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LME Asia Week 2017: Seeking happier returns

LME Asia Week 2017: Seeking happier returns
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Pollution-related metals production capacity cuts are taking place in China, but return on investment (ROI) concerns also are likely to cause cuts, according to panelists at a session at LME (London Metal Exchange) Asia Week 2017, held in Hong Kong in May.

 

“There is overcapacity in China,” stated Luo Shengzhang, general manager of Shanghai-based Jinchuanmaike Metal Resources Company Ltd. He said there is “a lack of core competitiveness” among many players in the market. “You must change your competitiveness, or you will be phased out,” he commented.

 

Luo said the operating profit margin “is already so small” for many metals producers, who are in a situation where they “have to identify inefficiencies [and] need to make changes.”

 

Fellow panelist Arthur Fan, global head of commodities at Hong Kong-based Bank of China International, said China’s excess capacity has been a contributing factor toward an “impact of excess supply [that] will be long-term in nature.”

 

Fan said even after capacity cuts, the excess supply will still be found “in the global chain.” Over time after cuts are made, said Fan, “the price [of commodities] will be more satisfying.”

 

Hu Zhanghong, chairman and CEO of Hong Kong-based CCB International, said that after the commodity down cycle of 2008 and 2009, the financial sector “made use of the opportunities” available to investors and speculators in metal commodity markets. He listed speculation in the Shanghai rebar steel market as one example.

 

If capacity cuts in China result in “supply-side reform,” added Hu, then an era of less overcapacity could return market pricing closer “to the basic supply and demand equation.”

 

Hu also said that while the LME is uncertain how many active traders it has in mainland China as of 2017, one indicator could be what Hu says was a 30% drop in LME trading activity during the Lunar New Year (Chinese New Year) holiday. Through that figure, said Hu, “You get a feel for the impact of mainland players.”

 

Regarding short-term pricing in the metals market, Luo commented, “I don’t see anything that excites me about prices rising for copper, because of [anticipated] United States interest rate hikes and [global] copper inventory levels.”

 

Fan said the trading and speculating culture emerging in China likely will lead to volatility—and thus risks and opportunities—in the metals sector similar to what has happened in China’s real estate sector. “When people believe there will be a correction, many transactions will be based on this assumption,” he said regarding China’s real estate market. “The same will happen in the commodity markets, so there will be opportunities.”

 

The LME Asia Week 2017 metal seminar was 10 May at the Hong Kong Convention and Exhibition Centre.

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Source: Recycling Today
LME Asia Week 2017: Seeking happier returns
<![CDATA[Pollution-related metals production capacity cuts are taking place in China, but return on investment (ROI) concerns also are likely to cause cuts, according to panelists at a session at LME (London Metal Exchange) Asia Week 2017, held in Hong Kong in May.   “There is overcapacity in China,” stated Luo Shengzhang, general manager of Shanghai-based Jinchuanmaike Metal Resources Company Ltd. He said there is “a lack of core competitiveness” among many players in the market. “You must change your competitiveness, or you will be phased out,” he commented.   Luo said the operating profit margin “is already so small” for many metals producers, who are in a situation where they “have to identify inefficiencies [and] need to make changes.”   Fellow panelist Arthur Fan, global head of commodities at Hong Kong-based Bank of China International, said China’s excess capacity has been a contributing factor toward an “impact of excess supply [that] will be long-term in nature.”   Fan said even after capacity cuts, the excess supply will still be found “in the global chain.” Over time after cuts are made, said Fan, “the price [of commodities] will be more satisfying.”   Hu Zhanghong, chairman and CEO of Hong Kong-based CCB International, said…

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