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PrintSome nonferrous enterprises in China began to reduce production on the current market downturn.
Prices of copper and zinc futures of SHFE dropped by 40 percent and 36 percent respectively in October.
The spot and futures prices of zinc and aluminum have both dropped below their cost prices.
Generally, the cost price of zinc in China is 13,000~15,000 yuan/ton, while that of aluminum is 15,000~17,000 yuan/ton. However, the main contract of zinc futures closed Tuesday at 9,515 yuan/ton and that of aluminum futures, 13,800yuan/ton.
Profits of related production enterprises fell sharply on the price slump. A number of listed nonferrous companies earned much less in the third quarter than the previous two. For example, the Q3 EPS of CHINALCO (601600.SH) dropped to 0.0135 yuan from the 0.0863 yuanin Q1 and 0.0912 yuan in Q2, down 84 percent and 85 percent respectively.
Some nonferrous enterprises have started to reduce production.
Yunnan Tin Co., LTD (000960.SZ) was reported Tuesday to cease or cut production periodically due to the sharp fall in tin sales and prices.
Earlier, Yunnan Luoping Zinc and Electricity Co., LTD (002114.SZ) and CHINALCO have already announced output cut.
Companies with great financial strength can survive through output reduction, while small and midsize companies may have no choice but to shut down, an industry insider said.
In addition, some spot dealers start to buy in on the futures market so as to stabilize the prices.
Situation of the current nonferrous market matched the result of CLSA's Monday report, which showed China's Purchasing Management Index (PMI) fell to 45.2, the lowest since April 2004 when the index was founded.
Editor: Ivy
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