Rising metal prices to affect key industries

Rising metal prices to affect key industries

Geopolitics, Covid-19 driving recent trend

Off-cuts from newly formed copper cathode sheets at the KGHM Polska Miedz SA copper smelting plant in Glogow, Poland. (Photo: Bloomberg)
Off-cuts from newly formed copper cathode sheets at the KGHM Polska Miedz SA copper smelting plant in Glogow, Poland. (Photo: Bloomberg)

Rising commodity prices due to a rise in domestic consumption is expected to negatively impact the construction, electrical appliance and electronic component industries, analysts say.

However, the effect on share prices may not be felt at this time as investors are speculating on first-quarter results.

The hike of commodities prices has also put pressure on the SET Index as it dipped to 1,559.23 points, down 0.03 points or 0.02%, after a brief spark in the morning session on Tuesday. The government announced on Tuesday it would control steel prices, which have risen by about 25% year-to-date.

Copper reached the highest price on Tuesday in about a decade as global growth stirred a rally in the metals markets. Commodities are advancing towards highs seen during the last supercycle in the early 2000s when prices spiked with a surge in Chinese orders.

Natapon Khamthakrul, vice-president at Yuanta Securities, said iron prices year-to-date have risen by 25%, while copper increased by 26% -- 3% in this week alone.

Mr Natapon said the surge in commodity prices was caused by announcements by the US and Chinese governments about new investments, the prospect of a global economic recovery, a weakening US dollar, and geopolitical conflicts between the US and China, and between China and Australia that have negatively affected the transport of commodities.

Another factor was the flare-up of Covid-19 in India affecting the sea transport of metals.

"Commodity shares are likely to remain high until the third quarter thanks to increasing domestic demand. The third quarter is also the pick-up cycle for metals, with accelerated transport. However, the situation must be reassessed after the third quarter," he said.

Mr Natapon said the government's large construction projects to stimulate the economy will drive the private sector to import commodities, avoiding price increases after projects begin.

He said higher commodity prices, especially for iron, will affect share prices of construction, auto parts, gas tanks, conduit pipe and structural steel pipe businesses. An increase in the global copper price could also drive prices of electronic home appliances such as air conditioners and electronic parts to increase.

Therdsak Thaveeteeratham, senior executive vice-president at Asia Plus Securities, said more expensive copper will increase the price of electronic parts, but should not reduce profits as demand remains strong.

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