SunSirs: Production Capacity Utilization Rate Rebounded in April, Chinese Non-ferrous Market Rebounded Slightly

According to SunSirs data monitoring, the non-ferrous index rebounded in April. By the end of the month, the non-ferrous index closed at 792 points, up 4.65% from 757 points at the beginning of April, down 6.87% from the beginning of the year, and down by 6.22% year-on-year. Non-ferrous analyst pointed out that the non-ferrous index rebounded after bottoming out on March 19, and the current rebound has not reached the level of the beginning of the year. Comparing the operation trend of the non-ferrous market in the past 9 years, since its peak in July 2011, it has experienced five consecutive years of decline. Non-ferrous metals began to rebound in December 2015 and continued until the beginning of September 2017, with nearly 22 months. A few months later, the non-ferrous index began to fall again. Affected by COVID-19, the non-ferrous index hit the second big bottom in nearly ten years this year, and is now in a slight rebound stage.

According to SunSirs price monitoring, in April 2020, there were a total of 7 kinds of commodities in the non-ferrous section with an increase of more than 5%, accounting for 31.8% , the top 3 commodities are aluminum (11.16%), copper (8.73%), nickel (8.40%). There were 14 kinds of commodities that fell sequentially, of which 1 kind of commodities fell more than 5%, accounting for 4.5%. The top 3 commodities in the decline were metal silicon (5.10%) and magnesium (4.61%), cobalt (4.37%). The average increase or decrease this month was 0.93%.

The non-ferrous market rose in April, mainly due to the following reasons:

1. Bottom rebound

The non-ferrous index has fluctuated and dropped since late January, mainly due to the pandemic. Demand has almost stagnated after the new year, stocks have accumulated, and the prices of non-ferrous metals have plummeted to a new low of nearly ten years. With the domestic COVID-19 situation under control, domestic demand recovering, inventory consumption, and non-ferrous prices rebounding slowly, in April, the non-ferrous operating rate reached 90%, and non-ferrous prices rebounded further.

2. Official metal storage

On April 26, the Yunnan Provincial Government carried out commercial collection and storage of copper, aluminum, lead, zinc, tin, germanium, indium and other key non-ferrous metal products in the province, with a total collection and storage of about 800,000 tons and a storage period of 1 year ; Gansu Province is also formulating the ‘Gansu Province Nonferrous Metals Reserve Implementation Plan’, the variety and total reserves of nonferrous metals are: 436,000 tons of nonferrous metal products, including 80,000 tons of copper, 300,000 tons of aluminum, and 40,000 tons of zinc , 15,000 tons of nickel, 1,000 tons of cobalt. The purchase and storage news obviously drove the metal market up.

3. Blocked supply side

As foreign COVID-19 spread, nickel and copper mines that depend on imports are affected to varying degrees. Currently, the production and transportation of nickel mines in the Philippines are suspended until April 30. Last week, the number of shipments was only 8 ships, which was much lower than the 23 ships in the same period last year. If the supply is restored at the end of April, the estimated metal loss is about 30,000 metal tons, and if it recovers at the end of May, the amount of metal damage will reach 70,000 metal tons; and on the Indonesian side, the six lines put into production this year lag behind the release increase this month. The maintenance of two lines has affected the supply of nickel-iron in Indonesia and the pandemic also affects production efficiency. Blockade measures by Peru and other copper-producing countries reduce supply or interrupt logistics. MMG revokes production guidelines for the Las Bambas copper mine in Peru in 2020. The transportation of copper concentrate has been suspended. The copper mine in Antamina, Peru, was shut down for two weeks due to the pandemic. The mine's copper output in 2019 was 448.59 million tons. Supply cuts have caused copper supply concerns.

4. Production capacity utilization rate rebounded

According to a Xinhua News Agency report in Beijing on April 28, in the first quarter, China's nonferrous metal production remained generally stable, with nonferrous metal output of 14.172 million tons, a year-on-year increase of 2.1%. As of April 26, the China Nonferrous Metals Industry Association surveyed 241 commonly used non-ferrous metal smelting and copper-aluminum production enterprises, with an operating rate of 92.9%. The production capacity utilization rate of commonly used non-ferrous metal smelting products is 86.6%. The rate of the copper and aluminum materials resumption and recovery enterprises gradually recovered. As of April 26, the capacity recovery rate of the resumption of production of copper and aluminum processing enterprises reached 90.6%.

SunSirs non-ferrous analysts believe that the rebound in the non-ferrous market in April is due to a rebound in demand on the one hand, a recovery in domestic demand and a blockage in foreign supply on the other, and finally the impact of the national purchasing and storage policy. In May, domestic demand fully recovered, and foreign countries were optimistic to resume work. At that time, the foreign trade industry will recover and demand is expected to increase. May is the peak season for traditional demand. As the recovery rate increases, demand has increased. It is expected that the non-ferrous metal shocks in May will be mainly strong, but it may be difficult to reach the level of the same period last year.

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