Posts tagged China
China rides to metals commodities sector rescue
China’s almost $600 billion economic stimulus programme announced this weekend is designed to improve confidence in the country’s infrastructure construction sector and should have a positive knock-on effect for steel and base metals.
China (cnmining) has unveiled an economic stimulus program which it says totals $586 billion. It is aiming to bolster domestic demand and help avert a global recession. According to Andrew Batson for the Wall Street Journal, “though the two-year package appeared to include some previously announced measures, its size was clearly designed to revive the fading confidence of Chinese businesses and consumers, and impress foreign governments. Asian shares rallied sharply early Monday on the Chinese announcement, with benchmark stock indexes in Tokyo, Hong Kong and Shanghai all jumping close to or above 5% in the early hours of trading.
“The announced sum of four trillion yuan represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006. New spending of even half that amount would be substantial next to China’s six trillion yuan annual budget for this year.”
The interest for the mining industry is that the plan includes spending in housing and infrastructure. In particular, there is hope for a turn round in the steel sector.
Macquarie Research had just analysed steel industry inventories in China and noted that “despite recent production cuts, steel mill inventories remain under pressure as end-user demand has collapsed. While the mills are lowering prices to clear inventories, the buyers’ strike continues as traders await further price falls. Even more severe production cuts may be expected in the short term as mills struggle to clear inventories. This de-stocking is particularly severe as mills will try to work down stocks, not just to previous levels, but to even lower levels in the face of uncertain demand.
“Over the past week, the hot rolled coil price dipped to $419/t ex-vat, down by 1.5% from last week and cold rolled coil reported at $535/t ex-vat, down by 2.3% from last week.”
However, Macquarie also reported that “index iron ore spot prices rallied last week for the first time in many months. The two main index providers, Platts and Metal Bulletin, both reported a small recovery. Platts’ 62% Fe price rose to $60.00-60.50/t cfr, while the Metal Bulletin quote hit $61.55/t, both up 5% on the week. There appears to have been a rise in the volume of orders for the first time in a while, perhaps signalling an easing of the credit squeeze, which has hit demand in China.
Reported stocks of iron ore remain high, but current shipping schedules suggest a major collapse in Chinese iron ore imports in November and December; Vessel line-ups suggest a 20-25% reduction in Australian and Brazilian iron ore exports in November and December from levels of a few months ago; and Indian exports are down by 80% year-on-year.
Macquarie also reported that along with the major fall in global and Chinese aluminium prices, it was hearing “of a steep decline in aluminium raw material input cost including price drops in alumina, carbon anodes and thermal coal. As a result, we note some temporary relief on smelters’ cost margins.”
Rio Tinto today revised its estimate of iron ore shipments from the Pilbara region of Western Australia to between 170 and 175 Mt (100% basis) in 2008. As a result of the reduced demand from its customers and reduced shipments, the annualised run rate of iron ore production from its Pilbara mines will be reduced by approximately 10%.
Tom Albanese, Chief executive, Rio Tinto, said, “Operations continue to perform well but demand has continued to decelerate. This reduction is a prudent move to align production with revised customer delivery requirements in the light of the fourth quarter drop in Chinese demand. We believe this will be a short, sharp slowdown in China, with demand rebounding over the course of 2009, as the fundamentals of Chinese economic growth remain sound.”
Well China’s economic growth did slow in the September quarter, but not too many commentators thought fit to mention a major contributing factor besides the slowing economies of the west and the credit crunch.
And that was the shutdowns forced on businesses in and around Beijing (a 300 kilometre radius according to some reports) for the Olympics in August and September, plus the impact of the Sichuan earthquake and the early year impact of the huge snowstorms in January.
When taken together the drop in growth from an annual rate of 10.1% in the June quarter, to 9% in the September quarter, is understandable.
The figure was low, under market estimates of a 9.7% rise, but western and local forecasts about the Chinese economy can’t be that precise because the collection of the figures is less than ideal, as is the certainty that the statistics will be presented in an unvarnished fashion.
The 9.0% figure for the quarter gave an annual rate of 9.9% for the first nine months of the year, after a 10.4% rate for the first six months.
That was enough for the Central Government to reveal moves to help property prices (which are falling in many areas) and assist small exporters.
The government said that taxes on house purchases would be reduced and value-added tax rebates would be increased for exporters of textiles and machinery.
However, the scope and timing of such policy changes were not revealed and there is a debate about just how big a fiscal stimulus is needed to prevent a sharper slowdown.
It was the first time since the fourth quarter of 2005 that quarterly growth in China slipped into single digits, according to figures from the government.
The 9.9% figure is a notable reduction from the 12.2% for the first nine months of 2007.
The trade surplus hit a record of just over $US29 billion in September, but that will be the most recent high point as shipments start to slip. China’s industrial output grew 15.2% over the first nine months of this year, down from the 16.3% rate of the first six months.
Again the reductions on output in and around Beijing for the games should not be forgotten, nor should output cuts and closures by aluminium, copper, lead and zinc producers during the quarter as they should to try and cut stocks of unwanted products and match demand and output.
Growth in industrial output slowed to 11.3% in September.
Fixed asset investments, a key gauge of government spending on infrastructure and factories, rose 27.0% in the first three quarters of this year, compared with 26.3% in the first half, the bureau said.
Retail sales, a main indicator of consumer spending, increased 22.0% in the first three quarters of 2008 compared with the first nine months of 2007 and rose 23.2% in September.
Those figures are small, but interesting examples of what the Chinese government seems to be doing as export growth slows: it is attempting to restoke domestic demand.
Inflation looks like it has been tamed and is falling at the consumer level.The spiralling upward surge in food prices had has slowed this year. They had been the major driver of rising consumer inflation in 2008 and the early months of this year.
But figures out yesterday from the Government’s statistics bureau revealed that consumer inflation hit 4.6% in September, and 7.0% in the first nine months of the year.
That is a lot better than the 7.9% inflation in the first half of 2008, and a near 12-year high of 8.7% recorded for the month of February when those winter storms boosted the cost of power and energy, as well as curtailing food shipments. That pushed up food prices.
The AMP’s chief economist, Dr Shane Oliver is one who doesn’t see gloom and doom in the forthcoming Chinese statistics.
He said in his weekly market note that the Chinese economic data will be watched closely for indications as to how fast it is now slowing down.
“Having just returned from China I must say that while China is in far better shape than the US its economy nevertheless looks to be cooling significantly on the back of slowing exports and a property slump.
“Pretty soon we will be talking about China’s factories exporting deflation to the world again, after the silly “China is now exporting inflation” fears that were doing the rounds earlier this year.”
China’s Cabinet made a rare public statement on the economy Sunday, saying the economy can weather the effects of the global financial turmoil. But it also said that growth will decline as the expansion of business profits and public revenue slows.
The State Council said in a statement at the end of an executive meeting led by Premier Wen Jiabao that the turmoil and economic instability will have a “gradual” effect on the country.
It said China’s economic growth will slow along with corporate profits and public revenue, and as capital markets continue to fluctuate.
Newsagencies reported that the statement posted on a government website said “Unfavourable international factors and the serious natural disasters at home have not changed the basic growth situation of our country’s economy. Our country’s economic growth has the ability and vigour to resist risks.”
China must “adopt flexible and cautious macroeconomic policies” to maintain stable growth, the statement said.
Steel prices in China have fallen about 20% and there are reports of small steelmakers being forced to close because of shrinking demand.
Mount Gibson, our fourth biggest iron ore exporter, has found that some buyers won’t take iron ore shipments, and on Friday Fortescue Metals revealed that it had been helping some Chinese customers with freight costs as iron ore spot and shipping costs had fallen because of the slump in China.
Indian iron ore exporters have had similar problems with smaller Chinese buyers.
Atlas, a smaller iron producer, made a similar announcement yesterday.
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7pm TV News WA | Tue, 30 Mar 2010 20:41:00 +0800 | Duration 1m 41s Iron ore miner Gindalbie Metals has signed a new $60 billion export deal with China, covering the output from the new Karara mine, north of Perth.
Australia’s economy has been buffered from the Global Financial Crisis due to our strong exports to China. With Chinese Steel manufacturers starting to run at a loss, will we see a slow down in our exports to China?
China is expected to increase steel supply by 8.6% in 2010 to 621.5 million metric tons, according to a report from the Mysteel consultancy in Shanghai. That will occur, says a report in the official Xinhua news agency, despite an expected increase in domestic prices caused by increased costs of iron ore, coking coal and other steelmaking ingredients.
The need for more steel stems from the multi-billion-dollar, multi-year economic stimulus package that has boosted production of such steel-bearing products as agricultural machinery and equipment, infrastructure construction materials, environmental protection equipment, motor vehicles and emission-reduction equipment. Since the construction of these key projects usually lasts for three years and longer, Xinhua says expanded consumption for such raw materials as steel will continue in 2010 and 2011.
Meanwhile, the Chinese central government has forecast that China’s economy as measured by gross domestic product will grow by between 8% and 10% in 2010. Some private economists put the figure even higher, at more than 10% since Li Yizhong, minister of the China Ministry of Industry and Information Technology, has announced fixed-asset investment growth of 22% this year.
So, with demand for steel expected to boost production in 2010, the China Iron and Steel Association (CISA) expects foreign iron ore miners to call for a 20-30% increase in benchmark iron ore prices in 2010, the official China Securities Journal has reported. This forecast is in line with current market expectations as analysts have said the 2010 Asian benchmark price might inflate on Chinese buys.
However, Luo Bingsheng, vice-chairman of CISA, tells the newspaper that the proposed price rises would \”complicate negotiations” with Rio Tinto and BHP Billiton of Australia and Vale of Brazil. China and the three major seaborne ore suppliers have been at odds for more than a year and actually never settled on a 2009 contract price. Instead, CISA members bought from the three mining firms on spot deals.
Meanwhile, Reuters is reporting that India’s 5% iron ore export tax hike may “tempt Chinese buyers back into a loveless annual relationship with the big three miners,” in preference to the uncertain supply and volatile prices of the spot market. As has been reported on Purchasing.com, India\’s boost of the export taxes on iron ore likely will add $4-$5 a metric ton to the cost of Indian iron ore. Indian exports most of its iron ore to China, which already has been accumulating inventories ahead of 2010 price negotiations with major iron ore miners in Australia and Brazil.
Provided By: http://www.frbiz.com/
Rio to Cut Iron Ore Output 10% as China Demand Slows
Rio Tinto Group, the world’s second- largest iron ore exporter, will cut output at its mines in Western Australia by 10 percent because of reduced demand from steelmakers in China (cnmining), following the lead of bigger rival Cia. Vale do Rio Doce.
“This reduction is a prudent move to align production with revised customer delivery requirements in the light of the fourth- quarter drop in Chinese demand,” Tom Albanese, chief executive officer of the London-based company, said today in a statement.
Slowing economies have slashed steel demand, damped prices and in October made mills unprofitable in China, the biggest maker of the metal. BHP Billiton Ltd., the third-biggest exporter of the ore, so far has declined to cut its production or curb expansion.
“Rio is facing reality and I think BHP will inevitably have to say something,” Peter Arden, an analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co., said from Melbourne. Rio’s cuts will reduce earnings “quite significantly”, he said.
Rio Tinto’s shares rose 8.5 percent to A$78.16 at 12:01 p.m. Sydney time. BHP’s shares rose 7.4 percent.
China yesterday pledged a 4 trillion yuan ($586 billion) stimulus plan to prop up growth as the world heads towards recession. The funds will go toward low-rent housing, rural infrastructure as well as roads, railways and airports.
“This will be a short, sharp slowdown in China, with demand rebounding over the course of 2009, as the fundamentals of economic growth remain sound,” Albanese said in the statement.
Fortescue ShutdownFortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, said today it’s bringing forward a planned shutdown of its port and mine processing plant, reducing production this year by about 10 percent. More normal conditions are expected for next year and beyond, the Perth-based company said.
The world’s largest producers of aluminum, iron ore and steel are cutting output and reviewing investment plans. Brazil’s Vale began iron ore output cuts last month and doesn’t expect a market recovery until next year.
“We have no plans to cut production,” BHP spokesman Peter Ogden said by phone from Melbourne today.
Shipments from Rio’s mines will also be reduced to be between 170 million metric tons and 175 million tons in 12 months ending Dec. 31, the company said, without giving the original figure.
The company produced 145 million tons of ore from its Pilbara mines in Western Australia last year. It had forecast 2008 output of between 190 million and 195 million tons in October. Rio produced 139.2 million tons in the first 9 months of the year.
Cut PricesRio and BHP may be forced to cut prices by 15 percent next year, ending six years of gains, according to the median estimate of 11 analysts surveyed last week by Bloomberg News. BHP, the world’s third-biggest iron ore exporter, is seeking to buy Rio in a hostile $73 billion all-stock takeover offer.
“This is about as bad as it gets,” said Ord Minnett’s Arden. He expects contract prices may fall by 10 percent next year and may decline again the following year.
ArcelorMittal, the world’s biggest steelmaker, last week said it will reduce production by as much as 35 percent in the U.S. and 30 percent in Europe after prices tumbled. The Luxembourg-based company forecast earnings will slide as much as 48 percent to $2.5 billion in the fourth quarter.
Provided By: http://www.cnmining.org
Provides key data and concise analyses, presents a comparative analysis on the development of iron ores mining industry in 31 provincial regions and 20 major cities in visualized form of data map. The report also includes a list of top 100 enterprises in the sector and the comparison on investment environment in top 10 hot regions. In addition, the report truly reflects the position of foreign enterprises in this industry across China based on a comprehensive comparison of operating conditions among different enterprise types. Furthermore, this is the first report to adopt ISIC (International Standard Industrial Classification of All Economic Activities) in classification of Chinese enterprises, corresponding to the reading habit of international readers, and it is also very helpful for readers to make a comparison on the development condition and investment potential of iron ores mining industry in China with that in other countries.
Additionally, by original creation of ZEEFER Industry Distribution Index, the report directly shows the difference in various regions of Mainland China in terms of iron ores mining industry, providing an important reference for investors’ selection of target regions to make investment.
What will you get from this report?
- To get a comprehensive picture on distribution of and difference in performance in regions of Mainland China in terms of the iron ores mining industry;
- To figure out the hot regions in China for iron ores mining industry, find out the potential provinces and cities suitable for investment as well as the economic development level and investment environment in these regions;
- To get a clear picture on the overall development, industry size and growth trend of iron ores mining industry across China in the past 3 years;
- To get a clear picture on development status of foreign enterprises, state-owned enterprises, and private enterprises in recent years as well as the industry position of the above ownerships;
- Based on adoption of the global uniform industry classification standard – ISIC, the report enables you to make a direct comparison of China iron ores mining industry with parallel industry in other countries;
- Present you with a list of top 100 enterprises inside the industry in terms of the sales revenue
For more information please visit:
What next for China iron ore prices?
The latest research weekly from Macquarie suggest that iron ore contract prices for China(cnmining) in 2009 will be around 20 percent lower than in 2008, copper TC/RC costs are rising and aluminium imports and exports continue to fall.
The 2009 annual iron ore negotiations are approaching, and once again, news headlines are teeming with all kinds of arguments from different iron ore stakeholders. We believe that iron ore contract prices will fall next year, but will not collapse (we are expecting a 20% decline for 2009). Spot business will also be more important in the next year.
Over the past week, steel prices have lost their uptrend momentum. Hot rolled coil prices were unchanged from last week at $456/t ex-Vat, and cold rolled coil prices were down by a slight 0.5% WoW to $543/t ex-Vat. Also, rebar suffered a 0.4% WoW decline to $440/t ex-Vat, and galvanised steel was $548/t ex-Vat, down by 0.8% WoW.
Local spot iron ore prices were unchanged from last week. 66% Hebei iron ore fine stayed at $102/t ex-Vat, while the Indian 63.5% iron ore fine prices increased by $5/t to $80/t cif.
Copper treatment and refining charges (TC/RCs) have strengthened in the spot market along with smelter production cuts in China and collapsing copper prices. We heard the average benchmark TC/RC is sealed at US$80/t and US8.0¢/lb (US20.5¢/lb combined) in the spot market compared with US$45/t and US4.5¢/lb ((US11.5¢/lb combined) quoted in October.
According to the preliminary trade data from China customs, China imported 217,214t of unwrought copper and semi-finished copper products in November, down 6% from October and a 3% drop from the same period in 2007. The October number was the highest since April. For the first 11 months of 2008, total imports were down by 8.0% YoY to 2.35mt.
Chinese unwrought aluminium exports, including aluminium alloy, kept falling in November to 30,396t (lowest level in 2008), a 36% fall MoM and a 32% drop from the same period in 2007. The combination of lower prices and the introduction of a 15% customs duty on aluminium alloy exports, effective 20 August, has severely affected Chinese aluminium exports.
Chinese aluminium imports also declined. The provisional data from China are for imports of aluminium, alloys and semi-fabricated products combined, and thus are not directly comparable with the export figures. These data show imports falling from 66,000t in October to 54,500t in November. Allowing for an estimated 40,000t of semis imports (down from 45,400t in October), this would imply imports of aluminium and alloys of around 14,500t in November.