With less than a week now until the Australian Federal Election, the country sits in anticipation of what the week may bring. Metal prices remain reasonably steady with no major fluctuations seen. The Australian dollar seems comfortable, continuing to trade just below USD 0.90.
**** DJ Base Metals Close Higher, Take Strength From PMI Data ****
By Laura Clarke
London Metal Exchange metals closed mostly higher after upbeat manufacturing data from China and the euro zone pushed some investors betting on lower prices out of the market, analysts said, tipping gains to continue in the short-term.
The final reading of the HSBC China manufacturing purchasing managers’ index for August came in at 50.1, back in growth territory and a big jump from July’s 47.7 level. The official Chinese PMI released Sunday rose to 51.0 in August, its highest level in 16 months and up from 50.3 in July.
The manufacturing PMI for the euro zone as a whole showed factory activity rising at the fastest rate in more than two years.
The data lifted prices as it stoked hopes for better demand for industrial metals and their applications in many sectors. Base metals fell last week on fears about a U.S. military strike against Syria. A delay in the expected military response to Syria’s use of chemical weapons has since helped ease recent market concerns, analysts said.
“We believe the improved data prints may add support to industrial metals such as copper into October–or at least make participants think twice about shorting commodities–despite the fact that we forecast surplus markets for many commodities in 2013,” Standard Bank analyst Walter de Wet wrote in a note. Newedge director of Asian commodity trading, Richard Fu, also said gains were likely to extend in the near term as Chinese economic figures and stock markets improve.
Even so, Standard Bank cautioned that many manufacturing sectors in Asian economies are still struggling, noting PMI readings below 50 in India, Indonesia and Australia.
Furthermore, analysts cautioned that the recent reversal of so-called short positions in some base metals markets leaves a risk for this to turn quickly again.
“The market is now positioned much less bearish on many metals than two months ago,” noted Mr. de Wet. “The risk remains that the market length rises too much, and too fast, with underlying real economic conditions not maintaining [their] current momentum [and] speculative longs liquidate once again.”
**** China’s steel industry in crisis ****
From China Daily USA
China’s iron and steel industry is looking down the abyss. Plagued by over-capacity and high competition, profits have plunged. Compounding the problem is a severe rise in levels of pollution.
A pictured blast furnace cost around 60 million yuan and took over two years to build. But today it stands lifeless, unused. Worse, the company knew this would happen, but went ahead and built it.
According to statistics released by the China Iron and Steel Association, nearly half of its 86 members are losing money, and their average selling profit stands at only 0.13%. Most steel companies in Hebei produce crude steel. Over capacity and fierce competition have dragged profits down.
But the overall volume of production has soared over the past few years. Hebei Xin Gang Iron & Steel Group raised its production volume by nearly 80 percent last year. By the end of 2011, China’s total crude steel output capacity stood at 90 million tons. But the cost is also striking. In the province’s Zhou Zizhuang village, an iron and steel plant stands only thirty meters away from residential areas.
The Ministry of Environmental Protection investigated some of the iron and steel companies in the province last March. The results were staggering. There were environmental concerns at 60% of the companies. Of these, 70% had anti-dust equipment that didn’t work, and 80% were guilty of illegally dumping waste water.
Since 2005, China’s iron and steel industry has increased its capacity output by thirty million tons. However, only one fifth of the new equipment constructed since then has been inspected and approved.