Since the beginning of this year, the rapid rise of commodity prices has brought about an impact on China's downstream entities, which has aroused high attention from all sides. The State Council executive meeting several times "name", deployment of bulk commodities to ensure supply and stabilize prices. Relevant departments have taken active actions to form synergy, adopt comprehensive policies and hit a combination of regulation and control to promote the removal of the "empty fire" of bulk commodities. At present, the domestic bulk commodity market has achieved initial results in "ensuring supply and stabilizing prices", and the bulk commodity prices have fallen to varying degrees.
Positive changes took place in the market
Since mid-May, the prices of black and non-ferrous commodities on the Shanghai Futures Exchange have fallen and gradually stabilized by the end of May. As of July 2, prices for thread, hot coil, copper and aluminum have fallen 17%, 19%, 13% and 8%, respectively, from their mid-May highs, narrowing year-to-year gains to 17%, 19%, 18% and 22%. At present, futures and spot prices are generally in line. As of July 2, thread, aluminum futures slightly discount spot, hot coil, copper futures and spot basically flat. Spot prices for copper, aluminum and zinc have fallen 9.2%, 10% and 9.7%, respectively, since June.
Colored varieties prices fell, is the refraction of this round of price control. A series of regulatory policies, such as joint supervision of the futures and spot markets, cracking down on hoarding and malicious speculation, have exerted a significant impact on the supply and demand, trading sentiment and market expectations of the bulk commodity market. Except for petroleum, coal and other fuel processing industries, other industries fell significantly, ferrous metal smelting and rolling processing industry, non-ferrous metal smelting and rolling processing industry all fell to the contraction range.
Increase supply to stabilize expectations
Futures spot market linkage supervision, in the thermal coal varieties have been fully implemented. At the futures end, zhengzhou Commodity Exchange has taken measures such as raising margin and handling fee to effectively reduce the market heat. On the spot side, the comments made by relevant competent authorities, such as the further release of thermal coal supply and the drop in prices in July, have had a great impact on market expectations and significantly suppressed traders' hoarding sentiment. On the supply side, local governments and enterprises in major producing areas are actively fulfilling their responsibility to increase production and ensure supply, and the pace of production capacity release is accelerating.
Gao Mingyu, head of the energy group and chief analyst at STIC Essence Futures, told reporters, "The adjustment of supply and demand, especially the release of production, transportation and marketing, is very useful for alleviating the contradiction between supply and demand in the market. Only by effectively increasing the effective supply in port areas and coastal coal areas can the contradiction between supply and demand be alleviated fundamentally. Therefore, it is most effective to increase the release from the perspective of supply in regulation and control ".
In the non-ferrous market, the State Reserve announced on June 16 that it would sell copper, aluminum and zinc, and on June 22 announced the specific quantity of the first batch of copper, aluminum and zinc. Selling stocks alleviated the contradiction between supply and demand in the spot market and released clear information to the market. Together with other market regulatory policies, it effectively managed market expectations and played an important role in calming the price rise of non-ferrous metals.
Wei Lai, the person in charge of non-ferrous metals, said, "The regulation is successful and timely. First of all, the balance of supply and demand of various varieties took the lead in changing, and then the market's macroeconomic expectations, such as the long-term rise in inflation, also declined, and the market's overall restlessness and excitement for colored varieties then cooled down.
In the steel market, the "one-two punch" of regulation plays an obvious role, the profits in the industrial chain are transferred from the steel mills to the downstream manufacturing industry again, effectively alleviating the cost pressure in the downstream. "There are three lessons that have worked for this round of regulation." Everbright futures black research director Qiu Yuecheng told reporters, one is to safeguard supply, including the implementation of crude steel production policy to slow down, coal security efforts to increase supply, market supply has increased; Second, in terms of demand regulation, the domestic demand is expected to weaken somewhat through real estate regulation and increase, and the issuance of special bonds is slowed down. The overseas demand is suppressed to a certain extent by canceling the tax rebate for steel exports and studying the imposition of additional steel export tariffs. Third, in stabilizing prices, through a series of investigations and interviews with key enterprises, enterprises hoarding, price gouging and other phenomena have played a strong role in inhibiting.
"Through policy regulation, the market supply and demand expectations and the mentality of the main participants have been changed in a timely manner, and the profit distribution pattern in the middle and lower reaches of the industrial chain has been readjusted." Hai-card futures research institute deputy director stone told reporters, the current steel market, facing the "top policy" and "cost at the bottom" of the dual control, late steel prices are expected to maintain high width shock, not easy to appear a large unilateral fluctuations in the market.
Make the best use of the situation and take precise measures
Bulk commodity price presents differentiation characteristic. Industrial metal prices fell, energy and chemical prices are still resilient. Part of the demand is rigid, but supply bottlenecks in a short time to solve the possibility of varieties, will be stable in the trend, and some supply is easier to solve, strong began to fade. Therefore, to treat the fluctuation of commodity prices, to classify, policy regulation and control to be precise.
Take cotton, for example. Cheap cotton hurts farmers, and textile companies want cotton prices to be relatively stable. Therefore, China's cotton price regulation is flexible and efficient, which can not only stimulate the enthusiasm of cotton farmers to grow cotton, meet the production needs of textile enterprises, but also make textile enterprises competitive in the world.
On July 2, 2021, the central reserve cotton wheel out notice was released, the plan is to wheel out 600,000 tons. This year, if the cotton spot price index in the domestic market drops by more than 500 yuan/ton in three consecutive working days, the cotton rotation will be suspended, and it will be resumed when the cotton spot price index stops falling in three consecutive working days.
Tang Zhen, general manager of the Dezhou sales department of Luzhenfutures, told the Economic Daily that this sends a signal that the country continues the normal operation of cotton reserve rotation in recent years. At the same time, it also focuses on the consideration that the rotation of cotton reserve should not depress the current cotton price. Therefore, on the one hand, the policy can meet the market demand for low-grade cotton. On the other hand, it also releases guidance that will not exert great pressure on market prices.
Iron ore prices are also extremely complicated to regulate. The proportion of imported iron ore in China is large, while the supply of overseas iron ore is in the pattern of oligarchy.
On May 19, Dalian Commodity Exchange issued a revision of iron ore futures contracts and related rules, adjust the iron ore futures deliverable brand premium announcement. This adjustment makes the premium range of high-quality middle and high grade mines in the deliverable brands significantly expand, the warehouse receipt cost is reduced to some extent, and the deliverable resources are expanded.
Haitong futures investment advisory department black industry researcher Qiu Yihong told reporters, this round of regulation is mainly from the end of the demand for iron ore, but in the long run, iron ore supply side regulation is very necessary. There are many types of iron ore, and steel mills will have large differences in demand for iron ore varieties at different stages, and it is difficult to control the supply side of iron ore, so the iron ore spot market will be more prone to structural contradictions.
"In the long term, it is essential to reduce China's dependence on iron ore imports and increase the iron ore bargaining power of China's steel mills." Zhou Minbo, a ferrous metals researcher at GF Futures, suggested increasing the concentration of China's steel companies, phasing out outdated capacity, accelerating the pace of mergers and reorganizations, and improving iron ore pricing mechanisms.
It is worth noting that with the improvement of the global epidemic and the gradual recovery of oil demand, domestic and foreign crude oil futures prices rose simultaneously. Crude oil is the king of commodities, and the rebound in crude oil prices means that the battle for "price stability" in commodity markets is not over. Wei suggested that in the long term, China could consider establishing a more complete and flexible reserve system for commodities, while further encouraging Chinese enterprises to go overseas to acquire high-quality resources.
