About 70% of mining enterprises in Hebei stopped production

“When does the spring of minerals come? How long does this winter last? How will the price of minerals fall?” On March 25th, 2015, the Mine Enterprise Branch of the 2015 International Conference on Metallurgy and Mineral Products was filled with pessimism.

The previous day, international iron ore prices on the 24th had fallen to around US$54/tonne. This is undoubtedly a bad news for domestic mining companies with high ton mine costs. More than 10 representatives of mining companies from Hebei, Shanxi, Inner Mongolia and other places complained to the industry association that “the maximum loss of 1 ton of mine is 300 pieces, and the mining enterprise is in a period of time.” They appealed to the association to be able to report difficulties to the government authorities, hoping that the competent authorities We can adopt some policies and measures to reduce tax burdens for mine companies.

However, mining experts believe that it is unrealistic to expect the government to reduce taxes to solve the problem of industrial surplus, and that mining companies still need to dig up their potential to improve their internal strength.

About 70% of mining enterprises in Hebei stopped production

Hebei is a big steel province, and mining companies also occupy half of the country. Affected by the cliff-type fall in iron ore mine prices last year, domestic mining companies are currently suffering from losses and production shutdowns.

According to a person in charge of the Hebei Metallurgical Mines Management Office, there are currently 1,800 mineral processing companies in Hebei. 2014 is a turning point in the market. The ore output of the mining enterprises in the province was approximately 407 million tons, which was significantly lower than the previous year's 500 million tons, and produced more than 80 million tons of fine iron powder.

According to its introduction, with the continuous decline in the price of ore since last year, about 70% of the mining enterprises have already stopped production. The state-owned mining companies that continue to maintain production are still producing at a loss. In terms of costs, of the more than 400 million tons of minerals produced last year, the cost of ton ore was about 25% for about 800 yuan, and about 65%-70% for 450-550 yuan. There were still some poor iron ore mines that cost About 300 yuan, this proportion accounted for 5%, "according to the international ore price of 55 US dollars, the vast majority of domestic mines are the loss of tons of mine costs."

“Our company has already stopped production of five mines, and there are two difficulties to maintain.” Li Fengguang, vice president and chief engineer of the Fujian enterprise rich bird mining group, said that the suspension of production brought many problems, including causing local financial difficulties, “We hope to give companies Find a prescription."

According to the statement made by the senior management of Minmetals under the China Minmetals Mining Corporation, the company is a state-owned independent mining enterprise and owns 6 mines in Yongxing, Anhui, and Shandong, with an annual output of 10 million tons or more of iron ore and iron fines. Annual production of 4.6 million tons. Last year was affected by the international price of minerals. It is estimated that the current loss has exceeded 100 million yuan (it is still auditing). Compared with the profit of 6.7 billion yuan in the previous year, the contrast is huge. However, due to the status of state-owned enterprises, their mines are still maintaining production.

“The cost of continued production of state-owned mining industry is very high. Our losses have gradually widened and the capital flow has been in trouble. The products produced are not easy to sell, and they have not sold well and have not received any money,” said the executive.

The person in charge of the Hebei Metallurgical Mine Management Office explained to 21st Century Business Herald reporter that “1 ton of fine iron powder can produce 0.67 tons of pig iron. However, on the other hand, a domestic mining company can produce 1 ton of minerals and can feed 0.2 individuals. With 138 yuan in tax revenue, the taxes paid by these miners can in turn support the finances of more than 90 mining cities, and also drive downstream industries such as catering and transportation. These are not direct purchases of one ton of foreign mines that can be replaced."

The situation in Hebei is not a special case in China. According to the representative of Shanxi Jincheng Xin Trading Company, according to its mastery, “about 90% of the mining enterprises in the province of Shanxi stopped production at the end of last year, and it is estimated that 95% of the mines have been shut down. Almost 100% of the mining enterprises have lost money.”

A representative from Inner Mongolia Zhongxing Energy stated that there are more than 200 mining companies in the Inner Mongolia area. “Now 80% of the mines have ceased production. Two or three big mining companies have started production.”

Tax cuts? Limit import mines?

According to the data provided by the private enterprise Aowei Mining, the proportion of various taxes and fees in domestic tons of mining companies is about 25%, while the proportion of taxes and fees for international mining giants is only 4% to 5%. . “Now, the mine produces 1 ton of fine powder, and the highest loss is 300 yuan. But those state-owned enterprises are still producing, and it is normal to lose more than 100 pieces. A while back, we went to Xuanhua, Akagi and other places to investigate the market. It's very sad to see it."

“What we are most concerned about is policy. Can we call for tax cuts for mines?” A senior executive of the company seems to be burdened with heavy taxes and taxes, and the pressure on the survival of mine companies also comes from the impact of imported mines. “There are only 30 to 50 grades of foreign mines that are low. The international community has always been anti-dumping against Chinese steel. Can we also anti-dumping on imported low-grade foreign mines?”

The above-mentioned representatives of Inner Mongolia Zhongxing Energy also stated: “There are 17 steel enterprises in Inner Mongolia. Except for Baotou Steel, other small and medium-sized steel enterprises are reducing production due to excess and other reasons, and greatly increase the external ore ratio. At 45%, but now there are up to 70% of the ratio of external mines, and even 30% of internal mines do not make up. Foreign mines have a very large impact on domestic mining companies."

Li Fengguang said, “The price of foreign minerals is low, and the profits of steel companies are correspondingly higher. Like big giants such as Rio Tinto, the mine price fell to 40 US dollars and there is still huge profit margin, and if our domestic mining companies fall below 50 US dollars, How long can it be estimated?

According to the calculation of the head of the Hebei Metallurgical Mine Management Office, “If the ore price is hovering around USD 55/ton in the next six months, then about 60% of the production capacity in Hebei's domestic mines will disappear. At present, it has not reached US$55 and there are already 70 % of the cost of production costs is a loss, and the support will certainly not be particularly long."

The person who has been engaged in mine management for more than 20 years believes that at present, the international ore prices continue to decline, similar to the decline in crude oil prices, and there are also some international giants who deliberately depress the market price factors.

Li Fengguang also acknowledged that foreign miners will seize market share and kick out high-cost ore enterprises, which will allow them to raise prices later. The mining production cycle is very long. Once the domestic mining companies are shut out of the market, the resumption of production is very difficult. “The national competent authorities should think about what strategic security considerations should the iron ore industry be placed on?” said Li Fengguang.

According to Yang Jiasheng, a member of the China Metallurgical and Mining Enterprises Association, the association has already repeatedly informed the relevant state agencies of the difficulties faced by mining and steel companies since last year. “The mining company's tax burden is 25% on average. If it can be reduced, it will help the production and development of the company. These conditions have already attracted the attention of the ministries and related leaders, but the taxation is a major event that will trigger the overall situation.”

Yang Jiasheng said, “Looking for appropriate reduction in taxes and fees, there is still a certain possibility. We have submitted some suggestions to the relevant departments, hoping to reduce the percentage of collection and reduce the burden. But this is not what our trade associations can solve. The ministries jointly solve the problem.”

According to data provided by Yang Jiasheng, last year, there were six major mining companies in the country with a total loss of 290 million. However, he also pointed out that even if taxes and fees are reduced smoothly by 10 to 20 yuan, they may not be able to change the loss caused by falling ore prices.