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A busy week on overseas commodities markets with the enthusiasm over the EU debt solution tempered by the lack of detail and reality that the European problems are far from solved.  Any extended slow down in the European economies will flow onto reduced demand for metals including copper, aluminium & nickel which in turn will result in lower LME prices.

In addition the Japanese Government intervention into foreign exchange markets yesterday was also blamed as the cause of the fall in LME prices. The Japanese Government entered the market to weaken its currency and boost exports.

MARKET TALK: Base Metals Down; Prices Seen Under Pressure (Dow Jones)

Base metals on the LME are lower but steadying in Europe. FastMarkets expects further declines, in volatile conditions. “We feel the economic outlook is weak and that will weigh on prices in the months ahead,” it says. Adds that changes in short-term sentiment are likely to keep prices choppy and “there are likely to be counter-trend moves, as we saw last week, but these are expected to run into overhead and dominant selling.” LME 3-month copper down 2.9% at $7,934.75/ton

The following article from the Economist points to the issues being confronted as China quickly grows its economy

Unpaid wages in China – Can’t pay, won’t pay

(The Economist) – EFFORTS to curb inflation in China are having some painful side-effects. A squeeze on bank lending has prompted some businesses short of cash to stop paying wages to blue-collar workers.

Even the much-vaunted state sector is feeling the pinch. Work has all but ground to a halt on thousands of kilometres of railway track, and many of the network’s 6m construction workers have been complaining about not being paid for weeks or sometimes months.  Migrant workers from China’s vast countryside are usually the first to suffer when employers find themselves strapped for cash. In February a revision to the criminal law made it illegal for a company to withhold salary if it had the means to pay. This has done little to protect the more than 150m rural migrants who perform most of the country’s manual labour.

A household-registration system that discriminates against migrants in employment, housing, health care and education reinforces a widespread tendency to treat them as second-class citizens.  The government touted building railways as a great way to keep the economy buoyant during global financial trouble, and boost employment. But the $600 billion stimulus launched in 2008 is all but spent. Indeed, the central government has urged state banks to cut back on lending in order to curb inflation, which in the year to July reached a three-year high of 6.5%, before dropping to 6.1% in September.  In recent weeks a credit crisis in the eastern city of Wenzhou has led to the flight of dozens of businessmen, leaving thousands of workers at private companies unpaid. State firms are little better off.

After two record years of track-laying, the problems now facing the railway-building industry are severe. The government has had a change of heart about rapidly expanding the high-speed rail network following a fatal crash of two high-speed trains in July. But bank credit drying up has also played a big part. China Daily, an English-language newspaper, says many of the industry’s migrant workers have not been paid for months. Complaints have been growing. A senior railway official quoted in the state media said workers at China Railway Engineering Corporation, one of the country biggest civil-engineering firms, had submitted more than 2,000 petitions to the authorities since July. Another newspaper, Economic Information Daily, said wage arrears and protests by rail workers had “alarmed” top leaders in Beijing. Only a third of railway construction projects were continuing normally, it said.

Similar problems have also been reported in road building and property construction, prompting a growing number of demonstrations and violent incidents, including clashes with employers and suicides. Such difficulties are likely to get worse towards the end of the year, when companies traditionally try to settle accounts with employees. Wage inflation is adding to employers’ woes. Minimum wages have risen by an average of nearly 22% in the two-thirds of China’s provinces which have adjusted them this year. Nice if you can get it, but not much use if you are not being paid at all.

 



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