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Good to see Tian Zhiqiang here at TMS this year. He is the young man going around with Tony Botelho. Mr Tian is taking on some of Tony’s role as the Marketing manager for Sinoway Carbon. Tony will focus on India and the Middle East, giving him the chance to slow down and spend more time at home in Goa India.
Which leads me to a question – what English name should Zhiqiang adopt? Let’s face it, we foreigners can get our heads around his family name, Tian, but when you were reading this, how did you do at pronouncing his given name? (For the record, it is pronounced as “Djer Chiang”.)
I suggested to him that in his new role as global jet setter selling CPC, he could call himself Howie, or Scott, perhaps Gord, or maybe Gerry or Ron. But he felt that those names were already taken.
Maybe he can just call himself Tony junior.
If you bump into Zhiqiang, he would be delighted to hear your suggestion. But keep it nice!
By the way, if you bump into Tony the elder, make sure you give him an extra warm greeting. Tony is planning to slow down and spend more time at home, and this will probably be his last TMS, so don’t let him go home without saying hi to him. (Yes, I know, he has said that before, but I think he’s serious this time.)
Probably the most talked-about subject here this year is not whether coke prices will rise or product specs will fall, but simply, where are the crowds?
It’s a difficult thing to measure, but at least in this environment just about all attendees are trapped here in the Swan/Dolphin or one of the Boardwalk hotels. So that gives us a chance to see the crowds coming and going. And that is exactly what we don’t see.
Someone told me that the official registrations are about 15% down on typical years. But it appears to be also true for the rest of us who don’t actually register. It’s now Monday morning, and the hourly lobby crawl is about to get under way, so we will see if it is any easier to find a nook in which to hold a meeting.
Speaking of the Swan/Dolphin, the other chatter here is that this is the last year TMS will be held here. Apparently there was a contract for another event in the 3-year cycle for 2018, but that has been cancelled. I don’t have confirmation but it’s said that the next East Coast TMS will be in Miami.
And 2016 will be in Nashville Tennessee.
One young lady spending the week at TMS is away from her family and friends on the day of her birthday. So let’s all wish her a very happy birthday – it’s today.
And who is this young lady? I won’t embarrass her by naming her here, but those of you who know anything about bath material will know who I mean.
So a big happy birthday Sonja, from everyone here.
This qualifies as zoo news as well as TMS news. Angelo Danese, formerly a long-term employee of BP before he took on the role of Sinoway Carbon GM that ended 18 months ago, has found himself working for BP again.
Angelo is consulting to the BP Spain operations, getting involved in the preparation of CPC for BP’s clients there. Angelo tells me he commutes, which is saying something, as he lives in Los Angeles.
Angelo is of Italian heritage, though those who know him don’t need to be told that. He will be glad that Spanish and Italian are cousin languages – he might almost feel at home, especially being so close to the motherland.
Arriving at the Swan Hotel yesterday, I bumped into two people that I know well. I won’t name them here, in light of the conversation I am about to describe.
It went like this:
“Hey Paul, where is your beautiful lady?”
“You mean my wife?”
“Paul, every year when you come to TMS, you always bring a beautiful lady with you. We always look forward to seeing who will come with you.”
So, it’s nice to know that while I am rabbiting on about China or the market, the attention of my audience is focused on my colleague… (Just joshing guys.)
In case you are wondering, I am here by myself this year.
Every year when TMS comes around, I try to bring you news and gossip as it comes up.
This year, the event will be held in Orlando. We are now in the grip of the dreaded 3-year cycle. The planners have always tried to share the event around between the East Coast USA, West Coast and somewhere in the middle. So we have had years in cities as boring as Charlotte North Carolina to as lively as New Orleans and San Francisco. But since about 2011, the event has been cycling through Orlando Florida, San Antonio Texas and San Diego California.
Of the 3, Orlando is the worst. You are captive to the Disney behemoth, and it’s a crazy sight seeing a bunch of suited businessmen trying to meet in the same hotel lobby as holidaying families and kids in bathers. It’s also about as far as you can travel if you are coming from Asia. It will take me 30 hours to get there.
This year I decided to do my own meeting bookings, rather than leaving it to an assistant. Bad move – despite my careful maintenance of the Excel Spreadsheet, I have still managed to double book a couple of meetings. I have also reduced my meeting count to only 36, by not booking any meetings for the Saturday.
So much easier to blame an assistant for stuffing the meeting schedule! Now I only have myself to blame. (I write this because I am sure all you experienced TMS attendees have been there!)
So I am off to a shocker on several counts – still trying to move meetings around at the last minute before setting off on a cruel flight plan.
I will bring more news and photos as the opportunity arises.
Stewart Hamilton, a rising star in Rio Tinto’s Pacific Aluminium subsidiary, has left the company to take up a new role in Tanzania.
Stewart’s most recent role was as General Manager of Business Improvement & Technology, but had had several gigs prior, including management roles in the NZAS smelter on the southern tip of New Zealand and in the Brisbane Australia office.
Last Friday Alcoa announced that it was conducting a 12-month review of its primary aluminium and alumina assets, with a view to possible closure or divestment.
The announcement seemed to catch the market by surprise, and led to all sorts of theories and postulations. Some Australian newspapers were worried that it could lead to further cuts to Alcoa’s footprint in that country. Others saw the announcement as a response to high levels of Chinese metal leaking into China’s markets, while other commentators linked it to the falling premiums.
Let me address a couple of those points and raise some of my own ideas.
* Chinese semis exports. I highly doubt that Alcoa would take a structural action in response to a temporary situation. Sure Chinese reports continue to climb, but that phenomenon could stop at any minute. The entrepreneurs who are making money on the trade will continue to do so only for as long as there is a buck in it. Falling premiums hurt the equation for them too. As we have reported before, the Chinese government is contemplating removing the VAT refund. And if the gap between the LME price and the SHFE price narrows, that could also hurt. Any single event of these three could be enough to stop the one way traffic almost overnight.
Besides, if one takes a big picture view, China is not structurally set up to be a major long term supplier of aluminium to the world. More and more of its capacity is moving to the Northwest, some 2000kms from the nearest major port. I can’t see China being a reason why Alcoa would close aluminium capacity. And as for alumina capacity, Alcoa has 3 refineries in Western Australia all of whom could stand to benefit from a growing China aluminium industry. Or a growing Indian or Middle Eastern industry.
* Premiums. As I understand the way aluminium companies work at the board room level, premiums are not part of the equation when evaluating long-term profitability. Like Chinese semis exports, the rise in premiums is a relatively recent phenomenon, and although aluminium companies benefited from the rise in premiums, that isn’t to say that they have changed their long-held profitability models. Premiums go up and down, and historically have not been hedge-able. Besides, if one looks at the long term structural position, the future for premiums is positive. As metal production centres become more pronounced – Middle East, French Canada, India, perhaps a basket of South East Asian plants once the Vietnam smelter is built, then one can see that production of aluminium is occurring in places well away from where it is being consumed. If one believes the hype about the US auto industry switching to aluminium panels, then the USA will be net short of metal and delivery premiums to that country will rise.
I doubt Alcoa would make a structural change to its asset portfolio because of premiums.
So, why is Alcoa doing this? I presume as a publicly listed company they are obliged to reveal strategic reviews of assets, to keep shareholders informed. But this review seems to be no more than an update to an ongoing review. Alcoa has been shutting plants since regularly over the last couple of years, and such decisions do not come lightly. Certainly on face value, the motivation to move further down the cash cost curve is a valid one. But that’s not an exercise you do sporadically. Profit centres and those who manage them are looking at where they stand all the time, and figuring out how to improve all the time as well.
Could there be another reason why this announcement came out when it did? And why is it that Bob Wilt was quoted, when as I understand it, his portfolio does not include alumina? To me, it’s possible there were other reasons why this announcement came out when it did and in the way it did. Could it be that we finally see some assets moved into a new entity, similar to what we reported about a month ago? Time will tell.
In case you were wondering about the answers to the Petcoke questions I posed in a recent post (Who Am I?) Here are the answers:
Q1. Iran purchased just over 32,000t of CPC from China, with the price falling to as low as $255/t.
Q2. The sales history showing in this question belonged to ZCGG (not including their Suyadi subsidiary).
Q3. The countries and their % reduction in CPC prices were:
- Australia 22% reduction in prices 2014 compared to 2013
- Russia 28%
- UAE 3%
- India 12%
- Iran 21%
Q4. The 6 Chinese oil refineries produced the following petcoke volumes in 2014:
Sinopec Qilu Refinery = 764,000t
Sinopec Gaoqiao Refinery = 510,000t
CNPC Jinzhou Refinery = 263,000t
CNPC Fushun Refinery = 403,000t
CNOOC Huizhou Refinery = 829,000t
Independent Dongming Refinery = 660,000t
Q5. A total of 50 of China’s refineries produced at least 100,00t of anode grade petcoke in 2014.
Q6. Export CPC had fallen to only 15% of the LME price by Q4 2014. That was due to both numbers heading in different directions – the LME rising and CPC falling. It was a big difference to 12 month earlier, when the ratio was at 20%. It’s an important ratio, because as one aluminium company said to me, the revenue from LME sales is the only source of funds to pay for the CPC.
Thanks to those of you who entered.
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Liang Hui (两会) is Chinese for “two meetings”. The term describes what’s happening in Beijing this week – the annual gathering/talkfest that is supposed to be China’s national Parliament. (The word parliament comes from the Latin to talk or speak, so in that respect it’s an appropriate term.)
Each year for one week China’s Lower House, the National People’s Congress comes together to propose laws and pass resolutions. That is followed by the CPPCC – the Chinese People’s Political Consultative Conference – a sort-of Upper House or Senate.
Neither meeting packs the clout that a counterpart parliament would have in an England or USA or Australia. If anything, the lower house meeting has more significance, since it is usually at the end of this meeting that the Premier gives his annual economic address, and it’s usually the only time of the year when the Premier takes questions from the Press.
That significance has been watered down recently. For a start, Premier Li Keying does not have the same public profile as his predecessor Wen Jiabao had, with President Xi Jinping seemingly hogging the limelight. And in recent years, the press interview has been turned into a laughing stock with mock questions from supposed foreign journalists destroying any credibility.
The CPPCC meeting is more of a bucket list meeting. It’s on the bucket list of many Chinese to be selected to be a part of the meeting, and it’s a bucket list of aspirations, hopes and crazy ideas that get airplay out of this meeting.
Not that either meeting delivers any direct benefits. The Party decided well before this week what the economic and cultural and social agenda would be, and President Xi’s “Four Comprehensives” take the air out of any possible surge of interest in any particular ideal. As I said, the NPC meeting is often a kick-off for economic agendas for the short to medium term, but that’s more a matter of good timing, coming so close after the annual vacation period.
Possibly the most tangible outcome for Beijing residents is that factories are forced to close, so the air is cleaner while the meetings are on. Traffic is better controlled, so it’s easier to get around the city.
Outside Beijing, the effects are also very short-term, but in a different direction. It’s said that pork prices go up at this time of the year, since there is a huge demand in Beijing that sucks available supplies out of other markets. Perhaps this year will be different, with President Xi’s crackdown on corruption and excess. But it is hard to see so many well-connected citizens coming together without the odd banquet happening somewhere around the city – quietly and with no fanfare.