The market is always fraught with uncertainty and volatility—changes in international relations, domestic policies, and shifts in supply and demand can all send the market soaring or plunging. This year, the global economy has accelerated its recovery, and shortages of most mineral products have intensified, driving a broad-based rise in market prices and significantly improving the operating performance of mining companies as well as boosting investor confidence in capital markets. However, institutional investors have become more cautious about future prospects, and their enthusiasm for investing in the sector has also waned somewhat.

　　Since the beginning of this year, China’s mining market has shown a steady and positive trend, and the mining industry continues to be in a period of structural adjustment and optimization and upgrading. In line with this trend, the China Mining Index has generally maintained a moderate upward trajectory without experiencing significant fluctuations. According to the China Mining Industry Index jointly released by the China Institute of Land and Resources Economics and the China Mining News, in November 2017, the coal industry index stood at 123.3, up 1.1% year-on-year and 0.4% month-on-month; the non-ferrous metals industry index reached 181.9, up 2.9% year-on-year and 0.3% month-on-month; the ferrous metals industry index was 140.5, up 1.4% year-on-year and 0.4% month-on-month; and the oil and gas industry index came in at 117.4, up 1.0% year-on-year and 0.1% month-on-month. Overall, the China Mining Index for November showed an upward trend, with both year-on-year and month-on-month growth rates posting positive figures. The coal industry index, non-ferrous metals industry index, oil and gas industry index, and ferrous metals industry index all recorded positive year-on-year and month-on-month growth rates, indicating better performance compared to the previous month.

　　Overall, China’s mining market continues to follow the trend of structural adjustment while maintaining a stable and positive trajectory.

　　The coal market has achieved a basic balance between supply and demand.

　　With the continued advancement of “capacity reduction” and its significant achievements, in 2017 the focus of coal industry regulation policies gradually shifted from the 2016 approach of “reducing capacity and limiting output” to “ensuring supply and stabilizing coal prices.” Overall, in 2017, the coal market achieved a basic balance between supply and demand, and coal price trends as a whole moved away from the one-sided upward trend of 2016, entering a phase of fluctuating adjustments.

　　In 2017, both the Bohai Rim Power Coal Price Index—reflecting the composite price of power coal, including long-term contract coal—and market coal prices exhibited an oscillating and adjusting trend. Regarding coking coal, although the fluctuation patterns of coking coal prices and power coal prices were not entirely synchronized, their overall trends were broadly similar. From the beginning of the year to mid-February, both power coal and coking coal prices experienced declines to varying degrees; from mid-February to the end of March, power coal prices rebounded while coking coal prices gradually stopped falling and stabilized; from the end of March to early June, both power coal and coking coal prices weakened again overall; from June to September, power coal prices showed oscillating recovery, while coking coal prices stabilized and then quickly rebounded; after October, both power coal and coking coal prices generally stabilized or even declined; starting from late November, the Bohai Rim power coal price began to rise again, and in some local areas, coking coal prices also stabilized and rebounded.

　　2017 marked the first year in which the medium- and long-term coal purchase and sale contract system was promoted on a large scale under market economic conditions. A year of practical experience has demonstrated that these medium- and long-term contracts have played an important role in stabilizing the operations of supply-and-demand enterprises, stabilizing the market, ensuring a steady supply and stable prices, and promoting the healthy development of related industries. Recently, data collected by third-party credit agencies on the implementation of 2017 medium- and long-term contracts showed that the fulfillment rate exceeded 90%. According to statistics from the China National Coal Association, in 2017, the proportion of medium- and long-term contracts signed by major coal enterprises nationwide generally exceeded 80%, and the price of 5,500 kcal动力煤 contracts at Qinhuangdao Port remained stable within a reasonable range of 560 to 570 yuan per ton.

　　Due to capacity reduction efforts and the geographical distribution characteristics of coal resources, thermal coal production is increasingly concentrated in the “Three Wests” region and other western areas. As a result, the pattern of coal production, transportation, and demand has undergone significant changes, posing greater challenges to stabilizing coal supplies. For a period of time, some local regions experienced shortages in supply. Relevant authorities have stepped up their investigation and research, and based on a thorough understanding of the situation, have taken strong measures to boost the release of high-quality production capacity and further enhance coal transportation capabilities. Currently, positive changes have been observed in coal production, transportation volume, and inventory levels. From January to November, raw coal production reached 3.14 billion tons, representing a year-on-year increase of 3.7%. As of the end of November, the average settled price for 5,500 kcal coal at Qinhuangdao was 609 yuan per ton, down 7 yuan per ton from the end of October; for 5,000 kcal coal, the price was 578 yuan per ton, a decrease of 20 yuan per ton; and for 4,500 kcal coal, the price was 512 yuan per ton, down 14 yuan per ton.

　　In accordance with the deployment of relevant national ministries and commissions, coal enterprises are expected to ensure that the number of medium- and long-term coal purchase and sale contracts signed in 2018 accounts for no less than 75% of their own resource volumes. They should also set prices reasonably based on a pricing mechanism of “base price plus floating price,” while strengthening contract performance to maintain a contract fulfillment rate of over 90%. To some extent, this will further stabilize coal prices.

　　Looking ahead to 2018, with the implementation of a series of policies—including an increase in medium- and long-term contract ratios and the coal inventory system—industry experts predict that coal prices next year will generally follow a pattern of higher at the beginning and lower toward the end of the year. The volatility of coal prices will decrease, and overall prices will experience slight fluctuations and a gradual decline throughout the year.

　　China is driving global growth in oil and gas demand.

　　In 2017, although the continued production cuts by OPEC and its allies remained the primary factor influencing the crude oil market, demand once again took the lead, with China playing a key role. From January to November, China imported 390 million tons of crude oil, representing a year-on-year increase of 12%.

　　According to the World Bank’s October 2017 Commodity Markets Outlook report, oil prices are forecast to rise from an average of $53 per barrel in 2017 to $56 per barrel in 2018, driven by steadily increasing demand, an agreement among oil-exporting countries to cut production, and stabilizing U.S. shale oil output. OPEC and other producing countries may further agree to reduce output, thereby maintaining upward pressure on oil prices.

　　Industry insiders analyze that China has become the primary driver of global crude oil demand growth. This year, three key factors are boosting China's crude oil imports: the ongoing replenishment of strategic reserves, demand from smaller-scale non-state-owned refineries, and growing exports of refined petroleum products. It is expected that China’s demand for crude oil imports will play a significant role in the global supply-and-demand dynamics in 2018. Although the aforementioned factors in China remain at work, it is likely that the rate of growth will slow down to single-digit levels.

　　As the Chinese government continues to promote the “coal-to-gas” conversion initiative, China’s LNG imports surged by 48% from January to October this year. Combined with pipeline natural gas imports from Central Asia, China’s total natural gas imports from January to November this year reached 60.7 million tons, representing a year-on-year increase of 26.5%.

　　Compared to the sharp increase in natural gas imports, China’s domestic natural gas production from January to November reached 133.81 billion cubic meters, representing a year-on-year growth of only 9.1%. For the government’s plan to gradually phase out coal-fired boilers used for industrial and residential heating, the insufficient supply of natural gas has already become evident. Industry insiders predict that by next winter, China will have improved its natural gas infrastructure and will be able to increase natural gas consumption. Given the constraints on domestic natural gas production and the capacity limitations of pipeline imports, LNG imports in 2018 are expected to surge once again, even if prices remain at high levels.

　　Iron ore prices have experienced wide fluctuations.

　　In 2017, iron ore prices experienced a period of wide-ranging fluctuations. In the first half of this year, as iron ore inventories at major ports continued to rise, prices plummeted significantly. It can be said that the price trend in the first half of the year was consistent with the fundamental logic underlying iron ore itself. However, from June to August in the second half of the year, the iron ore market saw both inventory levels and prices rising simultaneously. During this period, iron ore prices were primarily influenced by the sustained increase in steel prices. Starting in late August, prices began to decline steadily, initiating a new round of downward pressure. The main driver behind this round of decline was steel mills’ winter production restrictions, which dampened demand for iron ore. After entering November, the market realized that steel mills’ production cuts fell short of expectations. Given the steel mills’ consistently high profit margins, expectations for demand for high-grade iron ore were rekindled, and prices began to rebound. As of now, iron ore prices in 2017 have shown a trend of wide fluctuations with a general weakening bias.

　　Data show that from January to November 2017, the output of raw iron ore reached 1,160.108 million tons, representing a year-on-year increase of 6.5%. In the first 11 months, iron ore imports totaled 989.6 million tons, up by 53.84 million tons, or 6%, compared to the same period last year. It is estimated that total iron ore imports for the full year 2017 will reach 1,086.98 million tons, an increase of 62.27 million tons over the 1,024.71 million tons recorded in 2016.

　　From the supply side, industry insiders expect that the four major mining companies will continue to increase production in 2018, with the main increments coming from Vale and Rio Tinto. BHP’s overall supply is expected to remain stable, while FMG’s output may see a slight decline. Due to environmental policies implemented by the Chinese government, domestic iron ore production experienced a sharp drop in the fourth quarter of 2017, prompting steel mills in certain inland regions to turn to port-based imports for their iron ore needs. Judging from the trend of inland steel mills starting to purchase long-term contracted imported iron ore in 2018, it appears unlikely that domestic iron ore production will significantly increase in the near future.

　　From the demand side, as environmental protection measures aimed at curbing production continue to be implemented, steel output is expected to keep declining in the coming period, and the intensity of iron ore demand will also continue to weaken. Currently, the average number of days’ worth of imported ore inventory held by domestic steel mills stands at over 30 days. In the short term, unless iron ore prices fall sharply, steel mills are likely to stick to their strategy of sourcing ore as needed and will not significantly increase their inventories. Moreover, in 2017, China’s steel mills saw a substantial increase in their consumption of scrap steel.

　　Overall, from the perspective of iron ore fundamentals, the supply-demand imbalance is unlikely to change anytime soon, and mining companies will continue their trend of increasing production. Meanwhile, as China’s supply-side structural reform continues to deepen, demand for iron ore will increasingly shift toward higher-grade ores. In the later stage, the market’s main focus will remain on determining whether declining demand or constrained supply will exert greater influence. With an ample supply of iron ore, fluctuations in iron ore prices will primarily mirror those in steel prices.

　　The shortage of non-ferrous metals is intensifying, driving strong price increases.

　　Stimulated by the steady recovery in prices, the production growth of most global metal varieties has accelerated since 2017. According to statistics from the World Bureau of Metal Statistics (WBMS), in the first three quarters of 2017, among the major metals and minerals monitored, only the output of nickel and silver (mineral) declined year-on-year; zinc production remained roughly flat; copper and gold (mineral) production saw a slight increase; while lead, molybdenum (mineral), and tin production showed significant growth. As for domestic supply, data from the National Bureau of Statistics show that, in the first 10 months cumulatively, China’s combined output of ten non-ferrous metals reached 45.21 million tons, representing a year-on-year increase of 3.4%.

　　Supported by the accelerating global economic recovery and the phased stabilization of China’s economy, consumption of most metal varieties worldwide increased steadily in 2017. According to statistics from the International Metal Statistics Bureau, in the first three quarters of 2017, cumulative global consumption of lead, aluminum, zinc, and copper all rose to varying degrees compared with the same period in 2016; only nickel and tin saw a slight decline in consumption. As for domestic demand for base metals, in the first three quarters cumulatively, demand for aluminum and lead grew relatively significantly, while demand for copper and zinc remained largely unchanged. By contrast, demand for nickel and tin contracted notably.

　　According to an article by the China Minmetals Economic Research Institute, under the dual influence of supply and demand, the degree of shortage for most global metal products since 2017 has widened compared to 2016.

　　Starting from the fourth quarter of 2016, international market prices for metal minerals began to rebound across the board. Entering 2017, prices of major products continued to fluctuate and rise, becoming the main driver behind the global surge in commodity prices. Moreover, while global commodity prices generally weakened somewhat in the third quarter, metal prices remained strong, with several products continuously hitting new highs not seen in the past three years. However, starting from the fourth quarter, prices of some metal commodities also began to experience volatile adjustments. Among the major commodities, copper, aluminum, zinc, and lead all saw cumulative year-to-date price increases exceeding 20%, and nickel and gold also posted price gains of over 10%. Only tin and iron ore saw their prices decline slightly by the end of November compared to the beginning of the year; yet their average prices for the year still rose by 11.96% and 21.91%, respectively, compared to their average prices for the entire previous year.

　　A World Bank report predicts that supply constraints should push up prices of base metals such as lead, nickel, and zinc. The demand situation in the Chinese market will influence future global metal price trends.

　　Since 2017, prices of minor metals related to new energy and new materials have also surged. Among them, the price of lithium carbonate (Shanghai) rose from 124,500 yuan per ton at the end of 2016 to 168,000 yuan per ton by the end of November 2017, an increase of nearly 40%. The price of electrolytic cobalt (Shanghai) climbed from 268,000 yuan per ton to 482,000 yuan per ton, representing an increase of nearly 80%. In addition, the prices of tungsten and rare earth elements have also risen by around 30% to 40% since 2017. Prices of chromium and molybdenum have seen relatively lower increases. Although the price of electrolytic manganese fell sharply by the end of November compared to the end of 2016, its average price still rose by 7.34%.

　　Nonferrous metals, especially rare metals, serve as the industrial foundation for new energy and new materials. The new energy industry, in turn, is generating new demands for advanced materials. The seven strategic emerging industries—energy conservation and environmental protection, the emerging information industry, the bio-industry, new energy, new-energy vehicles, high-end equipment manufacturing, and new materials—identified in national plans and supported by complementary policies at both the central and local levels, will drive increased demand for more than 50 mineral resources that underpin the development of these strategic emerging industries, including cobalt, titanium, lithium, tungsten, tin, platinum group metals, rare earths, tantalum, fluorite, and graphite.

　　Affected by rising international oil prices and a stronger U.S. dollar, global gold production costs have increased this year, reaching $820 per ounce in the first half of the year. Thomson Reuters analysts forecast that, starting this year, global mine-produced gold output will decline year-on-year. On the other hand, in the long term, Chinese companies could become a major driver of increased gold production. At this year’s China International Mining Conference, executives from China Gold, Shandong Gold, Zijin Mining, and Zhaojin Group all emphasized in their speeches that gold mines offer rapid time-to-production and enjoy a first-mover advantage over other mineral types. Moreover, countries along the Belt and Road Initiative hold 47% of the world’s gold reserves and boast a well-established, stable consumer market. Looking ahead, these companies plan to make the Belt and Road Initiative a key focus for their gold business development and accelerate their strategic deployment along these routes.

　　The latest Monthly Business Sentiment Index Report for the Nonferrous Metals Industry released by the China National Economic Research Institute shows that, overall, the industry is experiencing stable production and continuously improving profitability. Driven by factors such as the recovery of major global economies, the gradual enhancement of global economic stability, and rising prices of bulk commodities, China’s nonferrous metals industry has demonstrated strong fundamentals. Production of major nonferrous metals has grown steadily, and corporate profits have increased significantly. In the third quarter, the Information Index for nonferrous metals enterprises stood above the critical threshold at 52.7, reflecting stronger business confidence and positive market expectations. At the same time, it is important to note that several prominent challenges remain, including persistent overcapacity, difficulties in enterprise financing, and continually rising production costs. Overall, in the coming period, the nonferrous metals industry is expected to maintain a stable or slightly upward trend.

　　The non-metallic mineral products market as a whole remains stable.

　　In 2017, the non-metallic mineral products market as a whole remained relatively stable. Export volumes showed a recovery-driven growth, prices tended to stabilize, and the industry’s profitability increased significantly. According to the China Economic Research Institute’s Industrial Prosperity Index for the third quarter of 2017, in the first three quarters, the value-added of the materials sector rose by 2.7% year-on-year, a slowdown of 0.3 percentage points compared to the first half of the year. Among them, the non-metallic mineral products industry grew by 4.7% (higher than other materials sectors), though its growth rate slowed down somewhat from the first half of the year. Special attention should be paid to the markets for phosphate rock and magnesite.

　　After a long period of “rest and recuperation,” the phosphate rock market has finally seen its prices rise in line with the adjustment. This year, we’ve witnessed an unprecedented large-scale environmental inspection campaign that has significantly impacted all industries—including the phosphate rock sector, naturally. Starting from the second half of the year, the year-on-year growth rate has been steadily declining. Particularly in October, with the combined impact of intensified environmental and safety inspections, mining operations across the country were severely restricted, resulting in phosphate rock production dropping to just 85.56 million tons—a decline of 35.87% compared to the same period last year. Since entering November, phosphate rock manufacturers nationwide have begun raising their price quotes. Recently, prices for downstream products such as ammonium phosphate and yellow phosphorus have surged, exhibiting strong performance and driving up trading activity in the phosphate rock market. Overall, the domestic phosphate rock market had been operating in a weak but stable manner prior to this price adjustment; thus, this price hike can be described as a case of “accumulating strength over time and then bursting forth.” Moreover, as the weather turns colder, mining operations at mines will continue to face restrictions, and with mine inventories remaining relatively low, there is still room for further price increases. To gain a clearer picture of market dynamics, it’s crucial to closely monitor changes in mining output rates and downstream demand.

　　Regarding magnesite, since the beginning of this year, Liaoning Province—where magnesite reserves account for 80% to 85% of the nation’s total—has seen its magnesite mining operations severely constrained and production significantly reduced due to local governments’ efforts to consolidate mineral resources and increasingly stringent environmental regulations. This has driven a sustained rise in magnesia sand prices. It is worth noting that China’s demand for magnesite resources has already reached its peak, and future demand is expected to decline gradually.

　　Our country strongly supports the development of the functional materials industry based on non-metallic minerals. In the future, the non-metallic mineral industry has a bright prospect and tremendous potential for growth.

　　An article by the China Minmetals Economic Research Institute argues that after several consecutive years of sluggishness and adjustment, the global mining market showed signs of recovery in 2016. Since entering 2017, prices of major commodities have continued to rise unabated, with some individual commodity prices hitting new highs since the last round of adjustments. As a result, mining companies’ operations have significantly improved, and their attractiveness to capital markets has been restored, marking the entry of the global mining industry into a new round of development cycle. However, some experts also believe that the mining sector’s adjustment is not yet over. Nevertheless, mining’s fundamental role in the national economy remains unchanged. Deepening structural reforms on the supply side of the mining industry will undoubtedly provide sustained momentum for reshaping the mining sector’s structure and promoting its further development. In 2018, we will continue to closely monitor how the mineral products market unfolds.