With the new coronavirus infection (Corona 19) overcoming the crisis, China’s manufacturing industry is expanding, some international raw material prices are rising one after another. Shutterstock
China, the’big hand’ of the international commodity market, is returning. This is as domestic demand, centered on the manufacturing industry, has expanded after overcoming the new coronavirus infection (Corona 19) situation. In China Power, the prices of some raw materials, such as grains and non-ferrous metals, are already in the shape of excitement. In addition, as the demand to invest in raw materials increases due to the weakening of the US dollar, there are predictions that the possibility of a price increase in the future will be higher.
This forecast was contained in the report on the’Background and Future Prospects of the Recent Rise of International Raw Material Prices’ published in the’Overseas Economy Focus’ published by the Bank of Korea on the 17th.
Raw materials are also’uppered’ following the recovery of Chinese manufacturing industry
As China recovered from Corona 19, raw material prices began to recover, centering on non-ferrous metals (industrial metals excluding iron). Reuters = Union
Raw material prices plummeted in March and April last year when the spread of Corona 19 began in earnest. The S&P GSCI index, an international raw material price index, plummeted from 326.91 on January 17 last year to 228.35, the lowest point of the year on April 22, three months later.
However, as China emerged from the shock of the Corona 19 crisis and showed a state of economic recovery, raw material prices began to find their way. As the manufacturing industry revived, the system of supply and demand for raw materials, which had collapsed, survived. As China’s demand for non-ferrous metals recovered to pre-coronavirus levels, prices began to rise. China accounts for 53.2% of global demand for non-ferrous metals (as of 2019).
As China gradually recovered from the Corona 19 crisis, raw material prices went on an upward trajectory. The raw material supply and demand system, which had collapsed as the manufacturing industry revived, also survived. Then, China’s demand for non-ferrous metals, which had great influence, recovered to pre-coronavirus levels, and prices began to rise. Bank of Korea
In fact, international prices for copper, aluminum, nickel, and zinc were found to have recovered or exceeded the level before the corona 19 crisis. According to the Korea Mineral Resources Corporation on that day, the price per ton of copper (based on spot at the London Metal Exchange) is around $8,000 per ton in mid-January this year. It is the highest level in 8 years since 2013. The trading volume per t of other non-ferrous metals is also higher than before the spread of Corona 19, centering on nickel ($17,000) and aluminum ($2,000).
Proving’China Power’ for demand for non-ferrous metals and grains
In addition to the metal raw materials affected by the manufacturing industry, the place where China’s’big hand’ works is grain, a raw material for food. Bank of Korea
The grain market is also gaining momentum from’China Power’. The representative one is soybean. Grain prices, which have plummeted after the Corona 19 crisis, have risen sharply since August last year, mainly soybeans. The price of soybeans, which was traded at $312 per ton in March last year, jumped to around $500 per ton earlier this year.
Amid extreme weather conditions in grain-exporting countries such as the United States and South America, the crop situation became uncertain, and a surge in demand in China fueled the price increase. This is due to the rapid increase in demand for feed as the number of pigs raised due to sluggish cropping due to flooding and African swine fever (ASF) increased. In addition, as China implemented an agreement to purchase US agricultural products earlier last year, the amount of US grain exports to China increased significantly.
The Bank of Korea analyzed that “the price of raw materials (raw materials) recovered rapidly, centering on non-ferrous metals and grains, where China’s influence is large, while China’s influence in the international commodity market increased after the global financial crisis.” China accounts for 24.1% of global grain demand.
‘Everything Rally’ with overflowing liquidity… “Prospects for continued upward trend”
As the zero interest rate of the US Federal Reserve (Fed) and the real interest rate in the United States remain negative, the so-called’everything rally’ (FT), which increases the price of real estate, minerals, and bitcoin excluding the dollar The rise is also expected to continue. Shinhwa = Yonhap News
China’s trend is fueling it, but the main driver of the rise in raw material prices is the liquidity that overflows into the market after the coronavirus outbreak. The so-called so-called rising prices of commodities, real estate, and bitcoin are flowing as the liquidity overflows in the market as governments and central banks, such as the US Federal Reserve (Fed), have poured money to prevent the economic slowdown caused by Corona 19. ‘Everything Rally’ (FT) is appearing.
Real interest rates in the U.S. remain at negative and the weakening of the dollar is also fueling the rise in commodity prices and preference for risky assets. According to the report, the correlation between the international commodity price index and the US dollar index did not show a clear trend after the 2008 global financial crisis, but the opposition has been strong since the beginning of 2020, when the spread of Corona 19 in earnest.
The Bank of Korea said, “The price of raw materials is greatly affected by factors such as the recovery of the international economy and continued preference for risky assets, and is expected to continue the uptrend for the time being.” The movement is expected to show a differentiated appearance.”
The BOK predicted that international oil prices will lead the rise in international raw material prices due to the decline in production by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC oil producing countries, and the recovery of demand amid global economic improvements. In the case of non-ferrous metals and grains, the steep rise is expected to ease somewhat. The BOK said that the prospects of rising and falling gold prices are mixed.
Reporter Yoon Sang-eon [email protected]