Chinese demand part 2: trade, production and apparent consumption :::Macquarie Research,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Chinese demand part 2: trade,
production and apparent consumption
Feature article
 Following on from yesterday’s report on China’s end-use indicators, today we
look at trade and production data for the major commodities and calculate
apparent consumption.
Latest news
 Base metals shook off the revelation that there is to be no QE3 to close higher
on the day. Zinc (+0.9%), lead (+3.5%) and nickel (+2.9%) were the strongest
performers, while copper (+0.5%) and aluminium (+0.5%) posted only modest
gains.
 The second read on US GDP growth confirmed activity was weak in the second
quarter, with growth downgraded from an annualised rate of 1.3% to 1%. Partial
indicators for 3Q continue to suggest better economic conditions in the current
quarter, for example with durable goods orders coming in firmly for July. Much
stronger orders for motor vehicles reinforce the view that 3Q GDP should get a
big boost from the auto sector, as supply chain shocks dissipate.
 Chinese steel prices were relatively flat this week, with HRC showing no
change at RMB4,800/t ($643/t ex VAT), while rebar traded down 0.5% WoW
to RMB4,855/t ($650/t). Billet prices in the Tangshan region, usually a good
lead indicator of price direction, started to rise by the end of the weak, and
mills are generally reported to be optimistic about demand over September.
 Iron ore prices ticked up slightly over the week, with the TSI 62% Fe series
rising 0.7% to $178.5/t CFR N. China. Although iron ore inventory appears to
have been rising over the last few weeks, mills we have spoken to report they
are planning to continue building inventory in anticipation of stronger
production over September.
 China’s Ministry of Railways has confirmed that the Daqin Railway – the key
transport line for taking coal from Shanxi to the coast – will undergo
maintenance starting from 20 September. The line will be closed for four
hours a day over the 15-day maintenance period. The last time work was
done on the line was in April this year, and the subsequent supply distribution
was credited with contributing to a run in coal inventory at the time.
 The government of Peru has reportedly reached an agreement with mining
companies that could see their annual tax contributions rise by $1 billion for
the next five years. No further details on the new royalty rate or tax scheme
agreed with miners have been released. Leftist President Ollanta Humala’s
promise to introduce a windfall tax during the country’s election campaign this
year created a cloud of uncertainty over future investment in Peru’s mining
sector, which should lift following this announcement.