Difficult economic data and new regulations by the Chinese government sent Asian stock markets temporarily into a tailspin today. Western commodity exchanges unimpressed by Chinese data. Tight supply situation for aluminium continues to drive prices up. European delivery times for raw materials such as stainless steel at their highest level in more than 20 years.
In recent days and weeks, the Chinese government has increasingly intervened in the domestic market. Not only for steel products (end of some steel tax rebates and new export taxes), but also for other metals and for Chinese technology companies. Among other things, this has caused some stocks to fall on the Asian stock exchanges.
In addition, China is struggling with extreme weather conditions, problems in energy supply and currently not the best figures for manufacturing development. All this contrasts with strong figures from the United States and Europe.
Complicating matters further was a message from the CPC Central Committee Politburo dated 30 July 2021. This calls for the Chinese Carbon Peaking Action Plan to be implemented in a coordinated manner to bring the two currently prevailing extremes to one level.
Now a loud part of the world is worried about the market in China. An unnecessary clamour, as the Chinese market works best in a planned environment.
The Chinese government is currently taking regulatory action, no question.
All these points are intended to improve supply and availability in China and lead to the Chinese economy growing and remaining competitive on the international market.
Looking at the stable values in the Western markets, the excellent results from July 2021 and the fact that many post-Corona infrastructure projects have not even fully started yet, it is only understandable that China tries to keep its products in the country.
For just as the Western world protects its markets, China must also protect its planned economy from the all-too-free market economy. The free market economy does not stick to annual plans.
The turmoil that the Chinese regulatory frenzy has brought to the Asian markets is therefore, in our eyes, only of a temporary nature. And if on the one hand shares of large steel companies in China fall, in the same breath the shares of important machinery manufacturers rise – as these are at least as important for the transformation of the Chinese market as the manufacturers of preliminary steel products.
After the turmoil on the Asian markets first sent nickel on the LME down on the morning of 2 August 2021, it has since already risen by almost $400 per tonne and is currently up at $19715 per tonne.
Aluminium futures on the LME are up 0.55% at around $ 2612 per tonne.
Steel and stainless steel futures on the SHFE are down today, but we think this is a temporary effect at the moment. This is countered by spot prices, which are up just under 1% in Chinese HRC and up to $40 in stainless steel for individual grades.
Aluminium prices climbed to their highest level in more than three years on Friday, 30 Juil 2021, following more power outages in the key metal-producing province of Yunnan and concerns about reduced supplies from top producer China.
However, after peaking at $2638 per tonne, aluminium futures on the LME briefly slumped to $2585 per tonne around 5pm on Friday. This can best be explained by profit-taking before the turn of the month. Today, Monday, aluminium has already recovered and is back at $ 2612 per tonne on the LME.
It is assumed that the supply situation for aluminium will remain tight. This is also shown by the aluminium futures on the SHFE and reports of new highs for US aluminium premiums.
According to data from IHS Markit, the European and especially the German market is struggling with supply shortages. Delivery times for important raw materials, such as stainless steel, increased in July to the greatest extent since 1997. Germany, which has not seen such a sharp increase in delivery times since 1998, has been hit the hardest.
This is having an impact on prices, which in turn is having an impact on competitiveness.