Twitter

Asia Mining

China reaching “peak steel” isn’t all bad news – by Clyde Russell (Reuters U.S. – February 4, 2015)

http://www.reuters.com/

Feb 4 (Reuters) – A term gaining currency among China commodity watchers is “peak steel”, something that sounds ominous, especially to iron ore and metallurgical coal miners. The increasing market consensus is that China is at, or close to, reaching the maximum level of steel output and demand.

If this is the case, it means China’s steel consumption will peak at levels well below what many in the market had expected only a few short years ago. China produced a record 822.7 million tonnes of steel in 2014, roughly half of global output, according to data from the National Bureau of Statistics.

However, this was only 0.9 percent higher than the previous year, representing the slowest annual growth rate in 33 years. Even this modest increase in output was only achieved on the back of a surge in exports of steel products, which jumped 50.5 percent in 2014 to 79.35 million tonnes.

Apparent steel demand in China dropped 3.4 percent to 738 million tonnes, according to the China Iron and Steel Association (CISA).

These figures suggest that the “peak steel” proponents are probably on the right track, especially since a strong rebound in steel demand in 2015 is viewed as unlikely, given expectations of economic growth of around 7 percent and ongoing problems of oversupply in residential housing.

Read more

[Indonesia] House pushes for Freeport smelter location in Papua – by Ina Parlina and Raras Cahyafitri (Jakarta Post – February 3, 2015)

http://www.thejakartapost.com/

The House of Representatives is pushing the government to make copper giant PT Freeport Indonesia establish its smelter in Papua, increasing concerns over whether the company will be able to complete development by 2017 when a full ban on ore exports will be implemented.

The House’s leaders brought up the Papua smelter issue during a meeting with President Joko “Jokowi” Widodo on Monday.

The House’s deputy speaker, Agus Hermanto, claimed that the President had agreed that Freeport Indonesia should build its smelter close to its mine in Papua instead of following its plan to build in Gresik, East Java. “I say many problems will arise if the smelter is built in Gresik,” Agus said after the meeting, without elaborating.

Freeport Indonesia, a subsidiary of US-based giant miner Freeport-McMoRan Inc., is required to build a copper smelter in the country as a consequence of the 2009 Mining Law that requires mining firms to process and refine their minerals in domestic facilities.

Recently, the company said that it had signed a memorandum of understanding (MoU) to lease 80 hectares of land belonging to PT Petrokimia Gresik, located adjacent to the only copper smelter in the country, operated by PT Smelting Gresik.

Read more

BREAKINGVIEWS-Obama’s nuclear gift to Modi is shrewd investment – by Andy Mukherjee (Reuters India – January 26, 2015)

http://in.reuters.com/

Jan 26 (Reuters Breakingviews) – Barack Obama’s nuclear gift to India looks like a shrewd investment. By agreeing to a workaround that protects power station builders from civil liabilities in the event of a meltdown, the U.S. president has effectively unblocked New Delhi’s reactor programme. The bigger bet is on ending India’s energy crisis.

The agreement, struck on the first day of Obama’s visit to Indian Prime Minister Narendra Modi, could bring new orders for equipment makers like GE-Hitachi , Toshiba’s Westinghouse and France’s Areva. About 4 gigawatts (GW) of new nuclear power capacity is under construction in India; another 40GW is planned over the next 10 years. Even if only half of it gets built, that’s worth $35 billion in contracts.

But a more potent opportunity for U.S. businesses may be the jolt to Prime Minister Narendra Modi’s “Make in India” campaign. Lack of power is the single biggest obstacle to making India a manufacturing force. Electricity supply in northern parts of the country, which are poor and bursting with surplus labour, fell 6 percent short of demand in December.

Mining more coal will remain Modi’s first priority. But nuclear power will play an important supporting role. Currently it accounts for just 3 percent of India’s total electricity consumption; a legacy of the country’s pariah status in the global market for fissionable materials. That ended in 2008 with a civilian nuclear agreement with the United States. But the reactors that were conceived got stuck after India passed a law in 2010 making global equipment makers liable for accidents.

Read more

Iron Ore Extends Rout as China Slows, Banks Reduce Forecasts – by Jasmine Ng (Bloomberg News – January 26, 2015)

http://www.bloomberg.com/

Iron ore retreated to the lowest level in more than five years as a slowdown in China hurt the outlook for demand in the world’s biggest user while the largest mining companies add to supply, boosting a surplus.

Ore with 62 percent content delivered to Qingdao, China, tumbled 4.3 percent to $63.54 a dry metric ton, according to data by Metal Bulletin Ltd. That’s the lowest price on record going back to May 2009, and was the biggest one-day fall since Nov. 18. The commodity is 11 percent lower this year.

The raw material has been in a bear market since March after Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA spent billions of dollars to boost low-cost output even as China slowed. Goldman Sachs Group Inc. joined global banks on Friday in cutting price forecasts for 2015, predicting a return to a bull market is probably more than a decade away. The love affair between China and iron ore is cooling, the bank said.

The decline in prices is mainly due to “slower demand growth for steel in China, together with the expected new iron ore supply,” Vanessa Lau, a Hong Kong-based analyst at Sanford C. Bernstein Ltd., said before the figure was released. Steel mills in China are also cutting output before the Lunar New Year, putting further pressure on prices, she said, referring to the national holiday next month when industrial activity slows.

Read more

COLUMN-China 2014 growth the template for years to come – by Clyde Russell (Reuters U.S. – January 20, 2015)

 http://www.reuters.com/

LAUNCESTON, Australia, Jan 20 (Reuters) – The important thing from China’s economic deluge isn’t that fourth quarter growth was slightly higher than expected, or even that growth over the whole of 2014 was the weakest in 24 years.

These are merely the headline grabbers. What really matters is that 2014 provided the template for what China’s economy is going to look like in the next decade.

The trends that started to come to fore in the past year are likely to continue, and these include an economy less reliant on export-led manufacturing, slower growth in commodity consumption and imports and a lesser role for state stimulus spending. There will be those who bemoan the slower growth, having grown accustomed to China’s extended and rapid expansion over the past three decades.

However, a gradual slowing of the Chinese growth rate has to be seen as an overall positive, lowering the risk of creating unsustainable bubbles in the economy and transitioning the world’s most populous nation from the source of the world’s cheap labour to being the engine of middle-class consumerism.

Fourth-quarter gross domestic product (GDP) expanded 7.3 percent, above expectations for a gain of 7.2 percent and matching the third quarter number, according to official data released Tuesday.

Read more

COLUMN – A few rays of sunshine break through coal’s storm clouds – by Clyde Russell (Reuters India – January 19, 2015)

http://in.reuters.com/

LAUNCESTON, Australia – The new year has started positively for Asian coal, with prices rallying from a 5-1/2 year low, Chinese imports jumping to the highest in 11 months and renewed merger and acquisition interest.

While these are undoubtedly welcome developments for a sector that has witnessed four years of falling prices, there are still serious questions as to whether these swallows really do indicate a summer of good fortune ahead.

The spot price of thermal coal at Australia’s Newcastle port, an Asian benchmark, rose to $62.91 a tonne in the week ended Jan. 16, up 3 percent from $61.04 the prior week, which was the lowest since April 2009.

The obvious caveat here is that prices are still some way below the breakeven point for many miners in top exporters Australia and Indonesia, and it will take weeks of sustained gains to bring the sector as a whole back into the black.

Chinese imports were 27.22 million tonnes in December, the highest since January last year, again a positive sign but not enough to mask that imports for 2014 as a whole were down 10.9 percent to 291 million tonnes, the first annual drop in a decade.

Read more

COLUMN-Big iron ore miners supply strategy working partially – by Clyde Russell (Reuters U.S. – January 13, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Jan 14 (Reuters) – China’s record imports of iron ore in December capped a year of strong growth, while also proving that the strategy of the big miners is at least partially working.

China brought in 86.85 million tonnes of the steel-making ingredient in December, bringing the total for 2014 to 932.5 million tonnes, a gain of 13.8 percent over the previous year.

The jump in iron ore imports isn’t because China is producing more steel, with output of crude steel rising a mere 1.9 percent in the first 11 months of 2014 over the same period in 2013, according to official figures.

It’s also not because huge stocks of iron ore are being built up in warehouses, with inventories monitored by the Shanghai Futures Exchange SH-TOT-IRONINV dropping to 99.85 million tonnes in the week to Jan. 9, the lowest in 11 months.

The most logical explanation is that the 47-percent decline in the Asian spot iron price in 2014 .IO62-CNI=SI is displacing some high-cost Chinese domestic output.

This has been the strategy of the big three iron ore miners, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton.

Read more

Rio Tinto to spend at least $500 million to advance diamond project in India – by Cecilia Jamasmie (Mining.com – January 12, 2015)

http://www.mining.com/

Mining giant Rio Tinto (LON:RIO) plans to invest $500 million in its Bunder diamond mining project in the central Indian state of Madhya Pradesh, the firm boss Sam Walsh said Monday.

Speaking to reporters Walsh added the company is awaiting environmental clearances from Indian authorities to start mining, but didn’t say how soon he expected to receive such permits, Reuters reports.

Rio found the massive deposit in rural India, the most important diamond discovery in the country in the last 40 years, back in 2004. But it wasn’t until 2012 that it got an initial approval to develop the mining project, which is now just waiting for environment and forests clearances.

Rio Tinto Diamonds managing director Jean-Marc Lieberherr said last month the firm wanted to be the main player in the industry in India, driving the sector’s growth in years to come. The touted project is expected to generate about 30,000 jobs and produce up to three million carats a year, Rio has said.

Read more

China’s Virtue Dragon to Invest $5b in SE Sulawesi Ferronickel Smelter – by Ridho Syukra (Jakarta Globe – January 12, 2015)

http://thejakartaglobe.beritasatu.com/

Jakarta. A Chinese ferronickel producer, Virtue Dragon Nickel Industry, plans to invest up to $5 billion in Konawe industrial estate in Southeast Sulawesi province to build a nickel smelter and supporting infrastructure including a power plant and a port, its president director said on Friday.

Speaking to reporters at the Industry Ministry’s headquarters in Jakarta, Andrew Zhu, president director of the Chinese company, said the smelter is set to occupy a total of 500 hectares.

Zhu elaborated that the smelter development would involve three phases. First, it will develop a smelter with a maximum production capacity of 600,000 tons per year on an area of 100 hectares. This phase is expected to be completed by the end of this year.

In the second phase, Virtue Dragon will expand its land area to 200 hectares and double the production capacity to 1.2 million tons per year. This phase is scheduled to be completed by the end of 2017.

Lastly, it will expand the land area to 500 hectares and ramp production to 3 million tons per year. This phase is expected to be concluded in 2019. Zhu said the ferronickel produced will be sold to both Indonesia and China. Meanwhile Zhu said the smelter would be supported by a 335 megawatt power plant and a port.

Read more

India on brink of “quantum leap”, Modi tells investors – by RUPAM JAIN NAIR and AMAN SHAH (Reuters India – January 11, 2015)

http://in.reuters.com/

GANDHINAGAR – (Reuters) – Prime Minister Narendra Modi promised on Sunday to pursue predictable policies and ensure stable taxes, in a speech that sought to address concerns for foreign investors in Asia’s third-largest economy.

U.S. Secretary of State John Kerry led a roll call of leaders, including U.N. Secretary General Ban Ki-moon and World Bank head Jim Yong Kim, converging on Modi’s home town of Gandhinagar for the Vibrant Gujarat business summit. U.S. President Barack Obama visits India later this month.

Eight months into Modi’s rule, his failure to lift the economy from its longest growth slowdown in a generation has raised questions about how much substance there is behind his promise of “red carpet, not red tape”.

“We’re trying to complete the circle of economic reforms speedily,” Modi told the event that he founded when he was chief minister of the industrial state.

“We are also keen to see that our policies are predictable. We’re clear that our tax regime should be stable,” Modi said, speaking in English but making the occasional aside in Hindi.

Read more

Searching for Burmese Jade, and Finding Misery – by Dan Levin (New York Times – December 1, 2014)

http://www.nytimes.com/

MYITKYINA, Myanmar — At 16, the gem trader’s son set out for the jade mines to seek his fortune in the precious stone that China craves. But a month in, the teenager, Sang Aung Bau Hkum, was feeding his own addiction: heroin, the drug of choice among the men who work the bleak terrain of gouged earthen pits, shared needles and dwindling hope here in the jungles of northern Myanmar.

Three years later he finally found what he had come for — a jade rock “as green as a summer leaf.” He spent some of the $6,000 that a Chinese trader paid him on a motorcycle, a cellphone and gambling.

“The rest disappeared into my veins,” he said, tapping the crook in his left arm as dozens of other gaunt miners in varying states of withdrawal passed the time at a rudimentary rehabilitation clinic here. “The Chinese bosses know we’re addicted to heroin, but they don’t care. Their minds are filled with jade.”

Mr. Sang Aung Bau Hkum, now 24, is just one face of a trade — like blood diamonds in Africa — that is turning good fortune into misery.

Driven by an insatiable demand from the growing Chinese middle class, Myanmar’s jade industry is booming and should be showering the nation, one of the world’s poorest, with unprecedented prosperity.

Read more

China challenges India’s polished diamond throne – by Tanya Ashreena (Reuters U.S. – December 25, 2015)

http://www.reuters.com/

NEW DELHI, Dec 26 (Reuters) – India’s long-held position as the world’s top diamond polisher is being challenged by soaring output from China, compelling the south Asian country to seek help from ally and top rough diamond supplier Russia to defend its market share.

India has traditionally relied on the middlemen in trading hubs of Antwerp, Tel Aviv and Dubai for its supply of rough diamonds, which mainly come from Russia or Africa. Most of the world’s diamond output is sent to India for cutting and polishing before being retailed around the world.

But China has managed to break the established trade route by getting diamonds directly from African mines in which Chinese companies have a stake. This has boosted the value of China’s net exports of polished diamonds by 72 percent in the past five years to $8.9 billion.

While India’s exports, supplied by firms such as Asian Star , Gitanjali Gems Ltd and Venus Jewel, rose 49 percent to $14 billion over that time, shipments have seen a sharp drop this year.

“China’s active procurement of rough supply from African countries was reducing the supply available to Indian manufacturers,” said Sandeep Varia, an executive of Indian industry body Assocham. “Many units across the country had to lay off workers due to losses.”

Read more

Rare earths and China’s self-correcting folly – Alan Beattie (Financial Time – January 8, 2015)

http://blogs.ft.com/beyond-brics/

This week, a trade war that was supposed to tear the world of high-tech manufacturing apart ended peacefully, quietly and with few casualties.

China announced plans that would comply with a WTO decision from last year by removing export quotas and other restrictions on rare earth elements (REEs), the minerals used widely in the manufacture of electronics, computers and cars. It was another success for the US, which has not only chalked up a series of impressive wins against China in the WTO’s dispute settlement process but also (by no means a given) often succeeded in getting Beijing to implement the decisions.

So, a big victory for global governance? Huzzah for the international rule of law, and a celebratory round of Dan Drezners? Sort of. In reality, it was the free market as much as trade rules that did for China’s attempt to corner global commerce in rare earths. Moreover, in a rather choice irony, Chinese companies employed the very tricks that they use to sidestep trade restrictions by other governments to sabotage the export quotas set by their own.

By 2010, China produced 97 per cent of the world’s basic rare earth oxide production and much of the processing business. In its submission to the WTO, Beijing laughably argued that a complex system of export restrictions it had placed on its REE companies since the mid-2000s was aimed at protecting the environment by controlling mining.

Read more

Coal India Workers Strike to Fight Modi’s Privatization Plans – by Rajesh Kumar Singh and Abhishek Shanker (Bloomberg News – January 6, 2015)

 http://www.bloomberg.com/

A strike by coal miners in India has shut down some mines and disrupted supply at others as unions vowed the biggest walkout in decades to halt plans by Prime Minister Narendra Modi to privatize the industry.

“The strike is on,” said R. Mohan Das, a personnel director at state-run Coal India Ltd. (COAL), the world’s biggest miner of the fuel. It’s too early to assess supply losses, he said, adding that all workers have walked out at some mines, while others are partially closed.

Unions called a five-day strike starting today after rejecting an offer to meet management this morning. Hundreds of union members protested outside Coal India’s Kolkata office denouncing the privatization plans.

“If this strike intensifies there will be a severe coal shortage,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. “With many power utilities being hand to mouth as far as coal supplies are concerned, the problem may be severe.”

Of the 100 power plants that run on local coal, 42 had supplies for less than seven days as of Jan. 1, according to the power ministry’s Central Electricity Authority. Twenty of these plants had less than four days of stock.

Read more

Slowdown in China Bruises Economy in Latin America – by Eduardo Porter (New York Times – December 16, 2014)

http://www.nytimes.com/

SANTIAGO, Chile — Few people are as intensely worried about the slowing Chinese economy as Latin Americans. Not only does China buy nearly 40 percent of Chile’s copper, but its once-insatiable demand helped push copper prices from $1 to $4 a pound.

Meanwhile, Beijing plowed billions into Peruvian mines and fisheries and spent billions more buying soybeans from Argentina and Brazil. And it propped up the Venezuelan government to the tune of $50 billion in loans, to be paid in shipments of oil.

China’s voracious hunger for Latin America’s raw materials fueled the region’s most prosperous decade since the 1970s. It filled government coffers and helped halve the region’s poverty rate.

That era is over. For policy makers gathered here last week for the International Monetary Fund’s conference on challenges to Latin America’s prosperity, there seemed to be no more clear and present danger than China’s slowdown.

“The commodity boom allowed governments and companies to avoid hard choices,” Andrés Velasco, Chile’s finance minister from 2006 to 2010, told me. “For goodness’ sake even Argentina grew by 5 to 6 percent per year for almost a decade.”

Copper is back under $3. As commodity prices continue to swoon, driven in large part by China’s weaker demand, the going will get much tougher.

Read more