Research On The Risk Of Nonferrous Metal Industry Companies In China

Non-ferrous metal industry is an important support of our industry and an essential driving force for the information industry, new energy and other emerging industries, It lays a solid foundation for China’s economic construction. At present, China’s nonferrous metals industry is facing declining profitability and low efficiency. The downward trend in the fluctuation of non-ferrous metal prices, growth of the overall cost of the industry, exceeding investment in fixed assets, weakened solvency, and increasingly stringent environmental policy increase difficulties in improving the overall effectiveness of non-ferrous metal industry. Moreover,continuously blind expansion of production capacity, especially in aluminum business,leads to serious capacity inflation.Non-ferrous metal industry is constantly being tested by countries and markets.Many companies continuously increases production capacityeven with decreased efficiency, product price shocks, and huge losses, which accumulates and expands the risks and results in a high--risk status of the industry. Only with comprehensive assessments of the risk of non-ferrous enterprises, understanding of the risk profile,in-depth analysesof the reasons for the risks, and judgement of the risk level, appropriate policy measures can be taken to guide the healthy development of non-ferrous metals industry..Based on the relevant theoretical research on the risks, nine specific indicators are selected according to the characteristics of the nonferrous metals industry.In the analysis of a single indicator, we found non-ferrous industry companieshave a higher risk of investment, financing risks, the risks and benefits of the recovery of funds allocation risk. They have cash-flow risk. The risks are,manifested by high sensitivity to macroeconomic volatility risk, policy risk, risk related industries, environmental risk and technology risk, financial risk, raw material supply and demand risk.The causes of the risks of non-ferrous industries summarized that they, include external factors, such as main economic impacts of cyclical fluctuations, impacts of the international situation, and impacts of macroeconomic policy, as well as internal factors, that is, lack of awareness of risk management, fixed assets, high proportion of fixed costs, and irrational product structure.Subsequently, a comprehensive evaluation of the level of risk of non-ferrous industry is provided. Using factor analysis to build the nonferrous metals industry risk evaluation system of listed companies and static comparative analysis, we found that the risk rankings of the nonferrous metals industry listed companies in 2013 has a great change compared to the ones in 2007. From 2007 to 2013,the investment risk, cash flow risk and risk of income distribution of China’s nonferrous metals industry listed companies become more prominentafter the change of economic environment due to financial crisis spread and the impacts of domestic and international instability on the economic situation.After obtaining the composite score and the specific rankings of the nonferrous metals industry listed companies,the paper deeply analyzes the ferrous industry risk level of listed companiesfrom multiple perspectives ferrous industry risk level of listed companies.Specifically, from the nature of business, industry chain, industry and firm size, four different angles, we found that non-state ferrous industry risk profile of listed companies is continually getting better, while the risk situation of state-owned listed companies in the nonferrous metals industry is deteriorating; the average risk of listed companies in back-end of non-ferrous metal industry chain is less than the ones in front-end; the risk situation of listed company in aluminum industry, copper industry, and lead and zinc industry is not optimistic, most of which are in the middle and lower levels, with higher risk; in 2013 the risk profile of mid-sized non-ferrous metal industry is better than that of large public companies.Finally, the paper provides risk basis and practical policy recommendations for the prevention and control of non-ferrous metal industry companies,and promotes the sustainable development of non-ferrous metals industry.