Under the double cycle, the non-ferrous market faces the new development market and looks forward to the listing of more international non-ferrous derivatives.

SMM News: on the 19th, the Shangyan Nonferrous Forum hosted by the last issue was held in Shanghai. With the theme of "Innovation promotes double cycle and new development of service entities", this forum specially invited a number of industry experts to discuss such topics as the new development pattern of double cycle and the transformation of non-ferrous industry, the current situation of non-ferrous metal industry, the internationalization of non-ferrous metal futures market and opening to the outside world.

Under the double cycle, the non-ferrous market is facing new development.

In the view of the participants, affected by the COVID-19 epidemic this year, although there has been a phased correction in the global economy, under the condition that the epidemic was effectively controlled earlier, the Chinese economy entered a period of recovery ahead of overseas markets.

But this recovery period, compared with the past, Citic Securities cycle industry chief analyst Li Li believes that there are certain differences in the areas of investment, consumption and manufacturing. Under such circumstances, the non-ferrous industry will also usher in new development opportunities and challenges.

Under the concept of dual-cycle development in China, Liao believes that the non-ferrous industry needs not only higher trade in goods and services in the future, but also stronger mutual investment to promote the construction of domestic factor market and consumer market.

Especially the internal circulation demand, in his view, essentially comes from the metropolitan area, industrial upgrading and consumption upgrading, and these will also bring some new development opportunities to the non-ferrous industry.

Taking the development of urbanization in China as an example, it plays an important role in promoting the long-term logical consumption of non-ferrous industry, especially copper and aluminum. As for consumption upgrading and industrial upgrading, under the background of the development of emerging industries, some new requirements are put forward for the supply, demand and structure of the whole non-ferrous industry chain.

There are not only opportunities but also challenges. He said: for example, the intensification of competition in science and technology is likely to lead to the continuous emergence of "black swan" events, which will have a certain impact on the logic of industrial development; more and more overseas investment in domestic non-ferrous industries will also lead to security problems in the supply chain of domestic non-ferrous industries; in addition, continuous price fluctuations will also lead to a large number of risks, which will have an obvious impact on the long-term development logic of enterprises.

In particular, the domestic copper industry, Hu Changping, deputy secretary general and director of the heavy Metals Department of the China Nonferrous Metals Industry Association, believes that it is likely to develop into a "double extrusion" situation. "after all, China is committed to expanding the import of middle and high-end products, and once the medium-and low-end products produced in our country cannot get out, the copper industry is likely to become a double squeeze, and the industry needs to pay special attention to this."

In his view, although in the global epidemic prevention and control phase from 2020 to 2022, foreign countries will most likely rely more on China's non-ferrous metals, especially the copper market. However, once the epidemic is stable, there is a high probability that all countries will gradually change from pursuing the maximization of capital interests to taking into account the relative full employment of their own countries and regions, that is to say, to the direction of rebalancing or industrialization. Under such circumstances, China's copper industry needs to develop steadily and avoid rash advance.

"and derivatives instruments, during this period, will also play a great role." An industry veteran who spoke on condition of anonymity told reporters.

The utility of non-ferrous derivatives tools has been verified under the epidemic situation.

According to Shang Fushan, vice president of the China Nonferrous Metals Industry Association, under the influence of the epidemic, China's non-ferrous metals industry bottomed out in the first three quarters of this year and recovered in the second and third quarters. From January to September, the output of 10 non-ferrous metals reached 45.176 million tons, an increase of 3.5 percent over the same period last year. The profits of large-scale non-ferrous metal industrial enterprises reached 110.07 billion yuan, an increase of 2.9% over the same period last year. Driven by the resumption of production in the downstream manufacturing industry and new infrastructure, the apparent demand for non-ferrous metals has gradually stabilized, import and export trade has basically stabilized, positive factors have significantly increased, and market expectations have continued to improve.

Among them, non-ferrous derivatives instruments play a great role in the case of large fluctuations in market prices.

Take Jiangxi Copper, a leading enterprise, as an example. Wang Huiying, vice president of Jiangxi Copper Trade Division, told Futures Daily that during the epidemic, the downstream processing industry production was once affected. Jiangxi Copper once had a relatively high inventory in the sales of finished products, and the enterprise capital circulation was also affected to a certain extent. As an enterprise with a deep understanding of futures, Jiangxi Copper quickly delivered nearly 10,000 tons of finished products through futures, reducing its inventory. And under the promotion of the national resumption of work and production, its production quickly returned to the normal state.

Similar problems also occur in the domestic tin market. According to Wu Jianxun, deputy general manager of Yunnan tin industry, under the influence of the epidemic this year, the price of tin in China fell sharply and even hit the production costs of many mines. However, thanks to the tin futures market maker system introduced last year, the continuity of domestic tin futures contracts has been significantly improved.

In this context, Yunnan tin industry has not only greatly reduced inventory costs, but also obtained great support for its downstream production costs through hedging operations on continuous contracts such as 06, 07, 08 and so on. At the same time, it has laid a good foundation for the rebound of its performance in the second half of the year.

In fact, in the view of Chen Jinhua, vice president of founder products, derivatives and futures markets are equivalent to the body's "nervous system" for physical enterprises, once these tools are effectively applied, it is undoubtedly of great significance for Chinese trading enterprises, especially for the copper industry as a whole.

Looking forward to the internationalization of more existing varieties under economic globalization

For the listing of international copper futures, Wang Huiying said that Jiangxi Copper will actively participate in this market. After all, Jiangxi Copper buys a large amount of copper raw materials abroad every year, and these raw materials are priced by LME, so that Jiangxi Copper naturally needs to hedge in the LME market and the domestic market. However, there is a price difference in the domestic and foreign markets, which has a certain impact on the profits of enterprises. "the characteristics of RMB-denominated and net-worth trading in international copper contracts give us the opportunity to narrow the price gap at home and abroad, which is undoubtedly a good thing for the operation of enterprises."

Chen Jinhua agrees with this. In his view, the variety of copper, if not around a global trade, a lot of the value chain can not be formed. Especially today, with the continuous development of domestic enterprises, some very good futures tools will undoubtedly help China's "going global" enterprises to become bigger and stronger to a certain extent.

Especially at present, the inventory in Shanghai and its own supply and demand scale have reached a certain proportion. He believes that the fine hedging management on this basis will undoubtedly contribute to the further optimization of the costs of related industries.

In addition, he believes that the listing of international copper futures will not only form a good interaction with the existing market, but also provide more opportunities for the asset management market. "for example, there may be certain trading opportunities between international copper and Shanghai copper because of different fundamentals."

In this context, the above-mentioned industry veterans, who spoke on condition of anonymity, said that they are looking forward to the internationalization of copper as a prelude to gradually promoting the internationalization of existing non-ferrous metal futures.

As a matter of fact, there are plans for this in the previous issue. It is understood that the future will be based on the domestic cycle, serve the domestic and international cycle, adhere to the direction of internationalization, marketization, and the rule of law, and make efforts in the following aspects. First, to refine and deepen the existing varieties, adhere to the market-oriented, improve futures contracts and supporting rules, optimize the layout of delivery resources and warehouses, and improve the operation quality of the market in an all-round way. The second is to persist in opening wider to the outside world, scientifically co-ordinate both domestic and international markets, and steadily promote the internationalization of other non-ferrous metal futures. The third is to increase the supply of high-quality products, actively prepare for the listing of alumina futures, and further enrich the series of ferrous metals, orderly promote the research and development of new energy vehicle power battery-related metal futures, non-ferrous metal index futures and other reserve varieties, and serve the development of strategic emerging industries.

In fact, for the alumina futures mentioned by it, Li Guangfei, deputy general manager of Chinalco International Trade, said that the market is very much looking forward to it.

According to reports, the current international alumina pricing, mainly uses the "spot index price". In addition to spot index pricing, there is also a proportional pricing model for domestic alumina pricing. However, the two domestic models often deviate from each other, which leads to the continuous state of Hedong and Hexi for three years between electrolytic aluminum and alumina enterprises. Under such circumstances, the relevant enterprises are in urgent need of a fair price that can really reflect the supply and demand of the market to help adjust.

Considering the unique price discovery function of futures itself, as well as the position of China, the world's largest alumina production and consumption market. Li Guangfei believes that it is necessary to increase the "Chinese factor" in alumina pricing through the listing of alumina futures.