Macquarie Research, OECD leading indicators: underlying momentum in global IP poor

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OECD leading indicators: underlying
momentum in global IP poor
Feature article
 The latest batch of OECD leading indicators suggested momentum in global
industrial production (IP) has shifted into reverse. Measured IP, however,
looks like it will improve in July on a global level, with the mismatch a function
of the disruptions created by the Japanese disasters.
Latest news
 Commodity prices were hit by ongoing concerns about the health of the
European banking sector and also by a strong US dollar, which hit a sixmonth
high against the euro. However, an earlier heavy sell-off was largely
reversed by the end of the day as oil prices rallied and strong metal market
short-covering ensued.
 Chinese preliminary trade data confirmed the ongoing recovery in copper
imports. Imports of refined copper, alloy, blister and semis were 340kt in
August, the highest since January. We estimate that refined imports alone
were close to 230,000t, up from 194kt in July, 164kt in June and 149kt in May.
We estimate that January-August net metal imports were 1.34mt, still down
34% YoY. The recent recovery, however, seems to confirm an end to the 1H
heavy consumer destocking.
 Chinese Iron ore exports in August were 59.09mt, up 8.3% MoM and 32.9%
YoY with year-to-date imports rising 10.6% YoY to 448.2mt. This rise seems
to reflect a steady recovery in Australian and Brazilian exports. Indian exports
look likely to remain depressed given the recent clampdown on exports. Data
through August shows that Indian exports were just over 60mt in the first eight
months, down 22% or 17.5mt YoY.
 From the preliminary data on steel, it looks like Chinese net exports of steel
through August were around 22.5mt, up 2mt from Jan-Aug 2010. We
estimate that apparent steel demand was up around 12% YoY in August and
10% YoY in the first eight months of this year.
 In Indonesia, tin surveyed for export prior to shipment (as required by the
Ministry of Trade) fell for a second month in succession in August, declining
by 8% MoM to 8,560t. However, the tonnage surveyed was still 7% higher
than in the same month last year and the total tonnage surveyed this year to
date (Jan-Aug), at 67,989t, is 13% higher than the corresponding of
2010. Nonetheless, with the tin market already running a significant deficit
any decline in exports from Indonesia, which is the world's second largest
producer and leading supplier to international markets, is likely to lead to a
tighter balance. We note that cancellations of stocks in LME warehouses
have recently spiked and now stand at 2,975t, or 14% of total LME tin stocks.
 The union representing workers at BHP Billiton Mitsubishi Alliance’s (BMA)
Queenland coal mines is talking an escalation of industrial action at the mines
after negotiations on a new labour contract have reached an impasse. BMA
says that after nine months of negotiation it is planning to ask workers directly
to vote on a proposed agreement at the end of September.