The Black China Blog

Here is an article which appeared in yesterday’s China Daily.

Only about 60% of the 4 trillion in the package is listed here, but we know that additional money is going towards propping up the price of grain.

This article also gives us an insight into exactly how big the package is. Compared to 2007 at 13 trillion, 2008 will close out at 16 trillion and 2009 at 18 trillion. This suggests to me that in fact much of the 4 trillion is expenditure which was already announced, perhaps with some programs receiving a boost or an accelerated time frame.

But this also supports our argument that China’s economy is still primarily supported by investments, not by exports. Falling export figures are of course a problem for employment and confidence, but in macro terms the economy is likely to continue to grow as the investments in the stimulus package start to create more jobs.

Here is the article. I have inserted approximate USD values.

Minister of National Development and Reform Commission (NDRC) Zhang Ping has made public the breakdown of China’s four-trillion-yuan stimulus plan, which will cover livelihood improvements, R&D, environmental protection and other sectors.

· 280 billion yuan for housing projects (US$40bn)

· 370 billion yuan to improve people’s lives and infrastructure in rural areas (US$54bn)

· 180 billion yuan to build highways, railroads, and the power grid (US$26bn)

· 40 billion yuan for medical care and education (US$6bn)

· 350 billion yuan for ecological and environmental projects (US$51bn)

· 160 billion yuan to fund R&D and innovation projects (US$23bn)

· 1 trillion yuan for places worst hit by the earthquakes (US$146bn)

The new details of the stimulus plan have been revealed together at the same time as China’s total domestic investment was forecast to reach 18 trillion yuan in 2009. (US$2.6tr)

For 2008 total investment is expected to reach 16 trillion yuan, while last year it was 13 trillion yuan. The four-trillion-yuan stimulus package is just part of all the investment China needs to drive its economy.

Among the financial stimulus plan, 350 billion yuan will be spent on improving the ecological environment and treating pollution, Zhang said. The four-trillion-yuan investment will not be spent in the energy and resource-intensive industries or high-pollution industries.

Zhou Shengxian, minister of environmental protection, said earlier that the main targets of environmental investment will go to beef up rural environmental efforts. He said China’s fledgling green industries, such as those involved in the development of renewable energies and pollution treatment, will also benefit from the investment plan.

Further aspects to the NDRC’s plans to stimulate the economy have also been released, including a review of the fuel tax reform formula, undertaken with other government departments. Once the formula is ready, it will be released to seek public opinion on amendments, said Zhang at the press conference.

“The goal for fuel reform is to highlight four concepts, which are fair taxation, a regulated charging system, energy conservation and less financial burden for people,” Zhang said.

“It is fair that the more people consume oil the more they have to pay for it,” Zhang said. By replacing the maintenance fee for roads, navigation systems and road tolls with a fuel tax, car owners will pay less than before.

“By replacing the fees with fuel taxes, we also hope to regulate road toll stations that used to charge drivers for no legal reason,” he added.

Generally speaking, the coke market began to show downward trends last week. The whole market is depressed and inactive, laregly as a result of either the Olympics or the restrictions due to them.

The price of low sulphur (below 0.8%S) coke kept stable, despite Daqing refinery closing for overhaul. Green coke for smelters from northeast China dropped RMB300/ton as a result of the production cutbacks in smelters in Henan and Shanxi provinces. The price of high sulphur coke was continuing to go down, and was 2100-2015yuan/ton in Guangzhou and Maoming regions. High sulphur coke prices have decreased more than 10% comparing to the middle of July. It was reported that there are around 160,000 ton high sulphur cokes stocked in Ri zhao and Nanjing port. It is selling slowly at 1800 Yuan/ton. The price is sure to fall further.

Some suppliers kept the list price stable; however, the actual trading price was going down. It means the list price will go down soon.

Demand and Supply analysis.

l The decline in domestic demand.

l Environmental governance, poor transport, power shortage and the tightening of fiscal policy during current period causes some carbon producers to reduce production.

l The excessive price rises in previous periods resulted in reduced demand.

l Reducing aluminium production

l Demand from the silicon industry is falling. Silicon is a seasonal product and will be off-season in October.

1. Supply

l Some imported cokes stock in port, resulting in the inventory level rising.

l Some local refineries reduced production due to power shortage

It is expected that the price of coke will continue to go down in next few weeks.

Imported coke information

² It was reported that one cargo around 25,000 ton imported from USA arrived in Zhenjiang, Jiangsu province on 26 July. Sulphur content is around 2% and ash <0.2, volatiles 15%.

² It is expected that another cargo around 30,000t (S <2.0%, ash < 0.5% and volatile 10%) will arrive China east region at the end of August.

Downstream Product:

Aluminium Fluoride:

The trade price of aluminium fluoride (dry method) was 9800yuan/ton, and wet method was 9400yuan/ton. It is evident AlF3 is oversupplied in the China domestic market, but there is no report of reducing production from producers. The quotation for export was 10600yuan/ton.

Alumina

After the 2^nd price reduction of Chinaclo alumina at the beginning of August, alumina prices kept stable last week. The total price of Chinaclo alumina fell almost 24% this year. It seems the price decreased due to reducing aluminium production. However, the real reason could be over-expanded capacity. The alumina market is in severe oversupplied status. Although the selling price is close to the production cost, the price may be considered to go down further.

Anode

The domestic price is continuing to keep stable. Due to the Olympic Games, some plants reduced production.

Calcined coke

The price of low and high sulphur coke went down slightly last week. However, moderate sulphur coke keeps stable.