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The
Financial Post reports that China will drive commodities super-cycle.
(emphasis mine) [my
comment]
China
will drive commodities super-cycle: Scotiabank
John Morrissy, Financial Post
Published: Monday, June 29, 2009
Canwest News ServiceHeavy
equipment at McClean Lake uranium mine in Northern Saskatchewan. Driven by
record levels of imports into China, Scotiabank’s commodity-price
index climbed 2.2% in May from April.
OTTAWA - Canada's key commodities have reversed their dramatic declines
and are headed for years of renewed strength as the Chinese
"dragon" rekindles an Asian-led super-cycle in basic materials, says
Scotiabank commodities expert Patricia Mohr.
Driven by record levels of imports into China, Scotiabank's commodity-price
index climbed 2.2% in May from April, the month in which the 45% slide from
July 2008 peaks came to an end, according to Ms. Mohr.
"China's dragon has breathed life back into commodity prices,"
Ms. Mohr said.
Moreover, China's economy is prospering despite weakness in the G7
countries that constitute the Western world's industrial powers, she said.
"If you look at what has happened in terms of China's industrial
activity in the past three months (up 8.9% year-over-year in May alone) it
obviously has at least partly decoupled from the G7."
Though the notion of decoupling, in which Asian economies prosper
irrespective of Western growth, fell out of favour in last year's sell-off,
as did a commodities "super-cycle," extending over many years and
caused by a structural change in the world's economy, Ms. Mohr is convinced
they will be the prevailing trends for years to come.
"A lot of the analysis is still very U.S.-centric," Ms. Mohr
said. "But I think that increasingly as economists we all have to spend
a lot more time looking at China, India and Brazil and Malaysia and Vietnam
than we used to because this is where the real growth is going to be,
particularly for basic materials and commodities." [True]
Theage.com
reports that China's manufacturing expands for 4th
month.
China's
manufacturing expands for 4th month
July
1, 2009
China's manufacturing expanded for a fourth month as a 4 trillion yuan
($719 billion) stimulus plan and record bank lending revive the world's
third-largest economy.
The official Purchasing Managers' Index rose to a seasonally adjusted 53.2 in
June from 53.1 in May, the Federation of Logistics and Purchasing said
today in Beijing in an e-mailed statement. A reading above 50 indicates an
expansion.
…
`Gathering momentum'
``China's recovery is gathering further momentum,'' said Lu Ting, an
economist with Bank of America Merrill Lynch in Hong Kong. ``It has been
recovering faster than the market had expected.''
…
Higher growth forecasts
In China, the stimulus plan and new loans of 5.84 trillion yuan in the first
five months, almost triple lending a year earlier, are driving growth.
``China's stimulus program is having a demonstrable effect on domestic
spending, which has resulted in increased manufacturing activity,'' said Jing
Ulrich, Hong Kong- based chairwoman of China equities at JPMorgan Chase &
Co.
Bank of America Merrill Lynch and JPMorgan raised this week their forecasts
for second-quarter economic growth. The former expects 7.6 per cent, compared
with 7.2 per cent previously. JPMorgan increased its forecast to 6.9 percent
from 6 per cent.
Prices of copper, used for autos and construction, are headed for their
biggest six-month gain in 22 years as Chinese buyers boost imports to records
to replenish stockpiles.
Higher coking coal prices are adding to evidence that demand for steel is
recovering. Fushan International Energy Group Ltd., a producer of steelmaking
coal, said last month that it raised prices for the first time since January.
China's lending boom sparked a 32.9 percent surge in urban fixed-asset
investment in the first five months, the fastest growth in five years. New
loans in June may exceed 1 trillion yuan, triple lending in the same month a
year earlier, China Business News reported June 30.
Chinese Demand
For Oil
The Star Phoenix
reports that Chinese demand forecast to boost oil
price.
Chinese
demand forecast to boost oil price
By Joanne Paulson, The StarPhoenixJune 30, 2009
Scotiabank's commodities arm is forecasting $90 oil in 2010, based partly
on China's intention to build stockpiles of the commodity during the next
several years.
Scotiabank has revised its forecast from last month's target of $75 US per
barrel West Texas Intermediate (WTI), and slightly increased this year's oil
price projection to $63 from $58 US.
"It has to do with organic growth for petroleum in China, but also other
emerging markets like India and Brazil," Patricia Mohr, Scotiabank
commodities expert and vice-president of economics, said in an interview.
"I do think China will build stockpiles . . . it won't be a near term
kind of gain. It's something that will be with us for a while."
China has completed construction of its Phase 1 tank farm, and appears to
have five huge storage facilities along the coast, said Mohr.
China completed filling that farm by late last year, but a second phase of
storage is just starting construction. The massive nation will also build
underground aquifers to store crude, and will start constructing those this
year.
Next year they will begin the filling of those storage units, and then
begin a third phase, said Mohr.
These developments contributed to Mohr's more bullish price forecast, as
well as the fact that China's oil consumption jumped six per cent last month.
In addition, China imported 57 per cent of its oil demand as of May.
"That is now higher than the U.S. dependency," said Mohr. "The
U.S. is going down."
The U.S. wants to move away from imported oil and has various policies in
place to allow for that, including the production of corn-based ethanol, said
Mohr.
"The real growth story for petroleum is going to be China, and then
India, Brazil, Malaysia, Vietnam . . . the emerging markets."
The Globe and
Mail reports that China leading recovery in oil demand.
China
leading recovery in oil demand, Scotiabank says
"I don't think the market has recognized the importance of China's
role in raising prices in recent months."
Steve Ladurantaye
Globe and Mail Update Last updated on Tuesday, Jun. 30,
2009 10:16AM EDT
China's appetite for foreign oil
has surpassed that of the United States, according to the Bank of Nova
Scotia, as consumers race to the pumps to fill their new cars and the country
feverishly builds storage facilities to take advantage of weak markets.
In its monthly commodity update, market specialist Patricia Mohr said China
relied on imports for 57 per cent of its petroleum production, while the
United States imported 55 per cent of its needs. China's import dependency
was less than 40 per cent in 2003, and averaged 50 per cent in 2008.
“It's an interesting question for Canada's oil sands if growth is
coming from emerging markets rather than the G7,” she said. “Our
efforts are on serving the U.S. market, but I think commercially it would be
in our interests to diversify. The world has changed substantially and will
change more as we move into the next decade.”
Chinese Demand
For Base Metals
The Wall Street
Journal reports that iron-ore producers boost output as
Chinese demand rises.
JUNE 15,
2009
Iron-Ore Producers Boost Output as Chinese Demand Rises
By
JEFFREY
SPARSHOTT and ALEX
MACDONALD
LONDON
-- At least two more iron-ore producers announced output increases this
month, underscoring how signs of strong Chinese demand for the raw material
are spilling across the industry and pushing spot-metal prices higher.
It is a sharp reversal from last year, when Western companies curtailed
mining for iron ore, a vital ingredient for making steel, as the global
economy slowed, steel demand all but collapsed and spot iron-ore prices sank.
Chinese demand for iron ore seems to be picking up. Here, a steel and iron
factory in Shanxi province in March.
Reuters reports
that China mid-June steel output hits 2009
high.
China
mid-June steel output hits 2009 high -CISA
Thu Jul 2, 2009 12:56am EDT
By Coco Li and Tom Miles
BEIJING, July 2 (Reuters) - China's steel output hit 1.522 million tonnes
per day in June 11-20, the highest daily output this year, according to data
from the China Iron & Steel Association obtained by Reuters on Thursday.
The rate of output is equivalent to an annual production of 555.5 million
tonnes, more than 10 percent above 2008 output of 500 million tonnes, and
sets a pace that could leave June close to the all-time record for monthly
steel production.
The accelerating rate of steel production will further weaken the case for
a 40 percent cut in annual iron ore prices that CISA is demanding in talks
with top mining firms, which have run past a June 30 deadline without
agreement.
CISA wants Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz), BHP Billiton
(BHP.AX: Quote, Profile, Research, Stock Buzz) and Vale
(VALE5.SA: Quote, Profile, Research, Stock Buzz), the companies
that control most of the global iron ore trade, to cut prices back to 2007
levels, which would mean a deeper cut in 2009 prices than many other steel
mills have accepted.
Despite a slump on the global steel market, China's steel production has
rebounded strongly this year after a slump at the end of 2008, spurred by a 4
trillion yuan ($586 billion) state stimulus plan.
Marketwatch
reports that China reportedly to concede on iron-ore
pricing.
Jul 1,
2009, 8:09 p.m. EST
China reportedly to concede on iron-ore
pricing
Explore related topics
By John
Letzing, MarketWatch
SAN
FRANCISCO (MarketWatch) -- The China Iron & Steel Association has
backed down from its hard line on iron-ore prices and is prepared to discuss
a less-than-hoped-for 33% reduction on benchmark ore this year, according to
reports Thursday.
Last month, Australian iron ore exporter Rio Tinto Plc. /quotes/comstock/13*!rtp/quotes/nls/rtpand Japan's Nippon Steel /quotes/comstock/!5401had established a deal cutting
iron ore prices by 33%, effectively establishing a benchmark. But Chinese
steel mills including Baoshan Iron & Steel /quotes/comstock/28c!e:600019resisted,
instead aiming for price reductions of 40% or more.
CISA, a group that includes the country's major steel mills, had also
initially resisted the price cut, demanding cuts of 40% to 45%, according to
a report in the Australian.
However, "Rising demand for imported iron ore in China has undermined
CISA's efforts to strike a hard bargain," the Australian reported.
CISA represents the 72 main steelmakers in the country, who together account
for up to 75% of Chinese production.
Steel makers have been touchy about price cuts, after negotiations last
year resulted in a more than doubling of prices just before global demand
collapsed. [Ouch]
The Financial
Times reports that steel demand helps nickel extend its
rally.
Steel
demand helps nickel extend its rally
By
Miles Johnson and Javier Blas
Published: July 1 2009 11:08 Last updated: July 1 2009 22:21
Nickel prices on Wednesday hit their highest
level in nine months, extending the metals 65 per cent rally in the second
quarter of the year.
This came amid signs of a recovery in stainless steel production, in which
the base metal is a key ingredient.
The rise in nickel prices between April and June dwarfs the increases of
other base metals, including copper – 27 per cent – and aluminium
– 13 per cent.
On the London Metal Exchange, nickel prices for delivery in three months
surged above $16,500 a tonne, up more than 6.5 per cent on the day and the
highest level since late-September. But prices are well below the all-time
high of more than $50,000 a tonne set in May 2007.
Analysts justified the rally on increasing demand for stainless steel
– which accounts for 70 per cent of nickel consumption, according to
Deutsche Bank – as consumers are restocking.
Barclays Capital noted that nickel imports in China have risen, hitting a
record high in May, while mine output has declined 21 per cent so far this
year when compared with 2008.
forbes reports
that China May copper imports hit record for
4th month.
Thomson
Reuters
China May copper imports hit record for 4th mth
06.11.09, 05:08 AM EDT
By Polly Yam
HONG KONG, June 11 (Reuters) - China's May imports of unwrought copper and
semi-finished copper products hit a fresh high for the fourth straight month
on continued arbitrage trade, though domestic consumption waned ahead of low
seasonal demand in the summer.
Imports of unwrought aluminium and semi-finished aluminium products in May
dropped 24.6 percent on the month due to reduced arrivals of booked arbitrage
imports for primary aluminium after record inflows in April.
China, the world's top consumer of copper and aluminium, imported 422,666
tonnes of unwrought copper, including anode, refined and alloy, and
semi-finished products, in May, up 5.7 percent from April's record 399,833
tonnes, data from the General Administration of Customs showed on Thursday.
http://graphics.thomsonreuters.com/069/CN_CPRIMP100609.jpg
'Even by Chinese standards, the numbers are very strong,' said David
Moore, a commodities strategist at Commonwealth Bank in Sydney. 'Year-to-date
imports are immense. There are a number of factors driving that, that is,
restocking, reduced scrap -- but it's still a strong number and has been
supportive of prices.'
…
China imported 331,740 tonnes of unwrought aluminium, including primary
metal and alloy, and semi-finished products in May, down from April's
multi-year high. China is the world's top aluminium producer. [Agreed]
Based on April's ratio of primary aluminium to total imports, May's data
could show primary aluminium imports of 273,354 tonnes, down from April's
record 362,400 tonnes.
Traders had expected primary aluminium imports of 200,000-250,000 tonnes in
May. Data on primary metal, an indication of Chinese consumption, will be
released in late June.
But Chinese buyers have increased orders for spot imports of primary
aluminium over the past two weeks, which could boost imports in June, traders
and smelter officials said.
'May's arrivals were mostly previous months' orders. But Chinese orders are
rising again as domestic prices rise,' said an aluminium trader, who expected
June's imports to hit 300,000 tonnes.
Chinese Demand
For Lumber
Canada.com
reports about Canadian efforts to introduce the growing
Chinese middle class to Canadian-style wood-frame homes.
B.C.
lumber rebuilds structures destroyed in China's devastating 2008 earthquake
By Gordon Hamilton, Vancouver SunJune 2, 2009
A file picture of Chinese housing construction using B.C. lumber, as part of
a Canadian effort to introduce the growing Chinese middle class to
Canadian-style wood-frame homes.
Photograph by: Handout, Vancouver Sun
Vancouver Island carpenter Steve Ross moved to China two years ago as part of
a Canadian effort to introduce the growing Chinese middle class to
Canadian-style wood-frame homes.
But it's not in the sophisticated setting of Shanghai — where North
American-style villas are a sign of status — that he's making a mark.
Instead, he's in mountainous Sichuan, a rural and mostly poor province where
five million people were left homeless following a deadly earthquake on May
12, 2008.
And he's not building villas for the rich. He and a handful of other
Canadians are building small, affordable houses, made from British Columbia
lumber, in the county of Qingchuan, where their work has been getting a lot
of attention from the Chinese news media.
Ross isn't attracting attention just because he's a foreigner who is helping
rebuild after the disastrous 2008 earthquake. It's the type of house he and
three other Canadian colleagues are building.
Chinese normally do not build with wood. They prefer concrete or brick.
But wood-frame houses are more earthquake resistant than brick, an obvious
bonus in the minds of the residents of Qingchuan, as well as in faraway
Beijing, where they remember the quake that left 90,000 people dead. The
Canadians have been interviewed by Chinese reporters more than 20 times, and
this spring Ross was introduced to 250 million Chinese television viewers as
"Steve, the foreign carpenter," on China's CCTV news where he and
Canada's wood-building expertise were showcased.
It's the kind of attention that Ross — director of training for Canada
Wood, which is spearheading the wood-construction drive in China —
hopes will lead to a breakthrough.
China needs new houses. And Canada needs to sell lumber. B.C. in particular
has been working for most of this decade on introducing wood-frame housing to
China. Successes so far, it's fair to say, have been zip.
Now, for the first time ever, B.C. lumber sales to China are rivalling
those to Japan, even surpassing Japan in February and March. While only a
tiny percentage of the wood is going into housing, it's raising hopes on this
side of the Pacific that China may one day be a major lumber market.
Ross believes the switch to low-cost housing in the earthquake zone, funded
by an $8-million package from the B.C. and Canadian governments, is a factor
in China's new interest in B.C. wood.
"We are slowly seeing an actual market develop," Ross said from
Shanghai, where he had returned for a few days. "When the locals see a
wood-frame house, they recognize that it looks very stable in terms of
earthquake resistance. The builders have noticed that and they want to grasp
something new. And because it's relatively affordable they figure they can
make a go of it as a new building system."
And with North American lumber prices near record lows, Canadian wood-framed
houses, complete with insulation, vapour-barriers and waterproofing
technologies, are all of a sudden an affordable alternative to brick and
stone.
Ross trained local builders in the techniques of wood-frame construction
and has overseen the construction of three demonstration homes. Other
Canadians are building apartment complexes, a school, a special education
centre and a home for the elderly.
Further, another 60 single-family and multi-family homes are under
construction by the local builders to be sold to local residents. Contracts have
been signed for 150 new homes.
…
However, low lumber prices are stimulating more than just sales in the
earthquake zone.
"When you talk to lumber producers in B.C., which we do on a regular
basis, there is definitely something happening out there in terms of an
accelerated uptick in consumption of wood," said Paul Newman, managing
director of Canada Wood.
"It's hard to see the Chinese lumber market ever rivalling the North
American market. But to see it rivalling Japan is really shaking people up."
Prince George
Citizen reports that lumber exports to China still rising.
Lumber
exports to China still rising
Written
by Gordon Hoekstra
Citizen staff
Tuesday, 23 June 2009
As B.C.'s lumber exports continue to climb in China, Forests Minister Pat
Bell believes they may even eclipse shipments to Japan this year.
While the 714
million board feet of lumber shipped to China in 2008 did not meet Bell's
hopeful forecast last year of one billion board feet, it continued a trend of
several consecutive yearly increases. With another 413 million board feet
already shipped to China this year, Bell believes his
ambitious target of of seeing four billion board feet of the province's
lumber in China by 2011 is not out of reach.
"When I first set a goal of delivering four billion board feet by 2011,
everybody kind of looked at me like I was kind of crazy," said Bell on
Tuesday. "It's not looking so unrealistic anymore. If we can get to a
billion and a half this year, by 2010, 2.5 billion is not unrealistic, which
would have us right on target for four billion by 2011."
If B.C. was to reach the 1.5 billion board foot market into China, it
would account for about 15 per cent of its exports at today's reduced lumber
production. A housing collapse in the U.S. has significantly reduced lumber
production in the province. [Demand from China is slowly replacing the loss
demand from the US housing collapse]
Bell even believes the volume of lumber shipments to China in 2009 could
exceed that to Japan, traditionally B.C.'s No. 2 market. It's unlikely
the dollar value of shipments to China will surpass that to Japan, as Japan
is a market for high-end lumber. For example, the dollar value of shipments
to Japan in 2008 was $719 million, while the value of shipments to China was
$177 million.
The U.S. remains the No. 1 market for B.C. lumber, accounting in 2008 for
$2.2 billion in sales, a 61-per-cent dollar share of the B.C. export market.
Expanding markets into China has been part of a long-term course Bell has
charted as forests minister in the past year. Also on the list are better
utilizing timber to foster a bioenergy sector, using more wood in commercial
construction and growing better trees faster.
While analysts have pointed out that increases into China have been
incremental and largely based on low-grade lumber, Bell argues the province's
industry is finally having success selling higher-grade lumber in targeted
areas. One example has been B.C.'s success at modelling wood trusses for
use in the numerous multi-source apartment blocks in China. The province
used a demonstration project in Shanghai last year to prove lumber
suitability and cost competitiveness.
Chinese Demand
For Grains And Foodstuff
FXstreet reports
that China may sugar imports up 26% on year to
141,457 tons.
China May
Sugar Imports Up 26% On Year To 141,457 Tons
Mon, Jun 22 2009, 00:57 GMT
BEIJING (Dow Jones)--China's sugar imports in May rose 26% on year to
141,457 metric tons, the General Administration of Customs said Monday.
In the January-May period, sugar imports rose 66% to 639,459 tons.
Stormx reports
that grain prices respond to China and the
dollar.
Grain
Prices Respond to China and the Dollar
For
this month’s commentary we will focus on those fundamentals which
continue to fuel the surge in prices: tight supply and stable demand,
China’s strategic stockpiling, and the recent weakening of the U.S. dollar.
By Jordan Rizzuto
Updated: June 1, 2009
…
China
China’s demand has been a key driver of U.S. soybeans prices this
year; first quarter imports alone were up an incredible 31% from the same
period in 2008. Through the government’s grain reserve agency,
Sinograin, the Chinese have implemented a strategic stockpiling campaign,
whereby the government has been purchasing domestic soybeans since December
2008 at prices above prevailing market rates in an effort to support
farmers’ income. Sinograin has since committed to purchasing 40
million tonnes of corn and 7.25 million tonnes of soybeans for strategic
reserves.
To put these volumes in perspective, those 40 million tonnes of corn
represent roughly 25% of China’s total annual production. While
recent reports suggest that current storage is reaching full capacity, the
government has now announced that it plans to construct additional storage
facilities this year with capacity of another 15 million tonnes of grain.
The government’s stockpiling program has created the current market
dynamic where local Chinese prices are being maintained at higher levels than
international prices. This condition has played a major role in the higher
soybeans imports noted earlier, and a similar dynamic is developing for
China’s domestic corn and wheat markets. This month China publicly
confirmed that their purchasing campaign will indeed now spread to corn and
wheat this year. The National Development and Reform Commission has just
announced that the 2009 wheat purchase program will begin by the end of May,
and will serve the same purpose to support local prices should they fall
below pre-defined thresholds.
As remarkable as these purchase volumes have been, the government’s
announcement of further storage construction erases any doubt that
China’s grain demand will continue in the near term. For the longer
term outlook however, we must remain cognizant that many factors which have
supported higher soybeans prices have been “one-time” in nature
and may abate next year. The Argentinean farmers’ strike, historic
droughts in both Argentina and Brazil, and the strength of the Brazilian Real
in late 2008/early 2009 were all major factors this year that may not be part
of the equation for the 2009/2010 marketing season.
My reaction: The
Chinese dragon has breathed life back into commodity prices.
1) China's recovery is gathering further momentum.
2) The stimulus plan and new loans of 5.84 trillion yuan in the first five
months, almost triple lending a year earlier, are driving growth.
3) New loans in June may exceed 1 trillion yuan, triple lending in the same
month a year earlier.
4) China obviously has at least partly decoupled from the G7.
5) China's oil consumption jumped six per cent last month.
6) China imported 57 per cent of its oil demand as of May. That is now higher
than the US dependency on foreign oil.
7) China will also build underground aquifers to store crude, and will start
constructing those this year. Next year they will begin the filling of those
storage units.
8) Strong Chinese demand for the raw material are spilling across the
industry and pushing spot-metal prices higher.
9) Prices of copper, used for autos and construction, are headed for their
biggest six-month gain in 22 years as Chinese buyers boost imports to records
to replenish stockpiles.
10) China's May imports of copper products hit a fresh high for the fourth
straight month. China imported 422,666 tonnes of unwrought copper, very
strong numbers even by Chinese standards.
11) China's steel output hit 1.522 million tonnes per day in June 11-20, the
highest daily output this year. China's steel production has rebounded
strongly this year after a slump at the end of 2008
12) The China Iron & Steel Association (CISA) has backed down from its
hard line on iron-ore prices after rising demand for imported iron ore in
China undermined its position.
13) Nickel prices on Wednesday hit their highest level in nine months, and
nickel imports in China have risen, hitting a record high in May.
14) Something is happening in China in terms of an accelerated uptick in
consumption of wood. B.C.'s lumber exports to China continue to climb.
15) China's sugar imports in May rose 26% on year to 141,457 metric tons,
and, in the January-May period, sugar imports rose 66% to 639,459 tons.
16) China's demand has been a key driver of U.S. soybeans prices this year.
First quarter imports alone were up an incredible 31% from the same period in
2008.
17) This month China publicly confirmed that their purchasing campaign will
indeed now spread to corn and wheat this year.
Conclusion: This is exactly what I predicted in *****Hyperinflation will begin in China
and destroy the dollar*****. Chinese efforts
to boost domestic consumption while maintaining its dollar peg is creating
massive demand for raw materials, driving up prices. Eventually Chinese
demand will drive up commodity prices to an extent which forces it to drop
the dollar to contain domestic inflation. Judging by its incredible levels of
commodity imports, this event will happen in the very near future.
Eric
de Carbonnel
Market Skeptics
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