Commodities price rebound shows better supply and demand

The price rebound of commodities in the second half of last year showed the improvement in the relationship between supply and demand, experts said at the release of the Chinese industrial economy annual report on Monday.

The rise of PPI (producer price index) was a rebound after the sharp drop for 60 consecutive months, said senior statistician Jiang Yuan.

"The price of staple commodities slumped to the lowest level compared with all other commodities in early 2016. The production of steel was 10 times higher than that in 1994 while the price was 50 percent lower, which is very unreasonable.

"While the price of coal has been increased from 300 yuan ($43.7) per metric ton to 600 yuan, some say it's too high. However back in 2012, the unit price was 1,000 yuan," he said.

Last year, the coal capacity was reduced by 100 million tons as part of the national program to reduce overcapacity in coal and steel industries, which to some extent led to the drop in supply and the rise in price, he said.

"Much of the capacity removed was dead and zombie mines that didn't make any profit," he said. "We should insist in the reduction of overcapacity to avoid the sudden slump of price striking the market again."

He said the demand of downstream industries has also improved, mainly reflected by the rapid growth in import. "Otherwise the price would have increased more," he said.

Prepared by experts from the Institute of Industrial Economics of Chinese Academy of Social Sciences, the 2016-2017 annual report of Chinese industrial economy was released by China Social Sciences Press in February. The launch of English version is under discussion, according to the president of the press Zhao Jianying.

According to the report, the industrial added value growth rate above a designated scale was estimated to be 6 percent in 2017.

"In 2016, Chinese industrial economy was stable with a tendency to slow down and experience a limited recovery," said Huang Qunhui, director-general of Institute of Industrial Economics of Chinese Academy of Social Sciences.

"The industrial export and PPI showed growth. We must push forward the supply-side reform and improve the quality of industrial production," he added.