Rising costs and falling metal prices have taken the shine off non-ferrous metal producers
The past 12 months have seen extreme highs and plummeting lows for China's non-ferrous metal producers, but probably none more so than for Jiangxi Copper and the Aluminum Corporation of China (Chalco).
Both companies rode the recent boom in commodities prices to hit all-time-high share prices in the past year. However, as non-ferrous metal prices corrected in the wake of the slowdown in the global economy, so did their fortunes.
Jiangxi Copper, China's largest copper producer, has seen its share price come sharply off a 52-week high of HK$30.80 in October 2007, to HK$9 at Friday's close. This is despite the fact that the company reported solid half-year results with a 35 per cent increase in net profit from 2.05 billion yuan (HK$2.33 billion) in 2007 to 2.77 billion yuan this year.
According to analysts, the drop in Jiangxi Copper's stock is being fuelled by uncertainty in the copper market, caused by the slowdown in the global economy and the downward pressure this has exerted on commodity prices.
'If you look at copper prices it is basically a situation of supply and demand, and it is unlikely that the construction sector [a major consumer of copper in China] can maintain demand in this economic environment,' said Raymond Chan, a research analyst with South China Research. 'This has drastically affected the price for copper, and this downward pressure on prices looks set to continue well into 2009.'
