Analysis of the reasons for the violent fluctuation of some metal prices in the first half of 2022 How to maintain the stability of mineral resources under the epidemic?
On July 29, at the press conference on the economic operation of the non-ferrous metal industry in the first half of 2022 held by the China Nonferrous Metals Industry Association, Chen Xuesen, member of the Standing Committee of the Party Committee and spokesperson of the association, answered questions from reporters and business representatives.
Media 1: In the first half of 2022, the prices of some non-ferrous metals fluctuated violently. What are the reasons? In order to deal with the adverse impact of the violent fluctuation of non-ferrous metal prices on industry enterprises, from the perspectives of relevant government departments, industry associations, enterprises, etc., how to accurately implement measures to deal with the existing challenges? For the entire non-ferrous metal industry, how to implement the requirements of "the epidemic must be prevented, the economy must be stabilized, and the development must be safe"?
Chen Xuesen: Non-ferrous metals have strong financial attributes, and their prices fluctuated violently in the first half of 2022. In addition to the "black swan event", we believe that there are four main reasons for price fluctuations: First, since the outbreak of the new crown pneumonia epidemic , the flood of global liquidity, coupled with the surge in energy prices after the conflict between Russia and Ukraine, further exacerbated global inflation and adversely affected the recovery of overseas economies after the epidemic; second, due to the repeated domestic epidemics in the second quarter, downstream terminals started construction Third, in order to cope with its own high inflation, the United States started the process of raising interest rates and increased interest rate hikes, so that while tightening liquidity and restraining prices, it also affected demand. Fourth, with the gradual improvement of the epidemic situation at home and abroad, the original factors that hindered the production and logistics of bulk commodities have gradually eased, the supply has gradually been smooth, and the inventory of enterprises has been adjusted.
The relative advantages of my country's aluminum industry are mainly reflected in: First, the average power consumption level of my country's electrolytic aluminum industry is advanced, which is more than 800 kWh/ton aluminum lower than the average power consumption of foreign countries, and under the guidance of the national stepped electricity price policy, the energy consumption level will be further optimized. Second, my country's new energy industry chain has outstanding advantages and low costs, providing an industrial foundation for the development of new energy; third, the area where my country's electrolytic aluminum is located has huge potential for new energy development, and the proportion of new energy consumption will continue to increase; Fourth, my country It is expected that the consumption of primary aluminum will peak around 2025. With the gradual increase in the proportion of secondary aluminum replacing primary aluminum, the energy consumption and carbon emission levels will continue to improve. At present, the proportion of secondary aluminum in my country's total aluminum supply is only about 17%. With the continuous enrichment of urban mines, there is a lot of room for improvement in this proportion.
Aluminum Corporation of China: The price of non-ferrous metal products fluctuates greatly. In the face of downstream demand, the price transmission to the terminal is weak, and the international economic situation is unstable. Do you think the non-ferrous metal industry has started a new economic cycle? Do you have any suggestions for the production and operation of the enterprise? Will the supply side have a greater impact on the industrial chain?
Chen Xuesen: Looking back on history, the prices of bulk raw materials have always fluctuated cyclically. In 2008, the subprime mortgage crisis broke out in the United States, which had a serious impact on the world economy, and the prices of non-ferrous metals plummeted. In 2009, non-ferrous metal prices fell to historical lows. With the successive implementation of loose monetary policies in various countries, China and the world economy recovered quickly. In 2011, the prices of major non-ferrous metals rose to record highs. With the normalization of loose monetary policies in various countries, the prices of non-ferrous metals continued to correct. Until 2015, the price of non-ferrous metals reached an all-time low.
In 2020, due to the sudden impact of the new crown pneumonia epidemic, the global economy suffered a sharp recession, and the prices of non-ferrous metals fell. In response to the epidemic, countries have successively introduced loose monetary policies, which have greatly increased capital liquidity. The prices of non-ferrous metals with financial attributes took the lead to stop falling and rebound. In 2021 and the first quarter of 2022, the prices of major non-ferrous metals have repeatedly hit new highs. In the second quarter of this year, with the slowdown in global demand, the Federal Reserve continued to raise interest rates sharply in response to inflation, and the prices of major non-ferrous metals retreated sharply. For example, for copper products, in mid-April this year, the average copper price in the domestic market rose to 74,681 yuan/ton. In mid-July, the average domestic copper price fell to 56,756 yuan/ton, a cumulative decrease of 17,925 yuan/ton from mid-April. The average price of aluminum in the domestic market reached 22,916 yuan/ton in late March this year. In mid-July, the average price of aluminum in the domestic market was 17,746 yuan/ton, a cumulative decrease of 5,170 yuan/ton from late March. , a drop of 22.6%.
The peak of this round of price increases has already appeared in the first quarter of this year, but the possibility of a shock and correction in the prices of major metal varieties cannot be ruled out.
Non-ferrous metal enterprises should ensure continuous and stable production, moderate price risk control such as hedging, and formulate relevant business strategies such as inventory adjustment. The association will, as always, provide advice and suggestions to the relevant government departments at the right time to promote the efficient development of the industry, the difficulties faced by the industry and enterprises, and the purchase and storage.