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Business
Print Edition> Business
UPDATED: May 6, 2011 NO. 19 MAY 12, 2011
Limiting Output
To protect the environment and its domestic industries from excess production, China must guide the non-ferrous metal industry
By LAN XINZHEN
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IMPROVING AN INDUSTRY: A worker monitors the operation of a semi-autogenous grinding machine at the Dexing Copper Mine in Jiangxi Province. China will guide the non-ferrous metal industry to save energy, reduce emissions and enhance its overall efficiency (XINHUA)

In an effort to save energy and curb carbon emissions, in addition to reorganizing a currently disorderly industry, China will continue to control the overall output of non-ferrous metals, specifically rare metals.

On April 25, 2011, the Ministry of Industry and Information Technology (MIIT) issued a circular on the mandatory production planning of rare metals, clarifying the maximum output for tungsten, antimony, stannum, molybdenum and rare earth in various provinces, autonomous regions and municipalities in 2011 and prohibiting excessive production or raising the quotas. The quotas formulated by the MIIT mean the planned output of various metals this year will increase slightly on that of 2010.

On April 14, the MIIT, the National Development and Reform Commission (NDRC) and the Ministry of Land and Resources jointly issued an urgent circular on curbing surplus capacity and redundant construction in the electrolytic aluminum industry, requiring local governments to immediately suspend all such projects.

The China Non-Ferrous Metals Industry Association (CNIA) says related ministries are formulating policies to control the output of 10 non-ferrous metals (copper, aluminum, plumbum, zinc, nickel, stannum, antimony, magnesium, sponge titanium and hydrargyrum) in 2011-15 to within 41 million tons. The smelting volume for crude copper will be held under 5 million tons, plumbum under 5.5 million tons and zinc to 6.7 million tons.

Government control over the output of copper, aluminum, plumbum and zinc began in 2007. Controls over rare earth, tungsten and antimony followed in 2010.

Currently, China has one of the largest reserves in the world of non-ferrous metals, specifically rare earth.

Protecting, not reducing

MIIT figures set the maximum planned output of tungsten concentrates for 2011 at 87,000 tons, stannum at 73,000 tons, antimony at 105,000 tons, molybdenum at 200,000 tons and rare earth at 184,200 tons, up 8.8 percent, 12.3 percent, 5 percent, 8 percent and 5 percent, year on year, respectively.

"Protecting the resources does not necessarily mean we will decrease their production," said Kang Yi, Chairman of the CNIA. He said since global demand for non-ferrous metals is growing, appropriately increasing the output as China sees fit conforms to market rules.

The MIIT says that the quotas of non-ferrous metals will be preferentially allocated to key enterprises, and when formulating detailed quotas the ministry will consult local departments of land and resources.

Kang said the mandatory production planning shows the government's commitment to protecting and promoting proper development of the non-ferrous metal industry.

"To appropriately raise the output of these metals is not only conducive to promoting the development of the whole industrial chain, but also reveals China's advantages in terms of resource reserves and our ability to strengthen the country's pricing power," said Yuan Zhibin, a metallurgy industrial analyst at the CIConsulting Industrial Research Center.

From the present situation surrounding the non-ferrous metal industry, Yuan said, the Chinese Government has formulated clear supporting policies toward the metals in question. As the global economy improves, the market demand for rare metals will show rapid growth, and adjustment of quotas in the domestic market will strengthen the industrial restructuring.

"Take the rare earth industry for example. China has huge reserves of these metals, some of the largest in the world. Prices of rare earth used to be quite low but soared in 2010. If we slightly increase the mining volume now, it can not only strengthen our control of the market and our pricing power as well, but also calm down accusations from the international community that China has excessively restricted the industry," Yuan said.

Yuan said the policy of controlling overall output will stimulate and promote restructuring of the whole industry, and increase of market concentration will be an inevitable tendency for the industry's future development.

More actions needed

Certain non-ferrous metals actually need more strict regulations, the electrolytic aluminum industry in particular. The production capacity suspended this year accounts for 36.9 percent of China's total capacity. While this will help curb the production capacity in the long term, short-term problems of excess capacity won't easily be solved.

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