**Abstract**
Experts have pointed out that although the stock market has risen due to the positive impact of reforms exceeding expectations, the metal market remains short-sighted and is struggling to keep up. The annual China Nonferrous Metals Industry Meeting was held in Shanghai yesterday, where industry experts discussed the ongoing challenges facing the sector. They emphasized that oversupply has become a widespread issue across the entire non-ferrous metals industry.
The meeting highlighted concerns about the imbalance between supply and demand. One aluminum trader expressed his worries, stating, “Supply is seriously oversupplied, but demand hasn’t improved. The cost for the whole industry is shifting downward, and it’s expected to be even colder next year.†Whether in the futures or spot markets, the outlook for non-ferrous metals like copper, aluminum, and nickel remains bleak.
On November 18, the LME copper 03 contract closed at $7,000. The following day, three-month copper fell to $6,693 per ton, down 0.67%. This drop broke the 7,000-dollar threshold, intensifying the bearish sentiment. Fubao Information analyst Lelianhua believes that copper prices are heading into a bear market, with oversupply likely to pressure prices for at least the next three years.
Nickel has been the worst-performing base metal this year, with prices declining sharply. Since November, nickel has fallen by 6.83%, and it dropped another 1.44% overnight. The Indonesian government's planned ban on nickel ore exports at the start of next year has introduced significant uncertainty into the market. While the impact may be less than anticipated, it’s unlikely to provide a long-term boost to nickel prices. Analysts expect the metal to continue trading in a bearish trend due to weak supply expectations and slowing consumption growth.
Oversupply is clearly a major issue in the non-ferrous metals sector. According to news from London on November 18, the International Lead and Zinc Research Group (ILZSG) reported a global zinc surplus of 38,000 tons during January–September 2013.
China’s refined copper output in October reached 637,900 tons, surpassing the previous record of 620,000 tons set in September. Copper production in October also rose by 22.9% compared to the same period in 2012, signaling continued expansion in the sector.
As the leading metal in the non-ferrous category, copper faces an uncertain future. Jiangxi Copper recently negotiated its 2014 copper processing fee, which increased by 31% from the previous year. As a key industry benchmark, this rise suggests higher production capacity in the coming year. However, the sharp increase in processing fees signals potential pressure on copper prices, with challenges such as the "barrier lake" effect looming over the industry.
Copper concentrate processing fees refer to the cost of refining crude copper into anode copper, while refining fees relate to converting anode copper into electrolytic copper. An increase in these fees indicates that mine capacity is growing faster than smelting capacity, leading to higher copper production. Jim Lennon, a senior commodities consultant at Macquarie Bank, noted that global copper supply has surged since 2012 and is expected to peak at over 477,000 tons in 2014. He remains pessimistic about the medium-term price outlook, predicting that copper prices will continue to decline until 2014, with a possible bottom around $6,500 per ton.
Investors are closely watching whether China’s economic reform plan will lead to increased demand for base metals in the near term. The new policy includes opening up the financial sector, relaxing investment restrictions, and promoting a more market-oriented IPO system. While the stock market has benefited from the positive effects of these reforms, Michael Turek, head of trading at Newedge Metals, remarked that although China’s marketization process is progressing, it remains distant from the short-sighted metal market.
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