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Sustainability key for metals sector

By Wang Lan (China Daily)
Updated: 2007-04-26 08:40
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More than 200 metal traders, brokers, refiners and producers from around the nation gathered at a three-starShanghaihotel recently to find a strategy for more efficient use of raw materials mainly copper and aluminum, whose prices are expected to continue rising.

Delegates to the Copper and Aluminum Summit, organized by the China Nonferrous Metals Association, came away with an increased sense of urgency to economize the use of the two non-ferrous metals that are most in demand in China.

The summit was a strong indication that Chinese industry has woken up to the call for conservation as a cornerstone of sustainable economic growth. Growth on the basis of optimized economic structure and efficient returns was given priority at this year's National People's Congress (NPC). And protecting the environment and avoiding excessive pursuit of growth at the expense of resources is increasingly under the spotlight.

For Gao Dawei, a copper products manager from the city of Tieling in Northeast China'sLiaoningProvince, the summit was his first exposure to industry-wide collaborative action. "We can really learn a lot from conferences like these. It helps us in business. Price fluctuations of metals usually have a direct bearing on our earnings. Awareness of the price, market and resources in the metals industry is becoming increasingly important to our producers."

For many of the other delegates, rising prices of many essential commodities for manufacturing are a given.

Summit participants agreed that world prices of non-ferrous metals are expected to continue rising in 2007 as China's demand grows at levels projected to help sustain the world metal price rally.

In China, industry analysts expect the copper price on the Shanghai Futures Exchange will rise in tandem with the London Metal Exchange price, averaging around $6,600 in 2007. On the supply side, copper ore producers are seen to be holding back production to help maximize profits.

Export controls

China's output of copper concentrates in 2007 is projected to reach 3,270 tons, a slight increase of 1 percent from the previous year. But with the country's total consumption of copper concentrates estimated to hit 4,000 tons, a supply gap of 730 tons needs to be filled by imports.

To maintain adequate supply for the home market, the Chinese government has applied strict controls on the export of copper-based products. In November 2006, the export tax rebate on copper products was cut to 5 percent from 13 percent and the exporttariffon copper concentrates increased to 10 percent. Meanwhile, export tariffs on copper scrap, blister copper and electrolytic copper were also raised to 15 percent.

The China Nonferrous Metals Association has recommended the export tax rebate be lowered at a moderate pace by the government to give exporters an adequate transition period to adjust their businesses.

Wang Gongmin, vice-president of the China Nonferrous Metals Association, told the summit he expected controls on the copper and aluminum industries to be tightened this year to further contain exports as international prices continue to outstrip those in the domestic market. Because of the sometimes unpredictable impact of new controls, traders should exercise extra care in assessing the market risks of entering into longer-term copper contracts, Wang noted.

Major speakers at the summit also called for greater use of scrap metals to help alleviate the worsening shortfall in supply of key resources. Imports of copper scraps increased 2.4 percent in 2006 to 4,940 tons, while those of aluminum scrap amounted to 1,770 tons, up 4.7 percent from the previous year, according to Customs. The government is also encouraging recycling of scrap metals. In the11th Five-Year Plan(2006-10) period, the target consumption of secondary copper is 35 percent of the total national copper consumption, an increase of 14 percent.

The market outlook for aluminum presented a rather different picture from that of copper.

Ample supply of aluminum oxide, the raw material for the processing of aluminum ingots, has kept prices at a substantial margin below that of ingots. Producers have invested heavily in expanding production capacity, anticipating that the price difference, which has yielded a wide profit margin, will continue this year.

But insiders warned that there were already signs of overcapacity in the industry as a result of the investment spree.

China's output of primary aluminum is expected to exceed 12 million tons in 2007, up 27.7 percent from the previous year. Antike, aBeijing-based information provider for China's mining and metals industry, has forecast a worldwide overcapacity of 300,000 tons of aluminum.

(China Daily 04/26/2007 page15)

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