Friday, September 28, 2012

Faltering Chinese Demand Affecting a Broad Range of Industries

This from "Financial Armageddon" - have a nice read, then follow link to original
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http://www.financialarmageddon.com/

Faltering Chinese Demand Affecting a Broad Range of Industries

While sporting goods manufacturer Nike late yesterday blamed its disappointing results on weak Chinese demand for its apparel and other products, it's clear that faltering growth in that Asian nation is affecting a range of companies and industries. Here are just a few examples:

Fuel Oil

Shrinking demand for fuel oil in China for fuel oil in China weighed heavily on the Asian fuel oil market on Friday, while heavy arbitrage supply flows into Asia were expected to further depress prices.
Buying interest from China has been badly hit by slowing industrial and manufacturing activity. A key use of fuel oil in China is as a feedstock for small and medium sized refiners, who process the residual fuel for its gas oil, which is then sold of to industries for power generation.

Diesel

China is unlikely to import diesel for domestic use for the rest of the year due to a slowing economy, industry sources say, putting pressure on Asian diesel margins as well as potentially reversing high prices for the fuel in the West.
The drop in imports of diesel, Asia's most widely consumed fuel, is the latest example of slowing industrial activity in China feeding through to demand for resources. Consumption of iron ore, steel and copper have all fallen in recent months.
The main output of Chinese refineries is typically diesel, but China normally starts buying at this time of the year on the spot market to meet peak demand from agriculture and for power generation. This year China is still exporting.

Steel

Sellers of imported iron ore cargoes to top buyer China cut prices for a third day on Tuesday as weak demand pushed the benchmark rate to a one-week low, as the near-term outlook for the steel market remained weak despite recent gains.
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Iron ore has recovered from a near three-year low of $86.70 reached earlier this month, on hopes that China's approval of more than $150 billion worth of infrastructure projects would boost steel demand.
But the rebound has since been curtailed by signs end-user demand for steel in China, the world's biggest consumer and
producer, remains weak despite a recent spike in steel prices.
"Inquiries are very limited. It looks like most mills are done with restocking ahead of the holidays," said an iron ore trader in Shanghai.

Ships

SHANGHAI/DALIAN, China — A major Chinese steelmaker said on Thursday it has halted production at a loss-making plant and expressed doubt that government attempts to stimulate the slowing economy would revive demand in the world's biggest market for the metal.
With China's slowing growth sapping demand for new ships and construction, an industry official said more than a third of the country's iron ore mines were idle due to depressed prices, and the top steel producer also forecast lower output this year.

Coal

Slowing growth in China is taking a brutal toll on Appalachian coal mines and coal towns.
Appalachia has one of the world's richest deposits of high-grade coal used to make steel. Thanks to Chinese demand, the price for premium metallurgical coal, whose low-ash and low-sulfur content makes it ideal for steelmaking, hit a record $330 a metric ton in early 2011.
Now, the Chinese economy is slowing and so is its steel industry. That has sent the price of coal used for steelmaking down nearly 50% to $170 a metric ton. Those coal producers who counted on Chinese sales are reeling.
"When someone had coal to move, China was your big box store," said Ernie Thrasher, chief executive of XCoal Energy & Resources, a major U.S. marketer of such coal to Asia. This year, "the switch went off."

Specialty Minerals

BEIJING -- Prices of China's rare earth products dropped sharply over the past month as market demand remained weak amid the economic slowdown.
Data from Baichuan Information, a raw material information provider, showed that prices of several rare metals, including lanthanum oxide and praseodymium oxide, almost reached the year's lowest level in August despite a rebound starting in June.
The price of praseodymium-neodymium oxide, primarily used to make ceramics and magnetic materials, fell to around 360,000 yuan ($56,800) per ton in August, compared to the year's lowest of 340,000 yuan per ton in March, according to Baichuan Information.
The figure was also significantly down from the highest price level of 1.4 million yuan per ton recorded last year.
"Weak downstream demand is the major reason for the price slump," said Du Shuaibin, an analyst with Baichuan Information.

Trucks

Truck and other commercial vehicle manufacturers are facing growing headwinds from the global economy as demand in Europe, China and Brazil fades and the outlook for the previously buoyant US market grows more uncertain.
Europe’s sovereign debt crisis has caused industrial customers to postpone big-ticket purchases of heavy trucks, while public budget cuts have hurt demand for buses.
Truck sales have also slowed in China and India, two of the world’s biggest commercial vehicles markets, while tougher emissions standards and the weaker economy have caused a lull in Brazil.

Automobiles

After months of enjoying rude health and record sales, the luxury car sector may finally be catching a cold, courtesy of falling demand in southern Europe and China.
Executives at the Paris Motor Show are clear that premium car sales are holding up a lot better than Europe’s embattled mass-market sector.
Still, the big double-digit growth rates in China they enjoyed in past months may be a thing of the past and premium vehicles are becoming a luxury that many southern Europeans can no longer afford.

Diamonds

Demand for diamonds is slowing in China, according to the distribution arm of mining company De Beers, the latest company in the luxury sector to suggest that the meteoric growth rates in the world's No. 2 economy are leveling off.
China jumped to become the world's second-largest diamond consumer last year, buying 10% of the world's production. The country ranks behind the U.S., which buys 38% of the world's diamonds.
"Last year, China grew over 20%. This year, it will be up around 10%," said Varda Shine, chief executive of the Diamond Trading Co., the De Beers subsidiary that distributes rough diamonds.

Household Fixtures

You know it’s going to be a bad year for China’s exporters when all manner of goods – including the kitchen sinks – are gathering dust in storerooms.
“Of course [the slowdown] is affecting us,” Du Huayao, the manager at Foshan Nanhai Bigao Sanitary Ware Co. Ltd., which makes bathroom and kitchen fixtures, said in a telephone interview from his factory in Guangdong province.
“Sales this year from the foreign market have dropped from one-third to two-thirds.”
Compounding Mr. Du’s woes is China’s slowing property market, which has pulled down his domestic sales as well. The company has already laid off 20 of its original 50 workers and has slowed production.

Raw logs and milled lumber

China’s economic slowdown is cutting down the number of logs exported from Pacific Northwest forests.
A new report from the U.S. Forest Service says 25 percent fewer logs were exported from Oregon, Washington, Northern California and Alaska during the first half of this year. That’s compared with the same period of 2011.
Forest Service research economist Xiaoping Zhou says China’s decreasing appetite for raw logs and milled lumber is a big reason for the drop.
“China’s economic slowdown has reduced that country’s demand for log and lumber imports,” Zhou said. “This is largely responsible for the overall decrease in West Coast exports.”
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