Metallurgy / Chemicals / Rubber & Plastics

Affected by factors such as domestic and foreign supply and demand, and fluctuations in external markets, the prices of my country's agricultural products, energy and chemicals, and black commodities have fluctuated significantly recently. At the same time, the transmission effect of commodity prices has also attracted much attention. The April Industrial Producer Price Index showed that the price increase of ferrous metal smelting and rolling processing industries expanded due to increased demand and rising costs of raw materials such as iron ore.

Recently, the three commodity futures exchanges have issued relevant announcements to remind market risks. The State Council and the Central Bank also expressed their views one after another.

1

Three commodity futures exchanges take action to cool down

In the face of the recent rise in the market, the three commodity futures exchanges have issued relevant announcements to remind market risks and cool the overheated market.

The Shanghai Futures Exchange announced that, after research and decision, starting from the May 12, 2021 trading (evening night trading on May 11), the rebar Rb2110 contract intraday closing Iakura transaction fee will be adjusted to one ten thousandth of the transaction amount. The transaction fee for the hot-rolled coil Hc2110 contract intraday settlement of Imakura is adjusted to one ten thousandth of the transaction amount.

According to the ZCE announcement, in accordance with relevant regulations and research decisions, adjustments will be made to the trading margin standards, price limits, and transaction fee standards for thermal coal futures contracts.

DCE issued a market risk alert announcement to remind all market entities to participate in a rational and compliant manner, prevent and control risks, and ensure the smooth operation of the market. According to the announcement, on May 10, iron ore futures I2106, I2109 and other 8 contracts will have a daily limit. The price limit and trading margin level of the above-mentioned contracts on the next trading day will be in accordance with Article 19 of the Dalian Commodity Exchange Risk Management Measures. The regulations have been raised accordingly. Relevant measures show that the trading margin level for iron ore-related contracts on May 10 increased to 15% on the 11th, and the price limit increased to 13%.

2

The State Council and the Central Bank: Strengthen the regulation of the bulk commodity market

The executive meeting of the State Council held on May 12 requested that “to track and analyze the domestic and foreign situation and market changes, make market adjustments, and deal with the rapid rise in commodity prices and its collateral effects. Strengthen the coordination of monetary policy and other policies to maintain economic stability run".

This week, the central bank issued a report on the implementation of China's monetary policy for the first quarter of 2021 in response to the recent rise in global commodity prices.

The central bank pointed out in the report that recent global commodity prices and inflation indicators in major economies have shown an upward trend.

There are three main factors driving the rise in global commodity prices and inflation:

First, the governments of major economies have introduced large-scale stimulus plans, and the market generally expects that aggregate demand will tend to be strong;

Second, the overseas epidemic has rebounded significantly, and there are still restrictive factors on the supply side. The global economy in the post-epidemic era is recovering in stages faster than supply.

Third, the central banks of major economies have implemented ultra-loose monetary policies, and the global liquidity environment has continued to be extremely loose.

Regarding the phased increase of PPI during the year, the central bank pointed out that it should be viewed historically and objectively.

The central bank pointed out that, through comprehensive research and judgment, global commodity price increases may boost my country's PPI in stages, but the risk of imported inflation is generally controllable.

3

Commodity soaring momentum temporarily suspended

On May 13, there was a collective decline in bulk commodities.

Oil market

On the 13th, oil prices plummeted by more than 3%, due to the intensification of the new crown epidemic crisis in India and the resumption of operation of a key fuel pipeline in the United States, which suspended the rise in oil prices. As of the close, New York June crude oil futures closed down 2.26 US dollars, or 3.42%, to 63.82 US dollars per barrel. Brent July crude oil futures closed down 2.27 US dollars, or 3.27%, to 67.05 US dollars per barrel. The two major indicators of crude oil both recorded their biggest single-day percentage drop since the beginning of April.

Metal market

Gold prices have rebounded from a one-week low hit earlier, as falling U.S. Treasury yields have enhanced the attractiveness of gold as an inflation hedge.

Spot gold closed at US$1,826.57 per ounce, after hitting the lowest level of US$1,808.44 since May 6. The settlement price of US gold futures rose 0.1% to $1,824 per ounce.

Copper price

The price of copper fell as the US dollar strengthened, loan data from China, the largest consumer, was weak, and concerns that the Chinese authorities might limit commodity prices triggered a sell-off.

At 1557 GMT, the London Metal Exchange (LME) benchmark copper futures fell 0.9% to US$10,350 per ton.

Black, colored goods

As of the close of the afternoon of May 13, most domestic commodity futures closed down, the black series fell collectively, iron ore fell more than 7%, thermal coal, manganese silicon fell more than 4%, coke, coking coal, and No. 20 rubber fell more than 3%. Nickel, PTA, hot rolls, rapeseed meal, and starch fell more than 2%.