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rffrydr
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rffrydr
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 Posted: Thu Mar 22, 2012 6:36 am Post subject: |
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Though I'm highly suspicious of these 20-30yrs "visions," I think were seeing the realization of Citi's analysis in Dec. and the general restructuring going on this last six months:
Caterpillar reports slowing sales growth
| Quote: | Caterpillar, the world’s biggest maker of earthmoving equipment by revenues, said growth in machine sales had slowed down in the past three months in almost every region of the world.
The report came amid renewed concerns about China’s economic growth fuelled by BHP Billiton, the world’s biggest mining company by market value, which warned of “flattening” iron ore demand from the Asian country.
Caterpillar said retail machine sales by dealers rose 21 per cent in the three months to the end of February compared with the same period last year. However, that was down from a pace of 30 per cent year-on-year growth in the last quarter of 2011.
In the Asia-Pacific region Caterpillar’s sales growth slowed to 20 per cent in the three months to the end of February, down from 31 per cent in the fourth quarter. In North America sales were up 39 per cent in the three months to the end of February compared with last year, down from 51 per cent growth in the fourth quarter.
Doug Oberhelman, Caterpillar chief executive, is visiting China, from where he told CNBC television that he remained confident about the market.
“We look at China as a long-term market here,” he said. “It’s the largest construction equipment market in the world today. We want to be here in a bigger way and of course we are investing a lot of time for what would be a 20 or 30-year run.”
In January Mr Oberhelman said he expected construction markets in the US and Europe to remain “depressed”, but he added on Tuesday that he was “pretty optimistic” about growth in eastern Europe and the Middle East.
Caterpillar shares closed down 2.6 per cent at $110.76 in New York.
Earlier, Ian Ashby, president of BHP Billiton’s iron ore unit, told an industry conference in Australia that he was expecting growth in Chinese demand for iron ore to slow down over the next decade, comments that prompted a sell-off in industrial sector shares.
Global iron ore consumption rose by 6.1 per cent a year between 2000 and 2010. However, BHP is forecasting demand will grow by an average of 3.5 per cent annually until 2020. |
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rffrydr
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| Posted: Mon Mar 19, 2012 3:38 pm Post subject: |
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Ploughshares into pigears: Early days on this...and no inflation here:
China’s steel mills diversify to boost profits
| Quote: | As China’s construction boom slows, steel mills across the country are scrambling to find ways to bolster profits, and one has hit on an unusual strategy: raising pigs. Faced with a bleak outlook for its core business, Wuhan Iron & Steel, China’s fourth-largest by production, is investing Rbm30bn ($4.7bn) over the next five years in non-steel sectors including pig, fish and organic vegetable farming as well as logistics and chemicals.
Wuhan’s pig farm has quickly more than 40 per cent of global steel production and about 8 per cent of China’s gross domestic product, are also quietly expanding beyond their core business.
Most of China’s big steel producers are state-owned companies, giving them access to cheap loans. When steel making becomes unprofitable, as it is now, steel groups can get higher returns by taking loans and investing the funds in other sectors, including real estate or financing vehicles that re-lend the money.
The expansion by China’s steel groups into higher-profit areas has implications for global rivals, as it means Chinese groups will continue to flood markets with steel even when they are making it at a loss.
Exact statistics are hard to come by given limited disclosure by China’s state-owned steel groups, but “there’s no doubt that the diversification trend is growing,” says Zhang Changfu, deputy head of the China Iron and Steel Association, an industry representative body.
“The reason for diversification is weak profits [at the steel mills],” says Jiang Feitao, a steel industry specialist at the Chinese Academy of Social Sciences, a government-backed think tank.
The vast economic stimulus package that Beijing unleashed in 2009 fuelled loans to state-owned enterprises including steel mills. In the second half of last year, steel margins began to slump as China’s construction sector came off the boil, and as steel profits turned negative many groups became even more eager to look elsewhere to bolster revenues.
For Baosteel Group, the world’s third-largest steelmaker, half of its net profit of Rmb18.7bn ($3bn) last year came from non-steel businesses – up from 20 per cent the previous year. Outside of steel, where it has long dominated the market, Baosteel has extensive non-steel subsidiaries that span a wide range of industries ranging from real estate to telecommunications to manufacturing.
“Baosteel started to diversify early, especially in financial and investment areas … In these areas Baosteel has advantages over private companies because it can get market entry permits more easily, primarily because of their identity as a large state-owned enterprise,” says Mr Jiang.
The push to diversify is not limited to China’s steelmakers, however. State-owned grains trader Cofco has channelled its access to funds into building luxury hotels in Beijing. Copper producer Tongling, China’s second largest, is expanding into other base metals and timber.
Within the steel sector, the trend has accelerated in recent years as steel production has returned poor profits. Ansteel, one of the biggest steel makers in Hebei province, has moved into the coal sector while Maanshan, a large mill in central China, has invested billions of renminbi in wheel and axle manufacturing.
In January, China’s 80 biggest steel mills collectively saw losses of Rmb2.3bn on total revenue of Rmb260bn, and analysts expect that to continue. “The lower profits these days put more pressure on steel mills to diversify,” says Jiming Zou, an analyst at Moody’s. “During the last two to three months of 2011 many steelmakers in China were losing money and this will be the case for the early half of 2012 as well.”
Highlighting the situation, Baosteel – which plays a leading role in setting domestic steel prices – last week announced that its April price list would be unchanged from March. The company earlier this month said it had “no better options” than to expand its non-steel businesses.
China’s big steel mills often opt to operate at a loss rather than shut down because they are owned by local governments that rely on them for tax revenue and local employment.
“For the state-owned enterprises their major job is to keep the rice bowl full for their employees,” says Scarlett Chen, an analyst at Citi. “And steel mills are the least flexible among the heavy industries; it’s not like cement where you can shut down your plant one day and open it again the next.” |
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HenryTo
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| Posted: Thu Feb 16, 2012 2:06 pm Post subject: |
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Morningstar on Vale's 4Q results.
| Quote: | | Vale VALE released fourth-quarter and full-year results Wednesday. Sales and profits, while still stellar on an absolute basis, were lower sequentially because of weaker iron ore market conditions. Net sales fell to $14.4 billion from $16.4 billion in the third quarter and adjusted EBITDA dropped to $7.4 billion (51% margin) from $9.6 billion (59% margin). Once again, iron ore and related products accounted for the overwhelming majority of Vale's profits. Ferrous mineral operations generated adjusted EBITDA of $7.2 billion, or 97% of the consolidated number, highlighting the firm's enormous dependence on the trajectory of Chinese s teel production, which has exhibited worrying signs of shakiness in the past several months. Outside iron ore, operating results were rather weak. The base metal segment, Vale's largest outside iron ore, turned in sequentially poorer results in the fourth quarter, with lower nickel prices ($8.30 per pound on the London Metal Exchange for the quarter versus $10.01 in the third quarter) accounting for much of the pain. Looking ahead to the first quarter of 2012, we expect sequentially stronger consolidated results for Vale, as market conditions seem to have improved in the company's key commodities, with prices for iron ore, nickel, and copper all higher quarter to date. |
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rffrydr
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rffrydr
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| Posted: Mon Dec 12, 2011 8:08 am Post subject: |
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Citi calling 2012 as peak steel capacity:
| Quote: | | Longer term we remain convinced that China has reached peak capacity and that as economic growth begins to slow, steel output will revert to a more sustainable level. Our analysis of US steel production from the 1960s to date tells us that US needs only half of its peak capacity, with the country moving to a post-development phase. We envisage peak production for China by the end of the 12th FY at around 850 Mt. Thus we calculate that China will only require about 425 Mt of steel capacity for the long term |
--Alphaville
http://ftalphaville.ft.com/blog/2011/12/12/792151/chinas-mysterious-november-iron-ore-imports/
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rffrydr
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| Posted: Mon Dec 05, 2011 3:57 pm Post subject: |
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Believers... to the end?
| Quote: |
The iron ore price paid by China has fallen by almost a quarter from its September peak to $138 a tonne. But mining houses show little sign of slowing their capital expenditure. Anglo American devoted a fifth of its $2.3bn capex in the first half to iron ore development projects in Brazil and South Africa. Its project pipeline for the steelmaking ore has expanded fivefold since 2007. BHP Billiton, with capex in its year to June at more than 40 per cent of its $30bn net operating cash flow, has set aside $8.4bn for iron ore projects this year. Rio Tinto and Vale also invest hard in capacity.
This giddy spending might look out of tune with the global economic mood music. China’s economy expanded at its slowest clip in more than two years in the third quarter, albeit a still punchy 9.1 per cent. But the Organisation for Economic Co-operation and Development has inked in growth of 8.5 per cent for next year. That is 8.5 times the pace of some developed economies. Chinese equities, meanwhile, have fallen for four straight weeks, amid slowdown concerns. And China’s purchasing managers’ index slipped to 49 last month, signalling contraction. Growth was bound to slow as the country’s economic base expanded.
Investors should keep things in perspective, however. China is still in the early stages of urbanisation. It will approach the 50 per cent urbanised level only in 2014, HSBC estimates, (the US got there in about 1920), and could still be up to a decade away from when demand for iron ore peaks.
The beating that mining stocks have endured looks overdone. In sterling terms, BHP Billiton and Vale’s share prices have both fallen by 20 per cent, Rio’s and Anglo’s by a quarter. The miners can still land ore in China at between 55-65 per cent below the spot price. At such levels of profitability, there would have to be a huge drop in demand before miners need to moderate their capex.
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Interestingly (or maybe not) this is the most widely read LEX today.
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rffrydr
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rffrydr
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| Posted: Mon Sep 05, 2011 8:41 pm Post subject: |
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You probably haven't noticed good ol' BDI attacking highs. Of course it's broken...but still:
Iron ore: on a rollIf the global economy is slowing, iron ore miners have not noticed. The producers of the steelmaking commodity are partying away. The Platts index-based price for the grade of ore used as a reference by the likes of Vale and Rio Tinto for fourth-quarter contracts is $175.63 per tonne, nary a percentage point below that for the third quarter. Miners’ move from an annual to a quarterly pricing policy has helped them to lock in a 30 per cent spot price rise over the past year. The lack of price weakness reflects
the sources of demand: about
three-quarters from emerging markets, mostly China. Chinese demand for iron ore will still increase smartly even if the growth rate of gross domestic product slows to 7 per cent.
The miners – Anglo American, BHP Billiton, Rio Tinto and Vale – are bullish about the outlook. Rio, mostly an iron ore miner, predicts that the world will need an extra 100m tonnes a year for each of the next eight years – requiring a near doubling in production from 2010.
To meet the expected demand, miners are investing. And why not? Current iron ore prices are attractive. When Anglo American’s Minas-Rio project in Brazil starts to ship in two years, the cash cost of landing a tonne of ore in China could be just $43. The project pipeline may indicate that overcapacity looms: more than 1.5bn tonnes of capacity over four years, Citi notes. Rio, for example, is expanding in Western Australia by almost 50 per cent and has invested with Chinalco in Guinea. BHP and Fortescue Metals are also expanding.
But financing, permitting and other project delays should keep supply from rising too fast. Although the iron ore forward curve points to lower pricing in the next two years, the roll-out of 10m more units in China’s social housing programme alone creates annual demand for 52m tonnes of ore, Credit Suisse notes. The party still has legs.
LEX
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rffrydr
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| Posted: Fri Feb 04, 2011 6:49 am Post subject: |
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Thermal coal adding to "record price" list:
http://www.ft.com/cms/s/0/c10daf34-2f05-11e0-88ec-00144feabdc0.html?ftcamp=rss
UK's grand windfarm project alone set to demand new 12million tonnes of steel. Timing from perhaps slowing asia and increasing west can get us caught in a pinch.
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rffrydr
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| Posted: Mon Jun 21, 2010 8:39 pm Post subject: |
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Peak Steel?
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rffrydr
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| Posted: Fri May 21, 2010 11:42 am Post subject: |
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They have moved mountains for this resource...now they are moving towns:
http://www.reuters.com/article/idUSL12350858
We forget sweden is also a resource economy.
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rffrydr
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| Posted: Wed May 05, 2010 9:00 pm Post subject: |
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Baoshan noted: 1) Car production was slowing after a 50% gain in Q1, but the company still had a full order book from auto makers. 2) Property curbs would not hurt the company 3) Steel pipe exports were rising outside of the U.S. and Europe, but falling in the U.S. and Europe. 4) Profit margins were called good. Arcelormittal (MT) noted: 1) Chinese
steel demand growth will be healthy, but grow at a slower rate. 2) MT is cautiously reinitiating projects.
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rffrydr
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| Posted: Wed Apr 21, 2010 8:06 pm Post subject: |
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It doesn't quite mean the same thing....but we are higher than those highflyin' days of yesteryear ('0 .
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