Chinese Message to the Rare Earth Industry Received.
This morning I received a story from our Shanghai correspondent Hongpo to publish this piece titled: Baotou Steel Rare-Earth Announces 2012 Annual Results Net Profit down 56.58% to 1.51 Billion Yuan. Actually the title had a negative turn at the end, but I have taken the priviledged role as publisher to delete the second half, as this content’s conclusions raised more of an eyebrow from me of its authenticity, which I would like to provide a disclaimer for at the forefront before publishing.
Over the last year and a bit, I receive emails all the time with “who is this Hongpo?” And the answer is — I do not truly know. In my communications with him, he is most assuredly a writer and a blogger that loves our space, but I have not met him in person, so I cannot confirm anything else.
“Hongpo represents the Chinese” I have received in more than one conspiratorial angled note to others that believe he is a writing consortium. Well, I have always enjoyed his spirited angles, but today’s piece seemed to confirm that he does indeed have feeders and let me explain why. Traditionally when Hongpo sends us a piece, Alessandro painstakingly edits his english. Some paragraphs at times are flawless, when many have taken us some incredible lead time to try and confirm what he is trying to say. Additionally, some times the content intuitively feels like it is written by more than one person. Today’s piece was written unlike any other I have received before. It was flawless, and well — how could we get this lucky?
So I am going to print his text, but I will do it with the disclaimer that I believe that the conclusions in this text are intended to manipulate the market into agreeing with this well written conclusion summary. The same kind of style in which I have collaberated with teams for large corporations when attempting to communicate large ideas. Additionally, I would like to remind our audience that the Chinese-Japanese tensions are rising, hence the increase in media attention to seabed extraction processes or so my theory goes; and as well, remind our audience that the demand for innovative technologies from the Chinese based on intel reports we receive suggests that this information is ‘counter-intuitive’.
Hongpo: “China’s largest rare earths producer, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co Ltd.(Baotou Steel Rare-Earth), saw a year-on-year decline of 56.58 percent in net profit last year. Moreover, Baotou Steel Rare-Earth plans to achieve 2013 with annual sales revenue totaled RMB 7.5 billion Yuan, down 18.85% compared to 2012, according to the company’s 2012 annual report released on Friday, March 29, 2013.
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The company’s net profits amounted to RMB 1.51 billion Yuan, while operating revenue decreased 19.83 percent year on year to RMB 9.242 billion Yuan in 2012, earnings per share came in at 0.624 Yuan, in 2011, its net profits reached RMB 3.48 billion Yuan as well as per share reached 2.87 Yuan in 2011, according to its annual report filed with the Shanghai Stock Exchange.
“Rare earth spot market still remains in the doldrums in 2012, the rapidly falling prices of its rare earth-related products and a sharp drop in demand led to the profit and revenue declines. Moreover, the costs of raw materials have increased over the last year, which have increased production costs and push profit margins down”, the company explained.
In fact, the company said that it earned a net profit of RMB 1.689 billion Yuan in the first nine months of last fiscal year, which means Baotou Steel Rare-Earth where as it recorded a net profit loss of RMB 1.79 billion Yuan during the fourth quarter due to the company had suspended rare earth production since October 23, 2012.
In addition, the annual report also noted that, under the central government’s plan, only one rare earth upstream enterprise was to be permitted in Baotou. Baotou Steel Rare-Earth has signed an integration agreement with 12 other rare earth producers in the region last year. The company plans to speed up its rare earth monopolization in the Inner Mongolia autonomous region. Moreover, will continue to strengthen communication with Sichuan, Shandong, Gansu (Province), promoting to set up the “China Northern Rare Earth Group”, while led to the creation of the industry’s first ever “mega-company” this year.
At present, almost all China’s enterprises are facing the problem of insufficient demand; the relatively sluggish domestic and overseas consumption market has slowed down the demand for rare earth oxides from the electronics, automobile and other industries. Moreover, the contracted demand from Japan and the US, the world’s second and third largest rare earth consumers respectively also will directly hit the domestic rare earth enterprises. Therefore, expects that the external environment will continue to affect the downstream demand for rare earths as well as the price of rare earth oxides will not make substantial improvement in the short term.”
An accomplished entrepreneur and corporate finance professional, Tracy Weslosky is the CEO for InvestorIntel Corp. and the VP of Business Development for Bellotti Capital Partners ... <Read more about Tracy Weslosky>