Tungsten Industry Strategies Against the Background of Weak RMB

Tungsten market conditions on May 11, 2022

The domestic tungsten price generally continued to be weak and stable, and the market trading performance was still light. On the supply side, the production capacity and circulation of raw material resources are limited under the pressure of environmental protection and the disturbance of the epidemic; on the demand side, factors such as domestic and foreign epidemics and geopolitical factors are still impacting the consumption of tungsten products such as cemented carbide in downstream industries such as automobiless; on the macro side, external factors continue to disturb In the global capital market, the recent return of the RMB exchange rate to the 6.7 era has caused widespread concern among industry players.

Among the demand factors, the COVID-19 epidemic in April had an obvious negative impact on the production and sales of the automotive industry in the important downstream areas of tungsten products. Although the auto industry chain in Shanghai and other places is currently accelerating the resumption of work and production, it still faces great difficulties in full recovery, and the industry is full of blood. Expectations are generally after June. According to the statistics of the China Passenger Car Association: passenger car production in April was 969,000 units, a year-on-year decrease of 41.1% and a month-on-month decrease of 46.8%; exports (including complete vehicles and CKD) were 91,000 units, a year-on-year decrease of 17% and a month-on-month decrease of 15%; retail sales 1.042 million units, a year-on-year decrease of 35.5% and a month-on-month decrease of 34.0%; wholesale sales of 946,000 units, a year-on-year decrease of 43.0% and a month-on-month decrease of 47.8%.

Among the macro factors, the continuous rise of the RMB exchange rate is still an important opportunity and risk for my country's tungsten products exporters. In yesterday's WeChat, we analyzed the work that my country's tungsten products export enterprises can adjust themselves when the US dollar index is rising. Although some experts believe that the important resistance positions for the possible retracement of the RMB are in sequence at 6.74, 6.88 and 7.01; although the current onshore and The offshore RMB spread has widened, but we still recommend that foreign exchange be collected and settled as soon as possible to realize exchange gains.

As the most important factor in the change of the RMB exchange rate, the rapid rise of the US dollar index is the key factor leading to the depreciation of the RMB. The situation in Ukraine has lowered the confidence in the euro area. The yen has also continued to fall from recent lows. Various factors such as location are all external factors for the RMB to maintain its depreciation trend in the near future.

On the basis of this analysis logic, we suggest: (1) Enterprises with tungsten products export business, according to their own capital arrangements, plan to avoid future exchange rate decline losses through hedging business through relevant banks; (2) Companies with imported tungsten raw materials Enterprises should purchase foreign exchange at the right time and maintain a certain foreign exchange position to achieve exchange rate risk hedging according to the capital needs for importing raw materials. In general, the depreciation of the RMB is beneficial to the improvement of the performance of my country's tungsten industry. The whole industry is a net export trade. The export products are settled in US dollars, and the domestic raw material procurement is calculated at the cost of RMB. The relative depreciation of the RMB is bound to increase the RMB revenue of the whole industry. Interest rates will also increase proportionally.