Monthly Archives: March 2010
Rio Tinto employee Stern Hu has been sentenced to 10 years imprisonment, while is three colleagues have received sentences of between 7 and 14 years. All four were found guilty of receiving bribes and stealing commercial secrets.
The following article is from Reuters. I added the question mark to the headline, as I think one needs to be careful not to put too pessimistic a spin on the outlook. If the outlook for Q4 is 9%, then the overall result for 2010 is still going to be well over 10%. We remain confident that 2010 will come in at that level or above.
China’s annual economic growth will reach 12 per cent this quarter, a government researcher said in remarks published on Monday, as economists ratchet up growth forecasts following strong industrial output growth last month.
Yu Bin, head of macroeconomic research at the State Council Development Research Centre, said the Chinese economy would face relatively heavy downward pressure on the pace of growth in the second quarter and thereafter, the official Shanghai Securities News said.
It also quoted Fan Jianping, a senior economist with the State Information Centre, a think-tank under China’s economic planning agency, as forecasting the same rate of growth in the first quarter followed by a possible drop to 10.8 per cent in the second quarter and 9 per cent or less in the third and fourth quarters.
China’s GDP growth picked up steadily last year to 10.7 per cent in the fourth quarter from 6.2 per cent in the first, as aggressive government stimulus bolstered economic growth after a heavy blow from the global financial crisis. The latest industrial output data showed robust 20.7 per cent year-on-year growth for January and February, although China’s industry minister Li Yizhong said that the pace of growth, fed by a stimulus package in late 2008 that had nearly run its course, could not be maintained.
The following article comes from AFP.
China’s largest aluminium producer Chalco said it swung into the red in 2009 with a loss of 4.65 billion yuan ($A750 million) as the financial crisis took its toll.
“In 2009, (Chalco) was hit by the global financial crisis, demand for aluminium plummeted, and aluminium prices were low for a relatively long period of time,” the company said in a statement on the Shanghai stock exchange.
“The firm’s production and operations suffered unprecedented difficulties and challenges,” it said in Saturday’s statement.
The loss compared to a net profit of 9.2 million yuan in 2008, although this too was a significant drop from the previous year due to higher energy prices, falling demand and inventory devaluations as metal prices sank.
Chalco - which posted sales of 70.3 billion yuan in 2009 - is the listed unit of Chinalco, which struck a $US1.35 billion ($A1.49 billion) deal with mining giant Rio Tinto earlier in March to develop a huge African iron ore field.
Last June, Chinalco suffered a blow when its $US19.5 billion ($A21.49 billion) bid to effectively double its stake in Rio Tinto to about 18 per cent collapsed.
The following month, four employees of the Anglo-Australian miner were arrested on charges of accepting bribes and stealing trade secrets, during fraught iron ore contract talks between top mining firms and the Chinese steel industry.
The four were tried this week and the verdict is due on Monday. Chinalco has distanced itself from the case, saying it has no connection to the failed deal.
Rio Tinto executive Stern Hu will go on trial in China next Monday.
Hu and three Chinese employees of Rio Tinto have been charged with receiving bribes and infringing commercial secrets.
The Australian Department of Foreign Affairs says it has been told the hearings dealing with commercial secrets will be held in a closed court and Australian consular officials will be unable to attend.
They say they are asking for that decision to be reconsidered.
The following article comes from Reuters. Some numbers are difficult to believe. For instance, this article puts China 2009 consumption at 15 million tonnes. The general consensus is that it is at least 1 million tonnes lower than that. It also forecasts consumption growth at 20% for 2010. That is hugely optimistic. The best forecasts indicate growth of no more than 15%.
On the other hand, it is a good ploy to sell metal into China, especially in the first half of 2010. China is now running close to full capacity, with no new smelters coming on line until H2. There is likely to be some upward pressure on metal prices in China, which should deliver Rusal with some windfall profit.
Here is the article.
UC RUSAL, the world’s largest aluminum producer, plans to secure between five and eight major Chinese buyers on long-term contracts to carve a larger share of the world’s biggest market for the metal.
UC RUSAL, fresh from Russia’s biggest-ever private sector debt restructuring, also plans to restart 100,000 tons of idle capacity by the end of the first quarter as global consumption enters the second phase of recovery, a senior official said.
“Large Chinese companies represent a very interesting customer segment, and that is where we would like to focus our efforts,” Artyom Volynets, RUSAL’s deputy chief executive for strategy, said at the Reuters Global Mining and Steel Summit.
UC RUSAL, whose largest shareholder is Russian billionaire Oleg Deripaska, is seeking a bigger share of a Chinese market where per capita aluminum consumption has doubled to 10 kg a year in the last five years, versus 20-25 kg in western Europe.
The company struck a deal in November to sell 1.68 million tons of aluminum to Chinese state conglomerate NORINCO over seven years.
“We are in discussions with several similar-sized corporations, which will hopefully be buying from us at the same levels,” Volynets said on Monday. “Our goal is to sign five to eight similar customers over the next three to five years.”
Demand for aluminum, used in transport, construction and packaging, was rising as the global economy enters its second wave of recovery, Volynets said.
In China, demand could rise about 20 percent this year from the 15 million tons consumed in 2009. India, with annual per capita consumption of 1.8 kg, was also a growth market, he said.
UC RUSAL has capacity to produce 4.6 million tons a year of aluminum and produced about 3.9 million last year. About 100,000 tons of idle capacity, in Siberia, Sweden and Nigeria, would be operational by the end of the first quarter, he said.
“The other 500,000 tons can also be added. It is also profitable at today’s aluminum prices, but we are not in a hurry to do that,” he said. “We’ll review plans for this idle capacity every quarter.”
Though aluminum stocks in London Metal Exchange warehouses are near record highs in excess of 4.5 million tons, Volynets said supply was tighter than it might appear.
“A very significant proportion of those inventories are still locked into long-term financial deals: 60 or 70 percent,” he said. “These were two- to three-year deals, so they are not yet up for renewal.
“It’s inventories in Asia that matter for the global market. In Japanese ports, in South Korean ports, they are done to a single day’s consumption and that has pushed up premiums.”
The following article appeared today in Metals Palace.
A bill that passed the West Virginia legislature could offer a glimmer of hope to Century Aluminum. The plant closed last February leaving more than 600 people without a job.
Mike Dildine, a spokesperson for Century Aluminum, says the bill is a huge first step.
“The passage of the industrial power bill was a huge step forward,” Dildine says. “Because it provides for us a mechanism to design an affordable power rate which is something we absolutely need if we are going to restart the smelter.”
The House unanimously passed a Senate measure Tuesday that proposes linking utility rates to changes in the market prices for the goods made by qualifying businesses.
The bill would allow companies to pay more for power when their commodity is at a high price, and a lower rate when the commodity price is down.
These employers could negotiate special rate deals with power companies. If rate talks fail, the employer could petition regulators at the state’s Public Service Commission for the special rate.
Appalachian Power has said Century Aluminum spent more than $100-million each year on power. When the plant closed, the cost of electricity was a major factor. Aluminium prices dropped significantly making it difficult to cover the costs.
“They’ll be able to ride out these market fluctuations,” Delegate Mitch Carmichael, a Republican from Jackson County says.
While Dildine says, “the sooner we can open the smelter, the better,” this bill is just one piece of the puzzle.
Dildine says to re-start the smelter three things have to happen. They need a competitive long-term power contract, a contemporary labor agreement and they also need the expectation that aluminium prices will stay above the cost of the production.
The following article comes from AAP today.
Mining giant BHP Billiton says it has reached terms for much of its coking coal sales for 2010, involving switching to “shorter term market based pricing”.
“BHP Billiton today announced that it had reached terms for a significant portion of its hard coking coal volumes for 2010, based on a structural change to shorter term market based pricing for the contract period,” the company said in a statement on Monday.
BHP said agreement had been reached with a range of customers throughout Europe, China, India and Japan.
“These settlements reflect the company’s commitment to achieving market clearing prices over time across all its bulk commodities,” BHP said.
At the company’s half-year results briefing last month, BHP Billiton chief executive Marius Kloppers said the spot market was the “best indicator” of supply and demand.
“I always point people back to where is the market today as the best indicator of what the supply and demand is and as the best indicator of what expectations should be on where prices are heading,” Mr Kloppers said on February 10.
The spot price of coking coal has risen to about $US220 a tonne, well above the last year’s contract price.
Bloomberg reported on March 5 that BHP Billiton had won a 55 per cent price increase for coking coal from Japan’s JFE Holdings Inc’s steel unit.
JFE will pay $US200 a tonne for a three-month contract starting on April 1, a spokesman for the company was quoted as saying.
The price settlement for last year coking coal contract, which runs out at the end of the Japanese fiscal year on March 31, was for $US130 a tonne.
Coking coal is the raw material used to make steel. BHP Billiton is the world’s biggest coking coal exporter.
The following article appeared in today’s online version of China Daily. Here at AZ China, we think that the 4th quarter 2009 GDP of 10.7% is a benchmark. For China to achieve 8% rather than to continue at the most recent rate, a significant downshift is needed. We believe the economy will come in at 10% or above, simply because the authorities cannot afford to have the size of downward pressure that a shift from 10.7% to 8% must entail.
China expects its economy to grow around 8 percent in 2010 from a year earlier, said Premier Wen Jiabao at the annual parliament session Friday, expecting a “crucial but complicated” year for economic recovery.
Setting the 8-percent target mainly “aims at ensuring the quality of economic growth, focusing on transformation of economic growth pattern and adjustment of economic structure,” said Wen in his government work report to the National People’s Congress (NPC).
The increase of consumer price index, a main gauge of the country’s inflation, will be held around 3 percent, the premier said.
Although the development environment this year may be better than 2009, China “will still face a complicated situation,” Wen said.
The year of 2010 will be a “crucial but complicated” year for China’s economic development as the country will continue fighting against the global financial crisis while maintaining a stable and comparatively fast economic growth and accelerating transformation of growth pattern, he said.
Observers, however, said they are sure China will hit the growth target.
“I’m sure China will surpass the 8-percent growth target this year as its industry engine is very strong and the country has recovered from the financial crisis,” said Lars Backstrom, Ambassador of Finland in China.
The diplomat was echoed by Peter Trebitsch, a reporter from Hungarian News Agency Corporation. “If China sets 8-percent, it will be,” he said.
Zhuang Jian, senior economist with the Asia Development Bank, noted that last year China flexed its entire muscle to meet its eight percent target amid the most difficult year for economic growth, but this year, the goal will be achieved at ease as international and domestic conditions emerge from the worst time.
He also said the new target demonstrates the resolution of the Chinese government to shift its development focus from quantity to quality.
“Growth is not a priority. Even nine percent or ten percent of growth are within reach in the short-term, but that is no longer desirable since China has learnt from the financial crisis that the previous model is not sustainable,” Zhuang said.
Peter Trebitsch also noticed China is giving more attention to quality of growth, instead of only focusing on expansion.
The key of economic development pattern transformation, however, lies in implementation of policies in lower level governments, he said.
As the first country emerging from the global economic downturn, China’s gross domestic product (GDP) rose 8.7 percent in 2009 from a year earlier, above the 8-percent target the government set at the beginning of last year.
China’s quarterly economic growth accelerated as the government’s economic stimulus package started to pay off. The national economy rose 6.2 percent in the first quarter last year, 7.9 percent in the second quarter, 9.1 percent in the third and 10.7 percent in the fourth.
“Considering the circumstances that many countries are still suffering considerably, the target of 8 percent growth can leave room for Chinese people to improve their living standards,” said Francois Jackman, counselor with Embassy of Barbados in China.
The following article comes from the Melbourne Age in Australia. Melbourne is the State Capital of Victoria. This article is written with an assumption that readers understand the local issues. What is interesting to me is that Alcoa’s Australian chief mentioned future expansions. That could mean downstream of course, since power supply seems set to be a continuing issue.
THE biggest consumer of Victoria’s brown-coal-fired electricity is to continue operating for decades after the surprise announcement of a long-term power deal for Alcoa’s controversial aluminium smelters.
Unions were celebrating and environmentalists reeling last night with the news that aluminium giant Alcoa, Victoria’s biggest exporter, had signed electricity contracts with generator Loy Yang Power for the smelters at Portland and Point Henry, near Geelong, until 2036. The existing power contracts expire in 2016 and 2014.
The cost of the new deal to Victorian taxpayers, if any, was unclear. But after decades of subsidising Alcoa’s cheap power, the government said last night that it was not involved in the new deal and that subsidies would end in 2016.
Loy Yang’s brown-coal power station will supply the Alcoa aluminium power smelter until 2036. Photo: Rebecca Hallas
”The Victorian Government subsidy will no longer be required,” said Emma Tyner, a spokeswoman for Energy Minister Peter Batchelor.
The government also would not pick up Alcoa’s costs in the event of an emissions trading scheme being introduced, Ms Tyner said. Late last year Alcoa pressed the government to shield it from the costs of an emissions trading scheme in Victoria due to the state’s reliance on brown coal, the dirtiest of the major energy sources.
Senior figures in the energy industry and government last night told The Age they found it hard to believe that Spring Street was not involved somehow in the latest deal.
One by-product of the deal is the weakening position of International Power, owner of the Hazelwood and Loy Yang B stations. The deal in effect transfers business away from International Power, a move that may bring forward the closure of the much-maligned Hazelwood, the oldest and most polluting of Victoria’s major power stations.
The ALP is understood to be keen on an announcement about Hazelwood ahead of the November state election.
Taxpayers have been subsidising the smelters since the Cain government finalised a deal with Alcoa in the mid-1980s to build and operate the Portland plant. Last year an analysis by The Age found that the eventual cost of subsidies could be more than $4.5 billion by the time the contracts expire in 2014 and 2016.
In October Rob Maclellan, a former minister in the Hamer Liberal government, which drew up the original Portland deal, described the decision to build the smelter 500 kilometres from its power source as ”absolute madness” and a costly ”disaster” for the state.
Together, Alcoa and Loy Yang Power employ more than 2500 people in Victoria. Australian Workers Union state secretary Cesar Melhem said the deal would secure thousands of jobs that would have been jeopardised if the contracts were not renewed. ”That’s now put to bed, that’s really put people’s minds to ease that for the next 20 years they will hopefully continue to smelt there.”
Environment groups were shocked by the news about a facility that at times consumes as much as 20 per cent of the state’s electricity. Environment Victoria spokesman Mark Wakeham said: “In a time of climate change it is insane to power aluminum smelters with brown coal. Locking this behaviour in until 2036 defies belief.”
Alcoa general manager Alan Cransberg said the contracts would allow the company to expand in Victoria.
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