Under the background of excess liquidity, some commodities may be speculated by capital.
On January 11, the National Bureau of Statistics released the December 2020 price index.
As the Spring Festival is approaching, consumption picks up, driving up the price of pork and other foods, which is the main factor behind the rebound in CPI.
In the December price index, the most significant change was PPI. In December 2020, the national producer price (PPI) of industrial producers dropped by 0.4% year-on-year and rose by 1.1% month-on-month. PPI rose 1.1% month-on-month, the highest level in 2017. With the recovery of global demand and the steady recovery of domestic demand, the prices of crude oil, coal, steel, non-ferrous metals and other commodities have been rising.
However, it needs to be pointed out that there are still capital speculation factors behind the price increase of iron ore. Some analysts told reporters from the 21st Century Business Herald that in the context of the establishment of global economic recovery and excess liquidity, it is bound to benefit the performance of commodity prices, but it does not rule out that a few commodity prices are subject to capital speculation.
Looking to the future, the global economy is recovering steadily, but the spread of the epidemic is still uncertain. For example, in December 2020, the overall CPI is picking up, but due to the impact of domestic sporadic cases and the approach of the Spring Festival, local controls have become stricter. Residents are encouraged to celebrate the New Year on the spot and have fewer meals and gatherings. Tourism prices fell 0.6% month-on-month.
Commodity prices rise steadily
In December's price index, the most significant change was PPI. In December 2020, the PPI fell by 0.4% year-on-year, and the rate of decline narrowed by 1.1 percentage points from the previous month; it rose by 1.1% from the previous month, and the rate of increase rebounded by 0.6 percentage points from the previous month.
Commodity prices are picking up faster, and the signal of a steady recovery in global demand is clear. In October 2020, the international crude oil price was still fluctuating at US$40/barrel, and the overall steady recovery began in November. According to the latest data on January 8, 2021, the settlement price of Brent crude oil has exceeded US$55/barrel, and the settlement price of WTI crude oil has also exceeded US$52/barrel.
Affected by international crude oil prices and other factors, the price of petroleum and natural gas extraction industry rose by 7.9% from the previous month in December, the price of petroleum, coal and other fuel processing industries rose by 5.3% month-on-month, and the price of chemical raw materials and chemical products manufacturing rose 2.3% month-on-month .
In 2020, the price of iron ore has risen sharply as a whole, and the market is crazy. In December, the price of iron ore exceeded 1,000 CNY/ton. The active iron ore contract settlement price of the Dalian Commodity Exchange reached RMB 1,108/ton on December 21, a 57% increase from the beginning of the year.
On January 8, 2021, Valin Steel responded to investors on the interactive platform that the continuous increase in the price of raw materials such as iron ore has put greater pressure on the company's profitability. Like most steel companies are highly dependent on iron ore imports, about 90% of the company's iron ore comes from imports. The domestic steel industry has a low degree of concentration, and under the oligopoly of overseas iron ore producers, the bargaining power of purchases is weak.
The crazy price increase of iron ore caused a chain reaction in the industry. On December 10, 2020, the China Iron and Steel Industry Association organized iron and steel companies to hold an iron ore market symposium. The participating companies believed that the current increase in iron ore prices has deviated from the fundamentals of supply and demand and greatly exceeded the expectations of steel mills. There are obvious signs of capital speculation. On January 6, the China Iron and Steel Association invited companies to conduct a discussion on maintaining a stable and healthy operation of the industry in 2021. One of the topics is to curb the increase in the price of imported iron ore.
As domestic market demand continues to pick up, and the prices of international bulk commodities such as iron ore and non-ferrous metals have risen more, prices in metal-related industries continue to rise. Among them, the price of non-ferrous metal smelting and rolling processing industry increased by 3.9% from the previous month in December, and the price of ferrous metal smelting and rolling processing industry increased by 3.3% month-on-month.
Due to the high growth rate of industrial production and the low temperature, the demand for heating increased rapidly. In December, the electricity consumption in Hunan, Jiangxi, Zhejiang and other places increased sharply, and some areas adopted measures of “cutting the power supply”. Correspondingly, prices of coal, etc., have been driven to rebound. In December, the price of coal mining and washing industry rose by 3.5% from the previous month.
Zhou Maohua said that the current rise in commodity prices is mainly driven by three factors. First, the world’s major economies continue to implement policies to support domestic demand on an unprecedented scale, and the market looks forward to China’s infrastructure investment and the United States’ large-scale fiscal relief policy. The second is vaccination. Gradually spread to improve market expectations of the global economic outlook; third, the US dollar index has continued to be weak in recent months, which has driven the prices of US dollar-denominated commodities to rise.
"Some commodities are speculated by capital, mainly due to excess global liquidity. With the current major global economies still in a severe recession, capital seeks profits in the financial market," Zhou Maohua pointed out.
Liu Xuezhi said that the global economy is in the post-epidemic recovery phase, domestic and foreign demand is gradually improving, and the prices of bulk commodities have risen, which has given rise to the momentum of PPI imports. The recovery of the domestic economy is clear, and the recovery of industrial production has driven up the prices of production materials. The economic recovery trend is clear, and the PPI is expected to rebound to positive growth in the first quarter of 2021.
The macro team of CITIC Securities pointed out that PPI is expected to become positive in January this year. First, vaccines are gradually strengthening expectations of further global economic recovery, and the demand side will become a strong support for prices. Second, this year's replenishment of US manufacturing and real estate will benefit the rise in commodity prices. Third, this year China's real estate construction and installation investment is expected to maintain resilience and the demand for manufacturing replenishment. In general, commodity prices are expected to continue to rise in the future, especially for commodities priced in US dollars.
Under the background of excess liquidity, some commodities may be speculated by capital. On January 11, the National Bureau of Statistics released the December 2020 price index. In December 2020, the national consumer price (CPI) rose by 0.2% year-on-year, not continuing the negative growth trend in November. As the Spring Festival is approaching, consumption picks up, driving up the price of pork and other foods, which is the main factor behind the rebound in CPI. In the December price index, the most significant change was PPI. In December 2020, the national producer price (PPI) of industrial producers dropped by 0.4% year-on-year and rose by 1.1% month-on-month. PPI rose 1.1% month-on-month, the highest level in 2017. With the recovery of global demand and the steady recovery of domestic demand, the prices of crude oil, coal, steel, non-ferrous metals and other commodities have been rising. However, it needs to be pointed out that there are still capital speculation factors behind the price increase of iron ore. Some analysts told reporters from the 21st Century Business Herald that in the context of the establishment of global economic recovery and excess liquidity, it is bound to benefit the performance of commodity prices, but it does not rule out that a few commodity prices are subject to capital speculation. Looking to the future, the global economy is recovering steadily, but the spread of the epidemic is still uncertain. For example, in December 2020, the overall CPI is picking up, but due to the impact of domestic sporadic cases and the approach of the Spring Festival, local controls have become stricter. Residents are encouraged to celebrate the New Year on the spot and have fewer meals and gatherings. Tourism prices fell 0.6% month-on-month. Commodity prices rise steadily In December's price index, the most significant change was PPI. In December 2020, the PPI fell by 0.4% year-on-year, and the rate of decline narrowed by 1.1 percentage points from the previous month; it rose by 1.1% from the previous month, and the rate of increase rebounded by 0.6 percentage points from the previous month. Commodity prices are picking up faster, and the signal of a steady recovery in global demand is clear. In October 2020, the international crude oil price was still fluctuating at US$40/barrel, and the overall steady recovery began in November. According to the latest data on January 8, 2021, the settlement price of Brent crude oil has exceeded US$55/barrel, and the settlement price of WTI crude oil has also exceeded US$52/barrel. Affected by international crude oil prices and other factors, the price of petroleum and natural gas extraction industry rose by 7.9% from the previous month in December, the price of petroleum, coal and other fuel processing industries rose by 5.3% month-on-month, and the price of chemical raw materials and chemical products manufacturing rose 2.3% month-on-month . In 2020, the price of iron ore has risen sharply as a whole, and the market is crazy. In December, the price of iron ore exceeded 1,000 CNY/ton. The active iron ore contract settlement price of the Dalian Commodity Exchange reached RMB 1,108/ton on December 21, a 57% increase from the beginning of the year. On January 8, 2021, Valin Steel responded to investors on the interactive platform that the continuous increase in the price of raw materials such as iron ore has put greater pressure on the company's profitability. Like most steel companies are highly dependent on iron ore imports, about 90% of the company's iron ore comes from imports. The domestic steel industry has a low degree of concentration, and under the oligopoly of overseas iron ore producers, the bargaining power of purchases is weak. The crazy price increase of iron ore caused a chain reaction in the industry. On December 10, 2020, the China Iron and Steel Industry Association organized iron and steel companies to hold an iron ore market symposium. The participating companies believed that the current increase in iron ore prices has deviated from the fundamentals of supply and demand and greatly exceeded the expectations of steel mills. There are obvious signs of capital speculation. On January 6, the China Iron and Steel Association invited companies to conduct a discussion on maintaining a stable and healthy operation of the industry in 2021. One of the topics is to curb the increase in the price of imported iron ore. As domestic market demand continues to pick up, and the prices of international bulk commodities such as iron ore and non-ferrous metals have risen more, prices in metal-related industries continue to rise. Among them, the price of non-ferrous metal smelting and rolling processing industry increased by 3.9% from the previous month in December, and the price of ferrous metal smelting and rolling processing industry increased by 3.3% month-on-month. Due to the high growth rate of industrial production and the low temperature, the demand for heating increased rapidly. In December, the electricity consumption in Hunan, Jiangxi, Zhejiang and other places increased sharply, and some areas adopted measures of “cutting the power supply”. Correspondingly, prices of coal, etc., have been driven to rebound. In December, the price of coal mining and washing industry rose by 3.5% from the previous month. Zhou Maohua said that the current rise in commodity prices is mainly driven by three factors. First, the world’s major economies continue to implement policies to support domestic demand on an unprecedented scale, and the market looks forward to China’s infrastructure investment and the United States’ large-scale fiscal relief policy. The second is vaccination. Gradually spread to improve market expectations of the global economic outlook; third, the US dollar index has continued to be weak in recent months, which has driven the prices of US dollar-denominated commodities to rise. "Some commodities are speculated by capital, mainly due to excess global liquidity. With the current major global economies still in a severe recession, capital seeks profits in the financial market," Zhou Maohua pointed out. Liu Xuezhi said that the global economy is in the post-epidemic recovery phase, domestic and foreign demand is gradually improving, and the prices of bulk commodities have risen, which has given rise to the momentum of PPI imports. The recovery of the domestic economy is clear, and the recovery of industrial production has driven up the prices of production materials. The economic recovery trend is clear, and the PPI is expected to rebound to positive growth in the first quarter of 2021. The macro team of CITIC Securities pointed out that PPI is expected to become positive in January this year. First, vaccines are gradually strengthening expectations of further global economic recovery, and the demand side will become a strong support for prices. Second, this year's replenishment of US manufacturing and real estate will benefit the rise in commodity prices. Third, this year China's real estate construction and installation investment is expected to maintain resilience and the demand for manufacturing replenishment. In general, commodity prices are expected to continue to rise in the future, especially for commodities priced in US dollars.
