Recently, the State Council Information Office held a press conference on the development of industry and informatization in the first quarter of 2021. At the meeting, a reporter asked questions about the rapid rise in commodity prices in the second half of 2020. Huang Libin, spokesperson of the Ministry of Industry and Information Technology and Director of the Operation Monitoring and Coordination Bureau, conducted a detailed and in-depth analysis and answer to this question.
Q: Since the second half of last year, the domestic and international prices of bulk raw materials have risen sharply. The prices of some commodities have more than doubled. As a result, many manufacturing companies are facing the risk of loss or even bankruptcy. How does the Ministry of Industry and Information Technology view the rise in commodity prices? The impact on my country's manufacturing enterprises? How to guide SMEs to deal with the crisis?
A: Since the beginning of this year, the prices of major products in industries such as steel, nonferrous metals, petrochemicals have continued the upward trend at the end of last year, and the prices of nonferrous metals have risen quite sharply. The price of raw materials has risen sharply due to the following reasons:
First, the rising cost of raw materials has pushed up the price of bulk commodities. In the first two months, the average prices of imported iron ore and copper concentrates increased significantly by 56.6% and 44% year-on-year. Crude oil prices also set the largest increase in the same period in history. Brent crude oil futures and New York light crude oil futures both rose by about 20%. The increase in raw material costs supported the price increase of downstream commodities.
Second, the recovery of production in downstream industries has formed a tight supply and demand situation. In the first quarter, the output of light industrial products such as air conditioners, refrigerators, washing machines and some major mechanical products in the downstream industries showed a substantial recovery growth trend, and the growth rate far exceeded the output growth of raw materials such as steel, copper, and aluminum. In addition, some chemical companies stopped production for maintenance, and the polar storm in the United States led to a sharp drop in the output of some products.
Third, the financial attributes of non-ferrous metals and some chemical products are prominent. Loose monetary policy and better global economic expectations have boosted the activity of global futures trading. Short-term speculation in the financial market also has a significant amplification effect on price increases.
My country’s industrial volume is huge, and the overseas purchases of some bulk commodities are also very large. The rise in the price of related commodities has a very direct impact on PPI. In recent months, the ex-factory prices of products in upstream industries have shown a significant upward trend, and along with the industrial chain Downstream transmission, although the profitability of some upstream companies has been improved to a certain extent, it has also increased the cost pressure of downstream companies to a considerable extent and squeezed the profit space of the company. At the same time, we also see that the relevant price increase factors are mostly short-term and sudden. At present, high global debt, disparity between the rich and the poor, and the prominent aging problem have caused the global economic recovery to be difficult and tortuous. We believe that the global economic recovery is difficult and tortuous. Prices do not have the basis for long-term increases. my country has sufficient macro-control policy space and strong domestic market potential. It has a complete manufacturing category, abundant production capacity, and ample supply. The market is highly adaptable to self-adjustment. Relevant departments have also taken measures to strengthen the work of ensuring supply and price stability. On the whole, the current round of commodity price increases have an impact on the manufacturing industry, but this impact is generally manageable.
In the next step, we will work with relevant departments to actively take measures to promote the stabilization of raw material prices:
1. Strengthen operation monitoring and price supervision, stabilize market expectations, release operating conditions in a timely manner, do a good job of public opinion guidance, and prevent panic buying or stockpiling in the market. Cooperate with relevant departments to resolutely crack down on illegal activities such as monopolistic market and malicious speculation.
2. Support upstream and downstream enterprises to establish long-term stable cooperative relations, coordinate to respond to market price fluctuation risks, and encourage smelting and processing enterprises to conduct futures hedging transactions.
