A burning question that remains is that if the non-ferrous metals industry entered stagnation because of the global financial crisis, why has it not recovered, given the fact that the Chinese economy has resumed growth five years after the crisis?

Chen Quanxun, Chairman of the China Nonferrous Metals Industry Association (CNIA), said the answer is that non-ferrous metal companies have been expanding and caused serious surplus capacity.

During the 11th Five-Year Plan (2006-10) period, China had already become the biggest non-ferrous metals producer in the world. At the time, there was an appeal for strict control of fast-growing investment in the non-ferrous metals industry. The Chinese Government also issued policies to curb overcapacity and redundant construction in industries including non-ferrous metals, so as to guide sound industrial development.

However, these policies were not effectively implemented and surplus capacity in industries of lead, zinc, copper and electrolytic aluminum became an increasing worry. According to CNIA figures, excessive supply of aluminum alone is 773,000 tons and these excesses will restrict recovery of the non-ferrous metals industry for some time to come.

How should the non-ferrous metals industry resume its growth? Chen thinks that actions like CHALCO's selling of assets is not a permanent solution and would rather see reduction of surplus capacity. On October 15, the State Council issued a guiding recommendation on reducing surplus capacity in the non-ferrous metals industry, with electrolytic aluminum being among the five key industries mentioned.

According to the 12th Five-Year Plan (2011-15) for the Non-Ferrous Metals Industry formulated by the Chinese Government, by 2015, China's top 10 aluminum companies should contribute 90 percent of the country's total output. But at present, concentration of the top 10 aluminum companies is less than 40 percent, well below target.

Since the electrolytic aluminum industry is a big polluter and high energy consumer, and faces the most serious instances of overcapacity, reorganization of the industry must be accelerated.

Chen said to fundamentally solve the overcapacity problem in China's non-ferrous metals industry, the government should first control total production capacity. This would mean shutting down all unapproved electrolytic aluminum, as well as lead and zinc projects under construction, or planned to be built, that go against state industrial policies.

The government should also support development of enterprises that observe the law and conform to national policies. It is expected that in the coming months there will be frequent new policies related to shutdown of outdated capacity and reorganization of the industry.

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Performance of Non-Ferrous Metals Industry

In the first three quarters of 2013, China's non-ferrous metals industry realized profits of 121.5 billion yuan ($19.79 billion), decreasing by 6.8 percent compared with the same period last year.

Of the total, mining and ore washing industries earned profits of 44 billion yuan ($7.17 billion), a decline of 11.7 percent year on year; smelting and rolling industry realized profits of 77.5 billion yuan ($12.62 billion), dropping 3.8 percent.

Output of 10 non-ferrous metals reached 29.69 million tons, up by 9.8 percent year on year, which was 2.7 percentage points higher than growth in the same period last year.

The output of electrolytic aluminum stood at 16.21 million tons, a year-on-year increase of 8.7 percent, which was 1.9 percentage points lower than that in the same period last year; copper output grew by 13 percent, which was 5.6 percentage points higher than a year ago; lead output climbed up by 6.1 percent, which was 5 percentage points lower than a year ago; zinc output went up by 11.7 percent, 6.2 percentage points lower than in the same period last year; output of aluminum oxide rose by 13 percent, which was 3.2 percentage points higher than the growth a year ago.

(Source: National Development and Reform Commission)