Archive for the ‘WORLD TRADE’ Category

China’s Staggering Demand for Commodities

Sunday, March 4th, 2018

China’s Staggering Demand for Commodities

>50% of all steel, cement, nickel, and copper goes there

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

It’s said that in China, a new skyscraper is completed every five days.

China is building often, and they are building higher. In fact, just last year, China completed 77 of the world’s 144 new supertall buildings, spread through 36 different Chinese cities. These are structures with a minimum height of 656 feet (200 meters).

Just for comparison, there are only 113 buildings in New York City’s current skyline that are over 600 feet.

Unbelievable Scale

It’s always hard to put China’s size and scope in perspective – and we’ve tried before by showing you 35 Chinese cities as big as countries, or highlighting the growing prominence of the domestic tech scene.

Today’s chart also falls in that category, and it focuses in on the raw materials that are needed to make all this growth feasible & possible.

Year of data Commodity China’s % of Global Demand Source
2017 Cement 59% Statista
2016 Nickel 56% Statista
2017 Coal 50% NAB
2016 Copper 50% Global X Funds
2017 Steel 50% World Steel Association
2017 Aluminum 47% MC Group
2016 Pork 47% OECD
2017 Cotton 33% USDA
2017 Rice 31% Statista
2017 Gold 27% China Gold Association, WGC
2017 Corn 23% USDA
2016 Oil 14% Enerdata

Note: Because this data is not all in one location, it is sourced from many different industry associations, banks, and publications. Most of the data comes from 2017, but some is from 2016.

China Demand > World

There are five particularly interesting commodity categories here – and in all of them, China’s demand equals or exceeds that of the rest of the world combined.

Cement: 59%
This main ingredient in concrete is needed for roads, buildings, civil structures (bridges, dams, etc.), foundations, and in making joints for drains and pipes.

Nickel: 57%
Nickel’s primary use is in producing stainless steel, which is corrosion resistant. It also gets used in superalloys, batteries, and an array of other uses.

Steel: 50%
Steel is used for more or less everything, but demand is primarily driven by the construction, machinery, and automotive sectors.

Copper: 50%
Copper is one of the metals driving the green revolution, and it’s functional in electronics, wiring, construction, machinery, and automotive sectors, primarily.

Coal: 50%
China’s reducing coal usage – but when you have 1.4 billion people making demands for power, one has to be mindfull of how it is to be done. China has already hit peak coal, but the fossil fuel does still account for 65% of the country’s power generated by source.

 

 

 

 

 

 

 

 

 

 

Henry Sapiecha

China’s advance into Central Asia ruffles Russian feathers .Commerce & expansion

Sunday, January 3rd, 2016

Kazakh traders wait for their goods purchased from China to be cleared on the Kazakh side of the Horgos free-trade zone near Horgos, Kazakhstan image www.ww-globalcommodities.com

Kazakh traders wait for their goods purchased from China to be cleared on the Kazakh side of the Horgos free-trade zone near Horgos, Kazakhstan. Photo: Washington Post

Shymkent, Kazakhstan:  Slowly but surely, a four-lane highway is beginning to take shape on the sparsely populated Central Asian steppe. Soviet-era cars, trucks and aging long-distance buses weave past modern yellow bulldozers, cranes and towering construction drills, labouring under Chinese supervision to build a road that could one day stretch from eastern Asia to Western Europe.

This small stretch of blacktop, running past potato fields, bare dun-colored rolling hills and fields of grazing cattle, is a symbol of China’s march westward, an advance into Central Asia that is steadily wresting the region from Russia’s embrace.

A Chinese surveyor climbs to take measurements at the site of a bridge project near Shymkent, Kazakhstan.image www.www-globalcommodities.com

A Chinese surveyor climbs to take measurements at the site of a bridge project near Shymkent, Kazakhstan. Photo: Washington Post

Here the oil and gas pipelines, as well as the main roads and the railway lines, always pointed north to the heart of the old Soviet Union. Today, those links are beginning to point toward China.

“This used to be Russia’s back yard”, said Raffaello Pantucci, director of International Security Studies at the Royal United Services Institute in London, “but it is increasingly coming into China’s thrall”.

It is a shift that has shaken up the Russian leadership, which is watching China’s advance across the steppe with little apprehension. Moscow and Beijing may speak the language of partnership these days, but Central Asia has emerged a source of wariness and mistrust.

Kazakhstan President Nursultan Nazarbayev with then Australian prime minister Julia Gillard image www.www-globalcommodities.com

Kazakhstan President Nursultan Nazarbayev with then Australian prime minister Julia Gillard. Photo: Andrew Meares

For China, the region offers rich natural resources, but Beijing’s grander commercial plans — to export its industrial overcapacity and find new markets for its goods — will struggle to find wings in these poor and sparsely populated lands.

In September 2013, Chinese President Xi Jinping chose Kazakhstan’s sparkling, modern new capital, Astana, to announce what has since become a cornerstone of his new, assertive foreign policy, a Silk Road Economic Belt that would revive ancient trading routes to bring new prosperity to a long-neglected but strategically important region at the heart of the Eurasian continent.

Bound together by 2000 years of exchanges dating to the Western Han Dynasty, sharing a 1800 kilometre border, the two nations, Xi said, now faced a “golden opportunity” to develop their economies and deepen their friendship.

Tenge currency notes and coins in Almaty, Kazakhstan image www.www-globalcommodities.com

Tenge currency notes and coins in Almaty, Kazakhstan. Photo: Bloomberg

At the China-Kazakhstan border, at a place known as Horgos to the Chinese and Khorgos to the Kazakhs, a massive concrete immigration and customs building is being completed to mark that friendship, rising from the windswept valley floor like a mammoth Communist-style spaceship.

A short distance away, China is building an almost entirely new city, apartment block by apartment block, alongside a 520 hectare free-trade zone, where traders sit in new multi-storey shopping malls hawking such items as iPhones and fur coats.

This is reputed to have been a seventh-century stop for Silk Road merchants. Today, the People’s Daily newspaper calls it “the pearl” on the Silk Road Economic Belt.

Traffic is seen on a section of the road, which will link China and Europe, near Shymkent, Kazakhstan image www.www-globalcommodities.com

Traffic is seen on a section of the road, which will link China and Europe, near Shymkent, Kazakhstan. Photo: Washington Post

But this pearl is distinctly lopsided: On the Kazakh side of the zone, opposite all those gleaming malls, a single small building, in the shape of a nomad’s tent or yurt, sits on an expanse of wasteland where a trickle of people stop to buy biscuits, vodka and camel’s milk.

The Silk Road slogan may be new, but many of its goals are not. Beijing has long been working to secure a share of the region’s rich natural resources to fuel China’s industrial economy; it is building a network of security cooperation in Central Asia as a bulwark against Islamic extremism that could leak into China’s restive western province of Xinjiang, and it wants to create alternative trading routes to Europe that bypass Asia’s narrow, congested shipping lanes.

Under the Silk Road plan, China also is promising to spend hundreds of millions of dollars to build new infrastructure here, and hopes to reap benefits of its own: to create new markets for Chinese goods, especially for heavy industries such as steel and cement that have suffered as the Chinese economy has slowed.

New_silk_road map image www.www-globalcommodities.com

But the scene at Horgos underlines the fact that the economies of China’s Central Asian neighbours are simply too small to provide much of a stimulus to China’s giant, slowing economy.

China’s ambitious Central Asian plans did not go down well, at least initially, in Moscow.

“When China announced its Silk Road plan in Kazakhstan, it was met with a lot of skepticism and even fear by the Russian leadership,” said Alexander Gabuyev, head of the Russia in the Asia Pacific Program at the Carnegie Moscow Centre. “The feeling was, ‘It’s a project to steal Central Asia from us, they want to exploit our economic difficulties to be really present in the region’. ”

Russia had long blocked China’s attempts to create an infrastructure development bank under the auspices of the Shanghai Cooperation Organisation, a regional body, fearing it would become a tool for Chinese economic expansion. Beijing responded by side-stepping Moscow, establishing an Asian Infrastructure Investment Bank in June with a $US100 billion ($137 billion) capital base.

China has overtaken Russia to become Central Asia’s biggest trade partner and lender. Pipelines transport increasing amounts of Kazakh oil to China and vast quantities of Turkmen gas east through Horgos. That has served to undermine Russia’s negotiating position when it has tried to sell its own gas to China.

At the same time, however, President Xi has worked overtime to calm Russian fears, reassuring his counterpart Vladimir Putin that Beijing has no plans to counter his country’s political and security dominance in Central Asia.

In 2014, Russia attempted to draw the region more closely into its embrace by establishing a Eurasian Economic Union, with Kazakhstan a founding member. But even as Moscow moved to protect its turf, the realisation was dawning that Russia lacked the financial resources to provide Central Asia the economic support it needed.

After the breakdown of relations with the West over Ukraine in 2014, and the imposition of sanctions, the dogmatic view that Russia had to be the top economic dog in Central Asia was questioned, and then finally, grudgingly abandoned.

It was impossible, Gabuyev said, so Russia’s leaders decided to divide the labour: Russia would provide security, while China would bring its financial muscle.

In May, Xi and Putin signed a treaty designed to balance the two nations’ interests in Central Asia, and integrate the Eurasian Economic Union and the Silk Road.

China’s expanding influence has provoked mixed feelings in many Asian states, has used “velvet gloves” in its dealings with Central Asia, said Nargis Kassenova, an international relations expert at KIMEP University in Almaty.

About a quarter of Kazakhstan’s citizens are ethnic Russians, while Russian media dominate the airwaves. The Chinese language, by contrast, is nowhere to be seen or heard. Even India has more cultural resonance through Bollywood films, says political scientist Dossym Satpayev in Almaty.

What Beijing can offer is infrastructure loans and investment. It has been careful to frame its plans as more than just a “road” — where Kazakhstan’s natural resources are extracted, and Chinese goods waved through on their way to Europe – but as a “belt” of economic prosperity.

Nevertheless, a survey conducted by independent analyst Elena Sadovskaya found that Kazakh attitudes toward Chinese migrant workers reflect fears that China would one day dominate the country, swamp it with immigrants and cheap goods, grab land or simply suck out its natural resources while giving little in return. “In 2030, we’ll all wake up and find ourselves speaking Chinese,” is one common saying here.

In July, scores of people were injured when a mass brawl broke out between Chinese and local workers at a copper mine near the northern Kazakh city of Aktogay.

Kazakhstan’s Foreign Minister Erlan Idrissov plays down concerns. China may outnumber the 17 million Kazakh population by 80 to one, but its progress and development is good news, he says.

“Our philosophy is simple: We should get on board that train,” he said in an interview in Astana. “We want to benefit from the growth of China and we don’t see any risks to us in that growth.”

China’s state-owned investment giant CITIC runs an oil field and an asphalt factory in Kazakhstan, and says it has established a $US110 billion fund to invest in Silk Road projects, much of the money aimed at Kazakhstan and Central Asia.

But private Chinese companies and ordinary Chinese traders say they have yet to reap the rewards, as the small Kazakh economy is shrinking under the weight of falling commodity prices and Russia’s economic decline.

Meanwhile Russia is playing interference, they say, imposing new import restrictions under the Eurasian Economic Union in an apparent attempt to keep Chinese goods from flooding the region.

In Almaty, the Yema Group has been importing Chinese bulldozers, diggers and other heavy equipment for more than a decade. Business, once booming, has collapsed in the past two years, as many Chinese vehicles fail to meet tough Russian certification standards that now apply throughout the economic union.

Shi Hairu, a 52-year-old trader from Shanghai, who sells Chinese gloves in a small shop in a market in Almaty, arrived two years ago when the economy at home started to slow. But sales have been halved this year – a sharp depreciation in the Kazakh currency, the tenge, has drastically reduced locals’ purchasing power, while customs clearance has become slower and costlier.

In the Horgos free-trade zone, Chinese traders also say business is poor. Many were lured here by tax breaks and cut price deals to rent shops, and by enthusiastic cheer-leading by state media about the opportunities on offer.

“After we came here, we realised it was all lies,” said one owner of a shop that sells women’s underwear who declined to be named for fear of trouble with the authorities.”We basically got deceived into coming here.”

The Kazakh government is building a “dry port” at Khorgos — with warehouses, an industrial park and rows of cranes to transfer containers across different railroad gauges — in what it hopes will become a major distribution and trans-shipment hub for goods bound between China and Western Europe, a “mini-Dubai” in the making. But the nearby free-trade zone still boasts just the one small supermarket, guarded by four lonely concrete camels, plastic flowers in their saddlebags. The nearest Kazakh city, Almaty, is a five-hour drive away along a bone-jarring road.

Yang Shu, director of the Institute of Central Asian Studies at Lanzhou University, calls Horgos “a mistake,” because so few people are in its vicinity. Trade between the two nations declined 40 percent in the first six months of this year, to $US5.4 billion, just a quarter of 1 percent of China’s global trade.

Nevertheless, experts agree that China’s Silk Road plan has immeasurably more clout than the American New Silk Road plan advanced by then-Secretary of State Hillary Rodham Clinton in 2011 that was meant to bind Afghanistan to Central Asia but barely got off the ground, or Russia’s own pivot to Asia, mired in economic woes and bureaucratic inertia.

For now, Pantucci, at the Royal United Services Institute, said China and Russia have established some sort of “modus vivendi” here. “I used to believe Central Asia would become a bone of contention between the two countries, but the priority in Moscow and Beijing remains the broader strategic relationship,” he said. “Wrinkles like disagreements in Central Asia will get swept underfoot.”

But Tom Miller, at a consulting firm called Gavekal Dragonomics, argues that as Beijing’s investment and financial ties with Central Asia deepen, “its political influence will inevitably strengthen”, too. Harking back to the Great Game, the 19th-century contest between the British and Russian empires influence in Central Asia, he says there is only one winner this time around.

Beijing’s strategists studiously avoid any talk of playing a new Great Game in the heart of Asia – “but they look set to win it nonetheless,” Miller said.

Washington Post

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Henry Sapiecha

CHINA REJOICES IN THE SQUABBLE BETWEEN RUSSIA & THE USA OVER UKRAINE

Monday, August 25th, 2014

President Vladimir Putin, middle standing, alongside Chinese counterpart Xi Jinping image www.www-globalcommodities.com

President Vladimir Putin, middle standing, alongside Chinese counterpart Xi Jinping, right standing, in Shanghai in May, when Russia and China signed a much-anticipated gas deal.

With multi-billion dollar energy deals between Moscow and Beijing recently being pushed through, China, the world’s second-biggest economy, is benefiting the most from the spiraling tension between Russia and the West over the violence in Ukraine.

Hungarian Prime Minister Viktor Orban earlier this month compared the European Union’s sanctions policy against Russia to “shooting oneself in the foot,” and experts on China said Friday that Beijing would be better served by not answering U.S. calls to punish Russia.

Nonetheless, the U.S. seems determined to get China onside. Last week, in an interview with Lithuanian news portal Alfa.Lt, the U.S. State Department’s coordinator for sanctions policy Daniel Fried, said Washington was continuing its campaign to drum up support for sanctions on Russia and was seeking allies in Asia, namely in South Korea, Singapore and China.

“We had consultations with China and will continue our consultations,” Fried said.

So far, the U.S. has been joined by the EU, Canada, Japan, Australia, New Zealand, Norway and Switzerland in slapping various degrees of economic sanctions on Russia over its role in the increasingly bloody Ukraine crisis.

China — Asia’s most powerful economy, and a partner of Russia in energy-related trade — has been asked to join the sanctions before but has been reluctant to dance to Washington’s tune.

The White House is not in a position to force the issue either. The U.S. economy and trade have become so intertwined with China that Washington does not possess any real tools that could be used to convince Beijing to follow its policy, analysts said.

In addition, Chinese officials have repeatedly said that the sanctions tactic is ineffective and will only lead to retaliatory measures from Moscow, a prediction that came to pass earlier this month when Russia imposed a one-year food import ban on countries that targeted it with sanctions, causing billions of dollars in estimated damages.

China Skims The Cream

Vasily Kashin of the Moscow-based Institute of Far Eastern Studies said that China had nothing to gain from Russia being weakened by Western pressure.

“Officials in China are now quietly clapping their hands if not rejoicing openly. … The situation that came about because of the crisis in Ukraine is in their best interests and they would like to keep things the way they are,” Kashin told The Moscow Times.

China is already cashing in on Russia’s impasse with the West as long-planned deals are finally clinched in its favor.

In May, just as the conflict in Ukraine was gaining momentum and Russia’s relations with the West were deteriorating into what is now being called the worst standoff since the Cold War, Russia signed a $400 billion gas deal with China that had been under discussion for a decade.

“This deal has shown that China is a tough negotiator. [The deal] was discussed for years before being signed only in the wake of a difficult political situation,” said Sergei Grinyayev, head of Moscow-based Center for Strategic Estimates and Forecasts, a nongovernment foreign affairs and national security think tank.

Apart from future gas supplies, Moscow and Beijing recently agreed on increasing crude oil imports from Russia, and on the construction of new reactors at the Tianwan nuclear power plant on China’s east coast.

Also, as Russian companies now have limited access to Western technology because of the sanctions, many of them are turning to China for supplies, a market they are likely to stay in long term.

“When the current crisis is over, it does not mean that these companies will redirect their logistics back to Europe, they will likely continue buying their supplies in China,” Kashin said.

No Means To Squeeze The Dragon

The U.S. State Department’s Fried said he could not gauge the current effect of sanctions on Moscow’s policy in Ukraine, but stated that the U.S. was constantly looking for ways to ramp up the pressure.

But experts on China said they doubt the U.S. can persuade Beijing to join the sanctions club against Russia.

“The U.S. has no means to put pressure on China. It could be done only regarding some limited projects or companies,” Kashin said.

What the U.S. could do is pressure its own companies not to provide technology to their partners in China. For instance, limit the supply of know-how and software to Chinese IT companies, said Vladislav Inozemtsev, a professor of economics and director of the Moscow-based Center for Post-Industrial Studies.

But the Chinese market is very important to U.S. information technology firms, Kashin said, meaning that such a measure would do mutual damage.

Furthermore, China has already proven itself to be a tough fighter when put under pressure, and will not succumb to any forceful attempts to make it impose sanctions, according to experts.

“Chinese companies are all too familiar with U.S. State Department sanctions as many of them have been blacklisted by the U.S. and denied access to technology,” said Sergei Sanakoyev, secretary-general of the Russia-China Chamber for Trade Cooperation on Machinery and Innovative Products.

U.S. diplomats will get nothing more than a polite refusal to comply with their sanctions, Sanakoyev said, adding that all attempts to squeeze China will only result in harsh retaliatory measures.

One way China could retaliate would be through the revision of large trade contracts. For example, China is one of the world’s biggest markets for aircraft producers Boeing and Airbus and all large procurement deals have to be approved by the government.

“In the blink of an eye, Beijing could easily cut deals worth billions of dollars,” Kashin said.

China could also put several top managers of large Western corporations in jail, as was the case with Australian mining company Rio Tinto, Kashin said.

In 2010 a number of Rio Tinto staff were sentenced to prison terms for bribery. The arrests came shortly after Rio Tinto declined to sell part of the company to the Chinese state-owned company Chinalco and at a time when Chinese steelmakers were faced with sharply growing prices for iron ore.

“What in Russia is considered outrageous in China is common practice. This has been done a thousand times before and could be applied again,” Kashin added.

Henry Sapiecha

OILSEED PRICE HIKE FEARS ARE REAL TO MOST

Tuesday, May 1st, 2012

Oil seed $$$ hike ignites food price fear

If rising oil prices were not enough, investors now have to contend with a bigger risk: a repeat of the 2007-08 spike in food prices.

Prices of commodities ranging from soyabeans and corn to rapeseed and feeder cattle are soaring as bad weather and strong demand in China combine to tighten supplies and trigger food inflation fears.

The rise in prices of these crops could be sustained, warn industry experts. The market is “not going to see food inflation abating in the next 18 months, to two years,” says Richard Feltes, vice-president at broker RJ O’Brien in Chicago.

Yet the surge is unlikely to mirror that of the 2007-08 spike. The cost of wheat and rice, the two most important agricultural commodities for global food security because of their status as a staple for billions of people in southern Asia and sub-Saharan Africa, remains stable thanks in large part to bumper crops over the past few years.

The cost of sugar, an important source of calories in India and other emerging countries, is also down from previous highs.

Instead, the main concern centres on the price of oilseeds, such as soyabeans, rapeseed and canola, and corn.

Oilseeds are not only a source of edible oil for coking and processed food but also the main source of protein-rich feed meal used to fatten cows, sheep, pigs and poultry. Corn is also a crucial source of feed meal. The rise in feed is already pushing up meat costs worldwide, analysts say.

Soyabean prices have risen more than 20 per cent since the start of the year and hit a peak of $15.09 a bushel on Friday, the highest in four years. Commodities traders say they are likely to rise to $16-$17 a bushel, targeting the all-time high of $16.63 set in the summer of 2008. “I am very bullish,” says a senior executive with a leading commodities trading house.

Canola prices hit C$665.90 a tonne last week, their highest since July 2008 and only a fraction below the all-time high set during the 2007-08 food crisis. And rapeseed prices in Europe, at €514 per tonne, are less than 2 per cent below the 2008 peak.

Soya production is sharply down in the Latin American agricultural belt of Brazil, Argentina, Uruguay and Paraguay after the La Niña weather phenomenon exposed fields to hot, dry weather, hurting yields. The output drop in the region, which accounts for more than half the world’s exports of the commodity, comes as Chinese imports have increased more than 20 per cent in the first quarter.

Chris Gadd, analyst at Macquarie, says Chinese buyers could afford high dollar-denominated prices thanks to a fall in freight rates and a stronger renminbi.

Moreover, Chinese soya production has dropped as farmers have opted to sow more acres with corn, which is fetching record prices in China.

Commodities traders are more restrained about the outlook for corn prices, but they warn that costs are likely to remain at historically high levels in spite of an expected surge in US production due to unusually high Chinese demand.

Beijing has only been an occasional importer of corn over the past 50 years, with significant overseas purchases over three short periods: 1973-75, 1978-83 and 1994-96. Those sporadic imports have become more common and traders expect China in the 2011-12 and 2012-13 crop season to make its biggest purchases of corn over a two-year period since records began in the 1960s.

Abdolreza Abbassian, senior grains economist at the UN’s Food and Agriculture Organisation in Rome, anticipates Beijing will buy between 8m and 10m tonnes over the two seasons.

In China, the cost of corn hit an all-time high in March of Rmb2,497 per tonne, up roughly 10 per cent from the beginning of the year, after Beijing said that its inventories were lower than thought. Since then, agricultural traders say Sinograin, the state-owned trading house which manages the state grain reserves, has been in the market buying corn to replenish its strategic stockpile.

Corn prices rose on Monday to $6.58¾ a bushel yesterday after the US government last week said traders had concluded their biggest single-day corn deals since 1991. The market is assuming that the corn is heading to China. During the 2007-08 food crisis, corn rose to $7.65 a bushel.

Sourced & published by Henry Sapiecha

CHINESE ON THE VERGE OF NOW EXPORTING COPPER TO THE WORLD

Tuesday, May 1st, 2012

China producers want to export copper

By Jack Farchy in London and Leslie Hook in Beijing

Copper producers in China, the world’s largest importer of the metal, have announced plans to export the red metal, a rare move aimed at easing a shortage that has pushed prices higher.

Copper prices have risen recently after inventories of the metal outside China fell to unusually low levels, prompting a squeeze at the London Metal Exchange.

Jiangxi Copper, China’s largest copper producer, told the Financial Times on Monday it was planning “large” exports of the metal. The company will “export a certain number of [tonnes of] copper in the next few weeks,” said Frank Chen, senior trader at the company’s international trading division in Shanghai.

The move by China highlights the contrast in conditions inside the country, where demand is weak and stocks are mounting, with those in the rest of the world, where stocks are at their tightest for years.

The Chinese plan, first reported by Reuters, comes in response to a sharp fall in inventories at LME warehouses. Metals traders including Glencore have placed buy orders in recent weeks to take a record amount of the metal out of the exchange’s warehouses to supply their customers.

Excluding metal that has been earmarked for delivery, copper inventories at the LME have fallen to just 150,000 tonnes, the lowest since 2008. That has pushed the price of copper for immediate delivery to the biggest premium over longer-dated futures in four years, a sign of market tightness. The cost of copper for delivery in three months has risen to $8,496.75 a tonne, up nearly 8 per cent in two weeks.

On the other hand, stocks inside China are at record highs, leading some traders to suggest that China has “cornered” the copper market.

The high level of stocks and weaker-than-expected demand within the country have depressed prices on the Shanghai Futures Exchange, putting pressure on companies such as copper smelters who buy the metal in the global market and sell it in China.

“The Chinese smelting industry is bleeding very badly at the moment,” said James Luke, analyst at CICC. “For Chinese smelters you have to import based on LME prices but then sell into the Chinese market and they lose money on that.”

The export plan is difficult to implement because companies would need to ship metal from China to South Korea or Singapore to sell it at LME prices, a process that would take weeks since there are no LME-registered warehouses in China.

If Chinese companies fulfil their promise to export large volumes of copper, the move could depress LME prices in the next few months, analysts said, especially if it was combined with a fall in imports. “The LME has become disconnected from end market demand,” said Guy Wolf at Marex Spectron, a commodities brokerage.

But if the Chinese economy picks up again in the second half of the year, the exports could lay the foundation for a larger rally.

“The single biggest importer of copper on the planet wants to export copper because there is not enough of it outside their own country,” one trader said. “Then what happens when China needs to feed its own requirements?”

Some traders also expressed scepticism about how much copper Chinese smelters could export given their long-term supply commitments to customers within China, and various restrictions and taxes on refined copper exports.

Sourced & published by Henry Sapiecha

GLOBAL WORLD TRADE TO GET ON WITH THE JOB. NOT JUST TALK ABOUT IT.

Thursday, August 25th, 2011

End the charade in talks

on global trade

By Jean-Pierre Lehmann

There is a global trade crisis. Unlike the financial crises, it is not making headlines. But it is potentially far more dangerous. It is true there are no significant trade conflicts at the moment. But the whole institutional framework is breaking down. When a big trade conflict arises – and it is surely “when” not “if” – the system in all likelihood will not be able to cope. After the disastrous World Trade Organisation meeting in Seattle in 1999, Mike Moore, the then director-general, said he feared the WTO could become to the 21st century world economy what the League of Nations was to the world community before the second world war: an impotent talk-shop that was ultimately unable to survive. Twelve years later these seem to have been prophetic words.

The institutional trade crisis must not be seen in isolation. It reflects a deeper malaise and malfunction of global governance at a time when leadership is needed to tackle daunting challenges: huge and pervasive sovereign debts; climate change; the quagmire in Iraq and Afghanistan; nuclear proliferation; illicit trade (corresponding to about 30 per cent of all trade); widespread unemployment, especially among young people; sprawling urban slums; seemingly uncontrollable food price volatilities – to name just a few. Global governance meetings – of the WTO, of the G20, G7 and G8 groups of large economies, and on climate – are charades.

The WTO was established in 1995, in the euphoria of post-Berlin Wall globalisation, and the Doha round of trade talks was launched in 2001, a few weeks after the cataclysm of 9/11. Yet, by 2003, it was clear that the?Doha round would not succeed. In an institutional re-enactment of the myth of Sisyphus, trade negotiators have plodded on for eight more years from one failed meeting to the next. The most recent was in July, when it again proved impossible to agree a minimal deal. A ministerial meeting convened for December – marking the 10th anniversary of the Doha Development Agenda – is certain to be another failure.

Here are some suggestions for getting out of the impasse.

First, the Doha round should be buried. Some suggest it should be declared dead. But it has been dead for some time and the corpse is putrefying: so a burial, a wake, and some appropriate words of farewell.

Second, the planned WTO December ministerial meeting should be cancelled. Such meetings are terribly expensive, and even more environmentally corrosive. They should not be held unless constructive outcomes can reasonably be expected.

Third, in lieu of the WTO ministerial, a group of eminent people should be appointed with the task finding a way out of the current doldrums and outlining future courses of action. The head of the group should preferably be from one of the emerging economies: Ernesto Zedillo, the former Mexican president, Mari Pangestu, the Indonesian trade minister, and Ujal Singh Bhatia, India’s former ambassador to the WTO, are among the names that come to mind.

Fourth, the WTO needs a change of leadership. Pascal Lamy is an honourable man. He must be commended for his ceaseless efforts, but there is a need for fresh blood. Mr Lamy is too closely associated with Doha. He was the European Union’s trade commissioner at the Doha round’s launch in 2001 and at the 2003 Cancún ministerial meeting that collapsed (in part owing to his intransigence); and he then became WTO director-general in time for the inconclusive 2005 Hong Kong ministerial meeting. He was reappointed, unopposed, in 2009. The absence of an opponent was regrettable and probably harmful, because it aborted any possibility of debate.

Fifth, the next head of the WTO should not be from any of the G20 countries or regions. Ideally, he or she should be from a small, “neutral” country that is very active in trade. Chile, Singapore and Switzerland would be prime candidates, but consideration should also be given to Hong Kong.

The steps recommended here can do no more than lay the foundations for future developments. However, at the very least they would take us away from the putrefying Doha corpse and, one might hope, shed some light on prospects for the trade regime in the 21st century. They might also provide a model for other paralysed areas of global governance before they too putrefy.

The writer is founding director of the Evian Group at the IMD business school, Lausanne, Switzerland

Sourced & published by Henry Sapiecha


US DOLLAR WEAKER AGAINST THE AUSTRALIAN DOLLAR

Thursday, April 28th, 2011

Aussie dollar keeps climbing

towards 110 US cents

April 28, 2011 – 3:25PM

The Australian dollar has continued its record-breaking march towards the 110 US cent mark, charging through 109 US cents on its way to another post-float peak.

At the local close, the dollar was buying 109.09-14, after earlier touching 109.48 US cents, the highest level since February 1982, or almost two years before the dollar was floated.

The Australian dollar was also buying 89 yen, 73.5 euro cents and 65.3 pence.

The local currency had rocketed more than 2 US cents since noon yesterday because of renewed worries about the US dollar – which has sunk to its lowest in three years against a basket of currencies. The US Federal Reserve gave no indication overnight that it would raise its interest rate anytime soon.

Following the five-day Easter and Anzac Day weekend, the local unit resumed its recent rally after headline inflation figures for the March quarter came in at their highest since the June quarter of 2006.

Travelex head of dealing Bernie Tuck said the Aussie dollar was due for a pause following the flood of economic news in Australia and the US in the past 24 hours.

“The fundamental fact is that the Aussie is incredibly strong at the moment. The US dollar is weak across the board and there is no indication that the US is going to raise rates any time soon,’’ he said.

‘‘We’re effectively in uncharted territory. The rally upwards in the course of the last few sessions has been extraordinary.”

Mr Tuck said the Aussie has also been aided by a huge amount of so-called carry trade, or borrowing in low interest rate-linked currencies, such as the US dollar or Japanese yen, for investment in the local dollar which benefits from higher interest rates.

The Reserve Bank’s 4.75 per cent interest rate is the highest in the developed world, said Mr Tuck.

Westpac senior market strategist Imre Speizer said market optimism continued to encourage traders to invest in risk assets such as the Australian dollar.

“Risk appetite remains intact globally (and) the trend for the Australian dollar continues to be upwards,” he said from Auckland.

The US central bank’s Federal Open Market Committee (FOMC) ended its two day meeting early today, after which Fed chairman Ben Bernanke said the bank would complete its $US600 billion ($556.2 billion) economic stimulus plan in June as planned.

“The FOMC gave the Australian dollar a bit of a burst by keeping the status quo intact. There were no surprises at all, so the weak US dollar story remains, Mr Speizer said.

The Reserve Bank of Australia’s trade weighted index (TWI) was at 79.1, the highest since 1985, up from 78.7 on yesterday.

AAP, with Chris Zappone, BusinessDay

Sourced & published by Henry Sapiecha

CLEANING SYSTEM FOR DIRTY OIL USING LIQUID SALT

Sunday, March 27th, 2011

Liquid salt could help clean up tar sands

By Ben Coxworth

15:06 March 23, 2011

A tar sand sample treated with the ionic liquid process(Photo: Penn State University)

A tar sand sample treated with the ionic liquid process
(Photo: Penn State University)

The United States imports approximately one million barrels of oil per day from Canada, which is about twice the amount that it gets from Saudi Arabia. A large percentage of that oil comes from tar sand deposits, in which bitumen (a tar-like form of crude oil) is found combined with sand. The tar sands – also known as oil sands – are hugely controversial, as many people state that the process used for extracting the oil from the sand is too ecologically-unfriendly. A new technique being pioneered at Penn State University, however, could drastically reduce the environmental impact of that process.

The current method of separating sand and bitumen involves adding warm water to the two, then agitating the mixture. Unfortunately, it requires a lot of water, which is diverted from nearby rivers. Once the separation process is complete, the now-polluted water is pumped into open air tailings ponds. From there, it can potentially leach its way back into the water table. There’s also another risk – despite the presence of bird-scaring devices, in 2008 approximately 1,600 ducks died when they landed in one of the ponds.

Instead of warm water, the Penn State method utilizes room temperature ionic liquids (ILs), which consist of salt in a liquid state – a solvent such as toluene may also be added. When the ILs are introduced to a sand/bitumen mixture and stirred, the resulting combination settles into three distinct layers: a bottom layer of oil-free sand, a middle layer of ILs, and a top layer of bitumen. The bitumen can then be removed and refined, the ILs can be reused, and residual ILs in the sand can be removed using a relatively small amount of water (which can also be reused), after which the sand can be returned to the environment.

Not only is much less water used, but because nothing needs to be heated, there are also substantial energy savings.

The researchers state that the ionic liquids could also be used to clean up beaches devastated by oil spills. Sand could be cleaned and redeposited on the spot, supposedly containing even less hydrocarbons than it did before the spill ever occurred.

We’ll be watching this one with interest …

Sourced & published by Henry Sapiecha

METAL MARKET PRICE INDICATORS

Tuesday, March 22nd, 2011

Metal Market Price Indicators

""

February 2011 Indicators
Aluminum Sheet & Cast: 123.0
No. 1 Heavy Melt: 155.0
Yellow Brass Solids: 143.8
Stainless 304 Solids: 111.4

AMM price indicators show trends in key scrap prices. Each figure represents the current month average dollar price relative to an average price over the last two years, for that commodity. These indicators will be published monthly to track these critical markets.


More Market Trends

Sourced & published by Henry Sapiecha


BHP BILLITON STRIKES GOLD IN AQUISITION FAILURE

Saturday, February 26th, 2011

BHP’s strategic success

from takeover failure

February 15, 2011

If there’s one thing the latest WikiLeaks missive reveals about BHP Billiton, it is that the company’s much derided takeover strategy hasn’t been the disaster that many large shareholders claim.

BHP supremo Marius Kloppers no doubt is smarting over the leaked cables from US consul general Michael Thurston back to his masters in Washington. They reveal the kind of candid comments one would expect in a meeting between a corporate heavyweight and a representative of the US government on sensitive issues regarding the world’s fastest-growing economy, China.

But the leaked cables also highlight just how successful BHP was in railroading the contentious tie-up between Rio Tinto and the Chinese government-owned Chinalco, a deal that would have been disastrous for Australia’s national interests and that would have seriously undermined BHP’s ability to operate in China.

BHP’s big institutional shareholders, particularly those in the UK, have made it clear that they have been underwhelmed by the vast millions of dollars spent on advisers and consultants since 2007 on three massive merger proposals that never eventuated. In recent months, they have called for a halt to the mega mergers and insisted the company return a large part of the cash being generated by the resources boom.

In particular, many questioned the wisdom of BHP’s much vaunted joint venture proposal with Rio Tinto’s West Australian iron ore operations. Why proceed down that path when it was clear European regulators raised objections about that very issue two years earlier when BHP launched its hostile takeover bid for Rio Tinto?

The answer is now clear. To stymie Chinalco, BHP needed to offer Rio Tinto an alternative. It needed to offer its great rival a compelling reason to dump the Chinese government, a legally binding, superior offer that Rio directors could not refuse.

At the time, Rio’s new chairman Jan du Plessis was looking for an exit strategy from the China deal. With commodity prices rebounding, the Chinalco deal – struck out of desperation by a debt-laden Rio – was looking even less attractive and Rio shareholders were in open revolt.

Kloppers handed him the perfect opportunity. And while much of the attention focused on the potential synergies of the iron ore merger, the real value rested in severing the link between the Chinese government and Rio Tinto, a link that would have delivered the world’s biggest consumer of iron ore control of the world’s primo deposits.

The value for BHP in successfully killing that deal? Immeasurable.

iverrender@smh.com.au

Sourced & published by Henry Sapiecha


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