CDRC: bulk commodity market price expected to go higher

Recently, China Commodity Development & Research Center (CDRC) published the commodity confidence index (CCI) in September, and CCI in September was 0.05. Experts expressed that, the continuous rise of July and August had digested the good possibility of “golden September and silver October” in advance, while the supply side reform was hindered, and the bad possibility such as rate increase by Federal Reserve Board, thus these became the trap of the subsequent market. The market in September may be good, but the effect will be inferior to that of August.

 

 

Data shows that, compared with the previous month, CCI fell in September (0.15 in August), to constitute the continuous red line with August; it greatly rises year on year (CCI was -0.18 in September 2015).

Liu Xintian, the expert of CDRC pointed out that, ending of CCI in September indicated that the market confidence is optimistic. The reasons by analysis mainly include two points: 1. The market performance in August was good. Data shows that, the monthly rise of the crude oil is more than 10%, together with the steam coal having a monthly rise of nearly 15%, becoming the rise market leader; the commodity often rose but rarely fell in August, and the average rise of 58 key species was 2.76%. The market performance accords with the prediction of CCI in August, and even contributes more. 2. The market is hopeful to the situation. September is a conventional peak period, and there are market potentials for chemical industry, nonferrous, textile, agricultural sections. By reference to the continuous rise of February, March, and April in the first half year, it is a big probability event for the market in the next half year to copy the market performance in the first half year. 

Liu Xintian predicts that, according to the performance volatility of CCI, CCI in October may continue to decline by following the falling trend of CCI in September, and in consideration of that the CCI value in September is lower, there is a big probability for CCI to decline below the boom and bust line or the black closing line. The market in the fourth quarter may squeeze out foam, and go out of the bottom market.

As the weather vane of the commodity, the international price of the crude oil also continues fluctuation. The latest data shows that, the CCI (commodity confidence index) of the crude oil in September is -0.03, and FPI (commodity future price index) is -1.69. It reflects that, most market participants are mainly bear for the trend of the crude oil in September, lacking of market confidence. The average price of the crude oil in September may be USD 43/ barrel.

Statistics shows that, the international oil price in early and middle August rebounds off quickly from USD 39/ barrel, up to USD 49/ barrel at most, slips slightly at the end of the month, and closes at USD 44/ barrel. The whole trend is from high to low, falls from the high point, and USD 50/ barrel becomes the “ceiling” again. The experts in the industry points out that, the price fluctuation of the crude oil shall not be analyzed separately, and statistics shows that, the price of the steam coal, natural gas which are also basic energy species in August rise, forming linkage and echoing with the price of the crude oil; the prices of these three species rise synchronously, which is rarely seen in recent years, thus it can be seen that, whole energy section is in a rising situation, and this restrict each other with the price of oil, gas and coal from 2012 to 2015, even they compare the low prices to form a sharp contrast. It indicates that the game “Killers of the Three Kingdoms” of oil, gas and coal enters into a new stage. It can be found by deep analysis that, the new stage starts after the Spring Festival of 2016, and so far, the rises of three species have exceeded 30%.

The rise (15%) of the steam coal in August is higher than that of the crude oil (10%), natural gas (less than 3%), and the price of the steam coal has approached CNY 500/ton (closing at CNY 494/ton at the end of August), thus compared with the beginning of the year, the rise has approached 40%, and the insiders agree that, the high-position risk is obvious. In fact, there are “high-position” risks in the crude oil and natural gas. The price of the crude oil fell after rising in August, because it had reached the high position within the present period, and the “price” gravity pulled it down.

Liu Xintian holds that, the ceiling of the crude oil in 2016 is USD 50/ barrel, the ceiling of the steam coal is CNY 515/ton, and the ceiling of the natural gas is USD 3/mbtu. In view of “Killers of the Three Kingdoms” still at the high price competition stage, their respective bottoms have not been clear. There may be a divide in late September, and it is necessary for the oil, gas and coal to explore the bottom of the period.