The non-ferrous metal industry serves as a classic representation of upstream raw material sectors, where various elements dictate pricing, including both commodity and financial characteristics. As we navigate through this year, bolstered by an upswing in global commodity prices, several segments within the non-ferrous metals landscape have exhibited robust growth trajectories. Analysts project that, leveraging the rebound in the global economy as well as the rapid ascent of emerging industries, non-ferrous metal prices are poised for further gains. They also anticipate sustained market expansion, unveiling various investment opportunities across multiple sub-sectors.

From the start of the year, the revival of the global manufacturing sector, coupled with the ongoing optimization of China's real estate policies and the continuous expansion of downstream fields, such as renewable energy, has ultimately led to an escalating demand for upstream raw materials like non-ferrous metals.

This spike in demand has driven gold prices to new heights, with industrial metals such as copper and aluminum also seeing significant price increases. According to a report from Yangtze Securities, by October 24, 2023, the year-to-date growth rates of Shanghai Futures Exchange (SHFE) copper, aluminum, and gold reached 11.64%, 8.29%, and 29.73%, respectively.

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The operational outlook for China's non-ferrous industry remains positive, particularly reflected in correlating companies and overall growth. Data from the China Nonferrous Metals Industry Association confirms that in the first three quarters, approximately 11,464 large-scale non-ferrous metal enterprises achieved a remarkable revenue of 66,040.9 billion RMB, marking a 14.7% growth year-over-year. Profits, on the other hand, culminated in a total of 2,949.7 billion RMB, showcasing a staggering 42.9% increase compared to the previous year. The profit margin for these firms stands at 4.5%, which is an improvement of 0.88 percentage points from 2022.

“In the first three quarters of 2023, China's non-ferrous metal sector demonstrated steady growth in production and operation, marked by increased output and investment in key products, resulting in a pronounced rise in profits,” shared Chen Xuesen, the vice president of the China Nonferrous Metals Industry Association, during a recent economic performance conference. “High-end manufacturing sectors, such as the ‘new three types’ (artificial intelligence, robotics, and next-generation electronic information), have emerged as primary drivers pushing consumption within the non-ferrous metal market.”

Market analysts suggest that the surge in revenue and profits from non-ferrous enterprises can be attributed to a combination of rising prices for commonly used metals compared to the same period last year, which grants the sector greater profit margins. Simultaneously, it is noted that non-ferrous metal smelting firms have realized substantial profit enhancements, serving as crucial contributors to the overall profit growth in the industry.

Wang Jiechao, the chief analyst of metals and new materials at CITIC Construction Investment Securities, elucidated how the US dollar's excessive issuance, credit reconstruction, and global geopolitical tension have benefitted precious metals significantly, laying a solid foundation for long-term price increases. He elaborated that "most commodities, particularly non-ferrous metals, are priced in US dollars. Therefore, under relatively stable fundamental conditions, we often notice an inverse relationship between the dollar and dollar-denominated assets. Recently, with the US dollar’s supply running rampant and debt-to-GDP ratios climbing, the US dollar's credit is facing a reconstruction phase, which catalyzes a transition towards diversified currencies and monumental growth in central bank gold purchases." As a result, he argues that the acceleration of de-dollarization will likely exert depreciation pressure on the dollar, fuelling the pricing of commodities.

Over the past few years, China has implemented an array of policies aimed at nurturing the non-ferrous metal sector. These regulations have played pivotal roles in promoting steady growth within the industry, enhancing structural efficiency, fostering technological innovation, ensuring resource security, and advocating for a greener transition.

In August of last year, government targets for the 2023 to 2024 period were outlined to ensure the steady growth of non-ferrous metal production, aiming for an average annual output increase of approximately 5% across ten key non-ferrous metals while ensuring stable production levels for major products like copper and aluminum. Moreover, domestic resource development for copper and lithium saw measurable advancements as well.

Current policymaking suggests an emphasis on upgrading critical base materials like non-ferrous metals, chemicals, and inorganic non-metals. The strategies incorporate fostering advancements in high-performance carbon fibers and next-gen semiconductors while expediting the innovation and application of frontier new materials like superconductors. With these progressive policies set to reignite the sector, particularly within a framework of enhanced production capabilities, the non-ferrous metals industry stands out as a vital segment contributing to the higher-quality development illicit in modern infrastructure.

Currently, the direction of innovation within the non-ferrous metal sector is clear. A report published by the CiDi Consultancy highlights that research and development in new materials are steering industrial transformation. Progress in technology compels the non-ferrous metals domain to focus increasingly on the research and utilization of high-performance, specialized alloys and composite materials. These innovations will be instrumental for strategic emerging industries, such as aerospace, electric vehicles, electronic information, and high-end manufacturing, thus propelling industry upgrades. Looking ahead, enhanced collaboration between the manufacturing sector and research institutions will be imperative for breaking through essential technology barriers, fast-tracking scientific outcomes into practical production forces, and broadening the applicability of non-ferrous metals, thereby elevating the sector's competitiveness on a global scale. The continuous growth in the manufacturing industry’s demand for non-ferrous metal materials is prognosticated to remain steady, particularly within substantial growth areas such as photovoltaics, wind energy, power batteries, and the lightweight transportation sector.

Notably, the performance of non-ferrous metals has outshined expectations not just on the commodity front but also on the equity side. By October 24, 2023, the primary industry index for non-ferrous metals compiled by Shenwan Hongyuan recorded a year-to-date increase of 10.63%, placing it eighth among 31 industries. Industry insiders largely concur that the non-ferrous metal sector is expected to maintain a favorable growth trajectory, as commodity prices trend upwards with steady company operations indicating a solid investment appeal.

As China continues to embrace new productive forces, the upgrade of high-end manufacturing coincides with enhancements within the material framework, thus propelling select metallic elements into a new demand cycle. “Since the beginning of the year, a range of minor metals such as antimony, germanium, tin, tungsten, and molybdenum have experienced considerable price increases. This phenomenon is a direct manifestation of the aforementioned narrative,” remarked Wang Jiechao. Amid the imminent waves of global technological revolutions and domestic manufacturing enhancements, the composition of elemental demand is witnessing a significant transformation, heralding a renaissance for minor metals—though their consumption may not be grand in terms of volume, their impactful roles are undeniable.

According to the General Manager of Yangtze Securities Research Institute and chief analyst in the metals sector, a medium-to-long-term perspective offers an optimistic revaluation for non-ferrous resource commodities. On one hand, domestic likelihood suggests the continuance of policies aimed at economic stimulus; on the other hand, improvements in overseas industrial data are expected from rate cuts. A convergence of favorable macroeconomic conditions combined with the anticipated easing brought on by interest rate reductions from the Federal Reserve, alongside stimulus measures within China, heralds the prospect of lifting global equity and economic recovery. Emerging demands, particularly from renewable energy sectors compounded by previously insufficient capital expenditures leading to supply limitations, suggest signs of gradual optimization within fundamental supply-demand dynamics.

Since September, an amalgamation of monetary and fiscal policies has exerted a positive influence on the progress of the non-ferrous metal industry. “These measures are instrumental in stabilizing market confidence and economic expectations. Notably, enhanced lending and the stabilizing of the real estate sector will inevitably spur demand for non-ferrous metals,” indicated a director at the Information Statistics Department of the China Nonferrous Metals Industry Association. Moreover, the proactive resolution of local debt challenges will further encourage infrastructure projects, thus generating additional demand for non-ferrous metals. The successful implementation of capital market boosts translates into an invigorated market for non-ferrous metals, strongly characterized by its financial attributes.

Delving into specific areas of the industry, analyst Wang Hetao envisions robust demand for electric vehicles and energy storage solutions ongoing, projecting that this period will witness recovery in both commodity pricing and enterprise profitability. Given the current valuations within the energy metals sector, one could argue that the market has approached historical bottom levels, enhancing the attractiveness of investment potential.

In the realm of basic metals, copper and aluminum stand out as commodities robust enough to withstand long-term growth amidst evolving consumption structures. “In the context of electrification and lightweight trends, reflecting on experiences of developed countries, China—which accounts for nearly half of global demand—exhibits persistent growth in copper and aluminum consumption,” expressed Wang Hetao. Additionally, as emerging developing nations progress through industrialization, further international demand for copper and aluminum is expected to gain traction.

Research from Haitong Securities illustrates an improving supply-demand landscape in the non-ferrous metals industry by 2025, factoring in moderated supply growth of industrial metals. In this framework, the copper and aluminum market will likely experience positive shifts in dynamics; energy metals like lithium and nickel may have reached their pricing bottom, heralding upcoming reversals; improvements in the supply chain for rare earths will catalyze further price increases, while the monetary attributes of gold and silver reveal persistent upward trends, with silver potentially exhibiting increased volatility, indicating a bright future for the non-ferrous metals sector.