In June 2016, the China National Economic Research Institute’s (CNER) Business Sentiment Index for the nonferrous metals industry stood at 20.2, up 0.7 points from the previous month, remaining in the “slightly cold” range. The leading index for the nonferrous metals industry, also compiled by CNER, reached 85.3, an increase of 0.9 points from the previous month. The coincident index came in at 68.2, showing a slight uptick of 0.2 points over the previous month. Preliminary assessment suggests that the nonferrous metals industry’s business sentiment index will continue to rebound slightly within the “slightly cold” range, though the foundation for the industry’s recovery remains fragile.

　　1. The business sentiment index continues to rebound slightly within the “slightly cold” range.

　　In June 2016, the China National Economic Research Institute’s index of prosperity for the nonferrous metals industry stood at 20.2, up 0.7 points from the previous month. The prosperity index has shown a slight rebound for seven consecutive months, but the recent pace of recovery has slowed somewhat, indicating that the foundation for the industry’s recovery remains fragile.

　　Among the 12 indicators that make up the nonferrous metals industry prosperity index, two indicators—output of ten nonferrous metals and total profits—are in the “normal” range; five indicators—including LMEX, imports of nonferrous metals, main business revenue, power generation, and automobile production—are in the “slightly cold” range; and household appliance production, fixed-asset investment in nonferrous metals, and export value are in the “overly cold” range.

　　2. The leading composite index shows a slowdown in the pace of recovery.

　　In mid-June 2016, the China National Institute for Economic Forecasting’s Leading Index for the nonferrous metals industry stood at 85.3, an increase of 0.9 points from the previous month. The rebound in the composite leading indicator has slowed somewhat, and it is expected that, in the short term, the nonferrous metals industry will remain stable within a “relatively cold” range.

　　Among the seven indicators that make up the leading index for the nonferrous metals industry, four showed year-on-year increases after seasonal adjustment. Specifically, the year-on-year growth rates for fixed-asset investment in nonferrous metals, M1, sales area of commercial residential properties, and automobile production were 0.78%, 23.0%, 26.4%, and 6.5%, respectively. The year-on-year decline in the LMEX narrowed.

　　3. Production in the non-ferrous metals industry remains stable.

　　After seasonal adjustment, the output of ten non-ferrous metals in May reached 4.408 million tons, representing a year-on-year increase of 1.9%. The growth rate rebounded by 0.3 percentage points compared to the previous month. In recent months, the output of these ten non-ferrous metals has remained within a “normal” range, maintaining an overall stable operating trend.

　　4. Investment shows signs of warming up.

　　After seasonal adjustment, in May of this year, the completed investment in fixed assets in the nonferrous metals industry reached 56.44 billion yuan, representing a year-on-year increase of 0.8%. This indicator has turned to slight growth after experiencing a consecutive year of decline. Investment completed in mining and smelting projects has rebounded following several years of continuous decline. Meanwhile, investment in processing projects has declined, as general processing projects are already oversupplied, making it temporarily difficult to find promising new projects, and enterprises are facing tight financial conditions.

　　5. Prices of key products declined year-on-year, yet corporate economic performance showed a recovery-driven growth.

　　After seasonal adjustment, the London Metal Exchange’s index of non-ferrous metal prices fell by as much as 481 points year-on-year in May, with prices of all major products declining compared to the same period last year. In June, the average spot price of copper on the domestic market was 36,006 yuan per ton, down 16.6% year-on-year; the average spot price of aluminum was 12,470 yuan per ton, down 2.1% year-on-year; the average spot price of lead was 12,784 yuan per ton, down 4.5% year-on-year; and the average spot price of zinc was 15,850 yuan per ton, down 2.4% year-on-year.

　　The main business revenue of non-ferrous metal enterprises has shown stable growth since the beginning of this year. After seasonal adjustment, the main business revenue of non-ferrous metals in May reached 445.9 billion yuan, representing a slight year-on-year increase of 2.7%.

　　In the second quarter, product prices rebounded month-on-month. Specifically, copper prices in the domestic market rose by 0.4% month-on-month, while aluminum prices surged by 12.1% month-on-month. Thanks to improvements in product structure and a relatively low base period from the same time last year, nonferrous metal enterprises saw a recovery in profit growth. Among them, mining enterprises continued to experience declining profits, whereas smelting enterprises achieved a recovery in profit growth, and processing enterprises maintained steady profit expansion. Preliminary estimates indicate that in the first half of the year, nonferrous metal enterprises’ profits shifted from a 3.5% year-on-year decline in the first quarter to a recovery-driven growth. By metal type, nickel-cobalt, tin, and antimony continued to suffer losses, while lead-zinc, magnesium, silver, tungsten-molybdenum, and rare earths saw continued declines in profitability. Meanwhile, copper and aluminum, whose profits rebounded, drove the overall industry’s profit growth.

　　6. The import and export value of non-ferrous metals continues to decline.

　　After seasonal adjustment, in May, the value of nonferrous metal product imports was US$6.85 billion, down 8.0% year-on-year—a decline that was broadly unchanged from the previous month. The value of exports was US$2.05 billion, down 22.9% year-on-year, with the decline narrowing by 2.2 percentage points compared to the previous month.

　　7. The effect of destocking is becoming apparent.

　　After seasonal adjustment, the funds tied up in finished products in the nonferrous metals industry reached 165.93 billion yuan in May of this year, down 8.3% year-on-year. The decline widened by 1.9 percentage points compared to the previous month. To escape their predicament, enterprises have been implementing flexible production strategies, reducing supply volumes and lowering inventories of finished products.

　　8. The nonferrous metals industry is experiencing recovery-driven growth, but overall momentum for a sustained rebound remains insufficient.

　　From an international perspective, the U.S. economy is experiencing a weak recovery, while Europe’s economic recovery is broadening in scope; Japan, meanwhile, is grappling with a stronger yen and deflation. Emerging economies have seen some improvement in their recovery momentum, though overall remains relatively weak. The UK’s “Brexit” has intensified risk-averse sentiment among global investors, significantly eroding confidence in the European Union. As a result, both the euro and the British pound have plunged, boosting the U.S. dollar’s strength. Moreover, uncertainties surrounding the Federal Reserve’s interest-rate hikes persist, leaving financial markets under continued pressure. Commodity prices remain highly uncertain, geopolitical dynamics remain complex, and the global economy continues to face numerous sources of uncertainty and instability. On the domestic front, China’s economy is now tending toward stabilization, with positive changes emerging in structural adjustments. Consumption is growing, investment growth is picking up, prices are rebounding, and employment remains stable. However, structural contradictions remain prominent, domestic demand remains weak, the economy’s endogenous growth drivers still need to be strengthened, and debt leverage and financial risks have yet to ease significantly. Private investment is declining, and efforts to cut overcapacity, reduce inventories, and deleverage are proving challenging for enterprises, leaving downward economic pressures undiminished.

　　In the first half of the year, production in the nonferrous metals industry remained generally stable. Demand for copper and aluminum continued to grow, while prices continued to decline year-on-year. However, prices of major metal varieties showed a rebound on a month-on-month basis. In the second half of the year, the most prominent challenges facing nonferrous metals enterprises remain: significant upward pressure on demand for most metal varieties, numerous uncertainties affecting prices, increasing difficulties in cost reduction, heightened export challenges, persistently low product prices, high production costs, and tight financial conditions—issues that continue to be difficult to significantly improve. Additionally, enterprises face ongoing difficulties in securing financing and bear heavy financial burdens. Preliminary assessments suggest that the growth rate of the nonferrous metals industry throughout the year will likely remain moderate yet stabilize gradually, with the annual output of the ten major nonferrous metals expected to achieve a modest increase. Fixed-asset investment in the nonferrous metals sector is projected to show either slight growth or no growth at all. The pressure on nonferrous metals enterprises to sustainably improve their economic performance remains considerable. Overall, the challenging situation in the nonferrous metals industry has yet to see any significant improvement, and its potential for sustained development remains insufficient.

　　Note:

　　1. The Leading Composite Index for the Nonferrous Metals Industry (hereinafter referred to as the “Leading Index”) is used to gauge the recent trends in the economic performance of the nonferrous metals industry. This index consists of the following seven indicators: the LMEX Index, M1, household appliance output, automobile output, sales area of commercial residential properties, monthly fixed-asset investment in the nonferrous metals industry, and the import value of nonferrous metal products.

　　2. The Composite Index for the Nonferrous Metals Industry (referred to as the “Composite Index”) reflects the current economic conditions of the nonferrous metals industry. This index is composed of the following five indicators: output of ten nonferrous metals, power generation, main business revenue of nonferrous metal enterprises above a designated size, total profits of nonferrous metal enterprises above a designated size, and the export value of nonferrous metal products.

　　3. The lagging composite index for the nonferrous metals industry (hereinafter referred to as the “Lagging Index”) is used together with the coincident index primarily to monitor trends in economic fluctuations and serves as a post-event verification tool. It consists of the following three indicators: the number of employees at nonferrous metals enterprises above a designated size, the funds tied up in finished products at nonferrous metals enterprises above a designated size (end-of-period outstanding balances), and the average balance of current assets at nonferrous metals enterprises above a designated size.

　　4. The Composite Economic Sentiment Index reflects the current level of prosperity in the nonferrous metals industry. The economic indicator light signal chart divides the state of industrial economic performance into five levels: a “red light” indicates overheating, a “yellow light” indicates moderate overheating, a “green light” indicates normal economic performance, a “light blue light” indicates moderate cooling, and a “blue light” indicates severe economic cooling. Each individual indicator’s light signal is assigned a different weight, and the resulting Composite Economic Sentiment Index is also displayed using these five light zones.

　　The Composite Economic Index consists of 12 indicators, namely the constituent indicators of both the Leading Index and the Coincident Index.

　　5. All indicators used to construct the index have been seasonally adjusted and thus exclude seasonal factors.

　　6. The previous monthly business sentiment indices will be revised every month. As the time series incorporates data from the latest month, the previously published monthly business sentiment indices will change to varying degrees—this is an automatic adjustment made by the model.

　　7. The nonferrous metals industry encompasses both the mining and beneficiation of nonferrous metal ores, as well as the smelting, rolling, and processing of nonferrous metals. For ease of analysis, when compiling the business sentiment index for the nonferrous metals industry, data from independent gold enterprises have not yet been included.