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Metal Prices Stabilize on Stimulus Plan for Advanced Material Industry
Sep 7,2011 14:31CST
smm insight
China's 12th Five-Year Plan for the development of the country's advanced materials industry today is expected to boost metal demand in future.

SHANGHAI, Sept. 7 (SMM)--China will soon unveil the 12th Five-Year Plan for the development of the country's advanced materials industry today, which is expected to boost metal demand in future, pushing up base metal prices on the SHFE market.

During the 1st China International Advanced Materials Industry Exhibition opened today, “12th-5-Year Development Plan for New Materials Industry” is scheduled to be released. According to SMM sources, self-innovation, upgrade and “five principles” will be key factors for continuous and rapid development of the advanced materials industry. At present China produces huge quantities of advanced materials, but is still far from being a top new materials producer due to relatively less advanced technologies.

In order to realize rapid development of the industry, China will draw specific plans for new materials demand in certain key sectors including new energy, bio-pharmacy, new generation of information technology, energy conservation and environment protection, modern time transportation which includes new energy automobile and aerospace etc. Large scale projects will be implemented to provide support for development of key new materials.

Though technology/process barriers exist for development of high-end materials, huge potentials also exist for application of import substitution strategy. Furthermore, it will become increasingly difficult and even impossible to trade market and capital for advanced technologies from abroad. Therefore, China needs to break through relevant technical bottlenecks on its own. The so-called barrier actually comes from formations and processing techniques and therefore can be removed.

Considering China’s relatively less-advanced technologies in high-end materials and severe reliance on imports, import substitution provides huge development space for Chinese enterprises. From a long-term perspective, it helps China explore overseas markets with its cost advantage. Development of high-end materials used in key industries will also generate downstream demand, thereby leading to explosive demand growth for relevant products. Future demand for base metals and rare earths which are core raw materials for new materials is also expected to see significant growth.

In addition, Obama will Thursday announce the plan to boost jobs and infrastructure investment, and G7 summit will be held Friday, both of which will steady Chinese investors’ confidence and help base metals stop declining. But investors recently are awaiting China’s macroeconomic data for August due Friday, and before that markets will keep cautious. After adjustments for a long time, overall base metals prices have approached the average prices of the year, and are not expected to fall significant in future. Therefore, SMM advises that investors participate in the markets after the release of short-term risks in the markets. 

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