SHANGHAI, Jan. 15 (SMM) – Global economy remained sluggish in 2012 as Chinese demand dwindled, making overcapacity in the nonferrous metals industry more pronounced.
Copper: China's air conditioner and automobile industries experienced adjustments in 2012, while the real estate sector remained weak. Low-income housing construction also failed to boost home appliance consumption, leading to falling copper demand. The average capacity utilization rate was around 70% in the copper smelting industry. Investors should be more cautious towards overcapacity in the copper processing industry as small companies are scattered here and there, and since the quality of products becomes poor.
Aluminum: A new round of capacities in western China has been released, but Chinese government continues curbing the real estate markets, depressing aluminum demand, and causing aluminum prices to move below production costs for a prolonged period of time. This has resulted in low capacity utilization rate in the aluminum industry, while oversupply has been restricting aluminum prices. In order to shake off difficulties, large aluminum companies have opted to extend industry chains, pursuing terminal products with high added value.
Primary Lead: The capacity utilization rate at primary lead producers has remained below 70% in recent years, due largely to the following three factors. First, soft lead prices have led to insufficient raw material supply. Second, silver prices can affect production interest of lead smelters more than lead prices. Third, environmental protection inspections have also impacted the lead industry.
Zinc: Investment in railway infrastructure construction in 2012 was below the estimated RMB 600 billion for the 12th Five-Year Plan period, and slow growth in China's automobile industry has also dampened galvanizing used in transportation. Coupled with new released zinc capacity and increasing stocks, zinc oversupply is becoming more severe. Sluggish zinc prices are unable to entice zinc smelters to start production, as they have to depend on financial subsidies from local governments.