Ending of China's super-boom spells pain with no end seen yet

Discussion in 'China' started by I_PLAY_BAD, Jan 4, 2016.

  1. I_PLAY_BAD

    I_PLAY_BAD Regular Member

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    By Henning Gloystein and A. Ananthalakshmi

    SINGAPORE (Reuters) - A decade-old commodity boom came crashing to an end in 2015, hurting energy and mining companies as China's industrial rise and appetite for raw materials slowed. The outlook for 2016 is not much better.

    The Thomson Reuters Core Commodity Index fell by a quarter over the year, to hit its lowest level since 2002 in December, as commodities ranging from iron ore to oil took a battering. And there are few bright spots in sight.

    "The chances of an optimistic 2016 are bleak," Mark To, head of research at Hong Kong's Wing Fung Financial Group, said. "Slowing economic growth and structural reforms in China might contribute to decreased demand for commodities."

    Further interest rate hikes by the U.S. Federal Reserve will add to the pain, by strengthening the dollar and making many commodities more expensive for international buyers, To said.

    Among industrial commodities, iron ore prices have tumbled 40 percent this year due to global oversupply and shrinking Chinese steel demand, for a third year of losses, and the rout is seen stretching into next year.

    In coal, thermal prices fell almost a third in 2015, hurt by waning Chinese demand and the rise of renewable energy, with Goldman Sachs and the International Energy Agency saying China's coal demand has peaked.

    Both iron ore and coal have shed around 80 percent in value since their respective historical peaks in 2011 and 2008.

    The downturn has hammered mining majors like BHP Billiton, Rio Tinto and Anglo American, as well as merchants like Asia's Noble Group and Europe's Glencore, forcing them to slash jobs and sell assets.

    Benchmark oil and natural gas prices have also slumped, down a third this year and two thirds since the rout began in 2014, as ballooning supply met slowing demand.


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    "Headwinds (are) growing for 2016 oil," Morgan Stanley said this week, citing increases in global supply and a slowdown in demand, reflecting a market consensus that meaningfully higher prices are not expected before late 2016.


    FIGHT FOR SURVIVAL

    The outlook is expected to trigger a fight for survival across the supply chain, including shippers and private oil drillers, while oil-dependent countries from Venezuela and Russia to the Middle East face smaller revenues.

    Prices of industrial metals also plummeted this year. Copper and zinc shed a quarter of their value, and nickel collapsed more than 40 percent, hammered by slowing growth in top consumer China. [MET/L]

    Some investors are hoping base metals are over the worst, but some fund managers and analysts expect further losses next year before miners make significant output cuts to offset slowing demand growth.

    "We've come a long way, but 2016 will probably be another lost year for commodities, though we should see a bottom," said Tiberius Asset Management Chief Executive Christoph Eibl.

    "The supply overhang needs to be corrected, which will be painful because that means giving up market share and restructuring," Eibl added. "I think this will happen next year."

    Gold, however, is showing no sign of recovery after sliding to a near six-year low earlier in December.

    The metal was poised to close the year down about 10 percent for its third straight annual loss, on a stronger dollar and prospects that higher U.S. interest rates will hurt demand for non-interest-paying bullion.

    Its outlook heading into next year does not look much better, with several traders and brokerages predicting a drop in prices to $1,000 an ounce or below early in 2016, before firming in the second half.

    Gold has largely been influenced by U.S. data and the Fed's monetary policy. Even if the Fed rate hike path next year is slow, gold would take a hit, said traders.

    Link: http://mobile.reuters.com/article/idUSKBN0UE1CU20151231

    ===========================================

    Should India consider the option of importing these commodities from China as their prices have tumbled in the domestic markets ?
    What opportunities does this market slowdown of China provide for India ?

    @angeldude13 @Abhijat @Ancient Indian @anupamsurey @aliyah @Alien @angeldude13 @Abhijat @Ancient Indian @anupamsurey @aliyah @Alien @Aravind Sanjeev @A chauhan @asingh10 @asianobserve @BATTLE FIELD @bose @Bornubus @brational @blueblood @Blackwater @Blood+
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  3. I_PLAY_BAD

    I_PLAY_BAD Regular Member

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    Chinese stock markets closed after shares fall 7%

    SHANGHAI: Trading on the Shanghai and Shenzhen stock exchanges was ended early on Monday after shares fell seven percent, the first time China's new "circuit breaker" intervened to curb market volatility.

    The drop in the CSI300 index, which covers both bourses, for the first time triggered an automatic early closure under the new system, after an initial 15-minute trading halt failed to stem the declines.

    The falls followed poor data from official and private surveys of manufacturing in the world's second-largest economy. In addition, measures introduced to curb China's mid-2015 share slump are about to expire.

    The trading halt mechanism — dubbed a "circuit breaker" — went into force on Monday, the first trading day of 2016.

    Under the system, intended to reduce wild swings on the Chinese markets, a five percent drop in the CSI300 index sees trading suspended in both Shanghai and Shenzhen for 15 minutes before resuming.

    If the index falls seven percent the markets are closed for the rest of the day.

    Monday's slumps were triggered by a combination of market factors and fundamentals, analysts said.

    "The market is worried about the upcoming lifting of the rule that bans shareholders from selling," Central China Securities analyst Zhang Gang told AFP.

    "The pressure will continue to weigh on the market in the following days."

    China banned shareholders with holdings of more than five percent in a company from selling shares in July as part of efforts to stem a rout that wiped trillions off market capitalisations. The ban will expire on Friday, triggering fears of a big sell-off by major shareholders.

    At the early close the benchmark Shanghai Composite Index had tumbled 6.86 percent, or 242.92 points, to 3,296.26 on turnover of 240.9 billion yuan ($37.0 billion).
    The Shenzhen Composite Index, which tracks stocks on China's second exchange, slumped 8.22 percent, or 189.75 points, to 2,119.16 on turnover of 355.3 billion yuan.

    Official and private Purchasing Manager Index (PMI) surveys of manufacturing activity both showed contraction, heightening concerns over the health of the key sector.

    China on Monday also cut the yuan's value against the greenback, making it weaker than 6.5 for the first time in more than four-and-a-half years, as pressure on the unit mounts from the country's growth slowdown.

    "The weaker PMI and the weaker yuan are the likely triggers," Michael Every, head of financial markets research at Rabobank Group in Hong Kong, told Bloomberg News.

    Every said he believed the yuan in Shanghai and Hong Kong had a lot further to fall. "Fundamentals will see the market struggle," he said.

    ===============================================

    @amoy @Compersion @shiphone @badguy2000 @no smoking

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  4. bose

    bose Senior Member Senior Member

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    There should not be another China in this world... India should learn from China's example what not to do for an economic growth...
     
  5. amoy

    amoy Senior Member Senior Member

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    Obviously with @I_PLAY_BAD some comprehension problems ~ China is a net importer of major commodities, oil, gas, iron ores, coal, industial metals alike.

    The slowdown in the powerhouse results less demand of raw materials

    Therefore if India wishes to help pls contact below big shots BHP Billiton etc. It's them who've felt the crunch miserably, not China.
    China slowdown to leave Australia in 'dire' fiscal position
    China's economy is slowing and, even more worryingly for Australia, its growth is shifting away from relying as heavily on the commodity exports we have specialised in.
    http://www.abc.net.au/news/2015-04-...ave-australia-in-dire-fiscal-position/6405096



    ~~Still waters run deep. ~~from my MiPad using tapatalk
     
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  6. garg_bharat

    garg_bharat Senior Member Senior Member

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    It was widely expected that the construction boom in China will eventually peter out.
    No surprises here.
     
  7. I_PLAY_BAD

    I_PLAY_BAD Regular Member

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    I comprehend that genius.
    I am asking can India use this price depreciation and import commodities from Chinese companies for a cheaper price as the demand in domestic market is low. Don't just dub what I asked with a different sentence. Please give an answer if you have.
     
  8. dhananjay1

    dhananjay1 Regular Member

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    Chinese had gone crazy with building boom in last 10 years, with every town competing with one another to build something outlandish.
     
  9. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    Chinese have done which no other country have done. They have lifted so many people out of poverty that one can only dream.

    Yes, they did some excess in the last 5-7 years but that is not going to erase their gains. They will still grow a modest 5-6%, which is not bad after 10% growth for three decades.

    Funny thing is that they did all this using capitalistic economy while paying only lip service to communism.
     
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  10. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Chinese boom was a commodity driven buildout not a domestic consumption boom. All commodity driven booms end painfully


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  11. bose

    bose Senior Member Senior Member

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    But at what cost ? One will not prefer development where one find difficulty to breath leave alone living... China has created gas chambers... They are the biggest polluters in the world...

    I do not see China recovering in near future more so much so of their so called 10% data is doctored...

    It reminds what my father is to tell me some 35 years back "Communists are rank Opportunist"... They want political power by any means...
     
  12. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    They will clean up with time. You need to pay cost for development. Ever heard of how polluted London was at one point of time?
     
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  13. dhananjay1

    dhananjay1 Regular Member

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    Yes, a lot of newly built buildings were bought up by wealthy as property, while most of the rest didn't benefit much.
     
  14. bose

    bose Senior Member Senior Member

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    It is a million dollar question ... One need to understand that no one can question Chinese government policy on development unlike in western countries and elsewhere...
     
  15. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    The whole country is owned by the communist party only commies benefit


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    Last edited: Jan 5, 2016
  16. no smoking

    no smoking Senior Member Senior Member

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    First time hear this so called "commodity driven buildout", can you explain it a little bit more?
     
  17. amoy

    amoy Senior Member Senior Member

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    Nah, it's always hilarious to hear Indians -
    - accusing of "breath" difficulty and "gas chamber" (the price for progress?) when the topic is on China's ECONOMIC boom
    - diverting to domestic consumption when this is on COMMODITIES

    Sneaking Indian mindset! Always beating about the bush!

    Now I'd love to clarify a few points
    - The pollution in a un-industrialized India is worse
    New Delhi, the World’s Most Polluted City, Is Even More Polluted Than We Realized

    I'm always curious how brazen an Indian poster could be when lecturing others on "gas chamber" :bplease:
    [​IMG]

    Like I have told u before - "Slow trains kill more than bullet trains" in the same vein! People suffer more when there's no/little/inadequate development. When there're problems the answer is more development not stagnation.

    - China's domestic consumption is booming
    These are among the key findings of China’s e-tail revolution: Online shopping as a catalyst for growth, a new report by the McKinsey Global Institute.

    [​IMG]
     
  18. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Chinese have been lying about their growth for 2 decades . Truth coming out economy collapsing even 1 trillion pumped by government can't save stock market. Economist saying China
    Fairy tale over.


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  19. garg_bharat

    garg_bharat Senior Member Senior Member

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    I would take any Western publication including Economist with a pinch of salt.
    China has strengths which far outweigh any weakness in the stock market.

    Stock market is given to cycle of exuberance and despair far more than actual reality.

    There is no doubt there is over-reporting of data in China, but that does not take away solid infrastructure built over last 3 decades.
     
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  20. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    13 percent of Chinese national exports are to one company in USA Walmart . A lot of strength there


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    Last edited: Jan 6, 2016
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  21. Razor

    Razor CIDs from Tamilnadu Senior Member

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    hahaha Chinese talking about Sneaky snaky mindset and beating around the bush.

    Ask a guy from china a question, and 9/10 times he'll give you an indirect answer and beat around the bush; even among "friends."
    This seems to be national trait for them, no directness.
     

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