Indicators bode well for GDP

Here is an article which appeared in last week’s China Daily. Although it is always likely that China’s press will “talk up” the economic situation, there is grounds for believing at least some of what the journalist reports.

Indicators bode well for GDP
By Lillian Liu (China Daily)
Updated: 2009-01-07 11:54

Despite its growth rate slowing by a third, the Chinese economy has the potential to grow by 8 percent this year, as the manufacturing sector recovers and energy consumption showed signs of increasing late last year, according to economists with investment bank Credit Suisse.
“We saw a sudden collapse in investor confidence in China, especially in the fourth quarter of last year, but we recognize that the Chinese economy could reach the turning point,” said Dong Tao, chief regional economist, Credit Suisse. He cited the central government’s stimulus measures as key support for economic recovery.
Goldman Sachs, however, doesn’t share this optimism. The company revised the 2009 growth outlook for China from 7.5 to 6 percent, citing domestic problems such as the tightened credit policy for property developers.
The purchasing managers index, an indicator of the economic health of the manufacturing sector, rebounded to 41.2 in December from a record low of 38.8 in November.
The power consumption and trade finance conditions also seem to have improved last month, Tao told reporters at a press conference in Hong Kong yesterday.
He said that Beijing has launched many effective measures, and the next round of stimulus measures, which may be announced by the Chinese lunar New Year, could include raising the ceiling on tax-free income to boost consumption.
“We think the government will attempt to bolster rural consumption by increasing minimum grain procurement prices,” said Jing Ulrich, managing director and chairwoman of China equities at JP Morgan Chase.
In China, macroeconomic policy has now fully shifted to stimulating the economy and maintaining the GDP growth at around 8 percent, Ulrich said at a 2009-outlook press conference last month. A growth of less than 8 percent, she added, raises the risk of unemployment significantly.
Credit Suisse predicts the economy will remain gloomy in the first half of this year, with GDP growth reaching 7.1 and 7.6 percent in the first and second quarters, respectively.
But that growth is expected to hit 8.3 percent in the third quarter and 8.6 percent in the fourth, the firm forecasts.
But economists at Goldman Sachs suggest that the slowdown will be greater than during the Asian financial crisis or the 2001 dotcom bust.

Market Review December 23

Alumina
The quoted price of imported product has fallen RMB50/Tonne to RMB2250-2300/Tonne. Domestic alumina price dropped RMB50-100/Tonne to RMB2050-2100/Tonne (Not Chalco); Chalco price remained stable last week.

Alumina production cut backs so far have not enough to make an impact on the price, because demand is falling faster than the supply reductions.

Aluminium
Chalco aluminium price remained stable last week (RMB12,000/Tonne), but domestic deal price have dropped as low as RMB10,600/Tonne .

In order to boost market demand, last week the central government decided to decrease primary aluminium export tax to 5%. There is talk that soon the Chinese government will cancel all export tax for primary aluminium.

Green Coke
The trade price of coke continued to move within RMB500-1000. The price of Fushun and Lanzhou increased RMB 100 and RMB 150 respectively, but the price of Gaoqiao and Qingdao dropped RMB70 and RMB50 each.

Demand of coke from downstream is still slumping. It expected the price would be further down since the festival season is coming.

Calcined Coke
Last week the main price for low sulphur green coke rose RMB100/Tonne, low sulphur calcined coke suppliers also rose RMB100/Tonne to RMB1500-1600/Tonne.

The main reasons were :
1, the prices of green coke and calcined coke in Jinxi area have reached the lowest in recent years. Some factories around this area started to store goods rather than sell at a loss.
2, CNPC decreased their crude oil processing capacity, decreasing the vailable green coke quantity;
3, There has been increased export activity, reducing the available quantity in the local market.

Moderate and high sulphur calcined coke remained stable; moderate sulphur calcined coke prices were around RMB1300-1500/Tonne; high sulphur calcined coke prices were about RMB1150-1250/Tonne.

Anode
Domestic anode quoted price remained RMB2800-3300/Tonne last week.

Along with the global aluminium inventory level increasing, more and more international aluminium smelters reduced output. According to our sources last week anode export prices dropped; meanwhile international buyers were offering very low prices. Some supplier preferred to keep their goods in storage than sell them on a such low price. Contract negotiations are continuing but all should be settled very soon.

Coal Tar
Last week Coal tar market remained stable, but coal tar processing factories already felt some stress. The main domestic price was around RMB1400-1900/Tonne.

The highest price amongst producers in West China rose RMB100/Tonne to RMB1800/Tonne last week, the lowest dropped RMB100/Tonne to RMB1200/Tonne. In the north, the highest price remained RMB1700/Tonne, the lowest remained RMB1500/Tonne. In the east, the prices ranged between RMB1600 – 1900/tonne. In the south, the prices remained the same as previous week.

Coal Tar Pitch
Last week coal tar pitch market remained stable. The domestic mainstream modified pitch price remained RMB1800-2200/Tonne; moderate temperature pitch price remained around RMB1700-2000/Tonne.

According to our sources, most operating factories were selling products normally, meanwhile there were still lots of factories closed and were just maintaining their equipments.

Seasons Greetings

Warm wishes to you our readers. Here in Beijing Christmas day will be 2 degrees C. But this guy will be in Sydney for the next 2 weeks enjoying a spot of sunshine and family festivities.

Many thanks for following our blog. In the 4 months since we started putting these words together, our readership has grown almost 4-fold, with the hits now in the thousands. Hopefully you are finding the information useful, timely, accurate and interesting.

May the coming year bring you and yours health, happiness and good fortune.

Latest Black China Report now published

The December edition of the Black China Report is now released.

This month we look at the economy amid the gloom and try to see some glimmer of daylight. As we see it, the Chinese authorities have no choice but to keep the economy at a healthy growth rate. The risk of social unrest arising from unemployment is simply too great. The whole point of China’s remarkable economic growth these past years has not been for its own sake, but for the development of a “harmonious society”, in which the hundreds of millions of have-nots can keep up with the haves.

We look for the first time at the coal tar and coal tar pitch market in China in this month’s edition.

Subscribers can obtain their copy via the link that they will have received in an email. If you are interested in becoming a subscriber, please contact us at blackchina@az-china.com.

Rio to sell Ningxia plant?

There are unconfirmed reports circulating here that Rio Tinto has decided to sell its smelter at Qingtongxia in Ningxia Province.

Previously known as Alcan Ningxia, the smelter sits inside/alongside the Qingtongxia smelter, and includes a part-share of the power station. The Alcan smelter comprises line 3, believed to be almost 200,000t in capacity. The relationship between the two companies has been testy at times. Alcan’s high standards of safety embarrassed the Chinese, but the rigid HR policies from the West allowed the JV partner to pick off the best local people with fat pay packets.

It is understood Qingtongxia has first right of refusal. Qingtongxia smelter was looking to expand, so it will be a question of whether they can find the capital to meet Rio’s price. Outside of Qingtongxia, it will be interesting to see who else would be interested at this time. Soon as we can confirm the story, we will publish an update here.

Market Review December 10

Alumina
Alumina inventories are falling a little, thanks to the price continuously dropping. Meantime, other producers are simply holding back inventory from the market, rather than selling at current prices.

Imported product quoted price went up RMB100/tonne to RMB2300-2400/tonne, while the domestic non-Chalco alumina price rose RMB50/tonne to RMB2100-2200/tonne. The price from Chalco remained at RMB2600/tonne last week. But listed prices continue not to reflect the actual deal prices in the market, with some deals going down to RMB1900 in the last couple of weeks.

Aluminium
Aluminium price (Chalco) dropped RMB1000/tonne to RMB13,000/tonne last week, while the actual price was already down to RMB11,000/tonne, a ten year low.

The electricity cost for aluminium smelters started to drop last week. Yunnan province announced a new price of RMB0.06/kwh for non-ferrous metal enterprises from 1st Dec 2008. If electricity goes RMB0.01/kwh lower, then the cost for each one tonne of aluminum could decrease RMB150. Compared with last year`s price, the electricity price now is already RMB0.12/kwh cheaper. That means a RMB1800/tonne production cost decrease.

Even though the aluminum price is ready very low due to the production cost decreasing, still the market is very soft. According to latest data, China domestic aluminum inventory reached 1.1 million tonne 5th December. There is talk that the Chinese Government will buy a strategic stake out of this inventory.

Green petroleum coke
The market of GPC kept stable, with only small adjustments in certain regions.

The price of GPC in China east and south had small increases, while the price of Shandong local refineries fell slightly due to some local refineries resuming production. But some analysts pointed out the real trade price has not changed fundamentally.

The demand for GPC is still soft from downstream production, and with the New Year and Chinese lunar New Year coming, the demand situation will not improve. The demand of high sulphur GPC as fuel continued to increase. It plays a significant role for keeping the market stable.

The other reason for market stability is on the supply side. Sinopec and CNPC continued to lower production capacity. We understand the closed capacity of cokers in December has reached 3,400,000tonne/year, and another two cokers with annual capacity 1,600,000tonne and 1,200,000tonne respectively will be stopped this month too.

The export volume of GPC has enlarged since October, when it reached 122,000tonnes.

Calcined coke
Last week low sulphur coke kept stable at RMB1400-1600RMB/tonne. Moderate Sulphur coke kept stable at 1300-1500RMB/tonne;
Following the recent rise of high sulphur green coke price, last week high sulphur calcined coke price rose 100-200RMB/tonne to 1200-1300RMB/tonne. High sulphur calcined coke suppliers were still focus on exporting last week.

Anodes
The anode market kept weakening last week. The domestic market was already weak ,and now with the foreign aluminum smelters cutting back, the export market demand for anode is weakening. Last week the anode market quoted price was RMB2600-3500/tonne, but in Shandong area the actual deal price was around RMB2600-2800/tonne. In Henan area the actual deal price was RMB2500-2700/tonne, It`s rumored that there are even lower prices in this area. In Shanxi area the actual price was about RMB2600-2700RMB/tonne. In Chongqing area the actual deal price was about RMB2800-2900/tonne, but the sales have been bad due to the smelter cut backs in this area. At the moment, the actual deal price in these areas is already back to 2006 levels.