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    China has limited influence on raw material prices, optimistic about the future development of tungsten industry


    Release Time :

    2023-03-08

    French "Le Monde" on April 7 published an article co-authored by Abdul Abiyad, economic adviser of the Asian Development Bank, and Wei Shangjin, chief economist of the bank, entitled "The Role of China in the Fall of Raw Materials" limited". The article said that China's current economic slowdown will undoubtedly have a great impact on the global economy. But its role in falling raw material prices is more limited than is commonly suggested.

    China has limited influence on raw material prices, optimistic about the future development of tungsten industry

     

    French "Le Monde" on April 7 published an article co-authored by Abdul Abiyad, economic adviser of the Asian Development Bank, and Wei Shangjin, chief economist of the bank, entitled "The Role of China in the Fall of Raw Materials" limited". The article said that China's current economic slowdown will undoubtedly have a great impact on the global economy. But its role in falling raw material prices is more limited than is commonly suggested.

    There is indeed a clear link between China's economic growth and raw material prices. In the early 2000s, when China's economic growth accelerated, raw material prices rose sharply. By 2011, when China's economic growth began to slow, energy prices had fallen by 70%, metal prices by 50%, and agricultural raw material prices by 35%.

    However, as a new study conducted by the Asian Development Bank confirms, despite China's important role in the raw material market (as it represents about half of the world's consumption of metals, coal and pork), it is far less than one might imagine. as dominant. It accounts for less than a fifth of global consumption of sugar, wheat, poultry and beef, 12% of crude oil consumption and 5% of natural gas. In fact, the raw materials whose prices have fallen sharply, mainly oil (-73%) and natural gas (-55%), are the raw materials that China has relatively little impact on.

    Furthermore, actual consumption in China is weaker than the numbers suggest. Traditional assessments do not take into account international production chains, but only consider a country's total production and its imports to determine its consumption level. But for China, a large percentage of what it "consumes" is actually used to produce goods for export. For example, nearly a third of China's metal demand is used to meet foreign demand. Deducting the raw materials used in Chinese exports of manufactured goods could greatly reduce China's apparent role in this market. Looking at price swings further corroborates this view. For example, in the case of copper: from 2001 to 2006, its price fluctuated greatly, first falling by 30% and then rising by 150%, depending on the year, and during this period, China's industrial production growth and demand for copper increased Growth has remained relatively steady at around 15% and 20%, respectively. In addition, the price of tungsten has also fluctuated sharply in recent years. At first, it continued to rise, and then the price dropped rapidly in 2015 and 2016. In recent years, China's tungsten industry has been relatively stable in terms of national macro policies and market product delivery. Reserve to stimulate the market to pick up. It is clear that not only China's economic growth affects the development of the industry, but other factors related to global supply and demand, speculative demand and adjustment of inventories also play an important role in the changes in prices.

    The change in China's economic situation is not in the least catastrophic for raw material exporters. Even if China's economic growth slows further, as many feared, its impact on raw material prices will be limited. Demand from other emerging powerhouses such as India and Indonesia will accelerate over the next few years. Continued solid growth in the rest of Asia's emerging economies over the next decade will prompt demand for raw materials at least as strong as China's demand during periods of high economic growth. The prospect of a recovery in raw material prices seems promising.

    In this context, we are optimistic about the future development of the tungsten industry. The recovery of raw material prices will drive the price of tungsten concentrate to rise. In addition, it is widely rumored that the third national tungsten concentrate purchase and storage activity has been launched, which will directly stimulate the price rise of downstream tungsten products. The average price of tungsten is forecast in April, and the tungsten market continues to be optimistic. It is expected that the price of tungsten will rise steadily in the later period.

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