[NTD News, June 22, 2021, Beijing time]In order to prevent inflation, the CCP has introduced a series of measures, from curbing transactions to releasing national inventories. The prices of many commodities have fallen from May highs, especially The price of steel is falling rapidly. But experts say that in a two-month struggle to suppress prices and ease rising factory costs, it is too early to announce Beijing’s victory.
According to a Bloomberg report on Monday (21st), a huge challenge for the Chinese Communist government is that this year’s commodity boom is global. Although China is still the largest importer, the center of the commodity sector is shifting from China. The collapse of commodity prices last week can be said to have been driven by the Fed’s hawkish changes and the weather in the United States, rather than by the CCP’s intensified campaign.
Under the intervention of the CCP, although the prices of metals and crops have fallen, the prices of coal are still rising. And, most importantly, the price drop may not be able to persist.
“Intervention can help relieve stress, but it is difficult to change the trend.” Hao Hong, head of research and chief strategist at BOCOM International Holdings Company, an investment bank and securities company under the Bank of Communications of the Communist Party of China Said, “The skyrocketing commodity prices are driven by global demand growth, not by China. China is just a price taker.”
Under the double blow of the Chinese Communist government, Shanghai Copper Futures reached a two-month low last week. China’s strategic reserve providers promised to release inventories. This is an important signal that the Chinese government hopes to stabilize prices. It also warns state-owned enterprises to reduce their exposure. Risks in overseas commodity markets. However, investors questioned China’s ability to have a lasting impact.
“We don’t think the rally is over yet,” Citi analysts including Tracy Liao said in an email on June 17 that Beijing’s measures “are designed to manage Expectations and deter speculators, rather than addressing the imbalance between supply and demand”, due to low inventories, investors are likely to buy when prices fall and reignite the rise in the next few months.
China’s top economic planning agency specifically mentioned coal last Friday. Thermal coal futures hit a five-week high last weekend. The strong summer demand and a series of accidents occurred simultaneously, prompting some supplies to be cut off. China’s coal production only increased slightly in May, and inventories are very low.
If demand continues to be higher than supply, the Chinese government will face a struggle to manage prices, because prices have far exceeded the threshold that the government believes to be tolerable. Officials have considered setting a price cap. Michelle Leung, an analyst at Bloomberg Intelligence, said these measures may stimulate more price volatility rather than reverse the gains. She said that the price of thermal coal has not yet reached its peak.
The situation with pork is a bit different. Since mid-January, wholesale pork prices in China have fallen by nearly 50%. The drop is so great that the government wants to maintain “reasonable” production. Sluggish seasonal demand and increased sales and imports of fat pigs may prolong the decline in pork prices.
Muyuan Foods Co., Ltd., a key leading enterprise in China and a national primary pig farm, said in May that the price of live pigs is expected to continue to fall, and the decline will not bottom out until next year or even 2023.
(Reporting by reporter Li Zhaoxi/Editor in charge: Li Jia)
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