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Under the Economic New Normal: the Present and Future of China's Mining Industry
2015/10/22 5136

On October 21st, at the invitation of the organization committee, Mr. Chen Jinghe, the Chairman of Zijin Mining Group Company, delivered a keynote speech named Under the Economic New Normal: the Present and Future of China’s Mining Industry at the forum of China Mining 2015. Mr. Chen shared his understandings of mining industry under the new normal in a systematic and profound way via three perspectives: mining industry under the new normal, lden opportunities brought by the new normal, and new actions expected under the new normal.

Anticipation: Price will continue to fluctuate at low level in the next 3 to 5 years, and survival is top priority for Chinese mining companies.

Mr. Chen points out that it is widely agreed in the market that China’s economy has entered “the new normal”, an era labeled with overcapacity. China accounts for 40-50% of global metal production and consumption, and its per capita figures are twice of the world’s average, leading to a super cycle in bulk commodities over the past ten years. It is not realistic to expect China to continue to lead the world consumption while the consumption growth in China declines and even drop.

Mr. Chen believes that because under the present difficult market conditions when price falls and companies make losses, many mining companies get their profits by increasing production, it will take much longer time than expected to restore reasonable prices by eliminating additional capacity and reducing supply.

In the next 3 to 5 years, commodity prices will still fluctuate at current level, the price of some products may drop even further. Price may rise in the future, but the “lden Ten Years” will not come back.

Mr. Chen says, “Therefore, the more sufficient we estimate the difficulties we are confronted with, the safer we will be. As the new normal is featured with weak demand, over-supply and low prices, survival is priority. To reform and improve management systems established at peak time and apply strict cost control shall be on the top of our must-do list.

Confidence: Some Chinese companies are ready for global competition.

Mr. Chen says, though slowing-down of Chinese economy has become a fact, a 5% growth on that huge base is still a od rate; the emerging of India and countries in Southeastern Asia and along the “One Belt and One Road” as well as economic rebound in developed economies led by the US are all important factors in the increase of demands for mineral products. Besides, the fact that the prices of many products are at the cash cost level, along with the elimination of high cost production, will limit the downside of price fall.

In this new era, consolidation and M&A in mining companies will increase. Chinese mining companies will increase their global presence under the guidance of the One Belt and One Road Initiative, and become one of the most active players in the international market.

After more than thirty years’ development, Chinese mining companies have accumulated certain scales and skills. Some of them are already prepared for global competition. What does bother them most is the lack of talents and experience in international operation, a problem that only could be solved in practice.

Since China is faced with challenges presented by overexploitation of domestic resources, low resources per capita and limited space for internal growth, and the gloomy global mining market has resulted in substantial under evaluation of many mineral resources and mining companies, Mr. Chen urged capable Chinese mining companies to global and participate in global cooperation and competition, and it is the key to the future development of Chinese mining companies.

Appeal: Chinese vernment is expected to provide more policy and funding support for mining companies in “ing global”.

As quite a few mining related laws and regulations were enacted during the mining boom, Mr. Chen, in his speech, expresses his sincere expectation that management departments as well as fiscal and taxation departments related to mining industry will conduct reforms soon. He hopes that vernment can provide ing-global companies with more policy and funding support such as easier access to finance in the capital market, low-interest funding support with sufficient foreign exchange reserves, favorable policies for project approval, etc. Industrial associations such as the China Mining Association are also expected to take a more proactive position in defensing this downturn by listening carefully to the concerns of mining companies and thereafter reporting the industrial status quo and demands to relevant authorities.

Mr. Chen perceives environmental safety as the bottom line that none mining companies could ever over, but he also notices that most cases of “heavy metal pollution in soil” reported by media are actually “heavy mental anomalies in soil”, a background anomaly in the natural environment. In order to apply a more scientific and efficient environmental surveillance, he urged a careful differentiation between background anomalies and pollution resulted from development of mines.

At the end of the speech, Mr. Chen amplifies the tremendous stress Zijin Mining faces with in the slump of metal prices and Zijin’s counter measures. Under this new normal, Zijin takes “internationalization, large-scale projects and assets securitization” as strategy, “reform, growth and development” as focus and would very much like to cooperate with domestic and foreign friends to overcome this frosty winter for a better future.

The theme of China Mining 2015 is “New Normal, New Opportunities and New Development”. Around 8000 delegates from more than 50 countries are invited and attended this congress and expo.