China strains to see light at end of tunnel
February 11, 2009
China strains to see light at end of tunnel
By Geoff Dyer at Financial Times
China to the rescue? There has been a surge of hope in the markets over the past 10 days that China’s struggling economy has already turned a corner.
The Baltic dry shipping index – the much-watched measure of the cost of shipping raw materials around the world – has jumped more than 50 per cent in a week on hopes of rising demand for commodities from China, while the prices of several metals have also risen sharply. The Chinese stock market is up 13 per cent in the 10 days since the end of the Chinese new year holiday.
Such optimism might seem strained given the avalanche of downbeat economic news that has come out of China over the past three months. Yet some government officials have started to sound a similar tune.
Official newspapers on Tuesday quoted Su Ning, deputy governor of the People’s Bank of China, as declaring that the first signs of recovery had become visible at the end of last year and that China could be the first big economy to recover.
Investors betting on a Chinese rebound are confident that the government’s huge package of fiscal and monetary stimulus measures is beginning to bite and there is some evidence to back them up.
In recent days local media have reported that new loans issued in January reached Rmb1,200bn ($176bn, €135bn, £120bn) following big increases in lending in November and December. If the figure is confirmed, it would be more than three times the average in the first nine months of last year. (Reuters reported that the figure was even higher at Rmb1,600bn.)
The strong credit growth is an indication that the government is succeeding in using state-owned banks to push money through the door.
“Unlike their counterparts in the rest of the world, China’s banks should be an effective transmission mechanism for the ongoing loosening of monetary policy,” says Paul Cavey at Macquarie Research.
Rising prices for iron ore, steel and other metals are being interpreted as signs that China’s big infrastructure spending plans are being implemented quickly. A senior Chinese official told the Financial Times last week that the Rmb4,000bn of projects in the government’s fiscal stimulus had already been approved.
Source: Financial Times
Tags: growth, Shipping, iron oreRelated Posts:
China’s steel producers forecast drastic net profits decline for 2008
February 2, 2009
BEIJING, Jan. 30 (Xinhua) — China’s major listed steel companies forecasted a huge drop in net profit in 2008, mainly due to the plunging steel price, according to the latest annual net profit forecasts.
China’s Angang Steel Company Ltd. (Ansteel) reported an estimated 55 percent profit decline. Liuzhou Iron & Steel (Group) Company said annual net profit may drop 98 percent, and San steel Minguang Co. Ltd forecasted a 70 to 100 percent slump.
The weak performance mainly resulted from the shrinking market demand and price decline of both steel and raw materials, said there ports.
According to Lgmi. com, a metals information research center in China, price for secondary metallurgical coke dropped 50 to 60 percent from its highest point in the first half of 2008, while steel price dipped about 40 percent.
Chinese Academy of Sciences said domestic steel price will stay at a low level this year in a report on China’s economic outlook in 2009 last week.
China’s steel market will face both “shrinking supply and demand” in 2009, said the report. However, market demand will revive as the economic stimulus package took effect, and steel companies will see the end of profit decline at the end of 2009.
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Weak Economy Cuts China’s Ansteel 2008 Net Profit 55%
January 31, 2009
China’s Angang Steel Co. Ltd. (Ansteel) said Wednesday net profit fell 55 percent last year to an estimated 3.42 billion yuan (about US$500 million) Ansteel prices plunged.
Ansteel, one of the country’s top three steel producers, issued the estimate in an unaudited statement to the Shenzhen Stock Exchange, where it is listed.
The final figure indicates a loss of 4.83 billion yuan in the fourth quarter, as previous company data show net profits in the first three quarters totaled 8.25 billion yuan.
The decline reflected steep falls in steel prices and slow inventory movement starting in the second half, said the northeast-based company.
Steel prices in China plummeted in the second half as the deepening world economic slowdown weakened industrial growth and steel demand in the country.
The price of 6.5 mm carbon steel wire rods, a major steel product, was down more than 40 percent since June, Jia Yinsong, a Ministry of Industry and Information Technology official, told a forum earlier in January. Market data show the product was sold at about 3,400 yuan per ton.
The company also attributed the weak performance to the costs of buying raw materials and fuel at high prices earlier in 2008.
World crude oil prices are down more than 70 percent since peaking at 147 U.S. dollars per barrel in July. Earnings per share were estimated at 0.47 yuan in 2008, down 58 percent from in 2007, Ansteel said.
The company didn’t give a date for the release of its audited results, which under Chinese rules must be done within six months.
Source: Xinhua News Agency
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48 Major Steel Mills in The Red
January 2, 2009
About two thirds of China’s major steel mills were in the red in November, suffering from high prices in raw materials and the decreasing prices of steel products.
Forty-eight out of 71 large and medium-sized domestic steelmakers saw a loss in November (six more than in October), with total losses for the month in the neighborhood of 12.77 billion yuan, China Securities Journal reported yesterday citing anonymous sources.
Analysts largely contributed the loss to high iron ore prices and dropping steel prices, and they remained pessimistic for the mills’ performance in December.
Chinese steelmakers agreed to pay a record of $92 per ton for iron ore in the 2008 long-term contract, and steel prices have dropped about 40 percent since June as a result of the global financial crisis.
Authorities are considering measures including buying some steel products for reserves to help the industry through the rough time, Minister of Industry and Information Technology Li Yizhong recently said in Beijing.
Reports said the government would likely spend 10-15 billion yuan to establish a reserve of 3-5 million tons.
Some major steelmakers have increased steel prices on the news.
Angang Steel will raise the price of hot rolling steel by 350 yuan per ton from January; Shougang Group will rise by 300 yuan per ton and China’s largest steelmaker Baosteel will also raise product prices by 6 to 10 percent from February.
Analysts said building up stocks may provide some support to prices in the short term, but the policy could also mean producers take longer to emerge from the current slump in demand with a U-shaped recovery rather than a V-shaped bounce, since the government stocks may return to the market as prices recover.
The government could also increase export tax rebates on high-end steel products and will encourage industry reshuffling as well as innovation.
Source: China Steel Net.com
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China to decide soon whether tolling is okay
December 30, 2008
CHINA is the world’s biggest metals consumer. Here is the news important for buying products directly or indirectly related with copper:
(XINHUA) : CHINA, the world’s biggest metals consumer, is close to deciding whether to allow tax-free imports of copper concentrate and primary aluminum for processing into export-bound products to boost industrial production.
The government should make a decision soon on whether to allow the practice, known as tolling, Wen Xianjun, vice president of China Nonferrous Metals Industry Association, said yesterday.
China has been restoring tax benefits for overseas metals sales to encourage exports, which fell for the first time in seven years last month, and to boost industrial production that grew at the weakest pace in almost a decade.
“This is to help Chinese metal processors maximize capacity at a time when the global slowdown has reduced demand,” Wen told Bloomberg News. China ended tolling for some metal raw materials last year in an effort to curb expansion in the energy-intensive and polluting sector.
Raw material imports under tolling trade would be exempt from export duties and value-added tax, Wang Qinhua, head of the markets and trade department of the association, said. Exports of finished goods, which for the pending decision means refined copper and aluminum products, would still be subject to both taxes, Wang said. “Metal processors want the practice back, feeling such production isn’t energy-consuming and is often labor-intensive, which helps employment at this difficult time,” she said.
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