"International mining companies and Chinese steel companies have accumulated decades of cooperation and friendship, shared the benefits of growth, and gone through rain and rainbow, but facing the future, we still need to work together." Guo Bin, general manager of China Mineral Resources Group Co., LTD. (hereinafter referred to as China Minerals), pointed out when delivering a keynote speech at the Mineral Resources International Summit Forum held during the fifth China International Import Expo (hereinafter referred to as CIIE) on November 6.

'Chinese industry needs international resources and the world's mining companies need the Chinese market,' Mr. Guo said. Since the first shipment of iron ore was imported from Rio Tinto in 1973, the trade cooperation between China's steel industry and international mining enterprises has gone through half a century. Statistics show that in the 30 years from 1991 to 2021, China imported about 14.3 billion tons of iron ore, with a cumulative import value of more than 1.3 trillion US dollars. In the past 30 years, Chinese steel companies have been cooperating with major international mining companies in mineral resources development. These cooperation projects not only provide raw materials for Chinese steel enterprises, but also serve as friendly and open platforms for China and other resource-rich countries.

From 2000 to 2020, the output of international mining companies increased by three to five times. Combined with the rise in iron ore prices, the sales revenue of iron ore products of major mining companies increased much faster than the output growth, and the profit growth was even greater than the revenue growth. "Driven by China's demand, major international mining companies have shown rapid growth in output and revenue, becoming direct beneficiaries of China's integration into the global economic division of labor." Guo Bin pointed out.

In the context of sustainable development, the current industrial chain and supply chain are facing certain challenges

"Looking back is to look forward, and summarizing history is to create a better future. From the perspective of sustainable development, the current industrial chain is facing some problems, difficulties and challenges, we should face up to them. Only by facing problems squarely can we overcome obstacles and move towards a better future." Guo Bin pointed out. In his opinion, the challenges facing the current industrial chain and supply chain mainly include the following aspects:

First, the value distribution of the industrial chain is unbalanced, and the profit space of steel enterprises is excessively squeezed. Guo Bin cited data from the iron ore and steel industry as an example. 2021 will be the best year for China's steel industry in nearly 10 years, with the industry-wide sales profit rate of 5.1 percent and the return on equity of all listed steel companies of 13 percent. In the same year, the average net profit rate on sales of major international mining enterprises reached more than 30%, and the average return on equity was as high as 50%. In the face of high costs, some steel enterprises have already faced difficulties in survival, and the high cost of raw materials will be transmitted along the industrial chain to downstream industries, greatly weakening the growth foundation of the entire economy, which is unhealthy and unsustainable.

Second, the price of resources fluctuates abnormally, the trend of financialization is increasingly obvious, and the entity enterprises suffer heavy losses. At the beginning of this year, Tsingshan Holdings LME (London Metal Exchange) nickel futures incident has caused extensive discussion and deep reflection in the industry. This event once caused large fluctuations in nickel price, which had a great impact on the spot market and futures market. The cost pressure of downstream manufacturers rose sharply, and it even caused the occurrence of upstream and downstream enterprises to reduce production and stop orders, which made the nickel industry chain run into trouble. At the same time, the futures price has lost its guiding significance to the spot price and deviated from the original intention of the futures market to serve the entity enterprises.

Third, the pricing mechanism needs to be improved, and the price disorder makes the development of the industrial chain unsustainable. In addition to iron ore, Guo Bin cited data that lithium carbonate prices rose from 50,000 yuan per ton in early 2021 to more than 500,000 yuan per ton now; From the first auction in July 2021 to the 10th auction on October 18, 2022, the price of lithium concentrate from Australia's Pilbara Minerals rose from an initial price of $1,250 per tonne to $7,100 per tonne. The Pilbara auction represents just 1 per cent of the global lithium carbonate market, but it is an important guide to rising global lithium prices. "I believe that a short-term spike in upstream raw material prices will make downstream companies suffer. I also believe that the lithium industry chain will also face huge risks. The high cost of raw materials will accelerate technological substitution, which will eventually lead to shrinking demand and damage the entire industry chain and ecosystem." Guo Bin pointed out.

In addition, the industrial chain and supply chain also have asymmetric information and unequal trade rules. "We should not ignore these unreasonable phenomena, we should see the crux of the problem, face up to these problems, and jointly study how to overcome these obstacles. 'It is hard to lift up alone, but easy to walk. 'A healthy and sustainable industrial ecology should be conducive to the survival and development of the industrial chain, rather than game and squeeze each other." Guo Bin stressed that an enterprise with a long-term vision, responsibility and wisdom can have more development opportunities only by organically combining global consensus, national policies and corporate strategies to form a synergy.

A consultation mechanism will be established to ensure the safe and stable operation of the industrial chain

In the face of the future, Chinese and international companies should be full of hope, pool wisdom, form synergy, and jointly open the door of shared prosperity and a better future. To this end, Guo Bin put forward three proposals.

First, actively implement the ESG (Environmental, Social and Governance) concept to achieve green, low-carbon and sustainable development. Guo Bin said that as China steps into a new era of development after decades of rapid economic growth, implementing the ESG concept is of great significance to promote the implementation of national strategies and achieve sustainable development. He believes that green and low-carbon transformation is a huge challenge to the industrial chain of steel, copper, aluminum and other basic metals. The good news is that we, along with upstream companies and other technology partners, are already taking steps. At the CIIE, China Minerals signed strategic cooperation memorandums with major international mining enterprises, including the content of cooperation in the field of green and low-carbon. In recent years, several major international mining companies have also cooperated with major Chinese steel companies on decarbonization technology. He hopes that more partners will participate and actively practice the ESG concept in the whole link from exploration and mining to logistics and processing to smelting and application, so as to make contributions to carbon neutrality and carbon peak.

Second, stand in the panoramic view, promote the industrial chain ecosystem more harmonious and effective. "Under a good industrial ecology, enterprises have a high degree of cooperation. Through mutual empowerment through efficiency, professionalism, innovation and reform, enterprises, customers, suppliers, partners and other relevant subjects in the industrial chain can cooperate and share the overall value, and form an industrial ecosystem of multi-link, value multiplication and mutual benefit." Guo Bin pointed out that the industrial ecosystem is the growth mother and common home that the enterprises in the system depend on for rest and survival. In order to promote the safe and stable operation of the industrial chain and supply chain, a joint consultation mechanism should be established to guide and promote the relevant enterprises to consider the overall interests and social responsibilities of the industrial chain while seeking their own interests, and give more consideration to long-term and sustainable interests, so as to promote the standardized, orderly, harmonious, healthy and long-term development of ecological communities.

Third, improve the industrial chain governance mechanism and rules. "The sustainable development of the mineral resources industry chain requires an industrial governance system that can keep up with the development of The Times and has the ability to be forward-looking and self-evolving as a support. In the industrial governance system, trade rules and pricing mechanisms are the key links." Taking iron ore as an example, Guo Bin pointed out that the existing pricing mechanism and trade rules have been continuously updated and promoted by the industry, but there is still a need for further optimization and improvement. In the future, it is hoped that the upstream and downstream of the industrial chain in the field of mineral resources can, like neighbors and relatives, study, negotiate and solve problems together, optimize the existing industrial trade rules and pricing mechanism, establish a more scientific and reasonable pricing and trading mechanism that reflects the real relationship between supply and demand, and ensure the safety, stability and sustainable development of the supply chain.

"' We know each other far and near, but thousands of miles are neighbors. 'Let us embrace the world with openness, pool our strength with cooperation, and take concrete actions to build a prosperous, healthy, harmonious, green, low-carbon, more resilient and sustainable industrial and supply chain system, so as to cope with the changing times and create a better future." Guo Bin put forward the proposal.