While the demand for commodities in China without a doubt has been weak, that doesn't mean China isn't a buyer in this market, because it is.
What must be understood is the demand now isn't domestic or for exports, but from the fact the prices have fallen so much, China, as it has done historically, is buying up the resources at bargain prices.
When measured by customs data, there are at least 21 commodities China has increased imports in by over 20 percent in July, according to Reuters.
Agricultural imports were especially strong, "with wheat up 158 percent, barley by 67.9 percent, corn by 1,184 percent, cassava by 28.5 percent, rice by 78.2 percent, soy oil by 25.8 percent, palm oil by 53.3 percent, natural rubber by 70.1 percent and sugar by 72.7 percent."
Crude oil imports jumped 29.3 percent in July.
Metals were also strongly represented. Molybdenum imports climbed 139.8 percent; uranium was up 227 percent; zinc ores up 84.5 percent, and silver up 63.3 percent, among others.
Among major commodities, copper ore and concentrates increased 7.2 percent, and iron ore imports were up a modest 4.4 percent.
What was also interesting in this was China's decision to increase imports at a time its currency was extremely weak. While low prices were definitely a part of the impetus, a declining yuan also had to play a part. If the currency loses more value, the cost of imports would rise even if commodity prices remained stable.
It looks like China was pressed into acquiring the depressed commodities before its currency weakened further. Or course China knows what its policy is going to be, and it's possibly a nod to further debasing of its currency after it buys the commodities it wants at low prices.
Showing posts with label China Commodities. Show all posts
Showing posts with label China Commodities. Show all posts
Tuesday, August 25, 2015
Tuesday, May 28, 2013
China and its Focus on Boosting Consumer Demand
China is a complex country to analyze, not only because the economic data released from the country is not considered reliable, but also because it is going through some major changes at this time, which have significant implications for investors around the world.
The major adjustment by China for its economy is its decision to rebalance it by focusing on consumer demand to drive growth in the country, rather than to be reliant on exports and investments as it has been in the past.
Monday, February 4, 2013
Mohr Sees Strong Commodity Growth, Weaker Gold
In the near term Scotiabank’s commodity market specialist, Patricia Mohr, sees commodities in general doing very well, with gold going through a consolidation period, moving up to $1,725 an ounce in 2013.
Over the longer haul, Mohr sees commodities to continue rising based upon growth in emerging markets. Of particular note for Mohr is the potential growth of automobile ownership in Asia, specifically in China, where only about 80 in 1,000 people own vehicles at this time.
She also like fertilizer companies because of farmers holding back on buying fertilizers recently. With food prices higher and margins widening, farmers should have a positive outlook going forward, which should result in higher demand for potash especially.
Another area that looks promising is uranium, which should enjoy strong growth as demand continues to rise, even though the media reports only part of the story. While there have in fact been some cutbacks in production in some countries for political expediency, they simply make it up by importing uranium for other countries, allowing the illusory policies to stay in place, distorting the fact that uranium demand will continue to grow.
Also of note with uranium is the program instituted by the U.S. and Russia dubbed Megatonnes to Megawatts. That will result in close to 24 million pounds of U308 no longer in the market, affecting supply.
Mohr sees uranium climbing to as high as $65 a pound by the middle of the decade, up from the $40s range it has been in lately.
As for copper, that is seen by Mohr as slowly dropping from the $3.50 she sees in 2013, to about $3 a pound over the longer term. Increased mine capacity is her reasoning there.
Over the longer haul, Mohr sees commodities to continue rising based upon growth in emerging markets. Of particular note for Mohr is the potential growth of automobile ownership in Asia, specifically in China, where only about 80 in 1,000 people own vehicles at this time.
She also like fertilizer companies because of farmers holding back on buying fertilizers recently. With food prices higher and margins widening, farmers should have a positive outlook going forward, which should result in higher demand for potash especially.
Another area that looks promising is uranium, which should enjoy strong growth as demand continues to rise, even though the media reports only part of the story. While there have in fact been some cutbacks in production in some countries for political expediency, they simply make it up by importing uranium for other countries, allowing the illusory policies to stay in place, distorting the fact that uranium demand will continue to grow.
Also of note with uranium is the program instituted by the U.S. and Russia dubbed Megatonnes to Megawatts. That will result in close to 24 million pounds of U308 no longer in the market, affecting supply.
Mohr sees uranium climbing to as high as $65 a pound by the middle of the decade, up from the $40s range it has been in lately.
As for copper, that is seen by Mohr as slowly dropping from the $3.50 she sees in 2013, to about $3 a pound over the longer term. Increased mine capacity is her reasoning there.
Thursday, August 30, 2012
Jim Rogers Says Commodities will Come Roaring Back
Some have wrongly believed that the end of the commodity super cycle is over, but Jim Rogers isn't one of them, as he says the recent downturn is only a temporary setback, and because supplies remain constrained, the upward move in prices will continue for some time.
Rogers stated in an interview with Mineweb, that "this is nothing more than a blip. The bull market will continue until a lot of supply comes on stream and the problems since 2008 ensure not a lot of supply is coming on stream."
Why it's different this time around as far as the length of the commodity bull market, is historically companies are starting to bring more supply online after about 8 or 9 years of higher prices. This time around, because of the crises in 2008, that temporarily halted much of the expected boost in production, resulting in a slow down in supply of commodities.
Rogers said concerning expansion of commodities companies, that "All these guys are delaying or suspending or cancelling new supply which is bullish. Until the supply comes we're not going to have an end to the bull market and, certainly in agriculture, my goodness, inventories are near historic lows, we have serious shortages of everything in agriculture developing, including farmers."
As for China, which is the major impetus behind commodity demand, Rogers sees them possibly loosening up their money supply, suggesting more demand for commodities, although he says that "China has loosened up too early every time in the last decade, which is why the real estate bubble has continued and it's gotten worse. So it looks as though China is going to loosen up again and in my view they're going to loosen up again too early this time around, and you'll probably have a continuation of the same old thing - more inflation and perhaps excesses in real estate again."
Concerning where investors should place their money in regard to commodities, Rogers concluded they should look for those commodities which have fallen the most in price for the place to begin.
Rogers stated in an interview with Mineweb, that "this is nothing more than a blip. The bull market will continue until a lot of supply comes on stream and the problems since 2008 ensure not a lot of supply is coming on stream."
Why it's different this time around as far as the length of the commodity bull market, is historically companies are starting to bring more supply online after about 8 or 9 years of higher prices. This time around, because of the crises in 2008, that temporarily halted much of the expected boost in production, resulting in a slow down in supply of commodities.
Rogers said concerning expansion of commodities companies, that "All these guys are delaying or suspending or cancelling new supply which is bullish. Until the supply comes we're not going to have an end to the bull market and, certainly in agriculture, my goodness, inventories are near historic lows, we have serious shortages of everything in agriculture developing, including farmers."
As for China, which is the major impetus behind commodity demand, Rogers sees them possibly loosening up their money supply, suggesting more demand for commodities, although he says that "China has loosened up too early every time in the last decade, which is why the real estate bubble has continued and it's gotten worse. So it looks as though China is going to loosen up again and in my view they're going to loosen up again too early this time around, and you'll probably have a continuation of the same old thing - more inflation and perhaps excesses in real estate again."
Concerning where investors should place their money in regard to commodities, Rogers concluded they should look for those commodities which have fallen the most in price for the place to begin.
Friday, July 20, 2012
Who Says Warren Buffett Doesn't Like Commodities
Recently Warren Buffett made another shrewd move by investing heavily in a little followed metal - tungsten.
How it came about is IMC International Metalworking, which is 80 percent owned by Buffett's holding company Berkshire Hathaway (NYSE: BRK-A), invested $80 million in a South Korean mining project, which effectively gives Berkshire a 25 percent stake in the mine.
The Sangdong Mine, which was the object of the investment, is among the top tungsten producing mines in the world, and used to be the top tungsten producer.
Sangdong is operated by Woulfe Mining Corp. (TXSV: WOF), which was also guaranteed by IMC International Metalworking to buy up 90 percent to 100 percent of all the tungsten produced there.
With China being the top producer in the world and not in any way interested in exporting tungsten, that makes the Sangdong a major tungsten producer outside of China, accounting for about 50 percent of all tungsten produced beyond the Chinese borders.
The mine, which will resume production in 2013, is expected to produce about 7 percent to 10 percent of tungsten globally.
According to Nick Smith, manager of investor relations at Woulfe, he said in an interview with Tungsten Investing News that "Without tungsten, Western manufacturing comes to an end. You are not working with steel without tungsten. There's no global mining unless you have tungsten-tipped drills."
He's referring to the super hard characteristic of tungsten, which is used in multiple mining and manufacturing applications such as mining drill tips and circular electric saws.
One of its more practical and ubiquitous applications has been in the filament of incandescent light bulbs. It makes one wonder with the industrial and military applications if that's the major reason behind eventually eliminating the use of incandescent light bulbs in the United States.
Tungsten is also in high demand in the energy and high tech sectors, making a vital component of many industries.
China now accounts for about 80 percent of all known tungsten resources in the world, and as mentioned, isn't about to export them to aid its competitors. It has quotas on exports to ensure they maintain the supply in that country for its manufacturers.
Demand for tungsten has grown at a steady pace of close to 6 percent for a number of years, and if it continues at that pace, production will have to grow from 68,000 metric tons in 2011 to 96,000 metric tons by 2016.
In just three years the price of tungsten has skyrocketed from $180 a metric ton to about $430 a metric ton as of this writing.
Now you can see why Buffett has entered into the tungsten fray, which will undoubtedly rise in price continually into the future.
Unfortunately, at this time there isn't much in the way for investors to invest in tungsten other than in rare earths companies searching for it or an ETF that offers exposure to the metal. The problem there is it's only a one piece of a pie with many pieces.
How it came about is IMC International Metalworking, which is 80 percent owned by Buffett's holding company Berkshire Hathaway (NYSE: BRK-A), invested $80 million in a South Korean mining project, which effectively gives Berkshire a 25 percent stake in the mine.
The Sangdong Mine, which was the object of the investment, is among the top tungsten producing mines in the world, and used to be the top tungsten producer.
Sangdong is operated by Woulfe Mining Corp. (TXSV: WOF), which was also guaranteed by IMC International Metalworking to buy up 90 percent to 100 percent of all the tungsten produced there.
With China being the top producer in the world and not in any way interested in exporting tungsten, that makes the Sangdong a major tungsten producer outside of China, accounting for about 50 percent of all tungsten produced beyond the Chinese borders.
The mine, which will resume production in 2013, is expected to produce about 7 percent to 10 percent of tungsten globally.
According to Nick Smith, manager of investor relations at Woulfe, he said in an interview with Tungsten Investing News that "Without tungsten, Western manufacturing comes to an end. You are not working with steel without tungsten. There's no global mining unless you have tungsten-tipped drills."
He's referring to the super hard characteristic of tungsten, which is used in multiple mining and manufacturing applications such as mining drill tips and circular electric saws.
One of its more practical and ubiquitous applications has been in the filament of incandescent light bulbs. It makes one wonder with the industrial and military applications if that's the major reason behind eventually eliminating the use of incandescent light bulbs in the United States.
Tungsten is also in high demand in the energy and high tech sectors, making a vital component of many industries.
China now accounts for about 80 percent of all known tungsten resources in the world, and as mentioned, isn't about to export them to aid its competitors. It has quotas on exports to ensure they maintain the supply in that country for its manufacturers.
Demand for tungsten has grown at a steady pace of close to 6 percent for a number of years, and if it continues at that pace, production will have to grow from 68,000 metric tons in 2011 to 96,000 metric tons by 2016.
In just three years the price of tungsten has skyrocketed from $180 a metric ton to about $430 a metric ton as of this writing.
Now you can see why Buffett has entered into the tungsten fray, which will undoubtedly rise in price continually into the future.
Unfortunately, at this time there isn't much in the way for investors to invest in tungsten other than in rare earths companies searching for it or an ETF that offers exposure to the metal. The problem there is it's only a one piece of a pie with many pieces.
Tuesday, July 10, 2012
China's Drop in Imports Not a Sign of Significant Slowdown
At first glance it appeared after the numbers came out in China concerning that the decline in imports pointed to a disaster in China. But that wasn't and isn't the case, but is rather a reflection of a commodity management strategy by the country.
When China announced its growth in imports had been slashed by almost half of analysts projected in June, traders and investors pushed down the price of commodities and equities, as coupled with weak financial reports from American companies, seemed to point to a catastrophic quarter.
Imports in China fell to 6.6 percent year-over-year in June, dropping from the projected 12.7 percent analysts were looking for.
Exports by the Middle Kingdom, on the other hand, jumped to 11.3 percent, easily surpassing the estimated 9.9 percent analysts estimated.
Most of the decline in imports to the company are a result of Chinese buyers building up commodity inventory over the last several months, which resulted in the need to use up those inventories before buying large in the market again.
For June crude oil and copper imports appeared to be hammered, with copper imports falling by 17.5 percent and crude by 15 percent from the prior month. Most should have known that there was something unusual about those numbers, even with the strained global economic situation we're in.
Expectations are China imports will probably be weak for several months while it works down its inventory.
It was noted by analysts covering China that the low imports have nothing to do with consumer spending in China, as it does in the United States, because Chinese imports are mostly commodities used in for infrastructure projects and manufacturing.
For the annual goal of a growth of 10 percent for China in 2012, China will likely reach it, although economically devastated Europe, along with the weak American economy, make it unlikely China's goal of export growth of 10 percent will be met. Exports are probably going to be more in the 8 or 9 percent range for the country.
Chinese imports should climb in the second half as commodity inventory is used up.
When China announced its growth in imports had been slashed by almost half of analysts projected in June, traders and investors pushed down the price of commodities and equities, as coupled with weak financial reports from American companies, seemed to point to a catastrophic quarter.
Imports in China fell to 6.6 percent year-over-year in June, dropping from the projected 12.7 percent analysts were looking for.
Exports by the Middle Kingdom, on the other hand, jumped to 11.3 percent, easily surpassing the estimated 9.9 percent analysts estimated.
Most of the decline in imports to the company are a result of Chinese buyers building up commodity inventory over the last several months, which resulted in the need to use up those inventories before buying large in the market again.
For June crude oil and copper imports appeared to be hammered, with copper imports falling by 17.5 percent and crude by 15 percent from the prior month. Most should have known that there was something unusual about those numbers, even with the strained global economic situation we're in.
Expectations are China imports will probably be weak for several months while it works down its inventory.
It was noted by analysts covering China that the low imports have nothing to do with consumer spending in China, as it does in the United States, because Chinese imports are mostly commodities used in for infrastructure projects and manufacturing.
For the annual goal of a growth of 10 percent for China in 2012, China will likely reach it, although economically devastated Europe, along with the weak American economy, make it unlikely China's goal of export growth of 10 percent will be met. Exports are probably going to be more in the 8 or 9 percent range for the country.
Chinese imports should climb in the second half as commodity inventory is used up.
Wednesday, May 16, 2012
Commodities Fall on Greece, Economic Worries
Fears Greece may exit the euro has put pressure on commodities, as concerns it would lead to a domino effect, which could result in Spain, among other countries, abandoning the euro as well.
That would lead to a period of chaos in the region, which when combined, is the largest market in the world.
Not too many people are concerned about Greece itself, as it's largely irrelevant. It's what Greece represents in regard to other countries that strikes fear in the hearts of leaders in the region, as it does those who have been attempting to peddle the concept of a one-world order.
That and concerns over China, Japan and the United States, all of which seem to have economies that are slowing down, has commodities under extreme pressure, aided by the rise in value of the U.S. dollar against the euro, as well as other major currencies.
Because commodities are bought in U.S. dollars, that makes it more expensive for those trading in other currencies, exasperating the problem. That's why the price of gold and other commodities have been plummeting.
In Japan, machinery orders dropped 2.8 percent in March, while in the U.S. retail sales fell to the lowest growth level in April for 2012.
The Dollar Index was in positive territory for the 13th day in a row - a record, while the euro plunged to its lowest level in four months, falling as low as $1.2681.
As for Greece, until that situation is resolved, it appears commodities prices will remain under downward pressure. Even though nothing has really changed economically with the failure of the country to form a new government, the market is acting as if this is something new and that Greece is actually serious about austerity measures and paying back its debt.
If Greece does exit the euro, which, over time, is almost a surety, that could have a dramatic impact on commodity prices and the global economy because of the very real and legitimate concerns over what is going to happen with Italy, Portugal, Ireland and Spain.
That of course translates into the euro zone, where the inability to project the short-term future with any clarity will hinder the ability to obtain funding, and even if businesses and banks could access funds, it's highly unlikely they'd take the risk with the specter of uncertain growth weighing on them.
One thing that could quickly change that is the introduction of another round of quantitative easing, which would temporarily give the global economy a boost, but at the growing risk of even more debt, which already can't be paid down by governments that promised the moon to their people but are now reaping the whirlwind because of the failure of Keynesian economics.
While there is no doubt the commodity bull run isn't over, we are in a correction that seems to still have longer to go before commodities begin their upward climb in prices again.
This is why the U.S. dollar is the perceived place of safety for investors, even though currencies around the world, including the greenback, have been devastatingly debased.
That would lead to a period of chaos in the region, which when combined, is the largest market in the world.
Not too many people are concerned about Greece itself, as it's largely irrelevant. It's what Greece represents in regard to other countries that strikes fear in the hearts of leaders in the region, as it does those who have been attempting to peddle the concept of a one-world order.
That and concerns over China, Japan and the United States, all of which seem to have economies that are slowing down, has commodities under extreme pressure, aided by the rise in value of the U.S. dollar against the euro, as well as other major currencies.
Because commodities are bought in U.S. dollars, that makes it more expensive for those trading in other currencies, exasperating the problem. That's why the price of gold and other commodities have been plummeting.
In Japan, machinery orders dropped 2.8 percent in March, while in the U.S. retail sales fell to the lowest growth level in April for 2012.
The Dollar Index was in positive territory for the 13th day in a row - a record, while the euro plunged to its lowest level in four months, falling as low as $1.2681.
As for Greece, until that situation is resolved, it appears commodities prices will remain under downward pressure. Even though nothing has really changed economically with the failure of the country to form a new government, the market is acting as if this is something new and that Greece is actually serious about austerity measures and paying back its debt.
If Greece does exit the euro, which, over time, is almost a surety, that could have a dramatic impact on commodity prices and the global economy because of the very real and legitimate concerns over what is going to happen with Italy, Portugal, Ireland and Spain.
That of course translates into the euro zone, where the inability to project the short-term future with any clarity will hinder the ability to obtain funding, and even if businesses and banks could access funds, it's highly unlikely they'd take the risk with the specter of uncertain growth weighing on them.
One thing that could quickly change that is the introduction of another round of quantitative easing, which would temporarily give the global economy a boost, but at the growing risk of even more debt, which already can't be paid down by governments that promised the moon to their people but are now reaping the whirlwind because of the failure of Keynesian economics.
While there is no doubt the commodity bull run isn't over, we are in a correction that seems to still have longer to go before commodities begin their upward climb in prices again.
This is why the U.S. dollar is the perceived place of safety for investors, even though currencies around the world, including the greenback, have been devastatingly debased.
Wednesday, October 13, 2010
Alcoa (NYSE:AA) Continues Climb on China Commodity Imports
Dow movers Alcoa (NYSE:AA) and Caterpillar (NYSE:CAT) moved higher today on news commodity imports to China were higher than expects, with China's trade surplus dropping to a five-month low of $16.88 billion in September.
The Dow Jones Industrial Average and Standard & Poor's 500-stock index are both up today.
Alcoa rose to $13.38, gaining $0.18, or 1.36 percent at 1:14 PM EDT. Caterpillar increased to $80.95, gaining $1.61, or 2.03 percent.
The Dow Jones Industrial Average and Standard & Poor's 500-stock index are both up today.
Alcoa rose to $13.38, gaining $0.18, or 1.36 percent at 1:14 PM EDT. Caterpillar increased to $80.95, gaining $1.61, or 2.03 percent.
Monday, May 24, 2010
Goldman Sachs (NYSE:GS) Bullish on Broader Market
While they acknowledge the challenges associated with the European debt crisis, especially if it continues on for the rest of 2010, and onward, Goldman Sachs (NYSE:GS) remains bullish on the broader market.
Here's how they described the reason for their bullish sentiment:
“We recognize the dramatic decline in the Euro, and the potential impact it may have on reported US corporate earnings if it persists through year-end. We acknowledge the risk that European economic growth may be weaker than many currently expect as a result of pending fiscal tightening. However, we remind equity investors that US companies in the S&P 500 have total annual revenues of $8.4 trillion and Europe, Middle East and Africa combined explicitly account for just 10% of the total (and if charitably inclined, perhaps as much as 15% of the total if a generous allocation of sales to “Other” regions is allocated to Europe).”
I'm not as optimistic as Goldman, and just like their positive outlook for the banking sector, looks a little too strong for the broader market as well.
Even if revenue is close to what Goldman states, many companies have said their growth is going to be based on China, something Goldman didn't comment on.
With the demand from China expected to decline, combined with the austerity pressure in Europe, it looks like the outlook by Goldman may not be as good as they're saying.
It does make me wonder if they're doing this as a gesture to put them in a more positive light or not, as they have to take the global exposure of these companies, and not just selected regions.
Here's how they described the reason for their bullish sentiment:
“We recognize the dramatic decline in the Euro, and the potential impact it may have on reported US corporate earnings if it persists through year-end. We acknowledge the risk that European economic growth may be weaker than many currently expect as a result of pending fiscal tightening. However, we remind equity investors that US companies in the S&P 500 have total annual revenues of $8.4 trillion and Europe, Middle East and Africa combined explicitly account for just 10% of the total (and if charitably inclined, perhaps as much as 15% of the total if a generous allocation of sales to “Other” regions is allocated to Europe).”
I'm not as optimistic as Goldman, and just like their positive outlook for the banking sector, looks a little too strong for the broader market as well.
Even if revenue is close to what Goldman states, many companies have said their growth is going to be based on China, something Goldman didn't comment on.
With the demand from China expected to decline, combined with the austerity pressure in Europe, it looks like the outlook by Goldman may not be as good as they're saying.
It does make me wonder if they're doing this as a gesture to put them in a more positive light or not, as they have to take the global exposure of these companies, and not just selected regions.
Tuesday, May 18, 2010
Canadian Dollar Close to One-week Low
The Canadian dollar fell 0.5 percent as of 4:02 p.m. Toronto, against the U.S. dollar dropping from C$1.0325 yesterday to C$1.0375 today.
With the strong possibility of another global slowdown, one that really hasn't began to recover in any meaningful way, Matthew Strauss, senior currency strategist at Royal Bank of Canada, noted that Canada's reputation as strong producers of raw materials will help the currency and its bonds.
The European sovereign debt crisis is part of that concern, but even more so, and under-reported at this time, is the challenges facing China, who is battling the threat of inflation by increasing interest rates and regulating their property industry more.
But there's no doubt about the fact that China is the major consumer of base-metal commodities from Canada, and it's probably not a matter of whether or not demand will lower, but the degree to which it will.
That also has commodity countries like Brazil and Australia concerned as well, who have been counting on China to help their emerge out of the recession in a sustainable manner. That expectation is no longer a certainty for any country or company providing commodities to them.
It's unlikely the Canadian dollar will continue to fall, although if it happened for a short period of time, it would be advantageous to Canadian business, as the lucrative tourist season is coming, and Canadian exporters could compete better with a lower currency
With the strong possibility of another global slowdown, one that really hasn't began to recover in any meaningful way, Matthew Strauss, senior currency strategist at Royal Bank of Canada, noted that Canada's reputation as strong producers of raw materials will help the currency and its bonds.
The European sovereign debt crisis is part of that concern, but even more so, and under-reported at this time, is the challenges facing China, who is battling the threat of inflation by increasing interest rates and regulating their property industry more.
But there's no doubt about the fact that China is the major consumer of base-metal commodities from Canada, and it's probably not a matter of whether or not demand will lower, but the degree to which it will.
That also has commodity countries like Brazil and Australia concerned as well, who have been counting on China to help their emerge out of the recession in a sustainable manner. That expectation is no longer a certainty for any country or company providing commodities to them.
It's unlikely the Canadian dollar will continue to fall, although if it happened for a short period of time, it would be advantageous to Canadian business, as the lucrative tourist season is coming, and Canadian exporters could compete better with a lower currency
Saturday, April 17, 2010
Vale (NYSE:VALE), Rio Tinto (NYSE:RTP), BHP Billiton (NYSE:BHP), Under Investigation by Chinese
Vale, Rio Tinto, BHP Billiton and China
The Chinese have stated they are undertaking an investigation into iron ore giants Vale (NYSE:VALE), Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP) over the possibility they have illegally worked together as a monopoly to manipulate iron ore prices to their advantage.
China has fought hard to use its status as the largest importer of iron ore to negotiate better prices for themselves, but have been resisted strongly by the three leading iron ore producers.
This latest move seems to be a tool being used by the Chinese to influence the process and hopefully get the mining companies to capitulate.
The Chinese have stated they are undertaking an investigation into iron ore giants Vale (NYSE:VALE), Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP) over the possibility they have illegally worked together as a monopoly to manipulate iron ore prices to their advantage.
China has fought hard to use its status as the largest importer of iron ore to negotiate better prices for themselves, but have been resisted strongly by the three leading iron ore producers.
This latest move seems to be a tool being used by the Chinese to influence the process and hopefully get the mining companies to capitulate.
Thursday, April 8, 2010
China Driving Copper Demand
China and Copper Demand
The strength and weakness of copper demand rests solely on China, as everything else pales in reference to copper and price movements in the present and future.
Much of this is predicated upon the fact that the developed countries continue to struggle economically, and contrary to mainstream media reports, the economics of the developed world are far from being in a recovery, and in fact may have never left the recessionary period, as jobs reports and unemployment reveal.
What the means for copper is the only economy that can be counted on to drive demand is China at this time, so it narrows what needs to be watched closely going forward. This of course doesn't mean there won't be some copper demand in other parts of the, just that China is completely driving the demand, and the demand from other countries pale in comparison, and if they were to cut back on copper orders, it wouldn't have much effect on copper prices.
Anglo American (LSE:AAL) said today that because of this copper does have vulnerability, as if China falters so will copper demand and copper prices.
Basically what this means for copper is there will probably be huge swings as news from around the world affects the prices in the next 12 to 18 months.
Over the long term, copper prices will assuredly arise with demand, but there will be ups and downs along that path until things finally level off.
There are far too many economic uncertainties in the developed world, and to a lesser extent in emerging markets to be able to count on stability any time soon. Copper demand and prices will react accordingly.
The strength and weakness of copper demand rests solely on China, as everything else pales in reference to copper and price movements in the present and future.
Much of this is predicated upon the fact that the developed countries continue to struggle economically, and contrary to mainstream media reports, the economics of the developed world are far from being in a recovery, and in fact may have never left the recessionary period, as jobs reports and unemployment reveal.
What the means for copper is the only economy that can be counted on to drive demand is China at this time, so it narrows what needs to be watched closely going forward. This of course doesn't mean there won't be some copper demand in other parts of the, just that China is completely driving the demand, and the demand from other countries pale in comparison, and if they were to cut back on copper orders, it wouldn't have much effect on copper prices.
Anglo American (LSE:AAL) said today that because of this copper does have vulnerability, as if China falters so will copper demand and copper prices.
Basically what this means for copper is there will probably be huge swings as news from around the world affects the prices in the next 12 to 18 months.
Over the long term, copper prices will assuredly arise with demand, but there will be ups and downs along that path until things finally level off.
There are far too many economic uncertainties in the developed world, and to a lesser extent in emerging markets to be able to count on stability any time soon. Copper demand and prices will react accordingly.
China Ready to Revalue Renminbi?
China about to revalue renminbi?
Rumors on the street are China is close to announcing they are ready to revalue their currency, although we shouldn't expect much of a move there, and if the rumors are true, it will be a relatively small increase in value in the renminbi.
What is expected is a very quick but low revaluing of the Chinese currency, probably to placate politicians in the U.S., who for the most part, are clueless over it all, but are pressuring the Chinese from a populist position.
Concerns over speculators entering the market will evidently be handled by the Chinese saying the renminbi can just as easily be lowered in value as increased in value, as they want to keep the possible huge influx of investment that could come into China from assuming an inevitable upward climb in value which could hurt the country.
Rumors on the street are China is close to announcing they are ready to revalue their currency, although we shouldn't expect much of a move there, and if the rumors are true, it will be a relatively small increase in value in the renminbi.
What is expected is a very quick but low revaluing of the Chinese currency, probably to placate politicians in the U.S., who for the most part, are clueless over it all, but are pressuring the Chinese from a populist position.
Concerns over speculators entering the market will evidently be handled by the Chinese saying the renminbi can just as easily be lowered in value as increased in value, as they want to keep the possible huge influx of investment that could come into China from assuming an inevitable upward climb in value which could hurt the country.
Tuesday, March 30, 2010
Rio Tinto (ASE:RIO) Under China's Thumb?
How long did Rio Tinto know employees were guilty?
After a long period of time of making it look like China had trumped up the charges against the four Rio Tinto (ASE:RIO) employees, it looks like Rio Tinto knew they were guilty of the charges as long as six months ago.
Some may have wondered why Rio Tinto and Australia backed away from pursuing the matter so strongly, and I think if this is true, and it seems it is, this is the underlying reason.
What's somewhat ugly about this is Rio continued to allow the farce to play out on the global scene while knowing for some time their employees had indeed engaged in the actions they were accused of, according to the Independent (UK).
Many reports in the media, especially over the last several days have placed China in a negative light over the event, assuming the four accused were innocent, and the move by China one of retaliation for a failed business deal.
If this is all true, than it is a poor reflection on the type of company Rio Tinto is to allow this to play out for so long without bringing out the truth, and allowing China's name to be dragged through the mud.
There are of course problems in China, but we need to focus on real ones, not ones made up by the media based on a company that lost control of its people and failed to have internal controls in place to siphon out these types of actions before they get too far along.
In other words, it's Rio that seems to be incompetent in this matter, and their reputation is the one that should take a big hit for allowing it to continue on.
So is Rio Tinto under China's thumb now? Absolutely, in the sense Rio was caught in a circumstance which makes them look bad and operationally and ethically inept. That could be a competitive advantage to China, and may be the reason a number of deals have been struck between Australia and other Chinese mining companies recently.
After a long period of time of making it look like China had trumped up the charges against the four Rio Tinto (ASE:RIO) employees, it looks like Rio Tinto knew they were guilty of the charges as long as six months ago.
Some may have wondered why Rio Tinto and Australia backed away from pursuing the matter so strongly, and I think if this is true, and it seems it is, this is the underlying reason.
What's somewhat ugly about this is Rio continued to allow the farce to play out on the global scene while knowing for some time their employees had indeed engaged in the actions they were accused of, according to the Independent (UK).
Many reports in the media, especially over the last several days have placed China in a negative light over the event, assuming the four accused were innocent, and the move by China one of retaliation for a failed business deal.
If this is all true, than it is a poor reflection on the type of company Rio Tinto is to allow this to play out for so long without bringing out the truth, and allowing China's name to be dragged through the mud.
There are of course problems in China, but we need to focus on real ones, not ones made up by the media based on a company that lost control of its people and failed to have internal controls in place to siphon out these types of actions before they get too far along.
In other words, it's Rio that seems to be incompetent in this matter, and their reputation is the one that should take a big hit for allowing it to continue on.
So is Rio Tinto under China's thumb now? Absolutely, in the sense Rio was caught in a circumstance which makes them look bad and operationally and ethically inept. That could be a competitive advantage to China, and may be the reason a number of deals have been struck between Australia and other Chinese mining companies recently.
Monday, March 22, 2010
Marc Faber: Chinese Economy Will Slow, Not Crash
Marc Faber on Chinese Economy
Investment expert Marc Faber said the Chinese economy, which a number of economists and analysts have said could crash sometime soon, won't crash, but it will definitely slow down in the second half of 2010.
Some feel even if the Chinese economy does slow down, it'll still grow at a rate of 8 to 9 percent; solid growth by almost any standard.
Some American politicians, along with the increasingly irrelevant Paul Krugman, have been publicly blasting China for its monetary policy, a type of action that has never worked with Asian people, and is not the best way to gain cooperation.
China will eventually change its monetary policy, but these types of populist actions are just plain stupid and bad strategy.
The Chinese would win the battle if they simply decided not to acquire any more U.S. Treasury instruments, and could do more damage if they decided to sell them as well, as the Fed would then have to print hundreds of billions to purchase them, which would drive down the value of the U.S. dollar even more, which would bring a lot of consequences to the country.
Investment expert Marc Faber said the Chinese economy, which a number of economists and analysts have said could crash sometime soon, won't crash, but it will definitely slow down in the second half of 2010.
Some feel even if the Chinese economy does slow down, it'll still grow at a rate of 8 to 9 percent; solid growth by almost any standard.
Some American politicians, along with the increasingly irrelevant Paul Krugman, have been publicly blasting China for its monetary policy, a type of action that has never worked with Asian people, and is not the best way to gain cooperation.
China will eventually change its monetary policy, but these types of populist actions are just plain stupid and bad strategy.
The Chinese would win the battle if they simply decided not to acquire any more U.S. Treasury instruments, and could do more damage if they decided to sell them as well, as the Fed would then have to print hundreds of billions to purchase them, which would drive down the value of the U.S. dollar even more, which would bring a lot of consequences to the country.
BHP Billiton (NYSE:BHP): Good Investment?
Is it a good time to invest in BHP Billiton?
BHP Billiton (NYSE:BHP) is one of the most diversified and largest of all commodity companies, as most people know. The question now is, is it a good time to invest in BHP Billiton or should you wait?
As of this writing, BHP Billiton has a market cap well over $200 billion, and operations on six continents.
To make a decision as simple as possible, as you can wear yourself out trying to trace every aspect of this company, especially when commodity prices can be strongly effected by geo-political circumstances. And when you have a company as large and diversified as BHP Billiton, they can be booming in one part of the world and getting hammered in another part.
So with that in mind, it's better, as far as it relates to BHP, to solely base your decision on supply and demand, and how the company is weighted during this season of time.
And when talking of supply and demand, we're largely talking primarily about China, and secondarily about India. As China and India go, that's how demand will go on a macro-economic scale.
Even if China tightens their capital markets, they are still expected to grow at an eight to nine percent rate. Still huge by any measurement you use.
Another key element in investing in BHP Billington will be the actions of major central banks around the world concerning interest rates.
If you think interest rates will go up soon, it could be a bad time to invest in a company like BHP, but if you think they'll stay low for some time, then investing now could reap some nice returns.
BHP is still close to 20 percent below its highs in 2008, so there is room to move up for them.
Even in these extremely volatile times, supply and demand will eventually win out on investing in commodities, and even though temporary events can cause huge fluctuations, that should be the deciding factor for investing in any commodity company. Otherwise there are too many variables to consider that can really be made sense of in a cohesive way which can lead to an informed decision.
BHP Billiton (NYSE:BHP) is one of the most diversified and largest of all commodity companies, as most people know. The question now is, is it a good time to invest in BHP Billiton or should you wait?
As of this writing, BHP Billiton has a market cap well over $200 billion, and operations on six continents.
To make a decision as simple as possible, as you can wear yourself out trying to trace every aspect of this company, especially when commodity prices can be strongly effected by geo-political circumstances. And when you have a company as large and diversified as BHP Billiton, they can be booming in one part of the world and getting hammered in another part.
So with that in mind, it's better, as far as it relates to BHP, to solely base your decision on supply and demand, and how the company is weighted during this season of time.
And when talking of supply and demand, we're largely talking primarily about China, and secondarily about India. As China and India go, that's how demand will go on a macro-economic scale.
Even if China tightens their capital markets, they are still expected to grow at an eight to nine percent rate. Still huge by any measurement you use.
Another key element in investing in BHP Billington will be the actions of major central banks around the world concerning interest rates.
If you think interest rates will go up soon, it could be a bad time to invest in a company like BHP, but if you think they'll stay low for some time, then investing now could reap some nice returns.
BHP is still close to 20 percent below its highs in 2008, so there is room to move up for them.
Even in these extremely volatile times, supply and demand will eventually win out on investing in commodities, and even though temporary events can cause huge fluctuations, that should be the deciding factor for investing in any commodity company. Otherwise there are too many variables to consider that can really be made sense of in a cohesive way which can lead to an informed decision.
Sunday, March 21, 2010
Paul Krugman Clueless on China ... and Everything Else
Peter Schiff in talking about Paul Krugman - who doesn't have the right to be called an economist - asked for the Nobel Prize committee to take the medal back for stirring up issues with China that will end up doing the U.S. great harm.
Schiff calls out Krugman on calling for an economic war with China, where Krugman believes China no longer purchasing Treasuries is a winner for the U.S. and devastating to China.
But if China were to sell its existing debt or refuse to buy any more, the Fed would be forced to again ramp up the printing presses and throw more money at the problem, which even Krugman admits would cause the value of the U.S. dollar to fall; something he thinks would be good for all of us.
That would drive up prices for American consumers, although it would temporarily help American-made products to be more competitive on the world stage.
Consequently, the standard of living for most Americans would plunge, while the Chinese standard of living would continue to rise. That doesn't sound like a winning hand for America, and it isn't.
The Chinese would start to have their domestic prices lowered while their own factories would do the majority of the supplying of those goods.
Commodity prices in that scenario would also fall steeply, making it easier and cheaper for China to produce products to serve their people.
Being a fading Keynesian, all Krugman can think of is printing money will solve all economic problems. The idea of transferring that thought stupidly to the Chinese monetary situation is reckless and ignorant. No wonder Schiff is calling for the Nobel Prize committee to take the medal back from Krugman.
Of course he should never have received it in the first place.
Schiff calls out Krugman on calling for an economic war with China, where Krugman believes China no longer purchasing Treasuries is a winner for the U.S. and devastating to China.
But if China were to sell its existing debt or refuse to buy any more, the Fed would be forced to again ramp up the printing presses and throw more money at the problem, which even Krugman admits would cause the value of the U.S. dollar to fall; something he thinks would be good for all of us.
That would drive up prices for American consumers, although it would temporarily help American-made products to be more competitive on the world stage.
Consequently, the standard of living for most Americans would plunge, while the Chinese standard of living would continue to rise. That doesn't sound like a winning hand for America, and it isn't.
The Chinese would start to have their domestic prices lowered while their own factories would do the majority of the supplying of those goods.
Commodity prices in that scenario would also fall steeply, making it easier and cheaper for China to produce products to serve their people.
Being a fading Keynesian, all Krugman can think of is printing money will solve all economic problems. The idea of transferring that thought stupidly to the Chinese monetary situation is reckless and ignorant. No wonder Schiff is calling for the Nobel Prize committee to take the medal back from Krugman.
Of course he should never have received it in the first place.
Tuesday, March 16, 2010
MarK Mobius: China Growth is Sustainable
Mark Mobius on China Growth
Mark Mobius was talking at the Reuters Mining and Steel Summit on the future growth of China and whether he believed it was sustainable or not. The emerging market expert said while China will continue at high growth levels and it will be sustainable, it won't be able to continue at double-digit growth levels, but will probably continue on some time in higher single-digit growth.
This ensures raw material demand will continue to be high based on China alone, according to Mobius, and I would add it shows the long-term demand cycle we're in when taking into account all emerging nations, and to a lesser degree, developing nations as well, who will benefit from selling commodities.
Contrary to the idea China will be tightening up, Mobius looks at them continuing to to pursue raw materials no matter what they do with their currency. Taking into account Chinese concerns over economic conditions in the United States and the rest of the West, and you can see they know exports are going to take a long time to rebound, making their internal needs and domestic projects as important as ever. This doesn't mean there won't be decent exports, just that they'll take time to build up to pre-recession levels.
Some of the larger and safer emerging market investments Mobius mentioned as good plays were Compania de Minas Buenaventura SA (NYSE:BVN), Vale (NYSE:VALE) and PetroChina Company Limited (NYSE:PTR).
Mark Mobius on China Growth
Mark Mobius was talking at the Reuters Mining and Steel Summit on the future growth of China and whether he believed it was sustainable or not. The emerging market expert said while China will continue at high growth levels and it will be sustainable, it won't be able to continue at double-digit growth levels, but will probably continue on some time in higher single-digit growth.
This ensures raw material demand will continue to be high based on China alone, according to Mobius, and I would add it shows the long-term demand cycle we're in when taking into account all emerging nations, and to a lesser degree, developing nations as well, who will benefit from selling commodities.
Contrary to the idea China will be tightening up, Mobius looks at them continuing to to pursue raw materials no matter what they do with their currency. Taking into account Chinese concerns over economic conditions in the United States and the rest of the West, and you can see they know exports are going to take a long time to rebound, making their internal needs and domestic projects as important as ever. This doesn't mean there won't be decent exports, just that they'll take time to build up to pre-recession levels.
Some of the larger and safer emerging market investments Mobius mentioned as good plays were Compania de Minas Buenaventura SA (NYSE:BVN), Vale (NYSE:VALE) and PetroChina Company Limited (NYSE:PTR).
Mark Mobius on China Growth
Citibank (NYSE:C) Growing Commodities Unit
Citibank Commodities Unit
Citibank (NYSE:C) is looking to its investment banking division for growth, specifically its commodities unit, which it is focusing on expanding in the near term.
Raw materials and agriculture should be strong sectors for many years, and even with the alleged move by China to tighten its monetary policy, that could be a ploy as it negotiates across a number of sectors for raw materials it needs desperately.
One for sure is iron ore for the steel industry in China, which is booming and a major export for the country.
Precious metals are another sector which China will have great demand for in the years ahead.
With the pressure to cut back on fees in relationship to consumers, banks like Citibank are looking outside of retail banking for growth sectors, and commodities afford some of the best opportunities in the years ahead, even though there could be a lot of ups and downs on the road.
Citibank Commodities Unit
Citibank (NYSE:C) is looking to its investment banking division for growth, specifically its commodities unit, which it is focusing on expanding in the near term.
Raw materials and agriculture should be strong sectors for many years, and even with the alleged move by China to tighten its monetary policy, that could be a ploy as it negotiates across a number of sectors for raw materials it needs desperately.
One for sure is iron ore for the steel industry in China, which is booming and a major export for the country.
Precious metals are another sector which China will have great demand for in the years ahead.
With the pressure to cut back on fees in relationship to consumers, banks like Citibank are looking outside of retail banking for growth sectors, and commodities afford some of the best opportunities in the years ahead, even though there could be a lot of ups and downs on the road.
Citibank Commodities Unit
Thursday, February 25, 2010
China Tightening and Gold Market
China Gold Market
Even though China is tightening their money supply some, according to the Far East managing director of the World Gold Council, Albert Cheng, it will have little effect on the gold market or gold demand..
The reasoning behind Cheng's assertion is the Chinese market doesn't have investment vehicles like exchange-traded funds, so they aren't a factor in that market.
Consequently, the Chinese market for gold is driven by retail investors and consumers, and the majority of them want to include gold as a part of their investment portfolio in order to maintain their wealth.
For China itself, they've been steadily increasing the amount of gold holding they have in the country, up to 1,054 tons now from the approximate 600 tons they had in 2003.
While they are getting a little more investment savvy and didn't bite at the offer from the IMF to acquire about 191.3 tons of gold, it is suspected they continue to buy behind the scenes.
China Gold Market
Even though China is tightening their money supply some, according to the Far East managing director of the World Gold Council, Albert Cheng, it will have little effect on the gold market or gold demand..
The reasoning behind Cheng's assertion is the Chinese market doesn't have investment vehicles like exchange-traded funds, so they aren't a factor in that market.
Consequently, the Chinese market for gold is driven by retail investors and consumers, and the majority of them want to include gold as a part of their investment portfolio in order to maintain their wealth.
For China itself, they've been steadily increasing the amount of gold holding they have in the country, up to 1,054 tons now from the approximate 600 tons they had in 2003.
While they are getting a little more investment savvy and didn't bite at the offer from the IMF to acquire about 191.3 tons of gold, it is suspected they continue to buy behind the scenes.
China Gold Market
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