Near Over the past two weeks, overseas energy commodity prices have risen significantly, and the energy crisis has intensified. Supply chain bottlenecks, labor shortages, and declining energy supply elasticity are becoming major challenges facing countries today.
This round of large overseas price increases began with European natural gas. Natural gas is the main raw material for power generation in many European countries, but its natural gas depends on imports from Russia and other countries. Since the third quarter, Russia has suffered from severe cold weather, domestic natural gas demand has surged, coupled with factory fires and other factors, external gas supply has been restricted. Coupled with the shortage of wind power generation in European countries this year, the demand for natural gas power generation has surged, which has further aggravated the contradiction between supply and demand. Oil shortage, gas shortage and power shortage have swept all countries for a time.
Rising oil prices are also related to supply. On the one hand, OPEC did not increase production at the October meeting. On the other hand, the US shale oil did not expand production as scheduled this year. This led to increased market concerns about insufficient energy supply, and international oil prices broke through US$80. The reason why U.S. shale oil has not expanded is related to the Biden administration’s emphasis on climate issues and its unfriendly policies towards the fossil energy industry. According to the forecast of International Energy Agency (IEA), the supply of fossil energy such as coal and crude oil will continue to decline as the world’s major economies achieve the goal of net zero carbon emissions. Under the expected influence, the US shale oil investment and willingness to expand production have weakened, leading to soaring oil prices.
The increasing effect of commodity prices on prices has become more apparent. The PCE price index in the United States in August increased by 4.3% year-on-year, and the core PCE price index increased by 3.6% year-on-year, both reaching the highest level since 1991.Far beyond the 2% warning line of the Federal Reserve. Powell testified before Congress at the end of September, “As the economy continues to reopen and spending rebounds, we see upward pressure on prices, especially due to supply bottlenecks in certain industries. These effects are larger and longer-lasting than expected.” At the online meeting of the four major central banks in the United States, Europe, Britain, and Japan two days later, he further pointed out that the bottleneck of the supply chain has deteriorated and inflation has been pushed up for a longer period of time. The control of the epidemic is still a policy focus. Both of these two current conditions are "disheartening. ".
In order to alleviate the bottleneck of the supply chain, the United States has even begun to consider removing additional tariffs on Chinese products. U.S. Trade Representative Dai Qi stated on October 4 that the U.S. has no intention of "intensifying" trade tensions with China and is trying to "reconnect" rather than "disconnect" with China. The US government's previous methods of handling economic and trade issues with China have failed to resolve the fundamental concerns of the United States. The Biden administration will seek to handle economic and trade relations with China in a "new, comprehensive and pragmatic" way. On the 9th, Liu He, the Chinese leader of the China-US Comprehensive Economic Dialogue, and Dai Qi, the US trade representative, held a video call. Both sides agreed to continue communication in an attitude of equality and mutual respect, with a view to creating a sound development of the economic and trade relations between the two countries and the recovery of the world economy. condition.
In fact, the price issue has become a major concern of various countries’ policies to a considerable extent. Recently, more countries have joined the interest rate hike camp. Although the September non-agricultural data in the United States fell short of expectations, only 194,000 were added, the smallest increase since January of this year. However, as wage growth is still accelerating, the Fed’s original taper rhythm is not expected to be affected. It is possible to start reducing debt purchases and end QE in the middle of next year.
This policy expectation, superimposed on the recent US debt ceiling crisis, has jointly promoted the continued increase in US Treasury yields. The current 10-year Treasury bond yield has risen to 1.61%, the highest level since the beginning of June. Even though the US Congress recently reached an agreement to raise the short-term debt ceiling, it did not reverse the downturn in the Treasury bond market. With the rise in risk-free interest rates, US stocks, especially growth stocks represented by and NASDAQ , have seen a significant correction.
China is also facing the risk of "quasi-stagflation". In September, the official manufacturing PMI fell by 0.5 percentage points to 49.6%, and fell below the prosperity line for the first time since March 2020. Affected by the power cuts in various places under the pressure of dual-control energy consumption assessment, the production index dropped by 1.4 percentage points to 49.5%. At the same time, the purchase price of main raw materials rebounded by 2.2 percentage points to 63.5%, and the ex-factory price rebounded by 3.0 points to 56.4 %, both rose to highs in the past four months. It is expected that the year-on-year increase of PPI in September is likely to break 10%, reaching the highest level in decades.
The important reason for the power cuts is that coal prices are rising too fast and electricity prices are difficult to increase, resulting in a lack of motivation for power generation companies. The National Development and Reform Commission recently stated that it will take multiple measures to strengthen the adjustment of supply and demand, to ensure a stable supply of energy this winter and next spring, and to ensure the safety of residents' energy use. Including increasing energy supply resources through multiple channels, releasing advanced coal production capacity in accordance with laws and regulations, increasing coal imports in an orderly manner, and trying our best to increase domestic natural gas production; playing the role of "ballast" in medium and long-term contracts, etc. The State Grid also held an emergency video and telephone conference, requesting to increase the power allocation of resources across regions and provinces in the power grid, and to fully protect the bottom line of people's livelihood power consumption. Subsequently, Shanxi and 14 provinces (cities) signed a medium- and long-term coal supply guarantee contract for the fourth quarter, and Inner Mongolia requested to speed up the release of coal mine production capacity.
However, the contradiction between "market coal" and "planned electricity" is still difficult to resolve in the short term. The first National Convention after the National Day holiday made small steps in reforming and improving the market-oriented formation mechanism of coal power prices. try. The meeting required that, while maintaining the stability of electricity prices for residents, agriculture, and public welfare undertakings, the fluctuation range of market transaction electricity prices should be adjusted from no more than 10% and 15%, respectively, to no more than 20% in principle. For high-energy-consuming industries, prices can be formed by market transactions, which are not subject to a 20% rise.
In addition to price issues,Stabilizing growth and preventing risks are also the focus of current policies. The travel and consumption situation during the November holiday is far from returning to the pre-epidemic level. The central bank's survey showed that residents' willingness to consume in the third quarter further declined. In the face of downward pressure on the economy, the central bank stated in its regular third-quarter monetary policy meeting that it would “persist in putting service to the real economy in a more prominent position”. It should be pointed out that this statement appeared in the regular meetings of the first and second quarters of 2020. Since the middle of last year, with the acceleration of economic recovery, monetary policy has gradually shifted to normalization, and this term has also faded out in the subsequent quarterly meeting drafts. The reappearance after a lapse of one year may indicate that monetary policy will shift to structural credit.
In addition, this regular meeting also extremely rarely requires "maintaining the healthy development of the real estate market and safeguarding the legitimate rights and interests of housing consumers". Subsequently, the central bank and the China Banking Regulatory Commission held a real estate finance work seminar to reiterate "" The two maintain " statement. After the Evergrande incident continued to ferment, the regulators remained vigilant about the debt risks of real estate companies and possible secondary risks. It is expected that the housing mortgage loan policy of the rigid needs group is expected to usher in marginal easing, but the real estate market regulation has not turned.
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