China Scores Win as Inflation Steadies After Commodities Fight

A worker stands next to piles of steel reinforcing bar at a metal stock yard in Shanghai. (Photographer: Qilai Shen/Bloomberg)

China Scores Win as Inflation Steadies After Commodities Fight

Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

If the goal of Beijing’s efforts to tame the commodities rally was to halt an escalation in manufacturing costs, the government can claim some initial success.

Producer prices rose 8.8% from a year earlier in June, easing from a 9% jump in May. While that’s hardly a huge decline, it does mean factory-gate prices are being contained as Beijing places more focus on demand conditions.

The figures were largely in line with expectations as industrial commodity prices were broadly flat to lower over the course of June. Spot prices for steel coils fell more than 4% last month after notching a record in May, while spot copper lost 7.1% in June after rising to the highest since 2006 in May.

While the precise impact of Beijing’s high-profile, multi-pronged campaign to batter down commodities prices is arguable, the implications of softer prices are becoming clear. A less frenzied commodities market and peak inflation give authorities more policy space to tackle rising pressures on the economy.

This week’s surprise dovish tilt from China’s State Council, by mooting a possible boost to banking liquidity, suggest a government that’s now ready to prioritize growth over the commodities battle. A flurry of data next week might confirm why, with trade figures due Tuesday, before second-quarter growth numbers on Thursday.

Events Today

(All times Beijing unless shown otherwise.)

  • China June aggregate financing & money supply due from this date
  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, ~15:30
  • China International Aluminum Industry Exhibition in Shanghai, day 3

Today’s Chart

China’s solar stock boom just lifted the sector’s biggest company past two of the country’s three oil giants in terms of market capitalization. Longi Green Energy Technology Co.’s value on Thursday passed that of refiner Sinopec for the first time.

China Scores Win as Inflation Steadies After Commodities Fight
Markets Latest
Copper +0.3% in ShanghaiCrude oil +1.4% in Shanghai
Iron ore -1.1% in DalianSteel rebar +0.1% in Shanghai
Thermal coal +2.4% in ZhengzhouCoking coal +1.6% in Dalian
Live hogs +0.2% in DalianCorn -0.3% in Dalian
Soybeans +0.5% in DalianRubber -0.9% in Shanghai

On the Wire

Energy use and carbon emissions dropped almost everywhere in the world in 2020, with one major exception: China. The country’s consumption of fossil fuels and renewable energy rose last year, even as global demand fell 4.5%, according to BP Plc.

  • China’s Clean-Energy Ambition Unfazed by Carbon Trading Delay
  • China’s Didi Crackdown Is All About Controlling Big Data
  • CHINA INSIGHT: Consumption Looks Up, Supply Stable - Gauges
  • Chinese Coal Mines Restore Output Following Shutdowns: Sec. News
  • Solar Giant Longi Is Now China’s No. 2 Energy Company: Chart
  • Elon Musk’s China Battery Partner Is Now Richer Than Jack Ma
  • China’s Copper Output Slips in June on Maintenance, SMM Says

The Week Ahead

Monday, July 12

  • China farm ministry’s monthly supply-demand report (CASDE)

Tuesday, July 13

  • China’s 1st batch of June trade data, incl. steel, aluminum & rare earth exports; steel, iron ore & copper imports; soybean, edible oil, rubber and meat & offal imports; oil, gas & coal imports; oil products imports & exports
  • Singapore Iron Ore Forum 2021

Wednesday, July 14

  • Singapore Steel Forum 2021
  • Shipowners Forum Singapore 2021

Thursday, July 15

  • China new home prices for March, 09:30
  • China June output data, incl. steel & aluminum; coal, gas & power generation; and crude oil & refining. 10:00
    • China retail sales, property investment, fixed assets investment, jobless rate
    • China 2Q GDP
    • China 2Q pork output and inventory levels
  • China’s monthly 1-year medium-term lending facility rate
  • Singapore Coking Coal Conference 2021
  • USDA weekly crop export sales, 08:30 EST

Friday, July 16

  • Rio Tinto quarterly production report
  • China aggregate financing & money supply for June due from this date
  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, ~15:30

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.