Commodity prices skyrocketing, multi sector moves to “cool down”



Recently, the prices of iron and steel, nonferrous metals, coal and other bulk commodities have risen sharply. In April, PPI recorded a recent high. The price rise of some raw materials has also begun to transmit to the consumer side, and the pressure of enterprise cost rise has gradually increased. Therefore, many departments have taken actions to cool the market. On May 19, Premier Li Keqiang presided over the executive meeting of the State Council, and then deployed to ensure the supply and price of bulk commodities and maintain the stable operation of the economy.

The meeting pointed out that since the beginning of this year, affected mainly by multiple factors such as international transmission, the prices of some commodities have continued to rise, and the prices of some varieties have even reached new highs. We should attach great importance to the adverse effects of rising commodity prices, implement the deployment of the Party Central Committee and the State Council, according to the requirements of precise regulation and control, focus on market changes, implement comprehensive policies, ensure the supply of bulk commodities, curb their unreasonable price rise, and strive to prevent transmission to consumer prices.

Specifically, the meeting mentioned that we should take multiple measures to strengthen the two-way regulation of supply and demand. We will implement policies such as increasing export tariffs on some iron and steel products, implementing zero import provisional tax rates on pig iron and scrap steel, and abolishing export tax rebates on some iron and steel products, so as to promote the increase of domestic market supply. Efforts should be made to adjust the structure and restrain high energy consumption projects. We should give full play to China’s advantages in rich coal resources, urge key coal enterprises to increase production and supply on the premise of ensuring safety, increase output of wind power, photovoltaic, hydropower and nuclear power, and do a good job in energy security for peak summer. We will continue to open wider to the outside world, strengthen the regulation of the import and export of bulk commodities and their reserves, promote the facilitation of customs clearance, make better use of the two markets and resources, and enhance the ability to guarantee supply and stabilize prices.

Strengthening market supervision is also an important part. The meeting pointed out that it is necessary to give play to the role of industry associations and strengthen industry self-discipline. Strengthen the linkage supervision of the futures and spot markets, timely take targeted measures to check abnormal transactions and malicious speculation. According to the law, we will strictly investigate and deal with monopoly agreements, spread false information, bid up prices, especially hoarding, and expose them to the public. In addition, we should maintain the stability of monetary policy and the basic stability of RMB exchange rate at a reasonable and balanced level, and reasonably guide market expectations. Help market players, especially small and micro enterprises and individual businesses, cope with production and operation difficulties such as rising costs.

As a matter of fact, as early as May 12, the executive meeting of the State Council required that we should track and analyze the domestic and international situation and market changes, do a good job in market regulation, and deal with the rapid rise of commodity prices and its associated effects. Behind it is also the constant trend of rising commodity prices.

Taking steel as an example, data from China Iron and Steel Industry Association show that domestic steel prices have continued to rise since the beginning of this year. By the end of March, China’s steel price index had increased by 9.4% compared with the beginning of this year, with a year-on-year increase of 37.37%“ Before and after the May Day, the domestic steel market soared again, breaking through the historical high at one stroke. The average spot price of rebar once broke the 6200 yuan mark, and the average spot price of hot rolled coil once broke the 6600 yuan mark, and then quickly fell back and adjusted.

“In the near future, the sharp rise of some commodity prices is mainly due to the superposition of factors such as rising international commodity prices, loose global liquidity and market expectations.” The day before, at the regular press conference of the national development and Reform Commission in May, Jin Xiandong, director of the policy research office and spokesman of the national development and Reform Commission, just made a response. He pointed out that the impact of rising commodity prices on China has both advantages and disadvantages. On the one hand, it is conducive to improving the profitability of upstream raw material enterprises and reducing debt risk. On the other hand, it will also lead to the rising operating costs of the middle and downstream manufacturing industries and affect the industry efficiency.

“In April this year, the producer price index (PPI) rose by 6.8% year-on-year; In the first four months, PPI rose 3.3% year on year. From the perspective of future trend, affected by the transmission effect of international commodity prices and the low base in the same period of last year, the increase of PPI in recent months may further expand, and the year-on-year increase of PPI in the second quarter may continue to rise. ” Jin Xiandong also said that with the continuous release of price signals to guide the production and circulation of raw materials, commodity prices will gradually return to the fundamentals of supply and demand.

Comprehensive report of Beijing Business Daily

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