China's non-ferrous sector downbeat for 2nd half

China's nonferrous metals industry will remain downbeat in the second half of this year, with rising costs and weak consumption, according to a report by the China Nonferrous Metals Industry Association (CNMIA) released July 17.

CNMIA's pessimistic estimate is based on a range of internal and external factors. By and large, increasingly expensive raw materials, labor and electricity are pushing up production costs, while downstream consumption will remain slack, hindered by a weakening global economy, an appreciating Renminbi and government export restrictions, the CNMIA said.

Regarding the prospects of the nonferrous metals industry in the second half of this year, CNMIA estimates that output will continue to grow, with combined production of 10 major nonferrous metals, namely copper, aluminium, lead, zinc, nickel, tin, antimony, mercury, magnesium, and sponge titanium, expected to increase by approximately 15% year-on-year.

According to the report, Chinese nonferrous metal producers generally saw their profits slide during the first five months of this year, and this trend is likely to continue into the latter half of the year thanks to growing production costs and falling prices.

Due to a market surplus in the first half of the year, the prices of lead, zinc, aluminum and nickel all suffered falls, and the CNMIA is not optimistic about the situation changing in the second half.

The report indicated that the total volume of imports and exports of nonferrous metals will also continue to slide, while the trade deficit is set to expand.

In addition, a report on the country's nonferrous metals industry released by the National Development and Reform Commission (NDRC) on July 14, said that combined profit growth for 73 major producers and traders of nonferrous metals in the first four months of this year decreased by 7.25% on an annual basis, and that a growing number of smelters are losing money.

The NDRC is considering taking counter-measures to ease the situation, according to the report.

Interfax commentary: Output of various nonferrous metals in China has been an issue which has made headlines in the lead up to the summer. Suggestions of production cuts for aluminum, lead and zinc have been been aired, only to be rejected as being unlikely to follow through. Whatever the NDRC's counter-measures may be, a weakening global economy and weakening demand from the globe's biggest consumer are suggesting that there is only one long-term answer to the surpluses of various metals – that market forces will have to be allowed to play their role, eliminating production when low price creates too tough an environment for all but the strongest players. – Interfax