Interview with Jim Rodgers on FSO
http://www.financialsense.com/Experts/2005/Rogers.html
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Interview with Jim Rodgers on FSO
http://www.financialsense.com/Experts/2005/Rogers.html
I believe this tread should do well; thanks for introducing this subject. It will fill an important gap.
Cheers,
Gerry
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SILVER - Investment Opportunity of the Decade
Richard Greene
The environment for investment opportunities is, right now, in the process of undergoing a radical change that only a relative handful of investors has come to recognize. A vastly greater number of people believe they are going to become wealthy over the next decade by investing in technology stocks, rather than in the areas we have targeted. When all is said and done at the end of the next decade, we believe silver and silver stocks will have been by far the best performing asset classes on the planet.
First, we think it is appropriate to view the historic bear market that has unfolded since (not 1980 as many believe when silver hit $50, but) 1477 when silver hit an equivalent $806 per ounce!
www.goldinfo.net/silver600.html
When one views this stunning chart (see above link), it is most amazing that for one to appreciate the investment merits of silver, it is not even necessary to rely on silver returning to its historic role as money, although that would truly be the icing on the cake.
Silver is an industrial metal whose price has fallen so low that only a handful of primary silver producers are efficient enough to produce silver profitably. Much of the world's silver production today is produced as a byproduct of gold, copper, lead, and zinc. Many market observers are dumbfounded and question why these producers would continue to sell their product into the market at a loss. Some observers, most notably Jason Hommel and Ted Butler have prodded managements to do the opposite, by either withholding their production or using their excess cash to buy silver. In light of the increasingly rapid money creation, this appears to be a brilliant strategy. Silver Standard (SSRI) has lead the way by purchasing silver on the open market, and Nevada Pacific Gold (NPG) - Toronto is another producer that has announced it will withhold some production.
The truth of the matter is that supply is rapidly drying up. The US Government had a 60-year stockpile of silver that has been completely depleted. There has been a supply deficit in silver for 15 years running and this year the deficit could be as high as 50 million ounces. It is uncertain how or if this deficit will be filled. Whereas 95% of the gold that has been mined still exists, estimates run that only between 250 and 650 million ounces of the silver that has been mined is still in existence, excluding silver jewelry. This means that there is probably as much as seven times as much gold still in existence as silver. In addition, silver is incredibly cheap relative to gold. The long run price of gold to price of silver ratio has been about 16 to 1. Currently, the ratio exceeds 60 to 1 which suggests that silver should appreciate several times the rate of appreciation of gold. The reason this could be explosive is there are a multitude of commercial uses for silver that are difficult if not impossible to replace. Much is made of the replacement of traditional photography with digital photography and its bearish implications for silver usage. Realistically, a good portion of the world's population does not own a computer and in the huge population centers such as China and India, it is much more likely that growth will be seen from these countries in the traditional photography area which uses silver. Silver's unusual chemical properties ensure increased demand in high technology and medical markets which make up 40% of demand. Among its most important properties: it is superconductive, highly reflective, malleable, ductile, it endures extreme temperature ranges, and has electrically low contact resistance. While demand from these areas alone are enough to make the silver story an exciting investment theme, the real home run is if silver returns to its more traditional role in history as money. Incredibly, while not given much publicity this is already happening in at least two US states.
We feel strongly that paper
TANTALUM
Tantalum is a rare, grey-blue metal used primarily in the electronics industry in the manufacture of capacitors, devices that regulate the flow of electricity within electronic circuits. Tantalum has a number of properties that make it a valuable commodity, including:
High Boiling Point (5,425°C)
High Melting Point (2,997°C)
Resistance to corrosion
Ductile ie it alloys well
Superconductivity
Low co-efficient of thermal expansion
High co-efficient of capacitance (capacity to store and release a charge)
Tantalum Applications
The electronics industry is the largest single consumer of tantalum; it is primarily used in the manufacture of capacitors, devices that regulate the flow of electricity within an integrated circuit. Tantalum capacitors are found in many every day devices such as mobile phones, lap top computers and video cameras. Another increasing application for tantalum is as an alloy in the manufacture of turbine blades for power stations and jet engines, where tantalum improves the structural integrity of blades at high temperatures, enabling turbines to operate at higher temperatures, thereby improving fuel efficiency.
History of Tantalum
Geologically tantalum often occurs with tin and until relatively recently, tantalum was regarded as an impurity that attracted penalties to the tin price. Tin was historically produced via dredge operations, mainly in SE Asia, that resulted in large, often high tantalum grade bearing tin slags. Historically, tin slags were the largest source of tantalum, today however, these slags are depleted and they are a less important source of tantalum. Tantalum supply is now dominated by hard rock sources where tantalum is the primary metal of interest.
Tantalum Demand
There is little public information on the tantalum market and tantalum pricing. The Tantalum Institute (“TIC”) is an organisation of many of the world’s tantalum producers, traders and users whose objective is to collect and distribute information on tantalum to its members. Until recently the TIC collected, on a confidential basis, information on the purchases, sales and applications of tantalum from its members and then published that information in a bi-annual bulletin.
These TIC statistics showed that tantalum demand rose steadily from just under 3 million lbs of tantalum in 1993 to over 6 million lbs of tantalum in 2000. The increase in demand was largely driven by the electronics sector, where demand for high performance and miniature electronic goods, such as mobile phones and personal organisers, made its properties particularly attractive. In 2001, as a result of the global economic slow down, demand fell quite dramatically to 1999 levels of approximately 4 million lbs tantalum. Unfortunately in 2002, for legal reasons, one of the world’s largest refiners of tantalum decided to no longer supply this information, so even this limited source of information is now no longer available.
Tantalum Market
Unlike many of the more common metals such as copper and nickel there is no central market for tantalum, as a consequence it is often difficult to determine the price of tantalum. The difficulty in establishing a current price for tantalum is further complicated by the fact that there are many different types and grades of tantalum raw materials, all of which have implications for the refining process.
Source of info:
http://www1.sog.com.au/pages/tantalum.asp
Heavy Metal- Spinal Tap.
We all have our favorite heavy metal but for me Spinal Tap will always
hold a special place. Apart from a series of unfortunate incidents involving their drummers it is the first amplifier that went to eleven that shows how this was a band that was always pushing the boundaries.
Nigel: This is a top to a, you know, what we use on stage, but it's
very...very special because if you can see...
Marty: Yeah...
Nigel: ...the numbers all go to eleven. Look...right across the board.
Marty: Ahh...oh, I see....
Nigel: Eleven...eleven...eleven....
Marty: ...and most of these amps go up to ten....
Nigel: Exactly.
Marty: Does that mean it's...louder? Is it any louder?
Nigel: Well, it's one louder, isn't it? It's not ten. You see,
most...most blokes, you know, will be playing at ten. You're on ten
here...all the way up...all the way up....
Marty: Yeah....
Nigel: ...all the way up. You're on ten on your guitar...where can you go
from there? Where?
Marty: I don't know....
Nigel: Nowhere. Exactly. What we do is if we need that extra...push over
the cliff...you know what we do?
Marty: Put it up to eleven.
Nigel: Eleven. Exactly. One louder.
Marty: Why don't you just make ten louder and make ten be the top...
number...and make that a little louder?
Nigel: ...these go to eleven.
URANIUM
Following the advance of nuclear power generation over the last decades, uranium has become one of the
world's most important energy minerals.
Currently, uranium from nuclear reactors generates over 16% of the world's electricity or about 2,400 billion
kWh each year, which is equivalent to 12 times Australia's total electricity production. It comes from over 440
nuclear reactors with a total output capacity of more than 350 000 megawatts (MWe) operating in 31 countries.
In addition, 28 reactors are under construction and a further 71 are being proposed.
Australian Market
Australia is now one of the world's major producers and exporters of uranium, providing about 25% of world
uranium supply. Major countries buying Australian uranium include USA, Japan and South Korea.
Australia’s reasonably assured resources of uranium represent around 28% of the world total reserves.
Known Recoverable Resources* of Uranium
Tonnes Uranium Percentage of world
Australia 989,000 28%
Kazakhstan 622,000 18%
Canada 439,000 12%
South Africa 298,000 8%
Namibia 213,000 6%
Russian Fed. 158,000 4%
Brazil 143,000 4%
USA 102,000 3%
Uzbekistan 93,000 3%
World 3,537,000 100%
* Reasonably Assured Resources plus Estimated Additional Resources - category 1, to US$ 80/kg U
According to international policies regarding nuclear power, uranium can be sold only to countries which are
signatories of the Nuclear Non-Proliferation Treaty, allowing inspection to confirm that it is used only for power
generation purposes. Importantly, customer countries for Australia's uranium must also have a bilateral
safeguards agreement with Australia.
Supply x Demand Forces
Fundamentally, uranium prices are expected to remain above US$20/lb. While world consumption is currently
about 78,000t U3O8, mine production is around only 42,000t. The gap from consumption and production is then
filled up with stockpiles and recycled military uranium. As most of these stockpiles are largely depleted, concerns
regarding a supply deficit have driven spot prices from US$10/lb U3O8 in early 2001 to nearly US$20/lb U3O8 in
mid 2004.
Historical U3O8 Prices
1987 - $17/lb
1988 -
1989 -
1990 -
1991
1992 - $7/lb
1993
1994
1995 - $9/lb
1996
1997 - $16/lb
1998
1999 - $8/lb
2000
2001 - $7/lb
2002
2003 - $10/lb
2004 - $20/lb
Over the last decades, increasing fuel demand has been partly offset by the implementation of power reactors’
operational efficiencies. Consequently, uranium fuel requirements have increased at a lower pace than power
reactors have increased their capacity.
Currently there are 28 new reactors under construction around the world, with another 35 on order and a further
71 at the proposal stage. Assuming that all these reactors come into operation, demand for uranium will increase
by more than 30% in order to meet future nuclear power needs.
While the construction of nuclear power reactors is capital intensive, they are relatively cheap to operate
compared to gas/coal fired power stations. The cost of fuel for a nuclear power station is less than for an
equivalent coal fired power plant, making nuclear reactors competitive with coal and gas plants.
As coal raises environmental issues on its emissions and gas prices rise, nuclear energy looks progressively
more attractive. In 2002 Australian uranium exports saved the emission of some 290Mt of carbon dioxide. In a
greenhouse conscious world, nuclear power has now the potential to increase its share of the electricity market
at a faster pace than in the past.
A major supply deficit
is expected from
around 2008.
Expectations of growing uranium
demand over the next decade are
also supported by the World
Energy Council forecast that
electricity demand should almost
double from 1990 to 2002 and
concerns regarding the emission of
greenhouse gases.
Source - Martinplace Securities report
http://www.summitresources.com.au/
.
Here's one for ya Mick that I was gonna put on my iron thread, but yours is at the top of the page and I'm too lazy to scroll down to mine located just below yours.
Steel producers bet on new market dynamics
`For the next 10 years, steel prices are going to be higher than the ones obtained in the last 10 years.'
THE SUNSHINE days are here again for the Indian steel industry. A combination of factors appears to be working to push it on to a higher orbit. If the steel producers are grinning, consumers at large are wearing a grim look. The way the industry is slowly moving into a new era, chances are that prices will head only one way - northward.
In the emerging global scene, experts predict a shift in steel use away from the developed world towards populous nations like China and India.
B. Muthuraman, Managing Director of Tata Steel, is convinced that the steel dynamics will witness a dramatic change in the next 25-30 years. A quick recap will be in order before taking a peep into the future.
Steel making has come a long way since its commercial production in 1856. In the first six decades of the last century, there was only an upward movement in steel consumption. The growth averaged around 7-8 per cent a year. Subsequently, the growth rate halved over the next 30 years. From 1980 to until a couple of years ago, the rate slumped further and was hovering just around 2 per cent.
Saturation in U.S.
The reasons for the slide are not far to seek. The slowdown is primarily explained by the fact that the per capita steel use in the developed countries has settled down to the sustainable level of around 300 kg. "The U.S. does not build any more houses. By this, I do not mean that no houses are being built. I mean they are building very few houses. This is because the population increases in that country is marginal. So, very few houses, bridges and roads are getting built,'' Mr. Muthuraman says. Major U.S. steel consumption is in consumer durables such as cars, refrigerators and domestic appliances.
Even in a developed economy, the sustainable level of consumption is only 300 kg per person. "When a country is in infrastructure creation mode, the per capita consumption goes above 300 kg to even 1,000 kg and then comes down and remains stable around 300 kg,'' Mr. Muthuraman points out.
Given the fact that even in an advanced nation the sustainable level of per capita consumption is 300 kg, the six billion people in the world should be consuming close to two billion tonnes of steel. At the moment, however, the global steel consumption is just half of this. How do we scale the potential? This can happen if countries across the globe can scale the quality levels obtaining in the developed nations like the U.S., Japan and Europe. Even if a nation reaches that level, a steel consumption of 300 kg per person may still be required. If the population rises, the demand can go beyond the two billion tonne estimate.
The U.S, Europe, South Korea and Japan may have hit the dead-end vis-a-vis infrastructure growth. Further, they do not have a great people size to drive steel consumption further up. "The U.S. population is about 300 million. Europe has 300 million. Japan has 120 million or so. With such populations, the infrastructure creation gets completed quickly. And, a stable level of consumption is reached,'' points out Mr. Muthuraman.
After these nations reached a stable level, China is now on the upsurge. Chinese consumption of steel this year is slated to be in the vicinity of 290 million tonnes for a population of 1.3 billion people. This works out to a per capita consumption of 220 kg. A sizable part of China is still backward. So, there is huge scope for per capita steel consumption to go up substantially. "I can tell you that it may reach 600-700 kg in the next 15-20 years. It will then settle down to 300 kg,'' predicts the Tata Steel Managing Director. Ipso facto, he feels that ``the steel consumption... and economic prosperity in the world has now shifted to more populous countries. Therefore,
Oil prices surge
An International Energy Agency report stresses a strain from rising demand and weak supply growth.
February 10, 2005: 10:30 AM EST
LONDON (Reuters) - Oil prices jumped Thursday as the International Energy Agency said faster-than-expected demand and disappointing world supply growth threatened to keep the strain on world supplies.
The IEA's monthly Oil Market Report cut its forecasts for non-OPEC supply growth, especially from Russia where supply has boomed in recent years.
The agency, which advises industrialized nations on energy policy also revised up its 2005 oil demand forecast and reported a heavy fall in oil stocks during December.
Light crude for March delivery was $1.19 higher at $46.65 a barrel following the report. London Brent crude was up 89 cents at $44.02.
Lower expectations for Russian production growth and ongoing problems in other non-OPEC producers threatens to maintain the supply strain that fueled last year's 34 percent oil price rise.
"While 2004 was characterized by surprises in demand, 2005 has begun with changed to the expected supply," the Paris-based agency said.
The IEA also revised upwards world oil demand growth estimates by 80,000 bpd to 1.52 million bpd, based on a robust Chinese and South Asian outlook.
The IEA warned however of the danger of an economic slowdown, adding: "The impact of the oil price rise over the past year has been felt and will continue to be felt in 2005."
Latest official data Wednesday had shown that crude stocks in the United States are more than 20 million barrels above year-ago levels, while inventories of gasoline were nine million barrels in surplus to last year.
Dealers said news that top exporter Saudi Arabia would maintain supplies at current levels in March had reduced the chance of an imminent cut in output by the OPEC producers' cartel.
The Organization of the Petroleum Exporting Countries is due to review production policy on March 16 in Iran. Dealers had been wary that rising supplies and any sharp fall in prices may trigger an early OPEC cut agreement by telephone.
source: http://money.cnn.com/2005/02/10/mark...reut/index.htm
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By Bill Powers
February 4, 2005
www.canadianenergyviewpoint.com Email Article
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In January 2004, I put together an article that appeared in the February 2004 issue of the Canadian Energy Viewpoint, which laid out the case for and against $50 oil. While the arguments against $50 oil have been thoroughly discredited, most market observers still do not understand that the price of oil will continue to head much higher. Below, I will examine several of the reasons why the price of oil will not significantly pull back from today’s levels and is likely to reach the $80 mark within the next 24 months.
At the foundation of many oil analysts’ argument for lower oil prices is the belief that OPEC can control the price of oil and use its spare capacity to keep the price within acceptable limits. There is one main reason this line of thinking is not valid – OPEC has no spare capacity whatsoever. OPEC, or more specifically Saudi Arabia, has given several indications over the past two years that it will increase production to keep oil prices at palatable levels, yet we continue to see oil prices reach new highs.
In past years, when there was excess production capacity both inside and outside of OPEC, high prices always brought additional supply onto the market. Times have changed and many analysts have failed to recognize it. Now that the world has reached the apex of Hubbert’s Peak (the thesis that once half of a petroleum-producing region’s reserves have been extracted, that region’s oil production will peak and decline along a bell-shaped curve), the world’s supply of oil will go down irrespective of price. This is an extremely bullish situation for the price of oil.
Some of the industry’s most informed participants believe there is little that can be done to increase worldwide oil production. Last year, British Petroleum announced that it will be returning to shareholders all cash flow it receives in excess of $25US per barrel. For every dollar the company receives in excess of $25US per barrel, BP will adjust its dividend or increase its share buyback program to return the cash flow to shareholders. BP has essentially given up its efforts to increase production or even keep production flat. Instead, the company has chosen to give shareholders back their capital with interest.
Another reason the price of oil is headed higher is that OPEC’s reserve base is vastly overstated. One of the world’s leading experts on petroleum supply, Dr. Colin Campbell, contends that OPEC has been vastly overstating its reserves for years. Campbell offers substantial evidence that OPEC reserve estimates are politically motivated. Kuwait is an excellent example of what is wrong with the way OPEC countries report reserves. The country reported a gradual decline in its reserve base from 1980 to 1984. This should be expected from a mature producing country. However in 1985, the country reported a 50% increase in reserves with no corresponding discovery. The Kuwaiti government increased its reserve estimate following the implementation of an OPEC production quota system that set country production levels based on country reserves. Kuwait was not alone in increasing its reserves for political reasons. In 1988, Abu Dhabi, Dubai, Iran and Iraq all significantly increased their reported reserves for political reasons. Even OPEC heavyweight Saudi Arabia followed suit and reported a massive increase in reserves in 1990.
Lack of new discoveries in both OPEC countries and non-OPEC countries has led to the current situation in which the world consumes far more oil each year than it discovers. According to Dr. Campbell, the world consumes four barrels of oil for every one it discovers. Clearly this situation cannot continue indefinitely since discovery and consumption must mirror each other.
The last reason I believe we will see $80 oil within the next 24 months is that worldwide oil supply is dropping and prices have not yet reached levels high enough to choke off demand. Despite record gasoline pric
Platinum - The Noble Metal
Ron Struthers
Platinum is often referred to as the 'noble metal'. Webster's definition of Noble is "high and great in character, showing greatness, outstanding or excellent, fine splendid, magnificent"
Platinum has certainly been standing up to this definition. The noble metal averaged US$845 a troy ounce in 2004, the highest average annual price since 1980 and also up 22% from the average in 2003 of $691/oz.
Platinum has always been a leader in the precious metal sector, other than a brief time in 1996 when gold was priced higher than platinum. The platinum price has been the top performer in this precious metal rally, climbing from $350 in 1999 to $950 in 2004 up 171%.
Meanwhile gold went from $255 in 1999 to a high of $457 in 2004 up 79%. Silver up about 95% from its 2001 low to recent high.
Since platinum spiked early in the year to $950, it has settled in a trading range between $825 and $875 for the past 6 months.
Probably the big question on your mind, can the platinum price maintain these lofty levels?
I think so, and here is why
You probably are aware that the most platinum production comes from South Africa (S.A.). In 2003, 75% of global supply came from S.A. and 17% from Russia. Three mines, namely Anglo American Platinum (Angloplats), Impala Platinum (Implats) and Lonmin plc Platinum (Lonplats), accounted for 96% of S.A. production. Norilsk Nickel (Norilsk) accounted for 98% of Russia's production and Montana's Stillwater produced 2% of the world's platinum.
Much higher metal prices normally translate into higher production, resulting in lower prices as supply increases. However, since most platinum is mined in S.A. and mainly by three producers, what is happening here is of importance.
The most important factor, is the main listed PGM producers operating in S.A. have seen the S.A. currency (Rand) appreciate significantly, it has been one of the strongest currencies and this has resulted in operating margins that have actually contracted while platinum prices have skyrocketed!
According to a very recent report by Deutsche Bank, based on their new long-term rand forecast, they have calculated an average marginal cost of production for an "average" Bushveld Igneous Complex operation at US$700 per ounce. Their modelling shows a range of marginal costs of production of US$600-850 per ounce on a 3-PGM basis depending on individual circumstances.
This US$700 cost/ounce is based on a decrease in both their short-term (three-year) Rand/US$ forecast by 20-25% & importantly, their long-term real rand forecast has decreased by ±22% to R7.10/US$ (from R9.10/US$).
You can see that unless platinum prices remain high, S.A. producers will be unable to expand to meet future higher demand. The cost forecast also considers a drop in the rand/US$ rate. If the rand rises further, so will costs and probably US$ platinum prices.
There are sufficient platinum reserves if the price is high to meet long-term demand, but delays in planned expansions have resulted in demand outstripping supply since 1998. The most notable example is Angloplats, which announced in 2000 its planned expansion from 2 million platinum ounces/year to 3.5 million by 2006. Every subsequent year it has missed its target and in December 2003 it revised down its target for 2006 by 15% to 2.9 million platinum.
The longer term mining trend looks bullish too, in future more UG2 Reef and less Merensky Reef will be mined, due to a greater depletion of the latter. UG2 has a higher proportion of palladium and less platinum and base metals, which will influence the supply of platinum. The metal ratios in the eastern Bushveld also have more palladium and less platinum and base metals than those in the western Bushveld, where historically the majority of the mining has taken place.
No stockpiles left
Since 1990, approximately 6 million platinum ounces and 19 million palladium ounces have been sold from the Russian strategic stockpile. The size of the Russian PGM strategic stockpile is
TWELVE GUIDELINES
FOR BUYING GOLD MINING STOCKS
Kenneth J. Gerbino
The twelve guidelines should help you to better understand some investment basics regarding the mining industry, especially if you do not have a background in geology or mining engineering. I have kept this as non-technical as possible so no one falls asleep. Keep in mind, these are basic guidelines and far from complete.
-If the company does not have an independent professional resource calculation for gold or silver or other minerals, know that someone is either speculating or guessing at the most critical data point regarding mining industry valuations. Be careful not to confuse "resources" with "reserves". Measured and Indicated resources are reliable as a resource. "Inferred resources" are very speculative mineral inventories, so be careful when "inferred" is used. A resource still has a long way to go to become an economic deposit, as opposed to "reserves" which are deemed to be proven economic and mineable ounces calculated by very strict engineering and government rules. Canada's National Instrument 43-101 is one such guideline regarding resources and reserves.
-I would suggest your portfolio be 60% invested in companies already producing gold or silver profitably. The other 40% divide into companies close to production with impressive projects or very far along in defining large and significant mineral resources. Producers should include majors and mid-tiers (your monetary insurance, since they undoubtedly have the goods in the ground). Look for mid-tiers with good growth profiles. Junior producers with new projects are also ok.
-Companies with lots of money in the bank or access to sponsorship from top investment banks in Toronto, London and Vancouver is vital in this capital intensive business and always a good thing to look for. Diversify: have at least 15 good companies. Depending on your risk tolerance you could allocate a small portion to grass roots exploration stocks but know this is the very high-risk end of the business.
-The industry has changed in the last five years. Exploration and development budgets from 1998 to 2002 declined dramatically. Therefore going forward, in my opinion, any substantial project that is near feasibility (an extensive outside engineering report based usually on tens of millions of dollars of geological, metallurgical, and engineering work) could be a buy-out candidate for major and mid-tier companies that need to catch up on reserve replacement and growth.
-"Good management" is an overused word. My definition of good management is 20 year mining professionals who have had successful executive positions with large or successful mining companies or projects in the past. If you see names like Barrick, Newmont, Placer, Anglo, Goldfields, etc. on the resume you are most likely dealing with some quality professionals. People who ran mid-tier companies or successfully helped bring medium to large projects to production also qualify. There are always exceptions, but you better know who you are dealing with. Direct mail pieces touting some gold stock and claiming top management should be carefully checked out.
-Size is very important. The larger the deposit or potential resource the better. Small mines are not worth your trouble as there are few institutions that will finance them and fewer companies that will ever acquire them. With gold mines try and look for 2-3 million ounce and above possibilities. Mining giant Goldfields, only targets projects with 2 million reserve ounces. With silver, 100 million ounces should be your minimum. But the above still has to be qualified. If the resource is too deep under the surface, of very low grade (richness), or has one of many other negative reasons it may not ever be economic to mine.
-Tonnage is important. Big tonnage operations create economies of scale that can make some low metal values economic to mine. Three hundred million tonnes (a tonne is 2204.62 pounds, not to be confused with a ton which is 2000 pounds) for an open pit gold mi
The Feb 8th Bulletin magazine has a two page article on nuclear power and the shortage of uranium. 68% Rio Tinto owned ERA gets a mention.
A Case For Investing in Water:
http://www.financialsense.com/editor...2005/0211.html
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Fresh water - Blue Gold
An essay by Jim Puplava
http://www.financialsense.com/Market...2004/1122.html
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Bloomberg News
E-Mail This Story Printer-Friendly Format
China Says Oil to Exceed 50 Percent of Its Energy by 2010
Feb. 14 (Bloomberg) -- China will rely on oil for more than half of its energy by 2010, when net imports will rise to between 180 million tons and 200 million tons of oil a year, a Chinese official said.
``China should import more energy - that's the picture for oil and gas,'' Gao Shixian, director of energy economics and development strategy at China's National Development and Reform Commission, said at a conference in London today. ``Energy diversification is a priority for China.''
The world's second-largest oil consumer after the U.S., China relies on coal for two-third's of its energy. Rapid growth in Chinese demand helped send oil prices to record levels last year.
By 2010, oil will account for between 51.4 percent and 52.6 percent of China's energy needs, up from 29.1 percent in 2000, Shixian said at an ``IP Week'' conference organized by the U.K.'s Energy Institute. In 2010, the country's oil demand will probably be between 350 million tons and 380 million tons.
Last year, China's net import of oil was more than 100 million tons, of which about half came from the Middle East.
China's natural gas consumption is rising at an even faster pace and the country is projected to have net gas imports of between 20 billion cubic meters and 25 billion cubic meters in 2010, from zero imports in 2000.
By 2010, natural gas will account for 20 percent of the country's energy needs, as the percentage share for coal declines. The country may import more gas in the form of liquefied natural gas, or LNG, as industrial demand grows, Shixian said.
China paid $1 billion more for oil and gas last year because of higher prices, he said. The country has about 40 million private cars, he said, a low figure when compared with developed nations considering that China has about 1.3 billion people.
China's demand is unlikely to rise as fast in 2005 as in 2004, Adam Sieminski, global oil strategist at Deutsche Bank AG, said at the conference.
To contact the reporter on this story:
Stephen Voss in London sev@bloomberg.net
To contact the editor responsible for this story:
Tim Coulter at tcoulter@bloomberg.net
Last Updated: February 14, 2005 11:54 EST
O Mick I am pleased you do not just follow gold. Most people apart from the blinkered yankee infidels have worked it out that gold is going nowhere.
I would describe myself as being bullish on all commodities / resources abdab, including gold
Only 1 in 10 co's that i hold is primarily into gold. You may have got the wrong impression from my rantings on the gold thread.
Mick
Like Mick100 I am very bullish on commodities and resources
Initially I was not sure how long that the bullishness would last , but I am now convinced that it will be with us for at least another two or three years and perhaps much longer , ten years or more a possibility
I have the vast majority of my funds invested in commodities and resources , with a wide spread within the sector
Returns achieved over the last couple of years have been very satisfying and I expect a continuation thereof , but at a slightly reduced rate
China's Iron-Ore Imports Will Grow 15% This Year, SSY Says
Jan. 13 (Bloomberg) -- Chinese imports of iron ore for use in steelmaking will expand by 15 percent in 2005 as China increases steel output, shipbroker Simpson Spence & Young said.
Iron ore imports will rise to 240 million tons as the world's fastest growing economy starts new steel mills, SSY told a meeting held by the Organization for Economic Cooperation and Development today in Paris.
The iron ore mining industry will maintain its status as the leading growth area for the shipping industry, SSK said in an e-mailed report used as a presentation at today's conference.
Melbourne-based BHP Billiton Plc, the world's largest mining company, Rio de Janeiro-based Vale do Rio Doce and London- based Rio Tinto Plc will boost their iron ore mining capacity by more than 150 million tons a year in the next four years to meet higher demand from steelmakers, SSY said.
China's steelmakers will raise output of the metal used in washing machines and cars by 12 percent to 303 million tons this year, SSY said, and by a further 7 percent in 2006.
Steel demand growth in China may slow to an annual 7 percent to 8 percent this year and next, compared with as much as 25 percent a year between 2001 and 2004, SSY said.
Iron ore prices, which rose 19 percent last year, may increase 20 percent this year to $30 a ton, Morgan Stanley said in a Nov. 15 report. World Steel Dynamics said surging coking coal and iron ore prices will likely add $35 a ton to integrated steel mill costs next year.
Imports of coking coal, another ingredient in steelmaking, will grow as much as 20 million tons a year this year and next as China boosts its steelmaking capacity, SSY said.
To contact the reporter responsible for this story:
Matthew Craze in London at mcraze@bloomberg.net.
To contact the editor responsible for this story:
Stephen Farr at sfarr@bloomberg.net
Last Updated: January 13, 2005 12:44 EST
The Super cycle Thesis - Commodities
http://www.aireview.com/index.php?ac...atid=5&id=1328
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Metal price forcasts
http://www.aireview.com/index.php?ac...atid=8&id=1384
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In my opinion copper will remain at very high prices for some time
It has just broken through US $1.50 per pound and is in supply deficit
China has an insatiable thirst for it for such things as power stations , communications , housing , vehicles etc and this will continue for some years
Check out price and stock charts at www.kitco.com
If Commodities Beckon, Use Caution
Monday July 12, 2004 11:22 am ET
By Will Swarts, TheStreet.com Staff Reporter
If first-half trends continue over the next six months, this could be the year of commodities. Stocks have fared poorly, bonds worse, but commodity investors have seen gains from the rising prices of everything from oil to steel to meat.
So, if you're looking for a piece of the action, investment professionals say it's best to spread the risk throughout the futures markets, rather than betting big on soybean contracts and taking a beating in these fast-moving and often volatile markets.
Whether investors buy into mutual funds that invest in commodity baskets or commodity-related equities, or take on a bigger commitment with some of the closed-end partnerships that follow futures indices such as the Goldman Sachs Commodity Index or the Dow Jones AIG Commodity Index, financial advisers warn that any move into these volatile markets requires a good deal of research to make sure you know what you own. Most funds that offer some type of commodity exposure are heavily weighted to the energy sector, which has been especially volatile over the last several months.
But once you know what you're buying, many investment professionals say a small allocation of 5% to 10% of your portfolio is a smart move.
"That would be the maximum allocation," says Jim Baer, managing member of Uhlmann Price Securities, which sells the Rogers International Raw Materials Fund, a limited investment partnership based on an index devised by the high-profile investor Jim Rogers, best known for his book Investment Biker.
"As far as your portfolio's concerned, this will give you a noncorrelated investment that normally works the opposite of stocks and bonds, and real estate," Baer says.
Lynn Russell, a mutual fund analyst at Morningstar, says most small investors get exposure to commodities through funds, either the (Nasdaq:PCRAX - News)Pimco Real Return fund or the (Nasdaq:QRAAX - News)Oppenheimer Real Asset fund, which invest in commodity indices, or in any of the 40 or so natural resources equity funds, which led the fund tracker's performance categories last year with an average return of 32%, well ahead of the S&P 500's 22.3% gain.
Russell says resource funds -- which take on commodities by investing in oil, timber, mining and agricultural companies, for example -- continue to outpace the S&P this year, but that buyers should know funds such as the (Nasdaq:VGENX - News)Vanguard Energy don't offer the same diversification as the direct commodity buys.
"It's not just that it's apples and oranges," she said. "Some are actually kumquats. Equities don't move in lockstep to the commodities themselves. The funds that invest in equities are going to move differently than the commodity funds do, and there is much more variability in how different types of equities behave."
She and others say the recent boom in commodities owes much to the rapid pace of development in large emerging markets, especially China and India. That opens an investor up to geopolitical risk, and that can mean wide price swings if a national economy slows. Combine that with the recent volatility of the oil market, and it's no surprise that Michael Kitces, a financial planner in Columbia, Md., urges caution, telling small investors to avoid any sort of individual futures contract.
"They're big markets and they move very quickly, and you can't possibly have more information about them than the people on the trading floor," he says. "By the time you hear the Florida orange crop is bad and orange juice futures are tanking, the price is already down. It's virtually impossible for you to make winning trades on information that others don't already have. You can't analyze commodities like stocks."
But investors who want to try their hand at timing those markets in some fashion can head for a quartet of funds offered by Maryland fund company Rydex, which allows rapid trading of its funds. The no-load funds that focus on exposure to co
China - driving Global Raw Materials Growth
A presentation from BHP
http://www.abare.gov.au/china/presentations/Kirkby.pdf
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Unloved, undervalued and underowned - (commodities)
Jim Puplava
http://www.financialsense.com/Market...2005/0124.html
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Uranium mining in Australia
http://www.uic.com.au/mines.htm
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Bloomberg News
E-Mail This Story Printer-Friendly Format
Copper Trades Near 16-Year High on China Demand, Weaker Dollar
Feb. 18 (Bloomberg) -- Copper traded near a 16-year high in London as China's expansion of its electricity network boosted demand and a weaker dollar made commodities cheaper for holders of other currencies.
Copper futures topped $3,200 a metric ton for the second time since March 1989 and headed for the biggest weekly gain since mid- December. The metal has climbed 4 percent since Feb. 11 as Asian traders return to the market following a seven-day shutdown for the Lunar New Year holidays. Copper is used mostly to make electrical cables and wiring.
``China's insatiable need for more power will help keep the copper price bubbling,'' Gary Mead and Jessica Cross, analysts at U.K.-based consulting company Virtual Metals, said in a report published yesterday by Fortis Bank. Copper for delivery in three months may reach $3,500 a ton in the first half, they said.
The contract was up $33, or 1.1 percent, to $3,190 a ton on the London Metal Exchange at 9:13 a.m. It earlier reached $3,215, or $5 short of yesterday's intraday peak. The metal has risen 1.3 percent this year after a 37 percent gain in 2004.
``Investment funds were the driving force behind the rise,'' Tobin Gorey, an economist at Commonwealth Bank of Australia in Sydney, said in a report today. ``A weaker euro-dollar did the market no harm.''
Dollar Slump
The dollar headed for its biggest weekly loss against the euro after Federal Reserve Chairman Alan Greenspan declined to signal an acceleration in interest-rate increases. Copper is denominated in dollars.
The U.S. currency is down 2.5 percent from a three-month high of $1.2732 per euro on Feb. 7. Greenspan yesterday told the House Financial Services Committee that U.S. interest rates are still ``fairly low'' after six quarter-point increases since June.
Demand for copper in China, the world's biggest user, will rise 8 percent this year to 3.7 million tons, more than a fifth of the global total, according to London-based GFMS Metals Consulting Ltd. The nation's imports may rise more than a third to 1.5 million tons. China is using about 55 percent of its copper in the energy sector, the Virtual Metals analysts said.
Power producers in China are adding capacity to supply an economy that expanded 9.5 percent last year, the fastest pace in eight years. China experienced power shortages in four major cities and 24 of 27 provinces last year.
Copper for April delivery, the most active contract on the Shanghai Futures Exchange, rose 2.5 percent today to 30,860 yuan a ton.
Shrinking Gap
Global copper demand will exceed production by 172,000 tons this year, according to Merrill Lynch. The gap will shrink from 787,000 tons in 2004 after mining companies including Melbourne- based BHP Billiton and Phoenix-based Phelps Dodge Corp. boosted output, the bank's analysts said in a Feb. 14 report.
Copper consumers are making for lagging production by draining stockpiles. Inventory monitored by the LME has slid 87 percent since the start of last year to 55,800 tons.
Most other metals also rose on the LME. Lead had the biggest gain, rising $29, or 3.2 percent, to $948 a ton, close to a six- week high. Nickel rose $250, or 1.6 percent, to $15,500 and tin climbed $90, or 1.1 percent, to $8,050. Zinc was unchanged at $1,361 and aluminum fell $6 to $1,903.
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Mick100
I have been very bullish on copper forat least a year and have leaned towards buying gold shares that are backed up by other minerals , especially copper or silver , on the basis that it is better to have more than one string in your bow
If you take a look at the copper charts on the Kitco site it is pretty obvious thgat copper will trade at a considerable premium for quite some time ;
was approx 80c up to about 18 months ago
now $1.50 plus , 16 year highs
in supply deficit
stocks continually reducing
huge demand , especially from China
etc , etc
So I cant see any settling back in the price for some considerable time
And if it was profitable to produce copper when it was 80c what does that make it now ? !!!
Yes , there is money to be made --- I am in no doubt about that
WH, I expect this bull market in resources to last for another 10 yrs. Each of the base metals will have their day in the sun over the next 10 yrs. Copper, coking coal and iron ore are the frontrunners at the moment but it's unlikely that they will still be in front in 10 yrs time
One has to keep an eye on the supply demand equation for each individual metals as we move through this bull market. Each will have their own minnie bull market within the resouces bull market. As prices increase, supply will be ramped up and deficits in supply will be replaced by surpluses. Prices will then level off and start falling.
Mick
Mick100
Yes , one needs to be out before supply is ramped up to meet or exceed demand and one has to be continuously vigilant to assess when this situation is nearing
I have come to the conclusion that you and I are pretty much on the same wave length on such matters
With copper I believe that supply will not outstrip demand for some time , maybe for five or ten years
Stocks are nearing critical levels and if a situation is reached where there is simply not enough stock to satisfy demand then anything could happen
One point that I failed to make above is that with the advance of technology it is now possible to provide high speed internet connections over copper cables
This must result in copper cables being preferred over fibre optics in many cases and hence a further demand on copper
I had initially thought that fibre optics would largely take over from copper cabling , but this would not now seem to be the case
The rules of supply and demand are very strong ; they pretty much rule metal prices , with the exception of silver for the time being maybe , but I am sure that at the end of the day the laws of supply and demand will win with silver also , even if it takes another two or three years
There is something really tricky going on with silver at present in my opinion --- some form of price rigging , short selling etc
I am just waiting for the day when it can no longer be sustained and that those that are involved are bitten in the bum
Whiteherron why would copper be preffered for High speed internet When F/O is faster and allso better for phone calls.
SPEAKING FREELY
Why oil prices are barreling up
By Andrew McKillop
Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.
LONDON - In the past week, oil prices have regained about US$3 a barrel after hitting a low of $45. Apart from the perennial US weather factor, positive sentiment was reinforced by IEA (International Energy Agency) data revising previous forecasts for world oil demand growth in 2005 by 80,000 barrels per day, or 0.08 million barrels/day (mbd), to the suspiciously modest figure of 1.52 mbd.
This is hard to fathom because the IEA also raised its final estimate of world demand growth in 2004 to 2.68 mbd. In percentage terms, growth in 2004 was very close to 4%, the highest for over 25 years. This number conflicts with forward planning ideas and beliefs of the IEA and other energy players - especially the world's 10 biggest oil corporations. None of these players plan for demand growth beyond 1.75% per year. Some, such as BP and ENI, still claim that the "normal" long-term growth is about 1.3% per year.
On the consumer side, to back the notion of slow growth being a fixed paradigm, oil users are everywhere thought to show "price elastic" response to higher prices. That is, they cut their consumption as prices rise. On the supply side, the same high prices are expected to bring new and big suppliers into the market. If this does not happen, we have an oil crisis. This pre-crisis context is directly reflected in the market by rising volatility on a longer-term upward price profile. The IEA forecast of growth in 2005 dropping about 42% against 2004 is, we can surmise, purely wishful thinking.
The Organization of Petroleum Exporting Countries (OPEC) is usually wheeled into the pricing melee by saying it will now "defend" $40/barrel, after waiting until December 2004 to say it was no longer "defending" a price range of $22-28/barrel. But the question is: what spare capacity does OPEC really have? This raises the key question as to what exactly OPEC's current 11 members (OPEC-11) produce and export. Using data from the Oil & Gas Journal on world daily average production in 2004 and 2003, only Iran, Qatar, Kuwait and Saudi Arabia are credited with production hikes of over 3% in 2004, excluding the very special case of Iraq. For Oil & Gas Journal, there was a 55% increase in Iraq's daily average production to about 2.05 mbd in 2004, while EIA (Energy Information Administration) and the DoE (Department of Energy) figures give about 1.55 mbd, almost identical to the 2003 average output. BP places Iraq's 2003 production at a daily average of 1.33 mbd. This is exactly half the growth in world daily average oil demand in January-December 2004.
Any production numbers for OPEC are subject to the key question: net or gross? Iraq, for example, has soon recovered pre-war domestic oil demand of about 0.65 mbd despite shattered economic infrastructure and 60% unemployment. US occupation forces in Iraq are credited with about 0.35 mbd demand. During the economic reconstruction phase that may now be about to start, Iraq's domestic demand will certainly increase rapidly. Normal economic development in oil producer countries is of course oriented to energy-intensive activities. Saudi Arabia's domestic oil demand in 2004, according to BP, increased by 5.5%, much more than its 3.2% hike in daily average oil production. Kuwait's domestic oil demand, again according to BP, has been growing at over 10%/year of late (19.8% in 2003), dwarfing all increases of its national oil production.
This pattern of domestic demand increasing much faster than production is common to more than nine out of 10 oil producers, both OPEC and non-OPEC. Net exports, therefore, will always tend to grow slower than national production. Conversely, world oil import demand is significantly higher than consumption demand. In 2004, for example, world oil demand rose 2.68 mbd, but import demand growth was about 3.1 mbd.
This is related
ENIGMA
I understood that fibre optics was significantly more expensive than copper and hence would not be used where copper would would be adequate , but since reading your posting I have read up on the comparisons
Whilst not pretending to understand all of the technical matters I have discovered that it does appear that fibre optics still has significant advantages over copper even though copper can now be used for fairly high speed connections and that the price differences are not all that significant
Thank you for pointing this out ; maybe the article that I read on high speed copper connections ( and I cant recall where it was from ) gave me a wrong message
WhiteHerron I read the same article but took it in the correct context, that it would allow Broadband over copper in Existing Subburbs without the huge cost of rewiring with Fibre Optic. But all new work would except some unusual locations would be in Fibre Optic
ENIGMA
Yes , on reflection I have to agree with you totally
Thanks
An asset class for resessionary Times
http://www.financialsense.com/editor...2005/0126.html
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Some short term charts on the metals
http://www.kitco.com/ind/Lee/feb212005.html
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Mick100
Thanks , some good charts and comments there
Do you know if this is a " one off " or is it available as a regular report ?
WH, there is a link on that kitco site
maybe more info there
www.goldinsider.com
,
Followers of this thread may find the site below of interest........
http://hedgefundmgr.blogspot.com/
Arco
China's Food and Agriculture - looking to the future
http://www.ers.usda.gov/publications/AIB775/
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Markets - Zinc, copper, Aluminum
http://www.reuters.com/newsArticle.j...0&pageNumber=0
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CHINA COULD USE 15% MORE COPPER/YEAR.
http://www.iii.co.uk/news/?type=afxn...action=article
BEIJING (AFX) - China's demand for electrolytic copper will continue to grow 15 pct annually over the coming years, the official Xinhua News Agency reported.
Citing Tongling Nonferrous Metals (Group) Inc president Wei Jianghong, Xinhua said that the country's copper demand in 2004 was 1.7 mln metric tons.
Copper consumption has continued to increase at a growth rate of over 15 pct year-on-year since 2000, the report added.
derek.jiang@xinhuafinance.com
dj/ap/tr
High iron ore costs hit global steel firms
http://news.bbc.co.uk/2/hi/business/4289291.stm
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THanks Psycho
The great iron ore goldrush begins
Producers have been caught napping by a spectacular price rise, writes Andrew Trounson
February 26, 2005
"SOMEONE has stuffed up big-time," an MBA graduate schooled in the virtues of market research declared over her wine after hearing news that Australia's iron ore miners had secured an unprecedented 71.5 per cent hike in iron ore contract prices.
On top of a 120 per cent rise in coking coal contract prices earlier this year, the deal, effective from April, means Australia is set to reap billions of additional export dollars as it basks in the sunshine of one of the biggest commodity booms in history.
The surprise cave-in by the Japanese steel mills on benchmark contract prices also underscored the complete turnaround in recent years in the balance of power in the global minerals game, with the miners now able to dictate terms.
The coal and iron ore price rises will boost the Commonwealth Bank's index of Australia's commodity export prices by 19 per cent, putting the US dollar price index more than 40 per cent above the previous peak in 1989.
Shares in major miners BHP Billiton and Rio Tinto soared to record highs on the news, while shares in Australia's largest steel maker BlueScope dropped in the face of galloping raw material costs.
"What is going on in the raw materials area is quite frankly inflationary," BlueScope chief executive Kirby Adams said this week.
Steel makers are already raising prices and are considering slapping customers with surcharges.
But the MBA graduate couldn't quite believe that in this modern age of elaborate market analysis and forecasting such a price rise could have happened.
The easy answer is that no one had fully reckoned with the massive commodity demand that has been unleashed by China's rapid industrialisation and its emergence as the world's largest steel market, which feeds on the key raw materials iron ore and coking coal. China's steel consumption is set to rise over 10 per cent this year compared with 5 per cent growth forecast globally.
But the commodity price boom has been exaggerated by the unpreparedness of miners that are now struggling to ramp up production quickly enough after years of under investment because of previously low prices. And even as they scramble to dig more out of the ground, rail, port and shipping infrastructure can't keep up, causing bottlenecks and delays globally. In Australia, queues of shipping off ports has reached 50 vessels in some instances.
BHP Billiton chief executive Chip Goodyear said this month there was little spare capacity in the industry and that supplies of major commodities were set to continue to lag behind global demand this year.
"Demand romps on and the supply side is muted," Mr Goodyear said.
The shortage of shipping has caused the average freight rate from Australia to Japan to blow out to an average $US21.15 a tonne last year, compared with a previous 10-year average of $US7.74/tonne.
"Once miners see that the demand is real, then it takes time to bring production on, and, even if they accelerate, they face bottlenecks," Dallas Horadam, steel analyst at AME Mineral Economics in Sydney said.
The answer to the question, then, of who "stuffed up" lies partly with the miners, though they are hardly suffering for it as they pop their champagne corks. But the steel mills must also shoulder blame for not sending the right price signals to ensure a more orderly ramp-up of production.
Back in the 1980s and 1990s, Australian coal and iron ore price negotiators would troop off to Tokyo every year to bargain for prices, only to be played off against one another by the steel mills. The first to cave in of either BHP or Rio would be granted extra tonnage, sometimes only after the miner had agreed to a secret price discount. On returning to Australia, they would be routinely be criticised by unions facing job losses for not having bargained hard enough.
But the world has now been turned upside down.
In a sure sign that t
Changing Of The Guard
by Mark M. Rostenko
Editor, The Sovereign Strategist
February 24, 2005
It’s been an interesting week so far and one that may very well herald a major turning point in the U.S. financial climate. Stocks got battered after failing to penetrate the cyclical bull market high, copper surged to a new 14-year high, gold had its largest one-day advance in some time. And flying well below the mainstream radar, the CRB Index of commodity prices broke out to a new bull market high, its highest in decades.
Fascinatingly enough, while the prices of just about everything continued to surge into the stratosphere, the dingbat mainstream financial press worked overtime to assure everyone that prices aren’t actually rising. The “tame” CPI report “edged up a TINY 0.1%” we’re told. Energy costs “went down significantly” (someone ought to tell $51 crude oil which apparently doesn’t read the CPI data). According to official reports, it was merely a “small increase” and inflation “remained very much under control.” Tame tame tame!
Not to worry, Alan “I didn’t know it was a bubble” Greenspan assures us that inflation is “anchored”, whatever that means. Bear in mind this is the fellow who assured us that $40 crude oil was “transient.” I’ll say, given its swift transition into the $50s! Unfortunately for the spin doctors, reality spins a far different tale.
While the Wall Street/Pennsylvania Avenue machine works tirelessly to keep our attention fixated upon the “healthy” stock market and housing bubbles, the stealth bull market in commodity prices continues. And that doesn’t bode particularly well for mainstream financial vehicles.
There is an established inverse-cyclicality to the prices of hard assets and paper assets. In general, one is vastly outperforming the other and over the long haul, you don’t do well in both at the same time. According to Barry Bannister of Legg Mason Wood Walker, that cycle spans about 18 years, which is pretty much in line with my estimation of a 20-year cycle which I discussed in TSS during the very early stages of the current commodity bull.
When paper assets are flying higher, commodities tend to fare poorly and vice versa. In the 1970s many commodities surged to all-time highs, surpassing their previous records by huge margins while stocks languished. Two years after grand-daddy commodity gold topped out in 1980, stocks began an 18-year bull run that ended in 2000. With stocks topping out after 18 years and commodities in an emerging bull market, what are the odds that stocks will be the “next big thing” in coming years? In technical terms, pretty freakin’ slim. Unless of course this cyclical pattern was merely a 130-year fluke. And I sincerely doubt that.
You don’t have to believe in cycles to have faith in the bloody obvious. In order to sustain a long-term bull market you need long-term bullish fundamentals. Ask yourself: are conditions more or less favorable for stocks today than they were between 1982 and 2000? Well, let’s see. We have rising inflation. A housing bubble that must and will burst in time. We’re waging a costly war in Iraq and getting ready to wage another in Iran. The trade and budget deficits stand at all-time record highs, consumer and national debt are higher than ever and savings are near an all-time low.
Meanwhile, commodities are on fire, many of which still have plenty of room to go before breaching their lifetime highs. The fundamentals are undeniably and powerfully in place: China is consuming metals and oil like Rosie O’Donnell sucking up chocolate cakes after a gut-wrenching two hour fast. More importantly, supplies of many commodities have dwindled over the years as everyone shifted their focus to the easy-money paper asset boom of the 1990s.
Major U.S. steel mills went bankrupt and shut down over the past couple of decades. When’s the last time you heard about a major gold find or a major new mine coming on line? Many U.S. oil companies are pumping the same old wells, not having discovered too many new major oil fields in qui
World market could be hurt as severe coal shortage worsens in China
Sun Feb 27, 1:47 AM ET Business - AFP
BEIJING (AFP) - China's breakneck economic growth is causing a dangerous shortage of its most important energy source coal, with potential consequences for the entire world, state media warned.
Scarcity is so severe officials even worry aloud that it could cause social instability among the 1.3 billion Chinese, the China Business Weekly reported.
"The imbalance between coal demand and supply will become more acute this year," the National Development and Reform Commission said, according to the paper.
"Easing the tightened coal supply will be the first priority for us," said the commission, the nation's top planning agency.
China is the world's largest consumer and producer of coal, which accounts for about two thirds of its energy needs.
The impact of the coal shortage could be global since soaring domestic demand could force the government to cut off export quotas and push up global prices, the paper said.
Last year, when China's economy expanded by 9.5 percent, its voracious demand was a key factor in causing international prices of coal to double.
One of the first sectors to be affected when coal supplies are under pressure is the power industry, which consumes about half of China's coal output.
The paper said the government was concerned a disruption in the power supply during the Lunar New Year earlier this month could have sparked social instability.
To prevent this from happening, it ordered state-owned coal mines to operate throughout the week-long festival, while railroads were told to use the extra holiday runs to transport more coal.
The nation's coal consumption this year is expected to rise by 120 million tonnes, or six percent, to 2.1 billion tonnes, according to estimates by the China Coal Industry Association.
The problem is that the opening of new mines is likely to result in no more than an additional 100 million tonnes of coal in the course of 2005, the paper said.
"New coal mines cannot meet the faster demand. There is little room for additional production," the National Development and Reform Commission said.
"All kinds of coal mines are almost operating at full capacity, or beyond capacity, and the pressure on safety is huge," it said.
The safety issue was highlighted most recently in the Sunjiawan coal mine in northeastern Liaoning province, which was among the operations that carried on extraction throughout the Lunar New Year festival.
The mine's workers only had one day off and towards the end of the festival it was struck by tragedy when a gas explosion erupted, killing up to 215 in China's worst recorded coal industry disaster for over 60 years.
Even if overtaxed mines can produce the amount of coal needed to keep fueling the economy, there is not guarantee that it will reach the power plants and factories that need it.
Rail is the preferred method of transporting it from the mines in the north to the industrial centers in the east and south.
But the railway system is also overburdened by the hyperactive economy and last year more than 65 percent of all transportation requests had to be turned down, the paper said.
Copper Rises to Record in London on Japan's Industrial Output Feb. 28 (Bloomberg)
-- Copper reached a record high in London after Japan, the world's third-largest user, reported a bigger-than-expected increase in industrial production, signaling that demand for the metal may rise.
Copper for delivery in three months was up $41, or 1.3 percent, to $3,238 a metric ton on the London Metal Exchange at 10:36 a.m. It reached $3,275, the highest since the contract began trading in its current form in June 1986. The yen rallied, making copper cheaper to buy with the Japanese currency.
``Japan's industrial production in January is encouraging and that's driving copper higher,'' Liu Songtao, a trader at Dalu Futures Co., said from Beijing. ``If the dollar continues to slide, it's very likely we'll see copper trading at $3,500.''
Industrial production increased 2.1 percent from December, seasonally adjusted, Japan's Ministry of Economy, Trade and Industry said. Global copper use rose 7 percent last year to a record 16.4 million tons because of higher demand from China and Russia, exceeding new supplies by 579,000 tons, the U.K.-based World Bureau of Metal Statistics said in a report.
The benchmark copper contract in London had climbed as high as $3,260 on Feb. 22, topping a record set in January 1989. Prices for the metal, used in electrical wiring and power cables, have surged 41 percent since the start of last year.
Yen Rallies
The yen rose to 104.32 against the dollar, from 105.23 on Feb. 25, according to electronic currency trading system EBS. The euro was up 0.1 percent against the dollar to $1.3257.
``Copper is more a technical market than a fundamental market in recent weeks,'' said Kevin Tuohy, a trader at Man Financial in London. Funds are buying ``on the expectation that they are going to benefit from a lower dollar.''
Most of the five other metals traded on the LME followed copper higher. Aluminum, turned into beverage cans and car parts, rose $23, or 1.2 percent, to $1,914 a ton. It had fallen for two days from a 10-year high of $1,987.50. Zinc, used to coat steel, jumped $16, or 1.2 percent, to $1,396, lead climbed $5, or 0.5 percent, to $950 and tin was unchanged at $8,375.
Shares of BHP Billiton and Rio Tinto Group, which own stakes in the world's two largest copper mines, rose in London as the companies sought price increases for iron ore sold to steelmakers. Melbourne-based BHP, the world's biggest mining company, was up 11 pence, or 1.4 percent, to 779 pence. London- based Rio, the No. 3 mining company, rose 18 pence, or 1 percent, to 1,845 pence.
Rio and Brazil's Cia. Vale do Rio Doce, the world's largest iron-ore producer, last week won price increases of 71.5 percent from Nippon Steel Co., Japan's biggest steelmaker.
Electronics Gains
Japan's manufacturing gain was led by electronics companies such as Toshiba Corp., which use copper in wiring and components, and exceeded the median forecast of 1.5 percent from 26 economists surveyed by Bloomberg News. Industrial output rose 3.1 percent in South Korea, Asia's third-largest economy, the most in more than a year, that nation's statistics bureau said.
Japan unexpectedly slipped into recession last year for the fourth time since 1991 as export growth slowed and consumer spending stalled. The economy shrank at an annual 0.5 percent pace in the three months ended Dec. 31, the third quarter of contraction.
China and the U.S. are the world's two largest copper consumers. China's economy grew 9.5 percent last year and the U.S. expanded 4.4 percent, the most since 1999. Russia's economy grew 7.1 percent because of rising oil, natural gas and metals prices, the government estimated on Feb. 2.
Draining Inventory
Consumers have relied on stored metal as production lags demand. Inventory in LME warehouses has slid 88 percent since the start of 2004 to 53,975 tons, less than two days' global use.
Mining companies like BHP, Chile's state-owned Codelco and Phoenix-based Phelps Dodge Corp., the second-largest
Crude oil outlook for 2005 - Matt Simmons
http://www.worldoil.com/Magazine/MAG..._YEAR=Feb-2005
Experts (Matt Simmomns) say Saudi oil may have peaked
http://english.aljazeera.net/NR/exer...E5850FB067.htm
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Investors watch rising energy costs
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The Paris-based International Energy Agency's recent pessimistic update about the world's oil supply/demand inversion set off global alarm bells. This was a major turnaround from a previous projection issued by the respected international agency before the end of last year.
With the IEA trumpeting increased global demand, combined with a cutback in non-OPEC production, the New York Mercantile Exchange oil traders returned per diem oil prices back to the high 40's per barrel. Only two months ago, oil prices had retreated back to the $40 per barrel range. The early winter weather in the Northeast was exceptionally mild, and it looked as if oil prices in the 30's were only a matter of time.
The timing of the IEA announcement was particularly ominous as the first quarter has historically proven to be the weakest in demand, coming between peak heating demand and the multi-month driving season.
This turn of events also did not go unnoticed by the equity markets' natural resource partnership, whose stock prices were driven to all-time highs, in an attempt to lock up future oil and natural gas availability, with prices projected to climb even higher.
OPEC, which is responsible for 35 percent of global oil exports, has shown no predisposition to loosen its quotas once again. Although cracking down on quota cheating after Jan. 1, the predominantly Middle East oil monopoly has signaled the possibility of further tightening at its mid-March meeting, scheduled for Teheran, Iran.
In effect, OPEC has taken off the mask of keeping prices down to accommodate global economic growth. Its spokesmen have lately "legitimized" price per barrel in the $50 range, due ostensibly to higher costs of production and the weakness of the dollar - the currency of all OPEC transactions.
The outlook for new arenas of oil production continues to deteriorate. In fact, depletion of existing sources are outstripping additional finds at an accelerating pace.
This phenomenon is best manifested by the behavior of the world's 10 biggest oil companies, which grew out of the mega-merger mania of the 1990s. Despite earnings of more than $100 billion last year on sales exceeding $1 trillion, not much of this unprecedented largesse is going into new exploration.
Despite a growing possibility that oil prices will remain high throughout 2005, the bulk of this all-time largest cash hoard is expected to go into mundane business commitments, such as stock buy-backs, dividend increases, and infrastructure strengthening, rather than expanding drilling activities. Even capital expenditures are being drastically cut back.
This has less to do with price risk aversion than too much money chasing too few exploration opportunities. This dilemma is complicated by many of the global oil-producing nations prohibiting partnering with the global multinationals.
Saudi Arabia, the world's No. 1 oil producer, is a good example. With rapidly aging oil fields and a deteriorating energy infrastructure, the Arab kingdom has demanded unacceptable terms from its former ARAMCO partners and is continuing to rapidly deplete existing reserves. Promises of Saudi reserves exceeding 500 billion barrels are increasingly labeled as pipe dreams by knowledgeable geologists. The same is true of repeated promises to pump 12 million to 15 million barrels a day.
Mexico, which had most recently discovered large offshore fields deep in the Gulf of Mexico, doesn't have enough money to even secure the sonar equipment necessary to confirm these finds. With 90 percent of its oil revenues confiscated by the government, Mexico is hamstrung by a law that does not permit non-Mexican partnerships.
This was part of a law passed in the late 1930s to make PEMEX, the national oil conglomerate, independent of extra-national influence.
The ongoing acquisitions and global energy partnership-building by China and lately India, also pose a dangerous restriction to U.S. av
Commodities and gold -Steve Saville
"In our opinion, what is presently underway is a final blow-off to the upside in the prices of some commodities and many commodity-related equities. It's impossible for us to confidently predict how much further these moves will go before the inevitable downturn gets underway, although our guess is that major peaks will be in place before the end of March. What we can say with confidence is that the decline that follows the speculative blow-off will take back all gains achieved during the blow-off stage plus a lot more. For an indication of what is likely to happen in some other sectors following the current blow-off take a look at what happened to silver and silver shares during March-May of 2004."
full article at:
http://www.gold-eagle.com/editorials...use030305.html
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Metal prices set to rise:
http://www.theglobeandmail.com/servl...tory/Business/
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Mick, read the article below on the way home tonight.
Seems a pretty credible call that steel prices at least may be heading for a fall.
http://news.ft.com/cms/s/0040aea2-8e...00e2511c8.html
Bloomberg News
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Copper Rises to 16-Year High in New York and a Record in London Listen
March 8 (Bloomberg) -
Copper prices rose to a 16-year high in New York and touched a record in London on expectations that production of refined metal from the world's smelters will lag demand through June.
Smelters aren't boosting output because some are shut for maintenance, Merrill Lynch & Co. said today in a report. Inventory monitored by the London Metal Exchange has plunged 80 percent in the past year. World supply is equal to three weeks of demand, down from more than six weeks in early 2003, said Jon Bergtheil, an analyst at J.P. Morgan Securities Ltd. in London.
``Anything below four weeks is still a danger zone,'' Bergtheil said. ``There is no doubt that copper is extremely tight in the first half of the year.''
Copper futures for May delivery rose 1.85 cents, or 1.2 percent, to $1.515 a pound at 10:12 a.m. on the Comex division of the New York Mercantile Exchange, after reaching $1.521, the highest since March 6, 1989. Prices are up 17 percent in the past year.
On the London Metal Exchange, copper for delivery in three months rose $43, or 1.3 percent, to $3,287 a metric ton. Prices reached $3,296, the highest since the contract began trading in its current form in 1986.
The copper rally is part of a surge in commodity prices, which are at their highest in 24 years. The Reuters-CRB Index of 17 commodities jumped 7.1 percent last month, the biggest monthly gain since August 1983. The index is up 14 percent in the past year to 310.93 today, the highest since Jan. 1981.
``Everybody wants to be long of commodities,'' said Stephen Briggs, an analyst at Societe Generale in London. Hedge fund managers ``think that the potential returns in commodities are still very high.''
Phelps Dodge, BHP Billiton
Shares of Phoenix-based Phelps Dodge Corp., the world's second-largest copper producer, rose $1.06, or 1 percent, to $107.61 in New York Stock Exchange composite trading. The stock is up 30 percent in the past year.
Melbourne-based BHP Billiton, which owns the world's biggest copper mine, Escondida in Chile, today offered to buy WMC Resources Ltd. for A$9.2 billion ($7.3 billion) in part to help supply more copper and nickel to China.
China surpassed the U.S. in 2002 as the world's largest copper consumer.
``We feel quite optimistic about China,'' BHP Chief Executive Officer Chip Goodyear said in a conference call. BHP would displace Phelps Dodge as the world's second-biggest copper producer. Santiago-based Codelco, owned by Chile's government, is the world's largest producer.
Global copper consumption will rise 3.5 percent to 17.3 million metric tons this year, exceeding supply by 190,000 tons, said Jon Bergtheil, an analyst at JPMorgan Securities in London.
Weaker Dollar
Hedge funds and other speculators that hold at least 100 copper contracts have increased their holdings in the futures for the past three weeks amid speculation that declines in the dollar would boost global demand for the metal. The dollar fell against the euro today.
``The weaker dollar helped spur renewed speculative buying which propelled prices higher,'' said Marc Morgan, a trader at Triland USA Inc. in New York.
Copper prices have almost doubled in the past two years as demand surged in China, the U.S. and Japan, the top three users of the metal.
Price gains now are ``consistent with seasonal tendencies for copper, which often posts significant highs in late March or early April,'' said Tim Evans, an analyst at IFR Markets in New York. ``With low inventory levels this time around, that seasonal peak should run somewhat later than normal rather than earlier.''
U.S. refined metal stockpiles at refineries, wire-rod and brass mills and exchanges fell in November to 137,000 tons, down from 656,000 tons at the end of 2003, the Interior Department's Geological Survey said in a report today.
A futures contract is an obligation to buy or
An argument for your continued shortage, Mick....
DJ INTERVIEW: Labor Shortages Shackle Australian Miners
This interview first ran around 0745 GMT
By Ray Brindal
Of DOW JONES NEWSWIRES
CANBERRA (Dow Jones)--At a time when Asia's appetite for raw materials remains
voracious, Australia's mining sector is facing unwanted challenges from higher costs
and chronic labor shortages.
These problems are now "a constant theme" in the industry, said Mitchell
Hooke, chief executive of the Minerals Council of Australia lobby group.
Capacity constraints reach beyond difficulties finding skilled and professional staff
such as electricians, toolmakers, and metallurgists.
"You can't get trucks, you can't get tires," Hooke told Dow Jones
Newswires, with other industry analysts adding explosives are in short supply.
Echoing a point made by the conservative government in recent days, Hooke cautioned
that supply issues need to be kept in perspective. Miners and companies in related
industries would rather be confronted by cost and labor pressures during a period of
booming sales rather than when the cycle is at a low point and balance sheets are
stretched, he said.
The investment boom, fueled by record prices for many mineral and energy products and
pushed by strong demand from China, isn't about to implode, say analysts.
More likely, some marginal projects will be shelved and development schedules for
others will be delayed, while many developers are also reworking project parameters.
Australia is a major global supplier of many mineral and energy products such as coal,
iron ore, base metals and liquefied natural gas. Slowing investment growth in the mining
sector could be something of a light dab on the brakes for the local economy, which at
this stage is being pushed along by strong capital expenditure.
Hooke said project economics are being recast and many people are reworking numbers for
previously approved projects.
"I know of circumstances where that's happening," he said.
"I certainly see the skills shortages as limiting the extent of the investment
activity. It isn't doom and gloom, it's limits," he said.
The dragon is Ravenous - daily reckoning
http://www.financialsense.com/editor...2005/0311.html
,
CRB breakout - Adam Hamilton
An excellent read
http://www.gold-eagle.com/gold_diges...ton031105.html
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Mick, how is the CRB calculated?
It was indeed an interesting read until the point that it mentioned that "I suspect that the greatest equity gains.... will occur in the elite ruling trinity of oil, GOLD, and silver producers."
Then I thought YAWN, it was just another bit of Gold Eagle propaganda in order to sell their book.
You would think they've never heard of coal, iron ore, nickel, copper, zinc etc etc in America.
"I suspect that the greatest equity gains.... will occur in the elite ruling trinity of oil, GOLD, and silver producers."
==============================
I think you can disregard that statement abdab. As far as I know, oil, silver and gold are only three of the 17 commodities which make up the CRB.
Mick
Bloomberg News
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Copper Futures Rise to Record in London on Surging Demand
March 16 (Bloomberg) -- Copper prices rose to a record in London amid signs that China's economic growth is accelerating, boosting demand from manufacturers.
Copper for delivery in three months rose as much as 2.1 percent to $3,307 a metric ton on the London Metal Exchange, the highest since the contract began trading in its current form in 1986. The metal was up $65 to $3,303 at 9:40 a.m. London time.
Investment in China's factories, roads and power plants increased at a faster pace in the year's first two months. China is the world's biggest consumer of copper, which is used in electric cable, power lines and construction.
``Prices are too high and it's evidence that demand is surging,'' said Liu Songtao, a copper futures trader at Dalu Futures Co. in an interview in Beijing.
China's fixed-asset investment in urban areas rose 24.5 percent in the first two months from a year earlier after climbing 21.3 percent in December, the statistics bureau said today. That's more than the government's 16 percent growth target for this year.
``The data confirms that growth seems to be accelerating and investment in real estate especially, is still too hot,'' said Frank Gong, chief China economist at JPMorgan Chase & Co. in Hong Kong. He said the government may need to raise mortgage rates or taxes to cool property demand.
Copper for May delivery on the Shanghai Futures Exchange, the most actively traded, gained as much as 900 yuan, or 2.9 percent, to 32,170 yuan ($3,885) a ton, the highest since 1993. The contract rose 2 percent to close at 31,900 yuan a ton.
State Purchase
``A rise in demand from copper users boosted prices,'' Li Ling, a metal futures trader with Shanghai Jinpeng Futures Co., said in an interview from Shanghai. Copper purchases by the State Reserve Bureau also contributed, Li said.
Copper for immediate delivery rose to a record 32,900 yuan ($3,973) a ton yesterday in Shanghai. The State Reserve Bureau probably took delivery of 2,000 lots, or 10,000 tons, of copper from the March contract that expired yesterday, she said.
The bureau, which buys and sells commodities to adjust prices and supply, doesn't disclose details of its activities. Traders monitor the positions of Cofco Futures, which the bureau uses as a broker, to gauge the bureau's operations. Cofco Futures won't disclose the positions of its customers.
Industrial Production
China's industrial production rose 17 percent in January and February from 2004, after a 14 percent gain in December, the statistics bureau said yesterday. Industrial growth in China led a jump in global demand for metals, sending copper to a 16-year high last week.
``Over half of copper consumption in China goes into power industry, from develop things like power generators and transmission lines,'' said Chris Ding, a Beijing-based analyst with China International Capital Corp. ``Power shortage is still acute in China.''
Power producers are building generation plants to end shortages that caused blackouts in nine-tenths of the country this summer. China plans to spend 200 billion yuan ($24 billion) a year to build plants, adding capacity of about 35 million kilowatts a year for two decades, according to the National Development and Reform Commission, China's top planner.
To contact the reporter on this story:
Xiao Yu in Beijing at yxiao@bloomberg.net
To contact the editor responsible for this story:
Peter Langan at plangan@bloomberg.net.
OPEC says it has lost control of oil prices
http://msnbc.msn.com/id/7190109/
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COBALT
Hybrid Gas Electric Vehicles
Go to page 11 of this report;
http://www.thecdi.com/cobaltnews/doc...ws_July_04.pdf
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St. Pats interview with Jim Rogers below. Some key points:
* gold has the worst fundamentals of any commodity, lead metal is very solid ;)
* bullish on oil prices
* expects a crash in Chinese real estate this year and a dip in commodity prices
* sees this as a buying opportunity
An Interview with Jim Rogers - 3/17/2005
By Jim Rogers
March 17, 2005
In this KitcoCasey exclusive, we talk to Jim Rogers, author of the bestselling book “Hot Commodities” and pioneer of the Rogers International Commodities Index, a basket of 35 metals and industrial and agricultural products, which has risen more than 200 percent in value since July of 1998. Jim tells us why commodities are the best buy around these days, and outlines his strategy for profiting from the current bull market.
Jim, let’s start by talking a little bit about your approach to investing in the current commodities bull market. You’ve written that you take a long-term view – you find things with good fundamentals and then hold them. We’ve seen a bit of a consolidation lately in things like gold. Do you try at all to play those ups and downs?
JR: No. I’m a hopeless trader and a terrible market timer, so I don’t bother.
So you buy things that you plan to hold for some time?
JR: Until the basic fundamentals change. Then you get out.
What sort of timeline do you generally have on an investment? Years?
JR: Normally, yes. That’s the best kind of investment. The ones you don’t ever have to sell, because then you don’t have to pay taxes. There’s not many of them but they do occur occasionally.
You’ve written in your book “Hot Commodities” that you thought lead might be one such good long-term investment. Is that still the case?
JR: Well, I didn’t say I really liked lead. I was using lead as an example, as a teaching point, because in the commodities markets there are two factors that determine prices – supply and demand. Lead has lost two of its major demand sources – paint and gasoline – and yet despite that, lead is at an all-time high because the supply of lead went down much, much faster than the demand. I was trying to show that, people say, well, what if we have a recession? That chapter was designed to show that you can have recessions and slowdowns and you can still have a huge bull market.
Looking around today, are there any commodities that have especially good fundamentals?
JR: With commodities it’s like anything else – you want to buy the things that haven’t moved up yet. Orange juice and cotton and soybeans and sugar, these are places where you might start looking because they are down and there may be some fundamental changes taking place.
Of course we like all investment opportunities, but we’re particularly interested in the metals, where it seems like almost everything has moved up already.
JR: That’s right, everything has moved up. Conceivably palladium – it hasn’t moved up as much as the others. Conceivably silver. I own a little of both.
And as you say, lead is an interesting one.
JR: There’s no question that the lead market is solid. But again, that was just an example in the book, like gold. Yes, I own some gold and silver, but I think you’ll make more money in other things right now.
But you do see upside for all commodities in the long-term.
JR: There’s no question about it. This bull market still has several years to go. Nobody’s brought a new tin mine on-stream in the last year or two. The reason that bull markets in commodities last a long time is because it takes a long time to bring this stuff on-stream. Even with agricultural products. It takes a coffee tree five years to mature. It takes a rubber tree several years to mature.
What about gold? You’ve written that its fundamentals probably aren’t as good as other metals’.
JR: I own some gold. But, yes, I think I’ll make more money in other things in the meantime.
So, do you own gold more as a hedge against economic troubles?
JR: It’s an insurance policy, if nothing else. If the world suddenly comes to an end, go
Living in Interesting Times
by Justice Litle
Contributor, The Daily Reckoning
March 18, 2005
“Practical men, who believe themselves to be quite exempt from any intellectual influence,
are usually the slaves of some defunct economist.”
~ John Maynard Keynes
There is an old joke about economists barreling down the road in a car with a blacked out windshield, driving by way of rear view mirror. The analogy has deep roots. These days we are always looking forward to the future, but the ancient Greeks had a different perspective: they saw themselves walking backwards through time. Keenly aware of where they had been, past terrain offered the best guess as to what might be coming next.
As investors and traders, we look forward as best we can; acting in the present, informed by the past, taking calculated risks in hope of getting it right. To some degree we walk backwards like the Greeks, yet with a significant advantage: the awesome depth and breadth of our past. As Mark Twain noted, history never repeats but often rhymes. Perhaps the skilled investor has a bit of poetry in his soul.
But what’s the point if Keynes was correct? Do our views really matter if we are just slaves to some dead economist? Fortunately, Keynes was not asserting some form of mind control beyond the grave. His point was to highlight the astonishing power of ideas and beliefs, especially the ones that act as building blocks for our assumptions, color our perceptions on matters of great importance, and are typically ignored as commonplace.
Many of these key concepts are invisible, woven expertly into the fabric of our assumptions. They hide in plain sight, like Poe’s purloined letter. Most of us do not consciously tend to our core beliefs. Like the foundation of a house, we place great weight on them sight unseen.
Yet without a solid foundation to build on, the house –or in this case, the investment portfolio- will not stand the test of time. A poor foundation is no good for building wealth, and a shaky framework invites collapse. The more volatile and dangerous things get, the more important the foundation becomes. When the sky is blue and the sun is shining, mistakes aren’t all that costly. But when the waters are churning and the winds gathering, structural integrity becomes paramount.
There is a tongue in cheek saying attributed to the Chinese (but potentially of western origin): ‘May You Live in Interesting Times.’ That certainly applies today, as opportunity and danger roar forth like a pair of marauding lions. With two titans (China and the US) facing off, neither at clear advantage and neither able to withdraw, the stakes have never been higher for the global economy. Not to mention booming commodities, inflation heading to the fore, crude oil on a long march to triple digits, the world’s reserve currency in doubt, nuclear confrontation, political turmoil on multiple continents, old strategic alliances cracking up, new alliances taking shape, and unprecedented financial leverage –from hedge funds to mortgage lenders to consumers to central bankers- straining the system to near breaking point.
So: do we seize the day, or run and hide? Is this a doomsday forecast? Not at all. For some of us, the rapidly rising stakes are as much a call to action as a call to caution. The commodity bull, already an impressive beast, is still in very early days. The pace of development in Asia is bringing forth a sea change of incredible proportions, with incredible profit potential in tow. Skyrocketing energy prices are a driving force in the development of fossil fuel alternatives and innovative 21st century technologies, creating major investment opportunities. Precious metals have awoken from their long slumber. And so on.
This is where the value of core ideas and beliefs comes into play. Action and caution must strike a balance. We don’t want to turtle up and let a fortune pass us by… nor do we want to be reckless and rash. So how do we go about maximizing our advantage in these ‘interesting times’, while successfully avoiding t
China's voracious appetite for materials
Drives up prices in the West
SHANGHAI, China – From the Cloud 9 bar atop the world's highest hotel, a visitor can get a bird's-eye view of the world's largest construction boom, which has fueled price increases and market disruptions around the globe.
Just 15 years ago, the Pudong area of Shanghai consisted of little more than dilapidated housing and muddy patches of ox-plowed farmland. Now it looks like downtown Manhattan.
From Cloud 9's windows on the 87th floor, visitors can pick out some of Pudong's more flamboyant buildings: the Oriental Pearl, Asia's tallest TV tower, which is studded with glass spheres that house stores, restaurants and museums; the sprawling Opera House, with separate venues for folk music, Chinese opera, classical music and Western opera; and the Science and Technology Museum, one of the world's biggest, featuring an indoor rain forest and a 230-foot-tall geodesic dome.
And that's just one neighborhood in one Chinese city.
Each month, China needs to build the equivalent of a Houston or a Philadelphia just to keep up with population growth. Each year, Shanghai – about the geographic size of the city of San Diego but with 10 times the population – constructs or renovates 200 million square feet of building space, about the same amount as all the office space in New Jersey.
To fuel that boom, and to feed its hungry factories, China uses more than two-fifths of the world's annual output of cement, one-third of its iron ore, one-quarter of its lead and steel, and more than one-fifth of its copper, aluminum and zinc.
The country's unprecedented demand for raw materials has had far-reaching effects, helping drive up the price of raw materials last year and creating short-term shortages throughout the world.
When victims of the 2003 San Diego County wildfires tried to rebuild their homes, some were told the price of wood had risen because of demand from China. And when the Sweetwater School District in Chula Vista wanted to repair some of its facilities last year, it had a hard time finding cheap concrete because so much was being used by China.
"A number of factors affected construction costs and timelines, but not the least was the tremendous demand for concrete and steel from China," said Bruce Husson, Sweetwater's chief operating officer.
Partly because of the price increases in raw materials, Husson said, some contractors submitted bids last year for almost twice what the projects were budgeted for.
"We had to slow down a number of (contract) awards because we couldn't afford such exorbitant prices," he said.
To most consumers, perhaps the most visible effect of China's growing demand is the recent rise in worldwide oil prices, as an ever-increasing number of Chinese switch from bicycles to automobiles.
More than 2 million new drivers hit the roads in China last year – helping make China the world's No. 2 consumer of oil, after the United States – and the number of new drivers is increasing at double-digit rates each year.
"The unexpected demand from China helped push crude oil prices above $50 a barrel," said Joe Sparano, president of the Western States Petroleum Association. "You have a market of 1.3 billion people that has suddenly discovered the automobile."
Although China represents only 8 percent of the world's oil demand – compared with 25 percent for the United States – its thirst is increasing exponentially and represents 50 percent of the growth in the market.
Steel and concrete
China is not the only reason for last year's shortages and price increases. War, terrorism and political disruptions helped push up the price of oil. Hurricanes and plant consolidations also put a crimp on building materials. Renewed production by North American factories chewed into metal supplies. In California, the demand for construction materials was also driven by a spate of public works projects.
Unlike one-time events that roil the marketplace, China's demand for raw materials represents a
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Tata Steel to Raise Prices to Record Starting April 1 (Update1)
March 24 (Bloomberg) -- Tata Steel Ltd., India's second- largest steelmaker, will raise prices for its products to a record starting April 1, to cover soaring raw material costs.
Hot-rolled steel coil prices for annual contracts will be increased by as much as 5,000 rupees ($114) a metric ton, Tata Steel Managing Director B. Muthuraman told reporters in Mumbai after a shareholder meeting. The price of hot-rolled coil, a benchmark steel grade, will rise to 29,000 rupees a ton, spokesman Sanjay Choudhry said.
Tata Steel and other rivals are raising prices as India's fastest economic growth in 15 years stokes demand for houses, cars and appliances, while surging demand in China, the world's biggest steel user, drive global prices to a record. Higher rates may help the company maintain growth in profit that has tripled in the past three years, investor Anoop Bhaskar said.
``Higher prices coupled with the growth in production volume will help maintain profit growth,'' said Bhaskar, a fund manager at Sundaram Newton Asset Management Co. He expects operating profit to rise 8.4 billion rupees in the year to March 31, 2006.
Outlook
Tata Steel may say net income rose 90 percent to 34 billion rupees in the year ending this month, according to a survey by IBES, a unit of Thomson Financial. Its ability to contain costs by mining its own iron ore, whose prices have surged to a record, may help the company beat forecasts, analysts said.
``Most of benefit from the price rise will get added to its bottomline since it is largely insulated from iron ore and coal price rise,'' Bhaskar said.
It costs Tata Steel about $200 to make a ton of hot-rolled steel, making the company one of the ``lowest-cost producers'' in the world, Standard & Poor's said today. Tata Steel plans to more than triple production to 15 million tons by 2010.
Japanese steelmakers will have to pay 1 trillion yen ($9.42 billion) more for raw materials next year, Nippon Steel Corp. President Akio Mimura said on Feb. 24.
Tata Steel shares, which have gained 80 percent in the last year, rose 1.2 percent to 413 rupees on the Mumbai stock exchange. Muthuraman spoke to reporters after trading had ended.
O Belgian of the Biscuits there were a couple of very worthy comments to be taken from the Jim Rogers interview:
Gold mine production has expanded nearly every year since 1980, when the bear market started. You don’t find that anywhere else that 25 years into a bear market, production is still expanding. In 2003, 75% of the money spent on exploring for metals was spent exploring for gold.
Small wonder the gold price is going nowhere.
The one I really liked was this oxymoron:
If the world suddenly comes to an end, gold will go up the most.
I certainly have my supply of gold bars squirreled away for when the world ends. I am comforted in the belief my gold will provide collateral in the afterlife.
Markets, across the board are getting hammered at the moment. The thing to watch for resource investors are the reports coming out of China. I just read another write-up on the commodties boom in china in the Press today. The mayor of the city, which the story was about (forgot the name), had said that his city would continue to expand at the current hectic pace for at least another 10 yrs. The journalist, who had obviously been there, decribed the place as one huge construction zone.
There are no indications of a slowdown in China whatsoever which means there is no need to panic for those people invested in resources. The bull market in commodities is still in force.
Bull markets never go staight up. Bull markets take two steps forward then one step back. What's happenning at the moment is a healthy correction in a long term bull market.
Mick
Good comments Mick
The way to go , I believe , is with quality resource / commodoties / mining stocks that are producing or at the point of producing , keeping away from those that are not past the exploration stage as they are too risky and too far away from creating real value even if successful in their exploration activities
Exactly WH, One of my "rules of thumb" is not to invest in companies unless they have completed a BFS (Bankable feasibility study) If the banks are not prepared to put their money into a project then I'm not putting my money into that company. When the BFS is completed the decision whether to proceed with developement is made.
I must admit that I have broken my own rule this year (got a bit greedy) and bought two companies (SMM , CMR) which have not completed BFS. I'v already lightened up on one of those two companies today and will be watching them very closely.
The rest of my miners are either producing or at different stages of developement and will be coming into production in either 05 or 06.
Mick
Mick
Our investment criteria is obviously very similar
Resource sector
Key component = BFS
Proven management
Financial backing from top banks / financiers
Producing or close to production
Location ( country and proximity to road / rail / shipping )
Financially sound
Low to medium cost of production
Reasonable mine life
Probability of further exploration / finds
These are the things that I look for --- the more of these that a company has the better
I am now looking to weed out my weaker stocks and replace them with those of better quality
This will mean less trading activity but a reduced exposure to volatility ( especially downward ) I believe
As a matter of interest I have been looking at gold , silver and base metal prices this evening
Gold and silver are not too flash at present but base metals are generally pretty strong , not much off their recent highs
I am a little unsure about gold although there is still room for a good profit to be made so long as production costs are in the low to medium range
Because silver is in supply deficit , has such a multitude of uses and such low worldwide stocks I believe that it will have a very rosy future
The demand for base metals must surely remain strong ( China , India etc ) and this will keep prices at a reasonable level at least , even if below the current levels
Efficient producers were able to turn a profit at prices around 50 % of what they are now so I see no cause for panic
Based on the above I will be sticking with top quality mining / resource / commodity stocks
Investment criteria - Resources
Yes WH, my criteria are very similar to yours however I had never got round to writing them down (formallising the criteria) which I have now done - made a copy of your list
I would include "country risk" on it's own rather than bundling it in with infastructure.
Cheers
Mick
By Kenneth J. Gerbino
March 29, 2005
I believe the base metal stocks are going to extend their bull market for a long time and well beyond the consensus "group think". There will be corrections along the way but I believe these stocks are going to surprise everyone over the next few years. My reasoning follows below.
I believe precious metal mining stocks should be in everyone's portfolio but I also think it is a good idea to have some exposure to base and other metals (copper, zinc, nickel, lead, chromium, aluminum).
In order to understand a major change that could take place in an investment sector one can gain insights from a major change that took place in another sector.
I remember twenty years ago when Intel was producing computer chips, which at the time had become like a commodity item. From 1985-1995, Intel sold for only 7-12 times earnings because of the then "commodity" aspect of chips and the fact the computer industry was at that time a cyclical industry. By 2000, Intel was selling for 60 times earnings because of the Internet, laptop and cell phone usage explosion (mega-trends creating a new electronic marketplace with a more sustained demand for chips). Even today, after the tech stock wipeout, Intel is still selling for 20 times earnings.
A similar usage explosion has now started in base metals. The corresponding new mega-trend is Asian and Indian base metal demand. Base metal stocks are now selling at only 5-8 times cash flow. Old time base metal investors are locked into the past thinking of the cyclical nature of the industry. Three billion Asian and Indian people say "no way". Any structural or sustained demand for these metals could increase cash flow multiples to 12-16 times or more. This has significant implications. It means that even if the prices of these base metals go down by 25-35%, because of the multiple expansions, the base metal stocks will still be buys.
Even with just 2-3% growth in Asia and India (current growth rates are 8-9%) a steady demand for resources will create a more sustained and structural market for these metals. A steady demand would change the "cyclical" aspect of base metal demand and this would be reflected in higher cash flow multiples and higher stock prices. Tight supplies also will help stock values.
The latest data from China shows that 82% of their capital spending is on housing and infrastructure (roads, power plants, railroads, sewers etc.). Even with only 2-3% growth, China's capital spending should be a long-term positive non-cyclical factor to metal demand, as these infrastructure projects will last for decades as huge rural populations enter their new economic world. In the more established economies, capital spending is more cyclical because people are buying cars and TV sets and washing machines based on the economy, which can go up and down. But newly industrializing countries do not stop building roads and power plants when their economies slow down.
Infrastructure projects are usually not cyclical since they have State backing and many times are not curtailed despite poor economic conditions. In the current age of debt financing and printing money by world governments, it would be hard to imagine politicians considering canceling a power dam or major highway because of a slowdown in the economy. It will not happen in China or in India. The projects in the U.S during the great depression and many projects in Asia during the Asian meltdown are good examples of large state projects that continued despite all. Therefore one can expect a robust demand for base metals for a very long time even with substantial slowdowns in India and Asia.
China will attempt to talk down their economic growth and try and get the hedge funds and speculators out of the metal markets so they can buy cheaper on world markets. But with 82% of their capital spending on housing and huge infrastructure projects any economic slowdown will still require a sustained demand for these metals.
Because of this change from a
A number of interesting articles, with references to China, on Joes Diner - FSO
http://www.financialsense.com/fsu/po...ncy/diner.html
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China to boost refining capacity by a third to handle booming energy demand
Tue Mar 29, 5:43 AM ET Business - AFP
BEIJING (AFP) - China, whose booming economy is expected to see record demand for oil this year, plans to expand its refining capacity by more than a third within the next five years, state media said.
By 2010, the country aims to add 100 million tonnes to its refining capacity, on top of its current nearly 300 million tonnes, the Xinhua news agency said, citing the China Petroleum and Chemical Industry Association.
"Fast-growing domestic demand for finished oil products has given full play to the surplus refining capacity that had lain idle for a dozen years," said Tan Zhuzhou, president of the association.
"It has been top of the agenda for the country's oil giants to develop and expand oil refining capacity," Tan said.
China processed a record 273 million tonnes of crude oil last year, up 13.7 percent from the year before, marking the fastest growth rate in three decades.
Boosting domestic refining capacity is a key element in China's plans for coping with its enormous appetite for energy and fits into a larger strategy to rely more on the country's own resources to the greatest possible extent.
"China has the potential to ease its reliance on foreign energy as it has vast oil and gas reserves," Tan said according to the Xinhua report.
Tan's remarks echoed a statement made by Foreign Minister Li Zhaoxing earlier this month saying China would rely mainly on domestic oil resources to fuel its economic growth.
Intensified exploration efforts helped the two biggest oil companies to locate nearly 850 million tonnes of oil reserves in the course of 2004, state media reported recently.
Consumption of crude oil in China, already the second-largest user after the United States, will jump to 320 million tonnes this year, an 11 percent rise over the 288 million tonnes used last year, according to earlier predictions.
A net importer of petroleum products since 1993 and of crude oil since 1996, China is reliant on overseas producers for one third of its supplies, a share that may rise as Asia's second-largest economy continues to expand.
Very good thought centring articles Mick!
So Mick you are a buyer in oil producers or soon to be oil producers?
I am, and more than just NOG!
I like NOG for the oil&gas and coking coal....make sense to me and the NOG bull run is set to continue. Name another small player with three commodity boomers with exploration upside?
Gregor.
The fact that you have got oil interests other than NOG is good to hear Gregor.
I suspect many of the NOGers have all their eggs in one basket - NOG, which I don't think is a good idea no matter how good NOG's prospects look. NOG has performed well for me over the past two yrs and I am confident that this strong performance will continue for another 2-3 yrs.
NOG is not my best oiler and not my worst - it's somewhere in the middle of the pack.
I'm very bullish on resources, particuarly oil as well as gas (in the US)
The thing I'm concerned about at the moment with oil is that there would be a sharp spike in oil prices which would reduce demand and bring the whole thing crashing down. Ideally I would like to see prices rise gradually (20-30% per yr) so that the economies can adjust slowly and demand for oil will remain high.
Mick
MICK we mostly agree!
So I hold some NEO/PPP/AWE on the ASX.
Bulk of Eggs are at this time in NOG....for the trilogy aspect!
Are you bullish on the gas discovery at Jack Hamar that is still under drilling by Neo, Opl and Neb in the gas hungry market region of California? I like this on much!
Gregor.
Quote:
quote:Originally posted by gregoroius
MICK we mostly agree!
So I hold some NEO/PPP/AWE on the ASX.
Bulk of Eggs are at this time in NOG....for the trilogy aspect!
Are you bullish on the gas discovery at Jack Hamar that is still under drilling by Neo, Opl and Neb in the gas hungry market region of California? I like this on much!
Gregor.
Have not researched PPP or AWE
Have had a quick look at NEO and I found a company that was putting all their eggs in one basket.
They had a small producer in ozzy which they sold in order to fund their exploration program in the US.
ie, they sold a low risk asset to fund a high risk asset (don't like)
I'm not saying that they won't produce gas at jack hammer - they probably will with todays technology - fraccing etc
I just don't like the style of managment.
This company also has the "hype facter" like NOG, which ,IMO, is another negitive.
Mick
PS, my pick for 2005 is NDO
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Nice post, Mick. Would appreciate that kind of contrarian wisdom on the NEO thread. I personally think the risk is reducing (apart from the as yet settled risk of low flow rates) as each announcement comes. But as I say, it would be good to hear your concerns re: NEO in full.
What is it about NDO which has caught your eye?
Yes I did a little trading in NDO a few months back in the 5c range.
What do you like about them (they have put on a little weight....)so much?
NEO have bigger upside though if commercial declaration of this very encouraging gas find is firmed up.
Gregor.
Reckon NDO have a fair upside too, Gregor. Looks like they'll be getting some North Sea permits: plus they already have a 'bird in the hand' with Galoc. Nido have good, proven management.
Over the long haul I expect Nido to have bigger upside than Nuenco. Its funny we should be expecting news around the same time for both these 'oil juniors'. For Nido on Galoc funding, and for Nuenco on the testing program in Cali.
Coop, Gregor I had a quick look at NEO last DecQuote:
quote:Originally posted by Cooper
Nice post, Mick. Would appreciate that kind of contrarian wisdom on the NEO thread. I personally think the risk is reducing (apart from the as yet settled risk of low flow rates) as each announcement comes. But as I say, it would be good to hear your concerns re: NEO in full.
What is it about NDO which has caught your eye?
My research on this co. is very limited so far, so I havn't really got any strong opinions either for or against this company (if I get time i'll have another look at it)
What put me off when I looked at it was the fact that they were in the proccess of selling their only producing asset - that's the point where I stopped researching this co.
IMO,the most important thing with these junior miners/oilers is the managment. The intentions of NEO managment is to find the big one - the company maker. But if your pouring all your resoures into one project the "company maker" may turn into a company breaker.
It all comes down to how much risk you can handle as an investor and when I done my research it looked too risky for me. As more favourable info comes to light the risk will reduce as you point out Coop.
Mick
Cheers Gents. Let me know what you think if you get to have a look at NEO Mick, your opinion would be valuable either way. Will have a wee look at NDO... looks like I'm a bit later than everyone else!
EDIT: As it stands at the moment Mick, flow rates for JH look to be the biggest concern for NEO, IMO... ie they may be so slow that feasibility is borderline. From the last announcement though I think flow testing is due within a matter of weeks, and things should be clearer then.
From J Mauldin:
Extract:
The Demand for Infrastructure
"My good friend Jim Williams at the Williams Inference Center sent me the following note on the increasing demand for infrastructure throughout the world. By that they mean roads, bridges, railroads, airports, ports, canals and so forth. It is a brief piece that I think you will find interesting.
"China is using 55 percent of the word's cement. Chinese businesses and the Chinese government are on a construction boom. In 1989, China had only 170 miles of highways. By the end of 2003, the country had 18,500 miles of expressways. To build all these roads, the Chinese government spent $42 billion. The Chinese Ministry of Communications states their plan is to reach 51,000 miles of highway by 2008. The Chinese government is committed to putting down roads, just like the United States started doing back in 1956.
"The list of infrastructure China needs is more than roads. For example, the country has about one third as many railways as we have in the United States and about one fifteenth as many airports. But, China has four times as many people. China needs more railroads, airports, bridges, roads, parking lots, phone lines, electrical lines and power plants. The demand for this infrastructure is now.
"Growing demand from China promises a lucrative future for South Africa's iron ore and manganese companies - if they can find a way to move the metals more than 500 miles to the coastal ports. The problem is that South Africa's government-run company does not have enough capacity. More trains and tracks are needed.
"Brazil has a similar train problem. The Brazilian government is trying to help the country's most important railways overcome a transportation bottleneck that threatens export growth. The current overhaul aims to help sustain the break- neck growth of Brazil's soybean and iron ore exports to China.
"India's shabby infrastructure, seen as a key roadblock to wooing foreign investment, stands to get a major makeover under ambitious plans by the government in the country's annual budget unveiled in March 2005. Improving India's potholed highways, congested ports and erratic telecommunications and blackout-plagued service, is vital to keep India's economy powering ahead.
"The demand for infrastructure is not restricted to China and India. According to the American Society of Civil Engineers, U.S. roads, bridges, sewers and dams are crumbling and need a $1 trillion overhaul. As of 2003, 27 percent of the nation's bridges were structurally deficient or obsolete. Since 1998, the number of unsafe dams in the country has risen by 33 percent to more than 3,500.
"The U.S. government is aware of the infrastructure demand. The usually fractious members of the House of Representatives, this March, found something they nearly all shared: an appetite for millions of dollars for home-state road, bridge and transit projects. On a vote of 417 to 9, House members approved a $284 billion six-year infrastructure bill.
"Natural gas will become the preeminent fuel of the 21st century. Moving natural gas requires liquefied natural gas (LNG) terminals, special ships, regasification terminals, and lots of pipelines for distribution. As one energy executive put it, 'Supply is not the issue; it is the delivery of gas to the market.' Before this transition occurs, a world-wide infrastructure for natural gas, such as that now enjoyed by oil, must emerge."
Iron ore prices - China
http://www.iht.com/articles/2005/04/...iness/ore.html
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Bloomberg News
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Copper Trades Close to Record High in London on Supply Concerns
April 7 (Bloomberg) -- Copper was little changed close to a record high in London on investors' concern that demand in China, the world's biggest consumer of the metal, may exceed supply this year, further draining dwindling stockpiles.
Global copper stockpiles monitored from London, Shanghai and New York have declined 79 percent this year, according to Bloomberg calculations. Copper futures in Shanghai today rose to a record for a second consecutive day, on investors' expectations mining companies won't be able to boost output fast enough.
``The London Metal Exchange followed that obviously,'' said Maqsood Ahmed, an analyst at Calyon Financial in London.
Copper for delivery in three months rose $5, or 0.2 percent, to $3,290 a metric ton on the LME at 10:28 a.m. The contract has gained 14 percent in the past year, rising to a record $3,308 a ton on March 31.
Copper for deliver in June, the most actively traded contract on the Shanghai Futures Exchange, gained as much as 640 yuan, or 2 percent, to 32,580 yuan ($3,935) a metric ton. China's $1.6 trillion economy expanded 9.5 percent in 2004 and may grow 8 percent this year.
Prices also rose on speculation China's State Reserve Bureau may buy 10,000 tons of copper when Shanghai's front-month contract expires on April 15, said Huang Xiaotian, head of the copper department at Henan-based Golden Dragon Precise Copper Tube Inc., China's biggest tube producer.
The bureau, a government body that regulates supplies of commodities including copper and grains, probably bought 10,000 tons of copper in Shanghai in March to replenish its stockpile, said Shen Haihua, a Shanghai-based analyst at trading company Southwest Futures Inc. on March 16. The speculation also drove LME copper prices close to a record on the day.
Stockpiles
This week's speculation on the bureau's possible purchase of 10,000 tons came after stockpiles on the Shanghai Futures Exchange fell 24 percent last week to 16,327 tons, the lowest in more than seven years.
Inventories of the metal at warehouses monitored by the LME rose for a third day, up 450 tons, or 1 percent, to 46,625 tons, the exchange said. Gains were reported in Vlissingen, Netherlands, and Long Beach, U.S. stockpiles are still 74 percent lower than a year ago.
Other LME-traded metals other than nickel and tin rose. Aluminum added $4, or 0.2 percent, at $1,956 a ton; lead rose $5, or 0.5 percent, to $967; and zinc rose $10, or 0.7 percent, to $1,376. Nickel fell $125, or 0.8 percent, at $16,275 and tin was untraded at $8,055.
To contact the reporter responsible for this story:
Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net.
To contact the editor responsible for this story:
Stephen Farr at sfarr@bloomberg.net
Last Updated: April 7, 2005 05:52 EDT
http://www.basemetals.com/
http://www.mineweb.net/columns/curve_ball/431302.htm
Kings of the jungle
By: Barry Sergeant
Posted: '08-APR-05 14:00' GMT © Mineweb 1997-2004
JOHANNESBURG (Mineweb.com) -- Leading globally-diversified resources stocks BHP Billiton and Rio Tinto have featured heavily over the past week in notes from investment bankers and stockbrokers’ analysts. The stocks were the subjects of several upgrades on both sides of the Atlantic.
The enthusiasm of analysts for the two stocks is notable, given that the broader resources sector, including energy, has maintained its leadership of global stock markets for some time. A number of investors are asking when resources stocks will peak out, not least on this week’s news from the World Bank that the global economic growth rate is likely to decline to 3.1% this year, from 3.8% recorded in 2004.
The extended broad rally in dollar commodity prices, which commenced early in 2002, has fueled a significant re-rating of the broader resources equity sector; BHP Billiton’s dollar stock price, for one, has almost trebled The world’s leading oil major, Exxon Mobil, currently boasts a market capitalisation of $389 billion, rating it as the most-valuable stock in the world, having overhauled a position long held by General Electric.
Outside the energy sector, BHP Billiton is by far the most-valuable resources stock, with a current market value of $90 billion. Rio Tinto holds second place ($51 billion), followed by Norilsk Nickel ($42 billion), Anglo American ($36 billion), Alcoa ($28 billion), and CVRD ($26 billion). Newmont rates as the most valuable gold stock, with a market capitalisation of $19 billion.
Given upgrades announced over the past week, analysts and investors appear to believe that the broader commodity cycle has some way to run. However, this was also the week when Merrill Lynch likened the boom in commodity prices and resources equities to the stock market bubble that burst in March 2000, when it became apparent that technology stocks, the drivers of the bubble, were a new kind of smoke and mirrors. By contrast, the commodities and resources equity bull market has produced very tangible evidence of physical output, and also enormous increases in profits, over the past two years or so.
As to specifics, on Thursday this week, Dresdner Kleinwort Wasserstein upgraded Rio Tinto to “buy” from “hold,” and added that the stock remained its “top pick” within the relevant peer group. DKW increased Rio Tinto’s stock price target to 2000 pence from 1900 pence, based on a “conservative” 10 times “peak cycle” earnings per share in 2006. The analysts believe that Rio Tinto is likely to generate excess capital of around 17% of current market capitalization over the next three years, “which could be returned to investors.” The stock was trading around 1738 pence in mid-day trade in London on Friday.
JP Morgan said it would maintain its “overweight” rating on BHP Billiton, with a 12-month target price of 810 pence (current price: 726 pence). DKW this week upgraded BHP Billiton from “hold” to “buy” and said that despite BHP Billiton's proposed acquisition of Australia’s WMC, BHP Billiton is likely to return about $5 billion to its shareholders during the next three years.
Canaccord Capital similarly upgraded BHP Billiton to “buy” from “hold,” and increased its 12-month target price to 800 pence from 650. Similarly, Morgan Stanley lifted its BHP Billiton price target to 800 pence from 780, and Rio Tinto’s to 1850 pence from 1800. Morgan Stanley also updated its commodity price outlook and concluded that these will remain “stronger for longer.”
In a special 24-page report JP Morgan said that, on balance, its view of commodity prices is closer to that of an extended cycle than to a normal one. “However,” stated analysts at JP Morgan, “recent fears over US inflation have made us realise that there is still a case for a normal price cycle.”
JP Morgan’s recommendation is to be overweight in BHP Billiton but to retain a neutral weighting
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China's Economy Grows 9.5 Percent, More Than Expected (Update6)
April 20 (Bloomberg) -- China's economy, which accounted for a 10th of global growth last year, expanded more than expected in the first quarter as exports and investment surged.
Gross domestic product rose 9.5 percent from a year earlier to 3.14 trillion yuan ($379 billion), matching the fourth- quarter's gain, the National Bureau of Statistics said in a statement released in Beijing. That exceeded the median 9 percent gain forecast in a Bloomberg News survey of 11 economists. Fixed- asset investment rose 23 percent.
Companies including Motorola Inc. and Quanta Computer Inc. are expanding factories in China to make cell phones and notebook computers for export to the U.S., Europe and Asia. Policy makers may raise interest rates or tighten lending curbs to prevent expansion picking up in the world's fastest-growing major economy, according to investors including Geoff Lewis.
``The government would not want to see GDP growth accelerate from here,'' said Lewis, the Hong Kong-based head of investment services at JF Asset Management Ltd., which holds $57 billion of mostly Asian assets. ``We might see that policy is tightened a little.''
The Shanghai Composite Index, which tracks yuan-denominated A shares and foreign-currency B shares on the city's stock exchange, dropped 15.79, or 1.3 percent, to 1184.11 at the 11:30 a.m. local time break.
Excessive Investment
``Investment is still too high and far exceeds the government's target,'' said Li Yan, who helps manage the equivalent of $3.62 billion with Harvest Fund Management Co. in Shanghai. ``There is pressure on interest rates to increase.''
Fixed-asset investment, which reached 1.1 trillion yuan in the first quarter, is ``too large,'' causing shortages of coal, oil, electricity and transport, said Zheng Jingping, a spokesman for the statistics bureau. New fees will be introduced to curb property speculation, he added.
Premier Wen Jiabao last year ordered banks to curb lending to industries including real estate, steel and autos after surging fixed-asset investment drove raw-materials prices higher and strained power supplies. Producer prices rose a record 8.4 percent in October and blackouts in 2004 affected 24 of China's 27 provinces and its four biggest cities.
Inflation averaged 2.8 percent in the first quarter, less than the government's 4 percent limit, and producer prices increased 5.6 percent, today's statement said. Real-estate investment rose 27 percent to 232 billion yuan.
Higher Rates
``Investment is still very strong,'' said Andy Xie, an economist at Morgan Stanley in Hong Kong. He predicts the central bank will raise its benchmark one-year lending rate to help damp industrial expansion.
The yield on China's benchmark seven-year government bond maturing in November 2011 was unchanged from yesterday's close at 3.90 percent at the midday break in Shanghai. The People's Bank of China lifted its key lending rate by 27 basis points to 5.58 percent in October, the first increase in nine years. A basis point is 0.01 percentage point.
Industrial production increased 16 percent to 1.44 trillion in the first quarter, today's statement showed. Exports rose 35 percent to $156 billion and the nation had a trade surplus of $16.6 billion, compared with an $8.4 billion deficit a year earlier, the customs bureau reported April 12.
Pegged Yuan
China accounted for 26 percent of the record $617.7 billion U.S. trade deficit last year, prompting U.S. Treasury Secretary John Snow to renew calls this week for an end to the yuan's peg to the dollar. American manufacturers say the peg, which enabled the yuan to track the dollar's 9.1 percent slide against the euro in the past year, gives Chinese exporters an unfair advantage.
Investors are betting China, which last year overtook Japan to become the world's third-biggest exporter, will allow its currency to appreciate. The yuan
Dave Forest: Taking Stock of Zinc- April 21
http://www.kitcocasey.com/displayArticle.php?id=76
Oil prices on the rise
http://www.msnbc.msn.com/id/5612507/
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Significant quantities of lead and cobalt are required in the production of hybrid cars
=============================
Hybrid Car Sales Soar in U.S. in 2004
Mon Apr 25, 7:30 AM ET Business - AP
By DEE-ANN DURBIN, Associated Press Writer
DETROIT - The lure of the Toyota Prius and other hybrid cars helped drive healthy sales of electric and alternative-powered vehicles last year, according to new data that shows the hybrid market has grown by 960 percent since 2000.
New hybrid vehicle registrations totaled 83,153 in 2004, an 81 percent increase over the year before, according to data released Monday by R.L. Polk & Co., a Southfield-based firm that collects and interprets automotive data.
Even though hybrids still represent less than 1 percent of the 17 million new vehicles sold in 2004, major automakers are planning to introduce about a dozen new hybrids during the next three years.
Lonnie Miller, director of analytical solutions for Polk, said federal and state tax credits for fuel-efficient vehicles have helped spur hybrid sales. More people also are buying into the idea that driving a hybrid is socially responsible.
"What's different about this than other types of vehicles is that hybrids are about what people want to give back and what they want to feel they're doing with their vehicles," Miller said.
Despite the arrival of Ford Motor Co.'s Ford Escape hybrid in showrooms last year, Japanese automakers continued to control the vast majority of the U.S. market, Polk said. Japanese brands accounted for more than 96 percent of the hybrid vehicles registered.
Toyota Motor Corp., which was the first automaker to commercially mass-produce and sell hybrid cars, continues to dominate the market. The Toyota Prius, which went on sale in the United States in 2000, occupied 64 percent of the U.S. hybrid market last year, with 53,761 new Prius cars registered, Polk said.
Toyota is on track to double Prius sales again this year. The company sold 22,880 Prius cars in the first three months of the year, more than double the number it sold in the first three months of 2004, according to Autodata Corp. Toyota has said it plans to produce 100,000 Prius cars for the North American market this year.
The Honda Civic hybrid was second with 31 percent market share. Honda Motor Co. also sold several hundred Accord and Insight hybrids, which each commanded 1 percent of the market.
Ford sold 2,566 Escape hybrid sport utility vehicles, or about 3 percent of the market, Polk said.
Automakers are introducing hybrid versions of several models this year, including the Lexus RX400h, Mercury Mariner and Toyota Highlander SUVs. General Motors Corp. and DaimlerChrysler AG already sell hybrid pickups, but the system they use is less fuel efficient.
Hybrid vehicles are powered by internal combustion engines but also are equipped with batteries that are recharged while driving and an electric motor to assist with power. They typically cost $3,000 to $4,000 more than traditional models.
Miller said hybrids could make up 30 to 35 percent of the U.S. market by 2015 as long as automakers remain committed to producing them and market to people who are passionate about driving them. While some analysts believe there's a limit to the number of consumers who will pay more for a hybrid, Miller said the cost of hybrids eventually will come down.
"Some people are thinking there's absolutely no reason that all vehicles shouldn't be hybrid. The technology is there," Miller said.
Polk said California was once again the top state for growth in hybrid vehicle registrations. More than 25,000 new hybrids were registered in California, a 102 percent increase over 2003. Virginia, Washington, Florida and Maryland rounded out the top five states for hybrid registrations, the same as in 2003.
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On the Net:
R.L. Polk: http://www.polkglobal.com
An oil supply tsunami alert:
http://atimes.com/atimes/Global_Economy/GE04Dj01.html
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Bloomberg News
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Oil Gains a Third Day as OPEC May Fail to Meet 2nd-Half Demand
May 6 (Bloomberg) -- Crude oil rose for the third day in New York on speculation OPEC and other producers may struggle to meet peak demand this year when refiners increase output of heating fuel before the winter.
The extra oil that producers can pump has ``decreased to dangerously low levels,'' Merrill Lynch & Co. strategist Francisco Blanch said in a report this week. OPEC's crude-oil production in April rose 0.9 percent to 30.07 million barrels a day, close to a 26-year high, a Bloomberg survey showed.
``If OPEC is having difficulties meeting current world demand during an off-peak demand period, will they be able to produce enough supply during the higher demand periods later this year?'' said Alan Herbst, a principal at New York-based Utilis Energy LLC, an energy-consulting firm. ``Traders have begun to focus their attention on the ability of U.S. refineries to produce enough heating oil.''
Crude oil for June delivery rose as much as 63 cents, or 1.2 percent, to $51.46 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was up 45 cents to $51.28 at 8:15 a.m. London time.
Yesterday, oil for June rose 1.4 percent to $50.83 a barrel, the highest closing price since April 28. Futures have declined 12 percent since reaching $58.28 a barrel on April 4, the highest for the contract that began in 1983.
Crude oil prices are more likely to fall than rise next week as U.S. inventories near a six-year high boost confidence that refiners will meet peak summer gasoline demand, a Bloomberg survey shows today.
Next Week
Twenty-two of 57 analysts and strategists, or 39 percent, predicted oil prices will fall next week, while 20, or 35 percent, said they will rise, the narrowest result for the weekly Bloomberg survey since February. Fifteen respondents forecast little change. Last week, 58 percent expected a decline.
World oil demand will rise 2.1 percent this year, with most of the increase in China and the U.S., the International Energy Agency, an adviser to 26 industrialized nations, said April 12. Daily demand will peak in the fourth quarter at 86.1 million barrels, the Paris-based agency said.
Saudi Arabia, the world's top oil exporter, increased oil output by 110,000 barrels, or 1.2 percent, to 9.45 million barrels a day in April, according to a May 3 Bloomberg survey. That's close to the April 21 output estimate of Saudi Arabia oil minister Ali al-Naimi April 21 of 9.5 million barrels a day. The country has capacity to pump another 1.5 million more barrels a day, he said.
`Run Faster'
``Asking the Saudis to pump more oil is like asking an athlete who runs at full speed to run faster -- the only way he can do it is by taking drugs,'' said Gal Luft, executive director of the Washington-based Institute for the Analysis of Global Security. ``Without the necessary infrastructure, the Saudis will be forced to pump huge amounts of water into their wells to increase reservoir pressure.''
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, raised its production quota in March to help lower prices and swell global stockpiles before the fourth quarter.
Including Iraq, which is not restricted by a quota, the group produced 30.1 million barrels a day last month, according to the survey of oil companies, producers and analysts. In October, OPEC pumped 30.54 million barrels a day, the highest since 1979, based on U.S. Energy Department records.
OPEC has no more than 1 million to 2 million barrels per day that could be pumped, Algerian Oil Minister Chakib Khelil said on April 27.
Oil rose to a record $58.28 a barrel on April 4, on concern spare capacity may not be enough to cover supply disruptions caused by sabotage, labor or civil unrest in producers including Iraq, Venezuela and Nigeria.
On May 4, Venezuela's highest-ranking opposition deputy of the energy commission
Profiting From the Wall of Worry
By Doug Casey
May 13, 2005
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Profiting From the Wall of Worry
By Doug Casey
In this article, I want to address what stage of the market cycle resource stocks are in, why, what’s likely next, and what you should do about it.
For pretty much all my adult life I’ve been a speculator. That is to say, someone with an appreciation for the relationship between risk and reward, an appreciation far too many people clearly don’t share.
Take for example, ostensibly conservative investments such as money market funds and T-bills. To my worldview, these are just bad jokes being played on the masses. Piling all your assets into increasingly worthless paper paying next to no interest is the financial equivalent of a death of a thousand cuts, guaranteeing that a large swath of the nation’s senior citizens will spend their golden years sporting paper caps while tossing fries. My view is that, certainly in today’s world, it’s much more prudent to risk 10% of your capital with a prospect of getting a 1,000% return than risk 100% of your capital for the prospect of a 10% (or less) return.
This brings me to the current market in natural resource stocks, a sector in which I have been an active investor for over 25 years. That’s enough time to have witnessed all manner of cycles and market action. As is to be expected, in the early years especially, I made mistakes, most attributable to the hubris of youth. On one memorable occasion, the error was serious enough that I felt the need to spend a day in bed pondering the magnitude of my losses.
But most humans (politicians and most economists being the exception) learn from their mistakes, and I learned from mine. As a direct consequence, I have made considerable money in the resource sector. Certainly enough to retire and hang out in upscale locales for the rest of my life, if that were my wont. (It’s not… as you read this, I’ve just returned from a rock-kicking expedition to a developing gold play in the boondocks of Columbia).
Further, I’m convinced that if I were wiped out tomorrow, I could start with a small grubstake and recoup most of my losses in a few years’ time. In fact, I believe I could do it even if I was airdropped into the Congo, with no money at all. And so could anyone with an entrepreneurial spirit, who knows the difference between something’s price and its value, and understands how to balance risk and reward.
But there’s no need to do anything exotic, starting with nothing. A relatively small amount of money, skillfully deployed in the right market at the right time, can compound quickly.
With that in mind, perhaps the most critical thing for people now in resource stocks is to examine the nature of bull markets. Many believe that, since resource stocks have had such a big move since their absolute bottoms in the 2000-2002 period, the bull market is, if not over, at least long in the tooth.
I don’t think so. And the reason goes back to an understanding of the way bull markets work—at least major, secular bull markets. They generally have three stages: 1) Stealth, 2) Wall of Worry, and 3) Mania.
THE STEALTH PHASE
The best time to buy in any market is when shares can be purchased on the basis of value alone. Of course that’s generally only possible when nobody wants to own them because they’ve been so beaten up in the previous bear market. It’s then, when people are most bearish, that new bull markets are born—quietly, unbeknownst to almost anyone. That’s why I term the first stage the Stealth phase: It’s there, but nobody can see it.
In the case of mining stocks, the bottom came between early 2000 and mid 2002, when few investors were even aware that a market in resource stocks existed any longer. It was so beat up that many companies were selling for less than their cash in the bank. Every week, several would change their names, roll back their stock, and make themselves over as dotcoms, or China telecom parts di
FINANCIAL MADNESS
Justice Litle
China presents two stories at once. In the long run, the dragon's rise seems inexorable. It's hard to imagine anything that could thwart it. In the short run, however, China must deal with dangerous internal weakness, namely a rotten banking system, poor internal controls and a dangerous torrent of "hot money" - speculative capital in pursuit of aggressive returns - that threatens to boil over the economy and unleash massive instability down the road when it withdraws, similar to the Asian currency crisis of the late '90s.
A divergence of opinion is slowly building as to whether China will make the full transition to free-market capitalism with its current political system intact. Naysayers believe that a top-down, statist approach to governance will never mix with free markets and that the conflicts inherent in China's uneasy arrangement will eventually tear the leadership apart...or bring about a violent end to free-market reforms...or both at the same time.
In contrast, optimists point to thriving countries like Singapore, where capitalism has flourished under the benign authoritarianism of Lee Kuan Yew and his protégées. (By the way, it's technically not illegal to chew gum in Singapore; you simply can't import or sell it legally.) They point out that an arrangement that appears statist and authoritarian is actually more democratic than it looks, because the people willingly endorse the arrangement. The tradeoff is stability for prosperity, and as long as prosperity is delivered, stability in the form of quasi-democracy will be accepted. The optimists see China's authoritarianism slipping away gradually - just as China's communism has transitioned from policy to rhetoric - and they see no reason why the transition cannot be carried further without a major dislocation.
Only hindsight will prove who is correct, but the stakes are high because of the global turmoil that would follow any political uprising. As of year-end 2004, China had more than $600 billion in U.S. dollar reserves. That is a sum that could effectively tear the financial plumbing system apart, if it were unceremoniously dumped on the markets with such massive pressure in a compressed period of time the pipes would surely burst. Of course, this would be fiscal suicide for the dumpers as well, which is precisely why such a move is not feared. China's own economy would be sucked into the vortex too, so why would the Chinese put a gun to their own heads?
The theme that applies here is the doctrine of mutually assured destruction, or MAD - but of the financial sort, rather than the nuclear.
A product of the 1950s, the doctrine of MAD essentially states that two parties with the capacity to destroy each other will recognize the folly of hostilities. We liquidate the Soviet Union, they liquidate us and nobody wins. So peace is assured, right? Wrong. The flaw in the theory comes in the form of a question: What happens if one side or the other is thrown into political turmoil, or if the reins are taken over by madmen with nothing to lose?
A Communist Party leadership on the edge of collapse would make a last-ditch bid for stability by any means necessary, which in turn would make it willing to contemplate the financial-Armageddon option, as a form of extreme blackmail, if its hand were forced. If the mandarins feared implosion, they would have the means to not just ask for extraordinary coordination from the United States and Japan, but to demand it... on pain of catastrophic consequences if they were allowed to fall.
But is this a point in favor of the optimists or the pessimists? Obviously, it's not a pleasant thought to imagine a breakdown in China's economy sparking massive civil unrest, in turn leading to a "hot war" with Taiwan as a means of distraction and a catalyst for unifying nationalism, which by extension draws in the United States and sets the stage for the grand finale: the financial equivalent of a hydrogen bomb going off as hostilities escalate out of control.
As a silver lining to t
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China's Industrial Output Rises 16%, Beats Forecasts (Update7)
May 18 (Bloomberg) -- China's industrial output rose 16 percent in April, faster than the highest forecast by economists, as companies including Royal Philips Electronics NV and Quanta Computer Inc. moved production to the nation.
The gain followed a 15.1 percent increase from a year earlier in March and exceeded the median 14.6 percent growth forecast in a Bloomberg News survey of eight economists. Production of computers jumped 69 percent, with laptop output more than doubling, according to Beijing-based Mainland Marketing Research Co., which releases figures on behalf of the government.
Overseas manufacturers are expanding in China to tap rising demand and take advantage of wages that the Asian Development Bank estimates are 4 percent those in the U.S. Chinese stocks fell after the report increased concern that Premier Wen Jiabao will tighten year-old lending controls in a nation that is the world's largest consumer of steel and second-largest user of oil.
The pickup in production reflects ``the structural story of China integrating into the global supply chain,'' said Tim Condon, head of Asian Financial Markets Research at ING Bank NV in Singapore. ``When you overlay that with the domestic boom, you have an unsustainably strong investment story.''
Condon's 15 percent production growth forecast was the highest in the Bloomberg survey, along with that of DBS Group. He estimates fixed-asset investment, which the statistics bureau is due to report tomorrow, rose 24.5 percent in April after increasing 26 percent in March.
Stocks Fell
China's industrial production reached a record 564.7 billion yuan ($68 billion) last month, with output of raw steel climbing 25 percent and that of cement gaining 9.6 percent. Steel and cement are among the industries targeted by the government's lending controls.
The Shanghai Composite Index, which tracks yuan-denominated A shares and foreign-currency B shares on the city's stock exchange, dropped 0.8 percent, to 1091.41 at 1:43 p.m. local time. The Shenzhen Composite Index, which tracks the smaller of the two Chinese markets, lost 1.1 percent, to 265.76.
``Economic growth is not slowing,'' said Li Yan, who helps manage the equivalent of $3.62 billion at Harvest Fund Management Co. in Shanghai. ``The government might need to do more to rein in expansion.''
China's economy expanded 9.5 percent in the first quarter, exceeding the government's prediction of a maximum 9 percent and the official 8 percent target. That pace of growth may be sustained this year, the Institute of International Finance said May 5, because foreign investment is foiling government efforts to rein in industrial expansion.
Hiring and Firing
Amsterdam-based Philips, Europe's biggest consumer- electronics maker, said April 20 its Chinese factories last year increased sales 20 percent to $9 billion, of which 60 percent came from exports. Chief Executive Gerard Kleisterlee, who has fired 50,000 workers since taking office in 2001, says the company will continue expanding and hiring in China, where it has invested $3.4 billion.
The company's sales in China grew by an annual average of 7 percent in the past two years, according to Bloomberg data. That compares with a 10 percent annual decline in the Netherlands, a 9 percent decrease in the U.K. and a 13 percent drop in the U.S. during the same period.
Moving to China
Industrial output in the U.S., the world's biggest economy, had the biggest drop in eight months in April, the Federal Reserve reported yesterday. Production in Germany, the U.K., France and Italy -- Europe's four largest economies -- fell in March, official figures show.
Quanta Computer Inc., the world's biggest notebook computer maker, said May 4 it will move mass production of the products to China and cut 800 manufacturing jobs in Taiwan to reduce costs.
``Moving production to China is the onl