Chinese prices of bulk commodity products including petroleum and ferrous and non-ferrous metals have no basis for long-term growth, Liu Aihua, spokeswoman of National Bureau of Statistics (NBS) stated at a press conference following the release of the country’s Q1 economic performance data on April 16.
Liu made the comment in response to a question over the concerns about the recent surges in bulk commodity prices.
Global commodity prices have indeed seen a round of increases recently, propelled upward by “abundant global liquidity (and) the recovery in market demand against short-term supply shortage,” Liu said.
In China, prices of upstream commodities have been rising too recently. Over this year’s first three months, China’s domestic PPI (producer price index) rose by 0.3% on year in January, 1.7% in February and leapt by 4.4% last month, according to NBS’s data.
Liu noted that the 4.4% on-year growth in March was mainly due to commodities related to petroleum and metals, where the average prices grew 11.1% and 17.6% on year, respectively.
As China is closely connected to the global economy, trade and investment activity ensure that rises in global commodity prices will affect industrial prices in China, she said. “Based on the structure of the rises in PPI, for now the impact is mainly being felt among some upstream industries, while downstream industries have not seen any effect as yet,” she explained.
Nevertheless, “prices of domestic upstream products have no basis for long-term growth” as their supply – regardless of quality or capacity – has been improving amid the economic recovery, according to Liu. “Demand is still in the process of recovery,” she remarked, indicating that prices don’t have the foundations to strengthen for very long because the recovery in demand is proving slower than the improvement in supply.
Among the prices of the 50 key commodities for industrial production tracked by NBS over April 1-10, some 27 have increased during the period compared with March 21-31. Prominent among them were the price increases of steel. Prices of Q235 20mm medium plate and Q235 3mm hot-rolled coil, for example, increased 7.2% and 7.4% respectively over the ten days, according to NBS statistics, with only prices of certain kinds of blended coal and styrene being higher.
But a steel analyst based in Beijing added a cautionary note for steel consumers, pointing out that compared with other commodities, “the growth in steel prices might be faster and larger, as it’s hard to see supply increasing under the impact of the production controls,” he told Mysteel Global.
“Steel demand is comparatively firm, though it has yet to return to pre-pandemic levels,” he said. China has vowed to cut steel output and make sure that production this year declines on year, as a means of reducing the nation’s carbon emissions, as Mysteel Global reported.
Written by Olivia Zhang, zhangwd@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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