Wang Feng, a nonferrous metal industry analyst at Everbright Securities Co. Ltd., told Beijing Review that cutting production to try to stabilize prices was a feasible measure for the short term, but could not alter the downturn trend of resource industries such as the nonferrous metal industry. Because of excess capacity, inefficient demand was the major reason for the continuously falling prices of resource products.

“Cutting production won’t alter the situation of supply and demand of these products,” Wang said.

Little effect

When BSREHT declared a one-month suspension of production on May 29, the prices of neodymium oxide and praseodymium oxide were 170,000 yuan ($24,927) per ton and 150,000 yuan ($21,944) per ton, respectively, on the Shanghai spot market.

But on September 10, the prices of neodymium oxide fell to 120,000 yuan ($17,595) per ton, a drop of 50,000 yuan ($7,331) per ton compared with May 29; the price of praseodymium oxide was 110,000 yuan ($16,129) per ton, a drop of 40,000 yuan ($5,865) per ton.

Prices of aluminum, copper, lead and zinc also have fallen during the past month. A report released by TX Investment Consulting Co. Ltd. on September 9 said the companies’ production cuts had failed and future prices would continue to fall.

But during the month when 27 lead and zinc companies jointly declared that they would cut their production on July 12, the output growth increased. In July, the zinc output reached 331,200 tons, up 18.6 percent year on year, which was higher than the 8.3-percent growth during the first seven months.

Wang said the cuts in production by the lead and zinc companies can be deemed as a kind of self-preservation aimed at balancing supply and demand by reducing supply during a sluggish period and tiding over the industry’s difficulties. But for the time being, reducing production to stabilize prices would have no effect, he said.