JAPAN AUTOMAKERS JITTERY ABOUT LOOMING GM, CHRYSLER BANKRUPTCIES
Major Japanese automakers are increasingly concerned that General Motors Corp. and Chrysler LLC are inching closer to filing for chapter 11 bankruptcy protection, a development they fear would disrupt their local parts procurement and sales networks.
The U.S. government said Wednesday that it will provide up to US$5 billion, or about 500 billion yen, to autoparts suppliers. And members of President Barack Obama's auto restructuring team were sent to Detroit to hold discussions with GM's management.
According to reports by U.S. media organizations, there is a plan for GM to file for bankruptcy protection and to spin off its most successful units as the "new" GM so that this firm can quickly get back on its feet. The other less-profitable units would likely be sharply downsized or liquidated under the supervision of a judge.
Jim Lentz, president of Toyota Motor Corp.'s (TSE:7203) U.S. sales unit, said that the impact of a GM bankruptcy filing would be huge.
According to a U.S. industry group, 58 per cent of American autoparts firms that deal with GM also provide parts to Asian companies. So if a U.S. autoparts manufacturer goes under, Toyota may not be able to procure a necessary component.
And because American dealerships often handle several brands, their collapse could weaken the sales networks of Japanese automakers.
"Our sales network would also be impacted," said Ikuo Mori, president of Fuji Heavy Industries Ltd. (TSE:7270), the maker of Subaru automobiles.
Ever since it became clear last autumn that U.S. automakers face a dire situation, Japanese automakers conducted simulations to see what would happen if the firms filed for bankruptcy protection. An official at a Japanese automaker acknowledged that the firm has entered into negotiations to acquire parts from an alternative source.
BHP Billiton Fails to Sell Coal-Bed Methane Business in China
" Another Example of the Un-Level Playing Field ?"
BHP Billiton Ltd., the world's largest mining company, failed to sell its coal-bed methane business in China after being unsuccessful in getting regulatory approval from the Asian country.
"In light of this, BHP Billiton continues to maintain its working interest in China coal-bed methane whilst progressing options to complete its exit strategy," Peter Ogden, a spokesman at BHP's Melbourne office, said in an e-mail today.
BHP had decided in 2006 to divest its coal-bed methane businesses and agreed to sell the China operations in March 2008.
Coal-seam gas is produced by drilling into coal deposits and pumping water from the well, causing methane gas to flow from the coal.
Shanghai copper futures rose 7 percent on Monday, touching their upside limit for a second consecutive trading session, supported by continuing declines in stocks and positive industrial output and other data from China.
Shanghai prices have surged 10 percent in the past two sessions while London was shut for the four-day Easter holiday, sending the premium for Chinese metal above 4,600 yuan ($673) a tonne accounting for China's 17 percent VAT, and likely to prompt a fresh wave of arbitrage dealing -- buying in London and selling in Shanghai.
"Things appear to be coming together for copper. The data from China is coalescing into some pretty decent support for the market. Given the dependence of China on supplies from the international market, the gains in Shanghai are very likely to lift London when it re-opens," a dealer in Singapore said.
Chinese banks extended 1.89 trillion yuan in local currency loans in March, bringing the first quarter total to 4.58 trillion yuan, near Beijing's full-year target of at least 5 trillion.
China's Premier Wen Jiabao said on Saturday industrial output growth rose to 8.3 percent in March from a record low of 3.8 percent in the first two months of the year.
Also supporting sentiment, China's imports of unwrought and semi-finished copper hit a record 374,957 tonnes in March, data showed on Friday.
More bullish news emerged on Monday. China is planning a new economic stimulus package targeted at boosting consumption, the China Securities Journal reported, citing a senior official of the State Information Center. China has already announced a 4 trillion yuan ($585 billion) stimulus package to combat the economic crisis.
Another Chinese Contaminated Product: " Quantity and to hell with Quality?"
Imported Chinese drywall causes corrosion in US homes}
At the height of the US housing boom, when building materials were in short supply, American construction companies used millions of pounds of Chinese-made drywall because it was abundant and cheap.
Now that decision is haunting hundreds of homeowners and apartment dwellers who are concerned that the wallboard gives off fumes that can corrode copper pipes, blacken jewellery and silverware, and possibly sicken people.
Shipping records indicate that imports of potentially tainted Chinese building materials exceeded 500 million pounds (227 million kilograms) during a four-year period of soaring home prices. According to some estimates, the drywall may have been used in more than 100,000 homes.
Alcoa May Cut Quebec Output if No Wage Agreement Is Reached
- Alcoa Inc., the largest U.S. aluminum producer, may cut output at a Quebec smelter by about a third if workers don’t agree to lower wages.
Alcoa may shut one production line, or about 136,000 metric tons of annual output, at its 75 percent-owned Becancour smelter by the end of this month if the wage concessions aren’t reached, Kevin Lowery, a company spokesman, said today in a telephone interview. Rio Tinto Group owns the remainder of the facility.
A shutdown at Becancour would follow curtailments of about 20 percent of Alcoa’s production since aluminum prices began falling last year. Alcoa started negotiating with about 3,500 unionized workers in Canada last month to lower payroll costs by 15 percent to help conserve cash.
“We told them that if we cannot reduce the costs, we’re going to have to reduce production,” Lowery said. “You’re going to see steps in the interim that will begin the preparations in order to be able to do the curtailment in a safe and efficient manner by April 30.”
The reduction would affect about 270 workers, he said.
A telephone message left at the United Steelworkers’ Quebec division wasn’t immediately returned.
Aluminum for delivery in three months has fallen 50 percent in the past year on the London Metal Exchange to $1,535 a metric ton.
Goldman Sachs Group Inc. said Monday it swung to a profit in the first-quarter compared to the prior period, and announced it has commenced a public offering of $5 billion of its common stock. Goldman Sachs said net earnings for the period ended in March were $1.8 billion, or $3.39 a share, compared to $1.5 billion, or $3.23 a share in the same period a year earlier. Analysts had been anticipating earnings of $1.64 a share, according to Thomson Reuters data. Meanwhile revenue net of interest expense rose to $9.4 billion from $8.3 billion. Goldman Sachs said in a statement that it intends to use proceeds of the $5 billion offering to help redeem "all of the TARP capital."
Rio de Janeiro - Brazilian iron ore miner Vale has registered a rise in Chinese demand for ore and other metals, despite the global economic crisis, the company's financial officer, Fabio Barbosa, said Monday.
Barbosa said shrinking stocks in the world's largest importer of iron ore had helped demand but added there was still considerable uncertainty over demand globally.
"It seems that there is a sign of recovery, of improvement, and in the case of China, it's more pronounced," said Barbosa during a seminar. "It is not visible in the global scene but in the case of China, it certainly is."
Barbosa's comments come as the world's largest iron ore miners -- including Vale, BHP Billiton and Rio Tinto -- and major Asian and European steel makers continue annual negotiations on the term price for ore.
Given the fall in world demand for steel, the main end purpose for iron ore, many in the industry expect annual term contract prices to fall for the first time since 2002.
Earlier Monday, China's vice chairman at the Commerce Ministry's trade department, Liang Shuhe, said his country's iron ore imports surged in February and March due to "fake demand" brought about by stockpiling.
Liang said imports would likely fall over the rest of 2009.
Barbosa added that it was important for the mining sector that the North American economy return to growth, as it represented a quarter of global demand for iron ore and metals.
"We are in a hiatus period for growth, an adjustment period, but the trend for improvement in the long term is clear," Barbosa said.}
f you want to know why the administration’s approach to the credit crisis has been lacking, and why the Obama bailouts looks surprisingly like the Bush bailouts, consider this: No Volcker.
“The one-time central banker has been put in charge of a presidential advisory board that hasn’t yet had a formal meeting. It has been nearly a month since he has seen Mr. Obama. Mr. Volcker hasn’t been a main player in key decisions handling the global financial crisis.
Treasury Secretary Timothy Geithner unveiled the administration’s plans for handling troubled financial institutions and the housing crisis without seeking input from Mr. Volcker, associates say. “Paul was surprised” at the failure to consult him, particularly on issues of financial rescue after his dominant role in resolving financial crises in the 1980s, says one person who has spoken to Mr. Volcker recently.”
To review: You have access to the greatest Fed chief in history, and you are choosing not to use him during the greatest crisis since the Great Depression.
I wonder what White House aide is too insecure to let the big dog loose . ...
==============
Volcker Assumes Smaller-Than-Expected Role With Obama
As an early supporter of Barack Obama, Paul Volcker gave the young presidential candidate gravitas and advice. He frequently sat by Mr. Obama's side at key economic events, and started carrying a cellphone for the first time, just to be able to brainstorm with the candidate from the campaign trail.
In the Obama White House, the role of the 81-year-old former chairman of the Federal Reserve has been more limited.
The one-time central banker has been put in charge of a presidential advisory board that hasn't yet had a formal meeting. It has been nearly a month since he has seen Mr. Obama. Mr. Volcker hasn't been a main player in key decisions handling the global financial crisis.
View Full Image Paul Volcker Getty Images
Former Federal Reserve Chairman Paul Volcker says he has no complaints about his new role. Paul Volcker Paul Volcker
Treasury Secretary Timothy Geithner unveiled the administration's plans for handling troubled financial institutions and the housing crisis without seeking input from Mr. Volcker, associates say. "Paul was surprised" at the failure to consult him, particularly on issues of financial rescue after his dominant role in resolving financial crises in the 1980s, says one person who has spoken to Mr. Volcker recently.
On the eve of one announcement, a Wall Street executive ran into Mr. Volcker at a cocktail party and asked what he expected from the Treasury secretary's imminent announcement. "I have no idea what Tim's going to say," he responded, according to somebody there.
A Treasury spokeswoman said Mr. Volcker was "briefed" on all plans, including the latest one addressing banks' toxic assets. A White House spokeswoman said that Mr. Volcker "is a valued economic adviser to the president and the administration." She said that his "advice on issues including regulatory reform and financial stability are invaluable to the administration."
Mr. Volcker, who recently had a pacemaker implanted in what he told friends was a "trivial procedure," said in a brief telephone interview Wednesday that he has no complaints about his role. "How they use me is up to them," Mr. Volcker said. "I'm conflicted about wanting to go fishing and being responsive....I might get busier than I want to be." He declined to comment about specific areas where he was or wasn't consulted.
When Mr. Obama announced the blue-ribbon advisory group on Feb. 6, he praised Mr. Volcker as "one of the world's foremost economic policy experts." With big names like General Electric Co. Chief Executive Jeffrey Immelt, the group, Mr. Obama said, would provide "voices to come from beyond the Washington echo chamber...." At a ceremony in the White House's East Room, the president added that the group would "meet regularly" with him.
So far, the full group hasn't met. "The whole organizational side of this has been a nightmare," Mr. Volcker says. A White House spokeswoman says it will hold its first quarterly meeting in mid-May.
In the meantime, Mr. Volcker and his members have divided themselves into subgroups such as financial regulation, employment growth and housing, and are holding conference calls, two members say.
When Mr. Volcker was in town earlier this week, he met with Mr. Geithner, Lawrence Summers, the chief White House economic adviser, and Christina Romer, the chairwoman of the Council of Economic Advisers, to discuss financial regulation.
A key ally for Mr. Volcker inside the White House is Austan Goolsbee, the chief economist of his panel, and a member of the council. The pair grew close during the campaign when Mr. Goolsbee, Mr. Obama's chief economic adviser, worked to bring in Mr. Volcker after he indicated his support for the underdog candidate.
Mr. Goolsbee says he talks with Mr. Volcker three or four times a week and helps get his views to the president and to senior administration officials. The task force, and particularly Mr. Volcker's input, "is meant to serve a role akin to an economic version of the president's BlackBerry," Mr. Goolsbee says. Messrs. Volcker and Goolsbee also send periodic memos to the president on the issues.
Mr. Volcker's advice hasn't always been heeded. The former Fed chairman urged the administration to "slow down" its push for regulatory changes. "Paul thought it was important to take enough time to fill holes in the regulatory framework and not get caught up in the current atmosphere," says former Securities and Exchange Commission Chairman William Donaldson, who's on the Volcker panel.
When a former Fed official, attorney John Walker, recently met Mr. Volcker, Mr. Walker told him the administration "isn't getting the best use of you." Mr. Volcker shrugged it off, saying he's comfortable with his role. Mr. Walker says Mr. Volcker added: "I'm 81 years old."
Asarco Must Wait for Court Decision on Planned Sale to Sterlite
April 14 (Bloomberg) -- Asarco LLC, the bankrupt Grupo Mexico SAB unit, must wait for a ruling on its proposed sale to Sterlite Industries (India) Ltd., India’s biggest copper producer, for $1.1 billion in cash and a $600 million note.
U.S. Bankruptcy Judge Richard Schmidt declined to rule on Asarco’s request to sign a sale contract with Sterlite at a hearing today in Corpus Christi, Texas. Lawyers for the buyer said they would try to get an extension of tomorrow’s deadline to allow the judge more time to reach a decision.
“It would really help me to have another week,” Schmidt said at the hearing.
Grupo Mexico, which put Asarco into bankruptcy in 2005 and then lost control of the Tucson, Arizona-based copper miner to a court-appointed board, said yesterday that creditors with asbestos-related claims support its own $1.3 billion plan to regain control of Asarco.
Sterlite withdrew an earlier bid of $2.6 billion last year as copper prices fell. Under the proposed sale, Asarco could accept a higher offer until Schmidt gives final approval at a hearing on the company’s reorganization plan.
The case is re Asarco LLC, 05-21207, U.S. Bankruptcy Court, Southern District of Texas (Corpus Christi).
Rio Tinto says global iron-ore output dips 15% in Q1 Miner secures $2.5 billion in asset sales
HONG KONG (MarketWatch) -- Rio Tinto said Wednesday output of iron ore in the January to March quarter fell from a year earlier, as poor weather disrupted operations in Australia, but noted output gains for copper and coal.
The miner said it had made good progress on asset divestment, securing $2.5 billion in asset sales.
Chief executive Tom Albanese said in a statement he was dedicated to finalizing a stake sale to Chinese investors. "We remain committed to delivering the Chinalco transaction and our focus is on successfully navigating the regulatory processes before putting it to a shareholder vote," Albanese said in the statement posted on Rio's Website.
Rio's operations in the Pilbara region of Western Australia suffered weather-disruption that led to a reduction in output of 15% from a year earlier. Global iron ore output was also down 15% in the quarter, it said. Rio noted iron ore output against the previous quarter was little changed. Rio forecast global iron ore demand this year of 200 million tones, helped by a recovery in demand from Chinese steelmakers "First quarter production was in line with reduced market demand and iron ore was further affected by heavy rains. We have acted swiftly where necessary to reduce costs and conserve cash," Albanese said. The miner said output of :
bauxite fell 19%,
alumina was down 2% and
aluminum fell 6%.
Mined copper production rose 9% and that of
refined copper production rose 33%.
Output of coking coal was up 32%,
thermal coal fell 2% and
uranium output was basically steady at 3.4 million pounds.
COAL & Allied Industries' share of saleable coal production was down nine per cent in the first quarter of 2009 due to wet weather. The miner’s share of saleable coal production for the quarter was 4.2 million tonnes, nine per cent lower than the first quarter of 2008.
“During the quarter, production was adversely impacted by wet weather conditions,” a company statement said.
The company, majority owned by Rio Tinto, said its share of saleable production during the three months to March 31 was 4.24 million tonnes, compared to 4.664mt in the first quarter of 2008.
The first quarter 2009 saleable production was down 11 per cent on the 4,745mt in the fourth quarter of 2008, mostly due to wet weather at its operations, the miner said in a statement today.
“Bengalla’s coal production was 20 per cent lower than the preceding quarter, due to the weather impact as well as coal seam sequencing,” the company said.
“Mount Thorley Warkworth’s production was 27 per cent down on the December quarter, largely impacted by coal seam presentation, truck availability and wet weather.
“Strong production and coal sales in the fourth quarter of 2008 resulted in all operations starting 2009 with low levels of in-pit coal inventories.”
Retail sales declined in March compared to expectations of an increase, according to a Commerce Department report. Most of the categories showed month-over-month declines, including motor vehicles and parts despite unit auto sales rising for the month. Economists attributed the slump to the abatement of incentives to push sales. However, the consolation is that private consumption hadn’t been a significant drag on first quarter GDP due to a solid showing in the first two months of the year. That said, Commerezbank believes that the ongoing deterioration of the labor market, which impacts wage growth, and the need for private households to pay down debt will restrain consumption for the time being.
Meanwhile, the Labor Department said producer prices fell 1.2% month-over-month in March and core producer prices remained flat. The decline was mainly due to a drop in energy and food prices.
Another report released by the Commerce Department showed that business inventories at the end of February were down 1.3% compared to the previous month, a slightly bigger drop compared to expectations for a 1.2% decline. Meanwhile, business sales edged up 0.2%. Annually, business inventories at the end of February declined 3.5%, while business sales for the month were down 13% compared to the previous year. The total business inventories to sales ratio was 1.43 in February compared to 1.29 in the year-ago period.
According to Commerzbank, the U.S. economy will continue to shrink until late 2009, which would make the current recession one of the longest. The bank expects GDP to shrink by 4% in 2009 and the unemployment rate to rise to 11% by the year-end.
The Labor Department’s consumer price inflation report showed that consumer prices fell 0.1% in March following a 0.4% increase in February. Core consumer prices, excluding food and energy, rose 0.2%, the same pace as in the previous month. Economists had expected a 0.1% increase in both consumer prices and core consumer prices.
Transportation prices had the largest downward influence on the headline number, as it declined 1.1% in March, reversing the 1.9% gain in the previous month. Apparel prices eased 0.2% following a 1.3% advance in February. Prices of other goods and services also rose at a faster pace of 2.7% in March.
The New York Fed’s survey showed that manufacturing conditions in New York deteriorated in April, but at a much slower rate than in recent months. The general business conditions index climbed 24 points to –14.7 in April. Economists expected a modest improvement in the index to -35.
The new orders index jumped 41 points to a reading just below zero, while the shipment index rose 25 points. The employment indexes remained negative despite an improvement. The future indexes improved significantly, with the future general business conditions, new orders and shipment indexes rising sharply to levels not seen since September of last year.
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for February at 9 AM ET.
The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate that industrial production declined 0.9% in March, while capacity utilization is expected to come in at 69.6%.
The industrial production report for February showed a 1.4% drop in industrial output. Although auto production rose 10.2% following 4 months of declines, a drop in the output in computer manufacturing, utilities and products, excluding defense, offset the gain. Capacity utilization continued to decrease, with the current rate of utilization being 10 percentage points below the average of 1972-2008.
The National Association of Homebuilders' is scheduled to release the results of their survey on homebuilders' confidence at 1 PM ET.
The housing market index remained unchanged at 9 in March, according to a report released by the National Homebuilders Association. The index was about 1 point above the record low of 8 in December and January. The index gauging current sales conditions held steady at 7 and the index gauging sales expectations in the next six months also remained at a record low of 15. However, the index gauging traffic of prospective buyers declined 2 points to 9.
The Federal Reserve is due to release its Beige Book, which is a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET. The report is normally released about two weeks before the monetary policy meeting is held.
Pace of decline has slowed in some regions, Fed banks report
The economy continued to worsen across the United States in March and early April, amid scattered signs that the pace of the decline was lessening in some regions, the Federal Reserve reported Wednesday in its Beige Book account of the economy. "Overall economic activity contracted further or remained weak," the Fed said, based on reports from thousands of business sources across the country. "However, five of the 12 districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level." The report, written by the economics staff at the Dallas Fed, generally agrees with comments by top policymakers that there are some signs that the economy may be getting worse at a slower pace. The economy declined at a 6.3% annual pace in the fourth quarter, and economists are forecasting a decline of 5% in the first quarter and about 2% in the current quarter. Almost all sectors were contracting or slowing in almost all regions, the Beige Books said. Manufacturing weakened, retail spending was "sluggish," the housing markets were "weak" and banks reported rising delinquencies and deteriorating loan quality. Five of the 12 regional Fed banks reported some lessening in the pace of decline: New York reported the economy was contracting at a "more subdued pace." Richmond reported some businesses were beginning to provide "scattered positive reports." Chicago said the pace of decline had slowed. Cleveland reported a leveling off in the decline in new orders. Dallas said its regional economy remained weak amid signs of stabilizing at low levels.
Since the historic 1987 stock market crash, the Federal Reserve has responded to every recession in the US economy by slashing interest rates, and funneling massive amounts of money into the hands of Wall Street’s aristocracy, - the ruling class that dominates the two political parties in Washington. The Fed’s cash injections have usually found their way into assets, including commodities, stocks, and mortgage-backed securities, and often fueling speculative binges into stratospheric heights.
But on March 12th, US President Barack Obama warned a group of chief executive officers of the Business Roundtable, that the Fed “can’t continue with its policies of endless cycles of bubble and bust, ...........
"And the Quest Goes On" : Chinese buy majority stake in Ontario's Liberty Mines
Jilin Ji En Nickel Industry Co., China's fifth largest producer of the metal, will pay $30-million (US$24-million) for a 51% stake in Mississauga, Ontario-based Liberty Mines Inc. to secure raw resources.
In addition, about C$20 million owed to Ji En by Liberty will be paid in cash or nickel concentrate as part of an agreement approved by both companies' boards, Panshi, Jilin province-based Ji En said in a filing to the Shanghai stock exchange today.
? The Commodities Rally? : " China to stockpile 1 million tonnes of aluminum, 400,000 tonnes of copper and 400,000 tonnes of lead and zinc combined"
China's reserve-building plan targets total purchases of 1 million tonnes of aluminum, 400,000 tonnes of copper and 400,000 tonnes of lead and zinc together over three years, a report on a website controlled by China Nonferrous Metals Industry Association said on Friday.
Jia Mingxing, president of state-research group, Antaike, discussed the three-year plan in a CCTV show late on Thursday, the report said. (www.cnmn.com.cn)
Kang Yi, chairman of the association, said on the same program that China's non-ferrous stimulus plan aimed to phase out old capacity of 800,000 tonnes of aluminum, 300,000 tonnes of copper, 400,000 tonnes of zinc and 600,000 tonnes of lead over three years, the same report said. (Reporting by Polly Yam; Editing by Ken Wills)
UBS has upgraded its price estimates on LME copper, nickel and zinc, on growing confidence of a demand recovery in China, and downgraded its aluminium price estimates due to an over-supplied market.
UBS ( UBS - news - people ) raised its 2009 price estimates on copper to 165 U.S. cents per lb versus its previous estimate of 130 U.S. cents per lb.
It raised its nickel 2009 forecast to 476 U.S. cents per lb from 400 cents per lb, while upgrading zinc forecasts for 2009 to 55 U.S. cents per lb from 45 cents.
'Given fiscal and monetary stimuli in China, there is growing confidence that a recovery is under way in the region,' UBS said in the note.
'Furthermore, industry costs have remained quite high, supporting prices at relatively high levels. Largely on the back of these factors, we have raised the price deck for copper, nickel and zinc, for 2009 and 2010.'
UBS cut its aluminium forecasts for this year to 66 U.S. cents per lb from 75 cents.
'The inventory overhang and recent subsidies offered to Chinese aluminum smelters indicates that deflationary pressure is likely to remain in place for this metal over the balance of the year,' the note said of aluminium.
UBS held its 2009 estimates for gold and silver at $1,000 an ounce and $14.8 an ounce, respectively, while raising its 2009 estimates on platinum to $1,100 an ounce from $1,050 an ounce.
Democratic Republic of Congo has rejected contract revisions proposed by six of the biggest mining firms there and will extend a much delayed review by six months, the deputy mines minister said on Thursday.
The review, which aims to boost state revenues from agreements mostly signed during the chaos of a 1998-2003 war and a corruption-plagued post-war transitional government, was initially due to last six months.
Of 61 contracts evaluated under the review launched in 2007, six are unresolved. They include deals with AngloGold Ashanti, Banro, First Quantum, Gold Fields, Freeport-MacMoRan and Mwana Africa.
"The outcomes of negotiations to date are far from the terms of reference, therefore they have been rejected by the government," Victor Kasongo told Reuters.
Banro said on Thursday it had received official confirmation from the government in February that its contracts were compliant with Congolese law and not heard anything to the contrary since then.
Negotiations between the six companies, representatives from state mining companies and the mines ministry broke down late last year. The government accused the companies of walking out of talks, a claim the miners denied, and earlier this year extended talks an additional 45 days.
"These companies have over 60 percent of our proven reserves. We can't just leave it like this ... They can come to discuss how to improve their proposals, or, in six months time, we'll shut down everything," Kasongo said.
Cash-strapped Congo's mining-dependent economy has suffered greatly due to a worldwide slump in demand for mineral exports -- its primary foreign currency earner.
The majority of companies operating in its copper and cobalt sector, once a promising treasure trove of largely unexploited concessions, have either suspended projects or closed down.
In December, Congo lowered its 2009 copper export forecast to 365,000 tonnes from a pre-crash projection of 410,000 tonnes. Expectations for cobalt were slashed by more than half.
Local authorities in Katanga province, the country's mining heartland, estimate that around 300,000 miners have lost their jobs due to the crisis.
Projected direct foreign investment to Congo for 2009 has been cut by two-thirds. Economic growth this year is expected to drop to 2.7 percent from a 2008 average of 8 percent.
GME4 Seeks To Sell Stake In Brazil Iron Ore Project to Chinese
Dow Jones has reported that the Brazilian mining exploration company, GME4, will start a global roadshow in the next few days to sell the majority stake in an 800 million tonne iron ore mine in northeast Brazil.
The iron ore deposits, valued at USD 2.4 billion and located in the south of Piaui State, will be presented to potential buyers in Shanghai.
Mr Joao Carlos Cavalcanti one of GME4's partners said that "Our aim is to sell around 80% of the mine."
Mr Cavalcanti estimated production costs at USD 21 to USD 23 per tonne and annual output at 20 million tonnes a year of pellet feed.
Mr Cavalcanti said that he has already signed an energy supply contract for the mine from the Sobradinha dam, the largest in northeast Brazil.
GME4 already has had one successful iron ore deposit sale to date. Three years ago, it sold Indian investor in neighboring Bahia State for USD 360 million.
Piaui and Bahia States aren't traditional iron ore mining regions. The Piaui deposits are within 20 kilometres of the route of the Transnordestina railroad, which is expected to be operational in 2011. The railroad will connect two relatively new deepwater ports: Suape near Recife and Pecem, near Fortaleza. }}
}Orion Minerals gets final tranche of Fengli funds
Orion Minerals Group, the NZAX-listed company with an iron ore mining concession in Chile, gained the final payment from its Chinese investor Fengli Group, enabling it to begin development.
Fengli, a steel processing and distribution company, made the US$8 million payment, bringing capital raised from the group to US$12.5 million. The company is issuing 100 million OMG shares at 12.5 U.S. cents apiece with Fengli as its cornerstone investor and business partner. SEARCH NZ JOBS AVIS: First day Free in Autumn Search New Zealand Business Click Here
Production and shipments will begin later than the third-quarter start date initially envisaged, because of the “unprecedented and unexpected reductions in the level and pricing of the global iron ore trade since this year commenced,” OMG said in a statement today.
OMG was created from a shell company set up as a low-cost way to list on the New Zealand stock exchange. It acquired Chile’s Minera Varry S.A for about US$13.5 million of cash and the issue of shares and options and changed its name to Orion.
The company is undertaking pre-operating mine development at its mining concession and finalizing arrangements for the shipment of ore through ports in Chile, it said today.
Fengli has close relationships with the major Chinese steel mills and extensive global trading and shipping businesses, according to OMG’s statement.
OMG shares trade infrequently and were last at 24 cents on March 17.
For sure Grupo Mexico not happy as ""Asarco Allowed to Sell Itself for $1.7 Billion""
April 22 (Bloomberg) -- Asarco LLC, the bankrupt Grupo Mexico SAB unit, won court permission to be bought by Sterlite Industries (India) Ltd., India’s biggest copper producer, for $1.1 billion in cash and a $600 million note.
U.S. Bankruptcy Judge Richard Schmidt approved Asarco’s request to sign a sale contract with Sterlite that allows rivals to top the offer. The decision sets up a competition between two plans to reorganize the company.
The proposed Sterlite purchase “is fair and reasonable and provides a benefit to the debtors, their estates and to all creditors,” Schmidt wrote in his order, issued today in U.S. Bankruptcy Court in Corpus Christi, Texas.
Grupo Mexico, which put Asarco into bankruptcy in 2005, has proposed a $1.3 billion plan that would allow it to regain control of the Tucson, Arizona-based copper miner. Mexico City- based Grupo Mexico lost control of Asarco to a court-approved board a few months after the bankruptcy case began.
The proposed sale to Sterlite won’t become final unless Schmidt approves the related reorganization plan supported by Asarco’s board and its main creditors.
The decision came after Schmidt on April 14 declined to rule on the deal, saying he needed additional time. Sterlite previously said the deal must be approved by Schmidt by April 15.
Withdrawn Bid
Sterlite withdrew an earlier bid of $2.6 billion last year, saying it was too high amid a drop in copper prices. Under the proposed sale, Asarco may accept a higher offer until Schmidt gives final approval at a hearing on the company’s reorganization plan.
Asarco faces $7.9 billion in claims. Government agencies seeking payment for environmental cleanup and individuals who say they were damaged by asbestos-based products from an Asarco unit together are seeking $5.2 billion. Asbestos fibers, which were used to make insulation, can lodge deep in the lungs and cause respiratory ailments.
Schmidt ordered Sterlite, Asarco and a unit of Grupo Mexico into mediation last year. Grupo Mexico said at the time it was willing to pay $2.7 billion to ensure that Asarco’s creditors would be paid in full.
Copper prices then plunged, dropping 54 percent last year in New York. Asarco’s mines hold about 5 million tons of reserves. The 110-year-old company produced 235,000 tons of refined copper in 2007.
Asbestos Creditors
Environmental and asbestos creditors supported Sterlite’s original plan because it included a settlement that would have paid them at least $2.1 billion.
Grupo Mexico says some asbestos creditors support its plan to regain control of Asarco. Details of Grupo Mexico’s plan, made through one of its U.S. subsidiaries, haven’t been filed with the court.
Juan Rebolledo, a Grupo Mexico spokesman, didn’t immediately respond to an e-mail seeking comment after regular business hours.
Fortescue Suspended From Baltic Exchange in London
Fortescue Metals Group Ltd., Australia’s third-biggest iron-ore exporter, was suspended from being a member of the Baltic Exchange, the world’s largest shipping bourse.
It’s the first suspension since 2005, exchange spokesman Bill Lines said by phone today, declining to comment further. The bourse’s 560 members include ArcelorMittal, the world’s largest steelmaker, and Glencore International AG, the biggest commodities trader.
East Perth, Australia-based Fortescue has yet to receive official notification from the exchange, company spokesman Cameron Morse said by phone. Fortescue is scheduled to start arbitration over shipping contracts in June, Morse said.
The action will have “little operational effect” on Fortescue, Morse said. The primary role of the Baltic Exchange is to provide price data that commodity producers and oil companies use as benchmarks for their shipping costs. Its data is also used to settle freight-derivatives contracts.
Greek shipping billionaire John Angelicoussis sued Fortescue for $130 million in December, according to a Dec. 11 filing in a U.S. federal court in New York. Ship-rental rates plunged by a record 92 percent last year.
Fortescue Suspended From Baltic Exchange in London
Fortescue Metals Group Ltd., Australia’s third-biggest iron-ore exporter, was suspended from being a member of the Baltic Exchange, the world’s largest shipping bourse.
It’s the first suspension since 2005, exchange spokesman Bill Lines said by phone today, declining to comment further. The bourse’s 560 members include ArcelorMittal, the world’s largest steelmaker, and Glencore International AG, the biggest commodities trader.
East Perth, Australia-based Fortescue has yet to receive official notification from the exchange, company spokesman Cameron Morse said by phone. Fortescue is scheduled to start arbitration over shipping contracts in June, Morse said.
The action will have “little operational effect” on Fortescue, Morse said. The primary role of the Baltic Exchange is to provide price data that commodity producers and oil companies use as benchmarks for their shipping costs. Its data is also used to settle freight-derivatives contracts.
Greek shipping billionaire John Angelicoussis sued Fortescue for $130 million in December, according to a Dec. 11 filing in a U.S. federal court in New York. Ship-rental rates plunged by a record 92 percent last year.
Mozambique: Riversdale Almost Doubles Estimated Coal Reserves
Maputo — The Australian mining company Riversdale has announced a rise of 90 per cent in the estimated coal reserves at its concession at Benga in the western Mozambican province of Tete.
Recent drilling activities in Benga have pushed the estimate for coal reserves up to four billion tonnes, according to a Thursday press release from Riversdale.
It adds that the combined total for "measured and indicated resources" amounts to slightly more than a billion tonnes, of which 893.4 million tonnes is less than 400 metres below the surface.
But what is crucial for the start of mining is the "initial coal reserve", now estimated at 273.3 million tonnes. Production at Benga is now expected to start at five million tonnes of coal a year, rising to 10 million and eventually 20 million tonnes. Much of the hard coking coal will be exported, and there are plans to use thermal coal in a power station at Benga.
The exports, however, all depend on transport. The rehabilitation of the Sena rail line, from the Tete coal belt to the port of Beira, should be complete later this year. But the railway cannot handle such large quantities of coal, particularly as other coal mining companies active in Tete (such as Coal India and CVRD of Brazil) will also be demanding its services.
Other transport possibilities have been mooted, including sending the coal on barges down the Zambezi, and even building a new railway across southern Malawi to take the coal to the northern Mozambican port of Nacala.
The Benga coal project is 65 per cent owned by Riversdale and 35 per cent by Tata Steel of India.
A mining contract and concession between the Mozambican government and Riversdale is expected to follow this new evaluation of reserves. Riversdale says it has provided the government with all the information it requested in support of the contract application.
Riversdale has extended the deadline to complete a feasibility study so that it can incorporate fiscal arrangements from the mining contract. Riversdale say it will be able to include significant cost reductions, resulting from the current recession. There has been a reduction in the costs of some of the major components involved with starting production in large mining projects, including the cost of key contractors and capital equipment.
Riversdale expects that the total amount to be invested during development of the Benga Coal Project will be over 800 million US dollars
A senior executive of the local operation of Rio Tinto Alcan told 200 Mandela Bay business people this week that the company‘s smelter at Coega would go ahead. Lesley Cabangani – who is based in the city as health, safety and environment manager – was addressing a PE Regional Chamber of Commerce and Industry (Percci) function.
It was also attended by the mining giant‘s commercial director in South Africa, Vernon Harvey, who operates from Johannesburg.
Cabangani said the company “intends putting up its 24th aluminium smelter in the Coega industrial development zone”, referring to the fact that it already operated 23 such facilities in various parts of the world.
Harvey said Rio Tinto Alcan, in its various forms as a company, had a 25-year association with South Africa and it “is the plan to bring the smelter to Coega”.
Billed primarily as a “networking” function, the executives used the packed event at a beachfront restaurant to update the Percci members on the latest planning on the smelter, the budget for which is $2,7-billion (about R23,7-billion at current exchange rates).
On the sidelines of the function later, Cabangani said that because of changes to the project‘s timeframe, a process of extending agreements with contractors was under way.
Regular talks were also going on with Eskom – the inability of which to guarantee the huge amount of electricity for the smelter caused one among several delays – and the Coega Development Corporation (CDC).
The latest planning for the aluminium smelter – an environmental impact assessment for which was approved in 2002 – was for construction to begin possibly within two years, Cabangani said.
He recalled that all the engineering work on the smelter had been completed in 2007 and the plan had been to start building last August.
“But in February last year, we had to revise the plan” because of the electricity situation “and the new timing is (to start) in 2011”. In the meantime, Cabangani told the function, the company was continuing with its policy of involvement with local businesses and with community projects.
These included environmental improvement programmes, school bursaries, further education bursaries, HIV-Aids treatment and prevention programmes, and micro, small and medium enterprise development. “We are looking forward to continuing to work with all in the region,” Cabangani said.
He added that all environmental issues had been addressed and approved.
The processes to be used would be the most high-tech and modern available and would present no risk.
The technology to be used would be similar to that already operating at company smelters in Richards Bay and in Mozambique and these were having no environmental impact, said Cabangani.
The programme is expected to create about 6000 new jobs in the construction phase and 1000 jobs once the smelter starts operating.
It has been dogged by delays and uncertainties, first when the original planned developer, French company Pechiney, was taken over by Canadian-based Alcan which, in turn, merged with Rio Tinto.
The electricity supply problem was the latest, while the subsequent worldwide economic meltdown, particularly its effect on commodities and demand for raw materials, had added to the uncertainty
Sesa to Raise Iron-Ore Output to Meet Chinese Demand
April 21 (Bloomberg) -- Sesa Goa Ltd., India’s biggest non- state iron-ore exporter, said it will raise production by as much as 30 percent this year as demand for the steelmaking raw material in China exceeds local supply.
Domestic iron-ore production in China is likely to fall because producers are finding it unprofitable to mine at current prices, Sesa Goa Managing Director P.K. Mukherjee said today in a telephone interview from Goa, where the company is based. The company will spend as much as 3 billion rupees ($60 million) to expand capacity, he said.
China boosted overseas iron-ore purchases to a record in March for a second straight month as smaller steelmakers sought cheaper supplies. Iron ore imports climbed 46 percent to 52.1 million metric tons last month from a year ago, China’s customs office said on April 10 on its Web site.
“Sesa Goa is profitable at current prices as its production cost is $35 a ton,” according to Niraj Shah, an analyst with Centrum Broking Pvt. in Mumbai. “While Sesa will continue to remain profitable, the days of achieving supernormal profits are over because prices are now at realistic levels.”
Sesa Goa, which fell 24 percent in the past year, gained as much as 6.8 percent today in Mumbai and traded at 119.45 rupees, up 2.7 percent, at 11:36 a.m. in Mumbai. The key Sensitive Index declined 0.6 percent.
Spot prices of iron-ore imports at Chinese ports have fallen 66 percent in the past year to $63.50 a ton on April 3 as demand from steelmakers dropped, according to research company Metal Bulletin. Iron-ore prices have halved to $61 a ton from $125 in January last year, Mukherjee said.
Sesa Goa sold 15.1 million tons of iron ore in the year ended March 31, 22 percent more than a year earlier, according to an earnings statement yesterday from the company.
Fourth-quarter profit fell 33 percent to 5.48 billion rupees from 8.12 billion rupees a year earlier, the company said yesterday. Sales fell 15 percent to 14.3 billion rupees.
OK, from where I sit in the cheap seats, my analysis has this last bullish drive up from 665 to 875 as a Zig Zag, where the wave c traced out the wedge formation which was an Ending Diagonal. From here we can expect price to fall to new lows.
Globalreverb : Agree with your wedge / ending diagonal . However they were in a rising channel and the ending diagonal terminated but another "geometric form" was created : triangular or expanding "wedge" - we shall see.
I think that there will be one more rise to Upper Boundary of the Channel and then there could be a big correction.
Perhaps "they" didn't want to disturb Easter vacationers - let them take swine flu bak to USA, Canada and New Zealand - SO FAR reported. Eventually the real truth about numbers of deaths including health care personnel . Until then here are a few emails that have been sent to the BBC:
"I'm a specialist doctor in respiratory diseases and intensive care at the Mexican National Institute of Health. There is a severe emergency over the swine flu here. More and more patients are being admitted to the intensive care unit. Despite the heroic efforts of all staff (doctors, nurses, specialists, etc) patients continue to inevitably die. The truth is that anti-viral treatments and vaccines are not expected to have any effect, even at high doses. It is a great fear among the staff. The infection risk is very high among the doctors and health staff.
There is a sense of chaos in the other hospitals and we do not know what to do. Staff are starting to leave and many are opting to retire or apply for holidays. The truth is that mortality is even higher than what is being reported by the authorities, at least in the hospital where I work it. It is killing three to four patients daily, and it has been going on for more than three weeks. It is a shame and there is great fear here. Increasingly younger patients aged 20 to 30 years are dying before our helpless eyes and there is great sadness among health professionals here. Antonio Chavez, Mexico City
I am a doctor and I work in the State of Mexico. I don't work in the shock team; I am in the echocardiography team, but I do get some news from my colleagues in the hospital. There have been some cases of young people dying from respiratory infections, but this happened before the alert and they were not reported because the necessary tests weren't done. We doctors knew this was happening a week before the alert was issued and were told to get vaccinated. I went to buy some anti-virals for my husband, who is also a doctor, because he had contact with a young patient who presented influenza symptoms and died. I don't think pharmacies stock enough anti-virals.
I understand the government doesn't want to generate panic, but my personal opinion is that they issued the alert too late. Still now, the population is not getting the information they need. We have been out in the street and some people are not wearing face masks and are not taking any preventive measures.
Guadalupe, Mexico City
Friends working in hospitals say that the situation is really bad, they are talking about 19 people dead in Oaxaca, including a doctor and a nurse Alvaro Ricardez, Oaxaca City
I think there is a real lack of information and sadly, preventative action. In the capital of my state, Oaxaca, there is a hospital closed because of a death related to the porcine influenza. In the papers they recognise only two people dead for that cause. Many friends working in hospitals or related fields say that the situation is really bad, they are talking about 19 people dead in Oaxaca, including a doctor and a nurse. They say they got shots but they were told not to talk about the real situation. Our authorities say nothing. Life goes on as usual here."
Makers of Tamiflu and Relenza should see greatly increased sales in these two antiviral products.
VANCOUVER — Two Canadian copper producers have announced copper hedging programs in efforts to secure cash flow.
Taseko Mines, operator of the Gibraltar copper-molybdenum mine at McLeese Lake, BC, has hedged 50% of planned copper production to the end of 2009. Approximately 30 million lb of copper has been hedged with a price range of US$1.88 - US$2.36 per pound.
Under the program, Taseko will receive the prevailing market copper price while it is within the specified price range. Should the market price be outside the price range, Taseko will receive a minimum of US$1.88 and a maximum of US$2.36 for the hedged copper. The remaining estimated 50% of production is unhedged.
Likewise, Lundin Mining has struck multiple deals for 40,000 tonnes of copper spread evenly over the next 12 months. The weighted average floor price is US$1.87 per pound copper and the weighted average ceiling is US$2.39. Lundin operates base metal mines in Sweden and Spain, and has an approximate 25% interest in the Tenke Fungurume project in the Democratic Republic of the Congo
Iron ore trades on Singapore Exchange for the first time
Hong Kong – (April 27, 2009) – For the first time in the history of the commodity, iron ore has been traded on an exchange.
Since the first Over‐the‐Counter (OTC) iron ore Swap was launched by Deutsche Bank and Credit Suisse in May 2008, an estimated 9,000,000 metric tonnes of swaps have been traded. However, all of these trades have been concluded on a bilateral basis with contracting parties being open to counter‐party risk.
Singapore Stock Exchange (SGX) announced on April 17, 2009, that it would launch the world’s first cleared OTC Iron Ore Swap contract via the SGX AsiaClear® platform on April 27, 2009. The contract trades in lot sizes of 500 metric tonnes and is cash settled against the monthly average of The Steel Index 62% Iron Ore Fines CFR China reference price, in the expiring month. Exchange clearing by AsiaClear® mitigates the counter‐party risk in OTC trading of financial iron ore swaps. Furthermore, the move will help the development of liquidity in the instrument which will be critical in the market becoming firmly established.
London Dry Bulk Ltd. (LDB), the world’s only specialist broker of iron ore in the physical and financial markets, brokered the first trade on opening of trading at 8am today [April 27, 2009]. LDB CEO Clive Murray said, “We are very proud to be part of these developments in the iron ore industry and to have brokered the first iron ore trade on SGX AsiaClear.” LDB has been a key participant in the development of the market in iron ore swaps from the beginning, and leverages its expertise in developing a prompt market in coal to make iron ore as successful. The company actively brokers iron in both the physical and financial markets. “To be successful, particularly in the current economic environment, a company’s ability to maintain profit margins remains key. With the establishment of iron ore swaps trading and the already active trade in financial steel contracts we are promoting the concept of hedging a company’s spread. This is similar to what happens daily in the energy sector where companies trade the dark‐ or spark‐spread. In the steel industry we would like to see the development of the ‘Red Hot Spread’,” adds Clive Murray.
"Copper advanced Wednesday for the first session in three. Inventories at London Metal Exchange fell to 420,275 tons Tuesday, down 5,000 tons from a day ago, according to data from the exchange.
Copper was rising "as a rebound in global equity markets coupled with another hefty drop in copper inventories has steadied the complex across the board," said Edward Meir, an analyst at MF Global."
The above, looked at from a 6 month time frame, gives a completely different picture as to the state of stockpile plus the price. ======= since the beginning of March the LME copper stockpile has been reduced from 550,000 tons to 420,275 tons. While today's decrease of 5,000 tons was described as a "hefty drop" it should be noted that at 420,275 tons the stockpile is still UP some 205,000 tons since the 30th of October.
In the same time period the price of spot copper has gone from $1.90 - $1.30 - $2.19 and back to $2.00 today. It should be noted that for the period December - February the price was, for most of the time, below $1.50 .
So even though the stockpile has been reduced some 130,000 tons the price is still only about $0.10 while the stockpile has had a net increase of some 205,000 tons. The price is still a Long ways from the days of copper at $4.00 / pound .
WASHINGTON (MarketWatch) - The Obama administration announced Thursday that Chrysler LLC will finally be tossed into bankruptcy to ease the crushing debt burden on the car maker, a move taken after creditors rejected a sweetened cash offer. "We don't believe this will harm the company or negatively affect it," a senior administration official said in a conference call. "Everything should go on normally and at the end of it ... this company will emerge stronger, more viable and more competitive." He said a partnership deal with Fiat (IT:F: news , chart , profile ) was also clinched, which will give the Italian automaker a 20% stake in Chrysler to start with and will rise to 35% as certain milestones are reached. The official said he expects the bankruptcy, which will be filed in New York, to last between 30 and 60 days and that the process won't affect Chrysler's day-to-day business of selling cars and covering warranties. David Silver, auto industry analyst at WStreet.com, said that the process, contrary to government assurances, will likely end up being messy. "There are a lot of people that have laid claims to Chrysler and it seems that there is just not enough to go around," he said. "I do not think that Chrysler will ever regain the aura it once had and I doubt it will be a major player on the world stage in the years to come." The Treasury Department, in a last ditch effort to avoid the Chapter 11 bankruptcy filing, increased its most recent offer to Chrysler's lenders Wednesday by $250 million to a total of $2.25 billion, with the banks and hedge funds in turn agreeing to forgive $6.9 billion in debt. See related story. Hedge funds turned down offer, but the Obama administration downplayed the move. "While the administration was willing to give the holdout creditors a final opportunity to do the right thing, the agreement of all other key stakeholders ensured that no hedge fund could have a veto over Chrysler's future success," said an administration official. "Their failure to act in either their own economic interest or the national interest does not diminish the accomplishments" by Chrysler, its planned alliance partner Fiat and other stakeholders in the company, the official said. "Nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward," the official said. Chrysler was initially told by the government to reach a deal with Fiat by the deadline or face bankruptcy. But now it has become more apparent that ridding the company of debt and shuttering dealerships through bankruptcy made Chrysler a more attractive partner and facilitated the merger. Obama said Wednesday night that he was "very hopeful" that Chrysler and the government would reach a deal to ensure the company's viability. Marking his first 100 days in office in a prime-time news conference, Obama said he didn't want the government to run either auto companies or banks. "I've got two wars I've got to run already. I've got more than enough to do. So the sooner we can get out of that business, the better off we're going to be," he said. Chrysler had been keeping its assembly lines running on $4 billion of emergency U.S. government loans doled out at the start of 2009. That was Chrysler's second federal bailout -- the first took place back in 1980 when the government provided the company with $1.5 billion after Lee Iacocca was handed the top job.
Daimler AG on Monday announced plans to unload what was left of its failed marriage with Chrysler, shedding its remaining 19.9% stake and forgiving repayment of the loans previously extended to the company. Cerberus bought an 80% stake in Chrysler back in 2007, leaving the rest with Daimler. Chrysler's bankruptcy comes amid the historic automotive industry slump and could serve as a preview of what's on tap for rival General Motors Corp. , which faces a deadline at the end of next month to prove its viability. Auto sales have plunged to levels not seen in almost three decades, sending the Detroit trio deep into red ink. Chrysler, specifically, lost $8 billion last year according to their restructuring plan as sales were cut by a third to $1.45 million cars and trucks.
Codelco earnings dwindle to US$97 million in 1st quarter
hile's state-run Codelco, the world's largest copper producer, saw its pre-tax profits shrink to US$97mn in the first quarter from US$2.02bn year-on-year due to lower metal prices and ongoing declining grades at its mines.
The company's copper output rose by 24,000t to 371,000t in the latest quarter, or 390,000t including Codelco's 49% in Chile's El Abra mine.
Revenues shrank to US$1.34bn in the recent period from US$2.87bn in the year-earlier one. Costs fell to US$1.63/lb from US$1.92/lb. But cash costs after byproduct credits totaled US$0.95/lb in the recent quarter, compared to US$0.41/lb.
As a state company that gives all its earnings to Chile's treasury, pre-tax profit is the bottom-line figure the company emphasizes. However, Codelco reports a net profit figure using the same parameters as private companies.
Using this method, Codelco reported a Q1 profit of US$80mn, compared to US$1.60bn year-on-year.
MINE OUTPUT
The company's largest branch, Codelco Norte, produced 176,000t in Q1, down from 184,000t year-on-year.
The second largest division, El Teniente, was responsible for 88,000t in the recent period, down from 93,000t.
The Andina division produced 55,000t in Q1 versus 56,000t year-on-year. The Salvador mine churned out 15,000t, up from 14,000t. Codelco's stake in El Abra amounted to 19,000t in both Q1 of this year and last.
Finally the Gaby mine, commissioned last year, produced 39,000t in the recent period.
No large scale iron ore mine suspension in China - Mr Zou Jian
According to Mr Zou Jian chairman of Metallurgical Mines' Association of China, though prices for both home and imported iron ore fall, domestic iron ore output kept increasing in the Q1 indicating there is no large scale production suspension of domestic medium and small iron ore mines.
Statistics from MMAC reveal China produced 166.7162 million tonnes of crude iron ore in the Q1 an increase of 4.21 million tonnes or 2.6%YoY compared with the same period of last year. Monthly output kept rising citing 47.2362 million tonnes in January 58.1902 million tonnes in February and 61.7223 million tonnes in March.
Mr Zou said output growth has slowed down. China's iron ore imports are expected to drop by 100 million tons this year, while on the other hand, domestic iron ore projects, with estimated capacity of over 100 million tons are still in process. He said that "Iron ore enterprises that come into operation five or six years ago report low production cost of about CNY 200 per tonne to CNY 300 per tonne. They can earn profits even when iron ore price stands at some CNY 500 per tonne. There enterprises account for approximately one third of the medium and small iron ore mines. He added that that new mines operated in recent two years suffer high costs and are on the brink of production suspension. Although some mines have halted productions, fresh mines start operation, still pushing total output upward.
Mr Zou noted that some local governments impose fixed taxes on iron ore enterprises at the moment. Enterprises can afford the taxed in H1 of 2008 when iron ore price stayed high, but some medium and small ones have to negotiate with local governments to lower taxed, or they may be pressed to halt operation. Governments will make some compromise for financial revenue concern so that some mines can restart productions. He said that China release support policies to domestic iron ore mines and slow down the construction of fresh mines waiting for a clear trend.
NEW YORK (CNNMoney.com) -- The U.S. government isn't due to reveal the results of its stress tests on banks until Thursday, but leaked results are painting a troubling picture.
Regulators have determined that Bank of America (BAC, Fortune 500) may need roughly $34 billion in capital to weather a more painful economic environment, several reports published late Tuesday said, citing sources familiar with the results.
A Bank of America spokesman declined comment on the matter.
The Charlotte, N.C.-based lender has received extensive assistance from the government to date, taking in $45 billion in taxpayer funds. Nearly half of that amount was injected into the firm earlier this year after the company realized the enormity of the losses it faced as a result of its purchase of Merrill Lynch last fall.
The new reports, however, suggested that Bank of America would not necessarily need to raise $34 billion in new capital. Rather, the bank may bolster its position simply by converting the government's preferred share stake into common stock.
Such a move, however, would severely dilute the bank's existing common shareholders. To offset that, Bank of America is believed to be considering the sale of certain assets, including its stake in China Construction Bank. 0:00 /1:18Cleaning up the banks
The government's view that Bank of America needs to shore up its capital position is likely to add pressure on Bank of America's chief executive Ken Lewis, who was ousted as chairman of the struggling bank last week.
Regulators are due to officially release the results of their so-called stress tests on 19 of the largest U.S. banks after the closing bell on Thursday.
In the run-up to the official release, speculation has been brewing that anywhere between 10 and 14 of the banks could be forced to boost their capital.
Attention has been focused particularly on Bank of America and Citigroup (C, Fortune 500) which is believed to face an approximately $10 billion gap, according to reports.
Regional banks -- including Birmingham, Ala.-based Regions Financial (RF, Fortune 500), Cincinnati's Fifth Third Bank (FITB, Fortune 500) and SunTrust Financial (STI, Fortune 500) of Atlanta -- are also widely believed to need more funding
Baysider : Saw your comments on ODB thread. I have no problem been cursed by you re my "cheerful" attitude . What you considered cheerful I just considered normal . I thought that my posts were realistic and I wanted to get a message across that "all was not well" and there was a "long ways to go". And " it ain't over till the fat lady sings ...".
I am glad that the posts were of some value to you.
Circumstances have arisen that have somewhat curtailed my postings. All things willing I will keep posting on my threads and leave ODB for the "long winded".
I'll conclude with a bright cheery note : "the fat lady may sing around 500 ".
Rudy : Nice to see that the Chicoms [ Chinese Companies - alias government] are quite UPSET about a couple of public companies forming a joint venture that results in a setback to China's quest to gain control or a major piece of the action of natural resources and natural resource companies.
P_erhaps Australia should tell them : "Keep your nose out of our domestic affairs".
Adios,
Paddy
From Reuters
China says BHP-Rio iron ore JV monopolistic: report
SHANGHAI (Reuters) - China's leading steel industry group strongly opposes a joint venture deal consolidating iron ore assets of BHP Billiton (BHP.AX)(BLT.L) and Rio Tinto (RIO.AX)(RIO.L) in Australia, China's influential Caijing Magazine reported.
It also said China Iron and Steel Association (CISA) General Secretary Shan Shanghua denied media reports that Chinese steel makers would accept a drop of only 33 percent in iron ore term prices as agreed to with miners by Asian steelmakers Nippon Steel (5401.T), JFE Holdings Inc (5411.T) and POSCO (005490.KS).
CISA, the de facto negotiator leading Chinese steel mills in iron ore price talks this year, has insisted on price cuts of at least 40 percent.
"After BHP Billiton and Rio Tinto establish the joint venture, large iron mines in Australia will belong to one company and this will lead to a monopoly operation," Shan was quoted as saying in the Caijing report, published late on Friday.
"China needs to import almost half of the iron ore it consumes, while the volumes from BHP Billiton and Rio Tinto account for more than half of imports."
The World Steel Association has also said it opposed the BHP-Rio Tinto deal, which would leave just two suppliers -- the Australians' joint venture and Brazil's Vale (VALE5.SA) -- controlling 70 percent of global iron ore trade.
The global association also called on competition authorities to seriously examine the deal, announced as Rio Tinto scrapped its proposed $19.5 billion tie-up with the Aluminum Corp of China (Chinalco).
NO 33-PERCENT SOLUTION
Shan was quoted as saying that China's demands in the 2009/10 iron ore negotiations were very clear, calling for an accurate reflection of changes in supply and demand conditions this year in the international iron ore market, where the global economic slump has softened demand.
"We absolutely will not accept a 33 percent price cut," he said.
"Iron ore term prices would be higher than last year under the 33 percent price cut agreed to by Nippon Steel and the Australians, as the Australian dollar depreciated 35 percent," he said.
Industry website Steel Business Briefing reported on Friday, citing unnamed sources, that CISA and Baosteel (600019.SS), China's largest steelmaker, had agreed internally to accept terms similar to those already struck with other Asian mills.
Shan added that Chinese steelmakers in CISA had no right to negotiate iron ore prices individually with overseas miners and that any separate agreements reached with miners would be invalid, as Baosteel was the only steel mill authorized by CISA to participate in talks on behalf of Chinese firms.
He also denied a media report that a state-owned steel major was in talks with BHP Billiton on an indexed pricing system.
Sources familiar with the situation said last week that BHP was offering index-linked iron ore pricing to Chinese steel mills.
I'll bet that Obie is right annoyed to say the least. Watch out if he gets the Supreme Court loaded with his flunkies. In the meantime maybe some of the GM bondholders will take similar court actions.
Guess the US Services are not going to use the Hummer anymore as Obie sold it to the Chicoms.
From MarketWatch:
WASHINGTON (MarketWatch) -- The U.S. Supreme Court blocked the sale of Chrysler's assets after a group of Indiana pension funds appealed the sale. The funds argued that the sale of Chrysler to Italian automaker Fiat is unconstitutional. A court spokesman said that the sale is stayed "pending further order of the court.
The key for the drop to your potential 500 will be at what point the market turns. Do you agree with Rudy's likely 4300, 4,500 for the ASX 200? I'll be keeping a close eye on it not to get caught out again and I have no doubt you will be too. How loud is your alarm bell??
And on another "war front" China continues ts quest for "domination" of natural resources:
Chinese firm buys into Consolidated Thompson
Consolidated Thompson Iron Mines Ltd. (CLM-T3.700.205.71%) said Tuesday that it has signed a deal with Chinese company Wuhan Iron and Steel (Group) Corp. for a $240-million (U.S.) investment that will help fund the development of the company's Bloom Lake project.
Under the deal, Wuhan Iron and Steel will buy 38.7 million common shares in Consolidated Thompson Iron Mines at a price of $2.72 (Canadian) per share for a total of $105.2-million.
The Chinese firm will hold a 19.99 per cent stake in the company after the deal and be entitled to nominate a director and maintain its proportionate interest in Consolidated Thompson under certain circumstances.
Wuhan Iron and Steel will spend the balance of its investment on a 25 per cent stake in a limited partnership that will hold the Bloom Lake project, located in Quebec.
Consolidated Thompson will be the manager of the project and, once Bloom Lake is in commercial production, will receive a management fee on a per tonne basis.
The Chinese firm will be entitled to a minimum annual distribution from the partnership equal to not less than the profits from the annual sale of 1.6 million tonnes of iron ore concentrate.
Under an offtake agreement, Wuhan Iron and Steel will be obligated to buy, at fair market value, a percentage of iron ore production during each year of the life of the Bloom Lake project that is equivalent to its percentage interest in the limited partnership.
Consolidated Thompson president and chief executive officer Richard Quesnel said the deal is expected to provide the company with the financial flexibility to reach the commissioning stage of the project while remaining debt free.
“This partnership with one of China's largest and most technologically advanced integrated steel groups also strengthens Consolidated Thompson's potential to expand from the current mine plan of eight million tonnes per year to 16 million tonnes of annual production of iron ore,” Mr. Quesnel said in a statement.
As of March 31, Consolidated Thompson had spent about $219.8-million (Canadian) on Bloom Lake.
Demand for iron ore, used in the production of steel, has slumped because of the worldwide recession, which has affected demand for everything from new buildings and vehicles to appliances.
Steel production and prices, which reached all-time highs last year, have dropped to their lowest levels in a quarter century in recent months. This has forced the closure of major steel operations in Canada.
Watch Out BHP - RIO - Chinese working on a "play" where you will be "blindsided" ::
China to Speed Australian Investment After Rio Rebuff
China is set to accelerate investment in iron ore projects in Australia, the world’s biggest exporter, after the collapse of its deal to buy stakes in mines owned by Rio Tinto Group.
“The opportunities for Chinese groups to come in and facilitate development of some of the smaller players are definitely going to start picking up pace,” said Eric Lilford, head of Australia mining at Deloitte Corporate Finance. Australia has A$26 billion ($21 billion) of proposed new iron ore mines, according to government estimates.
Rio last week scrapped a planned $19.5 billion deal with Aluminum Corp. of China, known as Chinalco, in favor of a share sale and iron ore venture with BHP Billiton Ltd., dashing Chinese expectations of locking in more supplies. Aurox Resources Ltd., Grange Resources Ltd. and Atlas Iron Ltd. may attract increased investment from China, according to Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co.
“We won’t see this trend stopping or being deterred by Chinalco’s rejection because these companies are trying to get sustained supplies with stable prices,” said Zhou Xizeng, a Beijing-based analyst at Citic Securities Co. “Chinese companies have been successful in forming alliances with Australian junior miners.”
Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, surged 15 percent to A$3.59 at the 4:10 p.m. Sydney time close on the Australian stock exchange, the highest in eight months. Aurox jumped 20 percent to 27.5 cents and Murchison Metals Ltd. rose 11 percent to a nine-month high.
Billionaire Forrest
Fortescue, controlled by billionaire Andrew Forrest, may be a target of Chinese investment with Baoshan Iron & Steel Co. and China Minmetals Group among companies seeking acquisitions of overseas mining projects as the nation opens its purse strings, Citigroup Inc. said last month. China may spend more than $500 billion on foreign resource investments over the next eight years, according to Deloitte Touche Tohmatsu.
“It will refocus interest on the junior iron ore sector in the Pilbara” region of Western Australia, said Mike Young, managing director of Perth-based iron-ore explorer BC Iron Ltd. “The Chinese want to have a more personal level of involvement with their suppliers. The private mills in China will start looking at other players.”
Rio, BHP and Brazil’s Vale SA, the world’s biggest exporter, control about 75 percent of the global iron ore exports. Steelmakers in China, Europe and Japan have said the planned venture between Rio and BHP, the world’s second- and third- largest producers, would limit competition.
Monopoly Hints
The China Iron & Steel Association has rejected an agreement reached by Rio Tinto and Japanese and Korean mills for a 33 percent cut in annual contract prices, still at the second- highest level on record. The BHP-Rio venture “hints heavily of monopoly,” the Chinese group said in a statement yesterday.
China, the biggest buyer of iron ore, needs supplies to boost economic growth. The nation’s 4 trillion yuan ($585 billion) stimulus package has already helped manufacturing expand, sparked record vehicle sales and boosted monthly imports of iron ore, copper and aluminum to records in April.
A total of 33 “less advanced” iron ore projects, with an estimated cost of A$26 billion, are planned, the Australian Bureau of Resources and Agricultural Economics said in a report last month. Many are lower-grade, magnetite ore projects including Atlas Iron’s A$3 billion Ridley project and Grange’s $1.6 billion Southdown project.
Magnetite Ore
Magnetite needs greater processing than higher-grade hematite ore, which accounts for about 96 percent of Australia’s output, according to Gindalbie Metals Ltd.
“The Chinese love magnetite so I’m sure they are going to push into the magnetite space big time,” Peter Arden, a resource analyst at Ord Minnett, said in an interview in Melbourne. “You are going to see at this stage multiple stakes being taken all over the place, to put their foot on it and keep others out.”
Aquila Resources Ltd. is seeking to develop a A$4.1 billion direct shipping iron ore mine, port and rail project in Western Australia. The company may seek partners to develop infrastructure for the project, Russell Tipper, general manager of iron ore for Aquila, said today by phone from Perth.
“That’s really where the funding could be of greatest assistance,” Tipper said. “We are discussing with parties the prospect of being able to share the development of infrastructure.”
Outside Australia
To be sure, China may also invest in projects outside of Australia, said Alan Heap, managing director of global commodities for Citigroup in Sydney. “There is high grade ore in West Africa, there is high grade ore in India,” he said.
Rio’s decision “aroused great repercussions among China’s enterprises and people,” Chinese foreign ministry’s spokesman Qin Gang said in an e-mailed statement yesterday. “However, we still believe China’s enterprises will continue” to carry out international investments and cooperation, he said.
The trend toward overseas investment “won’t be changed just because of one or two cases of failure,” said Li Kejie, a spokesman at Sinosteel Corp., China’s second-largest iron-ore trader, which last year acquired Australian producer Midwest Corp. for A$1.4 billion in cash.
Hunan Valin Iron & Steel Group, China’s ninth-largest steelmaker, this year bought a 17.3 percent stake in Fortescue for A$1.3 billion. Fortescue may need as much as $4 billion to proceed with plans to almost double output, Valin said last month.
* The drop in China was the largest ever year-on-year drop of exports
* Imports to China dropped 25.2 percent last month
* China has the second largest export economy in the world
* Fall the seventh straight month of decline in China's export business
Hopes for a China-led recovery to the world economy got a reality check Thursday, as government data showed the country's exports in May fell a record 26.4 percent compared to last year. China's $586 billion stimulus package includes a focus on increasing infrastructure.
China's $586 billion stimulus package includes a focus on increasing infrastructure.
With recent disappointing trade figures from South Korea, Taiwan and Germany, the numbers out of China suggests no light yet in sight at the end of the recessionary tunnel.
"We see evidence globally that productivity has slowed again," says Frederic Neumann, senior economist at HSBC in Hong Kong. "You look month-on-month, it's all very disappointing readings ... it was not the big bounce that people are looking for."
The drop in China was the largest ever year-on-year drop of exports, larger than April's 22.6 percent drop and worse than analysts predicted. Imports to China dropped 25.2 percent last month, compared to 23 percent in April.
China has the second largest export economy in the world, next to Germany. Industrial orders in Germany fell a record 28.7 percent year-on-year in April.
The fall was the seventh straight month of decline in China's once bustling export business, which has fueled the nation's nearly 10 percent annual growth for the past decade and ascent to the world's third largest economy. Don't Miss
* Global unemployment: green shoots and pink slips * China: From Tiananmen through today
But that came to an end after the September fall of Lehman Brothers. The spiraling impact of the financial crisis dialed down the spigot of orders from trading partners in the United States and Europe.
The nation's first quarter gross domestic product grew 6.1 percent, the government announced Thursday -- down from 10.6 percent a year ago.
Meanwhile, urban fixed asset investment in China was up nearly 33 percent the first five months of this year compared to last year. China's $586 billion stimulus package includes a focus on increasing infrastructure as a way to spur domestic demand to offset export losses.
"These two data surprises out of China -- exports worse than expected, fixed asset investment better than expected -- neatly summarizes the whole picture," Neumann said. "It shows that pump priming by the government is working and highlights the importance of continued pump priming.
"It highlights that trade risks remain. If there is no support in the private sector (for trade) that raises concerns that pump priming by the government won't be sustainable," Neumann said.
Meanwhile, in "less worse" economic news, revised data from Japan showed its year-on-year GDP decline from January to March was 14.2 percent rather than the 15.2 percent the government previously reported. Still, the decline was a record drop.
The Nikkei 225 Stock Average in Tokyo briefly broke 10,000 this morning for the first time in eight months. The Tokyo bourse hit a 26-year record low in March
Japanese* pair arrested in Italy with US bonds worth $134 billion
* other reports described as Chinese
Italian prosecutors were trying to establish yesterday whether US bonds with a face value of $134 billion seized from two alleged smugglers were real or counterfeit.
The bonds were found when the two men — said to be Japanese but as yet not identified — were arrested while attempting to cross into Switzerland from Italy by train at the frontier town of Chiasso this month. Prosecutors in Como said that the two men had hidden the bonds in the false bottom of a suitcase.
Police said that Chiasso was a notorious crossing point for currency and bond smugglers but the sums involved this time were “colossal”. The amount of $134 billion would place the two travellers as the fourth most important investors in US debt, well ahead of Britain ($128.2 billion) and just behind Russia ($138.4 billion).
The bonds were described as being 249 US Federal Reserve bonds each worth $500 million, plus ten Kennedy bonds with face values of $1 billion, in addition to various other types. Police said that the two men had stayed at a hotel in Milan last Tuesday. Instead of taking the express train to Lugano, they had boarded a slow commuter train from a suburban station to attract less attention.
Although Switzerland and Italy adhere to the Schengen accords on frontier-free travel, customs officers from both sides who still watch travellers became suspicious, Italian reports said.
Police said that there was cause for concern even if the bonds turned out to be forgeries, since it would amount to a counterfeiting scam “on an unprecedented scale”.
Yes the Democrats and a few misguided republicans have passed a bill that will see departure of more industry from the USA to China and other "the bottom line counts" countries. You'll be selling them more iron ore , metallurgical and steam coal for all their new industries.
""""House Passes Cap And Trade Energy Bill"""""""
The U.S. House Friday narrowly passed a landmark energy and global warming bill, after a contentious afternoon of heated back and forth exchanges on the floor of the legislative body.
The bill would establish a cap and trade system to regulate the emissions of carbon dioxide. Under the program, those emitting pollutants would be allowed a certain allotment of permits and could sell those that are unused or buy more if they're needed.
It passed by a vote of 219 to 212, with more than 40 Democrats defecting to vote with more than 165 Republicans in opposing the measure.
A handful of Republicans also voted in favor of the measure, which passed by a single vote more than the 218 necessary for passage.
Democrats hailed the measure as essential to ending America's dependence on foreign oil while setting the stage for a new, clean energy economy.
"The bottom line to this legislation ??? is it will make America less dependent on foreign oil," said Rep. Richard Neal, D-Mass.
He added, "Part of our job in leadership and governing is to make some difficult decisions and indeed some tough choices. This climate change bill we have before us today makes those tough choices for our future ??? [and leads] our consumers, our businesses and our communities toward smarter, cleaner and more efficient energy use."
Rep. John Larson, D-Conn., stressed the importance of ending the country's dependence on foreign sources of oil.
"President Bush stood on the floor [of the House] and proclaimed our addiction to oil and everybody put their head in the sand, did nothing as we continue to send and export American dollars overseas," he said. "We send American taxpayer dollars overseas to Russia, to Saudi Arabia, to Libya, to Venezuela. ??? That's the real tax that we are paying."
He continued, "Stop this addiction ??? [that is] going to fund our enemies' efforts against our own troops in our efforts against terrorism. That is what this is about in the final analysis."
But Republicans railed against the bill, claiming it would amount to a national energy tax that would actually result in more pollution as companies relocate to less regulated areas like China and India.
"This bill is not about science. It's not about costs and benefits. It's about ideology," said Rep. Paul Ryan, R-Wisc., the ranking Republican on the budget committee. "The goal of this bill is to reduce warming by 2/10ths of a degree over 100 years, hit our economy with this massive tax increase on homeowners, on people buying gas or heating their homes, hit manufacturing."
He added, "This bill will result in jobs leaving the Midwest and jobs leaving America and going to other countries. ??? That means more dirty air. That means more greenhouse gases."
Rep. Dave Camp, R-Mich., the ranking GOP member of the powerful tax-writing Ways and Means Committee, said the bill was "like jumping off an economic cliff."
"It's bad for the economy. It does nothing to reduce global greenhouse gases," he said. "It's all pain and no gain."
Democrats contend that the bill includes trade protection provisions that would avert the job losses Republicans predicted and believe that the measure will create many new jobs in green industries.
Late in the debate over the measure, House Republican Leader John Boehner of Ohio took the unusual step of speaking at length on the measure for more than an hour to protest a 300 page amendment to the bill filed at after 3 a.m.
Rep. Henry Waxman, D-Calif., the chairman of the Energy and Commerce Committee and an author of the bill, sought to cut Boehner off by noting that he had far exceeded the time allotted, but was overruled because of a rule allowing party leaders a "magic minute" to speak as long as they wish.
Waxman then hinted that Boehner was seeking to drag out the proceeding to encourage some members to leave because the vote was expected to be tight.
Biggest VIX Drop Hides Options Bets S&P 500 Will Fall
FROM BLOOMBERG July 6 (Bloomberg) -- The biggest drop in U.S. options prices since 1998 masks growing anxiety over the stock market’s rebound, as traders pay more for bearish contracts than any time since before the failure of Lehman Brothers Holdings Inc.
Investors are spending the most since August 2008 to protect against a 10 percent decline in the Standard & Poor’s 500 Index versus wagers on an advance, according to data compiled by Bloomberg. That’s one month prior to New York-based Lehman’s bankruptcy. The premium on so-called put contracts increased even after the Chicago Board Options Exchange Volatility Index, a gauge of U.S. options prices known as the VIX, fell 40 percent last quarter.
Traders are locking in gains on the S&P 500, which rose as much as 40 percent since March, on concern the worst U.S. recession in a half century isn’t abating, according to Huntington Asset Management, BlackRock Inc. and Fiduciary Trust Co. The widening gap between bullish and bearish options belies the VIX’s retreat to below its level when Lehman collapsed and comes as U.S. companies prepare to report second-quarter earnings this week.
“Too many people are thinking the worst is over, life gets better from here,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset in Cincinnati. “We’re scratching our heads, going, ‘Something doesn’t feel right here.’ It’s probably better to have some insurance on the books.”
Pay-Off Price
Sorrentino, who expects the S&P 500 to retreat more than 10 percent from last week’s closing price of 896.42, said he bought options that pay off if the index declines to 775 in December. The “strike price,” or the level at which Sorrentino can exercise the contract, implies a 14 percent slump.
The S&P 500 fell 2.5 percent last week after a worse-than- projected decrease in employment added to concern that rising joblessness will prolong the recession. The index slipped 0.7 percent to 890.06 as of 9:32 a.m. in New York today.
After losing almost $11 trillion during a 17-month bear market, U.S. equities have recouped 24 percent of their value since March 9 on speculation that corporate profits will rebound by year-end as economic growth resumes.
The S&P 500 climbed 15 percent in the second quarter, the biggest advance in a decade, as the government and Federal Reserve pledged $12.8 trillion to combat almost $1.5 trillion in losses at the world’s largest financial companies.
The rebound caused traders to pay less for options and pushed down the VIX, a measure of the S&P 500’s “implied volatility,” or expected price swings. It fell to a low of 25.35 on June 29 from 44.14 on March 31.
Not Normal
The reading indicates a 68 percent likelihood the S&P 500 will fluctuate as much as 7.3 percent in the next 30 days, according to data compiled by Bloomberg. That compares with the VIX’s all-time high of 80.86 in November, when traders priced in a swing of 23 percent in the S&P 500.
While prices for U.S. options have fallen, they are 38 percent above the average of 20.19 for the VIX over its 19-year history, a sign that financial markets have yet to return to “normal,” according to Carl Mason, head of U.S. equity derivatives strategy at BNP Paribas SA in New York.
The VIX ended last week at 27.95. On Sept. 15, the day Lehman declared the largest bankruptcy in U.S. history, the volatility index closed at 31.70.
“There’s still an element of caution,” Mason said. “Things have gotten to pre-Lehman levels, but I’m not sure if we can call that normal. The level of the VIX is quite elevated compared to historical levels.”
Cost of Protection
Traders are more inclined to buy insurance against stock market losses than they are to speculate on more gains, options trading shows. The implied volatility for contracts that lock in profits if the S&P 500 falls at least 10 percent in three months was 29.03 on June 29, according to data compiled by Bloomberg.
That compares with 20.20 for “call options” that pay off if the index rises at least 10 percent in the same period.
The difference between the prices of the two contracts, known as the implied volatility “skew,” steepened to 44 percent, the biggest premium since Aug. 28. The skew between contracts expiring in six months reached a nine-month high.
In Europe, demand for protection against losses has driven up skew on Dow Jones Euro Stoxx 50 Index options to the highest since November. Implied volatility for three-month bets on a 10 percent decline was 31.53 on July 1, compared with 23.08 for wagers on a 10 percent gain, according to data compiled by Bloomberg.
‘Back to Reality’
“The jury is still out on the recovery,” said Mark Lyttleton, a London-based manager at BlackRock, which oversaw $1.28 trillion globally as of March 31. “People are feeling the ‘green shoots’ now, but that will change over the next few months as they get back to reality.”
Call options on the S&P 500 convey the right, without the obligation, to purchase the index at a predetermined price on a specific date. S&P 500 put options give the buyer the right to sell at a set price on a future date.
Traders snapped up insurance against declines in the stock market as the World Bank said that the global recession this year will be deeper than it previously forecast, U.S consumer confidence unexpectedly weakened in June and delinquencies on the least-risky U.S. mortgages more than doubled.
Job cuts will probably push the U.S. unemployment rate to 10 percent by year-end and undermine consumer spending, which accounts for 70 percent of the economy, according to economists’ estimates compiled by Bloomberg.
Earnings Slump
Earnings at S&P 500 companies have fallen a record seven straight quarters and are forecast to decrease for two more before rebounding at the end of 2009, analysts’ estimates compiled by Bloomberg show. Analysts have trimmed projections for a fourth-quarter profit increase to 61 percent from a prediction of 95 percent when stocks began rallying in March.
“While we’ve avoided the doomsday scenario, the recovery is going to be modest,” said Michael Levine, a money manager at New York-based OppenheimerFunds Inc., which oversees about $150 billion. “There’s a concern that things have moved too far, too fast. Fundamentals just stopped getting worse, they haven’t gotten better yet. It’s not going to happen overnight.”
Bill O’Neill at Merrill Lynch Global Wealth Management says the biggest decline in the VIX since 1998 shows that the appetite for protection has decreased and the premium paid for S&P 500 puts versus calls will diminish as companies start reporting second-quarter earnings this week.
Stock Valuations
Investors are paying $12.06 for every dollar of operating profit analysts estimate S&P 500 companies will generate next year, a 41 percent discount to the average of $20.45 since 1998, data compiled by Bloomberg show.
“The potential for earnings upgrades is underappreciated,” said O’Neill, the London-based strategist at Merrill Lynch Global Wealth, which has $1.1 trillion in assets. “Valuations per se shouldn’t block an equity-market revival. The markets will be higher by the end of the year.”
Fiduciary Trust’s Michael Mullaney disagrees and says that the economy and corporate earnings haven’t improved enough to justify piling into equities after the S&P 500’s almost 40 percent rally from its March low.
“We need to have a dramatic improvement in the economy in order to keep on feeding the elevation in stock prices,” said Mullaney, a money manager at Fiduciary Trust in Boston, which oversees $7.5 billion. “All we can say about both the economy and earnings is that the forecast is just less bad.”
“People are taking some positions betting that if things don’t improve, they’ve got some protection,” he said. }
Mexico’s Peso, Stocks Fall as Calderon’s Party Loses Election
Mexico’s peso and stocks fell to a two-week low after President Felipe Calderon’s party lost congressional seats in midterm elections, adding to concern the government will struggle to implement tax increases that economists say are needed to narrow a budget gap.
The peso weakened 0.2 percent to 13.2520 per U.S. dollar at 2:33 p.m. New York time. It touched 13.3755, the weakest since June 23. Mexico’s Bolsa, the nation’s benchmark stock index, tumbled 1.5 percent to 23,696.06.
“This is not a market-friendly result,” said Jaime Ascencio, a fixed-income strategist at Actinver SA, Mexico’s biggest independent money manager, in Mexico City. “This result makes it very likely that Mexico’s credit rating will be cut.”
Ody / Rudy /Eugenio and other IMF holders: Two cases can be made for the stock price at this time . The following is based on a mixture of EW , Fibonacci levels and Support level calculations.
The various Support Levels mentioned in the tome are shown below in Table A. The letter designations: LT - monthly, MT - weekly, ST - daily are used for calculated Support Levels with levels S1 through S4. As implied the values pertain to their respective time periods. The letters MMBB- Monthly Middle Bollinger Band and WLBB - Weekly Lower Bollinger Band. The letters Df and DSF are my designation for descending Fibonacci and descending sub- Fibonacci values.
---------------------Table A --------------------------
==================================================== Chart #1 - IMF 30 Minute -End Date 7102009
Chart #1 shows that the price decline has been a nice orderly manner since the price Gapped down below the Lower Bollinger Band on July 6th. That drop and a Close below 1.68 triggered a Long Term Short on the stock. The next day the executives exercised their stock options . Whether it was by coincidence or not they will be prepared for when this decline comes to a temporary halt. Now where will the reversal be for the next leg.
By my numbers the price action dropped below a Fib level at 1.33 and then Closed above it at 1.35. It may be that it was a positive test that will not be retested and price will "rally" for next few sessions, However there be a retest of the 1.33 level and if there is a failure then the price could drop down to the The 1.21/1.22 . You can see from the Table that there are two coincidental Support Levels at 1.21 and at 1.22 there is a major Fibonacci Level at which a reversal would be a normal course of events.
IMF - Daily Chart 7102009
The 1.22 is also supported by application of EW estimations to the potential end point of the present down leg. The daily Chart shows that from the High of 1.98 there have been three legs . I have assumed, and it may be VERY WRONG, that this major leg will be composed of five sub legs and we are working on # 3. The first leg was from 1.98 to 1.525 or 0.455 units. Then leg # 2 went from 1.525 to 1.90 or 0.375 units. Now leg #3 has, so far, progressed from 1.90 to 1.315 or 0.585 units. If I am correct in my assumptions then by Ew guidelines leg #3 will be between 1.5 and 3.5 times the length of leg #1.
SO the potential termination of leg #3 is :
1.90 - [ 1.5 x 0.455 ] = 1.2175 or rounded to 1.22 .
That value matches the potential target derived from Support calculations and Fibonacci levels. One can also see that there are "players" not sleeping at the switch when the price falls over a cliff.
IMF Weekly Chart --------------------------IMF Monthly Chart
In conclusion I think that 1.22 will be tested before the start of the next UP leg is initiated. Based on the Monthly and Weekly charts it looks like the price could eventually drop to sub 1.00 if this evaluation turns out to be correct.
PS : If the reversal takes place at 1.315 then the Upside target could be 1.69 assuming leg #4 = leg #2 . I will post data for this potential event - hopefully this weekend.
One risk of doing business in China is on display this week as authorities detained four employees of Australian mining giant Rio Tinto for "stealing state secrets." The incident exposes China's weak rule of law and has the potential to deter foreign investment when China needs it most.
The employees -- three Chinese nationals and one Australian national of Chinese descent -- were detained Sunday in Shanghai without official charge. They worked in Rio's iron-ore division, a product line not typically known for global espionage. Yesterday, government spokesman Qin Gang said the group harmed "China's economic interests and security." Separate reports from state-owned publications suggested the Rio employees had bribed Chinese officials.
The history of such cases against business in China warrants skepticism about the charges. The judiciary still answers to the Communist Party, while state-secret laws are vaguely defined and cases are usually heard in closed courts. The line between routine commercial information, such as pricing, and "state secrets" isn't clearly drawn. The accused rarely receive independent legal counsel and could face up to life in jail. Jude Shao, an American businessman convicted of tax evasion and fraud, was released last July after spending 10 years in jail. He is still on parole in Shanghai and maintains his innocence.
The timing of the incident is suspect too. Rio rejected a $19.5 billion investment from state-owned Aluminum Corp. of China last month. The bid sparked regulatory concerns and a protectionist backlash Down Under. The rejection was seen as an embarrassment for Chinese officials who had pushed for the deal. The detentions smack of recrimination.
China and Rio are also in the midst of their longest-ever negotiations on iron ore, a crucial commodity for China, which imported 444 million metric tons of iron ore in 2008. Price negotiations, usually concluded by June 30, have dragged on as China demands a lower contract price than the deals Rio has already agreed with other Asian suppliers.
In a recent travel advisory unrelated to Rio Tinto, Australia warned that "There has been an increase in the number of incidents in which Australians and other foreigners, often factory managers, have been held against their will at their work place." Kidnappings or business occupations are not unusual in China, where disgruntled workers or business partners sometimes take the law into their own hands.
Australian officials expect they will be allowed to visit the Australian under detention today. Domestic political pressure is already building on Canberra for a stronger response. This isn't good news for either country, given their economic interdependence.
But the real lesson here is about China's economic and political trajectory. Rapid economic growth can't obscure the fact that all businesses in China, foreign and domestic, are hampered by a legal regime that is often abused for political ends.
But first, I want to direct the attention of those in the US finance industry to a white paper written by Themis Trading, called "Toxic Equity Trading Order Flow on Wall Street." Basically, they outline why volume and volatility have jumped so much since 2007; and it's not due to the credit crisis. They estimate that 70% of the volume in today's markets is from high-frequency program trading. They outline how large brokers and funds can buy and sell a stock for the same price and still make 0.5 cents. Do that a million times a day and the money adds up. Or maybe do it 8 billion times. It requires powerful computers, complicity of the exchanges (because the exchanges get paid a lot), and highly proximate computer connections. Literally, the need for speed is so important that to play this game you have to have your servers physically at the exchange. Across the river in New Jersey is too slow. Forget Texas or California. This is a game played out in microseconds.
The retail world doesn't get to play. This is a game only for big boys who can afford to pay for the "arms" needed to fight this war. But the rest of us pay for the game, as that half cent is like a tax on transactions, not to mention the increased daily volatility, which skews pricing. Think it doesn't affect you? That "tax" is paid by mutual funds, your pension fund, and every large institution.
Frankly, this is outrageous. The more I read the madder I got. And it is going to get worse as computers get faster and software more intelligent. We need rules to level the playing field. Themis suggests one simple one: just make it a rule that all bids have to be good for at least one second. That would cure a lot of problems. One lousy second! In a world of microseconds, that is an eternity.
Goldman Sachs went after an employee who stole some of their latest and greatest software this last week. The US assistant attorney general said in the courtroom that the software had the potential to manipulate the market. Imagine that. I am shocked. There is gambling going on in the back room? Gee, commissioner, I had no idea.
All this "algo" (algorithmic) trading also gives a very false impression of volume. If you are a fund and see 10 million shares a day traded, you might feel comfortable that you could hold one million shares and exit your trade easily. But if 80% of the volume is false "algo" trading, that volume isn't really there. You may have a position that will be a problem if you want to exit, and not know it.
"High-frequency trading strategies have become a stealth tax on retail and institutional investors. While stock prices will probably go where they would have gone anyway, toxic trading takes money from real investors and gives it to the high frequency trader who has the best computer. The exchanges, ECNs and high frequency traders are slowly bleeding investors, causing their transaction costs to rise, and the investors don't even know it." (Themis Trading)
We are literally talking billions of dollars here. The SEC needs to step in and stop this, and soon. This is a lot more important than the salaries of investment professionals, for which the Obama administration today suggested new rules, which would allow the SEC to oversee salaries at member firms. Seriously? They don't have enough to do already?
The quote du jour this week comes from Richard Russell, 84-year-old doyen of newsletter writers who has been scribing the Dow Theory Letters for the past 50 years. Russell said: “The whole bailout campaign stinks to high heaven. It was created and run by Wall Street - FOR Wall Street. Again, I say, personally, I wouldn’t have lifted a finger to bail Wall Street out. Let all these Wall Street thieves stew in their own toxic juices. Thieves should be out on the street or in jail, not luxuriating in government bailout money.
“In the end, the bailouts will simply extend the bear market in stocks and the economy. The Wall Streeters will be richer, and the nation will be poorer, choking on trillions in debt that will keep future generations struggling to deal with the sins of Wall Street. Too bad Obama didn’t have the courage (or knowledge) to tell the nation what was going on. Obama should have said, ’sit tight’ and ‘this too shall pass’. Unfortunately, after the trillions spent in bailouts, ‘this too will not pass’.
Financial Times: Fed warns on Congressional scrutiny
“The Federal Reserve warned on Thursday that a growing congressional threat to curtail its independence would destabilise markets and raise the cost of servicing US debt for ‘current and future generations’.
“Ron Paul, the Texas Republican, has gathered the support of a majority of the House of Representatives for a bill that would audit the Fed’s monetary policy decisions. He told a Congressional hearing he wanted the power to prevent the Fed being ’secret and clandestine and serving special interests’.
“The Fed is struggling to face down a political backlash from different parts of Congress amid scepticism over its policies designed to restart the flow of credit and the award of new powers to curb systemic risks.
“Donald Kohn, vice-chairman of the Fed, argued at the House financial services subcommittee hearing that any sense of political interference would negatively affect markets. ‘Any substantial erosion of the Federal Reserve’s monetary independence likely would lead to higher long-term interest rates as investors begin to fear future inflation,’ he said.
“Not only did Mr Kohn argue that the Fed should be given the power to regulate large systemically significant companies, but he argued against giving up responsibility for consumer protection, asking Congress to overturn the Obama administration’s proposal to create a new Consumer Financial Protection Agency.
“‘I would hope that the Congress might think about whether there are ways of strengthening the Federal Reserve’s commitment to consumer regulation as an alternative to creating a new regulator,’ he said.”
Source: Tom Braithwaite, Financial Times, July 9, 2009.
Nouriel Roubini (Forbes): Brown manure, not green shoots
“The June employment report suggests that the alleged green shoots are mostly yellow weeds that may eventually turn into brown manure. The employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000. With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer - around August or September - and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions.
“It’s clear that even if the recession were to be over anytime soon - and it’s not going to be over before the end of the year - job losses are going to continue for at least another year and a half. Historically, during the last two recessions, job losses continued for at least a year and a half after the recession was over. During the 2001 recession, the recession was over in November 2001, and job losses continued through August 2003 for a cumulative loss of jobs of over 5 million; this time we are already seeing more than 6 million job losses and the recession is not over.
“The details of the unemployment report are even worse than the headline. Not only are there large job losses right now, but as a way of sharing the pain, firms are inducing workers to reduce hours and hourly wages. Therefore, when we’re looking at the effect of the labor market on labor income, we should consider that the total value of labor income is the product of jobs, hours and average hourly wages - and that all three elements are falling right now. So the effect on labor income is much more significant than job losses alone.”
When your partner does something out of character it makes sense to look around for events that might have triggered this change of behaviour to gain a better understanding of what is really happening.
When we apply this rule to the decision by the Chinese to level criminal charges against Stern Hu and three other Rio Tinto executives the fury over the Chinalco deal hits the headlines, but two other 'trigger' events emerge.
The first is that the Chinese nation is now under unprecedented pressure as a result of the civil war in the province of Xinjian. A second trigger event may be that the 2009 iron ore negotiation was set to be different from any other because China had stockpiled a remarkable 100 million tonnes of iron ore (Chinese whispers, June 30).
Clearly some in China were preparing to play hard ball, but the stock pile was never used.
But before we look more closely at these two potential trigger events, let’s set out a few unpleasant facts that we must now accept:
– Under the Chinese legal system, just about everything can be defined as state secret, so all Australian executives in China are vulnerable to be treated like Stern Hu if they annoy the Chinese. Former WMC and BHP chairman Arvi Parbo discovered this in the 1980s and nothing has changed (What is a state secret?, July 10).
– Both the Australian government and Rio Tinto contributed to the current situation by the way they handed Chinalco. Rio Tinto might have been under financial pressure last year and should never have contemplated doing a minority equity deal with Chinalco and then handing effective control to Chinalco via 600 pages of side deals. And when the Australian government saw those incredible side deals they should have rejected them immediately. Instead they delayed the inevitable rejection.
– Let us all recognise that, while in day-to-day operations these Chinese state corporations are separate from the government of China, once there is a crisis they are simply an arm of the government and should be treated as such in all future deals.
– There is extensive bribery and corruption in China and, while I would be stunned if Stern Hu or RioTinto were involved, somewhere, somehow in the chain of events there might have been a bribe paid without the knowledge of Rio Tinto or Hu.
When it comes to the events in Xinjian it is clear that China is going to put this revolt down with brutality (The peril in China's west, July 7). This will represent a major shift to the left in China which could mean that the progressives must take a back seat until the crisis is over. Neither the Australian nor the Chinese print press have ever spelt out that the Rio Tinto side deals broke all the Australian controls rules – so the Chinese now believe, incorrectly, that they were duped.
If you combine the forces that have been unleashed by Xinjian with the Rio/Chinalco affair, you can see how easily such a situation could get out of hand. And then you add the fact that clearly some in China wanted to use the stock piles to play iron-ore hard ball. Did the Rio Tinto negotiators find a way to nullify the Chinese stock pile or were the hard ball forces over-ruled?
It now seems that Stern Hu has played a remarkable role in maximising the returns for Australia from the mineral boom – something from which all Australians have benefited. This is therefore a matter for the Prime Minister. But Rudd is right to let the dust settle and try to determine exactly what forces are at play and just how important Xinjian, the stock pile and other events were. But Stern Hu needs support and help at the highest level.
I hope Mr Rudd will use his "quanxi" connection to resolve the issue. There is a Chinese saying " To move forward, sometimes we have to step backward.It is not easy even for the Chinese overseas to understand and accept the culture as in China.The first port of call is the Chinese Diplomat in Canberra, to find out the best way to resolve all this, unless he has other means to do so. We could unknowingly offend someone, if so being apologetic is not a sign of weakness as many may think, but a sign of wisdom.If each party made a step backwards, things may not be that confrontational.My prayers are that this be resolved as soon as possible, in order for us to move forward. We must also explain in a transparent way, how we approve foreign investments in Australia. Overall, I find many of the analysts quite spot on, on their assessment of the overall situation.
------------------------------------------------- Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.
The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.
Paddy, as usual, you have always brought up some interesting and quite often challenging topics. I do appreciate the time you spend to quote and source such information.
------------------------------------------------- Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.
The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.
Chinese state-owned companies have been trying to portray themselves as independent, commercial entities as they roam the world buying up companies and sourcing raw materials, but may now face suspicions they are fronts for Beijing, analysts say.
CANBERRA/BEIJING (Reuters) – Australia summoned China's ambassador on Monday for a second time to press for details of the detention of Rio Tinto's top iron ore salesman in China and three other staff accused of spying.
The detentions of the four and protracted price talks between Rio and Chinese steel mills helped push down shares on Monday in BHP Billiton and Rio Tinto, two of the world's largest iron ore firms.
Australian Prime Minister Kevin Rudd, who attended last week's G8 summit in Italy, flew home on Monday as the diplomatic storm strained bilateral ties. Rudd would be on informal leave for the rest of the week, said his office, despite calls for the former Beijing diplomat and fluent Mandarin speaker to intervene in the Rio detentions and call Chinese President Hu Jintao.
Australia has urged Chinese authorities to consider the wider risks for international business confidence in China. But Australia, which has relied on China's insatiable appetite for its minerals to protect its economy from the global financial crisis, is treading carefully.
Australia will not use "megaphone diplomacy" to pressure Beijing to release the Rio staff, Finance Minister Lindsay Tanner told Reuters Television.
"Our dealings with the Chinese government are going through formal channels. It is always important in these very delicate situations for governments and ministers to be very careful about their public commentary … where an individual's freedom is at stake."
Australia's Foreign Ministry also summoned the Chinese ambassador on Thursday.
During his 2007 election race, Rudd promised deeper Australian engagement with Asia, especially China. He has forged a close relationship with China's leadership, phoning Premier Wen Jiabao in September 2008 to discuss the unfolding financial crisis and addressing President Hu in Mandarin at a 2007 regional leaders' conference.
SPYING CLAIMS
Anglo-Australian miner Rio was in intense price negotiations with China when Australian Stern Hu and the three others were detained in Shanghai, accused of stealing state secrets and bribing Chinese steel makers for information.
Chinese media reports say information from an internal meeting of the China Iron and Steel Association on the negotiations was leaked and that the investigation has extended to several senior figures in the Chinese steel industry, including within the association itself. A senior executive at Shougang, China's eighth-largest mill, has also been detained.
Sources say some Rio Tinto computers were removed in the course of the investigation, which could potentially expose the company's negotiating strategy as well as contractual terms with the mills it supplies. Rio has not commented on the computers.
The arrests came as local media reported Chinese steel mills had given in on annual iron ore prices, agreeing to the same 33 percent cut other Asian steel makers set earlier.
That capitulation would be a loss of face for the state-backed Chinese Iron and Steel Association, which had vowed to the central government it could achieve a deeper discount.
Chinese and Rio officials have denied any agreement was reached, although news that top mill, Baosteel, on Monday would raise steel product prices by 9-13 percent next month renewed speculation that mills had given up hope for lower prices, passing on higher-than-expected costs to customers.
Executives and analysts in the steel industry, which relies on open market information for trading and pricing, now fear the investigation could spread.
Chinese state-owned companies have been trying to portray themselves as independent, commercial entities as they roam the world buying up companies and sourcing raw materials, but may now face suspicions they are fronts for Beijing, analysts say.
The Sydney Morning Herald reported on Monday the Rio investigation appears to be part of a realignment of how China manages its economy amid the global financial crisis, with spy and security agencies promoted to top strategy-making bodies.
It said that President Hu endorsed the Rio investigation.
Peking University international relations professor Zha Daojiong said he did not think President Hu intervened personally in the Rio case and did not believe the arrests would make it harder for foreign firms to operate in China.
"(Police intervention) is very normal. That should not really be magnified. Let's face it. Corruption is part of the game in this business and it is a matter of how you define it," Zha said.
CHINESE BUSINESS CULUTRE
The inquiry into Rio began before it broke off its $19.5 billion investment deal with Chinese metals firm Chinalco and instead formed an iron ore joint venture with rival BHP Billiton on June 5, the Herald reported.
"Obviously a lot of this has to do with the emotions surrounding the Chinalco-Rio Tinto deal," said Zha, citing concerns over a concentration of ownership of iron ore resources.
Zha said China had been attempting to streamline and rein in new capacity in its steel making sector since 2003.
"There is too much disorder in the sector, and relentless adding of production capacity. This chaotic system in the trade is partly to blame for all this," he said.
But Zha said he did not believe the Rio arrests would make it difficult for foreign firms to operate in China and Australia's Tanner said Chinese steel makers were unlikely to drop their current long-term contracts with Australian iron ore producers and move to the spot market instead.
The contract system, which traditionally governs Australia's $14 billion in annual iron ore exports to China, faces an uncertain future, with Chinese steel mills unable to agree contract pricing this year with major iron ore miners.
Iron ore ore is Australia's second-largest export behind coal.
n response to the continued deterioration in the global economic conditions, BHP Billiton (BHP) is adjusting its production levels to match demand and is suspending cash-negative operations.
At the end of November 2008, BHP’s 50% owned Samarco joint venture (Brazil) announced a temporary reduction in pellet production. Following further assessment by management, production at both pellet plants was restarted during the quarter ending March 31, 2009.
In December, BHP announced a temporary reduction in manganese production at its 60% owned Samancor (Pty) Ltd operation due to weak market conditions. The cuts are expected to reduce ore production by 30% and alloy production by 35% for FY09.
Further, in January 2009, BHP announced the indefinite suspension of Ravensthorpe Nickel Operations (Australia) and cessation of mixed nickel and cobalt hydroxide processing at the Yabulu Refinery (Australia). Earlier this month the company agreed to sell its Yabulu nickel refinery in Australia to companies wholly owned by Professor Clive Palmer. The sale is expected to be finalized by the end of July.
These decisions were taken in response to the weak market conditions and deteriorating demand. The company had stated that it will continue to review all its operations and will take further actions if deemed necessary.
Though BHP expects the market uncertainty to continue in the short to medium term, it is confident that the ongoing industrialization in China and other developing economies will drive the long-term demand for its products.
With its diversified portfolio of high quality assets and a strong balance sheet, we believe BHP is well positioned to benefit from a market recovery.
BHP Delays $3.1 Billion Coal Mine By Two Years, Australian Says
July 14 (Bloomberg) -- BHP Billiton Ltd. has delayed development of the A$4 billion ($3.1 billion) Caval Ridge coal mine in Queensland state, the Australian newspaper reported, citing documents submitted to the Federal government.
Production from the project will begin in 2013 instead of 2011, the newspaper said, citing an environmental impact statement lodged by the company. The mine will deliver about 8 million metric tons of coking coal a year, the newspaper said.
BHP Seeks Support to Fund Newcastle Coal Expansion, Review Says
"Great Project for Australian Government to INVEST some Stimulus Funds."
July 14 (Bloomberg) -- BHP Billiton Ltd. has approached other mining companies to consider supporting a plan to provide funding for a A$1.2 billion ($940 million) expansion of the Newcastle coal port, the Australian Financial Review reported, without citing anyone.
The consortium includes Centennial Coal Co. Ltd., Donaldson Coal, Peabody Energy Corp., Felix Resources Ltd. and Whitehaven Coal Ltd., the newspaper said. The consortium is seeking expressions of interest for a proposed second-stage
CIT Announces That Discussions with Government Agencies Have Ceased
NEW YORK--(BUSINESS WIRE)--CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today announced that it has been advised that there is no appreciable likelihood of additional government support being provided over the near term.
The Company’s Board of Directors and management, in consultation with its advisors, are evaluating alternatives.
Individuals interested in receiving future updates on CIT via e-mail can register at http://newsalerts.cit.com.
About CIT
CIT (NYSE: CIT) is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the S&P 500 and Fortune 500. www.cit.com
Talks between government regulators and CIT Group (CIT: 1.64, 0.02, 1.23%) have ended and a bailout for the troubled commercial lender is not likely in the near term, according to a release posted on the company's Web site.
CIT announced Wednesday evening that it was told by the government there is "no appreciable likelihood of additional government support being provided over the near term." Meanwhile, the company's board is consulting advisors and evaluating its alternatives, according to the release.
Shares of CIT were halted Wednesday afternoon on reports of a pending government bailout package. An aid package from the U.S. government was rumored to be pending Wednesday, although the company’s discussions with regulators were described as “ongoing” with bankruptcy still an option, a person familiar with the matter told Reuters. The person went on to say that because CIT's situation had deteriorated, regulators were concerned a bailout might not be able to save the lender, Reuters reported.
President Obama was briefed on the company's situation this week through "a download" given to him by Larry Summers, director of the National Economic Council, and Treasury is monitoring the situation "very closely, minute-by-minute," White House Press Secretary Robert Gibbs told reporters in a daily press briefing Wednesday.
Shares of the company were trading at $1.64, up about 1.9% from where it closed Tuesday, when the stock was halted on the New York Stock Exchange.
A deal with regulators was reportedly in the works involving an aid package allowing the lender to transfer assets from its holding company to its bank and pledge some of those assets at the Federal Reserve’s discount window, The Wall Street Journal reported Wednesday morning.
The rescue plan rumors came about as customers withdrew as much as $775 million in credit lines from the bank amid bankruptcy fears, the paper reported. CIT’s board reportedly met late Tuesday in hopes of coming to a solution.
While CIT Group isn’t considered “too big to fail,” some regulators worry about the impact on small businesses if it collapsed. The Federal Deposit Insurance Corp. is said to be reluctant to give CIT access to a debt-guarantee program, while the Fed and Treasury Department are more supportive. CIT was given $2.33 billion in loans from Treasury as part of the Troubled Asset Relief Program, or TARP, last December, and was approved to become a bank holding company.
Mexico may bar major firm from Chinese car imports
A top official at Mexico’s Economy Ministry told media on Wednesday that the nation may bar domestic auto dealer Grupo Salinas Motors (GSM) from importing cars made by China’s First Auto Works (FAW).
“We are in the middle of a judicial review of the authorization that was given a few years ago to see what legal measures we might take,” Adalberto Gonzalez, who heads the ministry’s heavy industry department told media after giving a speech at the International Auto Industry Congress, held in Mexico City.
Grupo Salinas and FAW recently cancelled plans to build an auto manufacturing plant in Pacific coast state Michoacan, where drug violence has killed at least 20 people in the last seven days. Mexico’s auto market has also been in a funk since mid-October when a credit crunch spreading from the United States cut off financing to consumers and business people.
According to the ministry, Salinas had been importing FAW cars free of duties under a rule that allows firms to build a market for their cars providing they plan to invest at least 100 million dollars in a plant in Mexico that will produce 50,000 cars a year.
GSM’s license to import expires on Nov. 23 so if the ministry must act before then, he said.
GSM is owned by one of Mexico’s richest men, Ricardo Salinas Pliego. It will be obliged to keep providing parts and service for FAW cars even if it is barred from importing them.
* Improvement over 1st qtr seen due to copper recovery
* Market waiting on Asarco court resolution
By Mica Rosenberg
MEXICO CITY, July 16 (Reuters) - Mexico's biggest copper miner, Grupo Mexico, is expected to post a 69 percent decline in second-quarter profit, with metals prices down sharply from peaks seen during the same period last year.
But the price of copper has recovered since the beginning of 2009 and the company is expected to show better results compared with the first three months of this year.
Four analysts consulted by Reuters forecast, on average, that Grupo Mexico (GMEXICOB.MX) earned a net profit of $140.5 million in the second quarter, a steep decline from $451.7 million in the same period of 2008.
Revenue is expected to be $1.04 billion dollars, a 40 percent drop from the year-ago quarter.
The company, which also controls railroads in Mexico, earns the bulk of its revenue from mining unit Southern Copper (PCU.N) and was hurt by a more than 40 percent drop in copper prices in the second quarter compared with a year earlier, Rodrigo Heredia of Ixe brokerage said in a report.
Other analysts put a positive spin on the upcoming results because of an expected quarter-on-quarter recovery.
Compared to the first quarter of 2009, the company's net profit is seen jumping 635 percent and revenue could rise 26 percent.
Copper prices have improved from a crash at the end of last year on expectations that massive infrastructure projects in government stimulus plans will boost demand for the red metal.
Grupo Mexico's overall copper volumes have been hit by a strike at the massive Cananea mine that has dragged on for nearly two years.
ASARCO DECISION PENDING
The miner is battling in Texas courts to regain control of its bankrupt U.S. subsidiary Asarco, which is burdened by billions of dollars in environmental claims.
Grupo Mexico, which lost board control of the Arizona-based copper miner due to the bankruptcy, increased its offer to retake control of Asarco this month.
Grupo Mexico proposed $3.1 billion in cash and notes to counter a rival bid from Indian company Sterlite Industries (STRL.BO), a subsidiary of London-listed mining conglomerate Vedanta Resources Plc (VED.L).
One of Asarco's largest bondholders, investment fund Harbinger Capital Partners, unsatisfied with both offers, joined the battle last month with its own $500 million reorganization bid.
"In the next few weeks the judge will hand down his ruling on Asarco's restructuring (August 10), and given that Grupo Mexico's bid has the highest present value of the three that were offered, we think it has the best chance of once again consolidating the company," BBVA Bancomer analyst Pablo Peregrina said in a report.
In Texas court proceedings separate from the bankruptcy hearing, Asarco is suing its former parent for damages, alleging that it was stripped of its most valuable asset, Southern Copper.
Grupo Mexico is expected to report quarterly results between July 27 and July 30.
Following is a table with the average expected results for the copper miner (all figures in dollars). ==============================================================
2009 (POLL) 2008 PERCENTAGE
APRIL-JUNE APRIL-JUNE CHANGE -------------------------------------------------------------- Revenue $1.041 bln $1.758 bln -40.8 EBITDA* $ 406 mln $ 960 bln -57.7 Net profit $ 141 mln $ 452 mln -68.9 ============================================================== ==============================================================
2009 (POLL) 2009 PERCENTAGE
APRIL-JUNE JAN-MARCH CHANGE -------------------------------------------------------------- Revenue $1.041 bln $ 824 mln +26.4 EBITDA* $ 406 mln $ 277 mln +46.8 Net profit $ 141 mln $ 19 mln +635.7 ==============================================================
* Earnings before interest, tax, depreciation and amortization (Reporting by Mica Rosenberg; editing by John Wallace)
Hi Paddy Not bad for accuracy so far. Would I be right in saying 1.585 was the end of leg 4 and we're now on leg 5 possibly down to 1.21-1.25 where also the 200 day MA lies in additional support? Or was leg 4 too short and is unfinished? I'm not holding at the moment but am interested with others to follow it's course.
I don't have any IMF, but this was what I saw, a couple of weeks ago. I don't normally like to comment on a share when someone else has put their money into it and others are joining into the action.I also read of the director's intention to sell down part of his holding to take up his rights.I hope for the holders sake, that it will retest the support level and bounce off it.It was a well operated, pump and dump scenario that was played out.
------------------------------------------------- Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.
The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.
Baysider / Peterloh : Here are my latest thoughts on IMF. Peter the more comments the better. I agree with your "pump & dump". From my experience with junior mining companies directors exercise options to make money. Also once the options are used up then new ones can be issued at a lower price which somehow always happens. At least that was my experience.
--DSF0.3 -----1.130 -- also potential TP for leg #5
--MTS3 -------0.935 --LTS3 --------0.872
--DSF0.2 ----0.69 --MTS4 -------0.68
- The letter designations: LT - monthly, MT - weekly, ST - daily are used for calculated Support Levels with levels S1 through S4. As implied the values pertain to their respective time periods. The letters MMBB- Monthly Middle Bollinger Band and WLBB - Weekly Lower Bollinger Band. The letters Df and DSF are my designation for descending Fibonacci and descending sub- Fibonacci values.
Yes Baysider the daily chart shows that leg #4 was probably completed going from 1.315 to 1.585 for 0.27 points or 72% of leg #2 . Looks good enough for me and the action fit with the Support / Resistance levels. The level to go Short, for 717, was at 1.49. Now leg #5 has several potential termination points.
The first is at 1.304 which matches with the MTS1 level of 1.305. Interestingly this is also the value for a Fibonacci value . Reversal could occur at this level .
If that level fails then 1.20 - 1.19 is the next target level. Beyond that 1.13 comes into play . This would be met if leg #5 = leg #1 . Again it is also a Fibonacci level where a reversal could be expected to occur.
There is also the potential for 0.85 to be a target and MTS4 at 0.68 would coincide with the target level determined from a chart pattern that might exist in the "sawtooth range" of the daily chart.
IMF Daily Chart
==================== IMF - Weekly Chart
================== IMF - Monthly Chart
================== IMF - Profile of "Sawtooth Range"
After observing Obama on the campaign trail and during his first six months in office, we have concluded that our President lives and governs according to his own set of "Ten Commandments." They're certainly NOT the Ten Commandments you learned in Sunday School. In fact, many are the direct opposite! To prove that our conclusions are correct, you will find a link to source documentation for each commandment on the Patriot Update web site.
I. Thou shalt have no God in America, except for me. For we are no longer a Christian nation and, after all, I am the chosen One. (And like God, I do not have a birth certificate.) SOURCE
II. Thou shalt not make unto thee any graven image, unless it is my face carved on Mt. Rushmore. SOURCE
III. Thou shalt not utter my middle name in vain (or in public). Only I can say Barack Hussein Obama. SOURCE
IV. Remember tax day, April 15th, to keep it holy. SOURCE
V. Honour thy father and thy mother until they are too old and sick to care for. They will cost our public-funded health-care system too much money. SOURCE
VI. Thou shalt not kill, unless you have an unwanted, unborn baby. For it would be an abomination to punish your daughter with a baby. SOURCE
VII. Thou shalt not commit adultery if you are conservative or a Republican. Liberals and Democrats are hereby forgiven for all of their infidelity and immorality, but the careers of conservatives will be forever destroyed. SOURCE
VIII. Thou shalt not steal, until you've been elected to public office. Only then is it acceptable to take money from hard-working, successful citizens and give it to those who do not work, illegal immigrants, or those who do not have the motivation to better their own lives. SOURCE
IX. Thou shalt not discriminate against thy neighbor unless they are conservative, Caucasian, or Christian. SOURCE
X. Thou shalt not covet because it is simply unnecessary. I will place such a heavy tax burden on those that have achieved the American Dream that, by the end of my term as President, nobody will have any wealth or material goods left for you to covet. SOURCE
Number One of Quién Sabes : Alabama Hardware Distributor Blames CIT Woes for Its Bankruptcy
July 18 (Bloomberg) -- A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors.
Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had difficulty getting cash from CIT, its lender.
The company has tried to negotiate with CIT, though “the federal government’s recent decision not to support CIT’s reorganization has thrown CIT into disarray and casts substantial doubt on CIT’s ability to continue to fund the Debtor’s working capital requirements,” Moore-Handley said in documents filed in U.S. Bankruptcy Court in Birmingham, Alabama.
CIT has reported $3 billion of losses in the past eight quarters and has been in talks with lenders about funding its own possible bankruptcy, according to people with knowledge of the matter. CIT may need as much as $6 billion to avoid filing for bankruptcy protection after the U.S. wouldn’t give the firm a second bailout, according to CreditSights Inc.
Curtis Ritter, CIT’s director of media relations, didn’t immediately respond to a request for comment.
The company received $2.33 billion in funds from the U.S. Treasury in December and hasn’t been given access to the Federal Deposit Insurance Corp.’s debt-guarantee program.
‘Crisis’ for Retailers
CIT has said its bankruptcy would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers, according to internal documents.
CIT accounts for about 70 percent of all short-term U.S. financing known as factoring, worth about $40 billion annually, according to Ray Ecke, president of Credit Management Resource in Oakland, New Jersey. In factoring, one company purchases another’s accounts receivable.
Moore-Handley said in court filings that it owes CIT $18.8 million in secured debt, including $11.2 million on a revolving credit line and $6.4 million on a term loan. It also owes $1.25 million to equipment lenders.
Moore-Handley also has been hurt by the slowdown in the housing market, with sales for 2009 expected to be 20 percent lower than last year, the company said in court records.
To survive the downturn, the company hired financial Carl Marks Advisory Group LLC and formed a plan to cut expenses.
Even with that effort, the company has had trouble getting funds from CIT under their current financing arrangement, Moore- Handley said.
Hardware Stores
The company said its main customers are independent hardware and building-supply stores and small, family-owned chains. Its core customers are in the Southeast.
Moore-Handley is asking the bankruptcy judge in Birmingham, Alabama, for authority to use cash pledged as collateral to CIT even though it doesn’t have consent from the New York-based lender.
The Alabama company calls itself the second-largest independent hardware and building material distributor in the U.S. It reported a loss of $1.6 million last year on net sales of $145.5 million. Through June 30, the company already lost $2.4 million.
The case is In re Moore-Handley Inc., 09-04198, U.S. Bankruptcy Court, Northern District Alabama (Birmingham).
The recent G8 Summit in Italy ended with one important concluding note. As President Barack Obama summarised, “For us to think we can somehow deal with some of these global challenges in the absence of major powers like China, India and Brazil seems to me wrongheaded.” A well-timed thought as it is clear that the role played by these nations in the world economy is gaining prominence.
In the resource sector, China has already made its mark not only as one of the largest consumers but also as one of the largest accumulators of commodities. Chinese policy makers have ushered in an environment in which state enterprises, as well as private companies, are seeking to secure resource supplies around the world. It was against this backdrop that China Investment Corporation (CIC), a Sovereign Wealth Fund, acquired some 17% of Teck Cominco.
Copper is not the only metal China seeks to control and Teck is not the only acquisition China has made in the resource sector. In what could be a further indication of China’s tightening grip on the supply side, the China Non-Ferrous Metals Mining (Group) Co., Ltd. (CNMC) recently acquired controlling interest in the Australian rare earth project developer Lynas Corporation Ltd. (Lynas). The full transaction, comprising a combination of equity, debt and loan guarantees, is valued at US$366 million and provides a glimpse of what rare metal companies are really worth.
Interestingly, CNMC is not the only government sponsored rare metals investment company. The Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co. Ltd. (JIH), a unit of East China Exploration & Development Bureau, agreed to acquire a 25% stake in Arafura Resources Ltd., a gold and mineral mining company, for A$24 million, in February 2009. Arafura has a rare earth and phosphate deposit in its Nolans project.
Against this backdrop, one has to draw the attention to the ownership structure of these acquisitions and investments. Both CNMC and JIH are owned by the Chinese government and are established to ensure that China has interests in nonferrous metals both at home and abroad.
These investments clearly indicate that China is aggressively securing rare metal deposits around the world. Given China’s massive consumption of rare metals, their desire to secure supply sources makes sense. The concern however is their continued acquisition would enable them to control both supply and prices thus leaving the rest of the world at their mercy!
These investments clearly indicate that China is aggressively securing rare metal deposits around the world. Given China’s massive consumption of rare metals, their desire to secure supply sources makes sense. The concern however is their continued acquisition would enable them to control both supply and prices thus leaving the rest of the world at their mercy!
According to the EU, for several years China has applied export restrictions (quotas and export duties) to key raw materials of which China is the leading extractor and exporter. Such restrictions naturally distort competition and increase global prices as some of these resources cannot be found elsewhere. While the recent complaint has only been on coke, bauxite, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc, this development provides a foretaste of future developments in other metal markets as well.
In addition to the traditional rare earth metals, other strategic metals such as tantalum are now assuming increasing importance. Tantalum is primarily used in the production of electronics capacitors which find their way into cell phones, DVD players, personal computers, digital cameras, gaming platforms, LCD monitors and wireless devices. It is currently produced by only a handful of suppliers. As China tightens its grip over rare metals with foreign asset purchases and export restrictions, the investment case for tantalum companies is also expected to gain recognition.
The 2 up days for IMF 25th June and 26th June total about 840,000 shares whereas the distribution total 3.4 million was over 8 days. Court cases are not all one way street and if a case is lost, the defendants may have to be compensated on part of the legal cost too.The class action holders do not have to pay a single cent under a no win no pay situation. Like many other companies around this time,I suspect IMF has not been going as smoothly as before. I could be wrong here, but the capital raising may be an indication for that.I think the share will be volatile for some time yet. As 3 of the biggest down days had a bigger volume,it may also signify that a big holder is getting out.If I were to buy IMF, I would rather let it consolidate first, instead of catching a falling knife.I haven't traded IMF before, so someone who has traded this share will definitely know this share better. I made a quick analysis of it because of the interest shown here and pointed out the "pump and dump" scenario which could have been easily overlook.
------------------------------------------------- Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.
The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.
Peter : I used IMF as a test of a numbers crunching system after I saw it mentioned on ODB. From my viewpoint it is a good candidate with the needed volume and volatility.
On paper, it was a Short candidate at the break below 1.58 and remains in that category. I may be wrong but I think it could fall much further than a retest of the recent low.
In my experiences, when I exercised an option it was not to help the company coffers - it was to put money in my account.
Somebody Forgot to Tell Them that the Recession was OVER.
Microsoft cites weakness in PC market in reporting lower profit and sales
Microsoft Corp. said Thursday its fiscal fourth quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share in the same period a year earlier. Revenue in the period ended in June fell 17% to $13.1 billion, Microsoft said. Wall Street analysts had expected Microsoft to post fourth-quarter earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.
Softies Big Drop
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Amazon earnings fall 10% in the second quarter
-- Amazon.com said Thursday afternoon that earnings for the second quarter fell 10% from the same period last year despite a strong gain in sales. For the quarter ended June 30, Amazon /quotes/comstock/15*!amzn/quotes/nls/amzn (AMZN 93.87, -6.47, -6.89%) reported net income of $142 million, or 32 cents a share, compared to net income of $158 million, or 37 cents a share, for the same period last year. Revenue rose 14% to $4.65 billion for the quarter. Analysts were expecting earnings of 32 cents a share on revenue of $4.69 billion, according to consensus estimates from Thomson Reuters.
Leg #4 was completed at 1.585 . Then the down-trending leg #5 was started and so far has reached 1.375 just short of first target level given in last post on IMF.
Here is what was posted before:
Now leg #5 has several potential termination points.
The first is at 1.304 which matches with the MTS1 level of 1.305. Interestingly this is also the value for a Fibonacci value . Reversal could occur at this level .
If that level fails then 1.20 - 1.19 is the next target level. Beyond that 1.13 comes into play . This would be met if leg #5 = leg #1 . Again it is also a Fibonacci level where a reversal could be expected to occur.
There is also the potential for 0.85 to be a target and MTS4 at 0.68 would coincide with the target level determined from a chart pattern that might exist in the "sawtooth range" of the daily chart.
Joe Hagan has a big story on Goldman Sachs (GS) in this week’s New York, and Moe Tkacik and Matt Taibbi both pick up on the way that Hagan deals with Goldman’s share of the AIG (AIG) bailout funds. It’s worth quoting at some length:
Goldman Sachs was AIG’s biggest banking client, having bought $20 billion in credit-default swaps from the insurer back in 2005…
By that weekend in September, Goldman Sachs had collected $7.5 billion from its AIG credit-default swaps but had an additional $13 billion at risk—money AIG could no longer pay. In an age in which we’ve become numb to such astronomical figures, it’s easy to forget that $13 billion was a loss that could have destroyed Goldman at that moment.
Hank Paulson and then–New York Fed chief Tim Geithner called an emergency meeting for the following Monday morning…
At the meeting, it was hard to discern where concerns over AIG’s collapse ended and concern for Goldman Sachs began: Among the 40 or so people in attendance, Goldman Sachs was on every side of the large conference table, with “triple” the number of representatives as other banks, says another person who was there. The entourage was led by the bank’s top brass: CEO Blankfein, co-chief operating officer Jon Winkelried, investment-banking head David Solomon, and its top merchant-banking executive Richard Friedman—all of whom had worked closely with Hank Paulson two years prior…
On the government side, Goldman was also well represented: Geithner himself had never worked for Goldman, but he was an acolyte of former Goldman co-chairman and Clinton Treasury secretary Robert Rubin. Former Goldman vice-president Dan Jester served as Paulson’s representative from the Treasury. And though Paulson himself wasn’t present, he didn’t need to be: He was intimately aware of Goldman’s historical relationship with AIG, since the original AIG swaps were acquired on his watch at Goldman.
The Goldman domination of the meetings might not have raised eyebrows if a private solution had been forthcoming. But on Tuesday, Paulson reversed course and announced that the government would step in and save AIG, spending $85 billion in government money to buy a majority stake…
Of the $52 billion paid to AIG’s counterparties, Goldman Sachs was the biggest recipient: $13 billion, the entire balance of its claim. The amount was surprising: Banks like Merrill Lynch that had bought credit-default swaps from failed insurers other than AIG were paid 13 cents on the dollar in deals moderated by New York’s insurance regulator. Eric Dinallo, the former New York State insurance commissioner, who was at the AIG meetings, characterizes the decision this way: AIG’s counterparties, Goldman being the most prominent, “got to collect on an insurance policy without having the loss.”
Over time, it would appear to many that Goldman Sachs had received a backdoor bailout from a Treasury Department run by the firm’s former CEO. Why did Paulson bail out the banks that did business with AIG, critics have demanded ever since, and not Lehman Brothers? Certainly executives at Lehman want to know. (As one former Lehman managing director there puts it, “The consensus is that we were deliberately fx%*#@*.”)
The first thing worth noting here, beyond Hagan’s clearly prosecutorial stance, is that he’s got Eric Dinallo on the record criticizing the AIG bailout on the grounds that it was a backdoor Goldman Sachs bailout. That’s an important development, I think. Dinallo knows what he’s talking about, and he’s clearly not scared of annoying Goldman.
As Hagan notes, Dinallo was the person who orchestrated the unwind of smaller monolines’ positions; I believe that the 13-cents-on-the-dollar deal with Merrill Lynch was over CDS sold by ACA. I believe that ACA was rare in that it never had a triple-A rating to start with; Merrill was buying insurance from a single-A-rated insurer, which means that it had every reason to assiduously hedge its counterparty risk there.
I don’t think, in all fairness, that ACA ever provided all that much of a precedent for AIG. ACA was small enough that it could fail without much in the way of systemic consequences; it also had no consumer-facing obligations which it might default on. Even Taibbi seems to concede that if AIG had been allowed to fail, the entire financial system would have come down with it:
I was on a radio show a few weeks back with a hedge-fund manager, a Goldman apologist, who insisted on the air that Goldman would actually have made more money if AIG hadn’t been rescued, because the bank was properly hedged against AIG’s collapse… it wasn’t until the show was over that I realized the proper response to that argument was just, “Bullshit!” Goldman has been making that argument ever since the AIG bailout, but it has never come out and identified that magical counterparty or counterparties who’d have been able to come up with $20 billion after a system-wide financial collapse.
I think this is true. Yes, Goldman had as much counterparty hedging as it could, with respect to AIG, but counterparty hedging, like all hedging, is imperfect. For a detailed explanation of how Goldman hedged its counterparty risk, go here. But here’s the conclusion:
Ultimately, you try to hedge what you can hedge; what you can’t hedge, you try to quantify; what you can’t quantify, you try to understand; and what you can’t understand, you keep small enough not to sink the firm.
According to Hagan, Goldman failed on the last front: a loss of $13 billion on its AIG exposures would, he says, have sunk the firm. But then again, a loss of $13 billion on its AIG exposures would only have happened in the context of what Hagan calls “an overall collapse of the financial system” — and no investment bank is set up to survive that.
So yes, the AIG bailout was, to some degree, a Goldman bailout. But really the AIG bailout was a bailout of the entire financial system. Goldman was a beneficiary of that, to be sure, but so was every other financial company in existence.
By Leia Michele Toovey- Exclusive to Nickel Investing News
Nickel will average 6 per cent higher in the fourth quarter than previously forecast after a strike at Vale will reign in supply. Vale workers at the Sudbury nickel operations in Canada are on strike as they are hard- balling management for a change in benefits structure. Vale is already struggling to cope with nickel’s ubiquitous price drop, and CEO Roger Agnelli told media on July 7th that Sudbury was “not sustainable” and Vale won’t yield to union demands.
The strike began July 13 after workers rejected Vale’s proposals for Sudbury’s retirement benefits to be contribution-based, rather than benefit-based. The United Steelworkers’ Union, which represents about 3,100 of Sudbury’s workforce of 5,000, “remains poised” to also go on strike at Vale’s Voisey’s Bay nickel operations in Newfoundland from Aug. 1, McPhee added.
The strike is expected to drive the price of nickel for immediate delivery up to an average of $15,015 a metric tonne in the final three months this year, up from a previous forecast of $14,155 a tonne, according to CPM analyst Catherine Virga. CPM also raised its copper, lead, aluminum and zinc forecasts and lowered its estimate for tin, Virga said.
Nickel prices leapt as high as $17,200 a tonne yesterday. The metal has already gained 47 per cent since May 11, when it was trading for $11,700 per tonne. According to Tony Rizzuto, a New York-based analyst with Dahlman Rose & Co., nickel prices have strengthened in part because of the strike at Sudbury. “The strike is likely to be a longer-term situation — it’s difficult to see how they will break the union,” Rizzuto said in a phone interview. “There’s been a history of strikes at Sudbury and this one could be in excess of 90 days.”
Nickel stocks have remained high in the first half, represented by about 16 weeks of consumption, compared with so called “normal” levels of eight weeks.
Company News
PT International Nickel Indonesia, announced on Thursday that moving forward it would improve efficiency after posting an 89 per cent plunge in second-quarter net profit due to lower prices and weak demand in the economic slowdown. Brazil’s Vale Inco Ltd, which owns 60.8 per cent of Inco, said earlier this week that it planned to cut 87 jobs, almost 3 per cent of its workforce, as part of efforts to cut costs in response to the global crisis. It had also revised down its capital expenditure budget for this year by more than a quarter. Inco said its average realized price slumped 60 per cent to $8,894 per metric tonne in the second quarter, from $22,477 a year ago. Inco produced 16,300 metric tonnes of nickel in matte in April-June, down 4.2 per cent from 17,015 metric tonnes a year ago.
French miner Eramet is anticipating an operating loss for the second half of 2009, after reporting a heavy loss for the first half of the year. The world’s sixth-largest nickel producer made an operating loss of 223 million euros in the first half, after it had warned of a “very significant” loss, and compared to the year-earlier operating profit of 769 million euros.
First-half sales fell 44 per cent to 1.292 billion euros, although the decline eased in the second quarter due to some improvement in nickel prices and manganese volumes. The group plans to cut costs by 140 million euros this year, and also said it would pursue savings in its nickel mining operations to bring costs into line with competitors by 2012.
Russian aluminum giant Rusal has agreed on restructuring terms on $7.4 billion in debt with a committee of international lenders. Rusal has agreed on the principal terms of a long-term debt restructuring with the Coordinating Committee which represents more than 70 international lenders,” the company said in a statement.
“The agreement puts Rusal on a strong and stable financial footing and ensures that the business is capable of weathering the current economic environment.” The deal is still subject to approval by the banks’ credit committee, and if approved Rusal will pay off its debt within seven years.n
Cameroon and a subsidiary of Anglo-Australian mining firm Rio Tinto have signed an agreement to build an aluminium plant and a hydroelectric dam, the state daily Cameroon Tribune reported Thursday. The agreement signed by Prime Minister Philemon Yang and Jean-Philippe Puig of Rio Tinto Alcan (RTA) also provides for a deep water port and is initially worth 3.8 million euros ((5.3 million dollars), the paper said. The aluminium plant with a production of 400,000 tonnes per year will be built at Kribi, like the port, while the hydroelectric dam, with a planned capacity of 930 megawatts, will be at Song Mbengue, also in the south. Work on building the factory will begin at the end of 2011 and will create 30,000 jobs, while aluminium production should begin in 2016. Puig said that the project will be "one of the most important in sub-Saharan Africa in years to come and will enable Cameroon to become one of the major aluminium producing countries," according to the paper. Rio Tinto Alcan is already the majority shareholder in the aluminium company Alucam, which produces about 90,000 tonnes per year at Edea in south Cameroon.
Rio Tinto Spying Cost China Steelmakers $102 Billion
Aug. 9 (Bloomberg) -- Rio Tinto Plc’s six years of spying on China’s steel industry cost the nation 700 billion yuan ($102 billion) in excessive charges for iron ore, said a report published on a Web site controlled by the Chinese government.
Government agencies should enhance surveillance of the secret-protection work at key companies they supervise, said the article on http://www.baomi,org, which is affiliated with the National Administration for the Protection of State Secrets.
China, destination for half the $52 billion global seaborne trade in iron ore, has detained four members of Rio’s Shanghai team, including Australian Stern Hu, on charges they stole state secrets. The detentions have strained relations between China and Australia and followed Rio’s abandoning of a $19.5 billion deal with Aluminum Corp. of China four months after agreeing to what would have been China’s biggest overseas investment.
“That means China gave the employer of those economic spies more than $100 billion for free, which is about 10 percent of Australia’s GDP,” the article said. “It also caused the serious consequence of climbing losses in China’s pillar industry of steelmaking.”
Hu and three other Rio executives were detained by Chinese authorities on July 5 for allegedly stealing state secrets and actions that harmed the nation’s economic interests and security. Australia, which has said the detentions may be connected to annual price talks for iron ore, is seeking more information and has urged China to deal with the case expeditiously.
‘Step Forward’
“This is another step forward and we are moving toward the Rio employees being charged,” said Michael McKinley, a professor of global politics at Australian National University in Canberra. “History tells us that if someone is charged, there is a strong prime facie case and they will most likely be found guilty.”
Australian Prime Minister Kevin Rudd told reporters July 15 that the world was “watching closely” how China handled the Hu case. China is the world’s largest buyer of iron ore and Australia’s second-biggest trading partner, with two-way trade valued at A$68 billion ($57 billion) in 2008, and is also its largest source of foreign investment.
Rio Tinto’s Melbourne-based spokeswoman Amanda Buckley declined to comment on the report when contacted on her mobile phone.
The Web site is operated by the Gold Wall Press, which is administered by the Secrets Office of the Communist Party of China’s Central Committee, according to an introduction on the Web site. The article’s author is Jiang Ruqin, the Web site said, without providing further information.
“The case will still take some time,” McKinley said, “and China has a different definition of national security.” }
SAN FRANCISCO (MarketWatch) -- Ford Motor Co. said Tuesday that total U.S. sales in August rose 17% to 182,149 vehicles from 155,690 last year. In August, Ford Fusion sales jumped 131.6% to 21,010 units, and Focus sales rose 55.9% to 25,547 units. Flex sales rose 106.5% to 4,151 units, and Escape sales rose 49.3% to 20,933 units.
This I'm sure Obie would like buried .
General Motors U.S. August sales drop 20.2%
SAN FRANCISCO (MarketWatch) -- General Motors Co. said Tuesday that total U.S. August sales dropped 20.2% to 246,479 vehicles from 308,817 a year ago. Pontiac sales fared the best with a 23.3% increase to 29,921 vehicles from a year ago. Chevrolet sales saw a 9.2% decline to 168,130 vehicles. Cadillac sales fell 55% to 6,931 units, and Buick sales dropped 51.7% to 8,612 units.
Iron ore price slump may hit BHP Billiton and Rio XCHANGE
September 4, 2009
IN A development which could resurrect the pricing spat between iron ore miners and China, the spot price of iron ore, which reached more than $US100 a tonne last month, has crashed.
BHP Billiton and Rio Tinto are not selling much iron ore on the Chinese spot market these days. Instead, they are selling to customers on a provisional price of about $US60 a tonne for fines, based on the Japanese benchmark.
The benchmark price excludes shipping. If shipping is also excluded from the current $US77 a tonne spot price, spot sales of iron ore are selling for just $US63 a tonne - just a few dollars more than the benchmark.
The situation has changed so dramatically in the last fortnight that higher-cost producers in India that typically sell on the spot market are mulling cuts to output.
To date, BHP and Rio do not appear to have experienced a drop in shipments. Xchange hears Rio was flat out in August, with shipping and production around record levels.
But price could start to become an issue. In the past, when the spot price in China has dipped below the benchmark price, it has refused to continuing paying the higher price embedded in contracts.
Privately, miners say that in contrast with the firm agreements with Japanese and Korean producers, contracts with China are like options that come with no upside and unlimited downside for Australian miners.
Chinese steel prices are starting to fall, and there are fears iron ore imports could as well. If so, that could signal a tougher second half for iron ore miners and perhaps a good opportunity for investors to pick up BHP and Rio shares at a relatively cheap price.
Meanwhile, the market is waiting for any signs of an update on the BHP-Rio iron ore joint venture, even a more concrete guide on the timing of a decision by the European competition regulator.
The iron ore joint venture has been described by many as a win-win proposition for both, but a much bigger win for BHP.
Rio announced the deal on the same day as its $US15 billion ($17.8 billion) rights issue, the cynics would say in part to help prop up the share price after spurning Chinalco.
Now that Rio is not in dire straits, some wonder whether it should go through with the joint venture since it will, in effect, be selling a decent chunk of its production to BHP.
But its finance director, Guy Elliott, recently convinced analysts the venture has Rio's full support. Others note that Rio has considered cutting a deal like this for more than a decade.
Nickel prices have doubled off their March 2009 lows but remain at less than half peak levels
As we saw with many other metals, nickel prices were hammered earlier this year due to anaemic demand. Although the metal has rallied recently thanks to an uptick in stainless steel demand (among other factors), nickel prices are still a far cry from their early 2007 peak. We believe changes within the nickel industry could prevent a repeat of the 2006/2007 bonanza. Namely, a shift toward lower-nickel-content stainless steel has important implications for long-term nickel demand, while the emergence of Chinese nickel pig iron (NPI) production has introduced a swing producer to act as a pressure release valve when demand and prices are high.
Nickel Basics
Roughly two thirds of total nickel consumption goes into the production of stainless steel. Given its anticorrosive properties and the fact that it's easy to clean, stainless steel is widely used in food and chemical processing equipment and food service. Other uses of nickel include alloys for the aerospace, power generation, and automotive industries. As with many other metals, China has become a major consumer of nickel, accounting for approximately one fourth of global demand. The five-year period to 2006 saw rapid growth in global nickel consumption (5% per year, on average, according to the International Nickel Study Group). After 2006, however, nickel demand fell significantly due to weakening economic activity and increasing substitution of lower-nickel-content stainless steel. On the supply side of the equation, nickel production is relatively concentrated, with the top four producers (Norilsk Nickel, Vale, BHP Billiton, and Xstrata) contributing approximately half of the world's total supply. Nickel prices have been quite volatile in recent years, with a surge in demand driving prices to heights of nearly $55,000 per metric ton in early 2007. This spring saw prices drop as low as $9,000 before recently recovering to about $21,000 in August (although prices have now pulled back somewhat from the August highs.)
Nickel pig iron
An important development in the nickel industry in recent years has been the emergence of NPI production in China. NPI is produced from low-grade nickel ore, and this higher-cost production method sits primarily in the upper quartile of the global supply curve. Therefore, NPI production makes sense when nickel prices are strong, and this source can add to global supply when demand surges. NPI production can contribute roughly 200,000 metric tons per year, or roughly 14% of global primary nickel production. NPI production costs vary depending on ore prices, electricity and energy costs, and integration with a stainless steel plant. Estimates for what level of nickel prices "turn on" NPI production vary widely--Xstrata has stated that lower-cost producers need prices of only $11,000, while Australian Bureau of Agricultural and Resource Economics notes prices of $26,000. In other words, this part of the cost curve seems steep. Speaking in aggregate terms, however, given recent decreases in input costs, the nickel price necessary to justify NPI production is probably lower now than it was during the recent commodities boom.
Stainless steel
Changes within the stainless steel market have been a key dynamic for nickel demand. Given $50,000-plus nickel prices, it made sense for stainless steel manufacturers to substitute away from higher-nickel-content stainless. Indeed, in recent years higher-nickel-content stainless has lost share to lower- and no-nickel-content stainless. For example, the market share of "200 series" stainless (a lower-nickel-content variety) increased from roughly 5% in 2001 to over 10% in 2007, according to BHP Billiton and the International Stainless Steel Forum, while the market share of "400 series" stainless (no nickel) increased from about 25% to approximately 30%. This came at the expense of "300 series" stainless, the variety with a higher nickel content, where market share deteriorated from over 70% in 2001 to less than 60% in 2007.
Production cuts
Given weak demand and subsequent collapse in prices, nickel producers responded in the last year with substantial production cuts to attempt to bring the market back into balance. Xstrata estimates that production cuts and disruptions (such as strikes) have amounted to over 20% of global capacity. While these production cuts are necessary to balance supply and demand, some represent idle capacity that could be brought online as nickel prices rise.
Conclusion
We believe two important changes have occurred since dynamics in the nickel market brought about prices of nearly $55,000 per metric ton. High prices taught stainless steel manufacturers to use less nickel, which could have permanent implications for demand. In addition, China had the incentive and the means to ramp up NPI production, which now represents a swing source of supply. In combination, we think that these shifts have created pressure release valves that could limit the upside to nickel prices in the future when the supply/demand balance begins to tighten.
Iowa, Illinois banks bring '09 failure tally to 87 Banks
Eugenio : Here is some of that good news that will drive the Markets. Probably not much as it is only a paltry sum of $234 million.
SAN FRANCISCO (MarketWatch) -- Sioux City, Iowa-based Vantus Bank and Oak Forest, Ill.-based InBank were closed by regulators Friday, bringing the number of U.S. bank failures this year to 87. Vantus Bank had roughly $368 million in deposits as of Aug. 28, the Federal Deposit Insurance Corp. said, while InBank had $199 million in deposits as of Aug. 3. The combined bank failures will cost the federal deposit insurance fund $234 million, the FDIC said.
