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Commodity prices slip sharply after soaring in April

06-01-2011 09:07 BJT

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Global commodity prices slipped sharply this month, after soaring in April. In the first week of May, silver plunged nearly 30 percent, after climbing 150 percent last month. That was the largest single-week decline in 31 years. Other commodities, like oil futures and steel, are also taking the rollercoaster ride. Zou Yun takes a look at how declining commodity prices impact industries in China.

Chinese silver investors suffered big losses over the drop in international silver prices. After China's currency climbed against the U.S. dollar, the country's central bank raised the required reserve ratio, or RRR, by 50 basis points. The triple R hike led to another round of fluctuations in commodities prices.

"When commodity prices are on the rise, investors only pay attention to bullish news and ignore bearish news. The market fluctuations are usually driven by this kind of fear and greed," said Chang Qing, president of Jinpeng Futures Company.

After China's currency climbed against the U.S. dollar, the country's central bank
raised the required reserve ratio, or RRR, by 50 basis points. The triple R hike led
to another round of fluctuations in commodities prices.

But there's an upside to all this volatility. Declining commodity prices are benefiting some companies. Cheaper steel means reduced costs for many manufacturers.

Xin Zhiguo, chief engineer of Tianjin Longjia Door Company, said, "Profits are closely related with the price of steel. We barely made any profit in March with soaring steel prices. But now price are falling, we can make 20 to 30 yuan for each door produced."

Some analysts say, the decline in crude oil prices will reduce the purchasing expenditure of Chinese oil refining companies, by over 1 billion U.S. dollars. And purchasing costs of constructing roads, rail networks, and basic infrastructure will also be reduced. Experts say that will also ease the country's inflationary pressure.

Editor:Shi Jierui |Source: CNTV.CN

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