China Bulk Commodity Index Rises for Two Consecutive Months
According to news on July 5, the China Bulk Commodity Index (CBMI) for June 2023, surveyed and released by the China Federation of Logistics and Purchasing, reached 102.8%. This marks a two-month consecutive increase and a 2.1 percentage points rise from the previous month. The rise in the index indicates a continuous upward trend, with both the supply and demand sides experiencing growth.
The survey reveals that the supply index has risen for two consecutive months, while the sales index has rebounded and the inventory index has fallen. This indicates that both sides of the supply and demand equation have risen in tandem. The rebound in demand has been particularly strong, easing the pressure on market inventory. This trend indicates the continued recovery and development of the domestic economy, as well as strengthening policy expectations for stabilizing growth.
However, as July begins, the market structure may undergo a transformation from “booming supply and demand” to a “strong supply and weak demand” scenario. Regional demand is expected to enter the traditional off-season due to high temperatures and rainy weather. Despite this, the index is projected to continue running at a high level. In the medium and long term, this could have a positive impact on the US dollar but a negative effect on the commodity market. Nevertheless, with the current moderate domestic economic recovery, there is still potential for further policy measures to boost market confidence.
Commodity supply has continued to increase, with the supply index reaching 107.0% in June 2023, a 1.8 percentage point increase from the previous month. The domestic bulk commodity market has seen a surge in supply, resulting in increased pressure. Notably, the coal supply index reached its highest level since August 2020, and the supply of various commodities increased compared to the previous month. The growth rate for steel and iron supply has returned after a two-month decline, while other products have shown accelerated growth. The supply of iron and steel in particular increased by 3.2% from the previous month, while iron ore, coal, non-ferrous metals, chemicals, and automobiles saw increases of 4.8%, 6.2%, 3.3%, 2.9%, and 3.5% respectively. The growth rates were higher than the previous month, with increases ranging from 0.3 to 2.7 percentage points. Refined oil products experienced a 2.8% increase in supply, although the growth rate slowed by 1.6 percentage points.
Terminal demand has shown some recovery, with the bulk commodity sales index rising by 3.8 percentage points in June 2023, reaching 103.7%. This indicates clear signs of recovery in the downstream industry and a high level of enthusiasm for ordering in the market. The stable momentum of the macro economy, steady infrastructure development, and increased expectations for growth stabilization policies have supported the recovery in demand. However, it should be noted that the rebound is based on a low base from the previous period, and the demand recovery remains moderate. The impact of high temperature and rainy weather in late June has already led to a cautious shift in market sentiment. Major commodities have seen an increase in sales compared to the previous month, with steel, iron ore, and coal rebounding. Non-ferrous metals, chemicals, and automobiles have continued their upward trajectory. While refined oil sales have increased for seven consecutive months, there has been a slight slowdown in growth due to declining diesel demand.
Merchandise inventories have fallen once again, with the commodity inventory index reaching 99.0% in June 2023. This marks the lowest level since June 2021, highlighting the significant improvement in the supply-demand relationship in the domestic commodity market. Commodity inventory has continued to decrease, easing market inventory pressure. Steel and iron ore inventories have declined, while non-ferrous metals have seen a shift from rising to falling inventories. Although chemical and automobile inventories have increased, the growth rate has slowed down. Coal and refined oil inventories have continued to rise due to production recovery, with an accelerated growth rate. In June, steel and iron ore inventories decreased by 3.4% and 2.7% respectively, while non-ferrous metal inventories declined by 1.4% compared to the previous month after seven months of consecutive growth. Chemical and automobile inventories increased by 0.3% and 0.1% respectively, with growth rates slowing compared to the previous month. Coal and refined oil inventories increased by 5.3% and 3.9% respectively, with growth rates accelerating compared to the previous month.
Overall, the China Bulk Commodity Index’s consecutive rise for two months signals a positive trend in the domestic commodity market. Despite the potential shift towards a stronger supply and weaker demand scenario, it is expected that further policy measures will be implemented to boost market confidence and support the ongoing recovery of the Chinese economy.