China North Rare Earth:Improving the Novel Model in Marketing and Developing into the Wind Vane in the Industry

Since the beginning of the year,China North Rare Earth (600111) has been exploring novel business model,i.e.promoting online sales,of which the figures are rather eyecatching:8072 tons of physical exchange was completed during the month of the special listing trading,realizing 100%transferring of the original offline rare earth raw material transactions;during the auction trading launched for the first time,290 tons of rare earth metal products was exchanged within only 18 trading days.This can be called an outstanding school report achieved by China North Rare Earth in its exploring novel business model under the setting of novel industry situation.

Stepping into “the 14th Five-Year Plan”,China North Rare Earth has been making full efforts to implement “12367” development strategies issued by Baotou Steel (Group)Co.,Ltd.to accelerate innovating business model in rare earth industry,and formulate Implementation Plan on Novel Marketing Model by China North Rare Earth and Rare Earth Exchange by combining current sales model of China North Rare Earth and online sales model of Baotou Rare earth Products Exchange (Rare Earth Exchange in short),thus gradually building transaction center and pricing center that connect upstream and downstream markets,and exerting itself to construct a marketing system featuring“sunshine purchase and sunshine sales” .

1.Open and transparent special listing trading

For the past a few months,transactions made by China North Rare Earth are continuously increasing in domestic market.Continuous progress in trading volume is supported by optimizations in trading process.China North Rare Earth established a special listing trading platform in Rare Earth Exchange for the purpose of integrating all of its rare earth product sales into the Exchange,thus realizing online “sunshine sales”.

Customers are able to learn about rareearth-relevant information and make orders directly on the platform,which is open and transparent and ensures simple and swift process.“In the old days,contract signing and price negotiation took place via offline procedures,which was very inconvenient.Now,listing trading model breaks down the barriers of price and gradually simplifies trading procedures.The construction of an open and fair purchasing and sales environment helps to consolidate customers’ confidence in the company”,according to Qiao Fang,head of Domestic Trade Department of an international trading company.A variety of considerate measures are adopted to upgrade customer service,which also helps to enhance market competitiveness and customer satisfaction,so that market share has been further extended.

2.Online auction powerfully sets up a new trend for the industry

On July,7,China North Rare Earth held a special auction trading,when rare earth metal products were launched online for the first time.After intense price competition,the first 30-ton rare earth metal products auction transaction was completed at the price RMB 37,200/ton higher than the starting price eventually.After the operation got steady,China North Rare Earth started to launch auction trading on a daily basis,which has attracted 31 companies to participate within just 18 days and which has completed 290 tons of rare earth metal transactions.Now,a transaction center and pricing center that connects upstream and downstream markets has taken shape.

Special auction trading is another powerful effort made by China North Rare Earth in business model exploring.It is a breakthrough out of conventional business models and works as a brand new trading platform for upstream and downstream companies in rare earth industry.“In the past a few months,rare earth metal products are in short supply,which leads to a rise in rare earth price.Special auction trading not only solves immediate worries for magnetic material companies in downstream market but mitigates market turbulence to some level to some extent as well”,according to Dong Pengfei,a specialist in Settlement Department of the Rare Earth Exchange.

Online auction trading is featured by physical exchange and instant settlement.It helps to discover true intentions of the market and gradually form scientific and clear standards for rare earth price,thus becoming a wind vane in the industry.After seizing market opportunities,China North Rare Earth took advantage of its experiences in the past and became the first to build auction trading platform by means of which the company is effectively guiding the market as well as stimulating the industry and further expanding customer channel.According to Qiao Fang:“After one month of trial operation,the model of special auction trading has been widely attracting attentions around the industry.To some extent,the platform is performing the functions of price discovery and guiding reasonable fluctuation of market price.In addition,the model also raises extensive attentions to Rare Earth Exchange.Several companies are now in connection with Rare Earth Exchange on adopting such model for their market sales.”

3.Making active explorations to promote business model innovations

In the coming future,China North Rare Earth plans to strengthen the cooperation with Rare Earth Exchange by launching all of its products online,during which the Company will step by step construct national-level rare earth transaction center,pricing center and financial service center,where it can exert its pricing power and grow into a “moat” in the industry so as to promote “sunshine sales”.In the meantime,China North Rare Earth is making big steps forward to innovate novel trading pattern for functional materials,end application products and electronic goods,in the hope of broadening online sales business.According to Chen Xiukun,Board Chairman of Rare Earth Exchange,the Exchange will make further optimizations in terms of platform construction,big data center construction and information service to meet the demands raised by China North Rare Earth.The both parties will cooperate to actively explore rare earth market and identify market position.They are making joint efforts to ensure a steady growth and well perform the role of wind vane,in the hope of providing better service for our rare earth industry to develop.