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Golden opportunity for Aluminum industry for favorable non-ferrous metals market
In the first half of 2016, the prices of non-ferrous metals have risen rapidly due to a variety of factors. It’s estimated that in China Commodity Price Index (CCPI), non-ferrous metals price index rose more than 10% in June compared with the beginning of this year. By the end of June, aluminum price in Shanghai Futures Exchange was about 12,380 RMB/ton with an increase of 17.9%. Since July, important non-ferrous metals prices have continued to rise.
Aluminum industry will usher in golden opportunities in views of the following favorable non-ferrous metals market.
♦ Loose currencies stimulate the rising demand for non-ferrous metals hedging
The UK leaving the EU, known as the profoundest event of global economy, has aggravated the vulnerable global economy. In order to cope with the risks and uncertainties of global economic growth, it is expected that the world's major countries will have loose global currencies. International Monetary Fund (IMF) calls on the world's central banks to take action to increase monetary liquidity with the purpose of reducing economic fluctuations. As a result, rich global capital supply and new investment opportunities lead to new demands for monetary hedging. Bulk stock, especially non-ferrous metals and precious metals with good physical stability and low store costs , is bound to become an important option for global hedge funds.
♦ RMB devaluation against the U.S. Dollar causes the increasing cost of non-ferrous metals imports
Because of the decreasing economic development, shrinking export trade and foreign exchange reserves, RMB has depreciated to a certain extent. In addition, the relevant departments increasing RMB exchange rate market reform will have a more tolerant attitude towards the RMB exchange rate fluctuations, which is bound to increase the import cost of China's nonferrous metals, raw materials and energy, and cause the rising domestic prices.
In view of the import experience, if the future price of non-ferrous metals rises because of RMB devaluation, China’s non-ferrous metals and related commodity imports will increase accordingly. According to customs statistics, before June 2016, copper imports reached 2.31 million tons with an increase of 22.1%; crude oil imports amounted to 155.91 million tons with an increase of 16.5%; natural gas imports reached 22.55 million tons with an increase of 23.1%. Influenced by this trend, it is expected that in the second half of 2016 China's important non-ferrous metals and raw materials imports continue to increase rapidly, which will benefit the aluminum industry.
♦ Resolving excess capacity to maintain the balance between supply and demand
Oversupply caused by excess capacity becomes the biggest factor of suppressing the market price of non-ferrous metals. In the first half of this year, the decision-making sector highlights the importance of tackling excess capacity, and various provinces and municipalities have launched specific measures. It is expected that with the relevant policies and measures, the process of non-ferrous metal overcapacity will accelerate and some metals will be in short supply, resulting in fervent desire for the balance of non-ferrous metals market supply and demand.
From what has been mentioned above, it’s apparent that the advantages of China’s nonferrous metals market environment outweigh the disadvantages in the second half of 2016. In view of the change of global investment capital risks and low domestic stock, non-ferrous metal market prices will go up in the future, which will consequently cause the increasing supply.
Welcome to AL Expo 2016! Look forward to your participation sincerely!
Date: September 26th - 28th, 2016
Venue: China Import and Export Fair Complex