China Drying Network News Recently, many domestic rare earth giants issued 2012 performance warnings. Coincidentally, the net profit of these companies fell by about 50% year-on-year. At this time, the Ministry of Industry and Information Technology proposed that we must speed up the merger and reorganization of rare earth industries and promptly promote "large rare earth enterprise groups." It is not difficult to see that the industry merger and reorganization is quietly opened.
Corporate profits are greatly reduced
As an important strategic resource, rare earths in 2012 followed the global economic downturn and became one of the most injured industries. Xiamen Tungsten, the earliest to report a reduction in performance, said that its net profit attributable to shareholders of listed companies was 520 million yuan last year, a decrease of 48.71% year-on-year. As the representative of the Southern rare earth, Guanghan Nonferrous Metals Co., Ltd. followed with a large drop in net profit, reaching 60%-80%. Northern rare earth giants finally appeared, but still difficult to break the dilemma of the decline in net profit, net profit fell by 50% -60%.
In the interpretation of declining performance, the three rare earth companies all pointed to the price plummet. “In 2012, the company’s procurement costs for raw and auxiliary materials have risen. The prices of various types of rare earth products have fallen sharply year-on-year, and the market volume has decreased year-on-year, which has reduced the company’s annual results,†said Baotou Rare Earth.
Impacted by multiple factors
According to Liu Jianbo, a rare earth industry analyst from Zhuo Chuang Information Technology, last year, the price of some rare earth products even fell by 75%. "The global economy is declining, and weak market demand has led to poor corporate sales. Some companies have not used up their annual export quotas," said Liu Jianbo. According to official data, China's exports of rare earth ore, metals and compounds were 16,300 tons in 2012, a year-on-year decrease of 3.5%, and well below the 31,000 tons of export quota for 2012.
In addition to the economic downturn, the limited export of rare earth has also become an important reason for the decline of domestic companies' net profit. China was once the world’s leading supplier of rare earths, accounting for 95% of the total. However, in order to protect rare resources, since 2007, China has begun implementing mandatory planning for rare earth production and began to reduce rare earth exports. In 2012, it was seen as the toughest year for the rare earth industry. In this regard, many countries have continuously expanded their rare earth import channels and gradually turned their sights to Vietnam, Mongolia, Pakistan and other countries to reduce their dependence on China.
Restructuring tide approaching
However, the protection of strategic resources is indeed imperative. All along, rare earths have been widely used in many fields such as electronics and military industry, and are called "industrial vitamins." However, in the past, many small businesses and small workshops have resorted to self-interest to indulge in rare earths and smuggling. The scattered, chaotic and poor industries have caused great damage to the environment.
Therefore, in addition to restricting exports, the government is stepping up efforts to promote industry standardization. Recently, 12 ministries and commissions including the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Finance jointly issued the "Guidance Opinions on Accelerating the Promotion of Mergers and Reorganizations in Key Industries." The guidelines suggest that the number of rare earth mining and smelting and separation enterprises will be greatly reduced, and the degree of industrial concentration will be increased, and an industry structure dominated by large enterprises will basically form.
According to Zhu Hongren, a spokesperson for the Ministry of Industry and Information Technology, at present, some central enterprises involving rare earth businesses and local key provinces and regions have accelerated the pace of mergers and reorganizations. “The relevant state departments will approve the establishment of a large-scale rare earth enterprise group in accordance with the completion of the relevant responsibilities of the enterprise,†Zhu Hong said. In this regard, industry experts analyzed that with the acceleration of mergers and restructuring, the industry is expected to gradually return to a healthy development.
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