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China's Metals Industry Association Chief Warns of Speculation Risk amid Volatile Prices

9 Mar 2021 4:04 pm
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Mumbai Commodities Control - The head of China's base metals body on Tuesday said the industry should pay close attention to the risk of speculators driving prices away from fundamentals, warning that sharp fluctuations would "do more harm than good".

Ge Honglin, secretary of the Party committee at the China Nonferrous Metals Industry Association, made the comments as base metals including copper , nickel and aluminium fell sharply after hitting multi-year highs in February. The metals rally in early 2021 was partly driven by supply and demand fundamentals as well as expectations of a global economic recovery but did not rule out speculators had played a role.

Higher metal prices may help upstream companies to an extent but if they "blindly rise" beyond fundamentals that would "harm the entire industrial chain," he added, "It will inevitably raise the cost of downstream manufacturing, which will eventually be passed on to the end-users and even curb the willingness to consume," said Ge, who sees prices returning to fundamentals as coronavirus vaccines are rolled out and stimulus policies weaken.

Ge said China's copper and aluminium smelting capacity – accounting for around half the global total – will remain relatively stable over the next five years, although utilisation rates will increase.
China's plan to cap annual aluminium smelting capacity at 45 million tonnes is a "major contribution to the global aluminium industry," and will help achieve carbon neutrality in the sector, said Ge, who nonetheless does not see last year's bumper aluminium imports becoming a regular occurrence.

It is to be noted that base metals on domestic futures are trading heavily in red tracking international maret cues. MCX Nickel registered steepest fall of 3.26% at Rs 1162, MCX March copper is trading nearly 2.14% lower at Rs 681.15, Aluminium and Zinc on MCX are trading 1.23% and 1.80% weaker at 3.58 pm.

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