Rising commodity prices have long-term factors
Text/Flower Changchun
Published in the 997th issue of China News Weekly, 201.5.31
As the global new crown vaccine injection has made significant progress, the demand energy accumulated by the major economies in the past year has begun to release, driving the recovery of the global manufacturing industry.
Since the commodity market is more closely related to the economy than the stock market, it naturally reacts quickly. The prices of energy, industrial basic raw materials, metals and chemical products have risen significantly since November last year.
Rapidly rising material costs have squeezed the profits of midstream companies to a large extent and have triggered concerns about inflation.
At present, the market has different views on this: some people believe that the currency is over-issued seriously, this is the super cycle of commodities; there are also many people who believe that the top of commodities has already appeared, and the follow-up is the tail market.
At the moment, the time when bulk prices rose the fastest and the steepest slope may indeed have passed, but subsequent bulk commodities are likely to fluctuate at high levels for a long time, and even some commodities (including black and colored) may hit new highs.
In addition, efforts to transition to a long-term low-carbon goal cannot be slowed down. For example, the goal of zero growth in crude steel production this year cannot be completely abandoned.
More importantly, it is necessary to consider whether the long-term high-level fluctuations of the bulk market are indeed as expected, and the transmission to the headline inflation (CPI) is relatively weak?
If it is only a cyclical fluctuation, the transmission is indeed relatively weak, but if it is a long-term high volatility, it will erode the gross profit of many companies. We need to re-examine the market consensus that commodity price increases will not significantly raise the level of inflation, and we need to re-examine the global monetary policy goals Framework issues.
At present, various signs indicate that the supporting factors for this round of bulk price increase have not disappeared, and the bulk price increase has a certain long-term nature.
From the perspective of demand, this round of major increases mainly reflects the fiscal and monetary expansion of countries such as the United States and Europe, rather than the expansion of China's investment. Therefore, we must pay attention to the pace of global economic recovery.
Since the epidemic, the scale of global fiscal stimulus has reached US$17 trillion, accounting for nearly 20% of global GDP.
Major central banks have also injected a total of US$13 trillion in liquidity, accounting for 15% of global GDP.
China has exercised restraint in this round of expansion and recovered in a timely manner.
At present, many leading indicators have fallen to a certain extent, especially the growth rate of China's M2 and social financing, which fell earlier than other major economies.
The global M2 growth rate seems to have reached the top area in the first quarter of this year.
At present, major economies are gradually recovering from the epidemic, global PMI has risen to historical highs, and commodity retail, real estate sales, and automobile sales have clearly recovered.
Although there are still great uncertainties in the next three quarters, it seems difficult to prevent the global economy from releasing the momentum accumulated in the past, which means that demand will support commodity prices in the next 6-12 months.
In addition, in terms of China's domestic demand, what we see is more sustained resilience, and even a positive direction.
There is a high degree of certainty that the downstream demand for steel and coal will recover moderately and is in a tightly balanced state.
Although the new start of real estate has weakened, the resilience is strong, and infrastructure investment is actually in a rebound stage. The prosperity of machinery and equipment is still in a relatively high position. As developed economies recover, the prosperity is expected to continue to rise. Automobile consumption, There is also strong support for transportation equipment.
Moreover, this round of major factors also implies some long-term inflation factors:
First, in the past decade or so, the investment in raw materials and even the overall manufacturing capacity has been relatively weak. The superimposed epidemic has hindered the recovery of the supply chain, which has led to a mismatch between supply and demand, and this mismatch cannot be recovered in the short term.
Taking copper mines as an example, it basically takes an 8-year cycle from investment to capacity release.
Second, the transition to a low-carbon economy will create a mismatch between supply and demand in the short term and cause prices to rise, but this increase in cost will be long-term until the current life and production are adjusted in inventory, such as fuel vehicles can no longer be sold, etc. .
On May 12, the Standing Committee of the State Council “proclaimed” commodities for the first time in its history. The core was to combat speculation and at the same time express its stance on the regulation of supply and demand and maintaining the stability of monetary policy.
This has reduced market expectations to a certain extent and suppressed some speculation. It is expected that some measures may be taken to correct market sentiment in the future, but these have not touched medium and long-term factors.
China News Weekly, Issue 19, 2021
Statement: The publication of the "China News Weekly" manuscript is authorized in writing