The depreciation of RMB to boost the competitiveness of China's metal export
Right now, as the Chinese government takes action to guide the devaluation of the renminbi, the market expects the above-mentioned exports to the price-sensitive metals industry to accelerate. Since the beginning of this year, the export of related metals has increased by more than 25%. The increase in the market share of Chinese producers will depend on whether the RMB will fall further after the initial depreciation.
Analysts said that the devaluation of the yuan against the dollar by 3% may not stimulate overseas sales in itself, although the depreciation of the yuan has added a bit of competitiveness to Chinese manufacturers. The export of these companies has led politicians in the United States, Europe and India to call for punitive trade measures.
Economists pointed out that one reason for China's adjustment of its exchange rate policy is to stimulate domestic exports. The export of related metals industry was originally one of China's fast-growing export industries. According to Citi Research, in the first seven months of this year, China's aluminum exports increased by 28.3% year-on-year to 2.87 million tons, and steel exports increased by 26.6% to 62.13 million tons.
Market analysts say they are skeptical that exchange rate movements will immediately have an impact on industrial metal trade trends. Wallachbeth Capital Managing Director Ilya Feygin pointed out that he does not believe that the depreciation of the renminbi itself is sufficient to push China to significantly increase exports of steel and aluminum; he believes that at this stage, the devaluation of the renminbi will be more restrained, and at the same time, China will tackle the threats to financial stability.
The global metal market has already felt the impact of large-scale expansion of production capacity by large Chinese metal companies in recent years. Due to the slowdown in China's domestic economic development and the decline in demand for residential construction and other industries, these companies have too much capacity available. This is also the reason why a large amount of cheap Chinese steel is pouring into the global market.
This move has angered steel producers in many countries. In India, for example, the country announced last week that it would raise import tariffs on some steel products, which is the second increase in two months.
Daniel Hynes, an analyst at Australia and New Zealand Banking Group Ltd, said that steel is the most prominent. China’s exports of cheap steel to Europe and North America have encountered enormous resistance in these countries; even China’s Export prices can be lowered even more, and the ability of producers to benefit from the devaluation of the renminbi may be offset by such complaints initiated by the World Trade Organization (WTO).
The WTO, which is headquartered at home and abroad, has received more and more complaints about dumping at a price lower than the cost. Last year, the number of cases of dumping steel and aluminum products for China or other trading partners reached 89, more than double the 43 in 2010.
Matt Meenan, head of media at the US-based Aluminum Association, said it is clear that China's exports have been changing and they are paying close attention to this. The association represents primary aluminum producers in the US and other countries.
However, analysts at ANZ said that although the depreciation of the renminbi has added a challenge to the global metal market, only a considerable decline in the renminbi will trigger a new wave of China that was expected at the beginning of the devaluation of the renminbi. The wave of exports.
Blu Putnam, chief economist at the CME Group, points out that the renminbi has an incredibly strong trend against most global currencies. The Chicago business trades all metal futures contracts. Putnam said that a small devaluation of the renminbi is unlikely to trigger significant market volatility in major importing countries such as Brazil. These importing countries are also facing the problem of a weak domestic economy.
But if China's metal exports increase again, the impact will spread to the world.
Australia's BlueScope Steel Ltd. said it is working to maintain the competitiveness of the Port Kembla business relative to low-cost steel from other regions, while working to find a transformative approach to reducing costs and maintaining the plant's operations.