Wednesday, March 30, 2016

Steel in Europe

It is not just China that is cutting back on steel production. Demand is down worldwide and Tata Steel says it may sell off its U.K. steel operations. According to this morning’s CNNMoney story on steel production, steel plants have been closing across Europe, and “European officials say as many as 40,000 steel jobs have been lost in recent years,” the result of Chinese steel producers selling steel at a loss.

Monday, March 21, 2016

Car Sales Dip to 2012 Levels

The auto industry in China started 2016 with a sharp decline in retail units sold. Auto sales are volatile by nature, so two months do not indicate a trend, but this was the biggest two-month decline ever recorded with the pace of sales declining by almost half. Viewed on a time scale the data does not look quite so awful. The current pace is roughly that of 2012 and above that of any year before 2012. Still, the abrupt decline in sales is sure to cause some hand-wringing when put together with other indications of slower manufacturing and a sluggish consumer economy. The sales reports were not all bad — sales of electric vehicles were up from last year even as sales of fuel-burning vehicles declined.

Friday, March 4, 2016


China holds huge, mostly secret, stockpiles of basic commodities and sometimes doesn’t know what to do with them. Accounting rules prevent authorities from selling at a loss, so they may bend rules or restrict imports to make sales possible. Some of China’s stored corn is three years old and feared to be moldy. The government is preparing to sell a large amount of it without disclosing the volume or the buyers. Supposedly the corn will go to manufacture basic industrial material such as starch and ethanol, but there are fears that some of it might secretly end up in industrial food products such as corn syrup and corn starch. There are similar, if less serious, problems with selling old rice. Meanwhile, global cotton prices are holding steady in spite of dry weather in key growing areas because of the expectation that China will temporarily bar cotton imports in order to sell off parts of its huge cotton stockpile.

It is a different story with copper, which China is buying to guard against future price increases on the global market. Copper stockpiles can be estimated with some confidence because most of it is registered with exchanges. For the first time that anyone can remember, China has the largest stockpile of finished copper in the world.