One Side Effect of China’s Market Crash? Cheaper Mobile Phones

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This is part two of an analysis of how China’s recent stock market crash affects neighboring India.

The Indian arm of global credit rating agency Fitch said with soft demand in China, base metal prices had gone down in the range of 2-21% in the first six months of 2015.

Free Download: Latest Metal Price Trends in the July MMI Report

On a year-to-date basis, Chinese domestic hot-rolled coil steel prices declined by 21%. London Metal Exchange nickel prices are down by about 12%, LME copper prices by 9% and China alumina prices by about 10%. In the last one month, iron ore prices dropped by 20%, Shanghai steel prices by 16.4%, and zinc prices by 7%.

What’s This Mean for Steel?

In reference to India’s steel sector, rating agency Ind-Ra pointed out that Indian manufacturers were already struggling with low capacity utilization, and lukewarm domestic demand was unlikely to benefit the margins of manufacturing units in the short term.

So was there any silver lining at all for India where the Chinese downturn is concerned? Depends who you listen to or talk to. Here’s what a report in the Business Standard claimed — the economic downturn would be good for smart cities. The rationale — copper is trading at a 6-year-low and China is the world’s top copper consumer, accounting for 40% of global consumption.

How About Aluminum?

Similarly, aluminum is trading at new lows and was already trading at prices below cost of production of many Chinese companies. For India, as a consumer, this is good news as the cost of constructing new infrastructure, especially smart cities, would reduce.

And that extends to a lower price for a technology innovation dear to almost everyone in the world, according to the report. Mobile phones will be cheaper, it predicted. If the Chinese really devalued their currency, world markets will be flooded with Chinese goods at low prices affecting exports of other countries, including India.

As for the rest, such as automobile manufacturers, it could possibly get only worse in the coming days.

Free Download: July Metal Price Forecast

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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