Monthly Archives: January 2009
China’s National Bureau of Statistics this morning released the figures for Q4 and the full 2008 year.
The world’s press will surely report this in full, but here is the view from within China, as given by the China Daily.
China’s economy is sending out mixed signals, a raft of figures showed on Thursday, with growth decelerating for the sixth straight quarter to the lowest level in years and the specter of deflation rising，while some indicators showing signs of recovery.
The latest economic snapshot highlights the challenges facing the government, which is under mounting pressure to come up with more stimulus measures on top of a US$586 billion package, and makes it less likely that China can offer significant financial support elsewhere in the world.
The country’s gross domestic product (GDP), the most widely watched measure of its economic strength, grew 6.8 percent from a year earlier in the fourth quarter of 2008, said Ma Jiantang, Commissioner of the National Bureau of Statistics (NBS) on Thursday at a press conference in Beijing.
That marked the slowest pace since 2002, as well as a sharp turn for the worse from a growth of 9 percent in the previous three months.
For the whole of 2008, the economy expanded 9 percent to 30.067 trillion yuan, according to Ma, the first year of single-digit growth since 2003 and well below the average rate of 9.8 percent in the past 30 years.
The latest reading on all domestic finished products and services consolidated China’s position as the world’s third-largest economy after the United States and Japan. The NBS last week revised the country’s growth in 2007 to 13 percent from the original estimate of 11.9 percent, putting its GDP at $3.38 trillion against Germany’s $3.32 trillion.
Germany’s GDP increased 1 percent last year, according to earlier reports, citing Germany’s federal statistics office. Europe’s largest economy could have shrunk as much as 2 percent in the final quarter of 2008, the office estimated.
While developed countries may be looking at China’s growth with envy, the Chinese government is feeling the heat from the current economic slump. Conventional wisdom has it that China has to keep its expansion rate above 8 percent to have its workforce employed.
As a result, China may have to create 14 million new jobs in 2009, estimated Long Guoqiang of the State Council Research Center, citing the fact that around 6 million college graduates will enter the workforce this summer and millions of rural youth come of working age.
That represents a huge challenge for the government, who fears that the worst has yet to come for the country’s economy. This year will be the toughest year since 2000, Premier Wen Jiabao said Monday at a State Council meeting.
Several key indicators of the country’s economic performance in December 2008 justified Wen’s concerns. China’s industrial output grew 5.9 percent in that period, well below the average of 16.18 percent in the first half of 2008, albeit a slight rebound from 5.4 percent in the previous month.
Recently I posted an article relating to the announcement about Alcoa signing a letter of intent with Weifang Lianxing Carbon. In that post, I mentioned that Alcoa would take control of the sales or Lianxing’s coke, including coke from future expansions.
Alcoa has contacted me and advised that the correct wording is that “Alcoa will deploy Lianxing calcined coke into selected smelters across its global smelting system.”
Elsewhere the announcement says, “The proposed joint investment covers:
o Lianxing’s existing annual calcined coke production capacity of 300,000 metric tonnes
o an approved 2009 expansion of 200,000 metric tonnes
o and participation in Lianxing’s future capacity expansion potential “.
I stand corrected.
Alumina
The quoted price of imported product didn`t change last week. Domestic alumina prices rose RMB50/Tonne to RMB1850-1900/Tonne(Non Chalco); the Chalco price remained stable, 2000RMB/Tonne.
Due to smelter cutbacks continuing, over-supply in the international market is driving the price down. Australian FOB spot price went below US$200/Tonne, Chinese domestic alumina dealing price were around RMB1800/Tonne. In China more than 7 million capacity have been cut. Further cutback and price decreases are expected.
Aluminium
Due to the substantial production cuts and government purchasing and storage plans, the aluminium market turned for the better for the last two weeks. Last week Chalco aluminium prices rose RMB100/Tonne to RMB12500-12600/Tonne. The non-Chalco price was around RMB12200/Tonne last week.
To the end of November, domestic primary aluminium production is 12.18 million tonnes. If we count China`s total domestic primary aluminium capacity as 18 million tonnes then utilization is running at only 75%.
Green Coke
Low sulphur coke prices rose again last week as a result of tight supply. Daqing and Fushun Petrochemicals increased their coke price of RMB100/tonne. Other plants kept the list price unchanged. The price of high sulphur coke went up a little too, due to increased price of coal. However, the price of moderate sulphur coke dropped and the demand from downstream production has not recovered yet.
Calcined Coke
Calcined coke prices didn`t change last week. Low sulphur calcined coke remained RMB1800-1900/Tonne, moderate sulphur calcined coke was still RMB1400-1600/Tonne, high sulphur calcined coke price has remained RMB1150-1250/Tonne.
Anode
Last week anode prices remained RMB RMB2500-2800/Tonne. The quoted price in Shanxi province was RMB2700-2800/Tonne; RMB2300-2400/Tonne in Shandong area; in Henan area. High-end product price was RMB2600-2700/Tonne, low end product price was RMB2300/Tonne. The actual deal prices were much lower than quoted price in all areas.
Coal tar
Due to the downstream production cutbacks or stoppages, coal tar price started to fall last week. Two plants in Shandong province stopped operating last week. Coal tar prices in Shandong have fallen RMB50/Tonne to around RMB1400/Tonne; Jiangsu prices have fallen RMB 150/Tonne to RMB1400-1500/Tonne; Hunan price dropped RMB150-200/Tonne to RMB1500-1600/Tonne.
The Taiyuan steel auction took place last Friday. There, coal tar was sold at RMB1530/Tonne. This price is RMB100/Tonne cheaper than previous month.
Chinese spring festival is coming very soon. For this reason most coal tar suppliers are trying to sell as much as they can in order to not have a high inventory level.
Coal tar pitch
The main price of Coal tar pitch didn`t change that much last week even though coal tar price started to fall, because other downstream products of coal tar are much more difficult to sell compared with coal tar pitch. Modified pitch prices dropped RMB200/Tonne to RMB1800-2000/Tonne; moderate temperature pitch price has fallen RMB100-200/Tonne to RMB1600-1800/Tonne.
More coal tar pitch producers stopped for maintenance last week.
Paul Adkins, Managing Director of AZ China and publisher of the Black China Report and this blog, will be giving a paper at next month’s TMS conference. The paper will examine the changing situation in China’s coke and anode industry, and will give an insight into the aluminium industry in China. Data on Chinese smelters which is not generally available outside China, such as net carbon consumption, power consumption per tonne of aluminium and power costs, will be presented.
Readers are welcome to come to hear the paper and to say hello afterwards. Alternatively, a private meeting to discuss the market in more detail can also be arranged. Contact Paul at paul.adkins@az-china.com.
The January edition of the Black China report is now available.
This month, we report on the apparent bottoming of coke prices and the fall in prices for aluminium fluoride and pitch. We look at the aluminium industry in China and give a longer-term view. The drop in exports for low sulphur green coke makes for interesting comparison with the rise in high sulphur coke exports. We also look at calcined coke, anodes and cathodes.
If you are a subscriber to the Black China report, by now you should have received an email from the delivery system giving you the link that will allow you to download your personal copy.
If you aren’t yet a subscriber, contact us here at AZ China.
Alumina
The quoted price of imported product has fallen RMB50/Tonne to RMB2000-2050/Tonne. Domestic alumina price dropped RMB50/Tonne to RMB1800-1850/Tonne (Non Chalco); Chalco price fell RMB600/Tonne to 2000RMB/Tonne.
The market demand is very weak at the moment due to aluminium production cut backs. Domestic alumina deal prices have actually fallen to RMB1800/Tonne. Shanxi, Henan and Shandong provinces have decreased more than 2.2million tonnes of their annual alumina capacity; Chalco has closed 4million annual capacity. Henan as the largest alumina base in China has closed 1.8million tonnes of its annual capacity. Chalco Henan has closed 1.2million of its annual capacity.
Aluminium
To the end of 2008, Chinese aluminium production has been cut by around 4.3million tonnes (annualized), with 1.7million tonnes cut in December.
It`s estimated that the total aluminium production in 2008 is about 13.2million tonnes. According to CRU, Chinese aluminium production cut backs have already reached about 2.5million tonne per year, and there are another 2million tonnes annual capacity new projects will be delayed. But there are also some exceptions. During December Sichuan Aba aluminium smelter reopened their 110,000 tonnes production line, while Ningxia Qingtongxia aluminium smelter opened their 270,000 Tonnes new production line.
Last week Chalco aluminium price rose RMB400-500/Tonne to RMB12400-12500/Tonne.
For 2008, the actual growth rate of aluminium production was about 4.6%. This is much lower than was previously expected, but if the timing of the global financial and economic crisis had been earlier in the year, there is now doubt 2008 would have closed out with negative growth. If we take November, the last published data, and extrapolate that for a year, the 2008 figure would barely have reached 12 million tonnes.
Green coke
Low sulphur green coke prices improved slightly over the weeks leading into Christmas, primarily due to the recently-announced agreement between Chalco and CNPC. Conversely, refineries along the Yangtze river reduced their prices slightly. The latter was on the market for as low as RMB750 – 850 per tonne, while CNPC cokes were trading at RMB900 – 1060. High purity cokes were being offered at RMB1170 – 1250.
High sulphur green coke prices dropped further in the last two weeks. Prices are now down to RMB450 – 700 per tonne. This is largely due to the switch back to coal for fuel applications following coal’s price also dropping.
Calcined Coke
Last week low sulphur calcined coke prices rose RMB300/Tonne to RMB1800-1900/Tonne. Moderate sulphur calcined coke price rose RMB100/Tonne to RMB1400-1600/Tonne; high sulphur calcined coke remained unchanged. The price increase came about as a result of the increased cost of low sulphur green coke combined with a shortage of calcining capacity. Unfortunately this shortage of capacity is due to the number of calciners who have closed their doors in response to the lack of anode demand.
Anode
Except for a few anode suppliers with overseas orders, most suppliers cut back production or even stopped producing.
Last week anode prices fell RMB200/Tonne to RMB2800/Tonne. In Shandong and Henan area the main deal prices were down to RMB2400-2600/Tonne, while other domestic markets reported prices around the RMB2800 – 3000 mark.
There are reports circulating in the domestic market that Chalco has signed a deal with China National Petroleum Corporation for the supply of green coke in 2009.
There have been no official reports or announcements, and our enquiries have not yet yielded any official confirmation. But we understand the the deal covers up to 1 million tonnes of low sulphur green coke. There has been no information on prices, but presumably there will be a formula mechanism in place.
Based on the average loss in the conversion to calcined coke and anodes, 1 million tonnes of green coke translates to almost exactly Chalco’s total primary aluminium production capacity (not allowing for the recent cutbacks). Without more details about the exact nature of the deal, it is not worth speculating any further about price, offtake rules or what happens if the current poor market conditions were to change in either direction. But it is interesting to note that anode grade green coke prices from CNPC refineries have risen in the last week, while Sinopec refineries are reducing prices.
We will continue to monitor the market for more information.
Alcoa has announced it has signed a letter of intent with Weifang Lianxing Carbon in Shandong province for a joint venture in calcined coke production. Lianxing produces about 300,000T of calcined coke per year, drawing most of its green coke from local independent refineries.
The plan is apparently for Alcoa take to take control of the sales of the calcined coke from the existing plant, as well as from future expansions. Alcoa purchases mainly from USA based producers, but takes a strategic slice from China. The announcement does not name specific destinations for the coke, but presumably Australia would be high on the list.
We understand that until recently, Lianxing’s sales were mostly to the domestic market, with some export sales to India, Japan and Korea. That has changed due to the cut backs in domestic aluminium production, which have been particularly severe in Shandong province. Lianxing has recently idled part of its production, leaving just enough capacity to meet export sales.
Lianxing is not associated with either of the major green coke suppliers (Sinopec and CNPC), which is why they purchase from local refineries. That means a higher degree of variability in crude and coke properties, which is bad news for smelters. As well, the cost of calcined coke is not in the calcining, but in the green coke itself, which is outside the control of either of the JV partners. It will be interesting to see how this project unfolds.
Since this project is of strategic importance and interest to our clients/subscribers, we will continue to monitor and report developments as they occur.
The following article appeared recently in the Chinese national news agency Xinhua. Whenever a government intervenes in a market, the repercussions can be felt for years after. In this case, the metal will not actually be consumed, but will sit in warehouses waiting for the day that Government policy changes and the metal is released back into the market.
As well, 300,000T is not large enough to be important. China produces around 1m tonnes per month, so this initial volume is the equivalent of about 1 week. So, my own opinion is that this move does not make a whole lot of strategic sense. Perhaps one week is about how long the impact of this move will last.
State reserve agency stockpile to buoy aluminum sector
(Xinhua)
Updated: 2008-12-27 14:01
China’s State Reserve Bureau (SRB) will buy 300,000 tons of aluminum at 12,300 yuan (about $1,750) per ton in January 2009 to push up prices and support producers, Friday’s Shanghai Securities News reported.
The price represents a 10-percent premium on current market levels.
The SRB will buy about half of the total from Aluminum Corporation of China (Chalco), a listed arm of State-owned metals firm Chinalco. The rest will come from seven other smelters, sources told the newspaper.
Several sources said officials were still discussing further purchases, which could total 1 million tons.
The SRB maintains stockpiles of key raw materials.
This is the government’s first move in the current market crisis to prop up the ailing nonferrous metals industry. Slumping prices and weak demand, due to the global economic crisis and China’s own slowdown, have forced smelters to slow production and cut jobs.
On Wednesday, Zhang Ping, minister in charge of the National Development and Reform Commission (NDRC), delivered an economic report to the Standing Committee of the National People’s Congress, the top legislature.
Zhang said that the central government will take immediate measures to support nine industries, including the nonferrous metals sector.
Governments at all levels immediately announced policies to aid the smelting sector, including relaxed export controls, stockpiling metals, offering electricity subsidies and raising loan ceilings.
The southwestern province of Yunnan said it would buy 1 million tons of nonferrous metals from local smelters and neighboring Sichuan province said it would cut electricity prices for smelters.
Immediate impact on price,confidence
These measures have had an immediate impact on the market, with Shanghai aluminum futures up 0.5 percent to a three-week high.
Analysts said the metals industry in general is regaining confidence as a result of the purchase plan, as well as increased demand for steel by promoting infrastructure construction.
“Although the market trend won’t soon reverse, these procurement plans do help companies tide over the crisis,” said Heng Kun, an analyst at Essence Securities.
Company inventories of aluminum are estimated at about 1 million to 1.5 million tons, industry sources said.
Zhang of the NDRC said procurement and reserves are “key measures” of the State Council, or Cabinet, to boost market confidence.
According to the National Bureau of Statistics (NBS), the profits of the non-ferrous metal and processing industry fell 34.1 percent year-on-year and those of the iron and steel industry by 13.7 percent during the first 11 months of 2008.
On Thursday, the same day as the NBS announced the profit slump and the SRB announced the procurement plan, Bao Steel Group, China’s top steel maker, raised its February steel prices by 100 yuan/ton to 300 yuan/ton.
That was Baosteel’s fifth price adjustment since August but only the first raise in that period.
In November, China decided to launch a 4 trillion yuan stimulus plan to boost domestic demand over the next two years.
Combined with another 3 trillion yuan for railway construction and post-quake reconstruction, the investments are expected to increase steel demand by 200 million tons.