SMM 2017 Copper & Aluminum Summit: What will Affect Commodity Market in 2017?

SHANGHAI, Mar. 24 (SMM) – With accelerating of economy recovery in China, US and Europe, some commodities had supply-side structural reform. Capitals thus flowed into commodity market. Many commodity prices skied a rocket in 2016 and will those remain bull in 2017? What will affect commodity prices in 2017? Let’s see what five experts said on SMM 2017 Copper & Aluminum Summit.

Zhu Yi, Director of Bloomberg Intelligence Asian Metals & Mining, said that supply will affect commodity price in 2017 and eyes should be on supply-side structural reform and output cut after price rebound. Most producers were unwilling to slash output in 2016 for profits.

On demand front, commodity prices increased with improving demand last year and will demand keep improving in 2017, especially in the second half of year? Infrastructure construction remains decent from last year and eyes should be on effect from falling real estate industry.

On capital front, inflowing capitals helped commodity price surge last year and will this keep supporting commodities in 2017? Commodity price is expected to be positive in the first half of the year while it will meet pressure in the second half of the year with falling real estate market and out-flowing capitals.

Citi Research Commodities Strategy Tracy Liao indicated that attention should be on effect from China’s policies development, environmental protection and supply-side structural reform. As policies make different effects, commodities will see big divergence. In one period, if commodities move together in the first decade, those will be divergent later.

Besides, uncertainties over Black Swan events, such as Trump’s infrastructure construction plan and import tax adjustment, exchange rate after Brexit and presidential elections in Europe, France and Nederland, will lead to volatility commodity.

In addition, capitals will make bigger effect on commodity supply and demand, which has made great effect in 2016.

There were two systematic risks on March-April and November 11 in 2016 and systematic risk will add uncertainty over commodity price in 2017.

Dong Hao, Fund Manager of Kaifeng Investment, pointed out that demand will largely affect commodity price in 2017, as demand and supply is the main chance for trading. Economies in China, US and Europe were under recovery in 2016. In 2017, will global central banks raise rate of their own accord or not? Besides, macroeconomic factors and uncertainty over demand will lead to volatile commodity price in 2017. In this case, supply will be major chance for trading.

Senior Analyst Xi Meirong expected supply to make big effect on commodity price in 2017. China’s counted steel capacity was 18,000 tonnes lower than actual capacity, due to supply-side structural reform.

Besides, paper pulp tells real demand in a country. China’s industrial raw material price started rising from November 2015 while paper pulp rose from 2016, which was bulled by two large producers, and then declined again after 1-2 weeks. Hence, demand is actually lower than expectation in China.

Commodity price already advanced to the highest level in February 2017 as a whole and will decline continually in the rest of year.

Fu Peng, Fund Manager of Hongkong Clear Cover International Asset Management, indicated that supply and demand will affect global commodity price in a long time. Market players had high expectation over demand in Q4 2016, which was falsified in Q1 2017, and commodity price thus declined. Global commodity pricing power is shifted to China in recent years.

Supply largely affects commodity price, including copper, aluminum, lead and zinc prices. In addition, commodities interact with each other, such as rising ferrous metals will send nonferrous metals up, showing liquidity.

Capitals made great effect on commodity supply and demand in 2016, especially in China, which will be a big uncertainty in 2017.

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