[China News] net profit of Luoyang Molybdenum Industry increased by 174% in the first half of the year. Comprehensive interpretation of Copper, Cobalt, Molybdenum, Tungsten and Niobium Market in the first half of the year

SMM8 News of the 28th of July:

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Prospect of copper, cobalt, molybdenum, tungsten and niobium industry

The net profit of Luoyang Molybdenum Industry increased by 174% in the first half of the year

On August 28, Luoyang Molybdenum Industry announced its semi-annual report of 2018. In the first half of the year, the company's revenue was 14.057 billion yuan, 1.1655 trillion yuan more than the same period last year, an increase of 20.63 percent over the same period, and the net profit attributable to the shareholders of the listed company was 3.12 billion yuan. Compared with the same period last year, 835 million yuan, a sharp increase of 173.87% in the same period, basic earnings per share of 0.14 yuan, compared with the same period last year 0.05 yuan, a sharp increase of 180% in the same period.

Luoyang Molybdenum Industry believes that the company's main accounting data and financial indicators have increased significantly compared with the same period last year, the main reasons are:

(1) the production of each business sector of the company is stable, and the market price of the main products is higher than that of the same period last year.

(2) the company completed the A-share non-public offering in July 2017. after raising funds of 18 billion yuan, the financial expenses decreased and the investment income increased compared with the same period last year.

(3) the 24% minority interest project in the DRC copper and cobalt mine, which was exclusively locked by the company, was included in the consolidated statement after delivery on 20 April 2017, and the time for the company to enjoy 24% minority interest income increased compared with the same period last year.

Operation of Luoyang Molybdenum Industry:

Luoyang Molybdenum Industry belongs to the mining and dressing industry of non-ferrous metal mines, mainly engaged in copper, cobalt, molybdenum, tungsten, niobium, phosphorus and other mining, smelting and some deep processing, with a relatively complete one-dimensional industrial chain. It is the world's top five molybdate producers and the largest tungsten producers, the world's second largest cobalt and niobium producer and the world's leading copper producer, as well as the second largest phosphate fertilizer producer in Brazil.

The main business of the company in China is: the mining, smelting, deep processing and scientific research of Mo and W metals, and has the upstream and downstream business of Mo and W mining, mineral processing, smelting, chemical industry and so on. The main products include ferromolybdate, ammonium paratungstate, tungsten concentrate and other related products, as well as by-product copper, rhenium, fluorite, iron and other minerals.

Main product application areas:

Mines and main products owned by Luoyang Molybdenum Industry abroad

The main overseas mines owned by Luoyang Molybdenum Industry:

Operating NPM copper and gold deposits in Australia: the company indirectly holds an 80 per cent interest in NPM copper and gold mines. The main business scope of the mine covers the mining and separation of copper metals, the main products are copper concentrate, and the by-products are gold.

Operating CIL phosphate rock and NML niobium ore in Brazil: the company indirectly holds a 100 per cent interest in Brazil's CIL phosphate rock business, which covers the whole phosphorus industry chain and is mined by open pit mining. The main products include: high concentration phosphate fertilizer (MAP, GTSP), low concentration phosphate fertilizer (SSG, SSP powder, etc.), animal feed supplement (DCP), intermediate product phosphate and sulfuric acid (sulfuric acid mainly for their own use), and related by-products (gypsum, etc.). Fluorosilicic acid) and so on. The company indirectly holds 100 per cent interest in NML Niobium Mine in Brazil, which covers the mining and processing of niobium ore, and its main products are ferroniobium. The ore is processed by crushing, sieving, concentration, leaching and smelting of niobium ore.

Main application areas of overseas products:

Sales of Molybdenum products in Luoyang

The main products are copper, cobalt, molybdenum, tungsten, niobium and phosphorus and other related products. Of which:

The main products of copper and cobalt are electrolytic copper, copper concentrate and cobalt hydroxide. Electrolytic copper and copper concentrate are mainly sold to commodity traders and copper smelters, including (Trafigura Beheer BV) of the Netherlands, while cobalt hydroxide is mainly sold to Freeport Cobalt in Finland and cobalt smelters in China.

The related products of Mo and W adopt the direct marketing mode of "factory-consumer", supplemented by the distribution mode of "factory-third-party trader-consumer".

The niobium product is iron niobium. The company has established a marketing strategy to sell directly with end customers to different customer groups from Europe, Asia and North America. At the same time, by the Chinese domestic sales team to the company's domestic ferromolybdate customers to promote iron niobium sales.

The customers of phosphorus products are mainly chemical fertilizer mixers. Fertilizer mixers mix the company's phosphate fertilizer and other accessories according to different formulas to produce mixed fertilizers and sell them to end users.

Analysis of Copper, Cobalt, Molybdenum, Tungsten and Niobium Industry in Luoyang Molybdenum Industry

Copper industry:

As one of the important basic industrial raw materials, copper is an indispensable material in industrial production and residents' life because of its industrial and financial properties at the same time. Its consumption is second only to aluminum in non-ferrous metal materials. From the point of view of the main consumption areas, the consumption of the United States, Japan and Western Europe, as the traditional three major copper consumption areas, has been maintained at a relatively stable level. Copper prices continued to fall from 2011 to 2015, resulting in heavy losses in the industry, leading to a slowdown in mine construction at this stage. In recent years, the trend of "aging" of mines in the world is becoming more and more serious. About one and a half of the copper mines in the world have been more than 50 years old. Due to the long mining time, the grade of the existing mines is declining year by year. In the long run, copper mining is becoming more and more difficult and expensive. According to Wood Mackenzie statistics, except that the Cobre Panama copper mine (with a capacity of 320000 tons / year) will be put into production in 2018, there will be no new large mining projects in the world until 2020. The increment of copper mine mainly comes from the reconstruction and expansion project. The increase in copper supply is slowing, leading to structural shortages, while downstream demand is stable, and the amount of copper used for new energy vehicles is expected to become a new growth point of downstream demand. Copper price operation center is expected to go up 1 step.

Several events in the first half of 2018 before copper prices fell near the end of June had a positive impact on copper prices. Despite the appreciation of the dollar, copper hit a four-year high on June 7. Some of the positive market sentiment driven by US tax reform, better-than-expected Chinese demand and several pending labour issues at Chilean copper mines were eventually curbed by the pessimism of the trade war and its impact on overall economic growth. The cash settlement price of benchmark LME closed at $6635.91 a tonne ($3.01lb) in the first half of 2018, down 7 per cent from the start of the year. LME, the New York Mercantile Exchange and the Shanghai Futures Exchange continued to experience large inflows and outflows during the first half of the year, with flows strengthening, up nearly 32 per cent from the end of 2017. Copper concentrate processing fees (TCRC) prices were high in the first half of the year due to disruptions caused by a lack of concentrate supply and the accidental closure of Sterlite's Tuticorin Indian smelter in late May.

Cobalt industry:

According to the United States Geological Survey in 2017, the world's proven land cobalt reserves in 2016 were about 7.1 million tons, highly concentrated in the Democratic Republic of the Congo, Australia and Cuba. Among them, the Democratic Republic of the Congo (DRC) has 3.4 million tons of cobalt reserves in 2016, accounting for 47.9 percent of the world's total cobalt reserves, ranking first in the world. For a long time, cobalt minerals or cobalt compounds 1 have been used directly as glazes for ceramics, glass and enamel. By the 20th century, cobalt and its alloys have been widely used in motor, machinery, chemical, aerospace and other industrial sectors, and become an important strategic metal, and the consumption is increasing year by year. Cobalt is one of the most common metal materials for cathode of lithium battery. Lithium cobalt acid made of lithium carbonate and cobalt oxide is the most widely used cathode material for high energy battery. In the future, the newly built and completed cobalt smelting projects in the market will face overcapacity and increased competition in the industry, and the more definite capacity expansion will mainly come from Glencore and Eurasian resources. At present, battery materials account for about 50% of the total cobalt consumption. With the vigorous development of the new energy vehicle market, the demand for cobalt will continue to increase, or will be transmitted from the shortage of cobalt products to the shortage of cobalt ore. Due to the gradual reduction of cobalt stocks in the market, cobalt prices may remain high and volatile under the stimulation of multiple factors.

In the first half of 2018, the reference price of low-grade cobalt rose 9.46% to $32.24 / pound at the beginning of the year, exceeding $40 / pound since March. Despite a slight correction in mid-May, the average price in June was more than $37 a pound. The rise in cobalt prices is still based on good expectations of stable demand for the battery sector, which is mainly related to the optimistic forecast of electric vehicle production in the automotive industry. In the late second quarter, prices began to weaken after nearly 1.5 years of steady gains. The short-term correction can be attributed to a slowdown in buying activity in the run-up to the European summer season and a shift in car subsidies in China.

Mo industry:

Price trend is affected by economic development factors, supply and demand conditions, speculative factors and emergencies and other factors. Because Mo is mainly used in iron and steel industry, the change of Mo price is closely related to the market of stainless steel and high-end steel. Affected by the global financial crisis in 2008, steel production, which is driving the growth of molybdenum demand, has been sharply reduced, adding to the already weak stainless steel market. In addition, the continuous production of new Mo mines at home and abroad has led to a continuous increase in the supply of Mo industry, the intensification of overcapacity, and the further decline of international Mo prices. From 2009 to 2015, the molybdate price 1 is in the downward channel, and the low position is oscillatory. Under the influence of China's supply-side reform in 2016, inefficient and high-cost production capacity was shut down and reduced one after another, superimposed stricter and regular environmental protection inspection, and the situation of overcapacity at the supply side was gradually cleared. Since 2017, under the influence of supply-side reform and the normalization of environmental protection supervision, the iron and steel industry has accelerated the adjustment of industrial structure and product upgrading, the operating environment of iron and steel enterprises has improved, and the output of high-end steel and stainless steel has continued to increase. Lead the Mo consumption to heat up gradually, the price rises steadily.

During the reporting period, the domestic Mo market as a whole showed a trend of promotion before inhibition. In the first quarter, with the upswing of the international market and the good demand before and after the Spring Festival, ferromolybdate sales at home and abroad were released, and the inventory pressure was alleviated, while in the same period, some molybdate mines were affected by winter and their production supply was limited. Mo prices remain strong, Mo downstream product prices continue to rise. In the second quarter, due to the continued weakness of the stainless steel market, the demand of the molybdenum market shrank before mid-April, and the price fell phased. Mo smelting enterprises delayed procurement because the price of ferromolybdate was lower than the price of concentrate. The price of molybdenum concentrate stock is reduced after pressure; In the later stage, some small and medium-sized Mo mines resumed production seasonally, and the price of Mo concentrate continued to be pressured. Although the bidding volume of Mo Fe in iron and steel enterprises continued to release, the Mo production enterprises were forced by the inventory pressure, and the Mo Fe price could not effectively stop falling. At the end of June, supported by the cost of raw materials and the effective removal of inventory pressure after the bidding of iron and steel enterprises, the price of molybdenum gradually stabilized and began to rise sharply in July.

In the first half of 2018, the average price of molybdenum concentrate was RMB 1618.83 yuan / tonnage, up 45.14% from the same period last year, the lowest price was RMB 1472.50 yuan / tonnage, and the highest price was RMB 1725.00 yuan / tonnage. In the first half of the year, the average price of ferromolybdate was RMB 111200 yuan / ton, an increase of 41.66% over the same period last year. The lowest price was RMB 101800 yuan / ton and the highest price was RMB 117800 yuan / ton. In the first half of 2018, the average price of MW molybdate was US $11.95 / lb, up 50.13% from a year earlier, with a minimum price of US $10.60 / lb and a maximum price of US $13.00 / lb.

Tungsten industry:

At present, the three Daozhuang mines are the largest single tungsten mines in production. China, the world's largest tungsten producer, accounts for more than 80 per cent of tungsten supply. In recent years, the tungsten industry where the company is located is in the current situation of overcapacity, oversupply and de-inventory. Under the pressure of weakening demand and difficult inventory, the tungsten market continues to fluctuate at a low level. The market price fell below the cost line of tungsten production enterprises for 1 degree, resulting in the suspension or control of production by some mining enterprises, and the decline of the overall production capacity of the market. Since 2017, the increasingly stringent environmental protection and safety verification has led to the shutdown of mine production, the inventory consumption of manufacturers in the lower reaches of tungsten mines, and the supply and demand of tungsten market once again in short supply. At the same time, with the recovery of the overseas economy and the stabilization and recovery of the domestic economy, the export volume of domestic tungsten products has greatly increased compared with the same period last year, and the demand for cemented carbide and tungsten chemical products has increased in the mining industry, mechanical processing industry, construction industry, chemical industry, and other industries. Tungsten prices remain stable and rising.

During the reporting period, the domestic tungsten supply side was greatly affected by environmental protection factors, especially the special renovation of hazardous wastes by the Chinese environmental protection department in the second quarter, which directly led to the shutdown of APT plant for a large area and for a long time. Although there is little change in downstream demand, environmental protection and safety factors affect the phased supply pressure brought about by the operating rate of mines and smelting enterprises, which promotes the fluctuation and rebound of the domestic tungsten market.

Affected by the weather and the Spring Festival holiday in the first quarter, the overall opening rate and production capacity of the tungsten industry chain decreased, the market activity was not high, the market was stable, and the inventory of enterprises and intermediate traders was low, resulting in a tight supply of tungsten after the Spring Festival. The holder firm quotation, the market fluctuation rises; Although the new supply was limited at the beginning of the second quarter, the weakening of back-end demand led to caution in downstream procurement, increased pressure on buyers, obvious pressure on raw material prices, and weaker raw material prices. However, the new round of environmental protection inspection opened in May, resulting in a large number of unqualified tungsten smelting enterprises to stop production, APT spot shortage, price rise, but the late tungsten market demand is still flagging, the rising trend is difficult to sustain, the price trend to maintain a weak shock.

In the first half of 2018, the average price of 65% wolframite concentrate in China was 110500 yuan / ton, up 42.88% from the same period last year. The lowest price was 106000 yuan / ton and the highest price was 113000 yuan / ton. The average price of APT was 174200 yuan per ton, up 45.65 percent from the same period last year. The lowest price was 168000 yuan per ton and the highest price was 182000 yuan per ton. In the first half of 2018, the average price of APT in Europe was US $329U, up 56.77% from the same period last year, with a minimum price of US $307. the highest price was US $354per tonnage.

Niobium industry:

The niobium industry has a very high global market concentration., CBMM (Brazil Mining and Metallurgical Company, the world's largest niobium mining company, is engaged in the development, industrialization and commercial operation of related niobium products) accounting for 80% to 85% of the global market. It is absolutely dominant in the industry, has a strong influence on the niobium price trend, and controls the progress of the global niobium production expansion plan, so the niobium price has maintained a relatively stable level in history. Niobium is one of the indispensable raw materials for high quality steel. 1. The cost of niobium is relatively low because of its small amount of substitute and small dosage in iron and steel production. the above factors make the price elasticity of iron niobium demand low and the performance relatively stable. With the continued recovery of the steel industry in 2017, especially the gradual growth of stainless steel and high-end steel production capacity in China, niobium demand will continue to increase, providing a strong support for niobium prices.

The iron and steel industry is the largest user of niobium, with niobium iron sales accounting for 90 per cent of total niobium demand. Demand for niobium was strong in the first half of 2018, with exports (from Brazil) up 19 per cent from the same period last year. Global steel production also grew strongly on the back of a 5.4 per cent rise in China. This strong increase may be due in part to the imminent implementation of import tariff restrictions and quota policies. Prices remained stable during the first half of 2018. In addition to good market demand, vanadium (a competitive alloy element) has a high price all the year round, which may play a supporting role in the market.

Prospect of Luoyang Molybdenum Industry to Copper, Cobalt, Molybdenum, Tungsten and Niobium Industry

Copper market:

Copper demand is expected to increase steadily in 2018, in line with global GDP expectations, supported by improved demand in China. Wood Mackenzie, a commodities analyst, expects global consumption of refined copper to rise 2.4 per cent to 23.6m tonnes in 2018. A positive adjustment in expectations for refined copper demand in China was the main driver behind the forecast. Demand growth for refined copper in China is expected to rise to 3.2 per cent from 2.3 per cent in the first quarter of last year. Mainly based on the forecast that the increase in housing sales will lead to stronger-than-expected air-conditioning production, copper scrap supply has fallen as a result of government controls on imported waste, which is expected to lead to an increase in expected demand for refined copper.

Cobalt Market:

Demand for cobalt is expected to reach about 122000 tons in 2018, resulting in a small oversupply of nearly 8000 tons. The resumption of production by Katanga Mining in the first quarter, the commissioning of the ERG tailings RTR project in the fourth quarter of 2018 and the increased focus of existing producers on cobalt mining and other supply-side factors bode well for the market. According to CRU, cobalt demand will grow at a compound annual growth rate of nearly 8 per cent over the period 2023, mainly driven by the battery sector and the stable demand for cobalt alloys used in the aerospace industry. Strong market demand, including the ongoing pursuit of responsible exploration for cobalt resources, is expected to continue to contribute to prices during 2018.

Mo Market:

In the second half of 2018, the operation of the domestic iron and steel industry is still the key to affecting the trend of the domestic molybdenum market. The normalization of production restrictions in winter will further promote the upgrading and adjustment of the industrial structure of iron and steel enterprises, and the purchase volume of ferromolybdate in iron and steel enterprises will continue to rise. Stainless steel and high-end steel production will still have a lot of room to improve, resulting in a more active market for molybdenum demand. In terms of the operation of the Mo industry itself, the pressure of environmental protection and safety faced by domestic Mo production enterprises will still cause a great disturbance to the market supply. The impact of this factor has directly led to a stronger rise in ferromolybdate prices since July to the highest level since 2012. It is expected that under the premise of the increase in demand brought about by the upgrading of consumption and the adjustment of industrial structure of iron and steel enterprises in the second half of the year, the upgrading of environmental protection and safety policies in winter is expected to maintain a high level of volatility in the Mo market.

Tungsten Market:

In the second half of 2018, affected by the status of tungsten resources, environmental protection and safety inspection, mining and standardized operating costs, it is difficult to resume production in the short term, and there is still great uncertainty on the supply side. On the demand side, with the continuous consolidation of the positive trend in economic stability, the overall steady growth rate of investment, the continuous improvement of the investment structure, and the continued steady growth and development trend of the manufacturing industry, this will promote the steady growth of tungsten consumption, and the demand for tungsten will improve in stages. The trend of the domestic tungsten market may still rebound in stages.

Niobium market:

According to the World Iron and Steel Association, Chinese steel demand is expected to remain stable in 2018, while steel demand in advanced economies is expected to increase by about 1 per cent. Data as of May showed that EU steel production was up nearly 2 per cent, while US production was up nearly 3 per cent. In addition, China's steel production is stronger than expected, rising 5 per cent so far this year. In an industry where the main customers are niobium bearing steel producers, demand from the automotive industry in China and the European Union has remained strong, while the United States has stabilized after years of strong growth. Demand in the construction industry, which consumes about 1 / 50 of the world's ferronium for structural steel, has remained stable in North America and Europe. The oil and gas industry, which accounts for about 20 per cent of the world's ferronium consumption, is the world's third-largest ferronium consumer and will remain strong as recent high oil prices drive drilling and exploration activities.