Focus | how long can commodities rise? Analysts give judgment

Novel coronavirus pneumonia is associated with the rise in the current round of commodities. From the demand side, the new crown vaccine was promoted, the European and American economies were unsealed, and unprecedented fiscal relief policies were successively launched. The market is expected that the global economic recovery will drive the recovery of commodity demand; From the supply side, the epidemic spread and epidemic prevention measures are easy to produce the supply bottleneck of bulk commodities and the logistics transportation is blocked; From the perspective of market speculation, under the environment of zero interest rate (negative interest rate) and US dollar liquidity flooding, the market risk preference is boosted and commodity speculation is encouraged; In addition, the development prospect of new energy and short-term emergencies have disturbed the supply and demand of some commodities and exacerbated market fluctuations.

Generally speaking, recently, the prices of some basic metals, coking coal (carbon), grain and other commodities have risen, which is in obvious contrast to the economic data of major economies in the world. In addition to the impact of epidemic factors that have not been eliminated, some new factors such as environmental protection, coal mine accidents and extreme weather have been added, which have disturbed the supply of relevant commodities.

From the perspective of trend, commodity prices remain high in the short term, but lack of support in the medium and long term.

In the short term, factors supporting commodity prices remain high. On the one hand, the international loose financial environment will continue. Recently released data show that the spread of mutant virus is a drag on the global economic recovery, especially on the service industry. For Europe and the United States, the service industry is an important sector to absorb employment. If the epidemic continues to spread and the recovery of the employment market slows down, the policy adjustment of major central banks in Europe and the United States will become cautious. On the other hand, supply bottlenecks will continue to plague the world. As the spread of the mutated virus continues to impact the global supply chain, the supply of some bulk commodities is blocked and the high freight rate may continue.

However, in the medium and long term, commodity prices face several constraints.

First, commodity prices are on the high side. At present, the global economy has not recovered well, and the mutant virus may slow down the pace of global economic recovery. However, the prices of some non-ferrous metals have risen to a 10-year high, and the international corn prices have exceeded the level seven years ago. The rising prices of energy and industrial raw materials are good for upstream enterprises, but increase the production costs of some downstream manufacturing enterprises. Once enterprises are difficult to adapt to the rapidly rising costs in the short term, they may fall into business difficulties. In addition, the rising prices of energy commodities and the shortage of some raw materials will eventually be transmitted to the consumer terminals, leading to the emergence of inflationary pressure in economies such as the United States and Europe, weakening the welfare of low - and middle-income groups to a certain extent and hindering the recovery of domestic demand.

Second, supply side constraints have been gradually eased. Most of the factors leading to the rise of commodity prices in this round are short-term. With the continuous promotion of the global vaccine, the impact of the epidemic on the economy is gradually slowed down, the production of bulk commodities is restarted, and the logistics and transportation are gradually unblocked, the global supply and demand are expected to gradually restore balance.

Third, monetary policies in Europe and the United States have gradually normalized. At the end of August, the chairman of the Federal Reserve said that the reduction of bond purchase may be started within the year; Recently, the inflation data released by the eurozone rose, and the attitude of relevant officials of the European Central Bank obviously "turned to the eagle". These information point to the overall "water collection" direction of central bank policies such as the Federal Reserve. Although the recent epidemic rebounded and the market loose liquidity environment will not be tightened soon, in the medium and long term, the normalization of European and American policies will restrict the space for speculation in asset markets such as commodities.

Fourth, the effect of ensuring supply and stabilizing prices of domestic commodities has been gradually released. In view of the negative impact of the continuous rise of commodity prices on the production and operation activities of some middle and downstream enterprises in China, China timely issued the "combination fist" of commodity supply and price stabilization policy to "cool down" the market. At present, the policy effect has achieved initial results, the market as a whole shows a steady and slow trend, and investors' expectations tend to be rational.

Source: Economic Daily

Author: Zhou Maohua, analyst of Everbright Bank

In this article, except for the pictures indicating the source, the rest are from online public channels, and their source cannot be identified. If there is a copyright dispute, please contact our company.