Tag Archive for china

Reported drop on heavy metal steel scrap price in China

Eastern China steel mills have cut ferrous scrap prices.

Source is Singapore (Platts)–27 Aug 2015

Jiangsu Shagang Group, the largest scrap user of China, on Thursday cut its buying price by Yuan 40/mt ($6/mt) in view of a recent drop in rebar prices, a company source said.

After the adjustment, Shagang will pay Yuan 1,330/mt ($208/mt), including 17% value added tax, delivered to Zhangjiagang, Jiangsu province, for heavy melting scrap 6 mm and above.

“With the bearish outlook on domestic steel markets, I think scrap prices are likely to repeat the previous low levels,” said a source from a mill in the region, adding that small induction furnace mills had successively cut their buying prices earlier when rebar prices began to fall.

All of this sends a lower traffic signal for railroad traffic.

Most analysts have failed to predict this rapid a fall in scrap prices that two years ago were in the $360 to $400 approximate range per metric tonne.

Among the companies China’s Rescue Fund Is Buying to End the Stocks Rout

From Bloomberg, Aug 9, 2015

China Securities Finance Corp. has quickly become one of the most influential investors in the Chinese stock market, with $483 billion of firepower and the potential to add $322 billion

Here’s a look at some of the biggest CSF positions tracked by Bloomberg, all of which the agency has initiated or increased since June 30

They include rail

1) China Railway Group Ltd. * CSF’s holding: 10.4 billion yuan ($1.7 billion)

* Company description: One of China’s largest railway construction contractors

* Return since June 30: -2.1%

* Price-to-earnings ratio: 28

* Market capitalization: 275.1 billion yuan

2) China Railway Construction Corp. * CSF’s holding: 9.1 billion yuan

* Company description: Railway construction contractor

* Return since June 30: 7.2%

* Price-to-earnings ratio: 18

* Market capitalization: 211.7 billion yuan

To read the entire article, go to http://bloom.bg/1PeQ4e

China May Tip World Into Recession suggests a report by Morgan Stanley in Bloomberg

From Bloomberg, Jul 13, 2015

Forget about all the shoes, toys and other exports. China may soon have another thing to offer the world: a recession.

True or False?  Do we have sufficient evidence of this argument?

To read the entire article, go to http://bloom.bg/1Gi6POT

The China stimulated recession is the prediction from Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, who says a continuation of China’s slowdown in the next years may drag global economic growth below 2 percent.

That 2 percent is a threshold he views as equivalent to a world recession.

If true, it would be the first global slump over the past 50 year without the U.S. economy also contracting.

China accounted for 38 percent of the global growth last year, up from 23 percent in 2010, according to Morgan Stanley.

China is the world’s largest importer of copper, aluminum and cotton, and the biggest trading partner for countries from Brazil to South Africa.

China’s economic slowdown will thus have an enormous global impact from mines to railways and to ports.

Greece gets 7 July headlines, but the real economic story is in China

Greece gets all the financial headlines while the real economic story may be in China.

The Bloomberg report tonight Jul 7, 2015 points out that Chinese shares lost to negative territory on Tuesday. The benchmark Shanghai Composite Index was down finished at 3,727.13 points. The Shenzhen Component Index slumped 5.8 percent to close at 11,375.6 points. (Xinhua/Pan Yulong)

A wave of 1,249 Chinese companies halted trading in their shares.  That is estimated at over 40% of those listed.

Also, CHINESE regulators unveiled new measures to prop up the value of small-cap stocks in the latest attempts to stem a rout that’s wiped more than $3.5 trillion of value.

To read the entire article, go to http://bloom.bg/1Tk4PyJ

China stock market drop hits young inexperienced middle class the hardest

As one of my friends who travels to China a lot has warned, the stock market often appears like a wild casino game. With very little education about market risks, the current drop in value is hurting the middle class and young investors very hard.

What is the long term impact to China’s growth strategy?

As the BBC reports tonight, in China, unlike in the European or US markets, individuals make up around 80% of the stock market investors. Many of them are new and inexperienced, often following whim and rumour to make decisions. This can lead to “herd behavior”.

China  a leaders had been seeing a buoyant stock market as a key part of its strategic shift to a consumer society with rapidly increasing share ownership.

Now they need a Plan B.

See BBC full story on 7 July 2015.

Iron ore global glut — Latest bad news suggests four years of very low prices

Iron ore mining in India by Peter Craven, on Flickr

Are we paying attention? This assessment below, if true, will shut off a lot of hoped for iron ore mine and rail products from Africa to Mongolia. Mine executives hoping for a return to market demand prices of $90 and higher are betting upwind based on the evidence this past two years.

Mining Weekly picked up the following iron ore demand/supply information from different sources. Reuters is one source. Bloomberg another. The predictions for a higher iron ore price market keep getting worse. Up to half of iron-ore output by miners outside the three mega producers in Australia and Brazil may be at risk of closure or at least significant production and export cutbacks. This will occur with global demand set to peak at about 1.4 billion tons next year, according to Goldman Sachs analysts. Production volumes among top miners – Vale, Rio Tinto and BHP Billiton – may not be at risk, the bank said. But their profit margins are dropping further.

Goldman Sachs, in contrast, predicted that the rest of the iron ore industry (and the railways and maritime forces that service the export industry) is “now facing an existential challenge..”

Goldman analysts Christian Lelong and Amber Cai said in a report that “We expect seaborne iron ore demand to peak in 2016 as the displacement of marginal Chinese iron ore production fails to offset a contraction in China’s domestic steel consumption.”

Goldman cut its 2015 iron-ore price estimate by 18% to $52 a tonne. It forecast $44 in 2016 and $40 in 2017 and 2018. That is down 29% to 33% from previous estimates. Other sources like Moody’s estimate that the delivered Iron ore price could drop to $40 this year and next. No one is seriously talking out loud anymore about a price surge up towards $90 or more.

Current China delivered price for Iron ore hit $46.70 on April 2. That is based on the current spot-based price system — compiled by Goldman Sachs. Strategic planners with projects depending upon iron ore new export projects coming on line before 2018 — or maybe even staying in business. — really need a Plan B. Their current plans are based on the iron ore world changes seen about four to ten years ago.

What is your prediction?