China steel lockdown hits exports By David Uren AAP March 02, 2009 12:01am DOZENS of freighters carrying Australian iron ore are stalled outside Chinese ports amid a collapse in demand for steel, dashing hopes that Chinese industrial demand will protect Australia from the worst of the global recession. Tumbling Chinese exports and renewed stock market lethargy indicate that efforts by Chinese leaders to defy the global economic crisis are struggling.
Instead of being used in new office buildings, factories and bridges, steel is being stockpiled, driving an 8.6 per cent fall in Chinese steel prices in the past fortnight, The Australian reports.
The situation bodes ill for pivotal annual iron ore contract negotiations between Australia's big iron ore miners and China's steel mills.
The emerging weakness in China will weigh on the Reserve Bank board, which is meeting in Sydney tomorrow to consider a recommendation from the RBA management to halt its run of interest rate cuts.
Although Chinese authorities hope they can hold the decline in the country's growth rate to 8 per cent, the IMF is forecasting 6.5 per cent and private analysts are suggesting it could be considerably lower.
Related Coverage Chinese interest is good The Australian, 4 Feb 2009 Chinese focus on local miners surges The Australian, 3 Feb 2009 Ore price squeeze on Rio, BHP Herald Sun, 9 Jan 2009 Steel slump to continue The Australian, 21 Nov 2008 China iron demand in doubt The Australian, 10 Oct 2008 Kevin Rudd, the RBA and Treasury have clung to the hope that reasonable growth in China will limit reductions in Australian commodity exports and buoy economic activity.
Reserve Bank governor Glenn Stevens told a parliamentary committee 10 days ago there were early signs China's economy had reached a bottom, with industrial production levelling out.
Last week, Treasury's chief economist David Gruen told the Senate that China's fiscal stimulus package would boost commodity markets, and suggested China's economy was already bringing stability to commodity prices.
Until two weeks ago, reports of rising Chinese steel production had lifted world steel prices by 15 per cent since the beginning of the year, while bulk freight shipping rates, seen as an indicator of world commodity demand, were rising as mining companies responded to fresh Chinese orders.
But Macquarie Bank commodity analyst Jim Lennon said ships laden with Australian iron ore were queueing outside China's ports, unable to unload, because of cutbacks by China's steel mills.
"The number of total ships at anchor has risen to 75 from 55 at the beginning of February and from 21 at the beginning of the year," he said.
"This strong increase in ships waiting to unload cargo is clearly a negative sign for the Chinese iron ore market."
Mr Lennon said iron ore freight rates between Australia and China had dropped by between 15 and 20 per cent in the past week.
Little more than 12 months ago, there were long queues of ships outside Australia's coal ports of Newcastle and Dalrymple Bay because the ports could not load them quickly enough.
Citigroup commodities analyst Alan Heap said China's stocks of steel had almost doubled since the beginning of the year as traders readied for the stimulus package.
However, demand has not yet eventuated as China's steel industry continues to grapple with falling exports and the bursting of a property construction boom.
Mr Heap said China's steel production and iron ore demand were set to fall in coming months.
The change in assessment of China's growth outlook is not confined to the iron ore market. China's share market had been the strongest performer worldwide this year, rising 30 per cent since January, but it has reversed direction over the past two weeks, with the Shanghai Composite Index falling 7.9 per cent last week.
Companies that stand to gain from the stimulus package suffered the biggest drops, with the major investor in Rio Tinto, Chinalco, falling on Friday by the maximum limit of 10 per cent.
There is speculation that China's National People's Congress, which starts on Thursday, may be used as a vehicle to announce the doubling of the stimulus package, which is already equivalent to $920 billion.
Standard Chartered's chief China analyst, Stephen Green, said this would be a boost to confidence and improve the chance of meeting the Government's GDP growth target of 8per cent.
He said delays in getting projects approved meant it would be hard to assess the effect of China's stimulus spending for the next few months.
Read more on this story at The Australian.
Email Print Share: Add to MySpace Add to Digg Add to del.icio.us Add to Fark Post to Facebook Add to Kwoff What are these? Send us your news AdvertisementStock Quotes Search ASX code or name ASX Company A - Z
Most Popular Business News Blogs 'Worst year ever' for world's richest man Australia's most hated boss hires guard Aussies slashing personal debt '50,000 out of work within months' Up to 50,000 out of work by 2010 Steel lockdown hits exports Crackdown on banks' big gambles Floods stop mining operations Share market set for rocky ride Share market teeters on brink Girl, 9, to abort twins 'Great white shark attacked teen surfer' Woman leaves life savings on bus 'Worst year ever' for world's richest man Schoolgirl makes small fortune as prostitute Australia's most hated boss hires guard Cops investigate radio show's sick stunt Director 'devastated' over film's ban Fergie to strip down to a bikini Video: Cop caught bashing teenage girl Is he into me or not? Why can’t my husband act like a man? Polish businessman in England Why is the female CEO getting the big stick? Mistresses soon to take cheating husbands to ... How can I stop her blackmailing my friend? Should politicians be given IQ tests? Airline proposing passengers pay per poo Stan Zemanek’s memorable moments Did you have a sadistic teacher?
Market Charts at 09:15AM AUS/ASIA USA European AUD/USD Oil Switch to Chart: Points Change Percent ASX200 3344.5 -1.0 -0.03%
All Ords 3296.9 -0.5 -0.02%
Nikkei 7568.42 +110.49 +1.48%
Hang Seng 12811.57 -83.37 -0.65%
Switch to Chart: Points Change Percent DJIA 7062.93 -119.15 -1.66%
S&P 500 735.09 -17.74 -2.36%
NASDAQ 1126.88 -10.75 -0.94%
S&P 100 348.21 -9.01 -2.52%
Switch to Chart: Points Change Percent FTSE 3830.09 -85.55 -2.18%
DAX 30 3843.74 -98.88 -2.51%
CAC 40 2702.48 -42.36 -1.54%
Euro Top100 1546.92 -30.72 -1.95%
Switch to Chart: Points Change Percent AUD/USD 0.6393 +0.0005 +0.08%
Switch to Chart: Points Change Percent Oil 44.76 -0.46 -1.02%
More Markets
ASX200 - Top Gainers & Losersat 04:10PM Code Name Price Percent GCL Gloucester Coal Limited 4.91 +25.89% EQN Equinox Minerals 1.81 +20.66% OZL OZ Minerals Limited 0.63 +12.5% BLY Boart Longyear 0.10 -29.63% MMG Macquarie Media Group 0.55 -16.8% TSO Tishman Speyer Office Fund 0.07 -16.67%
More Gainers & Losers
Currency Converter Currency Value AUD/USD 0.6393 AUD/EUR 0.5045 AUD/GBP 0.4461 AUD/JPY 62.345 Convert: From: AUD CAD CHF CNY DKK EUR GBP HKD IDR INR JPY MYR NOK NZD SEK SGD THB USD ZAR To: AUD CAD CHF CNY DKK EUR GBP HKD IDR INR JPY MYR NOK NZD SEK SGD THB USD ZAR Sponsored Links New WeightWatchers® Plan Live life to the full with our new Satisfaction plan. No joining fee! www.WeightWatchers.com.au
P&O Biggest Cruise Sale! Save up to 50% - Enjoy P&O Cruising. Book Online
Need an intelligent home loan? For the smartest home loans Check out the CUA difference Click here