Time always seems to last longer in a sluggish market. Looking back and looking ahead to the year ahead, as we approach the end of 2015, although there have been no grand events in the rare earth industry, several trend releases at the "2015 Rare Earth · Outlook Conference" hosted by the Rare Earth Products Trading Center of our Southern Stock Exchange have been basically validated by the market. Against the backdrop of gradually entering Industry 4.0 globally, Made in China 2025 has also entered a policy golden period during the 13th Five Year Plan period. The Chinese economy, which is in the new normal of reform and transformation, needs to develop high-tech products such as new energy, new materials, aerospace, electronic information, biotechnology, energy conservation and environmental protection, which are widely used in rare earths. This is also the development direction of strategic emerging industries.
In 2015, China's economy was driven by reform and innovation to achieve industrial transformation and upgrading. The rare earth industry in China experienced changes and upgrades in export policies, integration of six major rare earth groups, bottoming out of market prices, and crackdown on organized crime; With changes in policies, economy, and market environment, China's rare earth industry will face more opportunities and challenges in reform and innovation in 2016.
Review of Major Events in the Rare Earth Industry in 2015——
1. Important policies and regulations
(1) Rare earth industry
Export Policy: With the approval of the State Council, the Ministry of Commerce has decided to cancel the export quota for rare earths starting from January 1st; On January 1st, the "2015 Catalogue of Graded Issuance of Export License Management Goods" was implemented, and rare earth licenses were issued by special offices. The customs declaration ports for rare earths were limited to Tianjin Customs, Shanghai Customs, Qingdao Customs, Huangpu Customs, Hohhot Customs, Nanchang Customs, Ningbo Customs, Nanjing Customs, and Xiamen Customs; On April 29th, the General Administration of Customs announced the cancellation of rare earth export tariffs from May 1st.
Tax rate reform: On April 28th, the executive meeting of the State Council decided to change the resource tax on rare earths, tungsten, and molybdenum from quantity based to price based from May 1st, and to reasonably determine the tax rate based on the principle of not increasing the tax burden on enterprises. At the same time, further cleaning up and standardizing fees, reducing the compensation fee rates for rare earth, tungsten, and molybdenum mineral resources to zero, stopping the collection of relevant price adjustment funds, banning relevant fee funds illegally established by local governments below the provincial level, and studying the establishment of a mineral resource equity fund system.
Financial subsidies: The Ministry of Industry and Information Technology and the Ministry of Finance of China will continue to implement the "Management Measures for Subsidies for the Development of the Internet of Things and the Rare Earth Industry" issued in May 2014; The governments of Ganzhou and Baotou have implemented policy subsidies for neodymium iron boron enterprises.
Instruction plan: The Rare Earth Office of the Ministry of Industry and Information Technology of China will continue to implement the Interim Measures for the Management of Mandatory Production Plans for Rare Earth in 2012.
Resource control: On November 20th, China Land and Resources News reported that the Ministry of Land and Resources issued a notice on regulating the approval and management of rare earth and tungsten mineral exploration and mining rights, making a series of new regulations. One is to continue to suspend the acceptance of new applications for rare earth mineral exploration, rare earth mineral mining, and tungsten mineral mining registration, allowing exceptions in three categories of circumstances; Secondly, strict management of rare earth mineral exploration and mining rights transfer; Thirdly, strict management of the extension of mining rights for rare earth and tungsten mines; Fourthly, for those involving the exploitation of associated resources, the exploitation of rare earth minerals and tungsten minerals should be included in the total control index management. If the exploitation exceeds the index, it should be reserved and not sold. Those who do not have reserve conditions or insufficient reserve capacity shall not expand the scope of the mining area or increase production capacity; The fifth type belongs to the ionic rare earth deposit type, which shall be managed in accordance with the relevant regulations for low-risk mineral resources; Sixth, improve the policy of retaining the exploration rights of rare earth and tungsten mines.
Crackdown and Rectification: Eight ministries including the Ministry of Land and Resources, the Ministry of Industry and Information Technology, the Ministry of Public Security, and the Ministry of Land and Resources jointly issued a document, deciding to launch a special operation from October 2014 to March 31, 2015 to crack down on illegal and irregular activities in the four links of rare earth mining, production, circulation, and export. According to the implementation plan, the special action will be divided into three stages: self-examination period (October 10th to November 25th, 2014), rectification period (November 26th to January 31st, 2015), and acceptance period (February 1st to March 31st, 2015); On October 29, 2015, the Ministry of Industry and Information Technology issued a notice on rectifying illegal and irregular processing of rare earth mineral products under the guise of "comprehensive utilization of resources". Relevant departments conducted on-site inspections of enterprises across the country from November 1 to November 20; A comprehensive rectification and investigation will be carried out from November 21st to December 20th. Organize personnel into 5 groups, including 3 groups in Jiangxi, 1 group each in Guangdong and Hunan, and 1 group each in Jiangsu and Anhui, to jointly carry out the rare earth strike.
Industry standard: On May 8th, the State Council issued a notice on "Made in China 2025", accelerating the construction of intelligent detection and supervision systems for key industries such as civil explosives, hazardous chemicals, food, printing and dyeing, rare earths, pesticides, etc., and improving the level of intelligence; In July, the Ministry of Industry and Information Technology approved 543 industry standards, including 2 related to rare earths, which will be implemented from January 1, 2016; On July 31st, the National Standardization Management Committee released the "2015 Second Batch of National Standard Revision Plan", which includes three items related to the rare earth industry; On October 29th, the Ministry of Industry and Information Technology announced 902 industry standards, including 5 rare earth industry standards, all of which involve the recycling of waste rare earths and will be implemented from March 1st, 2016.
(2) Application industry
Wind power: Since the release of the 2015 government work report, clean energy such as wind power has continued to benefit from the policy "east wind", and a series of support measures such as the new power reform plan and the Energy Bureau's urgent documents have been introduced successively; Many regions across the country have actively responded and promoted the quota system for renewable energy electricity; The Ministry of Finance has issued a notice stating that starting from July 1, 2015, the Chinese government will implement a 50% value-added tax refund policy for taxpayers selling self-produced electricity products using wind power.
New energy vehicles: In the first half of 2015, Chinese government departments introduced nearly 10 policies to encourage and support the development of the new energy vehicle industry, including reducing or exempting the purchase tax on new energy vehicles and vessels, and opening up access to electric passenger vehicles. In the second half of the year, policies will be intensively introduced to support the development of new energy vehicles from three dimensions: environmental protection, production, and consumption.
On April 29th, the Ministry of Finance, Ministry of Science and Technology, Ministry of Industry and Information Technology, and National Development and Reform Commission jointly issued the "Notice on Financial Support Policies for the Promotion and Application of New Energy Vehicles from 2016 to 2020", announcing the subsidy policies for the promotion and application of new energy vehicles from 2016 to 2020. The Notice specifically specifies the subsidy reduction standards, with a 20% decrease in subsidy standards from 2016 for 2017-2018 and a 40% decrease in subsidy standards from 2016 for 2019-2020.
On May 8th, the State Council released the "Made in China 2025" plan, which requires continued support for the development of electric vehicles and fuel cell vehicles, mastering the core technologies of low-carbon, information-based, and intelligent automobiles, enhancing the engineering and industrialization capabilities of core technologies such as power batteries, drive motors, high-efficiency internal combustion engines, transmissions, lightweight materials, and intelligent control, forming a complete industrial system and innovation system from key components to the entire vehicle, and promoting the integration of independent brand energy-saving and new energy vehicles at the same level.
On June 4th, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued the "Management Regulations for New Pure Electric Passenger Vehicle Enterprises", which will be implemented from July 10th, clarifying that the total investment amount and production scale of new enterprise investment projects are not subject to the minimum requirements of the "Automobile Industry Development Policy".
On September 23rd, the executive meeting of the State Council discussed the deployment of accelerating the construction of electric vehicle charging infrastructure and urban parking lots; On September 29th, the State Council executive meeting once again confirmed measures to support the development of new energy and small displacement vehicles.
On October 9th, the General Office of the State Council issued the "Guiding Opinions on Accelerating the Construction of Electric Vehicle Charging Infrastructure". Around October, the State Council issued a series of documents to show goodwill towards new energy vehicles. For example, various regions are not allowed to restrict the driving and purchasing of new energy vehicles, and the government will continue to implement subsidies; The proportion of newly built residential parking spaces or reserved charging facilities should reach 100%, and the proportion of large public buildings and public parking lots should not be less than 10%; Actively promote the development of charging station standards. For future planning, the "Guiding Opinions on Accelerating the Construction of Electric Vehicle Charging Infrastructure" points out that by 2020, a moderately advanced, vehicle pile following, intelligent and efficient charging infrastructure system will be basically established to meet the charging needs of over 5 million electric vehicles.
On December 1st, the State Administration of Taxation issued the "Vehicle and Vessel Tax Management Regulations (Trial)" announcement, which will come into effect on January 1st, 2016. The "Regulations" issued by the State Administration of Taxation this time point out that tax authorities, insurance institutions, and tax collection units should strictly implement the policies of energy conservation and new energy vehicle and vessel tax reduction and exemption announced by the Ministry of Finance, the State Administration of Taxation, and the Ministry of Industry and Information Technology. For pure electric passenger vehicles and fuel cell passenger vehicles that do not fall within the scope of vehicle and vessel tax, they should actively obtain relevant information about the vehicles to make judgments, and those who have been subject to vehicle and vessel tax should be refunded in a timely manner.
In addition, local governments at all levels are continuously increasing their support policies for new energy vehicles, and supporting policies such as subsidies and charging facilities are gradually being introduced.
2. Industry enterprise operation
Integration of six major groups: In January, the Ministry of Industry and Information Technology announced that the six major rare earth groups would complete the integration by the end of 2015, forming a "1+5" pattern and forming two large rare earth groups in the north-south camp. On October 12th, the establishment of a large rare earth enterprise group by China Aluminum passed the inspection of the Ministry of Industry and Information Technology.
Operation of listed companies: In 2015, the market for rare earth materials remained sluggish, leading to a rapid deterioration in the profitability of rare earth enterprises. The gross profit margins of A-share rare earth upstream listed companies have generally declined in the first half of 2015, and in the third quarter, rare earth prices experienced another wave of accelerated bottoming out, leading to a continued deterioration of gross profit margins. In the continuous state of losses, six major rare earth groups including Minmetals Rare Earth have successively joined the camp of limiting production and ensuring prices to alleviate the supply-demand contradiction in the market. Minmetals Rare Earth, Xiamen Tungsten, and Guangsheng Nonferrous all reported significant losses in their third quarter reports. On the contrary, other enterprises in the rare earth permanent magnet industry chain have performed well in terms of business performance. Listed companies such as Ningbo Yunsheng, Zhenghai Magnetic Materials, Hengdian Dongci, Keliyuan, and Zhongke Sanhuan have basically saturated orders, with significant year-on-year growth in performance and industry vitality. The recovery of the industry is evident under the guidance of destocking and national policies.
Enterprise capital operation: With the accelerated integration of the 5+1 rare earth group, the rare earth permanent magnet industry chain has also opened a feast for capital operation. Multiple listed companies have made efforts to achieve reform and industrial mergers and acquisitions expansion through the capital market. In 2015, companies such as Guangsheng Nonferrous Metals, Shenghe Resources, Minmetals Rare Earth, Ningbo Yunsheng, and Taiyuan Corundum all made mergers and acquisitions and private placement fundraising efforts, with particularly impressive performance in the restructuring and merger of Shenghe Resources. In addition, Longyi Technology, Ganzhou Chengzheng, and Haitian Magnetic Industry are listed on the New Third Board. More and more companies are investing in rare earth enterprises due to their optimism about the prospects of the rare earth industry.
Financial services in the rare earth industry are highlighted: In 2015, the development of rare earth electronic trading platforms also began to emerge. The daily trading volume of the Rare Earth Trading Center of the Southern Stock Exchange has approached 100 million yuan. At present, this platform has launched 16 types of rare earth oxides. Through this trading platform, it has taken the lead in launching two rare earth industry financial service products, "Upstream Oxide Pledge Financing" and "Downstream Enterprise Order Financing". The innovation is to activate the oxide inventory of Chinese rare earth enterprises and promote downstream rare earth users to expand production, which can achieve the coordinated development of rare earth products upstream and downstream, and activate industrial momentum. Enterprises can also judge the market supply and demand situation based on the spot prices presented on the trading platform, and arrange production accordingly. Then, they can adjust the supply and demand through online procurement and sales, and obtain substantial profits. The platform launched product pledge financing and rare earth trade loan services for rare earth enterprises in 2015, providing loan financing services for the funds needed by enterprises to buy and sell goods.