News on December 14: 1 The European Central Bank increased its monetary policy easing through PEPP and TLTRO. The EU Recovery Fund and the long-term budget have also made significant progress.
The Bank for International Settlements (BIS) publishes quarterly debt data of about 40 countries and regions around the world, as well as sub-sectoral debts of global, developed and emerging economies. Data in the second quarter of 2020 show that due to the impact of the epidemic, the world has shifted from full deleveraging in the first quarter to full leverage, with developed countries increasing leverage even more.
High-frequency weekly observation: Overseas domestic commodities continue to strengthen. This week, the CRB index continued to strengthen. The South China Composite Index performed strongly. The wholesale price of agricultural products 200 index, COMEX copper, COMEX gold, IPE oil distribution, rebar futures, etc. all rose in varying degrees.
Why is iron ore soaring? In terms of different industries, production capacity has cleared significantly, or varieties with obvious supply constraints will see a significant price upward trend. Iron ore that has been rising recently is a typical example, and its supply mainly depends on imports. , Especially imported from Australia, the supply is single and may be affected. Under the conditions of global monetary easing and continued economic recovery, the product prices of these industries whose production capacity has been cleared to a certain extent may have greater upward pressure.
Investment demand is not the main reason for the sharp rise in domestic commodity prices: since November, domestic commodity prices have risen rapidly. In November, the South China Commodity Index rose 4.6% year-on-year and 8.3% month-on-month, ending the continuous decline since September. The split between domestic and foreign commodity prices began to make up. According to our observations, the current impetus for domestic commodity prices to rebound may have a weaker relationship with investment demand. The more important factor is consumption and exports.
In short, under the conditions of global monetary easing and continuous economic recovery, the product prices of these industries that have been cleared to a certain extent may have greater upward pressure.
From 2016 to 2017, the United States promoted tax cuts and infrastructure construction, and China's real estate sales and infrastructure investment grew rapidly, and the efforts to reduce production capacity and environmental protection were obvious. The combined forces of demand expansion and supply contraction led to an increase in energy and raw material prices. In contrast, from 2020 to 2021, global liquidity is loose and the economy continues to be repaired. The two conditions are similar, but domestic demand expansion and supply constraints are relatively weak, especially the real estate regulation is not relaxed, and the pressure on local fiscal revenue will affect fiscal policy Intensity. Therefore, the price increase of energy and raw materials from 2020 to 2021 will be lower than that from 2016 to 2017. It is predicted that the PPI may peak at around 2.3% in May 2021.
However, by industry, production capacity has been significantly cleared, or there will be a significant upward trend in prices for varieties with obvious supply constraints. The recent increase in iron ore is a typical example. Its supply mainly depends on imports, especially from Australia. Single and may be impacted. Further reasoning, measured by the change in the number of enterprises above designated size in each sub-industry of the industry since the implementation of the concept of supply-side structural reform in October 2015, the number of ferrous metal mining and ferrous metal processing enterprises decreased by 61.5% and 49.0%, respectively. The decline was the most significant; the number of non-ferrous metal mining and coal mining companies decreased by 37.7% and 34.3%, respectively; the number of companies engaged in petroleum and natural gas mining, non-metallic mining, agricultural and sideline food processing, chemical raw materials and chemical products, wine, beverage and tea manufacturing, and textile industry There is also a drop of 10% to 15%.
Under the conditions of global monetary easing and continuous economic recovery, the product prices of these industries that have been cleared to a certain degree may have greater upward pressure.
Since November, domestic commodity prices have risen rapidly. In November, the South China Commodity Index rose 4.6% year-on-year and 8.3% month-on-month, ending the continuous decline since September. The split between domestic and foreign commodity prices began to make up. According to our observations, the current impetus for domestic commodity prices to rebound may have a weaker relationship with investment demand, and the main factor is consumption and exports.
We use cold-rolled coil prices to represent consumption and export demand, and hot-rolled coil prices to represent investment demand. Cold-rolled sheets are generally used in automobiles, home appliances and other products, while hot-rolled sheets are mainly used in bridges, railways, construction and other fields. The price difference between the two can roughly be used to observe the changes in consumption, export demand and investment demand. At present, the price of cold-rolled coil has exceeded the price of hot-rolled coil by more than 1,000 yuan/ton, reaching the highest point since 2017. The price of cold-rolled coil is significantly higher than that of hot-rolled coil, which is consistent with the current strong automobile sales and the continuous improvement in domestic and US real estate sales growth. From historical data, the price difference between cold and hot rolled coils is highly correlated with my country's export growth rate. Therefore, although domestic infrastructure investment and real estate investment demand may be restrained by the policy of stabilizing leverage next year, the restoration of overseas demand is expected to promote further restoration of domestic commodity prices.
Post time: Dec-16-2020