Non ferrous metals hardly jump out morass near future

It is reported that domestic non ferrous metals are experiencing an abrupt plunge from this Sep after five year bullish ascent and prices of copper, aluminum, lead, zinc, nickel and the other main base metals have tumbled 20% to 40%, which is the fastest and most serious slide in history. Aluminum, lead and zinc have already dived below the cost, forcing many enterprises cutting production to reduce losses.

Mr Shang Fushan, VP of China Non ferrous Metals Industry Association said that stimulus plans have a time lag to take effect in non ferrous metals industry which is expected to pick up in the H2 of next year and probably to recover in 2010.

Electrolytic aluminum industry which has expended an extraordinary pace in past two years becomes a lame duck now amid long time sluggish market. Even Aluminum Corporation of China Limited, big brother of China's aluminum industry has to curb production in its alumina and electrolytic aluminum sectors.

Mr Wand Feihong, chief aluminum industry analyst of Antaike, said that albeit trimming production cost, dismal price would destroy any possibility of rally.

He said that domestic electrolytic aluminum would reach 18 million tonnes at the end of this year with idle capacity of 3.7 million tonnes and production reduction of 1.5 million tonnes. He added that the electrolytic aluminum market will approximately maintain balance if production could keep zero growth this year.

Mr Feng Jun, an analyst of Antaike said that Zinc price is impossible to strongly rebound and production in mines would decline. LME 3 month zinc futures price probably remains at USD 1000 to USD 1300 per tonnes while lead price might edge up.

However, investment in lead and zinc mining is much shorter than that in smelting in past decade so lead concentrate output would diminish in the next stage. At present, plenty of zinc mining enterprises are in closure and market players are pushed to curtail or suspend production. Current zinc concentrate price is only 50% of the cost driving some makers to lay off almost 1000 workers.

Mr Feng Jun said that "China's annual output of zinc concentrate will abate 150,000 tonnes or 4.6% to 3.10 million tonnes this year with zinc consumption go up 2% to 3.7 million tonnes which is still far less than that in last year."

CNMIA's survey to copper firms shows that key copper enterprises haven't widely cut yield as some of them could maintain sound earnings from their own copper mines and have received little losses through profit hedge.

Mr Zhang Yanming, an analyst of Bohai Securities said that that non ferrous metals price is likely to experience a fluctuation after plumbing its bottom in 2009 when stock is almost immune to price change and zinc might become the leader of spiral market. Since then non ferrous metal price will have a larger space for increase than decrease after risk is totally released in the market.

Mr Chen Jinghe chairman of Fujian Zijin Mining Group said that present metal market just paced into early winter which will intensify in following 3 to 5 years. He said that 2009 might be the harshest time for metals which is expected to inch up in 2010.

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