When someone shares with you something of value, you have an obligation to share it with others.
Sunday, 14 December 2008
Commodity Countries Reeling
When China hits the brakes, commodities exporters half a world away have to shift to a lower gear, as the rapidly deteriorating fortunes of the copper sector shows.
SHANGHAI - When China hits the brakes, commodities exporters half a world away have to shift to a lower gear, as the rapidly deteriorating fortunes of the copper sector shows.
The global financial crisis has impacted China’s copper-wired construction industry, machine makers and electric appliance producers at an amazing speed, with demand at home and abroad crumbling abruptly.
Just as precipitously, China, the world’s largest consumer of copper, has passed on the misery to countries like Chile, its largest copper supplier.
Chile’s mines have cut production and laid off workers, leading to violent strikes in some parts of the country.
‘Business has fallen off a cliff,’ Mr. Simon Hunt, an independent UK-based analyst, said after recent visits to Chinese and other Asian copper firms.
About 30 per cent of China’s copper consumption goes into exports, Hunt said.
‘The impact of these (global) developments on China’s economy and its copper consumption will be dynamic,’ he said.
World copper prices have more than halved to less than 1.50 dollars a pound after record highs of four dollars in July, as China’s once-ravenous hunger for commodities has slowed and weakening demand abroad has hurt exporters.
‘As late as July, clients were calling, looking for assurance that China’s copper demand would maintain strong growth,’ said Mr. Shi Lin, an analyst with British metal consultancy CRU. ‘Now everyone sees what happened.’
‘Growth in China’s copper consumption accounted for 80 percent of the world’s overall growth. It’s no surprise copper prices were impacted so much by weakening Chinese demand,’ he said.
China’s economic growth slowed to nine percent in the third quarter, the lowest level in five years, and the World Bank has predicted it will go down to 7.5 per cent next year - a 19-year low.
Copper has been a key raw material in China’s economic boom, and it consumes a quarter of the world’s supply, importing about 80 per cent of its needs. Chile provides a third of China’s total demand.
The drop in Chinese demand has led to copper projects in the South American country, such as Canada-based Quadra Mining’s Sierra Gorda project, being shelved.
Commodities such as zinc, nickel, iron ore, and aluminium, too, have seen their prices plummet.
Anglo-Australian miner Rio Tinto said last month it slashed iron ore output at its Western Australia plants by 10 percent following a drop in demand from China. The company said Wednesday it would cut thousands of jobs globally.
The world’s largest iron ore producer, Brazil’s Vale - whose principal market is China - also slashed production.
The 2009 contract iron ore prices are expected to decline 35 per cent as China’s steel sector suffers an industry-wide loss following a fall in steel prices, according to China International Capital Corporation.
Economists suggested demand for raw materials in China was not only dented by slowing industrial production, but expectations of prices falling even further, suggesting the worst may be yet to come.
For example, copper will likely follow the economy. Australia’s Macquarie Bank expects Chinese demand to slow to between six and seven percent growth, at 5.1 million tonnes for 2008, compared to nearly 18 per cent in 2007.
It could fall to between four and five percent in 2009, according to Bonnie Liu, a Shanghai-based analyst with Macquarie.
Experts argue that Beijing’s 586-billion-dollar (S$873.26 billion) economic stimulus plan was unlikely to boost copper prices anytime soon.
‘China’s infrastructure spending spree by itself will not be enough to turn around the decline in major global commodity prices,’ Mr. Frank Gong, a Hong Kong-based economist with JP Morgan Chase said in a note.
About a fifth of China’s copper demand goes into construction, and the property market has also stalled, with prices rising only 0.2 per cent on the year in November - the slowest since monthly statistics began in 2005.
1 comment:
Commodity Countries Reeling
APF
14 December 2008
SHANGHAI - When China hits the brakes, commodities exporters half a world away have to shift to a lower gear, as the rapidly deteriorating fortunes of the copper sector shows.
The global financial crisis has impacted China’s copper-wired construction industry, machine makers and electric appliance producers at an amazing speed, with demand at home and abroad crumbling abruptly.
Just as precipitously, China, the world’s largest consumer of copper, has passed on the misery to countries like Chile, its largest copper supplier.
Chile’s mines have cut production and laid off workers, leading to violent strikes in some parts of the country.
‘Business has fallen off a cliff,’ Mr. Simon Hunt, an independent UK-based analyst, said after recent visits to Chinese and other Asian copper firms.
About 30 per cent of China’s copper consumption goes into exports, Hunt said.
‘The impact of these (global) developments on China’s economy and its copper consumption will be dynamic,’ he said.
World copper prices have more than halved to less than 1.50 dollars a pound after record highs of four dollars in July, as China’s once-ravenous hunger for commodities has slowed and weakening demand abroad has hurt exporters.
‘As late as July, clients were calling, looking for assurance that China’s copper demand would maintain strong growth,’ said Mr. Shi Lin, an analyst with British metal consultancy CRU. ‘Now everyone sees what happened.’
‘Growth in China’s copper consumption accounted for 80 percent of the world’s overall growth. It’s no surprise copper prices were impacted so much by weakening Chinese demand,’ he said.
China’s economic growth slowed to nine percent in the third quarter, the lowest level in five years, and the World Bank has predicted it will go down to 7.5 per cent next year - a 19-year low.
Copper has been a key raw material in China’s economic boom, and it consumes a quarter of the world’s supply, importing about 80 per cent of its needs. Chile provides a third of China’s total demand.
The drop in Chinese demand has led to copper projects in the South American country, such as Canada-based Quadra Mining’s Sierra Gorda project, being shelved.
Commodities such as zinc, nickel, iron ore, and aluminium, too, have seen their prices plummet.
Anglo-Australian miner Rio Tinto said last month it slashed iron ore output at its Western Australia plants by 10 percent following a drop in demand from China. The company said Wednesday it would cut thousands of jobs globally.
The world’s largest iron ore producer, Brazil’s Vale - whose principal market is China - also slashed production.
The 2009 contract iron ore prices are expected to decline 35 per cent as China’s steel sector suffers an industry-wide loss following a fall in steel prices, according to China International Capital Corporation.
Economists suggested demand for raw materials in China was not only dented by slowing industrial production, but expectations of prices falling even further, suggesting the worst may be yet to come.
For example, copper will likely follow the economy. Australia’s Macquarie Bank expects Chinese demand to slow to between six and seven percent growth, at 5.1 million tonnes for 2008, compared to nearly 18 per cent in 2007.
It could fall to between four and five percent in 2009, according to Bonnie Liu, a Shanghai-based analyst with Macquarie.
Experts argue that Beijing’s 586-billion-dollar (S$873.26 billion) economic stimulus plan was unlikely to boost copper prices anytime soon.
‘China’s infrastructure spending spree by itself will not be enough to turn around the decline in major global commodity prices,’ Mr. Frank Gong, a Hong Kong-based economist with JP Morgan Chase said in a note.
About a fifth of China’s copper demand goes into construction, and the property market has also stalled, with prices rising only 0.2 per cent on the year in November - the slowest since monthly statistics began in 2005.
Post a Comment