In 2014, the raw material industry faced a complex domestic and international economic situation, actively responded to the downward pressure of the economy, focused on promoting industry management innovation, worked hard to resolve overcapacity, vigorously expanded downstream demand, and overall maintained a stable growth trend in the industry's economic operation. New progress was made in industrial restructuring.

1、 Characteristics of raw material industry operation in 2014

（1） The overall production and operation of the industry are stable, but the growth rate has slowed down. In 2014, the growth rate of the added value of the raw material industry was 8.3%, a decrease of 2 percentage points from 2013. Among them, the growth rates of the petrochemical, steel, non-ferrous, and building materials industries were 7.2%, 7.2%, 11.4%, and 9.6%, respectively In terms of production, the growth rate of most products has declined. The annual production of crude steel, ethylene, cement, and ten types of non-ferrous metals was 823 million tons, 17.04 million tons, 2.49 billion tons, and 44.17 million tons, respectively, an increase of 0.9%, 7.6%, 1.8%, and 7.2% year-on-year, a decrease of 6.6%, 0.9%, 7.8%, and 2.7 percentage points compared to 2013.

（2） The economic benefits have slightly improved, but the overall profitability level is still relatively low. Benefiting from the significant decrease in iron ore and coal prices, key steel enterprises achieved a profit of 30.4 billion yuan in 2014, an increase of 40%, but the sales profit margin was only 0.9%, still at the lowest level in the industrial industry. The non-ferrous metal industry achieved a profit of 205.3 billion yuan for the whole year, a year-on-year decrease of 1.5% The petrochemical industry achieved a profit of 765.2 billion yuan, a year-on-year decrease of 8.5%, with a significant decrease in refining, a year-on-year decrease of 69% The building materials industry achieved a profit of 477 billion yuan, a year-on-year increase of 4.8% From the perspective of profit composition, the proportion of downstream deep processing links has increased. For example, non-ferrous metal mining and smelting have decreased by 12.4% and 13.7% year-on-year, respectively. However, rolling processing has increased by 11.6% year-on-year. In the building materials industry, the profit growth rates of cement products, lightweight building materials, glass fiber, insulation materials, sanitary ceramics, etc. are all higher than 12%

（3） The prices of the main products are showing a downward or low-level fluctuation trend. Steel prices continue to be sluggish, with the price index falling to 83.1 points at the end of 2014, 16.1 points lower than the same period last year. The prices of non-ferrous metals have generally fluctuated and adjusted, while aluminum prices have rebounded slightly, but still remain below last year's levels. The prices of building materials products are generally stable, with the average price for the whole year basically unchanged from the previous year. The price of cement continues to decline, falling to 316 yuan/ton in December, 39 yuan lower than the beginning of the year. From January to December, the ex factory prices of petrochemical and chemical products decreased by 2.6% year-on-year, with 77% of the 188 products monitored by the Petrochemical Federation experiencing a year-on-year decrease in prices

（4） The growth rate of fixed assets investment slowed down, and industrial restructuring accelerated. In 2014, the chemical industry and nonferrous metal industry respectively completed RMB 1.56 trillion and 691 billion of fixed assets investment, up 10.5% and 4.6% year on year, respectively, with the growth rate falling 4.1 and 15.2 percentage points respectively. Fixed assets investment in the building materials industry reached 1.46 trillion yuan, up 14% year on year, and the growth rate was basically the same as that of the previous year. Fixed assets investment in the steel, electrolytic aluminum and cement industries showed negative growth, down 3.8%, 17.8% and 18.7% year on year respectively. The excessive growth of production capacity was curbed, and the development of the industry was changing from scale growth to connotation growth.

（5） The pace of technological innovation in the industry is accelerating, and energy conservation and environmental protection have reached a new level. In 2014, a batch of new products were successfully industrialized in the steel industry, including Baosteel's 600 ℃ ultra supercritical thermal power unit steel pipes, Ansteel's three major series of nuclear power steel, Wugang's non oriented silicon steel, and Taiyuan Iron and Steel's 0.02mm precision strip steel, which were applied in downstream key fields. Breakthroughs were made in industrialization technologies such as fine ceramics, sparkling crystals, and high-pressure composite gas cylinders in the building materials industry. In terms of energy conservation and environmental protection, the emissions of major pollutants and energy consumption indicators in the raw material industry have both decreased. The comprehensive energy consumption per ton of steel, sulfur dioxide and smoke emissions of key large and medium-sized steel enterprises have decreased by 1.2%, 16% and 9.1% year-on-year, respectively. The comprehensive energy consumption of ethylene, caustic soda and calcium carbide have decreased by 2.2%, 3.2% and 5.5% respectively. The comprehensive AC electricity consumption of aluminum ingots has decreased by 144 kWh/ton year-on-year. The application of dust removal, denitrification and desulfurization technologies in the building materials industry has accelerated, and the development momentum of cement kiln collaborative disposal is good.

（6） The export trade has significantly increased, and the product quality has been improved. In 2014, China exported 93.78 million tons of steel, a significant increase of 51% year-on-year, and imported 14.43 million tons of steel, an increase of 2.5% The export and import volumes of the chemical industry were 162.1 billion and 186.5 billion US dollars, respectively, an increase of 11% and 0.6% The export value of non-ferrous metals was 77.2 billion US dollars, a year-on-year increase of 41%, while the import value was 100 billion US dollars, a year-on-year decrease of 3.2%. Due to restrictions on raw ore export policies such as Indonesia, imports of bauxite and laterite nickel ore decreased by 49% and 33% respectively year-on-year The building materials industry exported 36.1 billion US dollars, a year-on-year increase of 5.3%. The import value was significantly increased by 111% due to the large import of precious non-metallic minerals such as diamonds, reaching 46.3 billion US dollars. The export grade of products has been improved, and the proportion of high value-added products such as electrical steel plates and cold-rolled thin and wide steel strips has increased. Affected by various factors, trade frictions in the raw materials sector increased significantly in 2014, with 40 cases in the steel industry, expanding from Europe and America to Asia and Africa. The chemical industry, the United States, launched a double anti-dumping investigation against our tires, involving a total amount of 3.3 billion US dollars. There were also multiple anti-dumping lawsuits against aluminum materials in the non-ferrous industry.

2、 The main problems currently existing

（1） Overcapacity and insufficient demand coexist, and the contradiction between market supply and demand is prominent. In 2014, the raw material industry improved its capacity utilization rate through measures such as strict control of new additions, elimination of outdated products, and expansion of demand. However, in terms of overall production capacity, it is still at a high level. At the end of 2014, the crude steel production capacity of the steel industry reached 1.16 billion tons, and more than 2000 new projects were started throughout the year. Among the existing 35 million tons of electrolytic aluminum production capacity, there are not many outdated production capacity. The cement industry built and put into operation 54 clinker production lines with a total production capacity of over 70 million tons in 2014, and the chemical industry started more than 10000 new projects in 2014. From the perspective of market demand, domestic consumption of bulk raw materials will enter the peak arc zone. The apparent consumption of crude steel in China in the past three years has been 670 million tons, 770 million tons, and 740 million tons respectively, showing a slow to moderate downward trend. It is expected that under the new normal of the economy, the problem of overcapacity in the raw material industry will persist for a long time, forcing industries such as steel, petrochemicals, non-ferrous metals, and building materials to accelerate transformation and adjustment.

（2） Environmental and safety constraints have been strengthened, and the market competition environment urgently needs to be regulated. Since 2015, new environmental laws and emission standards have been implemented, and a considerable number of steel and cement enterprises cannot meet the requirements. Steel enterprises need to increase their environmental investment by 13% per ton of steel to meet the emission standards, and the operating costs will increase by about 200 yuan. Especially in areas with special emission limits such as the Beijing Tianjin Hebei and Yangtze River Delta regions, environmental protection supervision for enterprises will be more stringent. At the same time, raw material industry enterprises invest heavily and occupy a large amount of capital, generally facing difficulties, slow financing, and expensive financing. In 2014, the financial expenses of the steel, chemical, and non-ferrous industries increased by 21%, 21%, and 20% respectively year-on-year, and the financial expenses of the steel industry were more than three times the profit. In terms of market competition environment, there are still some places where law enforcement is not strict, enterprises do not operate environmental protection facilities, and produce and sell fake and inferior products.

（3） Insufficient guarantee capability for some key materials, and new materials are still a prominent problem restricting strategic emerging industries. In 2014, China's new materials industry accelerated its development, with a batch of high-end metal structural materials and special functional materials achieving new breakthroughs. Some provinces such as Hunan, Jiangsu, and Guangdong successively introduced special funds, first batch application subsidies, and other policy measures. However, compared with developed countries and strategic needs, there is still a significant gap in the domestic new materials industry, and the situation of relying on imported key materials has not fundamentally changed. The production lines for 8th and 8.5th generation LCD panels have been successfully put into operation, but the self-sufficiency rate of key materials such as polarizing films, ultra-thin glass substrates, and LCD materials does not exceed 10%. High strength and thick steel plates for marine exploration and oil production platforms are basically dependent on foreign countries. In 2014, the largest imported commodity in China, integrated circuit chips, were largely composed of materials.

3、 Outlook and Key Work Measures for 2015

In 2015, with the detailed implementation of the central government's series of policies to stabilize growth, promote reform, adjust the structure, and benefit the people's livelihood, in particular, the transformation of shantytowns, the construction of infrastructure in the central and western regions continue to increase, and the implementation of major strategies such as the "the Belt and Road", the domestic demand for raw materials is expected to remain stable in general. It is expected that the growth rate of the added value of the raw materials industry in 2015 will be about 8%, and it is expected to maintain a steady development momentum. However, under the overall situation of macroeconomic restructuring and promoting transformation, as well as factors such as severe overcapacity, the industry's growth rate will further slow down, and steel, electrolytic aluminum, and other industries will face significant difficulties and downward pressure. In 2015, the following key measures were taken to promote the stable and healthy operation of the raw material industry economy:

One is to properly handle the relationship between resolving overcapacity and stabilizing growth. On the one hand, we will resolutely curb new production capacity, increase the elimination of outdated production capacity and strengthen the supervision of projects under construction, on the other hand, we will vigorously support advanced enterprises to implement investment that is conducive to endogenous growth, such as technological transformation, product adjustment, and integration of industrialization and industrialization. Focusing on a number of major projects in the strategic layout of the "the Belt and Road", the Beijing Tianjin Hebei Cooperation, and the Yangtze River Economic Belt, we will encourage strong enterprises such as steel, electrolytic aluminum, cement, and fertilizer to carry out mergers and reorganization, and support qualified enterprises to establish resource mining, smelting, and deep processing bases overseas.

The second is to vigorously expand the market demand for raw material industrial products. Strengthen upstream and downstream cooperation in areas such as new urbanization, transportation and water conservancy infrastructure, and advanced equipment manufacturing, and actively promote the production and application of high-quality and high value-added products. By relying on coordination mechanisms such as high-strength steel bars, high-performance electrical steel, and steel for ships and marine engineering, we aim to promote the application of high-end steel. Relying on the upstream and downstream cooperation mechanism of new aluminum materials, strengthen the connection between production and demand, and promote key aluminum materials for aluminum alloy carriages and aircraft. Build a public service platform, organize product evaluation and labeling management, and vigorously promote green building materials. Promote the application of polymer materials in the fields of rail transit and high-end equipment.

The third is to strengthen economic operation monitoring and continue to deepen industry management. In response to the prominent downward pressure in industries such as steel, chemical, and non-ferrous metals, we will conduct in-depth investigations and research in enterprises, closely monitor operational indicators such as production, prices, and efficiency, timely identify emerging and trending issues, and study and propose targeted countermeasures. Improve industry standard management, strengthen dynamic inspections of announced enterprises, gradually establish management measures for enterprise self declaration and government strengthened in-process and post event supervision. Strengthen the connection and linkage between the announcement list and finance, environmental protection, energy and other aspects, and create a fair competitive market environment. Establish a coordination mechanism for the import and export of key products, properly resolve international trade disputes, and ensure the export environment.

Fourthly, we will continue to cultivate the new materials industry and guide its healthy development. Strengthen top-level design and formulate industry guidance to promote the development of new materials. Based on the overall deployment of the technological system reform, promote the preparation and demonstration of implementation plans for major projects in the research and application of key new materials. Research the establishment of new material industry associations, industry alliances, and expert advisory committees, and carry out the construction of new material statistical systems, certification systems, and standard systems. Promote the establishment of a risk compensation mechanism for the first batch of new material applications, using production to drive production and use production to promote use, and strive to form a collaborative innovation system with positive interaction between upstream and downstream, close integration of industry, academia, research and application. Develop breakthroughs in research and development, engineering applications, and industrial mass production as soon as possible, and achieve the large-scale development of the new material industry.