China s Lead-Zinc Industry in the Midst of Supply-side Structural Reform

Transcription

1 China s Lead-Zinc Industry in the Midst of Supply-side Structural Reform PENG Tao, Secretary-general of Lead-Zinc Branch China Nonferrous Metals Industry Association

2 I. Overview of Lead-Zinc Industry II. Industry Environment and Features III. Supply-side Structural Reform

3 I. Overview of Lead-Zinc Industry 1. Output 2. Import and Export Situation 3. Fixed-assests Investment 4. Consumption 5. Market Price

4 1. Output stabilized and increased in 2016 Lead output was MT, up by 5.7%, accounting for 42% of global output, retaining NO.1 place for 15 consecutive years. Zinc output, MT, up by 1.96%, accounting for 46% of global output, retaining NO.1 placefor 26 consecutive years. Lead concentrate, 2.23 MT, zinc concentrate, 4.63 MT. China s Lead & Zinc Concentrates Output from 2006 to 2016 (in 10,000 Mt) China s Lead Output from 2006 to 2016 (in 10,000 Mt) China s Zinc Output from 2006 to 2016 (in 10,000 Mt)

5 China's Lead Concentrate Monthly Production Lead concentrate output was million tons, up by 3.12%. Production from Jan. to Sep stood at million tons, increasing 8.9% y-o-y. Primary lead output was 3.0 million tons, up by 5.1%, with increased output in Henan and Yunnan provinces; secondary lead output was million tons. Production from Jan. to Sep stood at 3.76 million tons, increasing 5.3% y-o-y China's Refined Lead Monthly Production

6 Zinc concentrate output was MT, up by 1.14%. Production from Jan. to Sep stood at 3.03million tons, decreasing 5.6% y-o-y, The output is below extimation, expected equal to Monthly Zinc Concentrate Annual Output Equivalent Output of refined zinc was 6.27 MT, with highest single month production at 560,000 tons. Production from Jan. to Sep stood at 4.49million tons, decreasing 2.5% y-o-y. Negative growth of 2% is expected throughout the Monthly Refined Zinc Annual Output Equivalent

7 2. Import and Export Situation In the year of 2016, as affected by reduced TC: Import: lead concentrate import was 1.42 million tons, down by 25%; zinc concentrate import was 2 million tons, down by 38%; unforged zinc import was 525,000 tons, down by 19.5%; refined zinc import was 420,000 tons, down by 22%; net refined zinc import was 400,000 tons, down by 11%. During Jan. to Aug. 2017, lead concentrate import was 909,000 tons, down by 2.5%; zinc concentrate import was 1.7 million tons, up by 34%. Refined lead import quadrupled to reach 62,000 tons, while refined zinc import was 300,000 tons, down by 6%. China's Zinc TC China's Zinc Concentrate Import

8 3. Continuous decrease in fixed-assets investment and continuous optimization in investment structure Since 2011, more investments were made on mining than smelting. During Jan. to Sep. 2017, investment on 507 mining prjects fell by 22%, slowed by 22.5 percent point, while investment on 246 smelting projects fell by 19%, slowed by 12 percent point. Investment focuses on the environmental protection and safty. Completed Fixed-assets Investment of China s Lead-Zinc Industry from 2006 to 2016 (in 100 million yuan)

9 4. Consumption growth has begun to slow down Growth rate of Lead consumption slowed down, and the market share of primary lead was decreasing. From 2016 onwards, consumption tax and imminent environment tax will be levied on lead batteries. 4.7 million tons of lead was consumed in 2016, up by 2%. Growth rate in 2017 is estimated to be about the same. China's Lead Consumption Structure Battery Lead-semis Lead Oxide Lead Salts Others China's LAB Consumption Structure China's LAB Production

10 Zinc consumption up by 4% in 2016 in the fields of infrastructure, real estate, and automobile industry. The growth of 2017 is estimated to be 2%. Year Total Galvanizing Battery ZnO Brass Diecasting Alloy CAGR% 2.6% 2.9% 0-6.7% 3.4% -9% 75% MT Up by 4% Same 2% Low Low Other China's Zinc Consumption Structure Galvanization Die-casting Alloy Brass Zinc Oxide Battery Others China s Output & Net Export of Galvanizing Sheet

11 5. Prices in 2016: Deep-V rebound, with unexpected growth rate, vibrate in high price level and greater risk for the market Major factors: Lower concentrates production, slower smelting growth and reduction of inventory level Better consumption in infrastructure(19.8% growth rate), real estate(7.9% growth rate of investment) and automobile(5% growth rate) industries than expected Rigid cost support and market capital speculation. China's Real Estate Industry Index China's Automobiles Production

12 2016 lead spot price averaged at 14,571 yuan, up by 11%; During Jan. to Aug. 2017, lead spot price averaged at 17,862 yuan, up by 33%. Contract adjustment Contract Adjustment

13 2016 zinc spot price averaged at 16,866 yuan, up by 9% During Jan. to Aug. 2017, zinc spot price averaged at 23,153, up by 52%. GFC GFC Tightened savings, and 4 trillion yuan industry revitalization plan Tightened Savings & 4 Trillion Yuan Industry Revitalization Plan Structural shortage of concentrates Structural Shortage of Concentrates Influence from financial attribute Influence from Financial Attribute

14 II. Industry Environment and Features 1. Industry Policy: Regulation & Development 2. Environment Protection Policy: promote construction of ecological civilization 3. Industry Features and Stuctural Conflicts 4. Growth rate of the industry development will slow down due to China's New Normal, restriction of resource and environment.

15 II. Industry Environment and Features 1. Industry Policy: Regulation & Development MIIT published No. 7 Announcement Regulation Conditions of Lead & Zinc Industry (2015). General Office of the State Council published the Guiding Opinions on Creating Benign Market Environment to Facilitate Structural Adjustment, Transformation and Profit Enhancement of Non-ferrous Metals Industry (State Council [2016] No. 42) 13 th Five-year Development Plan of Non-ferrous Metals Industry, MIIT Regulation 2016 No. 316

16 2. Environment Protection Policy: promote construction of ecological civilization The State Council released the Action Plan on Prevention and Control Air, Water and Soil Pollution, tackling heavy metal pollution; The Guiding Opinions on Inspection and Law Enforcement Vertical Management Reform Pilot Work of Environment Protection Agencies below Provincial Level; Central environment protection inspection teams covered all 31 provinces of China Environment Protection Tax Law was approved (into effect on 1 st Jan 2018); SPP and SPC released the Explanation on Relevant Regulations Applied to Criminal Cases of Environment Protection; MEP released the 2017 Working Plan on Air Pollution Prevention and Control in Beijing, Tianjin, Hebei and Surrounding Areas, 2+26 cities. The purpose of the plan aims to reduce average concentration of PM2.5 and days of heavy pollution more than 15%.

17 3. Industry Features and Stuctural Conflicts 1) The industry is huge in terms of total capacity of 200+ smelters: 7.3 MT for Zn smelting, 4.9 MT of mineral Pb, 3.5/1.0 million tons of secondary Pb/Zn. Pb smelting technology has advantage. 2) The resource quality is not excellent despite of large volume. The share of mining-dressing-smelting integrated companies was low. The competitiveness of the whole industry is weak. Zn Smelting Capacity No. of Companies

18 4. Growth rate of the industry development will slow down due to China's New Normal, restriction of resource and environment. Monetary Policy M Flexible&moderate 11.3% Stable 9.2% CPI 2.0% 1.8/1.6% PPI Positive from Sept. 6.3/6.9% Fixed assests/infrastructure 8.1%/17.4% 7.8%/19.8% Consumption 10.5% 10.7% Import&export -0.9% 7.6% 2020 Demand Forcast Metals AAGR of 12th Consumption Consumption FYP(%) (10,000 tonnes) (10,000 tonnes) AAGR of 13th FYP(%) Ten Metals Lead Zinc

19 III. China's Lead and Zinc Industry under the Supply-side Structural Reform

20 III. China's Lead and Zinc Industry under the Supply-side Structural Reform Development Ideas: innovative, coordinated, green, open and shared development

21 5 Key Tasks of Supply-side Reform Cutting Excessive Capacity Reducing Inventory Deleverage Lowering Costs Improving Weak Links

22 Cutting Excessive Capacity: Optimize Stock, Guiding Increment, Pro-actively Reducing Volume and Restrict Total Capacity By 2020, lead and zinc production are estimated to be 4.65 and 7.10 million tons respectively. Maintain an economical and reasonable uptime ratio, and avoid chaotic competition with homogenous products Reducing Inventory: Inventory of zinc was declined 180,000 tons compared with early 2017, down by 60%. Acceleration in inventory circulation and influx of import zinc ingots. China's refined zinc inventory

23 Deleverage: Debt ratio is 61.3% in lead and zinc industry, down by 1.4% 16% mining companies and 21% smelting companies have been in loss. Make good use of leverage, and improve risk management. Lowering Costs: Prime operating cost per 100 yuan in 2016 was 92.2, down by 0.65%. Inelastic Costs Rising: environment protection, taxes, overhead; Elastic Costs Also Rising: energy, transportation costs; Companies shall innovate their management, reduce costs, tap potentials, and improve quality and efficiency.

24 Improving Weak Links 1. Step up efforts on environmental protection, enhance resource utilization, prevent and control heavy metal pollution, thereby increase industrial concentration. Build a standardized system for recycling and utilization of secondary lead and break through bottleneck of utilization of secondary zinc. 2. Improve Resource Security and International Competitiveness Resource reserve by the end of 2015: lead has increasd 41% from 11 th FYP level; zinc has increasd 29%. 43 large and medium lead-zinc mines were discovered in Xinjiang(Hetian area, 18.95MT with 28.5% of grade), Hunan etc.. At present, China's enterprises have owned more than 30 MT of lead and zinc resource overseas. Development target of China's lead & zinc industry: transformation and upgrading, reach a green, low-carbon,recycled and sustaibale development.

25 2017 China Lead and Zinc Week 21st-24th, November,Shenzhen City, Guangdong Province Thank you for your attention All comments are welcomed! Lead-Zinc Branch, CNIA Tel: