Inner Mongolia to Implement Production Quota in Iron Alloy Industry

During the 12th Five-Year Plan period, Inner Mongolia will accelerate to eliminate outdated capacity, speed up to work out implementation plan for key industries to eliminate outdated production capacity during the 12th Five-Year Plan period, break down and assign the tasks by year to all leagues and cities; improve the mechanism for elimination of outdated production capacity, guide and urge manufacturers with outdated production capacity to complete reemployment tasks.

Inner Mongolia will seek for more national transfer payment and greater support and reward for elimination of outdated production capacity of the Inner Mongolia Autonomous Region; improve the announcement system for elimination of outdated production capacity.Strictly control the national and local investment projects in leagues and cities that have not fulfilled the elimination tasks on schedule;suspend examination, approval and registration of construction projects of key industries in the leagues/cities that have not fulfilled the elimination tasks on schedule; according to the relevant laws, revoke the sewage discharge permit,production permit and safety production license of enterprises that have not fulfilled the elimination tasks on schedule. In the case of fraudulency, responsible person of relevant enterprises and local government shall be prosecuted.

In addition, the Inner Mongolia government will carry out production quota management for some energy-intensive products; implement production quota system for energy-intensive industries of calcium carbide and iron alloy;formulate production control plan, according to which, enterprises with excessive unitconsumption products and being extremely energy-intensive will not been given quotas;strictly carry out the control plan, narrow the production area until the above products and enterprises are pulled out of the market.Huhhot, Baotou and Ordos shall take the lead in doing so.

At the same time, changes in consolidation and elimination of rare earth of the Inner Mongolia Autonomous Region have appeared. Recently,the Inner Mongolia Commission of Economy and Information Technology has clearly indicated that the consolidation plan will be adjusted. And the number of cooperative enterprises, closed enterprises with compensation and eliminated enterprises will “change slightly” after the adjustment.

Recently, according to deployment and requirement of the People’s Government of Inner Mongolia Autonomous Region, the Commission of Economy and Information Technology held a special meeting, aiming to promote and implement the goal and readjust the plan concerning consolidation and elimination of upstream rare earth enterprises in the region.

The responsible person of the raw materials office of the Inner Mongolia Commission of Economy and Information Technology noted in an interview with NetEase Finance Channel,the consolidation plan was not greatly altered,but increased number of enterprises to be consolidated. The responsible person did not disclose the specific number, but only said that it had not been submitted to the government of the autonomous region for approval”. However, NetEase Finance Channel learnt from the responsible person of a rare earth enterprise that has been added to the list of restructuring and consolidation that the number of enterprises would reach approximately 10 after the merger and restructuring.

The above result also implies that those enterprises that have been previously determined to be closed down with compensation or eliminated will have the opportunity to survive.Nevertheless, according to the original consolidation plan, amongst all of the 35 upstream rare earth enterprises of the Inner Mongolia Autonomous Region, only 4 approved for rare earth smelting and separation by authorities in charge of investment above the level of autonomous region can adopt the way of property integration. The above 4 enterprises will be controlled by REHT and brought into the special rare earth business scope of REHT,while all of the other enterprises will be closed down and eliminated.

According to Consolidation Plan of Upstream Rare Earth Enterprises in the Inner Mongolia Autonomous Region issued by the government of Inner Mongolia Autonomous Region in May 2011, the consolidation will be completed at the end of June 2011. According to the goal of the Inner Mongolia Autonomous Region,REHT will become the only company in northern China approved to deal in upstream rare earth operation.

Nevertheless, the plan was strongly resisted by those enterprises to be closed down and made little progress. The disputes lie in: firstly, specific conditions of the enterprises were not considered in the consolidation plan, and mandatory closedown will bring about many problems such as reemployment, etc.; secondly, the compensation is too low to make up losses of relevant enterprises. As of June 2011, amongst the 31 enterprises to be closed down with compensations or eliminated, only 10 have been closed down and gone through modification procedures of business license, while the other 21 enterprises were not closed down yet,though they have already stopped production.

According to the special meeting held recently,Baogang Group shall actively negotiate with cooperative enterprises and work out specific plans for related enterprises; compensate the to-be-closed-down enterprises that have passed the acceptance check, and compensation shall be transferred uniformly to Commissions of Economy and Information Technology of related leagues and cities; actively persuade the Ministry of Industry and Information Technology to increase directive production plan quotas for rare earth business of Baogang Group;seek for fund support from the special national fund for the closedown of small enterprises for the special program of rare earth in Inner Mongolia Autonomous Region.

Actually, as the only beneficiary of rare earth consolidation of Inner Mongolia, REHT always fails to satisfy the government. A major reason for REHT’s lack of enthusiasm is that REHT has already monopolized upstream resources of the rare earth industry of Inner Mongolia, thus more restructurings are unnecessary. “Since we are plagued by the overcapacity, therefore, if the enterprises to be consolidated did not respond, naturally, we would be slow to take action”, an insider of REHT said in an interview with Netease Finance Channel.

According to the responsible person of the above rare earth enterprise when accepting an interview with Netease Finance Channel, although the number of enterprises to be restructured has been determined now, further arrangements remain unknown, for example, negotiation on restructuring matters of REHT are subject to further notification of the Inner Mongolia Commission of Economy and Information Technology.