The faster increase in the selling prices of a wide range of metal products than the PPI (producer price index) in April and May has greatly boosted the average profit margin of downstream enterprises in the non-ferrous metals industry.

The price gap is expected to widen in coming months because of projected increase in demand, according to industry experts at the 2007 China Lead, Zinc and Downstream Market Forum, held yesterday in Hangzhou by CBI China, a major commodities research firm and informational provider.

The downstream enterprises that stand to benefit most from the widening price gap include many processors of non-ferrous metals.

The average rate of increase in the sales prices of many non-ferrous metals falls in line with the national inflation trend, analysts said. National Bureau of Statistics figures show the PPI rose 2.9 percent and 2.8 percent in April and May while the consumer price index gained 3 percent and 3.4 percent for these months.

"Downstream enterprises in non-ferrous metals industry will generate more earnings in the years to come, for the consumption is expected to grow in the longer term," said Wu Xijun, an analyst with Shenzhen Zhongjin Lingnan Nonfemet Co Ltd.

The forum also named the increasing impact of zinc prices on the development of the non-ferrous metals industry, as the domestic market is in urgent need of the metal.

Analysts predicted an oversupply of some 100,000 tons of zinc in China's market. But the continuous rise in consumption is widely seen as the key factor to the upward trend of the non-ferrous metal in the long run.

Xuan Long, an analyst with Nanhua Futures Co, said the oversupply may bring down zinc prices in the second half of the year.

(China Daily June 29, 2007)