FREIGHT REPORT: Rates to China gain some traction as decline comes to an end

14 February 2011

Friday's levels: Australia-China (Port Hedland/Dampier-Qingdao) Capesize: $6.65-6.7. Brazil-China (Tubarao-Qingdao) Capesize: $17.9-18.2. India-China (Paradip-Vizag-Qingdao) Supramax: $13.5. Daily chartering rates to China rose on Friday as fixtures were concluded at higher prices, brokers told MB. Freight... Read More on this…

Tags: Freight report , iron ore freight , iron ore routes to China , iron ore market , Baltic Cape Index , Freight Investor Services , FIS , Clarkson Securities , Metal Bulletin

Spot iron ore climbs to $196-198 cfr China

Feb14,2011

Spot iron ore prices gained $1 on Monday on news that the Karnataka export ban may not come off till April, said several market participants. "Based on the court's proceedings, it looks certain that from April 2011, the ban would be lifted and we will be...

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Chinese CRC, HDG export offers rise further

Feb14, 2011

Chinese mills have further raised their export offers of cold rolled coil and hot-dipped galvanized coil in response to better demand and higher domestic prices. Typical export offers are at $880-890 per tonne fob for 1mm HDG, and $850 fob for 1mm CRC, an increase of $50-60 per tonne from January 19. Bookings are mostly at $860-870 fob for HDG, with base CRC....for more info visit www.metalbulletin.com

Tags: China , CRC , HDG , export , Shanghai bureau, cold rolled coil, hot-dipped galvanized coil, domestic prices

Miners push European shares to 29-mth closing high

17:50, Monday 14 February 2011

* FTSEurofirst 300 (E3X.FGI - news) up 0.3 pct

* Commodity (COMIN.NX - news) stocks gain on China import data

* Banks (SBK.NX - news) lower ahead of sector results

LONDON, Feb 14 (Reuters) - European shares hit a 29-month closing high on Monday, with miners up after Chinese trade data highlighted strong demand for raw material and as talk of easing inflation in the country capped fears of further tightening.

The pan-European FTSEurofirst 300 index of top shares closed 0.3 percent higher at 1,177.86 points, its highest close since early September 2008.

The index, up 3 percent this month, has rebounded almost 83 percent since hitting a record low in March 2009.

Miners in the STOXX Europe 600 basic resources index rose 1.6 percent as copper prices neared record highs after data showed a fall in China's trade surplus to a nine-month low, following surprisingly strong imports, notably of copper.

"The import data reaffirms the growth story in China and helps to give confidence in mining companies that interest rate rises are not going to suppress metal demand in the medium term," said Joshua Raymond, market strategist at City Index.

Traders also said there was talk China's consumer price index (CPI (Berlin: CEJ.BE - news) ) may have risen 4.9 percent in the year to January, well below the forecast of 5.3 percent, adding that might be because of weighting changes in the CPI.

"Inflation has been the major worry and there has been a fear of monetary overkill, but until the (inflation) data is released (on Tuesday) we could see a bit of volatility," said Heino Ruland, strategist at Ruland Research in Frankfurt.

Share (LSE: SHRE.L - news) price gains were kept in check by falls in heavyweight banking stocks ahead of sector earnings results due this week. Societe Generale (Paris: FR0000130809 - news) and BNP Paribas (BNPQF.PK - news) , which report this week, both shed around 1.2 percent while Lloyds Banking Group fell 1.7 percent.

Bucking the trend, Credit Suisse (CSMA - news) gained 1.9 percent after the Swiss bank said it will issue 6 billion Swiss francs ($6.2 billion) of contingent convertible capital bonds, or CoCos, to satisfy stricter capital rules. [ID:nLDE71D039]

ARM Holdings (LSE: ARM.L - news) rose 6.6 percent as traders cited bullish notes from Goldman Sachs (NYSE: GS - news) and Morgan Stanley (DWDF.EX - news) on its outlook. Nearly all the world's mobile phones and tablets use the company's low-power technology.

France's Thales (Hamburg: CSF.HM - news) rebounded from earlier losses to rise 4.6 percent, as investors brushed aside a profit warning from the defence company. [ID:nLDE71D0BM]

Cementing expectations of a pick-up in merger and acquisition activity, British energy services provider John Wood Group surged 13.9 percent after U.S. conglomerate General Electric bought a unit of the company for $2.8 billion.

(Reporting by Joanne Frearson;Editing by David Hulmes,sourced:resuters)

Tags:FTSEurofirst, Commodities, European market, shares, Chinease trade data, strong demand, raw materials, STOXX Europe, traders, Credit Suisse, ARM Holdings, Goldman Sachs Group Inc.,Thales, John Wood group, General Electric.

Japan overtaken by China as No. 2 economy

By David Watkins

Feb14,2011

Japan (NYSE: MCO - news) lost its 42-year ranking as the world's second-biggest economy to China in 2010, with data out Monday showing a contraction in the last quarter due to weak consumer spending and a strong yen.

While Japan was expected to fall behind a surging China in the year, the data underlined the weak state of a Japanese economy burdened by deflation, soft domestic demand and pressured by the industrialised world's biggest debt.

"It is difficult for the deflation-plagued Japanese economy to achieve self-sustained growth," said Naoki Murakami, chief economist at Monex Securities.

While China's leap forward reflects a shift in economic power as the country transforms itself from poverty-hit communist state to global heavyweight, it highlights the need for shrinking Japan to energise its economy, analysts said.

Japan's post-war "economic miracle" put it at number two behind the United States for more than four decades, but stagnation after the Japanese property bubble burst in the 1990s helped put China on course to supplant its neighbour.

However, Japan remains around 10 times richer on a per-capita basis, noted top government spokesman Yukio Edano. GDP per head in Japan is around $42,000, say economists.

Predictions vary as to when China may overtake the United States as number one economy, but it should happen by 2025, according to estimates by the World Bank, Goldman Sachs (NYSE: GS - news) and others.

Japan's real gross domestic product slipped by an annualised 1.1 percent in the October-December quarter as the expiration of auto subsidies hit car sales, a new tobacco tax sapped cigarette demand and a strong yen hurt exports.

In contrast, China grew nearly 10 percent in the same period.

While Japan's first contraction in five quarters was not as severe as forecasts of a 2.4 percent slide, the data is subject to constant revision.

The economy grew 3.9 percent in 2010, its first annual growth in three years. But this was not enough to keep it ahead of surging China.

Nominal GDP of $5.474 trillion in 2010 put Japan behind China's $5.879 trillion, the data showed. China first eclipsed Japan in the second quarter.

Despite Japan crawling out of a severe year-long recession in 2009, its recovery remains fragile with deflation, high public debt, an ageing population and a strong yen all concerns for policymakers.

Pressure is on Prime Minister Naoto Kan, who has seen his approval ratings tumble as his government looks to boost the economy without deepening the debt amid a legislative impasse over a $1.1 trillion budget for next fiscal year.

Last month Standard & Poor's cut Japan's credit rating one notch to "AA-" from "AA", saying the government lacked a "coherent strategy" to ease a debt running near 200 percent of GDP, the highest of any developed nation.

Nearly a third of government spending is being swallowed up by a social security system catering to a rapidly greying society, Standard & Poor's warned, with that ratio set to rise without reforms as Japan continues to age.

Kan's centre-left government has prioritised social security reform and a tax system overhaul, but the opposition has so far refused to begin talks on the issue.

Private consumption, accounting for about 60 percent of Japan's GDP, slid by 0.7 percent quarter-on-quarter in October-December as subsidies for green car purchases expired and as cigarette sales were dented by Japan's biggest ever tobacco tax hike.

Exports slipped in the quarter as the yen surged to 15-year highs against the dollar, making Japanese goods more expensive overseas and eroding repatriated profits.

But many analysts expect the economy to rebound in the January-March quarter as the rising tide of global recovery lifts Japan, amid a recent pick-up in corporate spending and exports.

"The contraction will not last long," said Murakami. "Companies' manufacturing activities are recovering rapidly in January-March this year from their bottom in October 2010."

The government played down Japan's slide to third biggest economy and said it would benefit from having a booming neighbour.

"We welcome, as a neighbouring nation, that China's economy is advancing rapidly," said Kaoru Yosano, minister for fiscal policy. (sourced:AFP)

Tags:Japan, biggest economy, China, economist, Monex Securities, GDP, credit rating one notch to "AA-", export data, Market analyst

Australian Coking Coal Drops a Second Week; European Prices Fall

By Nicholas Larkin - Feb 14, 2011
Australian coking coal fell for a second week. Benchmark European coal derivatives declined for the first time in three days.
Hard prime coking coal from Australia sold for $318.25 a metric ton on average in the week to Feb. 11, down 2.1 percent from $325 the week before, according to Petersfield, England- based researcher IHS McCloskey.

Thermal coal from South Africa’s Richards Bay, site of the continent’s biggest export facility for the fuel, declined 5 percent to an average $114.89 a ton for the week, McCloskey said. That’s the lowest price since the week ended Dec. 17.

Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year fell 0.4 percent to $117 a ton at 11:20 a.m. in London. The data are drawn from information supplied by ICAP Plc, GFI Group Inc., Spectron Group Ltd., Tullett Prebon Plc, Credit Suisse Group AG, McCloskey, Bloomberg and Tradition Financial Services.
(By Nicholas Larkin,London sourced;bloomberg)
Tags:Australian coking coal prices, benchamark, European coal derivatives, declined, hard prime coking coal, IHS McCloskey, South African thermal coal prices, Richards Bay Coal Terminal, coal for delivery to Amsterdam,Rotterdam,Antwerp, ICAP Plc,GFI Group Inc, Spectron Group Limited, Tullett Prebon Plc, Credit Suisse Group AG,

Ann Joo Resources expects to sustain operational costs - MD

Monday, 14 Feb 2011

It is reported that Ann Joo Resources Bhd, the largest steel firm in Malaysia by market capitalization, expects to sustain operational costs in the short term despite rising coal prices.

Mr Datuk Lim Hong Thye MD of Ann Joo Resources Bhd said that however, over the long term, the group and other steel mill players would need to pass the escalating costs to end users. He added that "We managed to get two shipments of coal before prices started to increase in the wake of floods in Queensland in Australia. We managed to get two shipments of coal before the price started to increase>"

He added that "This will help us in the short term. As the coal price has been increasing for the past two weeks and gives rise to concerns among the players, we expect continued increase in the steel price, which end users will have to absorb."

Mr Lim said that the group, which has a market capitalization of MYR 1.54 billion, was currently trying to source half its coal supply locally after relying on about 75% of imports. He added that "We have bought 20,000 tonnes of coal from some small suppliers in the local market and are now looking for the right local supplier that can suit our needs."

The new blast furnace project, which is essentially the iron making plant, is expected to be completed by the end of April 2011.

He said that "This blast furnace project is part of the group's expansion plans. It will help save electricity consumption by up to 40% in our existing steel making plant and provide the flexibility in feed materials whereby we are now able to switch between iron ore, coke and scrap, depending on the price levels."

Mr Lim said that the project would also shorten the melting cycle of the existing electric arc furnace, thus boosting steel output from 800,000 to 1.1 million tonnes. He added that "The project will also improve our product quality, especially steel purity, thus enabling Ann Joo to start producing engineering grade steel products."

He said that for its financial year ended December 31st 2010, the group exported 40% of its output to the region, and is aiming to maintain that level in the current financial year. He added that "Our target market will still be the local and regional markets, apart from the Middle Eastern countries."

The issuance of MYR 500 million bonds is for the group to finance its investment in the blast furnace project, which consists of a 450 cubic meters blast furnace and 75 square meters sintering plant as well as upgrade its electric arc furnace.

The bond issuance, jointly lead managed by Affin Bank Bhd, Affin Investment Bank Bhd, Alliance Investment Bank (M) Bhd, OCBC Bank (M) Bhd and United Overseas Bank Bhd, will have a tenure of up to five years.

(sourced:thestar.com.my)

Steel prices rise as demand to increase

Monday, Feb14, 2011

Reports of an expected 10 percent increase in steel demand in the United States this year sent some steel company stocks higher Thursday, the same day AK Steel announced a price increase.

West Chester-based AK Steel (NYSE: AKS) said it is hiking current spot market base prices for all carbon flat-rolled steel products, effective immediately with new orders. The company, the largest in the Dayton region, said base prices for carbon flat-rolled products will increase by $50 per ton.

This week, Arcelor Mittal (NYSE: MT), the world's largest steelmaker, said it expected a 10 percent increase in the U.S. demand for steel this year, with demand in China and Europe climbing up to 7 percent.

Stock prices got a boost on the news, with Arcelor shares climbing 1.3 percent to $38.09, AK Steel shares increasing 1.2 percent to $15.71, United States Steel Corp. (NYSE: X) jumping 1 percent to $57.83 and Nucor Corp. (NYSE: NUE) climbing half-a-percent to $47.29 per share in trading on Wall Street Thursday.

President Barack Obama reached out to the business community this past week, and has discussed spending $50 billion to improve infrastructure in the country as one of several new initiatives. Any effort to boost construction likely would help drive further demand for steel.

Despite increased demand that has boosted revenue for some steelmakers, profit has lagged. Last month, AK Steel reported a fourth-quarter and full-year 2010 loss, and Arcelor reported a loss this past week.

For the full year, AK Steel's loss grew to $128.9 million, or $1.17 per share, from a loss of $74.6 million, or 68 cents, in 2009. Sales for 2010 were about $6 billion, up from about $4.1 billion in 2009. The company's steel shipments increased to 5.7 million tons compared to 3.9 million tons for the full year of 2009. (sourced:AFP)

US takes two China trade disputes to WTO

Monday, Feb14, 2011


WASHINGTON (AFP) – The United States said Friday it had taken trade disputes with China over US steel imports and electronic payment services to the World Trade Organization.

The US requested the Geneva-based WTO to establish two panels to settle the disputes, US Trade Representative Ron Kirk said in a statement.

The WTO action marked an escalation in the long-running list of trade disputes between the world's largest economy and its fast-growing Asian rival.

One case addresses China's imposition of antidumping duties and countervailing duties on imports of grain-oriented flat-rolled electrical steel from the United States, the statement said.

The other case challenges China's allegedly discriminatory and restrictive treatment of US suppliers of electronic payment services.

Previous US attempts to resolve the two disputes directly with China had failed, the USTR said.

"We are troubled by the procedures and decision-making employed by China in its trade remedy investigations, which have now led to serious restrictions on exports of American steel," Kirk said.

"We also remain deeply concerned about China's continuing efforts to reserve its domestic payment card market for one state-owned enterprise, to the exclusion of American credit and debit card companies."

Kirk said that in each of those disputes, the "USTR will be pressing to ensure that we obtain the trade benefits provided by the WTO agreement, in particular the American jobs and economic growth at stake as a result of China's actions."

The US accuses China of flouting WTO rules in applying additional duties on imports of the electrical steel, used by the power-generating industry in transformers, reactors, and other large electric machines.

China imposed duties on specific steel imports in April 2009, saying the American steel had been dumped -- sold at less than fair market value -- into its market and was subsidized.

The USTR said that China?s antidumping and subsidy determinations in the case appeared to violate numerous WTO requirements, including initiating the proceedings "without sufficient evidence" and failing to disclose "essential facts" underlying its conclusions.

"We have watched with growing concern China's resort to additional duties on US exports," Kirk said.

"It is important to ensure that China is held to the WTO rules and so prevent any unjustified duties from affecting hundreds of millions of dollars of US steel exports to China," he added.

The two largest US manufacturers of electrical steel are in the struggling "rust belt": AK Steel Corporation, based in Ohio, and Allegheny Ludlum, based in Pennsylvania.

In the second case, the US accused China of creating a "national champion" to monopolize the country's operation of electronic payment transactions, which it estimated was worth several hundred billion dollars in 2010.

While most of the world's top providers of electronic payment services for credit and debit cards are headquartered in the United States, the USTR said, China prohibits foreign suppliers from handling the typical payment card transaction in China.

"China's regulator of electronic payment services, the People's Bank of China, has issued a series of measures -- dating back to 2001 -- that provide a Chinese domestic entity, China UnionPay (CUP), with a monopoly over the handling of domestic currency payment card transactions in China while excluding other potential suppliers," the US trade office said.

Steel deal sets example for Japan Inc say analysts

By David Watkins (AFP)
Monday,14 Feb'2011

TOKYO — The proposed merger of two Japanese steel giants is a sign of an industry looking to reassert itself and an example to Japan Inc. that restructuring is crucial to take on competition, say analysts.

Japan's biggest steelmaker Nippon Steel and third-ranked rival Sumitomo Metal Industries are working towards a merger that would create the world's second-largest steel firm by 2012, behind Luxembourg-based ArcelorMittal.

The agreement is the first steel industry merger in a decade in the country, and analysts say the move sets an example to the rest of Japan Inc. as it grapples with a weak home economy, a strong yen and rising overseas rivals.

"There is a desperate need for mergers and acquisitions to stitch together Japan's diffuse corporate base," said Nicholas Smith, director of equity research with MFGlobal in Tokyo.

The Nippon Steel-Sumitomo Metal move is seen as indicative of the growing need for steelmakers to gain leverage as prices for coal, iron ore and other raw materials of steel touch record levels.

"Increased scale will make them stronger in negotiating with raw material suppliers -- the rapid run-up in material prices had really hammered profitability," said Smith.

"The merger will give Nippon Steel the scale to consider acquisitions of raw material suppliers, like the Chinese steelmakers have done," he said, noting Chinese crude steel production has more than quadrupled in the last 10 years.

The deal also serves as an example to the rest of corporate Japan.

Many see consolidation in Japan's corporate space as essential to taking on overseas competition, with too many companies making the same products compared with the likes of South Korea and industrial champions such as Samsung.

"Often in comparison with South Korea, Japan is said to have too many players in such markets as autos and electrical machinery," added Hideyuki Araki, economist at Resona Research Institute.

"They vie for the same pie and can be worn out in domestic competition. There is no doubt that a single company that has a strong grip on the industry can better compete in international markets," he said.

Sony partly blamed a fall in third quarter profit on falling TV prices amid heavy competition in a sector where it is up against compatriots such as Toshiba, Panasonic and Sharp.

"Japanese companies are forced to cut prices and have only slim margins amid too much competition," said Hiroshi Watanabe, economist at Daiwa Institute of Research.

The Japanese government has recognised the need for consolidation and is promoting M&As because it sees the need for more reorganisation in a wide range of domestic industries, including materials and electrical machinery.

Tokyo is looking to encourage more mergers and acquisitions by simplifying the tender offer process, speeding up anti-monopoly vetting of merger plans and providing loans for deals, Japanese media reports said this week.

The number of mergers and acquisitions by Japanese firms tumbled 13 percent on-year to 1,707 in 2010, slipping far below a recent peak of 2,775 in 2006, according to M&A advisory firm Recof Corp, the Nikkei business daily reported.

But merger efforts have met with failure in the past year, with executives on both sides unable to iron out integration problems.

Shinsei Bank and Aozora Bank last year scrapped a merger plan because they could not agree on a business strategy.

Japanese drink giants Kirin Holding Co. and Suntory Holdings Ltd. last year abandoned ambitious plans to merge and create one of the world's biggest brewers, unable to overcome differences over who would own and manage the future company.

However, on Thursday drinks maker Sapporo announced it would boost its stake in soft drink firm Pokka, the latest in a series of deals in a shrinking market where players are searching for growth.

While it is important to expand scale in the way Nippon Steel and Sumitomo Metal plan to as they seek more control over prices, a balance needs to be struck to retain enough domestic competition to drive innovation, analysts say.

In particular, Japan must not risk ceding its advantage in high-end products where it still has a commanding share, analysts say. Its steel is seen a symbol of its manufacturing expertise.

Toyota buys nearly 60 percent of its sheet steel for auto bodies from Nippon Steel and Sumitomo, analysts say, and Mazda and Honda buy around 70 percent.

On the other hand, "anybody can make construction steel, and a dizzying array of companies do," said Smith.

(sourced:AFP)