throughout the life of a citizen in developed countries, the annual per capita copper consumption in developed countries is about 15 kilograms. Then can China’s per capita copper consumption grow to 15 kilograms level? As a country with large population, the effect of scale economy is obvious, per capita resource consumption intensity can hardly reach the resource consumption intensity level in developed countries with relatively low population density. Judging from concentration degree of urban population residence, the concentration degree of China’s urban population is far higher than that of developed countries, and this means the per capita possession degree of China’s infrastructure such as urban road, transport and building etc is far lower than that in Western developed countries. Take London with 7 million population as an example, London has 8 large railway stations, whereas Beijing, a city whose actual population is over 30 million, only has 3 large railway stations. Through rough comparison, it is easy to infer that China’s per capita copper consumption cannot be compared to that of Western countries. Furthermore, judging from experience of the electricity industry, according to estimates by the China Electricity Council, the peak value of US per capita power usage is 15000kWh, whereas China’s per capita power usage will reach peak value when growing to 8000kWh to 9000kWh. It can be inferred that, as key terminal sector of copper consumption, China’s consumption intensity peak value of electricity resource is only about half of US per capita power consumption peak value. In fact, based on previous calculation, currently China’s per capita copper consumption has approached half of the per capita copper consumption level in developed countries. On such basis, it can be estimated that China’s copper consumption already has very limited space for growth.

Thirdly, judging from lateral comparison, iron & steel industry is the leader of China’s metal industry, and also the barometer of the metal industry. On December 7, 2015, the forecast report published by the Metallurgical Industry Planning and Research Institute indicated that, in 2015 China’s actual iron & steel consumption volume was 668 million tonnes, down by 4.8% on Y-o-Y basis. This is the first time drop in China’s steel product consumption volume since 1995. According to forecast made by relevant departments, 2015 might be a peak year for China’s total iron & steel consumption volume, in 2016 it would continue to fall. The slide in total iron & steel consumption volume may herald that China’s total copper consumption will also closely follow behind.

Fourthly, judging from consumption structure, China’s main copper downstream consumption sectors all face huge pressures of high level of stock, and sluggish growth. China’s copper downstream consumption sectors are mainly distributed in electricity, air conditioner,construction, transportation, and household electrical appliance industries.

Electricity is the biggest sector of China’s copper consumption. According to data of Antaike, in 2015 copper consumption of China’s electricity industry is about 4.56 million tonnes, up by 7.3% on Y-o-Y basis, accounting for about 49.67% of China’s total copper consumption. According to data from the China Electricity Council, as economic development gradually fulfilled transition, the potential growth of electricity consumption presented steady declining trend. It is estimated that during the “Thirteenth Five Year Plan”period it would further decline to 4%. Therefore, the copper demand of electricity industry will also receive big impact. Before 2010, copper demand for electricity construction maintained annual growth of around 25%, after 2010 this growth rate quickly plunged, in 2012 the growth rate was only 10%. Specifically, electric wire & cable are main copper-consuming terminal products, accounting for about 70% of total copper consumption in electricity industry. In electric wire & cable, the copper consumption intensity of extra high voltage electric power transmission line is evidently lower than that of other electric power transmission lines. In the future, because extra high voltage electric power transmission line becomes the main direction of electricity investment, the consumption intensity of electric wire & cable for copper will decrease slightly. Judging from the “Thirteenth Five Year Plan” for the power industry, taking into account data from the China Electricity Council, long distance electricity transmission is a new bright spot in the electricity reform during the “Thirteenth Five Year Plan” period. Specifically, the power transmission passage-way from Western energy base to East China, Central China and Guangdong Province and the power transmission passage-way from Ordos Basin to North China, Central China, and East China are key construction projects in the “Thirteenth Five Year Plan” period. In the light of such assumption, the structure of future electricity investment will have certain changes, regions with less copper consumption and the construction of provincial-level extra high voltage main power grid network will further reduce copper demand intensity from electricity facility construction.

Air conditioner & refrigeration equipment is the second biggest field of China’s copper consumption. According to relevant data, in 2015 China’s air conditioner industry consumed about 1.42 million tonnes of copper, up by 4.4% on Y-o-Y basis, accounting for about 15.47% of China’s total copper consumption.

According to statistics of the International Copper Association (ICA), the copper consumed by air conditioner manufacture accounts for about 70% of the copper consumed by overall household electrical appliance industry. Judging from air conditioner sales, according to data published by the State Information Center recently at the Air Conditioner Industry Summit Forum 2015, in 2015 sales of the air conditioner market declined by 5.4% on Y-o-Y basis, and the sales amount declined by up to 10.50% on Y-o-Y basis. The bigger drop in sales amount than that in sales volume indicated that the air conditioner industry also is facing the pressure of de-stocking. According to forecast made by www. chinaiol.com, an authoritative institution in air conditioner & refrigeration industry, currently the stock of air conditioner industry has reached historical high level, the whole industry’s stock is up to about 50 million sets, some market insiders even considered the stock up to 70 million～80 million sets. Whereas in recent years annual sales of China’s air conditioner domestic market was less than 50 million sets on average. Judging from the existing possession of domestic and overseas markets, currently it is basically saturated, and there can be hardly any big consumption increment, in the long term, the copper consumption volume of air conditioner sector will slowly decline.

Construction is the third biggest sector for China’s copper consumption. According to relevant data, in 2015 China’s construction industry consumed about 755,000 tonnes of copper, up by 2% on Y-o-Y basis, accounting for about 8.22% of China’s total copper consumption.

Viewed from the long term, the dwindling future housing demand caused by population aging is the main threat facing copper consumption. In the short term, slowdown in the growth of newly started floor space resulting from de-stocking of the real estate industry is the biggest problem facing copper consumption today. in December 2015, data published by the National Bureau of Statistics indicated that, last year from January to November, Y-o-Y growth of nationwide real estate development investment dropped by 0.7% than that of the previous 10 months. Since January 2014, growth of real estate development investment has declined for 22 consecutive months. The People’s Daily published an article on December 25, 2015, pointing out that currently real estate investment continued slowdown, floor space available for sale increased, de-stocking has become a “national mission”. The article cited the views of Ni Pengfei, an expert of the Chinese Academy of Social Sciences, that by the end of 2015, China’s total stock of commercial housing is expected to reach 3.996 billion sqm. Wherein stock of completed housing is about 426 million sqm, whose absorption cycle is 23 months; stock of forward delivery housing is about 3.57 billion sqm, which needs 4.5 years for absorption. Such huge stock will inevitably affect future real estate investment and newly started floor space. In the long term, newly started floor space will present declining trend, which will accordingly bring down the copper usage in the construction sector.

Fifthly, in the substitution aspect: The trend of replacing copper with aluminum will exist for a long time. In September 2015, the industry standard “Rated Voltage 0.6/1Kv Aluminum Alloy Conductor XLPE Insulation Cable” was formally implemented, signaling the replacingcopper-with-aluminum trend made a further step forward. It has been learned that, this standard followed US ASTM standard, aluminum alloy cables up to this standard have been used in the US for nearly 50 years, featuring reliable safety performance. In real estate field, leading benchmark real estate enterprises such as VANKE, Country Garden, and China Overseas Land & Investment Ltd have begun to try aluminum alloy cable. In view of this trend, large-scale replacement of copper by aluminum will become another factor to restrain copper consumption in mid to long term.

Based on the above, the peak of China’s total copper consumption may have arrived in 2015 earlier than expected, in the next several years total consumption may hover around the high level in 2015. From longer perspective, China’s total copper consumption will inevitably present downward trend, this also becomes the New Normal of China’s copper industry. In order to cope with the New Normal of China’s copper consumption trend, has China’s copper industry made mental preparations? The author has the following tentative understanding for reference by China’s copper industry.

Firstly, it is necessary to develop crisis awareness, plan ahead and make early preparations. At present China is advocating reform of the supply front. China’s copper industry should also start a supply-side revolution. After fully recognizing the fact that consumption can hardly maintain rapid growth, it should make early deployment in enterprise transition & upgrading, ensure effective supply; strive to create innovative products, provide custom-made products for the market, avoid product homogeneity, so as to expand potential demand of the market.

Secondly, quicken the pace of enterprise technology upgrading, improve market competitiveness. As the consumption peak passes, seizing the market through qualityshould become the main development direction for enterprises. On October 21, 2015, the State Council Executive Meeting decided to relax R&D activity and expense scope for claiming weighted deduction policy since January 1, 2016. On the basis of the original rules, labor fee of externally engaged R&D personnel, inspection fee for trial products, and expert consulting fee as well as expenses incurred from cooperation or commissioned R&D etc can be included into weighted deduction according to rule. Excluding activities and industries prescribed as not suitable for using weighted deduction, R&D expenses incurred by enterprises can all claim weighted deduction benefit. Enterprises in the copper industry should take full advantage of the opportunity of supporting the development of hi-tech technology by the state government, vigorously develop relevant import substitution technology in copper industry, improve economic added value of self products, and occupy the highgrade, precision and advanced consumption fields ahead of others.

Thirdly, deeply understand “One Belt One Road” policy, seize markets along the “One Belt One Road” route. At present, domestic copper industry is facing dual pressures of weak consumption and capacity surplus. The implementation of “One Belt One Road”strategy will surely boost outward output of infrastructure capacity, in which the deployment of electricity and railway facilities will bring massive copper demand. On May 16, 2015, the State Council published the “Guiding Opinions on Promoting International Capacity and Equipment Manufacture Cooperation”, which put forward directional guidance for grasping favorable opportunities, propelling international capacity and equipment manufacture cooperation, and fulfilling improvement of quality, efficiency and upgrading of China’s economy. In the “Opinion”, iron & steel and nonferrous metals industries are placed at prioritized positions for industry promotion. Therefore, copper enterprises should grasp the good opportunity of penetrating to the “One Belt One Road” neighboring markets, regard developing countries with high level of integration degree in equipment and capacity with China, strong desire of cooperation, and good cooperation conditions as key countries, and actively expand markets of developed countries, progressively accomplish dual shift of production capacity and consumption.

Abolition Of The Lead-Acid Battery Consumption Tax Is Suggested

Zhang Tianren, an NPC representative and chairman of Tianneng Group suggests cessation or deferment in the collection or differentiated collection of lead-acid battery consumption taxes.

Lead-acid batteries play a fundamental role in China's transport, communications, power generation and wind energy storage, smart grid and national defense sectors, and are the most produced and widely used batteries around the world.

However, relevant departments think that a consumption tax should be levied on lead-acid batteries because they will cause serious environmental pollution during the recycling process for the heavy metals and electrolyte in them and consume many mineral resources.

Zhang said that the content of the heavy metal lead and electrolyte in lead-acid batteries doesn't make them polluting products themselves. The main risks of domestic leadacid batteries causing pollution mainly exist in the recycling and smelting steps. As a standard recycling system is yet to be developed at the government level, over 3.30 million tons of waste lead-acid batteries will be produced every year, less than 30% of which are recycled according to the standards.

It's suggested that the state implement a full refund policy on battery consumption taxes payable by standard battery producers, carry out an extended producer accountability system and develop a complete waste lead-acid battery recycling system.

10000 Tonnes Of Copper Concentrate Arrived At Nanjing Port

On March 20, a cargo ship loaded with 10000 tonnes of copper concentrate docked at Nanjing Port, signaling that the biggest overseas acquisition project of China’s metal industry received concrete result.

On that day, the first batch shipment of 11330 tonnes of copper concentrate from Peru Las Bambas Copper Mine, a project jointly acquired by China Minmetals, China Reform Holdings Corporation Ltd, and CITIC Group at a price of USD10.5 billion, successfully arrived at Nanjing Port following the project’s completion and start of production. It has been learned that this batch of copper concentrate has copper grade of up to 48.50%, silver content is 293.00g/MT, the grade is extremely superior.

Pc Electrolytic System Of Zhangjiagang Copper Industry Company Successfully Produced Copper After Resuming Production

On March 17, the PC electrolytic system of Zhangjiagang Copper Industry Co., Ltd successfully produced the first batch of qualified PC electrolytic copper after resuming production. This company’s 100,000 t/a PC electrolytic copper project was completed and launched into production in April last year. Owing to restriction of raw material market, it was forced to suspend production in August last year.

Since the beginning of this year, this company’s raw material gradually recovered. In order to grasp market opportunity, and wage a full-fledged fortification-storming battle of turning loss into profit, this company followed the requirement of “fully opening old system, and expanding new system”, went all out to organize raw materials, ensured increase in production and efficiency, which laid down solid foundation for the enterprise to turn loss into gain.

Mine Cost Can Hardly Be Lowered Due To High Percentage Of Inflexible Costs For Lead & Zinc Mine Enterprises

At the 2016 (11th) Shanghai Lead & Zinc Summit, Lian Chuanshuang from Tibet Huayu Mining explained the current operation condition of domestic mine enterprises. At the Summit, he pointed out that currently mine cost could hardly be reduced, the main reason is too high percentage of inflexible cost.

Wherein inflexible costs include: Safety cost, environmental protection cost, labor cost and depreciation etc. What’s more, against the current background of increasingly stringent supervision on mines by the state government, safety and environmental protection costs are still rising, labor cost also can hardly be reduced.

Furthermore, domestic mines differ widely in mining and dressing cost, it has been learned that the mining and dressing cost of domestic mines mostly is between 200 and 350 yuan/tonne. Wherein, in ore dressing, labor cost accounts for 20-40%, and fuel power cost accounts for about 20%.

Newly Added Capacity In Aluminum Market Will Be Collectively Released In The Second Half Of The Year

“It is expected that in 2016 aluminum price will fluctuate between 9500 and 13000 yuan/tonne, this year’s highest point may appear in the firsthalf of the year, because more newly added capacity of electrolytic aluminum may collectively enter production in the second half of this year, the manifestation of aluminum price will show a time lag”, analysts said at the “2016 (11th) Shanghai Copper Aluminum Summit” on March 17.

Last year, against the background of consistently falling aluminum price, the electrolytic aluminum industry suffered heavy loss, many domestic aluminum enterprises one after another reduced production for self protection, the coverage of flexible production further expanded. According to Antaike’s statistical data, electrolytic aluminum enterprises adopting flexible production in 2015 are distributed in 17 provinces (municipalities and regions), and are mainly concentrated in Gansu, Qinghai, and Henan. It has been learned that, under joint production cut by enterprises, in 2015 domestic aluminum industry’s total production cut reached 4.17 million tonnes. “Wherein 1 million to 1.5 million tonnes of capacity faces permanent closedown, capacity with actual restoration possibility is between 2 million tonnes and 2.5 million tonnes.” Liu Xiaolei said.

In the fourth quarter last year, the total production cut of domestic aluminum industry topped 2 million tonnes. “Such shrinking trend at the supply end continued till February this year, although in February there was still certain newly added capacity being released, overall speaking, the growth speed experienced evident decline.” Liu Xiaolei said.

Although in 2015 enterprises’ production cut seemed to give certain support to the price, with signs of rebound in recent aluminum price, will newly added capacity also face the possibility of further increase?

Regarding this issue, analysts argued that in the first half of 2016 newly added capacity is limited, compared with aluminum price, the pressure of production kickoff in the second half of the year is relatively high. “The launching of most newly added capacity faces fund pressure, the majority of enterprises find it difficult to guarantee very sufficient cash flow, this is also one of the key reasons that prevent previously closed down capacity from resuming production.”

In 2016 domestic electrolytic aluminum capacity will reach 42 million tonnes, higher than 39 million tonnes in 2015, but the capacity launched in the first half of the year will not exceed 1 million tonnes, more capacity will be collectively released in the second half of the year. The expected output is around 32 million tonnes, growth speed experienced significant slowdown, estimated to be 4.6%, whereas in 2015 the growth of domestic electrolytic aluminum output was kept at 10%.

“In fact, the relatively little capacity launched in the first half of the year gives a short-term window for aluminum price to go strong.”Analysts further indicated, “After the Spring Festival, aluminum price showed signs of rally, but many aluminum enterprises said banks’lending was very weak, this is because last year a large number of closed down capacity brought many bad debts, this year banks will be comparatively cautious in giving loans to electrolytic aluminum related enterprises.”

Although this year the growth of domestic electrolytic aluminum supply is expected to slow down, the recovery of consumption is also a key factor in determining the price trend.

Judging from situation in the aluminum processing industry, according to Nie Bo, Deputy Secretary-general of the China Nonferrous Metals Processing Industry Association, in 2015 the output of aluminum processing industry still showed growing trend, but the growth margin dropped by 5.7% when compared to past years.

Furthermore, the export/import structure of domestic aluminum products experienced certain diversification. According to relevant data, from January to November 2015, China’simport of aluminum products is 433,500 tonnes, down by 4.34% on Y-o-Y basis, export aluminum products is 3,852,200 tonnes, up by 21.82% on Y-o-Y basis.

“As far as domestic aluminum industry is concerned, structural contradiction on the supply front is prominent, capacity surplus is serious, as the demand growth of main nonferrous metals consumption sectors such as real estate, household electrical appliance, and automobile experienced decline to varying degrees, it resulted in low operating rate of the aluminum processing industry.” Nie Bo said.

Chinalco Shed Its Title Of Top Loss-Sustaining Company After Earning 200 Million Yuan Profit

Chinalco, the top loss-sustaining listed company in 2014, published public notice on March 18, saying it shed the title in 2015 with 200 million net profit. Nevertheless, the reversal of loss into gain mainly depended on asset disposal and government subsidy, Chinalco’s net profit after deducting nonrecurring profit and loss is still a heavy loss of 6.4 billion yuan.

According to published data, as a company with central enterprise background, Chinalco is a leading enterprise in China’s non-ferrous metals industry, its overall size ranks among leaders in the global aluminum industry. Former Chairman Ge Honglin guaranteed to help the company turn loss into gain in 2015. After mid February when the company released public notice of performance profit-earning forecast for 2015, Ge Honglin resigned from the post of Chairman.

According to Chinalco’s annual report for 2015, in 2015 it fulfilled operating income of 123.4 billion yuan, down by 13% on Y-o-Y basis; but net income attributed to shareholders was 210 million yuan, equivalent to earnings per share of 0.01 yuan, signaling it successfully turned loss into gain.

The company emphasized that, the main reason of Chinalco’s reversal of loss lied in cost reduction. In 2015, due to the closure of some loss-sustaining production lines and reduction in sales, operating cost dropped by 20.783 billion yuan on Y-o-Y basis, down by 14.85%. Owing to control of expenditure and other reasons, last year the management expense was 2.307 billion yuan, down by 2.005 billion yuan on Y-o-Y basis.

Non-recurring profit and loss brought a total of 6.638 billion yuan of income, which played a crucial role in the company’s reverse of loss, items with big amounts include 2.318 billion yuan of non-current assets disposal gain and loss; 1.769 billion yuan of government subsidy; and 1.294 billion yuan of investment proceeds from disposing of subsidiaries. On the other hand, the company’s net profit after deducting non-recurring profit and loss still suffers a heavy loss of 6.432 billion yuan, indicating it is still very difficult to truly turn loss into gain and restore profit generation ability.

China International Capital Corporation Limited yesterday said that, since 2015, the company significantly reduced production cost through electricity negotiation, increasing percentage of self-provided electricity, and strengthening cost control measures. As the prices of coal and other raw materials dropped, the company’s cost still has room for compression, but at the existing aluminum price level, the pressure of profit earning is still great.

GF Securities argued that, China’s electrolytic aluminum capacity has serious surplus, which results in heavy price fall. Currently taxincluded full cost of electrolytic aluminum in China is at 12000 yuan/tonne, tax-included cash cost is 10300 yuan/tonne, whereas aluminum price is 11300 yuan/tonne, resulting in loss for the entire industry.

China’s Annual Waste Lead Battery Topped 3.3 Million Tonnes, Authorized Recycling Is Below 30%

“Non-standardized recycling behaviors, and massive quantity of waste lead battery being randomly disassembled and disposed of, resulted in contamination of atmosphere, soil and water source, which not only seriously affected environment and human health, but also led to heavy waste of waste lead resource and loss of national tax revenue.” Zhang Tianren, NPC Delegate and Chairman of the Board of Tianneng Group, said, “Up till now China has not established standardized and effective recycling system, the quantity of waste lead battery generated each year topped 3.3 million tonnes, the percentage of authorized recycling is below 30%.” For this reason, he called for “no more delay in standardizing lead battery recycling system”!

Zhang Tianren said, according to statistics China’s illegal dumping of lead-containing waste acid has risen from 99,500 tonnes in 2008 to nearly 270,000 tonnes in 2014, presenting a growing trend each year; ‘threewithout’ smelting enterprises (without business venue, without production equipment, without operating fund) have low overall utilization rate, generally between 80% and 85%, below 90% at best (generally 95% in overseas countries), nationwide each year close to 160,000 tonnes of lead is lost in illegal smelting process; illegal recycling, smelting, and battery interest chain brought an annual loss of nearly 15 billion yuan in terms of tax revenue.

Furthermore, since lead battery recycling is mainly driven by market interest, it lacks technological recycling standards. In some areas with dense population, waste lead battery becomes resources for competitive pricebidding purchase by recycling enterprises. Some illegal underground recycling enterprises with no authorized environmental protection facility make hastened preemptive purchases, resulting in “shortage of supply” embarrassing situation for authorized recycling enterprises. By increasing purchase prices of raw materials, illegal processing enterprises have bigger competition advantages since they have no pollution treatment cost.

Zhang Tianren said, the state government is highly concerned with the development and environmental risk prevention work of the lead battery industry, and has unveiled many laws and regulations, however, due to incompleteness in policy support and lack of effective supervision, up till now China’s lead battery standardized recycling problem has not been solved fundamentally.

“In recent years, a number of departments of the state government organized project research on battery recycling, after years of repeated researches, some conclusions should have been drawn, and there should be no more delay.”Zhang Tianren said.

Zhang Tianren recommended to first tighten battery access system, issue recycling qualification to battery enterprises being granted approval after access audit, and give tax policy support to manufacturers being incorporated into government supervision system, in order to promote the development of circular economy. In 2016 the state government levies 4% consumption tax on battery enterprises, thus enterprises have bigger burden, and therefore all the more lack competition advantages compared with illegally operated battery enterprises with nonstandard recycling operation and unqualified environmental protection governance in recycling practice. The state government is recommended to totally refund battery consumption tax to qualified manufacturers, so as to implement Extended Producer Responsibility System (EPR), better promote China’s waste lead battery recycling utilization; and give no policy support to illegally operated battery enterprises with non standard recyclingoperation and unqualified environmental protection governance.

Zhang Tianren also recommended to implement EPR system, establish and improve waste lead acid battery recycling system, encourage secondary lead enterprises to carry out cooperation with battery enterprises, adhere to innovation concept, phase out backward capacity, promote development of circular economy; enforce policies conducive to development of circular economy, and offer tax benefits to battery enterprises engaged in developing circular industry in accordance with the “Circular Economy Promotion Law”; encourage battery enterprises to apply secondary lead products, give financial support to key scientific and technological problemtackling projects of battery & secondary lead enterprises in circular economy; and give preferential fund support to relevant waste battery circular economy projects.

China Tongling Nonferrous Will Cut This Year’s Copper Output To 1.2 Million Tonnes

Tongling Nonferrous Metals Group, China’s second biggest comprehensive copper manufacturer, plans to cut this year’s copper output to 1.2 million tonnes, last year it is 1.31 million tonnes.

The report quoted a statement from Xu Changning, a senior broker of the Commerce Department of Tongling Nonferrous Metals Group. Previously several Chinese copper manufacturers decided to adopt united production cut by cutting this year’s total output by 350,000 tonnes, aiming to support copper price. Tongling Nonferrous is one of them.

Xu Changning said, the copper manufacturer will proceed with production cut according to plan. According to another senior executive of Tongling Nonferrous Metals, this company will publish output in 2015 and production plan for 2016 in the next month, but he failed to confirm the figure in the report by www.smm.cn.

Aluminum Giant China Hongqiao Recorded 3.65 Billion Net Profit Last Year, Down By 30% On Y-O-Y Basis

As bulk commodity faces winter, the performance of China Hongqiao, the world’s biggest aluminum manufacturer, also received impact from low aluminum price. According to the financial statement for 2015 published by the company on March 14, the company’s net income attributed to shareholders in 2015 dropped sharply by 31.3% to 3.65 billion yuan compared to the same period last year.

According to China Hongqiao’s latest financial statement, by December 31, 2015, this company’s total design capacity increased to 5.186 million tonnes, ranking top worldwide. In 2015 actual aluminum output grew by 40% to 4.4 million tonnes, overtaking Rusal’s 3.6 million tonnes. Driven by sales growth, total revenue too rose by 22% to 44.1 billion yuan. However, due to impact of sharp fall of international aluminum price, the company’s net income attributed to shareholders last year fell sharply by 31% to 3.65 billion yuan.

The financial statement also indicated that, the Phase I production line of China Hongqiao’s joint venture aluminum oxide production base in Indonesia is scheduled to be completed and launched into production in the first half of this year, the designed annual capacity is 1 million tonnes aluminum oxide, Phase II is scheduled to start production by the end of next year.

According to data, as the world’s biggest manufacturer of primary aluminum, by the end of 2015, China’s aluminum capacity reached 38.98 million tonnes, the output is about 31 million tonnes, accounting for 54.2% of total global output. Under the pressure of shrinkingdomestic demand, aluminum enterprises chose to explore the route of export, just like many iron and steel enterprises. However, recently the US aluminum industry began to exert pressure on its government, hoping it wold adopt anti-dumping sanction measures.

Currently domestic coal, iron & steel, and nonferrous metal industries are all facing grim challenge of de-capacity, but China Hongqiao has no plan to cut capacity. At the financial statement release meeting on March 14, CEO Zhang Bo of China Hongqiao considers that currently global demand for aluminum is still strong, what market needs is increase of supply, rather than decrease. According to China Hongqiao’s plan, this year the whole Group’s aluminum capacity will increase to 6 million tonnes.

China Hongqiao Will Expand Output Capacity By 16% This Year To 6 Million Tonnes

As the world’s biggest aluminum manufacturer, China Hongqiao Group did not stop its pace of expansion against the macro background of decapacity.

China Hongqiao recently indicates that, this year it plans to lift aluminum output capacity to 6 million tonnes, up by 16% from the capacity of 5.19 million tonnes at the end of last year.

However, the exact expansion extent will be subject to market condition. “If the demand is brisk, we will follow our plan, if the demand is weak, we will slow down the pace of new capacity-adding plan and even temporarily suspend expansion.” According to Zhang Bo, CEO of Hongqiao, currently aluminum demand is quite strong, the market needs increase of supply, rather than decrease. He said, in the future prices of aluminum products will remain stable with slight increase, this year the price is expected to hover between 11000 yuan and 12000 yuan per tonne. According to the latest financial statement, China Hongqiao’s aluminum output in 2015 grew by 40% to 4.4 million tonnes, surpassing 3.6 million tonnes of Rusal. However, due to the impact of aluminum price plunge, China Hongqiao’s net profit margin last year dropped by 31% to 3.65 billion yuan, despite 22% increase in income. Overall debt level increased from 28 billion yuan to 42 billion yuan, due to RMB depreciation, this company experienced 1 billion yuan of loss in foreign exchange conversion.

Furthermore, the Phase I production line of China Hongqiao Group’s joint venture aluminum oxide production base in Indonesia is scheduled to start production in the first half of the year, the designed annual capacity is 1 million tonnes of aluminum oxide, Phase II is expected to start production by the end of next year.

Analyst Daniel Kang of J.P. Morgan in Hong Kong said, China Hongqiao is one of the lowest-cost manufacturers in China and in the global context, and ultimately it will grab the market share of other manufacturers. He said, this company kept cost at low level by building power stations, and developing its own raw material supply chain. This group is “very very ambitious”, but what somewhat disappointed investors is that its scale at the present stage did not bring any extra pricing ability.

Currently aluminum produced by Chinese manufacturers accounts for half of the global output, besides a considerable quantity of outputs is exported to overseas market, the United States is the biggest buyer of Chinese aluminum, the percentage of aluminum imported from China in US total consumption in the past five years soared from 14% to about 40%.

Recently the US aluminum industry began to exert pressure on the government to adopt sanction measures, insiders of the US aluminum manufacture industry allegedChina’s practice violated international rules, and resulted in export of massive quantity of low price Chinese aluminum products into the US.

Meanwhile, the domestic industry has listed decapacity as one of the five major work tasks for this year. On April 28, 2015, the MIIT promulgated the “Implementation Methods on Substitution of Industries with Serious Surplus Capacity”, which banned iron and steel, cement, electrolytic aluminum, and flat glass industry to newly add capacity, and any new addition must be balanced by reducing equivalent existing capacity.

Henan Key Aluminum Processing Enterprises Presented Healthy Trend With Brisk Production And Sales In Q1

In the first quarter of the year, Henan aluminum industrial enterprises strengthened internal potential-tapping, backbone electrolytic aluminum enterprises basically repressed the trend of heavy loss, key aluminum processing enterprises maintained dual growth in both output and benefit.

Yidian Holding Group’s aluminum processing business unit recorded brisk production and sales.

In the first quarter of the year, Yidian Holding Group’s aluminum processing business unit continually intensified efforts in product structure adjustment, technological R&D, market, brand construction, and cost control. Heralded by marketing, it sought breakthrough in market development; spearheaded by R&D, it tried to look for new frontiers in product structure adjustment; based on management, it endeavored to break new ground in brand construction; centering on profit, it sought breakthrough in cost control. It refined assessment indicators, promoted assessment and control of complete production cost, while fulfilling significant growth of output, market sales also grew in synchronized pace, total sales of aluminum sheet, strip and foil approached 110,000 tonnes, up by 48% on Y-o-Y basis, with over 20 million yuan of profit, thus becoming the Group’s new profit growth point. Based on industrial development trend in the 1st quarter, the Group’s aluminum deep processing business unit will fulfill the envisioned target of “460,000 tonnes of output, and 350 million yuan of profit” in 2016.

Zhong Fu Special Aluminum Company recorded new highest output in cold roll products in March.

In March, Zhong Fu Special Aluminum Company’s cold roll products output completed 7847 tonnes, which is 749 tonnes more than the early-year budget. This marks the first time that single-month output topped 7000 tonnes since the cold roll factory launched 2500mm single stand cold rolling machine, setting a new record. Meanwhile, finished product ratio is 5.69% higher than budget, overall cost, and electricity unit consumption indicator dropped significantly compared with the previous month. Vigorously enforcing basic management, and fulfilling production target and creating performance have become the consensus of everyone at the cold roll factory. Firstly, optimize procedures, intensify coordination, promptly grasp production operation conditions at the production site. It strengthened material turnover management, reduce down time, improved production organization efficiency. Secondly, by strengthening staff safety and operation training, it improved operation staff’s control of rolling machine. Thirdly, it improved technological operation standard, firmly established quality performance awareness, all shift groups are equipped with full-time quality inspectors, who will follow up on supervision and inspection on work flow process and product quality. Fourthly, it focused on reinforcing equipment touring inspection and repair quality, in order to guarantee safe and stable operation of equipment.

Wanji Holdings Group recorded new high in cold roll output in March.

In order to fulfill this year’s production and operation problem-tackling targets, Wanji Holdings Group Aluminum’s processing company made adjustment in the leadership group, the company strengthened management, adjusted structure, promoted production, explored market, it adopted a series of positive and effective measures, the number of orders and export volume both increased, presenting a healthy trend of brisk production and sales. In March the cold roll workshop manufactured 9184.28 tonnes of finished products, which is 2228 tonnes higher than the February record, and 343 tonnes higher than the historical level in November last year, creating the highest record in history.

In 2015 China’s Main Mineral Reserves Continued To Grow

From the press conference of the Ministry of Land and Resources, it has been learned that during the “Twelfth Five Year Plan” period, the total prospecting newly added proven resource reserves of the absolute majority of ore varieties in China all showed increase to varying degrees, in which tungsten ore, molybdenum ore, antimony ore, gold ore, silver ore, and phosphorus ore grew by over 50%.

It has been learned that, in 2015 excluding sylvine the 16 ore varieties of main solid ores in China all had newly added big and medium sized orefields and newly added proven resource reserves through prospecting. In 2015 six ore varieties of bauxite ore, tungsten ore, tin ore, gold ore, silver ore, and phosphorus ore all recorded growth to varying degrees in newly added proven resource reserve, in which tungsten ore, tin ore, gold ore and phosphorus ore grew by over 50%.

It has been learned that, in 2015 nine ore varieties of coal, iron ore, copper ore, lead ore, zinc ore, antimony ore, pyrite and sylvine decreased slightly, in which iron ore,copper ore, molybdenum ore and sylvine dropped by over 50%. Newly added proven resource reserves are respectively 37.5 billion tonnes of coal, 1.19 billion tonnes of iron ore, 2.27 million tonnes of copper ore, 4.28 million tonnes of lead ore, 5.64 million tonnes of zinc ore, 959,000 tonnes of molybdenum ore, 155,000 tonnes of antimony ore, and 140 million tonnes of pyrite, sylvine has no newly added proven resource reserve.

During the “Twelfth Five Year Plan” period, prospecting of 16 varieties of main mineral ores in China newly added a total of 736 big, medium sized orefields, there is little variation in the volume each year, which is basically stable, wherein there are 146 places in 2015, 139 places in 2014, 165 places in 2013, 154 places in 2012, and 132 places in 2011.

According to insiders, in the next step, the Ministry of Land and Resources will further continue to push forward prospecting breakthrough strategic actions, vigorously carry out public welfare-oriented geological survey, geological prospecting and saving & integrated utilization work, in order to provide powerful resource guarantee for the development of national economy and fulfilling the “Two Centuries” target.

China’s Electrolytic Aluminum Output Declined By 3% On Y-OY Basis In Q1

In the first quarter China’s electrolytic aluminum output dropped by 3% on Y-o-Y basis to about 7.45 million tonnes. In March 2016 China’s electrolytic aluminum output was about 2.48 million tonnes, basically on par with that of February. In 2015 due to sluggish market condition, China’s electrolytic aluminum factories reduced output by about 3.97 million tonnes. Furthermore, new capacity currently being released is expected to generate output in the third quarter. Therefore, in thefirst quarter China’s electrolytic aluminum output declined.

Becaue of significant expansion of Shandong Weiqiao’s electrolytic aluminum business in 2015, in the first quarter this year, electrolytic aluminum output grew by 6% on Y-o-Y basis to about 1.77 million tonnes in Shandong area. In 2015, electrolytic aluminum factory in Xinjiang Area launched about 1.39 million tonnes of new capacity, therefore in the first quarter of this year Xinjiang Area’s electrolytic aluminum output grew by 12% on Y-o-Y basis to about 1.61 million tonnes.

Although recently electrolytic aluminum factories expressed strong intention of production resumption, enterprises with production resumption action can only generate output in May or June the earliest, therefore it is forecast that in April China’s electrolytic aluminum output is basically on par with that in March.

Yichuan Concentration Area: Aluminum Processing Industry Gained A “new Lease Of Life”

Under the impact of nationwide de-capacity campaign, Yichuan, which is a key city in Henan Province’s aluminum smelting and processing industry, has become the focus of attention for all social circles in the whole province concerning the issue of how it will accomplish development and transition.

Now let’s turn to Yichuan, a Concentration Area whose leading industry is aluminum and aluminum processing, against the macro background of national nonferrous metals industry falling to freezing point, in 2015, enterprises above designated size in the Area fulfilled operating income of 29.08 billion yuan, growing by up to 8.25%, and accomplishing 101.5% of the targeted 28.65 billion yuan for the current year; in stark contrast to two-digit decline of enterprises in the same industry nationwide, they achieved a performance 1.5% over the target, which provided ample evidence of the “impact resistance” of Yichuan’s aluminum processing industry.

Vast difference by one word

From aluminum to aluminum processing. It seems there is an extra word, but the meaning has changed fundamentally.

Aluminum represents oversupply, backward capacity, and fierce competition in the raw material field; whereas aluminum processing represents high technology, as the application fields continue to expand, the application of high-grade, precision and advanced products such as aluminum foil, aluminum strip and aluminum processing products steadily grows, for many products we still have to rely on overseas import, there is vast prospect of development.

According to chief person of the Yichuan County Industrial Concentration Area, Yichuan Concentration Area followed the “dual-wheel driving” strategy of “enhancing traditional industries, and cultivating emerging industries”. Revolving around aluminum and aluminum deep processing industry, it continually stretched and extended industrial chain, currently it has 13 already completed or under-construction aluminum deep processing enterprises, whose total investment size topped 30 billion yuan, which developed clustered and concentrated development of industries, it now has core capacity with 2,220,000 kW installed capacity, 840,000 t/a electrolytic aluminum, and 750,000 t/a aluminum deep processing, it is estimated that by 2020, aluminum and aluminum deep processing industrial cluster will fulfill 60 billion yuan of annual output value. Meanwhile, in order to expand the volume of the Industrial Concentration Area, in 2015, they also introduced 35 projects by revolving around electronic information, and cultural creativity hi-tech industries, the total investment reached 32 billion yuan, which injected new vitality into economic adjustmentand optimization, transition and upgrading within the county jurisdiction, making it the receiving base for industrial relocation and incubation base for development of high and new technology industries. In the next three years, Yichuan County Industrial Concentration Area will come to possess core capacities for annual production of 10 million smart phones, 10000 tablet computers, 72 million photoelectric touch screens, and 5.70 million integrated electronic chips.

Build “aluminum processing” industrial cluster in Central China

Over the 6 years since the Concentration Area started construction, Yichuan created the golden rubric plaque of “Most Industrially Competitive in Henan Aluminum Processing Industry”, and was awarded “Henan Province New Industrialization Aluminum Processing Industry Demonstration Base”, it not only assembled the entire industrial chain of aluminum smelting and processing, but also walked at the fore front of team construction, service method, and efficiency of the Concentration Area in the whole province.

Despite extreme shortage of construction fund, they adopted BT and BOT financing mode, within a matter of several years, they constructed a total of 130 km roads, 160 km of water supply pipeline network, 120 km of sewage pipeline network, 26 km of gas supply network, completed 210,000 sqm of standard plant house for leasing, water, electricity, road, gas, heating, telecommunication, sewage treatment, and garbage treatment inside the Zone basically reached total coverage, investment environment further optimized, which earned effusive praise from participating merchants.

Despite intensified competition in investment invitation in the national context, they spent precious time in pushing forward investment invitation and key project construction. Up till now, the 600,000 t/a aluminum foil project of Luoyang Longding Aluminum Industrial Co., Ltd, 250,000 t/a continuous casting & continuous rolling aluminum sheet, strip and foil project of Yugang Longquan, Yari Precision Aluminum Product, Zhongsheng Copper Aluminum Industry, Fengtuo coating plate and easy-pull top, Longji Precision Copper Product, Huazhong Aluminum projects have started production or trial production; 5 projects including Jingshan Pump Industry, Hengyang Aluminum, and Changhui Science & Technology are constructing plant house or leveling the ground.

With the launching of projects introduced by Yichuan Concentration Area, the aluminum processing industrial chain became more developed, aluminum deep processing will embrace a brighter future.

In 2015 China’s Main Mineral Reserves Continued To Grow

From the press conference of the Ministry of Land and Resources, it has been learned that during the “Twelfth Five Year Plan” period, the total prospecting newly added proven resource reserves of the absolute majority of ore varieties in China all showed increase to varying degrees, in which tungsten ore, molybdenum ore, antimony ore, gold ore, silver ore, and phosphorus ore grew by over 50%.

It has been learned that, in 2015 excluding sylvine the 16 ore varieties of main solid ores in China all had newly added big and medium sized orefields and newly added proven resource reserves through prospecting. In 2015 six ore varieties of bauxite ore, tungsten ore, tin ore, gold ore, silver ore, and phosphorus ore all recorded growth to varying degrees in newly added proven resource reserve, in which tungsten ore, tin ore, gold ore and phosphorus ore grew by over 50%.

It has been learned that, in 2015 nine ore varieties of coal, iron ore, copper ore, lead ore, zinc ore, antimony ore, pyrite and sylvine decreased slightly, in which iron ore,copperore, molybdenum ore and sylvine dropped by over 50%. Newly added proven resource reserves are respectively 37.5 billion tonnes of coal, 1.19 billion tonnes of iron ore, 2.27 million tonnes of copper ore, 4.28 million tonnes of lead ore, 5.64 million tonnes of zinc ore, 959,000 tonnes of molybdenum ore, 155,000 tonnes of antimony ore, and 140 million tonnes of pyrite, sylvine has no newly added proven resource reserve.

During the “Twelfth Five Year Plan” period, prospecting of 16 varieties of main mineral ores in China newly added a total of 736 big, medium sized orefields, there is little variation in the volume each year, which is basically stable, wherein there are 146 places in 2015, 139 places in 2014, 165 places in 2013, 154 places in 2012, and 132 places in 2011.

According to insiders, in the next step, the Ministry of Land and Resources will further continue to push forward prospecting breakthrough strategic actions, vigorously carry out public welfare-oriented geological survey, geological prospecting and saving & integrated utilization work, in order to provide powerful resource guarantee for the development of national economy and fulfilling the “Two Centuries” target.