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Taiwan's economic activities are closely linked to the global economy. In addition to financial trade, industrial production is also a part of Taiwan's economic activities. In recent years, the prosperous economic activities in China have led to drastic fluctuations in metal prices, which in turn affect the production costs of various industries in Taiwan. Between 2010 and 2022, the price differentials for copper, aluminum, and zinc reached up to 2.5 times. To understand whether metal prices are also influenced by Taiwan's economic indicators, this study empirically analyzes the spot prices of copper, aluminum, and zinc from 2010 to 2022, examining their correlations with Taiwan's economic indicators. The aim is to provide domestic businesses with additional insights for judging metal price fluctuations and predicting metal prices.
Firstly, a descriptive exploration is conducted on the factors that influence the spot prices of copper, aluminum, and zinc, along with an observation of their respective trend charts. The study examines the correlations between these metal prices and various factors, including LME (London Metal Exchange) inventories, the USD-TWD (US Dollar to Taiwan Dollar) spot exchange rate, the benchmark interest rate, Taiwan's stock market index returns, inflation rate, industrial production index, composite leading indicator score, and consumer price index. The empirical analysis employs a linear regression model to analyze the interrelationships among the variables.
The empirical results of this study reveal that between 2010 and 2022, the spot price of copper is not affected by LME inventories, but LME inventories have a negative impact on the spot prices of aluminum and zinc. The USD-TWD spot exchange rate has a negative influence on the prices of copper, aluminum, and zinc. The benchmark interest rate has a negative effect on copper prices. Additionally, Taiwan's economic indicators such as the composite leading indicator score and consumer price index exhibit significant positive correlations with metal prices. Based on these findings, the study suggests that domestic alloy die-casting companies should not only monitor international situations but also observe relevant economic factors in Taiwan when procuring copper, aluminum, and zinc raw materials. These factors include the supply and demand conditions of industrial metals, exchange rates, benchmark interest rates, Taiwan's composite leading indicator, and consumer price index. Once a decline in economic indicators is detected, timely measures can be taken, such as reducing procurement ratios, minimizing high-priced inventory, and strictly controlling the funding gap in operations, to mitigate operational risks.
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