![]() ![]() To the relief of metal producers, as of now, China is maintaining a certain price discipline and not flooding the market with metal, otherwise given the delicate state of economic growth, prices are bound to crash. If commodity-oriented sectors see a prolonged period of soft price trends, then they may consider pulling back on making fresh investments or delaying project implementation. In metals, for example, generally speaking, price realisations matter much more than production costs do for profitability and cash flows. Falling price realisations potentially lower profits of those projects that are being envisaged, seeking to move production out of China. And a peaking of interest rates augurs well for their working capital management.īut there’s a headwind as well. Therefore, there is some relief on the raw material cost. One, raw material prices too have been trending down as inputs such as coking coal and iron ore have turned cheaper and energy prices are off their peaks though they still fluctuate a lot. A slowing world economy is not good news for India’s metal industry’s export outlook either.īut there is some consolation. India’s steel output, in comparison, has risen by 7.4 percent although its share of total steel output amounts to a much lower 7.2 percent.Ĭhina’s situation acts as a headwind for realisations for domestic metal companies, which has been visible in the June quarter results and it’s likely to play out in the current quarter as well. ![]() But its crude steel output has declined for three successive months, as today’s Chart of the Day based on World Steel Association data shows. In steel, for example, in the first 6 months of 2023, it produced 57 percent of global steel production and is equally a heavyweight on the steel consumption front as well. It raises the risk of a surplus in a wide range of commodities, particularly in ferrous and non-ferrous metals, where possibly no single country equals China’s weight. Surplus metal sloshing around the world seeking markets is never good news. But the global economy is anyway being slowed down to curb inflation, so appetite has weakened. If its domestic economy softens, then its industries will have to rely more on export demand to fill orders. But China’s status as a big consumer and producer of commodities makes the situation a bit complicated. If deflation takes hold, then its aftereffects could be severe, says the report.Ĭooling prices may be seen as good news in some quarters such as companies which buy these to make consumer products, and consumers who buy from such companies. If the rest of the world, at least the major economies, is worried about bringing inflation under control without hurting growth (read this piece on loose financial conditions in the US), then China has a different problem. Its economy is finding the going tough. A WSJ report talks about how China’s factory prices of commodities such as steel, cement and chemicals have been falling for months, and that signs of deflation are becoming more prevalent. While these measures may have their uses, reversing the slide in the economy sooner will require stronger fiscal and monetary policy measures, to make credit cheaper, put more money in the hands of consumers to spend and encourage companies to invest. On Monday, the government released a 20-point plan to increase consumption, according to an AFP report seen on Moneycontrol. While policymakers and government departments have been announcing measures to revive growth, analysts don’t expect Beijing to unleash a broader fiscal stimulus, according to the FT report. But non-manufacturing PMI activity fell as well, to 51.5 in July from 53.2 in the previous month, which was lower than the level of 53 that was forecast by Goldman Sachs, according to an FT news report. The market itself would not be very surprised as the actual reading was slightly above the consensus estimate. The July reading of the official manufacturing purchasing manager’s index (PMI) was at 49.3, the fourth consecutive month of contraction. ![]() India’s commodity producers will be focused on the country's economic outlook as efforts by China’s policymakers to revive growth now are not bearing much fruit. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.Ĭhina is facing a slew of problems on the economic, geopolitical and also on the internal political front as the disappearance of its foreign minister proves. The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. ![]()
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