• 4 minutes Trump will meet with executives in the energy industry to discuss the impact of COVID-19
  • 8 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 11 minutes Why Trump Is Right to Re-Open the Economy
  • 13 minutes Its going to be an oil bloodbath
  • 17 mins Ten days ago Trump sent New York Hydroxychloroquine. Being administered to infected. Covid deaths dropped last few days. Fewer on ventilators. Hydroxychloroquine "Cause and Effect" ?
  • 2 hours US Shale Resilience: Oil Industry Experts Say Shale Will Rise Again
  • 7 hours Mr
  • 16 hours While China was covering up Covid-19 it went on an international buying spree for ventilators and masks. From Jan 7th until the end of February China bought 2.2 Billion masks !
  • 4 hours Free market or Freeloading off the work of others?
  • 4 hours China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 5 hours Marine based energy generation
  • 18 hours What If ‘We’d Adopted A More Conventional Response To This Epidemic?’
  • 19 hours How to Create a Pandemic
  • 19 hours Apple to Bypass Internet and Beam Directly to Phones
  • 11 hours Which producers will shut in first?
  • 18 hours Real Death Toll In CCP Virus May Be 12X Official Toll
Alt Text

Global Economy Throwing Up Red Flags For Oil

Investors are feeling increasingly gloomy…

Alt Text

Trade War Weighs On Western Automakers In China

Western automakers in China are…

Stuart Burns

Stuart Burns

Stuart is a writer for MetalMiner who operate the largest metals-related media site in the US according to third party ranking sites. With a preemptive…

More Info

Premium Content

China Slowing But Growth Remains Robust

The latest set of data and various reports confirm that metals demand is strong and growing in China. Even as Beijing escalated efforts to close less energy-efficient and smaller smelting capacity across the metals sector, production has only increased. In fact, Beijing’s efforts to close less efficient, smaller plants may actually be having the effect of increasing overall production, as plant owners close old plants and re-invest in newer, more energy efficient and inevitably larger plants.

Beijing instructed local governments to cut nearly 28 million tons of steelmaking capacity and more than 2 million tons of lead, zinc, copper and aluminum, up from orders issued only a few months back in May. How much success they have remains to be seen, but with smelters averaging capacity utilization of something like 80%+ and all metals above the cash cost of production (with the exception of aluminum, which is around break-even at present), there is no incentive to close old capacity without replacing it with new.

China’s economy slowed very slightly in Q2 from Q1; but GDP growth still remained a robust 9.5 percent, supported by continued infrastructure investment, social housing construction, strong retail sales and buoyant exports. Clouds linger on the horizon, but those predicting a sharp contraction in growth have so far been perplexed. Repetitive increases in bank lending requirements, increased interest rates and a gradually strengthening currency have failed to do more than ease the pace of growth. Fixed asset investment grew at 25.6 percent in the first six months of this year, according to Reuters, while retail sales grew 16.8 percent, showing Chinese consumers are unperturbed by the sovereign debt crisis in Europe or slowing US growth figures. Still, with Europe and the US being China’s two largest export markets, some slowdown in exports must materialize in the second half of this year.

Even if Beijing is successful at closing older plants, it may well not have any impact on production as, according to Reuters data, China has over 2 million tons of excess aluminum capacity and 1 million tons of copper. Copper may slow anyway due to tight scrap supplies, but the surprise has been lead.

Following environmental problems associated with lead smelters (as reported in MetalMiner in April), many expected swift sanctions would result in wholesale smelter closings. In fact, although production fell 13.3 percent in May following Beijing’s actions, June’s production figures surged 29.2 percent higher to 446,000 tons per month — some 40 percent of global production. June output was 20.9 percent higher than a year ago and is just 0.4 percent from the record 448,000 tons set in November 2010. So much for an environmental clamp down.

Therefore the overriding picture is one of continued robust growth, despite expectations that China’s economy would rapidly slow in the face of domestic tightening and slowing export markets. The transformation from export-led to domestically driven economy still has a long way to go, but Chinese consumers clearly have sufficient confidence to continue spending. Inflation at 6.4 percent no doubt helps encourage buying now rather than waiting several months for that car or appliance when the price may be higher. Official inflation expectations stand at 4.8 percent by year-end, but with June’s headline at 6.4 percent, that may be a tall order.

An RBC analyst, in an interview with Reuters, said he expected at least one more interest rate rise this year, probably in Q3, before rates began to fall. Let’s hope he’s right; a gradual easing in the world’s second-largest and most robustly growing economy would be best for us all, while a hard landing could have a profound impact on metal prices and the global supply balance.

By. Stuart Burns

(www.agmetalminer.com) MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends, strategies, and trade policies that will impact how you source and/or trade metals and related metals services, MetalMiner provides unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.


Download The Free Oilprice App Today

Back to homepage






Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News