China-Commodity Price Decline

Shotlist

Guangzhou City, Guangdong Province, south China – Recent (CCTV – No access Chinese mainland)
1. Various of TV screen, stereo production in factory
2. Various of components
3. Li Yongfeng, Executive Deputy General Manager of Guangzhou Changjia Electronic, checking component
4. SOUNDBITE (Chinese) Li Yongfeng, Executive Deputy General Manager, Guangzhou Changjia Electronic (partially overlaid with shot 5):
” In June, the prices of copper, aluminum and iron dropped by 14 to 30 percent, lowering our total cost by about 15 percent and driving up our profit by five to 10 percentage.”
++SHOT OVERLAYING SOUNDBITE++
5. Li checking component
++SHOT OVERLAYING SOUNDBITE++

FILE: Tongling City, Anhui Province, east China – March 2021 (CCTV – No access Chinese mainland)
6. Various of electrolytic copper production

FILE: Huludao City, Liaoning Province, northeast China – Nov 14, 2017 (CCTV – No access Chinese mainland)
7. Various of zinc product production

FILE: Ningbo City, Zhejiang Province, east China – Nov 2020 (CCTV – No access Chinese mainland)
8. Various of aluminum welding wire production

Shenzhen City, Guangdong Province, south China – Recent (CCTV – No access Chinese mainland)
9. SOUNDBITE (Chinese) Hou Jun, president, Huatai Futures Research Institute (partially overlaid with shot 10):
“The decline in (commodity) prices shows market participants are less optimistic about most countries’ economies. Since March, the United States has raised interest rates by 150 basis points, complicating markets’ outlooks on inflation and economic development. As people have become more pessimistic about the economy, global commodity prices have fallen sharply.”

FILE: Huizhou City, Guangdong Province, south China – June 2022 (CCTV – No access Chinese mainland)
10. Oil refinery facilities

FILE: China – Date Unknown (CCTV -No access Chinese mainland)
11. Various of oil refinery facilities

Storyline

From copper to oil, the prices of many global commodities are sliding as fears of a worldwide recession grips markets.

Copper plunged below 7,330 U.S. dollars a ton Wednesday on the London Metal Exchange, its lowest level since November 2020.
(https://www.bloomberg.com/news/articles/2022-07-12/goldman-cuts-copper-outlook-as-energy-crisis-threatens-demand
https://www.lme.com/Metals/Non-ferrous/LME-Copper#Trading+day+summary )

Other industrial metals saw similar price decreases last month, with zinc, nickel and aluminum prices dropping by about 22, 24 and 13 percent respectively.

Two global oil benchmarks also tumbled. U.S. West Texas Intermediate (WTI) crude futures for August delivery fell by more than 16 percent and Brent crude futures for September dropped by over 14 percent.

The silver lining is that falling commodity prices mean a lower material costs for Chinese manufacturers.

Guangzhou Changjia Electronics manufactures and distributes TVs and stereos in Guangzhou City in south China’s Guangdong Province.

As copper, steel, and plastic account for nearly 80 percent of its total product costs, the decline in commodity prices is actually good news for the company.

“In June, the prices of copper, aluminum and iron dropped by 14 to 30 percent, lowering our total cost by about 15 percent and driving up our profit by five to 10 percentage,” said Li Yongfeng, the Executive Deputy General Manager of Guangzhou Changjia Electronic.

Experts attribute the widespread decline in commodity prices to bearish bets on the global economy.

“The decline in (commodity) prices shows market participants are less optimistic about most countries’ economies. Since March, the United States has raised interest rates by 150 basis points, complicating markets’ outlooks on inflation and economic development. As people have become more pessimistic about the economy, global commodity prices have fallen sharply,” said Hou Jun, the president of Huatai Futures Research Institute.

According to the World Bank, the COVID-19 pandemic, Ukraine crisis and climate change are together reshaping the global commodity market in a lasting way.