China’s steel production and trade – demand stagnating ::Macquarie Research,

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China’s steel production and trade –
demand stagnating
Feature article
 We run through the ferrous metal trade and production data released over the
past few days. Apparent consumption of steel has risen significantly year to
date, although the August data points to some stagnation in demand. Strong
iron ore imports, coupled with softer pig iron production, suggest a reduction
in the volume of domestic ore required to act as a balance, although demand
remains at elevated levels.
Latest news
 Recent press reports have highlighted that some European and US copper
consumers have asked to cancel deliveries from Codelco as concerns
increase over the economic outlook. One large copper trading company we
spoke to suggested spot sales to the European market in September are
down ~20% YoY. We hear some of this extra material from Europe is now
being offered to the Asia market, particularly China, given that the arbitrage
between the SHFE and the LME is still positive. As a result, we expect
continuous strength in Chinese copper imports for September following the 10%
jump MoM in August of unwrought copper and semis fabricating products.
 In a move that reinforces China’s continued tight monetary policy, there was
speculation that People’s Bank of China had issued punitive bills worth
RMB20bn to major banks in order to “mop up” some of the liquidity resulting
from the RMB548.5bn of new loans issued in August. Policy makers were
said to be surprised that the volume of new loans had increased so sharply
from July’s RMB493bn.
 Vale announced that it has reached a tentative labour agreement with the
union representing employees at its nickel mine in Thompson, Manitoba.
According to Reuters, a ratification vote on the new three-year agreement will
be held on Thursday. The Thompson mine and smelter has the capacity to
produce 60,000 tonnes a year of refined nickel.
 According to the Ministry of Housing and Urban-Rural Development, China
had started construction on 8.68m units of social housing by the end of
August, well on the way to hitting the 10m unit target. We have been sceptical
toward social housing as a demand driver for commodities given the
difficulties in ascertaining exactly how much is genuinely incremental and the
fact that the regular construction market has been strong enough on its own to
drive the levels of demand exhibited year to date.