12/14/2015 7:42:49 PM
捷凯金融 - 中国市场持续低迷,能源矿业处境堪忧

GKFX - Energy and Mining Industry suffer as China continues to disappoint -081215

Concerns about world's second-largest economy remain as China's exports slumped more than expected in November. But the decline in imports has slowed, perhaps a tentative sign that domestic demand is on the mend, The figures were released on  Tuesday by China's General Administration of Customs and showed November’s exports fell 6.8 percent from a year ago, dropping for a fifth consecutive month, while imports fell 8.7 percent over the same period. The trade surplus narrowed to $54.1 billion from the record high of $61.64 billion last month.

The data also comes after a report last week showed China's manufacturing conditions slipped to its weakest level in more than three years, while inflation data tomorrow is forecast to show additional weakness in consumer prices.

The trade figures compare with a Reuters' analyst poll of a decline of 5.0 percent for exports and a fall of 12.6 percent for exports.

Separately, yuan-denominated data showed a 3.7 percent fall in exports from a year earlier, while imports fell 5.6 percent. That left the country with a trade surplus of 343.10 billion yuan for the month.

Capital Economics' China economist Julian Evans-Pritchard said although the exports data were disappointing, suggesting foreign demand remains subdued, a recovery in imports hints at a policy driven pick-up in domestic demand.

The pick-up in imports was also partly due to a sharp drop in global commodity prices late last year, he noted.

Chinese growth dipped to 6.9 percent in the third quarter, dropping below the 7 percent mark for the first time since the global financial crisis of 2008-2009, reigniting concerns of a hard landing in the world's second largest economy after years of explosive growth.

President Xi Jingping said in November that the country's economic growth rate would not be less than 6.5 percent in the five years to 2020.

To support the economy, the People's Bank of China has repeatedly cut interest rate and devalued the yuan against the U.S. dollar this year.

So, though Imports were not as much as expected , it was still enough to signal continued weak demand from the world’s second biggest economy.

Analysts remain divided on whether  the numbers signal a possible improvement in Chinese domestic demand, which as we all know has been a key factor in driving world commodity prices to multi-year lows over the past year .

Kevin Lai, who is chief economist Asia Ex-Japan at Daiwa Capital Markets in Hong Kong commented on the data ,and here I quote :

“The big picture hasn’t really changed that much. The US is doing okay, but the problems with emerging markets are really quite big,”.

“Imports have been slumping for more than a year now, so the year-on-year figures are benefiting from a much lower base, which statistically we should expect. But I’m not so sure the number today reflects a real fundamental change for the better in import demand.”

What is clear though is that the latest OPEC generated decline in oil has spilled over into other industrial commodities with iron ore continuing its fall below the $40 per tonne barrier to $38.90. Copper has steadied its slump over the past few sessions thanks primarily to swathes of short covering on both the Shanghai and London markets in response to its heavily oversold condition and a variety of other factors from warnings of dire consequences from the Chinese regulatory authorities to those funds found guilty of maalicious short selling  to the slightly better China import numbers of the red metal in November. However  nickel and aluminium prices were weaker again today as the feel good rally ran out of puff and few if any dealers we talk to are calling the bottom yet . With oil’s current dysfunctional structure too prices are looking set for further tend influencing declines into 2016 .

Underlining the cautious outlook for China, a Reuters poll of Japanese firms today showed deep pessimism about near-term Chinese growth prospects, with 79% saying they do not expect to expand business there next year.

Meanwhile Australia, whose three biggest exports are iron ore, coal and natural gas, continue to feel acute pain in its large resource sectors.

The share prices of BHP Billiton and Rio Tinto, who along with the Brazilian company Vale, dominate the iron ore trade to China, continue to decline. BHP, which is also listed in the UK, fell more than 5% to a fresh 10-year low of $17.05. Rio was off more than 4%.

The strengthening of the US dollar ahead of a likely Fed rate hike has also put pressure on the Australian dollar which fell 0.5% to US72.22c.

The hard fact is that BHP Billiton, Rio Tinto, Vale and Fortescue Metals Group may be the only profitable iron ore miners left on the planet now as The worst combined  commodities crunch I have experienced in my 44year career  has now squeezed so tight that few miners have any breathing space at these levels.

Analysts at Petra Capital estimate that up to 70 per cent of the world's nickel mines are now loss-making.

Whilst In the copper market, close to 40 per cent of mines are now believed to be loss-making at Tuesday's price of $4565 a tonne.

For those selling iron ore into the Chinese market, it is very likely that only the aforesaid four miners are now profitable probably making as little as $US1 or $US2 profit a tonne at Tuesday's price of $US39.06 a tonne.

Meanwhile Mining giant Anglo American has become the latest victim of the rout in the sector, announcing  it will cut more than 80,000 employees, suspend its dividends and radically restructure the business.

Chief executive Mark Cutifani told investors: “The global market for commodities continues to deteriorate and this is not a time to talk about business as usual. The severity of commodity price deterioration requires bolder action.”

He said the group will make further writedowns of up to $4.7 billion (£3.1 billion) to reflect lower prices and unprofitable assets that are to be closed.

Canadian Bank RBC has counted 23 coal mines around the world that have been shut over the past 21 months, and there have been claims too that up to 50 per cent of Australian coal mines are now loss-making, with miners in South Africa and North America doing worse in some cases.

Given the dire situation, its hard to believe that commodity prices could take another big step down, But as we now know yesterday they did. led by falls of more than 5 per cent for prices of Brent oil and West Texas Intermediate oil prices.

Iron ore followed with a 2.4 per cent slide. Base metals like copper, nickel and silver were all down between 1 per cent and 2 per cent.

Compared with the carnage witnessed in the other base metals, Gold prices have been relatively steady of late but with the US federal reserve likely to lift interest rates in the near future and the outlook for the dollar remaining positive, it is hard to view gold as a safe haven yet.

A handful of smaller commodity markets like, zinc and lithium are offering the occasional bit of optimism, but they represent a very small section of an industry that is generally staggering on its knees.

Recent history would suggest that exchange stockpile data is not the perfect guide for where commodity prices are going to go.

As a result of the Warehouse financing lock ups ,the load out delays and rent capping plans many local analysts now believe that LME stockpile data for metals like copper and the other traded there to be less influential in setting the price than they were in the past, given the growth of undeclared non registered stockpiles around the world and the disproportionate impact of equities and currency correlated speculative volumes over industrial trade hedging.

Fortescue Metals Group executives have previously pointed to steady iron ore stockpile data during times of wild gyration in iron ore prices, with the company pointing the finger of blame at futures market speculation for having an impact on physical markets.

Glencore has also pointed to "aggressive and synchronised large-scale short selling" on copper futures in particular as distorting the benchmark copper price to levels that do not reflect the truth about supply and demand.

"The actual physical flows, the inventory levels are not justifying the prices where they are today," said Glencore chief Ivan Glasenberg back in August.

"It's hedge funds, it's Chinese hedge funds, it's US hedge funds. They're all just hitting the commodities at the moment." 

How often have we heard that particukar cry in recent weeks? Whilst it is true that  a mix of macro hedge , CTA’s and other algorithmic funds have simply followed the trend data out of China and elsewhere and the systematic weight of these selling orders continues to override the stuttering fundamentals. Whether they should be allowed to do this and potentially destroy so many businesses globally,  to say nothing of the lives of their workers is a debate for another day . Though it will be interesting to watch the mayhem once they collectively decide that enough is enough and then they attempt to get out of these monster short positions.

Meanwhile like everyone else we will continue to scan the streams of recognizable data coming out of China and its surrounding trade partners for clues that will announce the end to the pain while in our hearts we all know that the only solution to production oversupply in very slow growth markets is to shut down everything that is not profitable. That message is finally sinking home but  too late for some I’m afraid.

 

This has been Alex Heath for GKFX 

Goodbye and thanks for tuning in .

 

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Alex Heath
策略研究员

金融生涯长约40年,成为LME的一名银&锡交易员是Alex Heath职业生涯的起点。精通于LME基本金属在期货、期权等方面的风险及研究。曾供职于LM...
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