The non-ferrous metals industry will maintain a steady growth trend in the future.

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In November 2021, the climate index of China's non-ferrous metals industry was 37.6, down 2 points from the previous month; the leading index was 73.2, down 3.1 points from the previous month; and the consistent index was 85.8, down 4.4 points from the previous month. The data show that the industrial climate index has fallen in the "normal" range.

Prosperity Index of Nonferrous Metals Industry from November 2020 to November 2021

1. The industrial climate index fell slightly in the "normal" range.

In November 2021, the climate index of China's non-ferrous metals industry was 37.6, down 2 points from the previous month. Overall, the climate index fell slightly in the "normal" range this month.

Among the 12 indicators that make up the prosperity index of non-ferrous metals industry, 6 indexes, such as M2, import volume of non-ferrous metals, output of 10 kinds of non-ferrous metals, operating income, electricity generation and exports of non-ferrous metals, are in the "normal" range, while the LMEX index and the total profit are in the "hot" range (due to the low index in the same period last year affected by the epidemic). The sales area of commercial housing, the output of household appliances, the output of cars and the monthly investment in non-ferrous metal fixed assets are located in the "cold" range.

Fig. 1 trend chart of prosperity index of China's non-ferrous metals industry

Fig. 2 prosperous light chart of China's non-ferrous metals industry

2. The leading composite index keeps falling slightly.

The leading index in November 2021 was 73.2, down 3.1 points from the previous month. Among the seven indicators that make up the leading index of the non-ferrous metals industry, M2 and the import volume of non-ferrous metals are in the "normal" range; the LMEX index index is in the "hot" range (due to the low index in the same period last year affected by the epidemic); and other indicators, such as automobile output, commercial housing sales area, household appliance production and monthly investment in non-ferrous metal fixed assets are all in the "cold" range. After seasonal adjustment, compared with the same period last year, five indicators fell, namely, automobile output, commercial housing sales area, household appliance output, monthly investment in non-ferrous metal fixed assets and non-ferrous metal imports, with decreases of 14.3%, 0.1%, 11.6%, 38.4% and 4.4%, respectively. Compared with the previous month, four indicators showed a decline, namely, automobile output, household appliance production, monthly investment in non-ferrous metal fixed assets and non-ferrous metal imports, with decreases of 0.4%, 1.4%, 7.5% and 0.5%, respectively.

Fig. 3 Composite index curve of China's non-ferrous metals industry

3. The domestic non-ferrous metals industry is operating within the "normal" range, but it will still face great downward pressure.

Growth in the world's major economies slowed and performed worryingly in November, hit by rising inflation, outbreaks of Omicron mutants and supply chain disruptions. Inflationary pressures in the United States continued to rise, with the consumer price index ((CPI)) rising 6.8% year-on-year, a 40-year high. In response to inflationary pressure, the Fed announced a reduction in its bond purchase program (Taper), as scheduled at its interest rate meeting on the 3rd. Since then, the normalization of Fed monetary policy has entered the implementation stage. The final manufacturing purchasing managers' index ((PMI)) for the month was 58.3, down 0.8 points from the previous month and the lowest since December 2020. As the epidemic repeatedly became the center of a new wave of epidemics in Europe, the inflation rate in the euro area continued to rise that month, reaching an annualized rate of 4.9%, a 25-year high. Due to the dislocation of time and space, the impact of the epidemic on the global supply chain has become more complex. The UK economy has performed poorly, with CPI growth of 4.2 per cent year-on-year in that month, the highest in a decade. As manufacturers spread inflationary pressures downward to consumers, the final month-on-month rise in commodity prices superimposed the low base effect of October last year, with a significant increase in CPI. Affected by rising oil and food prices, Japan, South Korea and other countries have seen new highs in CPI and obvious economic recovery. At the same time, overall weakness in investment and exports has dragged down the export and economic growth performance of the two countries.

Domestically, the overall level of economic prosperity in China rebounded in November. With a series of policies and measures issued by the central government to strengthen energy supply and price stabilization gradually showing results, the tight situation of power supply alleviated in that month, the commodity prices of some raw materials dropped significantly, and the manufacturing PMI returned to the expansion range. According to data released by the Bureau of Statistics on November 30th, China's manufacturing purchasing managers' index ((PMI)) for the month was 50.1%, up 0.9% from the previous month, above the tipping point, and the manufacturing sector returned to its expansion range. The manufacturing industry shows five characteristics: a rebound in both supply and demand, a sharp drop in the price index, a continued rebound in the import and export index, an improvement in the prosperity of small and medium-sized enterprises and a rebound in PMI in key industries to varying degrees. The purchase price index and ex-factory price index of major raw materials were 52.9% and 48.9% respectively, significantly lower than 19.2% and 12.2% last month. Although the overall situation in the manufacturing industry has improved significantly, the service industry has been greatly affected because of the large number of areas affected by this round of multi-point sporadic outbreaks. The service industry business activity index was 51.1%, down 0.5% from the previous month, and the overall recovery of the service industry slowed down.

In terms of industry, the production of non-ferrous metals industry is stable and the output of major metals is lower than the same period last year. According to data released by the National Bureau of Statistics, the output of ten commonly used non-ferrous metals was 5.259 million tons in October, down 2.6 per cent from a year earlier. Of this total, refined copper production was 855000 tons, down 0.4 per cent from the same period last year, while raw aluminum production was 3.132 million tons, down 1.8 per cent from the same period last year. According to the confidence Index of Nonferrous Metals Enterprises compiled by our Association, the confidence Index of Nonferrous Metals Enterprises in the fourth quarter of 2021 is 48.7, which is 1.5 points lower than that of the previous quarter and is already below the critical point. In particular, it should be noted that the expected index for the current period has fallen below the critical point (48.2), and all sub-indicators are already below the critical point. Based on this preliminary judgment, the confidence index is likely to continue to decline in the next quarter, and the business activities of the entire non-ferrous metals industry are facing greater downward pressure. The marginal contraction of global dollar liquidity, global asset allocation adjustment and risk repricing, especially the capital flows and economic and financial stability of emerging market countries will face challenges. As a result, the dollar index strengthened and the prices of metal commodities such as copper, aluminum, zinc and lead generally fell. In addition, the consumer side, such as the low performance of the real estate market, with the introduction of the real estate tax pilot policy, buyers began to wait and see, the decline in commercial housing sales accelerated in November, the sales area decreased compared with the same period last year. Take aluminium, for example, aluminium for the month's LME March delivery fell as low as $2510 / tonne to close at $2625 / tonne, down $108.5 / tonne or 4.0 per cent from the previous month. In the same period, the main contract of Shanghai Aluminum dropped as low as 18230 yuan / ton to close at 18905 yuan / ton, down 965 yuan / ton or 4.9% from the previous month. The zinc market also showed a weak pattern. In that month, the average monthly price of zinc for the three-month issue of LME was 3262 US dollars / ton, down 2.4% from the previous month and up 21.6% from the same period last year. The performance of Shanghai Zinc and Lun Zinc is basically the same, with the average price of the main contract at 23245 yuan / ton, down 6.1% from the previous month and up 13.5% from the same period last year.

Looking at the overall situation, the international economic recovery faces a series of difficulties, such as increased inflationary pressure, novel coronavirus repetition and so on, but the overall pattern of sustained and stable domestic economy will not change greatly. With the gradual improvement of domestic terminal consumption and fixed asset investment, the non-ferrous metal industry will maintain a steady growth trend in the future, but the growth rate will slow down. Considering the current situation, we believe that the non-ferrous metal climate index will still run within the "normal" range in the near future, but the industry will still face greater downward pressure.