Black China Blog

April 30, 2014

Labour day

Filed under: Uncategorized — Paul Adkins @ 6:52 pm

The AZ China office is closed today and tomorrow, for the national Labour Day holidays.

In typical Chinese style, the government has added Friday May 2 to the holiday, but declared Sunday May 4 a normal working day.

Those of you who may have last minute business relating to the conference, please feel free to email us at enquiries@az-china.com.   We are checking incoming mail, and will try to address your needs as quickly as possible.

The office will be open on Sunday May 4.

However, please also note that all of us will be at the conference from Monday through to Wednesday, and back in the office on Thursday May 8.   We will be checking emails during the breaks at the conference, but our ability to respond quickly to some requests may be a little limited.

The best way to raise any questions or talk to AZ China staff is to look for them at the conference.   You will be able to recognise AZ staff from their uniforms.

We all are looking forward to seeing you at the Sofitel Beijing next Monday.

 

April 2, 2014

A blog about a blog

Filed under: Uncategorized — Tags: , , , — Paul Adkins @ 7:12 pm

Congratulations to the folks at Rain CII, who have entered the world of social media by launching their own blog site.

Launched earlier this year, the blog offers to give us an insight into the combined businesses of Rain CII and Rutgers, with the respective CEO’s being the first bloggers.

You can catch the musings of Rain CII’s Gerry Sweeney and Rutger’s Henri Steinmetz at blogs.raincii.com.

 

 

 

March 27, 2014

April Fool’s day coming

Filed under: Uncategorized — Paul Adkins @ 7:22 pm

Don’t be an April Fool!   The early bird discount for AZ China’s 4th International Aluminium and Carbon conference expires April 1st, and it would be foolish to let this date slip by without confirming your attendance with us.

Send us an email TODAY.   Get your name on the list before the discount expires.

www.conference.az-china.com or write to enquiries@az-china.com

 

Look who’s back

Filed under: Uncategorized — Paul Adkins @ 12:45 am

The terrible scenes of grieving families awaiting news of their loved ones aboard MH370 has been heart wrenching.   The Lido hotel in Beijing, about halfway between the airport and the CBD area has been on the nightly news almost daily.

But who was it that the Chinese government sent in to comfort and address those families?   None other than Xiao Yaqing, the former head of Chinalco.

Mr Xiao, who is a native of Beijing, rose through the ranks of Chinalco from humble beginnings in one of its smelters in the south west of China.   He eventually became chairman of the board, before being promoted into the State Council, China’s Cabinet.   It was Mr Xiao who led the attack on the proposed merger between Rio Tinto and BHP Billiton in 2008.    Hs years of running Chinalco were perhaps the most aggressive period of Chinalco’s history, though some pundits believe he handed a “poisoned chalice” to his successor Mr Xiong, who has had to deal with problems on several fronts.

Mr Xiao recently appeared in public as the leader of the investigation into the Qing Dao oil pipeline explosion that we reported on here about 6 months ago.   These days he is the Vice Secretary General of the State Council.   Insiders say that age 55, he is in a very good position to take a more senior role in the Party.

Right now though, he is calming the grieving relatives, no easy task.

March 25, 2014

UC Rusal aluminium output declines without surprise

Filed under: aluminium,Uncategorized — Tags: — Yuan JI @ 5:39 am

Russia’s Federal Bureau of Statistics data released on Thursday indicates aluminium outputs within January and February fell 14.3% y/y. They have not provided production numbers in detail, but there is no surprise on this decline.

Rusal started curtailing inefficient capacity several months ago. Looking at the published data, all the reductions occurred within 2013. The curtailment focused on the north of Russia, where they have small-scale capacities and backward technology. Bogoslovsk with capacity of 115kt, produced 103kt in 2012 but only made 41kt in 2013, dropping 60%. Soederberg technology is applied in this smelter, which is not very eco-friendly. Urals smelter has aluminium capacity of 75kt, which produced 71kt in 2012 but dropped to 32kt in 2013. This smelter is almost the oldest one in Russia, after Volkhov.

In addition to Volgograd, Nadvoitsy, Novokuznetsk (phase 1), we estimate all curtailments will be completed in 1H 2014, therefore we will see the outputs of Russia will continue going down without any surprise in coming months. If no other changes to their plan, we expect Rusal to produce 3.5mt by 2014 end, almost all will ship out from Siberia region.

March 21, 2014

Xinfa Group safeguards bauxite supply step by step

Filed under: Uncategorized — Tags: , , — Yuan JI @ 12:51 am

Xinfa Aurum Exploration Fiji, which is a subsidiary of Xinfa Group, will start work on a new bauxite site in Fiji after obtaining a mining license from the Fijian government. The new site is close to Xinfa’s current bauxite mining at Nawailevu in Bua Province and it is expected to have 400kt reserves.  Due to rapid growth of aluminium production in China and limited domestic bauxite grades, China relies on bauxite imports heavily.

By the end of 2010, Xinfa had domestic alumina capacity of 6mtpa, with 100% reliance on imported bauxite. In November 2011, they became the first bauxite mining company in Fiji and obtained mining rights of total reserves of 80mt, though they had been working on developing bauxite there since 2006.   The first shipment of 60kt left Fiji in early June 2012 and the second one of 70kt in July. At the same time, they started shipping bauxite from Indonesia in 2011, taking 800kt that year.

In addition to Fiji, Xinfa has 2 projects located in Australia, though it’s not clear that these will be ready for delivery this year.   Xinfa therefore still faces the risk of bauxite supply shortages. They need about 12mt of bauxite to support their existing aluminium production, or 20-25mt to operate their alumina refineries to 100% utilisation, though it’s not likely they will set that sort of target.

Just getting enough bauxite to meet their primary metal needs will be a big challenge for this company.   The new mine in Fiji is a relatively small number but still a step forward.

March 18, 2014

China’s urbanisation and transport master plans

Filed under: Uncategorized — Paul Adkins @ 5:14 pm

On Sunday, the Chinese Government released two papers which describe plans for the urbanisation of millions of rural Chinese, and the development of intra- and inter-city transport systems.

These two blueprints cut to the core of China’s gradual transition from a rural to an urban society.   Presently, just over 50% of the population live in cities, though that figure does not include the millions of “illegal” immigrants – people who have moved to the cities looking for jobs but without official approval to do so.

We think of China in economic terms as being a powerhouse of industry and development.   For the last 10 years, China-made products have flooded the shelves of department stores, toy stores and other retail outlets.   More recently, we have grown used to hearing about “ghost cities” and a rush to develop bridges and airports and local government buildings.   Yet this paradigm fails to take into account that the vast majority of China’s population does not share in the wealth generated by these developments.   In social and cultural and other measures, China still has a long way to go.   Urandaline’s Michael Komesaroff talks about China’s “capital stock”, a measure of the total investment in roads and railways and other infrastructure, and points out that China is still far behind most developed countries on this measure.

These two blueprints are therefore crucial to the future for China at a demographic level.   They are also crucial for China’s economic health, because if these projects are funded in the same way as the RMB4 trillion stimulus package of late 2008, the results could be devastating for the banking and credit systems in China.    The two documents released on Sunday deserve careful reading and consideration, so we at AZ China will be releasing a Client Briefing Note to our clients, examining the plans in more detail.   If you are not on our mailing list, please contact us here at AZ China to get your copy.

 

March 17, 2014

MH370

Filed under: Uncategorized — Paul Adkins @ 9:11 pm

There is nothing that we can say or opine about here that hasn’t already been explored, theorised, debunked or left unanswered in the media the world over.

But for us in our industry, it is a poignant story none the less.  We are in a global industry, where it is nothing for us to be in Brazil, China, the USA, the Middle East or other points of the globe at any time – all thanks to those planes and crews to who take us to these places and home again.

So let’s all add our wishes and prayers to those of the grieving families, that they might get closure soon.

March 15, 2014

Copper selloff – but not aluminium

Filed under: Uncategorized — Paul Adkins @ 5:45 pm

This week saw copper prices plunge in Shanghai and London, triggering the price circuit breaker early in the week.   The circuit breaker prevents the price falling any more than 5% on any single day.

But aluminium did not follow copper down.   Why?

We think there are several reasons.   First, copper is more exposed to an economic slowdown in China.   It is an industrial metal, where aluminium is more versatile.   Second, copper had been subject to a lot of financing deals towards the end of last year, as liquidity tightened and people looked for ways to generate cash.   Copper imports into China were being used as collateral for credit, but the fear of an economic slowdown caused players to liquidate their positions.   Aluminium is subject to finance plays as well, but inside China those plays are more tied to smelters, not traders.   Copper inventories are rising steeply as a result of the huge imports, but aluminium inventories have not risen, because the arbitrage window has not allowed for significant imports.

There’s also an argument that the shiny metal has found a floor price, where the red metal has not.   A break of the RMB13000 barrier would cause further plant shutdowns, causing the price to rebound strongly, especially on the forward curve.

The copper drama of the last week is probably overblown.   Certainly Barclays Bank thinks so, in their latest Metals Market Outlook.   Copper prices are likely to recover quickly, but aluminium prices, having not had a dramatic drop, are unlikely to have a rebound.

 

March 6, 2014

Kitimat delayed

Filed under: Uncategorized — Tags: , , , — Paul Adkins @ 8:46 pm

Rio Tinto Alcan CEO Jacynthe Cote has publicly acknowledged that the re-launch of the Kitimat smelter, outside Vancouver in Canada, will be delayed until the first half of 2015.

The plant had been scheduled to restart by the end of this year, but cost over-runs and a shortage of skilled workers in the region have caused the delay, according to Ms Cote.

RTA started the refurbishment back in 2011, and is set to spend $3.3 billion on the project.   That’s a huge spend for a plant that will produce only 420,000 tonnes of the light metal, once it is at full speed.   On a dollars per tonne basis, that puts the capital spend at $7860 per tonne.   Even if amortised over 10 years, it means that the plant need to run at less than $1200 per tonne cash cost to be fully economic   ($1200 cash costs plus $786 capital charge equals roughly $2000, against today’s metal prices which sit just slightly north of there.)

And in macro terms, an addition of 420,000 tonnes into the global market is a small drop in the ocean.   That represents less than a week’s supply.

 

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