Posts Tagged ‘China’


>

It is hard to be anything but bullish on copper prices over the long term – GFMS

China stocked, and then de-stocked, copper last year and while there remain downside risks to the price of the metal in the near term, GFMS says, given the fundamentals the long term remains bullish

Author: Rhona O’Connell
Posted:  Thursday , 07 Apr 2011


LONDON – 
There is a possibility of the emergence of negative news for copper consumption in the near future (linked to European sovereign debt, yet more trouble in the Middle east, further tightening of Chinese monetary policy or a series of lower than expected economic indicators for key mature markets), which could produce a significant correction in the price (currently at $9,500/t).  This, though, would generate a floor for prices, which should remain comfortably above $8,000/t.  Copper prices should subsequently resume an upward path, reaching new all-time highs approaching $11,000/t.
This is one of the key conclusions from the recently-published GFMS “Copper Survey 2011”.  The research house is expecting copper production to accelerate this year in line with higher prices, but does not believe that it will be able to keep pace with demand, thus keeping the market in deficit at least through to the end of 2011.  The Survey records a residual market deficit of just over 300,000 tonnes in 2010 (just less than one week’s refined consumption).  This comprised a gross deficit of 206,000 tonnes, a fall in reported stocks of 60,000 tonnes and an increase in “unreported” stocks of 176,000 tonnes.
The increase in these unreported stocks was concentrated primarily in China and South Korea and follows a 750,000 tonne increase in unreported stocks in 2009.  GFMS notes that the majority of the stock increase in China took place in the first months of last year, when there were arbitrage opportunities between local and international prices.  GFMS information suggests that there was destocking later in the year, especially in the last quarter; some of this was the mobilisation of physical investor positions, while much of the balance came from fabricators using inventory.  Some mobilisation is likely to have come about as a result of tightening credit and the need to generate cash.  Physical premia thus fell in China towards the end of the year, although the tightness in the market elsewhere in the world meant that international copper prices continued to rise, while local Chinese prices moved to a discount to the LME.
Global consumption increased by 11% or just under 2M tonnes over 2009 to 19.4M tonnes.  Almost 600,000 tonnes of this growth came from the mature economies, while the BRIC nations contributed a gain of 1.1M tonnes, much of which, of course, was in China.  The year 2009 was one of depressed demand in the mature economies, however and demand in these nations in 2010 did not regain the levels of any of the years 2006-2008 falling short of 2008 demand by more than 700,000 tonnes.  The rapid growth in demand in the BRIC nations, and the fact that 2009 demand in the Asian Tigers was barely below that of 2008, meant that the global fall in demand in 2009 was relatively shallow; global demand in 2010 was 4.2M tonnes higher than in 2000, an annual average growth rate of 2.5%.
Total reported inventories of copper stood at end-2010 at 1.28M tonnes, a fall of 160,000 tonnes or 11% from 2009, but substantially higher than the average level over 2004-2008.  The bulk of these stocks, which equated to just less than 3-1/2 weeks’ global refined demand, were in the hands of producers and the Exchanges.
The Survey, which goes into immense detail of the copper industry all across the supply and demand chains, identifies electrical and electronic products as the largest consumer of copper, with 38% market share last year, ahead of a 31% share for building construction.  Transport, and Consumer & General Products took up 11% each, with the balance in Industrial Machinery & Equipment.  The Survey comments that the general improvement in demand was encouraging given the economic uncertainties that continued to cloud the market.  Among mature economies as a whole, the construction sector was the only area that failed to register a double-digit rebound last year; these improvements in the other sectors reflected continued government stimuli in some areas, the release of pent-up demand and strengthening export demand, although overall offtake in these sectors in the mature economies remained below historical peak levels.
The continued improvements in the BRIC nations meant that their market share increased to more than 45% of total last year, compared with only 16% in 1990.  GFMS expects this trend to continue in the years to come, reflecting the continued shift of copper-product manufacturing towards China and other developing economies.  China accounted for 37% of global copper demand in 2010, reflecting the nation’s rapid economic growth, much of which revolved around copper-intensive end-uses.  Copper consumption in the mature economies, by contrast, has been falling at an annual rate of more than 3% over the past decade, reflecting the fact that infrastructure and urbanisation processes are now largely complete in these economies, along with the shift in the manufacturing sector towards low-cost areas.  This has been exacerbated by miniaturisation and technological advances that have impeded copper consumption in the mature economies.  Copper’s intensity of use, for example (expressed as tonnes of copper consumption per million dollars of GDP), has grown from 0.41 in 1990 in China to 0.79 last year; while in Brazil it has also doubled from 0.12 to 0.23.  In the United States it more than halved from 0.27 to 0.13.
GFMS takes a generally positive short and medium-term view for the metal’s fundamentals, with the rebound in demand expected to continue for much of the year.  Primary producers are responding to higher prices; secondary production was up by 19% last year and continues to increase this year.  GFMS believes though that much of the improvement in the market’s fundamentals have been discounted by prior investor activity and this, along with a speculative overhang, does mean that there are near-term downside risks to the price.  For the longer term, however, “it is hard to be anything but bullish for copper prices”.

GFMS bullish on copper – MINEWEB

The MasterMetals Blog


>below are some excerpts from Jim Rogers interview:

Dollar will be debased; gold and silver to hit new highs

Chinese economy:

There is some overheating and inflation

setback in urban, coastal real estate is under way

China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.

Europe:

I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt.

Following is an interview that The Daily Bell had with Jim Rogers:

Jim Rogers: Dollar will be debased; gold and silver to hit new highs
05 April 2011 | http://www.commodityonline.com

Daily Bell: We've interviewed you before. Thanks for spending some time with us once again. Let's jump right in. What do you think of the Chinese economy these days?

Jim Rogers: There is some overheating and inflation, which they are wisely trying to cool – especially in urban, coastal real estate. They have huge reserves so will suffer less than others in any coming downturn.

Daily Bell: Is price inflation more or less of a problem?

Jim Rogers: More. At least they acknowledge inflation and are attacking it. Some countries still try denying there is inflation worldwide. The US is even pouring gasoline on these inflationary trends with more money printing instead of trying to extinguish the problem.

Daily Bell: Is China headed for a setback as you suggested last time we spoke?

Jim Rogers: Did I say a setback or a setback in real estate speculation? I think you will find it was the latter. Yes, the setback in urban, coastal real estate is under way.

Daily Bell: They are allowing the yuan to float upward. Good move?

Jim Rogers: Yes, but I would make it freely convertible faster than they are.

Daily Bell: Will that squeeze price inflation?

Jim Rogers: It will help.

Daily Bell: Why so many empty cities and malls in China? Does the government have plans to move rural folk into cities en masse?

Jim Rogers: That is a bit exaggerated. China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.

Daily Bell: Is such centralized planning good for the economy?

Jim Rogers: No. Centralized planning is rarely, if ever, good for the economy. But the kind of construction you are describing is at the provincial level – not the national level.

Daily Bell: The Chinese government is worried about unrest given what is occurring in the Middle East. Should they be?

Jim Rogers: We all should be. There is going to be more social unrest worldwide including the US. More governments will fall. More countries will fail.

Daily Bell: Are they still on track to be the world's biggest economy over the next decade?

Jim Rogers: Perhaps not that soon, but eventually.

Daily Bell: Any thoughts on Japan? Why haven't they been able to get the economy moving after 30 years? Will the earthquake finally jump-start the economy or is that an erroneous application of the broken-windows fallacy?

Jim Rogers: It has been 20 years. They refused to let people fail and go bankrupt. They constantly propped up zombie companies. The earthquake will help some sectors for a while, but there are serious demographic and debt problems down the road.

Daily Bell: The Japanese were going to buy PIGS bonds. What will happen now? Does that only leave China?

Jim Rogers: Obviously the Japanese have other things on their mind right now. I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt. The thing that the world needs is for somebody to acknowledge reality and start taking haircuts.

Read more »


November 05 2010 5:23 PM GMT
Race for resources tests trade openness

By Alan Beattie in Washington and Bernard Simon in Toronto

An Australian minerals company failing to take over a Canadian fertiliser producer hardly sounds like the turning-point at which globalisation went into sharp retreat

Read the full article at: http://www.ft.com/cms/s/0/64d3942e-e8fe-11df-a1b4-00144feab49a.html?ftcamp=rss



weOctober 03 2010 7:47 AM GMT
Big Mac index gives more than a taste of true worth

By Steve Johnson

Intervention has kept some emerging market currencies artificially weak, at the same time many have raised interest rates to stem inflation. It is only a matter of time before some allow their currencies to appreciate
Read the full article at: http://www.ft.com/cms/s/0/2736d936-cd89-11df-9c82-00144feab49a.html?ftcamp=rss

Sent from my iPad


>

Friday Look Ahead: Tech a Focus for Stocks Friday, as Gold Dazzles Investors

Published: Thursday, 16 Sep 2010 | 9:10 PM E
By: Patti Domm
CNBC Executive Editor
Some good news from the tech sector could be a positive for stocks Friday.

Outside the New York Stock Exchange in lower Manhattan.
Photo: Oliver Quillia for CNBC.com
Outside the New York Stock Exchange in lower Manhattan.

Both Oracle and Research in Motion reported strong earnings after Thursday’s bell. Separately, Texas Instruments boosted its $0.12 dividend by a penny and said it would buy back another $7.5 billion shares. All three stocks were higher in after-hours trading.

Stocks Friday morning could feel the effect of the quadruple expiration of futures and options. Traders expect the expiration to be low key at the open, and if anything, the impact should be slightly positive.
CPI, at 8:30 a.m., is expected to show a 0.3 percent increase in August consumer prices. Consumer sentiment is expected to improve slightly to a reading of 70, from 68.9 last month, but economists say the strong performance of the stock market this month could push that number a bit higher. August’s sentiment reading was the second lowest of the year. Consumer sentiment is released at 9:55 a.m.
Stocks drifted on both sides of the unchanged mark Thursday. The Dow ended up 22 at 10,594, and the S&P 500 was off less than a half point at 1124.  The dollar weakened against the euro, and dollar/yen was barely changed after the Bank of Japan intervened to curb the yen’s rise Wednesday.
“This intervention might have higher chances of succeeding, assuming we continue to see relatively acceptable U.S. economic data. That’s the critical thing,” said Boris Schlossberg of GFT Forex. “…as long as the idea of double dip keeps receding, Treasury yields should stabilize and go back up and that will be critical to dollar/yen.”
On the other hand, if we see the 10-year yield move to 2.5 percent, or dip below 2.5 percent, I don’t think any amount of money will stem the (dollar) decline,” he said.
Barry Knapp, chief equities portfolio strategist at Barclay’s, said the initial stock market reaction after a big intervention is often a short-term decline. “For the first couple of days, the market goes down a little bit..the first reaction is to look at the dollar,” he said.
The view is “if the dollar is going up, that’s bad for earnings, so sell it. Dollar’s going down, that’s good. That’s a very simplistic approach. I don’t think it’s right at all,” he said. “If you look back at 2003, when the Japanese were intervening dramatically, the initial reaction was that the stock market sold off, and then it regained its footing.”
Knapp said the intervention at that time was about $360 billion, and he estimated this round could total $250 billion. The BOJ was reported to have bought more than $20 billion Wednesday.
“If somebody puts $250 billion into the markets, event though that money won’t be buying riskier assets, it can trigger an effect,” he said.
The impact on Treasurys could also be noticeable, he said. Traders have been speculating the Japanese will park their dollar holdings in shorter duration Treasurys. “Initially the Treasury curve steepens, but then that tends to drive investors who were in 2s and 5s to extend out the curve and it starts to flatten. Then it triggers a whole position rebalancing.”
All that Glitters
Gold continued to dazzle investors Thursday, scoring its second record settlement of the week. Investors are betting it could try to break the $1,300 level, maybe even as early as next week depending on the outcome of the Fed’s meeting Tuesday.  Gold Thursday rose about a half percent to settle at $1273.80.
Gold has faced some high-profile criticism this week, including from investor George Soros who called it a bubble. “If you think about a world where every major country is trying to find a way to devalue its currency, gold looks pretty good in that environment. Personally I think the dollar is going down more. There’s lots of reasons why gold will continue to rise. I don’t know if I’d buy it, but I know I wouldn’t short it,” Knapp said.

 http://www.cnbc.com/id/39223276


World economy: The China cycle

By Geoff Dyer – FT.com
Published: September 12 2010 20:03 | Last updated: September 12 2010 20:03

China-brazil trade
Allied by alloys: a steel market in the Chinese privince of Hubei. As well as investing in fellow emerging nations’ commodities, such as Brazilian iron ore, Beijing is increasingly investing in their infrastructure

Deep in the Amazon jungle, huge chunks of red earth are torn out of the ground at Carajás, the biggest iron ore mine in the world, to be transported halfway round the globe to the steel mills on China’s eastern seaboard. There they are turned into the backbone for millions of tower blocks in hundreds of booming Chinese cities.

Last year, China overtook the US to become Brazil’s biggest trading partner. The two large developing countries may be on opposite sides of the planet but their growing economic ties over the past decade have become among the enduring symbols of shifts in the global economy.

The duo could also be forging a path for one of the potential biggest realignments in the global economy over the next decade. With little fanfare, China is likely to emerge as the biggest direct investor in Brazil this year, following a string of deals announced in mining, steel, construction equipment and electricity transmission.

Such investments are part of a slow-burning but hugely important trend. Newly crowned the second-largest economy, eclipsing Japan, China is becoming the anchor for a new cycle of self-sustaining economic development between Asia and the rest of the developing world – one that is bypassing the economies of Europe and the US.

China is not only sucking in raw materials from other developing economies, just as it has during the past decade. It has also begun making investments in infrastructure and industry in those countries, some of which are made possible by its cut-price and increasingly sophisticated manufacturing companies or by the attractive financing terms it can offer. Beijing has for some years been investing in this way in parts of Africa: now such deals are being rolled out around the world. For many developing countries, the impact of the China boom is coming full circle.

“It is the start of a new cycle,” says Ben Simpfendorfer, an economist at RBS and author of The New Silk Road, a book on the surging economic ties between China and the Middle East, central Asia and south Asia. “China has companies that are willing to invest, they have products that are good enough, and they are backed by abundant liquidity in the country’s financial system.”

BEIJING MEETS BRAZIL
Direct investment overseas by Chinese companies has increased from just $5.5bn in 2004 to $56.5bn last year. Chinese officials predicted last week that it would reach $100bn by 2013.

About 70 per cent of the money invested last year went to other parts of Asia. Latin America came in second place with 15 per cent.

Chinese companies have so far invested only very modestly in Brazil but Brazilian officials estimate that investment will exceed $10bn this year.

Chinese banks have lent $10bn to Petrobras, the Brazilian oil company, and $1.23bn to Vale, the iron ore miner.

Ian Bremmer, president of the Eurasia consultancy and author of the recent book, The End of The Free Market, says there is no accident to this China-led process of decoupling from the west. It is, he says, a strategy to reduce economic – and to some extent political – dependence on the US.

“It is a very conscious policy, on the top of the agenda for the entire Chinese leadership,” he says. “They are looking for a hedging strategy because they feel uncertain about the long-term economic prospects of the developed world.”

Promoting innovation and stimulating domestic consumption are also part of that strategy, he argues, but pushing stronger economic integration with the rest of the developing world is the “one strategy that can be done quite quickly”.

Nowhere is the impact of this process being felt more keenly than in Brazil.
As trade has boomed with China during the past decade, Brazilians have sometimes complained of being relegated once again to their 20th-century role of providing commodities to the industrial powers. In the past year, however, the long-awaited wave of Chinese investment in the country appears finally to have reached Brazil’s shores. While it reached only $92m in 2009, the country’s officials estimate that it will exceed $10bn this year.

Wuhan Iron and Steel, for instance, paid $400m for a stake in a mining company owned by Brazilian industrialist Eike Batista, and is planning to build a huge steel mill beside the port near Rio de Janeiro that another of Mr Batista’s companies is constructing. Lifan, one of China’s biggest manufacturers of motorcycles and cars, already exports heavily to Brazil. Now the company’s founder, Yin Mingshan, says it is considering opening a plant to build cars in the country. “Brazil is a very promising market, with a vast territory and a big domestic market,” he says. “Some Chinese businessmen are foolish enough to ignore doing business in Brazil but I am not that stupid.”

If investment in Brazil is one symbol of this new stage of economic Chinese engagement with the developing world, another is the flurry of new rail networks taking shape globally. Chinese railway construction companies are some of the most efficient anywhere, and have for several years been operating in neighbouring countries in central and south-east Asia. But in the past year they have also signed contracts in such diverse places as Ukraine, Turkey and Argentina.

China exports
Chinese companies in the sector have not restricted their activities to the manual task of laying rail lines. They are hoping to start signing overseas deals to sell high-speed rail equipment, including locomotives and signalling systems. The first customer could be the planned high-speed line between São Paulo and Rio de Janeiro.

There are two factors that have made these new links possible. The first is that China has produced a generation of companies making capital goods that are now internationally competitive. They can offer developing countries new trains, power stations, mining machinery and telecommunications equipment of sufficient quality at prices that are often well below those of their multinational competitors.

GLOBAL RENMINBI USE
‘It’s like a Formula One starting race, everyone jostling for position’
Although China is both the second- largest economy and the biggest exporter in the world, the renminbi is virtually unseen outside the country. For global transactions, China depends on foreign currencies – in particular the US dollar.
The perils of this arrangement became clear during the financial crisis, when China’s mighty export machine was hit by a freeze in dollar-denominated trade credit. So in recent months Beijing has unveiled measures to facilitate the use of the renminbi and reshape the global monetary system. “We’re at the beginning of something huge,” says Dariusz Kowalczyk, a Hong Kong-based strategist at Crédit Agricole. “Intermediation through the dollar will be gradually eliminated.”
In June, Beijing expanded the scope of a year-old pilot scheme for settling cross-border trades in renminbi, opening it up to the world. Global banks such as HSBC, Deutsche Bank and Citigroup have since been encouraging companies from London to Tokyo to use the Chinese currency rather than the dollar. Some even offer discounted transaction fees as an incentive. “It’s like a Formula One starting race – everyone’s jostling for position,” says Philippe Jaccard of Citigroup.
The financial infrastructure is now in place to allow an Argentinian grain producer, for example, to sell goods for renminbi then use the proceeds to buy farm machinery from China. Cross-border trade in renminbi totalled Rmb70.6bn ($10bn) in the first half of the year. But that figure remains tiny compared with the $2,800bn worth of goods and services traded across China’s borders last year, most of which was settled in dollars or euros.
One of the obstacles to greater global use of the renminbi is a lack of ways for foreign companies to invest their renminbi or hedge their exposure to the currency. Strict capital controls place China’s financial markets almost entirely off limits. But that is changing. Last month, China opened its domestic interbank bond market to foreign central banks and commercial banks that have accumulated renminbi through cross-border trade settlement. Curbs on the free flow of renminbi in Hong Kong have also been lifted. Since July, financial groups in the special administrative region have been able to create a range of renminbi-denominated investment products and hedging tools – all open to global companies and investors.
McDonald’s, the US fast-food chain, last month became the first foreign multinational to issue a renminbi-denominated bond in Hong Kong. It plans to use the proceeds to fund its operations on the Chinese mainland. Robert Cookson

The second element is the financial backing from a banking system that has been mobilised to follow behind these businesses. Yi Huiman, a senior executive at Industrial and Commercial Bank of China, told a conference recently that the institution was working with the government to provide “railroads plus finance” around the world. Vale, the Brazilian company that operates the giant iron ore mine in the Amazon, announced on Friday that it had signed a $1.23bn credit with two Chinese banks to finance the purchase of 12 huge cargo ships from a Chinese shipyard, which will transport iron ore between the two countries.

The scale of these transactions is clearly much smaller than Beijing’s holdings of US securities, estimated to be in the order of $1,500bn, but the underlying dynamic is the same: the Chinese financial system is starting to recycle some of its holdings of foreign currency into the economies of its developing country trading partners, in order to stimulate demand for its own goods.

The impact is already apparent in China’s trade statistics, with the biggest increases in exports in the past year coming from developing countries. Trade with the Association of Southeast Asian Nations increased by 54.7 per cent in the first half of the year, and by 60.3 per cent with Brazil.

If Chinese investment does indeed help to kick off a growth cycle in other parts of the developing world, it will be a tonic for a global economy in which the outlook for many leading economies remains subdued, with some even facing the risk of a double-dip recession. The combination of Chinese demand and booming investment is one reason for Brazil’s ability to record China-style growth rates of 8.9 per cent in the first half of the year.

Yet for western economies there are also plenty or risks involved. The investment push is likely to herald an era of intense competition between developed-world multinationals and state-owned Chinese companies. The strong financial backing that such groups receive is also likely to fuel accusations that they are not playing on a level field. It is perhaps no surprise that some of the multinationals that in recent months have publicly voiced criticisms of Beijing’s industrial policies – GE and Siemens – operate in sectors in which China is becoming a fierce competitor, such as power equipment and railways.

China’s new clout is also raising questions about the future of the dollar. Chinese officials have talked about a long-term goal of replacing it as the global reserve currency with a basket of others, potentially including the renminbi.

As trade with the developing world balloons, Beijing has also been taking important steps to expand the international use of the renminbi, including allowing overseas holdings of the currency to be invested in the onshore bond market. Some economists believe it could become the reference currency for Asian trade over the course of the next decade.
Yet the irony is that, while there is strong economic momentum behind the Chinese currency taking on a much larger international role, Beijing is reluctant to let this happen. “China is still very hesitant about whether it really wants the currency to be international,” says Yu Yongding, an influential economist at the Chinese Academy of Social Sciences think-tank.
To become an important trading currency is one thing: but to become a global reserve currency with the power to threaten the role of the dollar, the government would need to lower capital controls and open up its domestic bond market. This would mean giving up its tight control of exchange and interest rates.
Furthermore, if economic integration with other developing countries is really to take off, it will require careful management by Beijing. There is a very real risk that the new-found interest in emerging markets will provoke a backlash, especially if China’s exports of manufactured goods keep up such a rapid pace of growth.
There are already plenty of warning signs. India, for instance, has tried this year to reduce supplies of Chinese power equipment in favour of goods made by local producers. For several months, New Delhi blocked Huawei, the Chinese maker of telecoms equipment, from the Indian market.
In Brazil, there are fears that companies such as carmaker Lifan want to use the country to assemble kits of nearly-completed cars made in China rather than promote a domestic industry. There is also concern about fresh competition for access to markets elsewhere in Latin America. Kevin Gallagher of Boston University calculates that 91 per cent of Brazilian exports of manufactured goods to the region are under threat from lower-priced Chinese products. If that market wilts away, industry is likely to become much more critical of the new China ties.
China’s growing links with the rest of the developing world could provide a huge boost both to the country itself and to the global economy during the course of the next decade. But a wave of protectionism could yet halt the process. Beijing will need to work hard to ensure its new partners in the developing world do not feel steamrollered by the Chinese juggernaut.


Sent from my iPad


this is the CNBC video of Erin Burnett’s spat with Michael Pento of Euro Pacific Capital on the merits of US Treasuries.

Looks like someone doesn’t like it when you poke a hole in their fantasy world…

The best part of the video, however, is not that.

It is when the other guest, Joseph Balestrino of Federated Investors, says:

Nothing is in a bubble when people want to buy it..”!!!  

Go tell that to the guys that were buying the NASDAQ/loading up on tech stocks  in January 2000 or (and, as they were probably the same old fools) buying/flipping homes in California, Florida, etc during 2007!!

Airtime: Tues. Sept. 7 2010 | :40:0 10 ET

http://plus.cnbc.com/rssvideosearch/action/player/id/1585891838/code/cnbcplayershare

Is U.S. Debt Junk? – CNBC.com

Share this|var addthis_config = { ui_cobrand: “The MasterBlog”}

________________________
The MasterBlog





%d bloggers like this: