I. Global Macroeconomic Outlook

In recent years, people have been talking about the global economic downturn, and some even claim that 2016 is a carbon copy of 1937. From the financial and economic crisis of 2008 until now, we’ve already gone through seven years—precisely the same span of time that ran from the Great Depression of 1929 to 1937. Thus, we’re now at a very difficult stage in the global economy.

Looking at the global economy as a whole, the economic crisis has gone through three distinct phases. At the onset of the crisis in 2008, emerging economies performed remarkably well, while advanced economies showed mixed trends—some improving and others deteriorating, leading to a stark two-tiered divergence. Later, starting from 2013, the situation began to reverse: advanced economies, through their own adjustments, started to improve; however, emerging economies as a whole experienced a downturn, once again reflecting a two-tiered divergence.

Figure 1: GDP Growth Curves for Developed Countries and Emerging Economies

However, another shift has emerged over the past 16 years. Looking at this year, both advanced economies and developing or emerging economies are heading downward. Taking industrial production value as an example, starting roughly from November last year, U.S. industrial production began to decline for the first time in a decade, falling by 0.3% year-on-year. In February and March of this year, industrial production continued to decline. As for the other two advanced economies—the Eurozone and Japan—things have been similarly grim: Japan’s industrial production fell by 5.2% and 1.2% year-on-year in January and February respectively, marking the largest decline since April 2011. Overall, advanced economies as a whole have begun to plunge sharply.

Looking now at emerging economies, we see that among the BRICS—Russia, Brazil, and ourselves—the situation is somewhat better only for China and India. Brazil and Russia have already plunged fully into recession: Russia’s economy contracted by 2.6% in January and 4% in March, while Brazil experienced negative growth, with two-month declines of 13.6% and 9.8%. Relatively speaking, India fares slightly better—but even India saw a decline of 3.4% and 1.2% in the last two months of last year, and then another drop of 1.5% in January of this year. This clearly illustrates the challenging economic outlook facing emerging market economies.

The overall macroeconomic situation is unfavorable, which has led to weak demand for our mineral products and a generally poor outlook for the mining industry.

II. Price Trends of Mineral Products

First, let me clarify that I haven’t included iron ore in this discussion, as it’s not a market-driven commodity and its price is relatively difficult to determine. Therefore, here I’ve selected several key minerals—gold, silver, platinum, palladium, copper, aluminum, lead, zinc, nickel, tin, and lithium—and will provide a description and analysis of their price trends and performance.

In 2011 and 2012, gold prices reached a peak of nearly $1,800 to $1,900 per ounce, then fell to a low of around $1,100 per ounce. Over the past six months, gold prices have shown some recovery and are now hovering around $1,200 to $1,300. Silver prices are roughly similar to gold prices, but so far, they haven't seen a clear rebound and remain largely at low levels.

Figure 2: Chart of Gold Price Fluctuations

Figure 3: Chart of Silver Price Fluctuations

The price of platinum has followed a very similar trend to that of gold—both started from their 12-year highs, fell to their lowest point by the end of 2015, and have since rebounded over the past six months.

Figure 4: Platinum Price Trend Chart

Palladium is somewhat different; in our country, it’s primarily used as a catalyst for automotive exhaust emissions. It has relatively more industrial applications compared to platinum, which is mainly used for jewelry. As a result, the decline in palladium prices has been relatively smaller.

Figure 5: Graph of Palladium Price Trends

Let’s take another look at the six nonferrous metals. Both copper and aluminum are still in the process of destocking—and haven’t yet completed it. Copper’s price has fallen from its peak of nearly 10,000 yuan in 2011 to just over 4,000 yuan today, with a slight rebound recently. Overall, copper’s price has essentially been cut in half. As for aluminum, its price has dropped from 2,800 yuan down to the 1,600- or 1,700-yuan level.

Figure 6: Chart of Copper Metal Price and Inventory Trends

Figure 7: Chart of Aluminum Metal Price and Inventory Trends

Lead and zinc are also undergoing destocking, with inventories steadily declining. In terms of prices, the current prices of lead and zinc have fallen by at least one-third compared to their peaks in 2011 and 2012.

Figure 8: Graph of Lead Metal Price and Inventory Trends

Figure 9: Chart of Zinc Metal Price and Inventory Trends

Nickel and tin. Nickel is a mineral resource that our country currently faces a shortage of. However, nickel inventories have been steadily rising lately. Since 2012, nickel prices have surged dramatically, increasing significantly—largely due to an event in 2012 when Indonesia banned the export of raw nickel ore. After inventories climbed, prices subsequently fell again. This is one distinctive feature of nickel. As for tin, prices have been declining steadily since mid-2011, dropping by roughly one-third.

Figure 10: Chart of Nickel Metal Price and Inventory Trends