Slow growth prospect for China's nonferrous metals industry in 2012

China's nonferrous metals industry is unlikely to grow in the second half of the year, as the economy continues to struggle, after officials reported a significant drop in output growth during the first five months.

Shang Fushan, vice-chairman of the China Nonferrous Metals Industry Association, said the industry has experienced a huge decline, as figures showed total output of the 10 major nonferrous metals in the first five months was 14.26 million metric tons - a 5.1 percent increase year-on-year, but still well down on the growth of 8.8 percent in the corresponding period of the previous year. "The development of the nonferrous metals industry largely depends on the country's macro economy in the following months, and that's not very good currently, so it is hard to predict what's ahead," said Shang.

However, he did say the central government is expected to carry out policies to boost the economy, suggesting he didn't expect the situation to worsen.

He added that the output of lead and zinc in the country is reducing and the growth of output of copper, alumina is falling.

According to recent estimates by Wistrategy Consulting, a domestic business consultancy focusing on listed companies, the total annual revenue of 24 listed nonferrous metals companies on the Shanghai and Shenzhen stock exchanges will grow by 14.24 percent this year, compared to 35 percent last year. Profits by the companies are expected to grow by 8.27 percent, a huge drop of 39 percentage points year-on-year.

Wistrategy said that a market oversupply of nonferrous metals still exists and the situation is getting worse with fierce competition.

Dependence on imports is also increasing, which adds to the challenges of the industry, said the consultancy.

It highlighted competition among electrolytic aluminum producers as being especially brutal. "Few producers who buy alumina and electricity to make electrolytic aluminum made profits during the first five months," said Shang. "Only the ones that own both alumina mines and coal-fired power plants can make a little profit," he added. However, output of electrolytic aluminum is still increasing at a rapid speed in China.

According to the figures from the National Development and Reform Commission, China's output of electrolytic aluminum had a 10.5 percent growth in the first five months, 6.5 percentage points higher than last year. In February, the Ministry of Land and Resources encouraged more private investment into the mining industry, to boost the industry and lessen the country's reliance on imported mineral resources.