[colored Changwen] non-ferrous metal industry private enterprises apocalypse: there are mines at home? I'm sorry. Even with a mine, we're having a hard time.-Shanghai Metals Market

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[colored Changwen] non-ferrous metal industry private enterprises apocalypse: there are mines at home? I'm sorry. Even with a mine, we're having a hard time.

Translation 07:12:36PM Nov 30, 2018 Source:SMM
The content below was translated by Tencent automatically for reference.

"in my life, I will never touch the edge of production. I have never done production without knowing the hardships of production. I have never had a good night's sleep. Fortunately, there has been no safety accident for so many years. One small thing can make you do it for nothing for a year. I disbanded the workers in June, never owed their wages, paid social security on time, paid severance pay, and burst into tears at the moment of closing the door, but that night was the most secure sleep, and now I have to receive the money from the client. Is the real money. "

Summary of key points:

Having a mine is not equal to having wealth

Nonferrous Industry: rich in Mineral Resources and overcapacity

Non-ferrous enterprises: heavy assets, slow construction cycle, great pressure on environmental protection

The pattern of Nonferrous Industry: the strong is always strong and the weak is difficult to continue

Self-Salvation of small and medium-sized Enterprises: another way to turn to Market Segmentation

Choice of non-ferrous metal giants: resource integration and joint efforts

If there is a mine disaster, there is wealth.

"what kind of family? do you have a mine at home?"

This dialogue between Zhao Benshan and Fan Wei from the TV series "Ma Da Shuai" has now spread all over the Internet, meaning to make fun of being rich at home. However, in reality, having a mine does not seem to be the same as wealth. In recent years, in the dual environment of capacity removal and environmental protection policies, due to the phenomenon of "one size fits all" in some areas, private enterprises in the non-ferrous metal industry have been greatly impacted.

According to the statistics of Zhongtai Securities, the number of private enterprises has decreased significantly in the past three years. Among them, in the past three years, the number of non-state-owned enterprises above the scale in the black gold mining industry has decreased by 42%; in the coal industry, the number of non-state-owned enterprises has decreased by 28%; and in the ferrous metal smelting and processing industry, the number of non-state-owned enterprises has decreased by 20%.

In terms of operating efficiency, private enterprises in the non-ferrous metals industry account for 20% to 30% of the loss-making enterprises. Among them, in the coal industry, when the economic downward pressure was greater in 2015, the number of loss units of private enterprises accounted for 30% of all private enterprises in the industry. The data for the iron and steel industry is 32%, for non-ferrous metal mining is 20%, and for the ferrous metal smelting and processing industry is 22%.

In terms of leverage, the asset-liability ratio of private enterprises in the industrial sector was 53 per cent by the end of 2017.

It seems to have reached a consensus that private enterprises are having a hard time, but it is probably only the entrepreneurs themselves who have a deep understanding of how difficult life is. Near the end of the year, due to the need to withdraw funds, private enterprises have taken the lead in feeling the "tight money." A senior financial executive in Shenzhen described the current market as follows: "some time ago, many private companies, including some listed companies, were frantically looking for money in the market, asking for help everywhere, even at high interest rates." Many private enterprises in the country have liquidity problems, which are at a critical moment of life and death. " Some enterprises are difficult to carry out capital turnover, so they have to stop production or even be forced to close down.

Why is the gap between the bleak and bleak sense of reality and the vitality of the heavy industry that people imagine to be full of machinery and equipment? SMM will analyze step by step in this paper, and borrow some classic cases to provide some suggestions and ideas for private enterprises, especially in the non-ferrous metal industry.

Nonferrous Industry: rich in Mineral Resources and overcapacity

If you want to support the non-ferrous metal industry, you must first take a look at the current situation of China's non-ferrous metal industry. Generally speaking, China's non-ferrous metal industry includes mining, smelting, processing and geological exploration, engineering survey and design, construction, scientific research and education and other departments constitute a complete industrial system. The non-ferrous metal industry is the basic raw material industry, and the non-ferrous metal industry is the pillar industry of our national economy. According to statistics, among the more than 100 industries in the country, more than 90 percent of the departments need to use non-ferrous metal products, and about 95 percent of the material production departments and 75 percent of the non-material production departments need to consume non-ferrous metals. The proportion of gross industrial output value in China's GDP is about 5% to 6%.

Due to China's vast land and resources, rich in mineral resources, diverse varieties of mineral resources, China's non-ferrous metal producing areas all over the country, especially the most widely used copper, aluminum, zinc and other minerals are widely distributed in ethnic areas. And relatively concentrated in some provinces and regions. For example, bauxite is distributed in southwest China, but it is concentrated in Guizhou and Guangxi, among which pingguo bauxite in Guangxi is the largest bauxite in China. Tin in Yunnan and Guangxi, rare earths in Baiyun Obo, Inner Mongolia, Hg, in Tongren, Guizhou, and two new and old "treasure basins" in the Chaidamu Basin and Panzhihua area are all non-ferrous metal resources with considerable reserves.

As the largest producer and consumer of non-ferrous metals in the world, the organizational structure of China's non-ferrous metals industry has a lot of room for optimization. Due to the overcapacity of some products, the low degree of industrial intensification and the weak ability of independent innovation, The performance of many non-ferrous metal enterprises is not optimistic.

According to data from the China Industrial Information Network, by 2017, the number of non-ferrous metal industries in China has reached 7215, of which 1143 enterprises have suffered losses, with an average loss amount of 20.192 million yuan. In 2017, the main business income and profits of non-ferrous metal enterprises above scale were 6.0444 trillion yuan and 255.1 billion yuan, up 13.8 and 27.5 per cent respectively over the same period last year. Among them, the profits of mining, smelting and processing were 52.7 billion yuan, 95.3 billion yuan and 107.1 billion yuan respectively, up 23.5%, 51.8% and 13.2% respectively compared with the same period last year. In 2017, the cost per 100 yuan of main business income of non-ferrous metal industrial enterprises above scale was 91.51 yuan, a decrease of 0.27 yuan over the same period last year. The total expenses of sales, management and finance totaled 248.8 billion yuan, an increase of 7.6 per cent over the same period last year. Among them, the financial cost was 77 billion yuan, accounting for 31.0 percent of the three expenses, which was 1.0 percentage points lower than that of the same period.

The number of enterprises above the scale of non-ferrous metals and the number of loss-making enterprises in China in the past seven years:

The average loss amount of China's non-ferrous metal enterprises in the past seven years:

Non-ferrous enterprises: heavy assets, slow construction cycle, great pressure on environmental protection

According to SMM research, compared with ordinary private enterprises, non-ferrous metal enterprises have three obvious characteristics: heavy assets, slow construction cycle and great pressure on environmental protection.

Heavy assets are originally an economic term, which refers to tangible assets held by enterprises, such as factory buildings, raw materials, and so on. Heavy asset company refers to a large capital investment, less profit return, low profit margin, product renewal needs to update the production line, asset depreciation rate is high. Manufacturing enterprises from the construction of factories, equipment, factories and so on, and finally have to switch to production, as a non-ferrous metal industry, the initial input cost is very huge, at the same time, the construction of factory building is a long process. After the preparation of all the pre-fixed equipment, because the non-ferrous metal enterprises are generally involved in the "wet smelting" process, it is inevitable to need the management of various environmental protection qualifications.

In recent years, the government has attached great importance to environmental protection issues such as haze, waste water, slag, and so on. The central government has issued policies to carry out special environmental protection actions one after another, and it has become the current norm to control environmental pollution with an iron hand. The "strictest" new environmental protection law has been implemented, the environmental protection department has set specific targets for controlling environmental pollution, and the government work report has also made a commitment. In order to achieve environmental protection with an iron fist and solve the "problems of people's livelihood and the pain of the hearts of the people," the relevant departments have launched several batches of central environmental protection inspectors in a row, with more than 10,000 people being held accountable. Under the heavy fist of environmental protection with an iron fist, the production of non-ferrous metals that do not meet the requirements of environmental protection has been greatly suppressed, especially some small and medium-sized non-ferrous metal enterprises that do not have the ability to control pollution will be forced to withdraw from the market. Including some simple smelting waste non-ferrous metal small workshop enterprises withdraw from the market. Iron fist environmental protection is not only bound to force the whole industrial chain of non-ferrous metals, metal smelting, ore mining, power supply and other enterprises to increase investment in environmental protection, but also require all sectors of society to add a huge amount of environmental protection costs. And it also needs to increase the cost of environmental protection every year. According to estimates by the mining industry, in order to meet the new emission standards, the total investment in environmental protection in the country will be as much as 10 trillion yuan in the future.

The pattern of Nonferrous Industry: the strong is always strong and the weak is difficult to continue

In the first half of 2018, benefiting from the rise in metal prices, the non-ferrous metals industry as a whole continued to improve, and is now running smoothly. According to prospective industry research data, 105 non-ferrous metal enterprises achieved business income of 707.7 billion yuan, up 8% from 652.3 billion yuan in the same period last year. Gross profit and net profit also increased significantly, reaching 77.8 billion yuan and 27.2 billion yuan respectively in the first half of the year, an increase of 18 per cent and 25 per cent over the same period last year. Among them, the top five net profits of the non-ferrous metals industry are Luoyang Molybdenum Industry, Zijin Mining Industry, Tianqi Lithium Industry, Huayu Cobalt Industry and Hesheng Silicon Industry. These five enterprises account for 41% of the profits of the whole industry, and the leading effect is prominent. According to the specific data, Luoyang Molybdenum Industry achieved a net profit of 3.6 billion yuan, ranking first in the industry, followed by Zijin Mining Industry, with a net profit scale of more than 3 billion yuan. The net profit of Tianqi lithium industry, Huayu cobalt industry and Hesheng silicon industry is between 13 and 1.6 billion yuan, which is a big gap with the top two.

Top 10 enterprises in net profit of non-ferrous metals industry in the first half of 2018 (unit: 100 million yuan)

At present, the high profitability of the non-ferrous industry has a general grasp of resources on the one hand and raw materials on the other. Take the lithium metal industry as an example. According to SMM data, the average gross profit margin of the lithium industry in 2016 was 33%. Tianqi lithium industry has its own raw ore, the raw material cost is controllable, the combined gross profit is as high as 71%, and the gross profit and lithium compound production project of Tianqi lithium project in the first half of 2017, the gross profit is more than 65%.

According to SMM research, at present, large enterprises in upstream lithium salt plants generally have relatively abundant funds, and at the same time, these giants have even the intention to distribute lithium mines or salt lake lithium resources around the world, and many small factories do not have their own lithium raw materials. Raw materials can only be purchased in the form of bulk orders and bulk cargo. Even if they are on a par with large enterprises in quality and technology, the cost advantage of products has become an important factor in the loss of market for lithium products in small factories. Due to the lack of advantages of products, many small enterprises can only choose processing and mergers and acquisitions, and some enterprises can only stop production or even file for bankruptcy under the pressure of funds.

Self-Salvation of small and medium-sized Enterprises: another way to turn to Market Segmentation

In the face of a large number of giants in the industry, some small businesses began to change their minds and find another way to move to other market segments. Taking the power battery market of cobalt lithium, one of the most popular non-ferrous metals in recent years, as an example, the market of new energy vehicles has exploded in recent years, and the power battery industry has become a new tuyere. However, the whole power battery market is not as prosperous and rapid as people think, but has shown a situation in which the strong expand and the weak are difficult to sustain. On the one hand, since the listing of leading enterprises such as Ningde era, In Germany to build another power battery factory, and continuous cooperation with a number of enterprises to set up joint ventures; On the other hand, many enterprises in the battery industry chain have encountered financial difficulties and are facing bankruptcy. Fang Jianhua, former president of Guoxuan High Technology and executive partner and president of the New Energy vehicle Venture Capital Sub-Fund of the National Science and Technology Achievement Transformation Fund, believes that at present, power battery enterprises with supporting products have entered the catalogue of the Ministry of Industry and Information Technology. It has fallen from more than 200 last year to more than 90, although the halving of the number is seen as a big adjustment, which is just the beginning of the adjustment, and the knockout stage will be even faster. By 2020, there are only more than 20 of the 200 power battery enterprises left, and more than 90% of the power battery enterprises will be eliminated.

At present, the power battery industry has gradually entered the era of oligarchy, market concentration has increased, and giant enterprises share dividends. According to the relevant data statistics, the head effect of the power battery industry is obvious. In the first half of 2018, a total of 77 battery core factories achieved installed supply, of which Ningde installed capacity, 6.58GWh market share reached 42.24%, ranking first; BYD ranked second with 21.50% of 3.35GWh and 63.74% of the total. Guoxuan High Technology ranked third with 892.23 MWh, fourth with 753.56 MWh 4.84%, and fifth with 547.82 MWh 3.52%. The market share of the top five enterprises in the power battery industry has reached 77.82%. Overall, the battery industry is still showing a winner-take-all situation, and the market share of the top few in the industry is expected to continue to expand.

Each enterprise share of the ternary battery in the power battery from January to July 2018:

(source: certificate, Oriental Wealth Securities Institute)

The share of lithium iron phosphate batteries in power batteries from January to July 2018:

(source: certificate, Oriental Wealth Securities Institute)

Under the background of overall overcapacity in the new energy automobile industry, the power battery industry is characterized by structural overcapacity, the high-quality capacity of leading enterprises is sought after, and the backward capacity of small and medium-sized manufacturers is not well digested. Living space will continue to be squeezed. Under the pressure of excess capacity clearance, some of the small and medium-sized manufacturers originally engaged in power batteries have turned to a new subdivision-consumer electronic batteries. The traditional 3c digital consumer battery market has been saturated, but due to the current market demand for new consumer electronic batteries is increasing year by year, compared with the inextricable power battery market, the competitive pressure is relatively small.

Choice of non-ferrous metal giants: resource integration and joint efforts

Compared with the regret that it is difficult for small and medium-sized enterprises to squeeze into the market, the giants of non-ferrous metals often worry about the loss of market share. Also take the cobalt and lithium industry as an example, on the basis of its own free mineral resources, the giant enterprises attach great importance to the construction of their own production capacity, consolidate their oligarchic position in market share, and complement the superior resources between upstream and downstream at the same time. Realize the deep integration of resources.

On November 9, the opening ceremony of the ternary precursor / cathode material project of Huayu Posco / Puhua New Energy Materials Co., Ltd. with an annual production capacity of 30,000 tons of power batteries was held. It marks a new stage in the strategic cooperation between cobalt giant Huayu Cobalt and steel giant Posco. Huayu Posco new energy covers an area of 141mu, a total investment of 1.008 billion yuan, the construction of an annual output of 30, 000 tons of power battery ternary precursor material project. The first phase of the project, with an annual capacity of 5000 tons, will be completed and put into production in August 2019. Puhua new energy covers an area of 156mu, a total investment of 930 million yuan, the construction of an annual output of 30, 000 tons of power battery three-way positive material project. The first phase of the project, with an annual capacity of 5000 tons, will be completed and put into production in August 2019. The cooperation between Huayou Cobalt and Posco, South Korea's largest steelmaker, originated at the beginning of this year. In January 2018, Huayu established two joint ventures with Posco: Zhejiang Huayu Posco New Energy Co., Ltd., Zhejiang Posco Huayu New Energy Co., Ltd., and Zhejiang Posco Huayu New Energy Co., Ltd. Mainly engaged in the research and development, production and sales of lithium-related precursors, the two China-based joint ventures will start producing ternary precursors and anode materials from 2020.

(cooperation between cobalt giants and steel giants)

Posco is a top 500 multinational company with global competitiveness. Huayu is a leader in the manufacturing industry of China's private enterprises and a leader in the global cobalt industry. joint venture is a strong cooperation with complementary advantages and mutual benefit. Huayu Cobalt Industry said that in order to fully grasp the development opportunities of the national new energy vehicle industry and meet the growing market demand for high-end power battery materials in the new energy market, For the company from the cobalt industry leader in the transformation and development of lithium power new energy materials industry leaders to seek the first opportunity. If no major adverse changes have taken place in the market, after the completion of the project to reach production, it is expected to achieve an average annual operating income of 12.525 billion yuan, with an average annual profit of 1.181 billion yuan.

Fang Yuan, deputy general manager of Huayou Cobalt Industry, said in an interview, "We are upstream and mid-stream enterprises with resources and cobalt smelting products." However, we want to extend the industrial chain through joint ventures, so as to ensure that upstream resources and intermediate smelting products can be fully utilized. With the help of the world's top 500 companies, we hope to be able to enter the market for new energy vehicles with better brands, including European car brands. " According to Northeast Securities statistics, at present, some of the company's high-end ternary precursor products through BASF, LGC, Dangsheng, Cunninghamia lanceolata and other well-known enterprises certification, has an annual production capacity of 20, 000 tons. The 150000 ton ternary precursor production project is scheduled to be put into production in 2020, and the project in cooperation with LG and Posco has also been steadily promoted. At the same time, Huayu acquired a 70 per cent stake in TMC, extended the recovery of ternary lithium power, subscribed for AVZ shares, and dabbled in lithium resources exploration. The company is making great efforts to build a closed ternary material industry chain of cobalt + lithium-precursor-resource recovery, and the company is moving forward to the leader of lithium power new energy materials. SMM believes that the diversification and internationalization of positive material enterprises will help manufacturers to integrate global resources at superior costs and provide competitive lithium power products. The cooperation between upstream miners and downstream terminal enterprises can not only ensure the future sales of a large number of production capacity of the company, but also complement each other's advantages and quickly improve the technical level of products.

Conclusion

"Enterprises are difficult to do, there is investment, there is no return; there is income, no profit; there is profit, no cash!" One head of a private company working in the non-ferrous industry commented on his current situation in an interview. In the macro environment, the urgent flow of capital, shrinking demand for downstream orders, coupled with fierce peer competition, many private enterprises are struggling on the brink of survival. Despite the difficulties, the person in charge is still optimistic about the future. "although there is still a lot of room for improvement in the business environment, it has also improved a lot."

On November 1, General Secretary Xi Jinping presided over a forum on private enterprises, emphasizing that private economy is the internal element of China's economic system, private enterprises and private entrepreneurs are our own people, and China's private economy can only grow and cannot be weakened. And to move to a broader stage. Since the forum, governments at all levels have expressed their views on this, and some policies on the rescue of private enterprises have been introduced one after another, such as Yi Gang, governor of the central bank, In view of the financing difficulties of private enterprises and small and micro enterprises, the "three arrows" policy combination of credit, bond issuance and equity financing will be adopted to support private enterprises to broaden their financing channels and help private enterprises tide over the difficulties. The CIRC is also considering encouraging banks to significantly increase credit lines for private companies. The announcement of a large number of policies to bail out private enterprises has given private enterprises a boost. We also believe that the vitality of private enterprises, the resilience of private enterprises, and the strong vitality of private enterprises will eventually enable private enterprises to extricate themselves from difficulties and embark on a stronger new stage of development.

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[colored Changwen] non-ferrous metal industry private enterprises apocalypse: there are mines at home? I'm sorry. Even with a mine, we're having a hard time.

Translation 07:12:36PM Nov 30, 2018 Source:SMM
The content below was translated by Tencent automatically for reference.

"in my life, I will never touch the edge of production. I have never done production without knowing the hardships of production. I have never had a good night's sleep. Fortunately, there has been no safety accident for so many years. One small thing can make you do it for nothing for a year. I disbanded the workers in June, never owed their wages, paid social security on time, paid severance pay, and burst into tears at the moment of closing the door, but that night was the most secure sleep, and now I have to receive the money from the client. Is the real money. "

Summary of key points:

Having a mine is not equal to having wealth

Nonferrous Industry: rich in Mineral Resources and overcapacity

Non-ferrous enterprises: heavy assets, slow construction cycle, great pressure on environmental protection

The pattern of Nonferrous Industry: the strong is always strong and the weak is difficult to continue

Self-Salvation of small and medium-sized Enterprises: another way to turn to Market Segmentation

Choice of non-ferrous metal giants: resource integration and joint efforts

If there is a mine disaster, there is wealth.

"what kind of family? do you have a mine at home?"

This dialogue between Zhao Benshan and Fan Wei from the TV series "Ma Da Shuai" has now spread all over the Internet, meaning to make fun of being rich at home. However, in reality, having a mine does not seem to be the same as wealth. In recent years, in the dual environment of capacity removal and environmental protection policies, due to the phenomenon of "one size fits all" in some areas, private enterprises in the non-ferrous metal industry have been greatly impacted.

According to the statistics of Zhongtai Securities, the number of private enterprises has decreased significantly in the past three years. Among them, in the past three years, the number of non-state-owned enterprises above the scale in the black gold mining industry has decreased by 42%; in the coal industry, the number of non-state-owned enterprises has decreased by 28%; and in the ferrous metal smelting and processing industry, the number of non-state-owned enterprises has decreased by 20%.

In terms of operating efficiency, private enterprises in the non-ferrous metals industry account for 20% to 30% of the loss-making enterprises. Among them, in the coal industry, when the economic downward pressure was greater in 2015, the number of loss units of private enterprises accounted for 30% of all private enterprises in the industry. The data for the iron and steel industry is 32%, for non-ferrous metal mining is 20%, and for the ferrous metal smelting and processing industry is 22%.

In terms of leverage, the asset-liability ratio of private enterprises in the industrial sector was 53 per cent by the end of 2017.

It seems to have reached a consensus that private enterprises are having a hard time, but it is probably only the entrepreneurs themselves who have a deep understanding of how difficult life is. Near the end of the year, due to the need to withdraw funds, private enterprises have taken the lead in feeling the "tight money." A senior financial executive in Shenzhen described the current market as follows: "some time ago, many private companies, including some listed companies, were frantically looking for money in the market, asking for help everywhere, even at high interest rates." Many private enterprises in the country have liquidity problems, which are at a critical moment of life and death. " Some enterprises are difficult to carry out capital turnover, so they have to stop production or even be forced to close down.

Why is the gap between the bleak and bleak sense of reality and the vitality of the heavy industry that people imagine to be full of machinery and equipment? SMM will analyze step by step in this paper, and borrow some classic cases to provide some suggestions and ideas for private enterprises, especially in the non-ferrous metal industry.

Nonferrous Industry: rich in Mineral Resources and overcapacity

If you want to support the non-ferrous metal industry, you must first take a look at the current situation of China's non-ferrous metal industry. Generally speaking, China's non-ferrous metal industry includes mining, smelting, processing and geological exploration, engineering survey and design, construction, scientific research and education and other departments constitute a complete industrial system. The non-ferrous metal industry is the basic raw material industry, and the non-ferrous metal industry is the pillar industry of our national economy. According to statistics, among the more than 100 industries in the country, more than 90 percent of the departments need to use non-ferrous metal products, and about 95 percent of the material production departments and 75 percent of the non-material production departments need to consume non-ferrous metals. The proportion of gross industrial output value in China's GDP is about 5% to 6%.

Due to China's vast land and resources, rich in mineral resources, diverse varieties of mineral resources, China's non-ferrous metal producing areas all over the country, especially the most widely used copper, aluminum, zinc and other minerals are widely distributed in ethnic areas. And relatively concentrated in some provinces and regions. For example, bauxite is distributed in southwest China, but it is concentrated in Guizhou and Guangxi, among which pingguo bauxite in Guangxi is the largest bauxite in China. Tin in Yunnan and Guangxi, rare earths in Baiyun Obo, Inner Mongolia, Hg, in Tongren, Guizhou, and two new and old "treasure basins" in the Chaidamu Basin and Panzhihua area are all non-ferrous metal resources with considerable reserves.

As the largest producer and consumer of non-ferrous metals in the world, the organizational structure of China's non-ferrous metals industry has a lot of room for optimization. Due to the overcapacity of some products, the low degree of industrial intensification and the weak ability of independent innovation, The performance of many non-ferrous metal enterprises is not optimistic.

According to data from the China Industrial Information Network, by 2017, the number of non-ferrous metal industries in China has reached 7215, of which 1143 enterprises have suffered losses, with an average loss amount of 20.192 million yuan. In 2017, the main business income and profits of non-ferrous metal enterprises above scale were 6.0444 trillion yuan and 255.1 billion yuan, up 13.8 and 27.5 per cent respectively over the same period last year. Among them, the profits of mining, smelting and processing were 52.7 billion yuan, 95.3 billion yuan and 107.1 billion yuan respectively, up 23.5%, 51.8% and 13.2% respectively compared with the same period last year. In 2017, the cost per 100 yuan of main business income of non-ferrous metal industrial enterprises above scale was 91.51 yuan, a decrease of 0.27 yuan over the same period last year. The total expenses of sales, management and finance totaled 248.8 billion yuan, an increase of 7.6 per cent over the same period last year. Among them, the financial cost was 77 billion yuan, accounting for 31.0 percent of the three expenses, which was 1.0 percentage points lower than that of the same period.

The number of enterprises above the scale of non-ferrous metals and the number of loss-making enterprises in China in the past seven years:

The average loss amount of China's non-ferrous metal enterprises in the past seven years:

Non-ferrous enterprises: heavy assets, slow construction cycle, great pressure on environmental protection

According to SMM research, compared with ordinary private enterprises, non-ferrous metal enterprises have three obvious characteristics: heavy assets, slow construction cycle and great pressure on environmental protection.

Heavy assets are originally an economic term, which refers to tangible assets held by enterprises, such as factory buildings, raw materials, and so on. Heavy asset company refers to a large capital investment, less profit return, low profit margin, product renewal needs to update the production line, asset depreciation rate is high. Manufacturing enterprises from the construction of factories, equipment, factories and so on, and finally have to switch to production, as a non-ferrous metal industry, the initial input cost is very huge, at the same time, the construction of factory building is a long process. After the preparation of all the pre-fixed equipment, because the non-ferrous metal enterprises are generally involved in the "wet smelting" process, it is inevitable to need the management of various environmental protection qualifications.

In recent years, the government has attached great importance to environmental protection issues such as haze, waste water, slag, and so on. The central government has issued policies to carry out special environmental protection actions one after another, and it has become the current norm to control environmental pollution with an iron hand. The "strictest" new environmental protection law has been implemented, the environmental protection department has set specific targets for controlling environmental pollution, and the government work report has also made a commitment. In order to achieve environmental protection with an iron fist and solve the "problems of people's livelihood and the pain of the hearts of the people," the relevant departments have launched several batches of central environmental protection inspectors in a row, with more than 10,000 people being held accountable. Under the heavy fist of environmental protection with an iron fist, the production of non-ferrous metals that do not meet the requirements of environmental protection has been greatly suppressed, especially some small and medium-sized non-ferrous metal enterprises that do not have the ability to control pollution will be forced to withdraw from the market. Including some simple smelting waste non-ferrous metal small workshop enterprises withdraw from the market. Iron fist environmental protection is not only bound to force the whole industrial chain of non-ferrous metals, metal smelting, ore mining, power supply and other enterprises to increase investment in environmental protection, but also require all sectors of society to add a huge amount of environmental protection costs. And it also needs to increase the cost of environmental protection every year. According to estimates by the mining industry, in order to meet the new emission standards, the total investment in environmental protection in the country will be as much as 10 trillion yuan in the future.

The pattern of Nonferrous Industry: the strong is always strong and the weak is difficult to continue

In the first half of 2018, benefiting from the rise in metal prices, the non-ferrous metals industry as a whole continued to improve, and is now running smoothly. According to prospective industry research data, 105 non-ferrous metal enterprises achieved business income of 707.7 billion yuan, up 8% from 652.3 billion yuan in the same period last year. Gross profit and net profit also increased significantly, reaching 77.8 billion yuan and 27.2 billion yuan respectively in the first half of the year, an increase of 18 per cent and 25 per cent over the same period last year. Among them, the top five net profits of the non-ferrous metals industry are Luoyang Molybdenum Industry, Zijin Mining Industry, Tianqi Lithium Industry, Huayu Cobalt Industry and Hesheng Silicon Industry. These five enterprises account for 41% of the profits of the whole industry, and the leading effect is prominent. According to the specific data, Luoyang Molybdenum Industry achieved a net profit of 3.6 billion yuan, ranking first in the industry, followed by Zijin Mining Industry, with a net profit scale of more than 3 billion yuan. The net profit of Tianqi lithium industry, Huayu cobalt industry and Hesheng silicon industry is between 13 and 1.6 billion yuan, which is a big gap with the top two.

Top 10 enterprises in net profit of non-ferrous metals industry in the first half of 2018 (unit: 100 million yuan)

At present, the high profitability of the non-ferrous industry has a general grasp of resources on the one hand and raw materials on the other. Take the lithium metal industry as an example. According to SMM data, the average gross profit margin of the lithium industry in 2016 was 33%. Tianqi lithium industry has its own raw ore, the raw material cost is controllable, the combined gross profit is as high as 71%, and the gross profit and lithium compound production project of Tianqi lithium project in the first half of 2017, the gross profit is more than 65%.

According to SMM research, at present, large enterprises in upstream lithium salt plants generally have relatively abundant funds, and at the same time, these giants have even the intention to distribute lithium mines or salt lake lithium resources around the world, and many small factories do not have their own lithium raw materials. Raw materials can only be purchased in the form of bulk orders and bulk cargo. Even if they are on a par with large enterprises in quality and technology, the cost advantage of products has become an important factor in the loss of market for lithium products in small factories. Due to the lack of advantages of products, many small enterprises can only choose processing and mergers and acquisitions, and some enterprises can only stop production or even file for bankruptcy under the pressure of funds.

Self-Salvation of small and medium-sized Enterprises: another way to turn to Market Segmentation

In the face of a large number of giants in the industry, some small businesses began to change their minds and find another way to move to other market segments. Taking the power battery market of cobalt lithium, one of the most popular non-ferrous metals in recent years, as an example, the market of new energy vehicles has exploded in recent years, and the power battery industry has become a new tuyere. However, the whole power battery market is not as prosperous and rapid as people think, but has shown a situation in which the strong expand and the weak are difficult to sustain. On the one hand, since the listing of leading enterprises such as Ningde era, In Germany to build another power battery factory, and continuous cooperation with a number of enterprises to set up joint ventures; On the other hand, many enterprises in the battery industry chain have encountered financial difficulties and are facing bankruptcy. Fang Jianhua, former president of Guoxuan High Technology and executive partner and president of the New Energy vehicle Venture Capital Sub-Fund of the National Science and Technology Achievement Transformation Fund, believes that at present, power battery enterprises with supporting products have entered the catalogue of the Ministry of Industry and Information Technology. It has fallen from more than 200 last year to more than 90, although the halving of the number is seen as a big adjustment, which is just the beginning of the adjustment, and the knockout stage will be even faster. By 2020, there are only more than 20 of the 200 power battery enterprises left, and more than 90% of the power battery enterprises will be eliminated.

At present, the power battery industry has gradually entered the era of oligarchy, market concentration has increased, and giant enterprises share dividends. According to the relevant data statistics, the head effect of the power battery industry is obvious. In the first half of 2018, a total of 77 battery core factories achieved installed supply, of which Ningde installed capacity, 6.58GWh market share reached 42.24%, ranking first; BYD ranked second with 21.50% of 3.35GWh and 63.74% of the total. Guoxuan High Technology ranked third with 892.23 MWh, fourth with 753.56 MWh 4.84%, and fifth with 547.82 MWh 3.52%. The market share of the top five enterprises in the power battery industry has reached 77.82%. Overall, the battery industry is still showing a winner-take-all situation, and the market share of the top few in the industry is expected to continue to expand.

Each enterprise share of the ternary battery in the power battery from January to July 2018:

(source: certificate, Oriental Wealth Securities Institute)

The share of lithium iron phosphate batteries in power batteries from January to July 2018:

(source: certificate, Oriental Wealth Securities Institute)

Under the background of overall overcapacity in the new energy automobile industry, the power battery industry is characterized by structural overcapacity, the high-quality capacity of leading enterprises is sought after, and the backward capacity of small and medium-sized manufacturers is not well digested. Living space will continue to be squeezed. Under the pressure of excess capacity clearance, some of the small and medium-sized manufacturers originally engaged in power batteries have turned to a new subdivision-consumer electronic batteries. The traditional 3c digital consumer battery market has been saturated, but due to the current market demand for new consumer electronic batteries is increasing year by year, compared with the inextricable power battery market, the competitive pressure is relatively small.

Choice of non-ferrous metal giants: resource integration and joint efforts

Compared with the regret that it is difficult for small and medium-sized enterprises to squeeze into the market, the giants of non-ferrous metals often worry about the loss of market share. Also take the cobalt and lithium industry as an example, on the basis of its own free mineral resources, the giant enterprises attach great importance to the construction of their own production capacity, consolidate their oligarchic position in market share, and complement the superior resources between upstream and downstream at the same time. Realize the deep integration of resources.

On November 9, the opening ceremony of the ternary precursor / cathode material project of Huayu Posco / Puhua New Energy Materials Co., Ltd. with an annual production capacity of 30,000 tons of power batteries was held. It marks a new stage in the strategic cooperation between cobalt giant Huayu Cobalt and steel giant Posco. Huayu Posco new energy covers an area of 141mu, a total investment of 1.008 billion yuan, the construction of an annual output of 30, 000 tons of power battery ternary precursor material project. The first phase of the project, with an annual capacity of 5000 tons, will be completed and put into production in August 2019. Puhua new energy covers an area of 156mu, a total investment of 930 million yuan, the construction of an annual output of 30, 000 tons of power battery three-way positive material project. The first phase of the project, with an annual capacity of 5000 tons, will be completed and put into production in August 2019. The cooperation between Huayou Cobalt and Posco, South Korea's largest steelmaker, originated at the beginning of this year. In January 2018, Huayu established two joint ventures with Posco: Zhejiang Huayu Posco New Energy Co., Ltd., Zhejiang Posco Huayu New Energy Co., Ltd., and Zhejiang Posco Huayu New Energy Co., Ltd. Mainly engaged in the research and development, production and sales of lithium-related precursors, the two China-based joint ventures will start producing ternary precursors and anode materials from 2020.

(cooperation between cobalt giants and steel giants)

Posco is a top 500 multinational company with global competitiveness. Huayu is a leader in the manufacturing industry of China's private enterprises and a leader in the global cobalt industry. joint venture is a strong cooperation with complementary advantages and mutual benefit. Huayu Cobalt Industry said that in order to fully grasp the development opportunities of the national new energy vehicle industry and meet the growing market demand for high-end power battery materials in the new energy market, For the company from the cobalt industry leader in the transformation and development of lithium power new energy materials industry leaders to seek the first opportunity. If no major adverse changes have taken place in the market, after the completion of the project to reach production, it is expected to achieve an average annual operating income of 12.525 billion yuan, with an average annual profit of 1.181 billion yuan.

Fang Yuan, deputy general manager of Huayou Cobalt Industry, said in an interview, "We are upstream and mid-stream enterprises with resources and cobalt smelting products." However, we want to extend the industrial chain through joint ventures, so as to ensure that upstream resources and intermediate smelting products can be fully utilized. With the help of the world's top 500 companies, we hope to be able to enter the market for new energy vehicles with better brands, including European car brands. " According to Northeast Securities statistics, at present, some of the company's high-end ternary precursor products through BASF, LGC, Dangsheng, Cunninghamia lanceolata and other well-known enterprises certification, has an annual production capacity of 20, 000 tons. The 150000 ton ternary precursor production project is scheduled to be put into production in 2020, and the project in cooperation with LG and Posco has also been steadily promoted. At the same time, Huayu acquired a 70 per cent stake in TMC, extended the recovery of ternary lithium power, subscribed for AVZ shares, and dabbled in lithium resources exploration. The company is making great efforts to build a closed ternary material industry chain of cobalt + lithium-precursor-resource recovery, and the company is moving forward to the leader of lithium power new energy materials. SMM believes that the diversification and internationalization of positive material enterprises will help manufacturers to integrate global resources at superior costs and provide competitive lithium power products. The cooperation between upstream miners and downstream terminal enterprises can not only ensure the future sales of a large number of production capacity of the company, but also complement each other's advantages and quickly improve the technical level of products.

Conclusion

"Enterprises are difficult to do, there is investment, there is no return; there is income, no profit; there is profit, no cash!" One head of a private company working in the non-ferrous industry commented on his current situation in an interview. In the macro environment, the urgent flow of capital, shrinking demand for downstream orders, coupled with fierce peer competition, many private enterprises are struggling on the brink of survival. Despite the difficulties, the person in charge is still optimistic about the future. "although there is still a lot of room for improvement in the business environment, it has also improved a lot."

On November 1, General Secretary Xi Jinping presided over a forum on private enterprises, emphasizing that private economy is the internal element of China's economic system, private enterprises and private entrepreneurs are our own people, and China's private economy can only grow and cannot be weakened. And to move to a broader stage. Since the forum, governments at all levels have expressed their views on this, and some policies on the rescue of private enterprises have been introduced one after another, such as Yi Gang, governor of the central bank, In view of the financing difficulties of private enterprises and small and micro enterprises, the "three arrows" policy combination of credit, bond issuance and equity financing will be adopted to support private enterprises to broaden their financing channels and help private enterprises tide over the difficulties. The CIRC is also considering encouraging banks to significantly increase credit lines for private companies. The announcement of a large number of policies to bail out private enterprises has given private enterprises a boost. We also believe that the vitality of private enterprises, the resilience of private enterprises, and the strong vitality of private enterprises will eventually enable private enterprises to extricate themselves from difficulties and embark on a stronger new stage of development.

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