Situation of this year’s mining industry: growth is maintained while high profit is no easily sustained

As for mining enterprises, the high profit era is approaching to the end, but the continuous growth is hard to change. On December 12, Chinese Academy of Land & Resource Economics held a seminar for analysis of mineral resources situation in 2013, on which experts from relevant industrial associations and institutes studied and judged development trend of mineral resource market as more optimistic.

The year of 2013 has witnessed complex changes and market adjustment of energy and other key mineral resources. According to experts participating in the seminar, in 2013, mineral market at home and abroad both featured “three increases and three decreases”. The “three increases” refer to that the rising trend of output of mineral products including crude oil, iron ore and 10 nonferrous metals, has been continued; investment in domestic mining industry has kept the trend of rising, and from January to October, accumulated FAI of mining industry in China has reached 1,129.8 billion Yuan, up 23.3% year over year; import quantity of basic mineral products e.g. copper, iron and coal etc. continues to present the trend of rising. The “three decreases” refer to continuous decrease in price of base metals, general decrease in mining stocks, and decrease in geological survey projects at home and abroad.

Under influence of macro economic environment, the present mineral resource market is inevitably to experience fluctuated callback to a certain extent. However, driven by development of emerging markets and national economy, the overall trend of growth is hard to change. In particular, on the Third Plenary Session of the 18th CPC Central Committee, decisions were made for several reforms such as to improve marketization degree and to accelerate urbanization construction, which would be conductive to promoting mineral resource market to develop towards optimism. Without doubt, amidst in the optimistic prospects, mining industry will still encounter with pressure to decrease reliance on capacity, inventory stocks and finance operations.

On the other hand, alongside with rise in price of factors e.g. workers’ salary, pressure on environmental restoration, financing, raw materials and fuels etc., operation cost of mining enterprises continues to go up, thus gradually pushing them towards a high-cost era and constantly squeezing their profit margin. Cost of main business of ferrous metal dressing has experienced the most obvious rise, and up to August of 2013, it has increased by 200% to the same period in 2008. At present, sustainable development centering on social responsibility and environmental protection has become the mainstream of mining industry, and ecological civilization construction has become an intrinsic requirement, which determines it an inevitable trend of constant rise in cost of resource survey and development and gradually decreases the high profit glamour of mining industry once driving capitalists crazy. In the future, competition in mining industry will be increasingly driven by both management innovation and integration of capital and technical equipment.