The Westpac–
BREE
China Resources
Quarterly
Southern winter ~
Northern summer
2014
1
© Commonwealth of Australia 2014
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ISSN 978-1-921516-05-4 (Print)
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2
Acknowledgements
This publication was jointly undertaken by the Bureau of Resources and Energy Economics
(BREE) and Westpac Institutional Bank, a division of the Westpac Group. The relationship is
non-commercial.
Editors
Westpac: Huw McKay.
BREE: Kate Penney and John Barber.
Design and production
Julie Doel
Cover image
Shutterstock
This report was finalised on 11 August 2014.
3
Contents
Acknowledgements........................................................................................................ 3
Contents ......................................................................................................................... 4
Foreword ........................................................................................................................ 6
Acronyms and abbreviations ......................................................................................... 7
Executive summary ........................................................................................................ 9
Recent developments in the Chinese economy ......... Error! Bookmark not defined.11
The real estate sector .................................................................................................. 12
International trade ....................................................................................................... 13
The monetary & financial sphere ................................................................................ 14
External finance & the currency .................................................................................. 15
Heavy industry ............................................................................................................. 15
The household sector .................................................................................................. 16
Steel ............................................................................................................................. 22
Iron ore......................................................................................................................... 23
Metallurgical coal......................................................................................................... 26
Developments in China’s energy policy ....................................................................... 27
Thermal coal................................................................................................................. 28
Oil ................................................................................................................................. 31
Gas................................................................................................................................ 33
Uranium ....................................................................................................................... 33
Gold .............................................................................................................................. 34
Silver ............................................................................................................................. 37
Copper .......................................................................................................................... 37
Aluminium .................................................................................................................... 40
Alumina ........................................................................................................................ 41
Bauxite ......................................................................................................................... 41
Nickel............................................................................................................................ 43
Zinc ............................................................................................................................... 45
Lead .............................................................................................................................. 47
Tin................................................................................................................................. 49
Molybdenum ................................................................................................................ 49
Tungsten ...................................................................................................................... 49
Cobalt ........................................................................................................................... 49
Antimony...................................................................................................................... 49
4
Platinum & Palladium .................................................................................................. 49
Mineral Sands .............................................................................................................. 49
China’s exports of rare earth oxides ............................................................................ 50
Magnesium & Cadmium .............................................................................................. 50
Diamonds and Magnesium .......................................................................................... 50
China maps ................................................................................................................... 51
5
Foreword
Welcome to the Southern winter ~ Northern summer edition of the Westpac–BREE China Resources
Quarterly – hereafter the CRQ. The CRQ is a ‘first of its kind’ collaborative research venture between
the Westpac Institutional Bank (hereafter Westpac) and the Bureau of Resource and Energy
Economics (hereafter BREE).
The CRQ is the primary reference point for public and private sector decision makers seeking to
understand developments in the Chinese economy, with special reference to its demand for
resources.
This edition has been compiled against an economic backdrop somewhat more favourable
than that described in its predecessor. More accommodative policy settings and an
improved export environment have contributed to a stabilisation of the growth trajectory
and a reduced perception of financial risks.
In the resources sphere, the intersection of increasing Australian supply potential and a
more sedate trend rate of growth in overall Chinese demand bears careful watching.
Globally, geopolitical risks have not abated, adding complexity to the analytical task.
With China’s development model arguably approaching an inflection point, and Australia’s
own commodity cycle moving clearly into the supply phase, it is more vital than ever to
trade in fact rather than rumour. The CRQ aims to do its part in this regard by making
available rigorous and empirically grounded analysis of macroeconomic and resource
demand trends.
Bill Evans
Chief Economist, Westpac
Wayne Calder
Deputy Executive Director, BREE
6
Acronyms and abbreviations
ABS
Australian Bureau of Statistics
AUD, $A
Australian dollar
ASEAN Association of Southeast Asian Nations
bcm
billion cubic metres
BREE Bureau of Resources and Energy Economics
CEIC
Chinese Economic Information Company
CFR
Cost including freight
CNY
Chinese yuan
cm
cubic metres
dltu
dry long tonne unit
FDI
foreign direct investment
FOB
free on board
FX
Foreign exchange
G3
United States, Europe and Japan
GDP
gross domestic product
GFC
global financial crisis
GFCF gross fixed capital formation
GCF
gross capital formation
IEA
International Energy Agency
IMF
International Monetary Fund
koe, mtoe
kilogram of oil equivalent, million tonnes of oil equivalent
kgpp
kilograms per person
kWh
kilowatt hour
LNG
liquefied natural gas
Mt
million tonnes
7
na
not available
NAR
net as received
NIEs
Newly Industrialised Economies (Singapore, Taiwan, Hong Kong, South Korea)
ODI
outward direct investment
OECD Organisation for Economic Cooperation and Development
OPEC Organisation of Petroleum Exporting Countries
PMI
Purchasing Managers Index
PPP
purchasing-power parity
ppt
percentage point
RET
Department of Resources, Energy and Tourism
RMB
Chinese Renminbi
SHIBOR
Shanghai Interbank Offered Rate
sqkm square kilometres
USD, US$
United States dollar
Growth rate conventions and abbreviations.
“Year-ended growth”, abbreviated %yr, is the level of an indicator in a single period (a
month or quarter) versus the corresponding period in the prior year, expressed as a
percentage.
The term “smoothed growth” should be understood to represent a 3 month moving average
(3mma) of the year- ended growth rate.
“Year-to-date growth”, abbreviated %ytd, is the accumulated level of an indicator at a point
in the calendar year (for example year-to-June, year-to-Sep) versus the corresponding point
in the prior year, expressed as a percentage.
“Annual average growth”, abbreviated %ann, is the level of an indicator over four quarters,
versus the previous four quarter period, expressed as a percentage.
“Month-on-month and quarter-on-quarter growth”, abbreviated %mth or %qtr, is the level
of an indicator in one period, versus the immediately prior period, expressed as a
percentage.
“Annualised growth or annualised rate”, is the change in an indicator in a single period
grossed up to a year, expressed as a percentage. If seasonally adjusted, this may be
rendered as %saar.
8
Executive summary
The Chinese economy grew at a rate close to, but slightly below its potential in the first half
of 2014. The general impression left by the flow of data since the previous edition of CRQ
has been one of modest improvement. Aggregate demand stabilised in April, having
deteriorated through the March quarter, and began to visibly improve as the June quarter
aged. The principal sources of the improvement have been easier fiscal policy, firmer
exports and the conclusion of the negative phase of the short run inventory cycle.
Growth in heavy industrial capacity and in mining investment slowed significantly in the first
half of the year, with coal mining and ferrous metals smelting among the weaker segments.
Outlays on utilities capex have picked up, in line with a rebound in centrally sponsored
investment projects. Investment in transport infrastructure was resilient in the first half,
counter to expectations of a decline in growth after a very strong 2013.
Real estate investment has been weak so far this year. Housing starts and sales both
experienced a very bad run in the year to May, but their respective rates of year-ended
decline eased somewhat in June. These tentative signs of stability are related to easier
policy conditions across a number of relevant axes. Even so, dwelling prices remain under
downward pressure. The net balance of cities seeing monthly price depreciation has
increased appreciably, to the point where previous cycle troughs are being approached.
Accordingly, households put forward a considerably less positive appraisal of the asset class
in the most recent Westpac MNI China Consumer Sentiment survey.
The heavy industrial sector has corrected the troublingly high inventory–to–sales ratios we
reported three months ago. As of June, output and sales are now moving closely in accord
and the growth of stocks has slowed appreciably. The latest survey information confirms
that the sector is in a healthier state. The basic materials sector appears to be ready to
move forward at whatever pace end-demand requires.
China’s exports to advanced economies are still growing faster than its total shipments, but
exports to East Asian and extra-regional emerging markets have both improved from very
weak levels over the course of the quarter. China’s imports from commodity producing
countries are no longer rising faster than its overall import bill, with a recovery in intra-Asian
manufacturing trade being the primary positive factor behind that observation.
In terms of external finance, the exchange rate stabilised in the June quarter following on
from the engineered weakness of Q1. The year to date depreciation of the CNY follows a
7.8% real trade weighted appreciation over 2013.
Commodity prices continued to exhibit softness during Q2 2014 but contrary to popular
belief, lower prices have been driven largely by the increase in supply rather than any
material change in demand. This misconception has been exemplified by Australia’s bulk
commodity export volumes, which have increased throughout 2014 despite lower prices.
Competition to supply China’s demand for mineral and energy commodities is growing with
new low-cost mineral regions emerging around the world following the wave of
international investment of the past five years. For traditional mineral and energy
commodity producers, such as those in Australia, the resulting market pressures have
9
forced companies to re-evaluate their operations with a renewed focus on cutting costs and
improving productivity to remain profitable in an increasingly competitive market.
10
Recent developments in the Chinese economy
The Chinese economy grew at a rate close to, but slightly below its potential in the first half
of 2014. The general impression left by the flow of data since the previous edition of CRQ
has been one of modest improvement. Aggregate demand stabilised in April, having
deteriorated through the March quarter, and began to visibly improve as the June quarter
aged. The principal sources of the improvement have been easier fiscal policy, firmer
exports and the conclusion of the negative phase of the short run inventory cycle.
Real GDP expanded by 7.5% year–on–year in the June quarter alone. That pace compares to
7.4% year–on–year in the March quarter, 7.7% in the December quarter, and 7.7% & 7.8% in
calendar years 2013 and 2012 respectively. Nominal GDP, which has historically exhibited
significantly more cyclical amplitude than the volume measure, improved to 9.0% in Q2,
versus the extremely weak 7.9% recorded in Q1. With the exception of the GFC period, the
recent phase has produced the slowest nominal growth since the deflationary late 1990s.
The change in the GDP deflator – the statistician’s estimate of economy wide prices – rose
1.53% year–on–year in Q2, up from just 0.51% in Q1.
Looking at the breakdown of real activity from the production side of the accounts, primary
output firmed (up from 3.5%ytd in Q1 to 3.9%ytd) secondary activity growth edged higher
(up from 7.34%ytd in Q1 to 7.40%ytd) and tertiary activity did a little better than that (up
from 7.83%ytd in Q1 to 8.00%ytd). As for the year-to-date contributions on an expenditure
basis, they are: 4.0ppts from final consumption (5.7ppts prior); 3.6ppts from investment
(3.1ppts prior); and net exports at –0.2ppts from –1.4ppts in Q1.
Real urban fixed investment growth stabilised in Q2, having slowed abruptly in Q1. In terms
of the sectoral composition of investment activity, on a nominal basis, growth in heavy
industrial capacity and the extractive industries is weak; investment in transport projects,
the main bright spot last year, has proved resilient; while utilities have improved, as
anticipated. Real estate started the year in poor fashion and has continued in that vein,
although tentative signs of stabilisation can be evinced from the latest updates. State–
owned enterprises contributed 27.6% of the growth in fixed investment in the first half of
2014, down from 29.1% in 2013.
Figures 1–3
Please refer to page 2 of The Westpac-BREE China Resources Quarterly PDF version.
Rather than relying on GDP alone to assess the state of the Chinese economy, it is prudent
to complement the national accounts with a range of alternative indicators that correlate
with overall activity. Doing so provides a richer and more complete picture of
macroeconomic trends. For the real economy (as opposed to the monetary–financial
sphere, which will be dealt with subsequently) these data fall into three broad categories.
They are (1) nationwide surveys (2) economy wide measures of intermediate input, and (3)
bellwether industry sectors that map the broader economic cycle. Additionally, balance
sheet information from the government and corporations contain relevant insights on
underlying growth.
11
In the previous edition of CRQ we argued that a balanced reading of the alternative
indicators suggested that the official GDP figures were providing a reasonable
approximation of the true state of affairs. In the June quarter, we judge that the ‘proxies’
indicate that aggregate demand is still running somewhat below trend, a shade below the
official estimates.
The People’s Bank of China’s corporate survey is the most valuable resource in category (1).
The largest firms in the country gauge that business conditions were stuck materially below
their long run average in the June quarter, a similar outcome to Q1. The details of the Q2
survey regarding order books and profitability were somewhat firmer though.
In category (2), alongside the traditional proxy of electricity output, logistics volumes
provide additional insight. As of June 2014, the smoothed year–ended growth rate of these
proxies was 7.2% (electricity); 8.0% (terrestrial freight) and 20.7% (aquatic freight). The
striking gain in aquatic freight is somewhat difficult to reconcile, whereas terrestrial freight
fits well with the general trend.
In category (3), the real estate industry – especially its construction arm – is the bellwether
of choice. It is considered in detail on the following page.
Regarding balance sheets, the smoothed year–ended growth rate of central government
revenues was 10.8% in Q2, the same pace as Q1. The profit margins of industrial firms
(manufacturing, mining & utilities) narrowed in early 2014 but have recovered a little in the
June quarter.
Figures 4–6
Please refer to page 3 of The Westpac-BREE China Resources Quarterly PDF version.
The real estate sector
Real estate represents around one quarter of nominal urban fixed investment. Real estate
investment itself is split roughly 70/30 between residential and non–residential. State–
owned enterprises represent around 16% of the total.
Nominal real estate investment grew by 14.1% in the year to June 2014. In year–ended
terms it was expanding at a modest 12.5% clip in the month of June, down from 22.3% in
December 2013. That compares to 19.4% in June 2013 and 12.4% at the end of 2012.
Dwelling investment alone is growing at 11.4% as of June, versus 18.7% in June 2013 and
22.5% as 2013 came to a close.
The year–ended pace of sales declined sharply across all regions in early 2014 (see figure 7) .
The theme of weakness has extended up to the time of writing, although the month of June
saw tentative signs of stability, with the rate of year-ended sales volume contraction easing
somewhat.
Swifter processing of mortgage applications and a selective easing of purchasing restrictions
have contributed positively to the consolidation. A complementary force has been
developers lowering their asking prices looking to liquidate excess stock. On this last point,
the present price environment is a reasonable facsimile of the situation that prevailed
12
during previous downturns. The net balance of cities seeing monthly price depreciation has
increased appreciably, to the point where previous cycle troughs are being approached. The
secondary market (secondary as in ‘not new’) was showing the most obvious strains at the
time of the last CRQ, but the new market now looks shakier, consistent with the theme of
developer (rather than vendor) discounts. A rising number of respondents to the Westpac
MNI China Consumer Sentiment Survey are now expressing caution regarding the near term
prospects of the market.
Regarding construction, housing starts had a very bad run in the year to May, but similar to
the sales story, the rate of year-ended decline eased somewhat in June. In the background,
we note that off-market building has been strikingly weak of late, but a renewed policy
emphasis on urban renewal and public housing more broadly should rebalance activity in
this under-the-radar segment.
Figures 7–9
Please refer to page 4 of The Westpac-BREE China Resources Quarterly PDF version.
International trade
Gross value–added attributable to the export sector accounts for approximately 17% of
China’s GDP. So while exports are secondary in importance to the domestic construction
cycle as a source of economic growth (and ultimately resource demand) they are far from
irrelevant. Indeed, given the large amplitude of historical swings in export growth, at certain
times external demand can outweigh the domestic story.
Net exports subtracted modestly from first half GDP, but they were a positive swing factor
between the March and June quarters, with the trade surplus widening sharply in Q2. As
been the case for some quarters now, China’s exports to the G3 ran at a faster pace than
China’s overall global shipments in Q2. That used to be a rare occurrence, but it is an
intuitive outcome in the current global growth environment. Intra–Asian export growth
rebalanced somewhat in Q2, with the distortions emanating from the illicit capital inflows of
early 2013 fading out of the numbers. Exports to extra–regional emerging markets are no
longer contracting, but they are far from strong, reflecting the need of many to suppress
their import bills as a hedge against a return of the fractious external financing conditions of
2013.
The business surveys are now describing an external environment where demand is growing
modestly. That is a contrast to the ‘flat or down’, assessments observed over most of the
last the year. The “new export orders” sub–index in the two most watched manufacturing
surveys (where 50 signifies the dividing line between expansion and decline) averaged 51.1
in Q2, up from 49.3 in Q1, versus prior year readings of 50.1 in Q4, 49.3 in Q3 and 48.0 in
Q2.
Imports of machinery and transport equipment have recovered from their March quarter
decline, but at just 3.7%yr in Q2, conditions remain subdued. The improvement derived
from firmer processing export volumes, with excess capacity in the onshore machinery
sector and subdued equipment outlays by local customers a drag on the total. The value of
13
food imports is growing by 18%yr, somewhat below the three year average of circa 30%.
Overall imports from commodity producing countries are no longer rising faster than the
total import bill; imports from the G3 have settled into a high single digit groove; while
imports from the NIEs (a proxy for the component and assembly trade) have bounced from
the egregious weakness exhibited early in the year.
Figures 10–12
Please refer to page 5 of The Westpac-BREE China Resources Quarterly PDF version.
The monetary & financial sphere
China’s monetary policy has been in constant flux since 2011. Credit supply reached a very
low ebb in 2011Q3, with ‘shadow banking’ going into reverse and sectoral lending controls
in place. Direct loan controls were eased soon after and ‘shadow banking’ re–engaged from
mid-2012. That situation persisted through early 2013, when policy tilted back towards
restraint, and shadow finance has presented a fragile facade ever since. As of June though,
the tide is again turning, with year-ended credit growth back on an upward trajectory.
The previous edition of the CRQ reported that the growth in new credit supply less local
currency bank loans had slipped to –23%yr in March 2014. For total credit the number was –
18%yr. Bill finance, trust loans, FX loans and bond issuance were all down heavily from a
year ago, with ‘entrusted loans’ the only element of the shadow that had maintained its
composure. Fast forward to June, and total credit is growing at +90%yr, with new ‘shadow’
finance back well above year-ago levels. A very large proportion of that “growth” is a base
effect, to be sure, but sequential outcomes have undeniably improved, and the return of
more normal credit conditions after a phase of stringent austerity will support activity in a
classic case of addition by subtraction. Reflecting the easier policy backdrop, interbank
turnover has increased and short-term market interest rates have been low and stable.
Developments in credit supply tend to lead the real economy by 2–3 quarters. Therefore the
abrupt deceleration in credit growth in the year to March is still affecting growth right now
and will continue to do so deep into this calendar year. The shift in stance observed in Q2
will begin to filter through to real activity from the final months of this year.
The People’s Bank has introduced a new tool dubbed “Pledged Supplementary Lending”, or
PSL. The PSL provides collateralised funding to financial institutions whose end-use is tied to
specific real economy activities. The initial use has been through the policy banks and has
focused on housing and urban renewal. The PSL allows the People’s Bank to avoid the sort
of blanket easing that has inflamed structural imbalances in the past. It also offers an
additional channel for liquidity creation as China transitions towards a world where capital
inflows are no longer a dominant source of money growth.
Figures 13–15
Please refer to page 6 of The Westpac-BREE China Resources Quarterly PDF version.
14
External finance & the currency
The bilateral exchange rate with the US dollar has appreciated by a cumulative 32% since
the peg exit in June 2005. The real effective exchange rate, which measures the nominal
trade weighted move in the CNY while also accounting for relative inflation, has appreciated
by 34% over the same time frame. The real effective CNY has depreciated by 1.4% over the
year to June 2014, while USD/CNY has fallen by 0.4% (an appreciation of the yuan).
In the previous edition of the CRQ we outlined the engineered depreciation of the exchange
rate that was conducted from January to April. This decision accommodated a widening of
the allowable daily trading band against the US dollar, from +/– 1% to +/– 2%; flushed out
the speculative bets that had built up over the course of 2013; assisted the embattled
export sector, in line with a range of support coming from other policy agencies; and
recalibrated financial conditions as it become clear that the overall stance of monetary
policy needed to shift, with inflation well under control and overall growth coming under
downward pressure.
Since the adjustment phase, the USD/CNY rate has been essentially range bound, although a
small move in the CNY’s favour is discernible over the last month or so, in line with an
improvement in the economic data. 12 month non-deliverable forward contracts are
predicting CNY depreciation of slightly less than 1%, whereas the 1 month equivalent
anticipates modest CNY gains.
The capital flow backdrop was not as weak as the movement in the exchange rate implied in
Q1, while in Q2 arguably the reverse was true. In other words, the observed stability in
USD/CNY in recent months may have flattered the underlying situation. Foreign exchange
reserves increased by just US$45bn in the June quarter, a considerable drop from Q1,
despite a significant widening of the trade surplus. The sum of all non-trade and FDI flows,
collectively termed ‘hot money’, constituted a major net outflow in Q2, with the months of
May and June seeing major action on this front (see figure 18). China now produces very
detailed quarterly balance of payments data, but this report is not yet available for Q2. It
will make for very interesting reading when it comes to hand.
Figures 16–18
Please refer to page 7 of The Westpac-BREE China Resources Quarterly PDF version.
Heavy industry
As heavy industrial output (and investment in new capacity) is essentially a measure of
‘derived demand’ from other sectors, it is a reactive variable in the medium term
forecasting framework. However, when the time horizon is shorter, swings in heavy
industrial activity can be responsible for much of the volatility observed in the aggregate
data. As the major direct consumer of raw materials and a key provider of intermediate
goods for use elsewhere in the supply chain, an understanding of heavy industry is vital to a
full comprehension of China’s resource demand.
Total industrial value–added expanded at a year–ended rate of 8.9% as of June. That
compares to 8.7% in the March quarter, an even 10% at the end of 2013, 10.1% in the
15
September quarter and 9.1% at the mid point of 2013. The growth rate of electricity output
at each of those points was 7.2% (June); 8.8% (2014Q1); 10.1% (2013Q4); 11.5% (2013Q3)
and 6.9% (2013Q2). The greater amplitude of the growth rates in energy production is
consistent with the movements in the heavy industrial subset of the wider secondary sector.
In the previous edition of the CRQ, we highlighted the sharp deterioration in inventory–to–
sales ratios in the basic materials sectors, which had obvious adverse consequences for
near-term production plans. Making such judgements in real time is not easy. It requires a
balanced reading of the business surveys, data from the industry associations, official
reports, price information and a concerted liaison effort. Moving forward to the current
state of play, our view is that the ‘bitter pill’ of adjustment has been consumed. Output and
sales are now moving closely in accord and the growth of stocks has corrected appreciably.
The basic materials sector appears to be ready to move forward at whatever pace enddemand requires.
In downstream manufacturing, capital goods have been falling in price since late 2011. The
rate of deflation had lessened in late 2013, but this proved to be a head fake, as price
declines re–accelerated in early 2014, before levelling off as of Q2. Unit sales of large
construction related machinery such as excavators, cranes and bulldozers have been
subdued, while smaller diggers and forklifts have reportedly been in higher demand.
Figures 19–21
Please refer to page 8 of The Westpac-BREE China Resources Quarterly PDF version.
The household sector
The previous edition of CRQ highlighted the launch of the Westpac MNI China Consumer
Sentiment Survey. The July edition of the survey (the third under the Westpac MNI banner)
indicates that the anxieties gnawing away at the Chinese consumer through the first half of
the year remained in evidence as the second half opened. A head-to-head comparison with
the business surveys implies that households are feeling less direct benefit from easier
policy settings vis-a-vis the corporate sector.
Consumer caution is manifesting itself in a number of ways. Chinese households are
reporting higher than average rates of saving out of their income. Household perceptions of
job security have deteriorated to levels historically associated with broad based policy
easing. Lower job security is in turn weighing negatively on households’ perceptions of their
own finances. Buying conditions for major items are assessed as unpropitious, consistent
with modest car sales growth. Countering that, small scale discretionary spending is
expected to increase a little.
New series covering households’ motivations for saving and their preferred avenues for
investing them were published for the first time in July. A generally ‘defensive’ or
precautionary approach regarding savings motivations comes through strongly, with
approximately one quarter of respondents nominating future loss of income or employment
as their main motive. The second and third most common motives were healthcare costs
and retirement, items that we expected would loom large in households’ calculus. The
fourth most common savings motive is schooling costs.
16
Consumers’ confident attitude towards real estate in the first half of the year, which was in
stark contrast to the gathering evidence of a correction, showed some signs of weakening in
July. A less positive appraisal of the asset class showed up consistently across the survey.
Housing purchases/deposits were a relatively distant fifth on the motivation for saving
hierarchy, while those nominating real estate as the “wisest place for their savings” fell by
3.7ppts from June. Even so, price expectations remain above long run average, implying a
collective faith that easier policy will eventually carry the day.
Figures 22–24
Please refer to page 9 of The Westpac-BREE China Resources Quarterly PDF version.
17
Table 1: General macroeconomic data
Jun–
11
Sep–
11
Dec–
11
Mar–
12
Jun–
12
Sep–
12
Dec–
12
Mar–
13
Jun–
13
Sep–
13
Dec–
13
Mar–
14
Jun–
14
Real GDP %yr
Nominal GDP %yr
Contributions to real GDP percentage points
ytd
Final consumption expenditure
Gross capital formation
Net exports
Secondary industry %ytd
Tertiary industry %ytd
Current Account %GDP
9.5
18.1
9.1
18.5
8.9
17
7.9
11.3
7.6
9.7
7.4
8.5
7.9
9.9
7.7
9.6
7.5
8.1
7.8
10.6
7.7
9.7
7.4
7.9
7.5
9
5.1
4.6
0.1
10.6
9.7
3.2
5
4.4
0.1
10.6
9.5
2.5
5.3
4.4
–0.4
10.3
9.4
1.8
6.4
2.4
–0.7
8.9
7.4
2.1
4.7
4
–0.9
8.2
7.7
2.3
4.2
3.9
–0.4
7.9
7.9
2.7
4.2
3.6
–0.2
7.9
8.1
2.6
4.3
2.3
1.1
7.8
8.3
2.8
3.4
4.1
0.1
7.6
8.3
2.6
3.5
4.3
–0.1
7.8
8.4
2.1
3.9
4.1
–0.3
7.8
8.3
1.9
5.7
3.1
–1.4
7.3
7.8
1.5
4
3.6
–0.2
7.4
8
na
GDP deflator %yr
Fixed investment deflator %yr
Land price index %yr
Consumer price index %yr
Non-food %yr
8.6
6.7
8.9
5.7
2.9
9.4
7.3
8.4
6.3
2.9
8.1
5.7
5.8
4.6
2.3
3.3
2.3
3.8
3.8
1.8
2.1
1.6
2.3
2.9
1.5
1.1
0.2
1.7
1.9
1.5
2
0.3
2.6
2.1
1.7
1.8
0.2
3.9
2.4
1.8
0.6
–0.1
5.1
2.4
1.6
2.8
0
6.2
2.8
1.6
2
0.9
7
2.9
1.6
0.5
1.1
7.5
2.3
1.7
0.5
0.6
7.2
2.2
1.7
Central revenue 4qma %yr
Central expenditures 4qma %yr
Central operating position 4qma %GDP
24.1
23.7
–0.9
27.1
22.5
–0.7
25
21.6
–1.1
20.2
23.2
–1.6
14.7
18.1
–1.6
10.9
18.2
–2.2
12.8
15.1
–1.6
10.7
11.6
–1.8
10.1
10.8
–1.8
10.8
7.5
–1.5
10.2
11.2
–1.9
10.8
11.3
–1.9
10.8
13.4
–2.4
Money supply M2 %yr
Bank loans (stock) %yr
Total credit supply (new, rolling annual) %GDP
15.9
16.9
31.6
13
15.9
28.4
13.6
15.8
27.1
13.4
15.7
25.8
13.6
16
26
14.8
16.2
29.2
13.8
15
30.3
15.7
14.9
34
14
14.2
33.6
14.2
14.3
32.6
13.6
14.1
30.4
12.1
13.9
29
14.7
14
30.1
Exports %yr
to G3
to Asia ex Japan
to Australia
22.3
16.3
25.8
32.2
20.6
16.6
22.5
26.2
14.3
11.5
14.6
15.6
8.9
7
9.2
10.5
10.5
6.8
12.1
15.1
4.5
–4.9
13.4
7.6
9.4
–1.6
21.7
12.4
18.9
3.4
36.7
5.7
4.1
–4.9
15.2
–5.3
3.9
2.6
7.5
3
7.5
9.4
6.9
–1.5
–4.7
2.8
–10.3
1.1
5
9.3
2.8
4.8
18
to non-Asian emerging markets
Imports
from G3
from Asia ex Japan
from Australia
from non-Asian emerging markets
Trade balance USDbn
Change in FX reserves USDbn
Enterprise survey - net balance
Business conditions
Profitability
Domestic orders
Foreign orders
Banking climate - % of long run average
Demand for loans
Ease of policy stance
Willingness to lend (corporate perception)
MNI Consumer Sentiment - % of long run
average
Headline composite
Real estate composite
Auto composite
Employment outlook
32.4
23.1
18.4
21.9
34.5
26.8
46.7
153
29.4
24.8
16.9
23.5
39.9
38.5
63.8
4
24.7
21.3
10.6
19.9
29.7
42.4
48.1
–21
15.5
10.2
4.3
10.7
18
26
1.1
124
16.7
6.5
1.6
3.2
19
24.6
68.8
–65
11.7
1.7
–0.9
3.8
–8.3
4.9
79.5
45
10.2
2.7
–4.3
10.9
–8.1
–1.7
83.3
26
22.2
9.4
–0.8
17.5
7.5
–0.9
43.5
131
0.4
5.2
–0.1
8.1
9.1
–6.8
65.7
54
–1.4
8.4
4.3
7.3
19
4.9
61.5
166
5.9
7.2
8.1
1.5
33.5
6.3
90.5
159
–3.3
3.3
11.5
–4.7
24.8
2.4
16.6
127
3.9
1.5
7.4
1.7
2.4
4.5
85.9
45
70.6
58.7
56.7
52.5
69.3
57.6
55.3
51.6
67.5
55.5
53.2
48.7
64.4
51.2
50.5
46.9
63.7
52.6
50.2
48.8
61.1
51.4
47.4
47.5
61.8
53.1
47.7
47.1
62.6
52.8
48.8
46.6
57.1
55.6
50.3
49.9
56.3
55.1
48.2
50.1
58.1
57.6
49.4
48.7
55.3
50.9
44.4
45.4
55.4
54.1
48.5
49.7
102.3
63.8
104.7
102.5
64
100.8
98.6
76.6
108.9
98.3
106.3
119.2
87.4
121.8
107.2
82.5
130.2
77.1
87.8
134.5
101.2
95.6
140.2
132.6
89.5
142.2
117.7
92.2
127.7
112
91.9
131.5
130.9
96.5
118.7
124.1
88.4
129.1
98.6
99.8
103.8
91.4
103.8
93.2
100
95.6
95.9
92.8
95.4
101.8
94
98.7
98
97.5
101.5
100.4
99.3
95.8
107.4
95
98.1
102.2
98
99.4
101.8
100.5
101.8
99.3
100.7
102.6
106.3
100.3
101.9
103.1
105.4
95
102.9
102.6
95.1
101.7
102.7
102.7
107.7
97.6
104.2
102.5
97.4
96.2
104.2
103
97.5
19
Table 2: Resource related economic indicators
Industrial production %yr 3mma
Electricity
Processed crude oil
Cement
Steel products
Non–ferrous metals
Automobiles
Civilian ships
Metal cutting tools
Fixed asset investment %yr 3mma
Manufacturing, of which
Heavy industry
Hard infrastructure, of which
Highways
Railways
Utilities
Real estate, of which
Dwellings
Non–residential
Off–market urban construction
Value of new project starts
Number of new project starts
Local government projects
Central government projects
State owned enterprise investment
%yr 3mma unless otherwise specified
Volume of housing starts
Jul13
9.3
7.9
6.4
10
10.3
8.3
12.1
–27.3
3.1
Jul13
19.9
16.3
14.9
23.9
23.3
15.2
20.4
13.2
20
25
11.6
Jul13
18.4
15.5
20.2
15.3
16.9
Aug13
9.7
10.8
7.5
10.2
12
6.8
12.5
–20.6
–4.0
Aug13
20.5
18.2
16.8
25.5
27.3
11
23.1
12.8
17.9
26.8
11.4
Aug13
14.5
6.7
21
13
18.3
Sep13
10.1
11.5
4
9.3
14.9
7.5
14.4
–11.2
4.2
Sep13
20.4
20.6
19.5
25.2
29.9
1.4
21.1
13.6
18.9
28.2
-1.8
Sep13
4.1
1
21
11.7
17.7
Oct13
10.3
11.6
2.6
9.3
15.5
8.1
17.6
–22.2
2
Oct13
20.1
22.7
22.2
22.3
23.6
-6.4
16.6
15.6
16.8
27.5
2.1
Oct13
13.6
6.2
20.9
8.1
15.7
Nov13
10.2
10.1
–0.3
9.8
13.6
10.5
20.9
–21.7
3.6
Nov13
18.8
19.9
18.4
20.6
20.5
-12.6
19.1
19.4
19.8
30.8
29.5
Nov13
8.8
16
18.6
21.9
13.8
Dec13
10
10.1
–1.0
11.6
11.9
8.4
22.6
–22.5
6.5
Dec13
18
16.4
15.6
20.2
15.2
-0.3
25.3
18.8
19.8
30.9
59.4
Dec13
15
9.2
17.7
23.7
14.6
Jan14
9.4
6.6
–5.3
na
na
na
na
na
na
Jan14
17.6
13.7
12
21.1
19.7
11.3
21
21.2
21.2
30.9
61.3
Jan14
27.4
7
17.2
23.4
14.8
Feb14
9
9.6
–2.1
na
na
na
na
na
na
Feb14
17.7
14
12.8
19.3
18.9
19.3
15.5
19.3
20.3
22.8
28.1
Feb14
50.1
6
18.1
12.4
14.6
Mar14
8.7
8.8
–0.3
9.6
6.1
6.9
3.2
–29.3
8.1
Mar14
17.7
15.2
13.6
20.1
23.5
16
11.4
21.1
17.6
19.3
1.9
Mar14
45.7
7.6
18.1
11.5
14.1
Apr14
8.7
11
4.1
7.3
5.8
5.9
5.8
–17.5
15.5
Apr14
17.3
15.2
13.1
20.7
23.8
10.1
13.7
21.2
16.3
21
-5.4
Apr14
22.6
3.3
18
5.2
14
May14
8.8
7.3
3.1
6.4
5.9
5.9
7.3
–19.2
19
May14
17
14.1
11.8
23.8
24.2
7
19.7
20.1
13.4
18.3
-3.1
May14
7.6
-0.4
17.4
8.3
15.2
Jun14
8.9
7.2
4.1
3.8
6.6
5.7
9.5
–12.8
26.4
Jun14
17.1
14.6
12.4
23.7
24.1
12.9
16.8
20.7
12.8
20.3
-1.6
Jun14
5.3
5
17.3
14.9
14.6
Jul13
19.3
Aug13
13.1
Sep13
22.1
Oct13
5.9
Nov13
32.2
Dec13
30.1
Jan14
22.1
Feb14
–6.6
Mar14
–25.6
Apr14
–21.4
May14
–14.9
Jun14
–10.7
20
Volume of housing sales
Value of housing sales - Nationwide
Eastern provinces
Central provinces
Western provinces
Volume of land sales
70 city new house prices net % rising m-o-m
Auto sales
Excavator sales
Bulldozer sales
Terrestrial freight
Aquatic freight
International air freight
Manufacturing PMI – index – of which
Output
New orders
New export orders
Order backlog
Raw material inventories
Finished goods inventories
Purchases of inputs
Imports
New orders to finished goods inventories ratio
17.2
47.6
53.3
45.9
32.4
27.6
85.7
10.2
4.9
–1.4
10.3
10.8
6.6
Jul13
50.3
52.4
50.6
49
44.7
47.6
47.3
50
48.4
1.07
11.1
40.5
44.5
39.2
29.9
22.2
90
10.5
7.2
1
10.2
12.7
4.3
Aug13
51
52.6
52.4
50.2
44.8
48
47.6
52
50
1.1
15.1
36.7
39.7
36.3
27.9
40.2
84.3
13.3
12.3
3.8
10.1
12.3
1.1
Sep13
51.1
52.9
52.8
50.7
46.2
48.5
47.4
52.5
50.4
1.11
15
34.3
36.8
34.8
26.2
1.4
91.4
16.8
18.3
–8.3
10.5
8.3
7.6
Oct13
51.4
54.4
52.5
50.4
45.5
48.6
45.6
52.7
50
1.15
16.6
32.7
34.8
34.4
24.8
49.5
91.4
18.1
20.6
–17.0
10.5
7.6
9
Nov13
51.4
54.5
52.3
50.6
45.3
47.8
47.9
53.6
50.5
1.09
Sources: Westpac Economics, CEIC
21
9.2
30.1
31.9
32
22.7
32
88.6
17.5
22.3
-29.3
9.7
6.2
11.8
Dec13
51
53.9
52
49.8
45.1
47.6
46.2
52.7
49
1.13
5.2
17.5
16.5
25.5
14.6
36.9
80
12.7
10.6
-6.4
5.3
10.1
3.1
Jan14
50.2
52.6
50.5
48.2
45.1
47.4
47.8
49.4
46.5
1.06
0.2
5.5
1.8
19.2
6.7
4.5
80
13.9
22.3
9.7
4.3
14.1
14.1
Feb14
50.3
52.7
50.6
50.1
44.8
47.8
48.3
50.3
49.1
1.05
–2.5
–5.9
–12.1
11.8
–0.3
–1.3
77.1
10.1
12.7
16.3
7.8
19.8
18.4
Mar14
50.4
52.5
51.2
49.1
44.9
48.1
47.3
50.6
48.6
1.08
–7.3
–7.5
–13.4
7.7
–0.9
13.5
52.9
11.1
9
-5.9
7.6
20.7
27.3
Apr14
50.8
52.8
52.3
49.3
46
48
47.1
52.3
49
1.11
–10.8
–9.3
–14.9
3.4
–1.6
11.7
-22.9
8
-19.8
-23
7.9
20
21
May14
51
53
52.8
50.3
46.2
48
47.3
52
49.2
1.12
–8.4
–9.8
–15.6
2.5
–1.6
15.3
-67.1
7.5
-25.3
-28.9
8
20.7
20.3
Jun14
51.7
54.2
53.6
50.8
46.4
49
47.6
53
49.3
1.13
Steel
Average steel prices continued to decline in Q2. Cold-rolled sheet recorded the largest
decline at 2.8%qtr while rebar, hot-rolled sheet and wire rod recorded declines of 2.7%qtr,
0.2%qtr and 1.4%qtr, respectively. Hot-rolled sheet prices averaged RMB3392 in Q2.
China’s Q2 steel production was a record 209 Mt, up 4.7%yr. Production growth was able to
firm through the quarter as inventory-to-sales ratios improved. Regarding end-demand,
road and rail infrastructure outlays rose by 32%yr and 21%yr, respectively. Real estate
investment—construction accounts for around 68 percent of steel use—grew 14%yr,
substantially below the 21% average growth recorded in 2013.
Figures 25–27
Please refer to page 14 of The Westpac-BREE China Resources Quarterly PDF version.
Table 3: Steel prices (quarterly averages)
Domestic RMB/t
Rebar
Hot-rolled sheet
Cold-rolled sheet
Plate
Wire rod
Benchmarks USD/t
Rebar benchmarker
HRC benchmarker
CRC benchmarker
Source: Bloomberg.
Mar12
4240
4272
5214
4273
4257
Jun12
4160
4255
5099
4255
4179
Sep12
3676
3663
4599
3655
3686
Dec12
3683
3849
4565
3703
3653
Mar13
3749
4043
4865
3934
3697
Jun13
3527
3623
4697
3676
3526
Sep13
3507
3609
4460
3599
3509
Dec13
3527
3489
4342
3455
3519
Mar14
3348
3399
4214
3433
3394
Jun14
3258
3392
4096
3448
3347
561
567
689
551
564
670
485
483
601
495
513
612
503
545
647
476
493
629
474
494
613
477
480
611
454
466
597
431
454
562
In an effort to reduce pollution the government plans to shut 19 Mt of pig iron capacity and
28 Mt of crude steel production in 2014, mostly in Hebei. Hebei is the largest steel
producing region in China, at 48 Mt (23% of total production), and is partially responsible for
Beijing’s dire air quality. Q2 production in the province was down 4% from Q1 as the
crackdown on polluting industries took effect.
Stronger domestic sales and export growth of 56%yr have pushed stocks down 20%yr to
13.2 Mt, around 2 Mt below average stock holdings. That is a stark contrast to the
overstretched situation at the time of the previous CRQ.
Figures 28–32
Please refer to page 15 of The Westpac-BREE China Resources Quarterly PDF version.
22
Iron ore
The Steel Index (TSI) 62% spot iron ore price CFR Tianjin averaged US$103 in Q2, down
15%qtr. Although steel production and iron ore imports continue to grow, abundant supply
kept prices under pressure through H1 2014.
Increased supply, high port inventories and lower demand growth all contributed to softer
Q2 prices. Port inventories increased from 104 Mt in Q1 to 106 Mt (5.9 weeks imports) at
the end of Q2. Following investigations into loan fraud at Qingdao port, CISA announced
that the probe is “not affecting the trade in iron ore” as Chinese firms rarely use iron ore
stocks as collateral for loans.
Figures 33–35
Please refer to page 16 of The Westpac-BREE China Resources Quarterly PDF version.
Table 4: Iron ore prices (USD/t, 62% ferrous metal content unless otherwise indicated).
TSI spot price, CFR
Mar-12
141.8
147.6
147.7
134.3
Jun12
139.4
134.0
149.4
129.9
Sep12
112.1
104.2
135.5
86.7
Dec12
120.6
144.9
144.9
104.2
Mar13
148.2
137.3
158.9
132.9
Jun13
125.8
116.5
141
110.4
Quarter average
Quarter end
Quarter high
Quarter low
TSI in CNY terms,
CFR
894.9
882.0
712.3
752.9
922.4
774.3
IODEX Aust FOB
134.9
133.2
105.6
112.9
140.5
117.9
IODEX Brazil FOB
120.9
119.7
93.4
99.5
129.0
106.5
Sources: Bloomberg; Platts. CFR is cost including freight. FOB is free on board.
Sep13
132.6
131.4
142.8
116.9
Dec13
134.9
134.2
139.7
131.2
Mar14
120.4
116.8
135
104.7
Jun14
102.7
93.8
119.4
89.0
812.0
122.2
106.9
821.4
122.6
107.2
734.5
110.8
95.9
639.7
104.5
91.6
In Q2 China imported a record 235 Mt of iron ore, up 19%yr, against a backdrop of rising
concern about China’s economic growth rate in general and construction in particular.
Imports from Australia increased 35%yr to 138 Mt, underpinned by record production in the
Pilbara. Imports from Brazil increased 21%yr to 39 Mt.
The value of China’s iron ore imports fell 2.4%yr in Q2 to US$26 billion as lower spot prices
more than offset higher import volumes. China’s domestic iron ore production has been
more resilient to lower prices than expected with no reports of significant mine closures.
The proportion of Chinese ferrous metal miners making losses remains above 20% (by
number, unweighted), where it has been all year.
Figures 36–40
Please refer to page 17 of The Westpac-BREE China Resources Quarterly PDF version.
Despite softer market conditions Chinese interest in asset ownership remains strong. In July
Chinese steel giant Baosteel acquired Aquila Resources with the goal of developing Aquila’s
iron ore tenement in the West Pilbara. Baosteel expects the West Pilbara Iron Ore Project to
begin operation in 2018 and to export 30 Mt a year once fully operational.
Australia’s export volumes increased by 36%yr to 146 Mt in Q2, with export earnings
increasing 19%yr to $A14.6 billion. Export earnings increased as higher volumes more than
23
offset the decrease in price. Australia’s share in China’s overall imports rose to a record
61.4% in June, up 13.9ppts from two years prior.
Figures 41–45
Please refer to page 18 of The Westpac-BREE China Resources Quarterly PDF version.
24
Table 5: Iron ore & metallurgical coal summary data
Iron ore
unit
Mar-12
Jun-12
Sep-12
China imports
Mt
187.2
179.8
185.3
Australia
Mt
83.0
82.7
91.6
Brazil
Mt
41.6
35.4
38.8
value
USDbn
25.6
25.1
23.4
Raw production *
Mt
256.4
342.1
361.1
Iron ore stocks at ports, end
Mt
of qtr
96.1
94.8
92.6
weeks of imports
weeks
6.7
6.9
6.5
Australian exports to China
Mt
78.1
86.1
91.8
value
AUDbn
9.2
10.8
9.0
Metallurgical coal
China imports
Mt
12.2
15.4
8.9
value
USDmn
2022
2355
1220
Australian exports to China
Mt
6.9
4.8
3.6
value
AUDmn
1092
751
441
Source: Bloomberg, ABS, CEIC. * Run of mine output with a low iron content.
Dec-12
193.1
94.3
48.8
21.2
369.0
Mar-13
186.5
89.8
38.4
24.2
287.4
Jun-13
198.0
102.6
32.1
26.3
356.6
Sep-13
216.7
111.8
40.5
26.3
387.0
Dec-13
219.1
112.9
44.4
28.1
405.4
Mar-14
222.0
118.2
41.6
28.4
304.2
Jun-14
235.3
138.2
38.9
25.7
393.7
70.5
4.8
100.9
9.5
68.1
4.8
92.9
11.2
71.5
4.7
107.9
12.3
70.1
4.2
113.8
13.6
81.3
4.8
126.8
15.6
103.8
6.1
123.2
15.2
105.7
5.9
146.3
14.6
17.0
2048
13.0
1584
17.2
2431
9.1
1284
18.1
2498
9.8
1296
19.4
2414
12.4
1547
20.7
2418
14.0
1823
13.0
1634
10.1
1250
18.1
1812
11.5
1277
25
Metallurgical coal
Metallurgical coal spot prices continued to exhibit softness during Q2, driven by a
combination of increased supply and relatively weaker import demand from China. Prices
for low volatility HCC CFR China averaged US$124 in Q2, down 8%qtr and 20%yr.
Australian benchmark contract prices for high-quality metallurgical coal delivered in Q3
2014 settled at US$120, unchanged from Q2.
Shanxi Coking Coal Group, China’s largest metallurgical coal producer, cut its August offer
price to domestic consumers by US$8–13 in an effort to reduce stockpiles.
A number of operations remain unprofitable at current prices, signalling a risk of mine
closures over the course of 2014.
Figures 46–48
Please refer to page 20 of The Westpac-BREE China Resources Quarterly PDF version.
Table 6: Metallurgical coal prices (quarterly average spot prices).
unit
Mar12
Jun12
Sep12
Dec12
Mar13
Jun13
Sep13
Dec13
Prem Low Vol
USD/t
230.1
236.3
188.0
169.0
179.7
155.0
154.7
156.3
HCC CFR
China
Low Vol PCI
USD/t
165.3
164.9
135.2
136.3
154.9
127.2
125.9
129.0
CFR China
Semi Soft CFR
USD/t
156.4
141.3
114.6
120.4
132.6
114.5
109.1
110.9
China
Prem Low Vol
USD/t
214.3
221.0
174.3
155.2
165.9
141.5
140.9
140.5
HCC FOB Aust
Prem Low Vol
AUD/t
203.0
219.2
168.0
149.4
159.6
142.6
155.4
155.3
HCC FOB Aust
Sources: Bloomberg; Platts. CFR is cost including freight. FOB is free on board. HCC is hard coking coal.
Mar14
Jun14
135.0
124.3
115.9
108.7
101.1
92.8
120.6
111.4
133.3
123.1
China imported 18 Mt of metallurgical coal in Q2, steady compared with Q2 2013, but up
39%qtr. The market for imported coal in China has been reasonably subdued during H1
2014 as buyers accessed domestic supply options.
Some steel producers have indicated that they intend to reduce the risk of procuring large
volumes of coal when prices are declining through more conservative restocking strategies,
purchasing coal as required rather than maintaining stockpiles.
Australia exported 11.5 Mt of metallurgical coal to China in Q2, up 18%yr. The value of these
exports decreased 1.5%yr to $A1277 million.
Figures 49–53
Please refer to page 21 of The Westpac-BREE China Resources Quarterly PDF version.
26
Developments in China’s energy policy
The State Council released a two year action plan in May to ensure China will meet its
emissions reduction and energy saving targets. In a 2013 mid-term assessment, China was
assessed as having fallen behind many of its outlined targets. For example, the target for
reducing nitrogen oxide between 2011 and 2013 was 60%, while the actual result was closer
to 20%. China is trying to reduce energy demand by around 170 million tonnes of coal
equivalent a year through a program of industrial restructuring and technological upgrades.
President Xi Jinping has called for improved efforts to ‘revolutionise’ energy production and
consumption habits in China, acknowledging the challenges China faces in dealing with its
rising energy demand amidst constrained supply and increasingly problematic
environmental considerations. The planned action includes energy supply reform to
diversify the energy system, encouraging technological innovation, and pricing reform to
develop a more competitive energy market.
In a bid to improve air quality, the Chinese Government has announced that around 5
million aging vehicles that do not meet Chinese fuel standards will be taken off the road in
2014, including 330 000 from Beijing and around 660 000 from neighbouring Hebei
province. The Beijing Government is imposing a limit of 5.6 million cars on the road this
year, with the total volume allowed to increase to 6 million by 2017. Other cities, including
Shanghai, Tianjin, Guangzhou and Hangzhou, have also began rationing license plates.
The Chinese Government has mandated new energy vehicles (electric, plug-in hybrids and
fuel-cell automobiles) must account for at least 30% of new vehicles purchased for official
use by 2016. The policy will be initially directed at central government agencies and the
target will be increased after 2016 when local provinces will be required to participate.
At UN Climate negotiations held in June, Chinese Government officials indicated their
intention to set a cap on carbon emissions. While no timeframe or level has been
announced, it is being considered as part of the next Five-Year Plan, which is scheduled to
be implemented in 2016.
In June, China and the United States signed several agreements on energy efficiency
projects which are expected to increase the energy cooperation between the two countries.
The projects include a distributed energy pilot in Shanghai, energy efficiency management
training, developing a low carbon eco-city in China, and consultancies for improving
corporate energy efficiency.
As part of continued efforts to reduce air pollution, the Beijing Government will require
steelmakers and power plants to use low-sulphur coal (<0.4%) beginning 1 August 2014.
Given Beijing has already announced its intention to reduce coal use and has banned the
development of new power plants, this measure is not expected to have a material effect on
China’s aggregate coal demand. Although it may well increase the demand for higher
quality, low-sulphur coal.
Electricity trends
After declining for three consecutive quarters, China’s electricity consumption increased by
5.5%qtr (5.2%yr) to 1.3 trillion kWh in Q2, supported by higher consumption by secondary
industry. The increase in electricity consumption has coincided with a gradual improvement
in economic activity.
27
Similarly, China’s electricity generation increased by 7.3%yr to 1.3 trillion kWh. Thermal
generation, which includes coal and gas, increased by 4.8%yr, but was down on Q1 owing to
increased utilisation of hydropower, which increased 13.2%yr and 54.8%qtr in Q2.
Figures 54–59
Please refer to page 23 of The Westpac-BREE China Resources Quarterly PDF version.
Thermal coal
Key thermal coal FOB prices continued to decline in response to surplus supply in Q2.
Newcastle spot prices declined 6.1%qtr, Baltic 6.6%qtr, QHD 5.0%qtr and Richard’s Bay
4.7%qtr. Industry behemoth Shenhua cut its offer price to domestic consumers in June and
July, but raised them mildly in August.
The CCIA announced that more than 70% of China’s coal producers are loss-making. Shanxi
province intends to implement measures such as reducing fees to assist struggling
producers.
The Beijing Government will require local power plants to use low-sulphur coal (<0.4%) from
August which may increase the demand for, and imports of, higher-quality coal.
Figures 60–62
Please refer to page 24 of The Westpac-BREE China Resources Quarterly PDF version.
Table 7: Thermal coal prices (USD/t, NAR unless otherwise indicated).
Quarterly averages
Mar12
143.0
Jun12
139.8
Sep12
117.2
Dec12
116.6
QHD 5800kcal
QHD 5800kcal
RMB/t
901.6
885.5
744.6
728.6
Newcastle
6000kcal
112.3
94.5
86.1
84.3
Newcastle
6000kcal AUD/t
106.4
93.5
82.7
81.2
Richards Bay
104.8
93.5
87.5
85.8
6000kcal
Baltic 6000kcal
95.3
83.7
84.4
84.4
Sources: Bloomberg. NAR stands for net as received.
Mar13
114.9
Jun13
112.8
Sep13
105.8
Dec13
106.1
Mar14
105.4
Jun14
100.1
715.2
694.4
647.8
646.8
643.1
623.9
91.3
85.4
77.1
82.0
77.4
72.7
88.0
86.7
84.3
88.6
86.5
77.9
84.8
82.0
80.5
75.5
73.0
71.4
83.1
78.2
78.7
74.3
75.0
69.4
China has reportedly begun trialling quality checks on imported coal in Fujian province in
anticipation of a ban on low-quality coal imports. Cargoes that fail to meet the specifications
will be directed to return to their port of origin.
China’s imports were affected by increased hydropower generation and cheaper domestic
supply in Q2, declining 3.9%yr to 58 Mt. Imports from Australia increased 25%yr to 15 Mt
while imports from Indonesia fell by 11% to 26 Mt.
Australia’s exports to China were up 13.5%yr to 12.8 Mt in Q2. While prices were weaker
during Q2, values increased 5.0%yr to $A869 million.
28
Figures 63–67
Please refer to page 25 of The Westpac-BREE China Resources Quarterly PDF version.
29
Table 8: Thermal coal summary data
unit
China imports
Mt
Indonesia
Mt
Australia
Mt
value
USDmn
End of quarter stocks at ports
Mt
weeks of imports
Australian exports to China
Mt
value
AUDmn
Sources: ABS, Bloomberg, McCloskey.
Mar-12
49.3
25.1
8.1
4940
22.4
5.9
5.1
451.7
Jun-12
62.9
30.5
11.4
5969
27.4
5.6
10.3
955.0
Sep-12
54.4
23.6
11.3
4885
22.9
5.5
7.5
625.9
Dec-12
68.5
36.5
14.8
5291
24.7
4.7
11.4
843.3
30
Mar-13
62.8
33.1
12.9
4846
26.8
5.5
7.9
561.7
Jun-13
60.5
29.4
12.2
4679
31.5
6.8
11.3
827.6
Sep-13
60.9
27.8
17.0
4647
25.1
5.4
11.7
892.2
Dec-13
67.6
32.8
15.9
4973
22.5
4.3
11.6
830.4
Mar-14
71.0
35.7
15.4
5145
27.5
5.0
11.4
860.2
Jun-14
58.1
26.1
15.2
4069
31.4
7.0
12.8
869.0
Oil
Oil prices averaged higher in Q2 on the back of firmer global growth and supply concerns
stemming from ongoing tensions in the Middle East and the Ukraine. In Q2 WTI prices
averaged US$103 a barrel (up 4%qtr), Brent US$110 (2%qtr) and Tapis US$115 (1%qtr).
In response to movements in world oil prices, China’s benchmark gasoline and diesel prices
were adjusted five times during Q2, ending the quarter around 1% higher than Q1.
China’s apparent consumption of gasoline has been increasing strongly underpinned by
rising motor vehicle sales, which increased 8.4%yr in H1 2014. The number of passenger
cars passed the 100 million mark in 2013.
Figures 68–70
Please refer to page 27 of The Westpac-BREE China Resources Quarterly PDF version.
Table 9: Crude oil spot prices (USD/bbl, quarterly)
Brent
Mar12
Quarter
average
118.4
Quarter end
122.9
Quarter high
126.2
Quarter low
109.8
Tapis
Quarter
average
128.0
Quarter end
133.0
Quarter high
135.6
Quarter low
119.5
West Texas
intermediate
Quarter
103.0
average
Quarter end
103.0
Quarter high
109.5
Quarter low
96.4
Source: Bloomberg.
Jun12
Sep12
Dec12
Mar13
Jun13
Sep13
Dec13
Mar14
Jun14
108.8
97.8
125.4
89.2
109.4
112.4
116.9
97.3
110.1
111.1
115.8
105.7
112.6
110.0
118.9
107.5
103.3
102.2
111.1
97.7
109.7
108.4
116.6
103.0
109.4
110.8
112.6
103.5
107.9
107.8
111.2
105.8
109.8
112.4
115.1
104.8
117.2
101.1
133.7
97.9
115.9
119.0
124.5
103.1
113.3
114.1
117.3
108.1
118.3
116.0
125.2
113.7
108.9
109.7
116.1
103.8
115.9
114.5
122.2
109.1
117.2
120.7
121.7
110.8
114.3
113.2
118.6
111.7
115.0
117.0
119.4
110.1
93.3
85.0
106.2
77.7
92.2
92.2
99.0
83.8
88.2
91.8
92.5
84.4
94.3
97.2
97.9
90.1
94.1
96.6
98.4
86.7
105.8
102.3
110.5
98.0
97.6
98.4
104.1
92.3
98.7
101.6
104.9
91.7
103.1
105.4
107.3
99.4
China imported 77.2 Mt of oil in Q2, up 11.6%yr. Imports from Iran and Oman were up
59%yr and 50%yr, respectively. This was partly offset by lower imports from Saudi Arabia
(down 11.8%yr) and Angola (2.6%yr).
Crude oil imports from Iran were a record 15.6 Mt in H1 2014 following the signing of new
contracts for supply and the relaxation of US sanctions on countries importing oil from Iran
in January 2014.
China’s imports of crude oil from Australia declined 10.8%yr to 712 kt in Q2. Import values
also declined, dropping 10.1%yr to US$567 million.
Figures 71–75
Please refer to page 28 of The Westpac-BREE China Resources Quarterly PDF version.
31
Table 10: Oil and gas summary data
Oil
China imports
Saudi Arabia
Angola
Russia
Iran
Oman
other
China production
Crude
Gasoline
Diesel
Chinese imports from Australia
value
Gas
China pipeline imports
China LNG imports
Qatar
Australia
Indonesia
Malaysia
other
China production
Chinese imports from Australia
value
Source: CEIC.
unit
Mt
Mt
Mt
Mt
Mt
Mt
Mt
Mar-12
70.6
14.3
9.5
7.2
4.3
4.3
31.1
Jun-12
69.5
13.7
11.5
5.6
6.4
4.7
27.6
Sep-12
60.3
11.6
9.8
5.5
5.1
4.8
23.5
Dec-12
70.7
14.3
9.4
6.1
6.2
5.8
28.9
Mar-13
69.0
14.0
9.7
6.0
5.0
5.6
28.7
Jun-13
69.2
13.0
10.4
6.4
5.5
5.7
28.2
Sep-13
73.2
13.9
10.5
6.1
5.5
6.8
30.4
Dec-13
70.8
13.0
9.4
6.0
5.4
7.4
29.5
Mar-14
74.7
12.7
10.7
7.5
6.9
6.0
31.0
Jun-14
77.2
11.5
10.2
7.8
8.7
8.5
30.5
Mt
Mt
Mt
kt
USDmn
51.0
21.5
42.8
767.5
702.8
50.8
21.1
41.8
1361.1
1229.5
52.0
22.6
41.6
625.6
505.0
53.2
24.1
44.3
961.4
821.7
17.7
8.3
14.8
531.9
452.6
52.3
24.0
42.1
798.3
630.8
51.4
24.0
42.7
1233.7
1052.3
53.2
25.4
44.0
461.8
393.3
51.3
26.6
42.3
730.9
599.8
52.2
26.9
42.9
711.9
567.1
Mt
kt
kt
kt
kt
kt
kt
Bcm
kt
USDmn
3.5
3260
1021.2
778.8
551.1
405.5
503.4
33.2
778.8
132.2
3.7
3410
1161.4
907.6
666.2
426.4
248.4
25.0
907.6
160.3
3.9
3800
1525.6
903.6
542.8
443.8
384.3
24.8
903.6
172.9
4.6
4230
1283.6
971.8
665.0
576.8
732.8
28.7
971.8
164.3
4.5
4180
1932.7
842.3
362.8
648.4
393.9
9.9
842.3
143.4
4.9
4160
1432.2
974.2
788.4
645.3
319.8
26.9
974.2
182.9
5.2
4560
1618.3
833.9
605.5
679.0
823.3
26.4
833.9
145.7
5.4
5140
1784.8
906.2
676.6
685.0
1087.4
30.2
906.2
159.6
4.9
5629
2570.0
842.5
617.4
842.9
756.2
32.3
842.5
146.4
5.9
4297
1380.5
904.6
608.3
698.1
705.2
29.0
904.6
159.7
32
Gas
LNG and pipeline unit values increased by 8%yr and 3%yr in Q2, respectively.
China is expanding its import capacity to meet its gas needs. Line C of the Central Asia–China
Gas Pipeline, moving gas from Turkmenistan, was commissioned during Q2. It is expected to
reach full capacity of 25 bcm/yr at the end of 2015. Total capacity of the three lines (A–C)
will be 55 bcm/yr (around 20% of total consumption).
Construction of the Siberia Gas Pipeline that will transport gas under the deal signed
between Russia and China in May is expected to commence shortly at a cost of around
US$60–70 billion.
Figures 76–80
Please refer to page 30 of The Westpac-BREE China Resources Quarterly PDF version.
China’s LNG and pipeline gas imports increased by 3%yr and 20%yr, respectively in Q2. LNG
imports from China’s traditional major suppliers—Qatar (-4%yr), Australia (-7%yr) and
Indonesia (-23%yr) were all lower in Q2, offset by a sharp lift from other sources (up
121%yr).
Pipeline import growth was supported by increased imports through the Myanmar pipeline,
which recently celebrated its first year of operation. CNPC reported that 1.87 bcm of gas
was transported through the pipeline during the year.
LNG imports from Australia were 904.6 kt in Q2, down 7%yr, as indicated above. Values also
declined, down 13%yr to US$160 million.
Figures 81–85
Please refer to page 31 of The Westpac-BREE China Resources Quarterly PDF version.
Uranium
Figures 86–89
Please refer to page 32 of The Westpac-BREE China Resources Quarterly PDF version.
Table 11: Uranium summary data.
Units
Jun12
Sep12
Dec12
Mar13
Uranium spot
USD/lb
price U3O8
51
49
43
43
China nuclear
bn kWh
22
26
25
23
power output
Investment in
RMBbn
15
20
26
12
nuclear
China uranium
t
imports
0
2510
10734
4516
Value
USDmn
0
290
1189
491
Source: CEIC, Cameco, The Ux Consulting Company, Trade Tech.
33
Jun13
Sep-13
Dec13
Mar14
Jun14
41
35
35
35
29
24
30
30
27
28
14
15
20
11
13
2567
292
9069
931
6216
677
4045
396
6801
675
The uranium supply glut continued to weigh prices down in Q2 and the spot price decreased
a further 17%qtr to average US$29/lb.
Nuclear power generation in China has continued to increase as a result of more power
plants being connected to the grid. In Q2 China’s nuclear power generation increased 19%yr
to 28 billion kWh.
China’s expenditure on nuclear power plant construction increased 22%qtr to RMB13.1
billion, but was down 8%yr.
China’s imports of uranium continue to increase in line with growth in its nuclear power
generation. In Q2 China imported around 6800 tonnes of uranium worth US$675 million.
Figures 90–94
Please refer to page 33 of The Westpac-BREE China Resources Quarterly PDF version.
Gold
Market responses to geopolitical events were a driver of gold prices in Q2 and early Q3.
LBMA gold prices decreased 0.2%qtr to average US$1290/oz (but peaked at US$1328) while
Shanghai Gold Exchange prices averaged RMB259/g, up 1.2%qtr.
China’s price rise came despite a significant downturn in China’s gold purchases in 2014H1.
According to the China Gold Association, domestic gold demand fell 19% in 2014H1 with
lower investor demand more than offsetting growth in jewellery purchases.
World Gold Council data showed similar results for Q1 with China’s total gold consumption
down 18%yr to 263.2 tonnes due to lower investment. Sales of gold bars and coins
decreased 55%yr to 60 tonnes and were only partially offset by higher jewellery purchases
which increased 10%yr to 203.2 tonnes.
Reflecting the decline in demand, China’s gold imports through Hong Kong decreased to the
lowest volume since January 2013. Total imports in the first five months of 2014 were 482
tonnes, down 23%yr as lower investment consumption weighed on imports and China
investigated the use of gold as a financing tool.
On 26 June China’s National Audit Office announced it had discovered RMB94.4 billion in
loans backed by falsified gold warehouse receipts. The finding and subsequent uncertainty
contributed to downward pressure on China’s domestic gold price which decreased 2%
through July to end at RMB259/g.
Figures 95–96
Please refer to page 34 of The Westpac-BREE China Resources Quarterly PDF version.
34
Table 12: Gold prices (USD/oz unless specified otherwise)
LBMA spot prices
Mar12
1691
1668
1784
1566
Quarter average
Quarter end
Quarter high
Quarter low
Shanghai avg
345
RMB/g
Shanghai avg
USD/g
55
Sources: LME, Bloomberg.
Jun12
1612
1597
1678
1540
Sep12
1653
1772
1777
1567
Dec12
1718
1675
1790
1648
Mar13
1632
1597
1693
1565
Jun13
1417
1235
1600
1201
Sep13
1330
1329
1418
1223
Dec13
1272
1206
1353
1189
Mar14
1292
1295
1383
1201
Jun14
1290
1317
1328
1244
329
338
345
329
286
265
251
256
259
52
53
55
53
46
43
41
42
41
Despite lower prices and the downturn in domestic demand, China’s gold production for the
year to May increased 8.3%yr to 163 tonnes.
The decline in China’s gold imports was reflected in Australia’s exports to China. In Q2
Australia’s gold export volumes to China decreased by 10%yr to total 40 tonnes. The volume
decline contributed to a 14%yr decrease in gold export earnings to $A1773 million.
Figures 97–101
Please refer to page 35 of The Westpac-BREE China Resources Quarterly PDF version.
35
Table 13: Gold and silver summary data
Gold
unit
China imports (via Hong Kong)
Domestic production
Australian exports to China
value
t
t
t
USDmn
Mar-12
135.5
80.8
17.8
924.9
Jun-12
247.3
96.2
49.9
2529.0
Sep-12
199.1
111.3
23.9
1185.1
Dec-12
252.6
114.8
18.9
1000.8
Mar-13
371.9
90.3
36.9
1845.3
Jun-13
365.7
90.3
44.5
2064.1
Sep-13
377.0
115.0
43.3
2032.0
Dec-13
381.9
120.3
50.9
2254.3
Mar-14
333.5
96.4
47.0
2175.8
Jun-14
na
na
40.1
1773.0
Silver
China imports
Domestic production
Source: CEIC, ABS.
t
t
93.7
910
111.4
910
110.3
910
99.7
910
83.6
977
85.5
977
99.9
977
78.1
977
67.8
918
90.5
na
36
Silver
Figures 102–105
Please refer to page 37 of The Westpac-BREE China Resources Quarterly PDF version.
Table 14: Silver prices (USD/oz unless specified otherwise)
LBMA spot prices
Mar12
32.7
32.3
36.9
27.9
Quarter average
Quarter end
Quarter high
Quarter low
Changjiang
6.79
RMB/g
Changjiang USD/g
1.07
Sources: LME, Bloomberg.
Jun12
29.5
27.5
33.0
26.4
Sep12
29.9
34.5
34.8
26.8
Dec12
32.6
30.3
35.0
29.9
Mar13
30.1
28.5
32.3
28.4
Jun13
23.2
19.7
28.0
18.5
Sep13
21.5
21.7
24.5
18.9
Dec13
20.8
19.5
22.8
19.1
Mar14
20.5
19.8
22.0
19.2
Jun14
19.7
21.0
21.1
18.8
6.18
0.98
6.27
0.99
6.65
1.05
6.11
0.98
4.72
0.76
4.28
0.70
4.24
0.70
4.15
0.68
4.15
0.67
Copper
The LME copper price declined through Q2, falling 5.0%yr to average US$6787. LME prices
subsequently recovered to reach US$7184 at the end of July. Trading is currently shrouded
in uncertainty as China’s investigates potential fraud in copper backed loans and commodity
financing more broadly.
The ICSG reported that it expects a market surplus in 2014. However, LME copper stocks
have fallen to their lowest level since 2008.
In line with LME price movements the SHFE copper price declined by 6.5%yr in Q2 to
average RMB49 328 a tonne. After falling through Q2 to 79 kt in June, SHFE copper stocks
increased through July and were 109 kt on 18 July.
Figures 106–108
Please refer to page 38 of The Westpac-BREE China Resources Quarterly PDF version.
Table 15: Copper prices (USD/t unless specified otherwise)
LME spot
prices
Mar-12
Jun-12
Quarter
average
8310
7869
Quarter end
8480
7605
Quarter high
8658
8576
Quarter low
7471
7252
3 Month
forward
8314
7829
Shanghai
avg RMB/t
58931
56554
Shanghai
9292
8965
avg USD/t
Sources: LME, Bloomberg.
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
7706
8268
8401
7327
7909
7915
8340
7541
7931
7583
8243
7539
7148
6751
7547
6638
7073
7291
7341
6719
7153
7395
7395
6939
7041
6636
7440
6435
6787
6955
7035
6600
7712
7921
7964
7180
7096
7161
7008
6757
56518
56984
57189
52778
51690
51545
49731
49328
8922
8971
9161
8473
8438
8465
8164
7915
37
In Q2 China’s refined copper production increased 8%yr (10%qtr) to 1823 kt underpinned by
the need to meet increased consumption stemming from income growth and expenditure
on electricity networks.
China’s copper imports increased 23%yr to 1699kt in Q2. Imports from Peru were up 52%yr
to 182 kt and imports from Chile were up 41%yr to 539 kt. Australia’s share of China’s
copper imports averaged 8% in 2013–14 and was 8.5% in the month of June 2014.
Australia exported 124 kt of copper to China in Q2, a decrease of 13%yr. Lower volumes
contributed to a 11%yr decrease in the value of copper exports to China, which totalled
$A886 million in Q2.
Figures 109–113
Please refer to page 39 of The Westpac-BREE China Resources Quarterly PDF version.
38
Table 16: Copper summary data
unit
kt
kt
kt
kt
kt
kt
kt
weeks
Mar-12
1597
97
558
127
816
1327
961
2.4
China imports
Australia
Chile
Peru
other
Refined production
World stocks
weeks of stocks
Australian exports to
kt
China
81
value
AUDmn
661
Sources: Bloomberg, World Metal Statistics.
Jun-12
1327
75
393
125
734
1417
860
2.2
Sep-12
1403
80
439
127
757
1433
860
2.2
Dec-12
1477
78
485
169
744
1562
1061
2.8
Mar-13
1356
97
436
171
652
1484
1297
3.4
Jun-13
1380
157
383
120
720
1693
1319
3.3
Sep-13
1731
135
519
200
877
1715
1107
2.7
Dec-13
1819
128
574
213
904
1909
902
2.1
Mar-14
1836
165
542
182
946
1651
899
2.2
Jun-14
1699
144
539
182
834
1823
na
na
50
385
70
554
90
660
109
844
142
991
123
888
154
1209
122
967
124
886
39
Aluminium
In Q2 average LME aluminium spot prices increased 5.3%qtr to US$1798. However they
were down 2.0%yr. Average Shanghai prices decreased 0.3%qtr and 9.7%yr to RMB13 133 in
Q2. The fall in the average price of the year was in large part due to excess supply.
China’s aluminium production increased by 8%yr in Q2 to 5.8 Mt. The north-west province
of Xinjiang overtook Henan as the main aluminium producing region in China in the quarter.
Xinjiang increased production by 32%qtr and 119%yr to 1.1Mt spurred by a relocation of
capacity chasing cheaper electricity in the province. Henan’s share of national production
remained at 15%qtr however quarterly production fell to 0.8Mt.
Figures 114–116
Please refer to page 41 of The Westpac-BREE China Resources Quarterly PDF version.
Table 17: Aluminium prices (USD/t unless specified otherwise)
LME spot
prices
Quarter
average
Mar-12
2177
Jun-12
1978
Sep-12
1918
Dec-12
1997
Mar-13
2003
Jun-13
1835
Sep-13
1781
Dec-13
1769
Mar-14
1708
Jun-14
1798
2099
1835
2094
2040
1882
1731
1803
1765
1731
1851
2308
2091
2177
2164
2123
1939
1877
1849
1768
1871
2004
1811
1794
1874
1868
1720
1730
1695
1642
1715
2216
2019
3 Month
forward
15957
15946
Shanghai
avg RMB/t
2516
2528
Shanghai
avg USD/t
317
317
Aus FOB
alumina
China
2651
2688
Alumina
RMB/t
Sources: LME, Bloomberg.
1945
2017
2042
1870
1827
1815
1752
1836
15467
15161
14722
14551
14363
14353
13168
13133
2442
2387
2358
2336
2345
2357
2158
2107
316
326
341
327
318
323
328
317
2581
2597
2571
2513
2500
2504
2438
2353
Quarter end
Quarter high
Quarter low
Growth in China’s domestic aluminium production has continued despite many producers
operating at a loss.
The volume of China’s aluminium imports increased 16%yr to 96 kt helped along by a 10%yr
gain in automobile production.
China imported 19 kt of aluminium from Australia in Q2, down 61%qtr however exports
were still up 33%yr. Russia exported 24 kt to China and regained top spot from Australia as
China’s principal source of aluminium imports.
Australia’s export volumes decreased by 17%yr to 9.7 kt in Q2, with export earnings
decreasing 16%yr to $A21 million.
Figures 117–121
Please refer to page 42 of The Westpac-BREE China Resources Quarterly PDF version.
40
Alumina
Alumina prices (FOB Australia) were down 3.2%qtr and 3.1%yr in Q2, averaging US$317, due
to ongoing oversupply.
The average Shanghai alumina price decreased 3.5%qtr and 6.3%yr to RMB2353. Market
oversupply combined with slowing demand growth, credit concerns and unplaced global
cargoes all contributed to the price fall.
China’s total imports were down 14%qtr to 1.3 Mt. Australian imports bore the brunt of the
fall, decreasing 45%qtr to 0.7Mt. However, Australia still provides the majority of China’s
alumina imports, accounting for 51% of the total in Q2.
Figures 122–126
Please refer to page 43 of The Westpac-BREE China Resources Quarterly PDF version.
Bauxite
China’s bauxite imports decreased by 65%yr to 6.6 Mt in Q2, with the resulting import value
falling by 60%yr to US$401 million. The fall is due to a decrease in seaborne supply following
Indonesia’s ban on ore and concentrate exports which began in January and users drawing
down stocks accrued in anticipation of the same. Prior to the export ban Indonesia provided
around 71% of China’s bauxite imports. Bauxite imports from Indonesia fell precipitately in
Q2 to 0.05 Mt.
In Q2 Chinese imports of Australian bauxite increased 20%qtr to 3.7 Mt. However this was
down 8%yr as China sharply increased its bauxite imports in 2013 to build reserves in
preparation for the ban.
Imports from countries other than Australia and Indonesia also increased in Q2, up 15%yr to
2.9 Mt. After Australia, India is now the second largest source of bauxite imports, shipping
1.5 Mt to China in Q2.
Australia’s bauxite export volumes decreased by 5%yr to 3.9 Mt in Q2, with export earnings
increasing by 2%yr to $A141 million. The distortions emanating from China’s multi-faceted
response to the Indonesian situation will continue to bias growth rates in coming quarters.
Figures 127–130
Please refer to page 44 of The Westpac-BREE China Resources Quarterly PDF version.
41
Table 18: Aluminium, alumina and bauxite summary data
unit
Mar-12
China imports
kt
209.0
Australia
kt
38.2
India
kt
10.0
Russia
kt
70.5
other
kt
90.3
Refined production
kt
4691
World stocks
kt
7239
weeks of stocks
weeks
8.8
Australian exports to
kt
China
36
value
AUDmn
78
Alumina
China imports
kt
1161.6
Australia
kt
1039.7
Production
Mt
9.0
Bauxite
China imports
Mt
13.1
Australia
Mt
2.3
Indonesia
Mt
10.6
Australian exports to
Mt
China
2.1
value
AUDmn
57.3
Sources: Bloomberg, World Metal Statistics.
Jun-12
144.9
18.3
5.0
36.9
84.7
5002
6839
7.7
Sep-12
179.8
25.5
28.0
53.3
72.9
5357
7203
8.2
Dec-12
104.6
21.6
0.5
19.6
62.9
5217
7361
8.3
Mar-13
67.8
14.5
0.0
18.1
35.2
5215
7400
8.7
Jun-13
82.8
14.3
2.9
28.1
37.6
5365
7439
8.4
Sep-13
137.7
31.7
13.1
28.9
64.0
5626
7089
7.9
Dec-13
193.0
31.5
17.7
46.1
97.7
5839
7171
8.0
Mar-14
175.5
48.0
19.1
29.6
78.8
5755
7356
8.2
Jun-14
96.1
18.9
0.7
24.2
52.3
5747
na
na
13
28
31
62
19
39
10
23
12
25
28
62
35
76
34
73
10
21
1303.8
1102.4
10.1
1255.0
1223.5
9.6
1298.7
1291.8
9.0
1034.9
1028.5
10.3
612.5
602.7
11.0
829.3
766.5
11.6
1354.4
1177.0
11.2
1483.7
1183.7
11.2
1280.7
654.9
11.5
12.6
2.0
10.4
5.1
3.0
1.8
9.3
2.3
5.6
14.0
2.7
9.2
19.0
4.0
12.4
21.1
4.2
14.7
17.6
3.4
12.4
13.1
3.1
8.7
6.6
3.7
0.1
2.4
68.7
2.6
72.4
2.6
71.9
2.8
82.0
4.1
138.0
4.2
149.5
4.0
149.0
2.5
87.0
3.9
140.9
42
Nickel
Following Indonesia’s ban on unprocessed minerals exports in January, nickel prices rose
dramatically, supported by the closure of Vale’s Goro mine in New Caledonia and the
possibility of trade sanctions on Russia. China’s stocks of Indonesian sourced ore fell by 35%
from 17.4 Mt in January to 11.3 Mt at end-June, or an estimated 130 kt of metal content.
The average LME nickel spot price increased 23%yr to US$18 465 in Q2. Prices increased
from US$15 780 in early April to a high of US$21 200 in mid-May. Some of this exuberance
has worn off but prices remained around US$18 500 at the end of July. The average
Shanghai price rose 33%qtr and 21%yr to RMB128 595 in Q2.
Figures 131–133
Please refer to page 46 of The Westpac-BREE China Resources Quarterly PDF version.
Table 19: Nickel prices (USD/t unless specified otherwise)
LME spot prices
Mar-12
Jun12
Quarter average
19651
17146
Quarter end
17430
16475
Quarter high
21830
18400
Quarter low
17405
16025
3 Month forward
19721
17215
Shanghai avg
RMB/t
Shanghai avg
USD/t
13802
5
12666
9
21760
20080
Sep12
1631
7
1852
0
1852
0
1519
0
1638
1
1180
70
1864
0
Dec12
Mar-13
Jun-13
Sep13
16967
17314
14963
13916
17085
16540
13680
13860
18840
18600
16390
14775
15850
16425
13560
13160
17036
17387
15039
13996
12092
0
12130
6
10605
3
98866
19038
19432
17026
16139
Dec13
139
09
139
70
146
35
132
70
139
79
968
50
159
05
Mar14
1464
3
1573
5
1622
5
1336
5
1469
3
9638
0
1578
5
Sources: LME, Bloomberg.
China’s domestic nickel ore production increased by 20%qtr to 90 kt in Q2. Production from
Gansu province, which accounts for 41% of China’s domestic nickel ore output, increased by
14%qtr to 37 kt.
In Q2 China’s nickel ore imports decreased 12%yr to 1625 kt. China’s imports of Indonesian
nickel fell from 914 kt in Q4 2013 to 28 kt in Q2, a fall of 97%. The Philippines has been the
major beneficiary of the Indonesian ban, with exports to China increasing 63%yr to 720 kt,
accounting for 44% of China’s imports.
Imports from Australia decreased 41%yr to 112 kt due to reduced production, despite a gain
of 69% in the quarter (essentially seasonal).
Figures 134–138
Please refer to page 47 of The Westpac-BREE China Resources Quarterly PDF version.
43
Jun-14
18465
18715
21200
15780
18512
12859
5
20634
Table 20: Nickel summary data
unit
Mar-12
Jun-12
Sep-12
China imports
USDmn
1731
2086
1890
Australia
USDmn
221
252
158
Canada
USDmn
166
103
93
Russia
USDmn
309
196
290
Indonesia
USDmn
699
871
425
Philippines
USDmn
114
445
673
other
USDmn
221
220
252
Refined production
kt
105
149
172
World stocks
kt
105
110
130
weeks of stocks
weeks
3.3
3.4
3.8
Australian exports to
kt
China
61
64
69
value
AUDmn
1077
1081
936
Source: Bloomberg, World Metal Statistics, International Nickel Study Group.
Dec-12
2376
147
110
514
985
411
209
198
162
4.5
Mar-13
2149
172
143
456
952
168
258
152
186
5.5
Jun-13
1842
189
107
257
629
442
217
161
207
6.3
Sep-13
1766
119
86
270
521
482
287
181
248
7.2
Dec-13
2095
112
89
233
914
448
299
217
282
7.6
Mar-14
1585
67
96
326
712
171
212
168
284
8.5
Jun-14
1625
112
85
402
28
720
276
na
305
na
67
909
60
851
66
946
67.2
822
59.2
739
48.7
739
na
na
44
Zinc
Tighter supply conditions in world zinc markets and a continued drawdown of stocks
supported higher prices in Q2. The LME zinc price averaged US$2073 a tonne in Q2, up
2.2%qtr, and finished the quarter at around US$2205. Zinc prices have continued to increase
and were around US$2340 a tonne in early August.
Mirroring the trends observed in world zinc markets, Shanghai zinc prices increased 1.3%qtr
to average RMB15 155 in Q2 and have increased to around RMB17 200 in early August.
LME stocks were 668 kt at the end of Q2, down from 1056 kt at the end of Q2 2013.
Figures 139–141
Please refer to page 49 of The Westpac-BREE China Resources Quarterly PDF version.
Table 21: Zinc prices (USD/t unless specified otherwise)
LME spot prices
Mar-12
2025
2003
2179
1827
2040
Quarter average
Quarter end
Quarter high
Quarter low
3 Month forward
Shanghai avg
15369
RMB/t
Shanghai avg
2423
USD/t
Sources: LME, Bloomberg.
Jun-12
1928
1843
2049
1760
1932
Sep12
1885
2088
2105
1760
1902
Dec12
1947
2035
2098
1785
1979
Mar-13
2033
1871
2188
1854
2057
Jun-13
1840
1823
1925
1784
1875
Sep13
1859
1877
1956
1793
1896
Dec13
1907
2086
2116
1828
1932
Mar-14
2029
1981
2156
1942
2027
Jun-14
2073
2205
2205
2073
2079
15132
14640
15021
15330
14596
14726
14969
14953
15155
2399
2311
2365
2456
2343
2404
2459
2450
2432
In Q2 China’s refined zinc production increased by 2.7%yr to 1.4 Mt. Higher production in
Shaanxi and Gansu underpinned the rise, offsetting reductions in Sichuan, Hubei and Anhui.
Higher refined production in China was matched with growth in zinc imports which grew by
8%yr (by metal content) in the first five months of 2014.
Australian export volumes (in metal content) to China decreased by 40%yr to total 93 kt in
Q2. The decline in export volumes resulted in lower export earnings, down 30%qtr to total
$149 million, the lowest since Q1 2012.
Figures 142–146
Please refer to page 50 of The Westpac-BREE China Resources Quarterly PDF version.
45
Table 22: Zinc summary data
unit
Mar-12
Jun-12
Sep-12
Dec-12
China imports
kt
357.5
244.6
359.9
374.5
Australia
kt
90.0
98.7
155.0
103.3
Kazakhstan
kt
19.5
19.4
38.0
44.5
Peru
kt
48.7
19.6
46.2
30.2
Turkey
kt
8.3
6.0
19.8
19.6
other
kt
191.0
100.9
100.9
177.0
Refined production
kt
1168.7
1179.2
1138.8
1342.7
World stocks
kt
1702.3
1758.1
1678.9
1929.2
weeks of stocks
weeks
7.6
7.6
7.1
7.9
Australian exports to China
kt
106
131
153
110
value
AUDmn
148
186
220
176
Sources: Bloomberg, World Metal Statistics, International Lead and Zinc Study Group.
46
Mar-13
347.0
119.0
46.5
65.0
12.4
104.1
1241.5
1903.2
8.2
110
176
Jun-13
374.4
86.3
35.1
58.7
11.5
182.7
1325.7
1756.8
7.0
155
214
Sep-13
345.5
75.1
41.6
41.2
16.2
171.5
1330.8
1589.3
6.2
116
175
Dec-13
427.9
142.8
39.6
55.6
9.5
180.3
1427.1
1472.4
5.6
190
282
Mar-14
431.0
138.5
49.9
57.5
5.5
179.6
1259.3
1511.0
6.2
120
195
Jun-14
na
na
na
na
na
na
1356.6
na
na
93
149
Lead
Figures 147–150
Please refer to page 52 of The Westpac-BREE China Resources Quarterly PDF version.
Table 23: Lead prices (USD/t unless specified otherwise)
LME spot prices
Mar12
2093
2021
2288
1943
2118
Quarter average
Quarter end
Quarter high
Quarter low
3 Month forward
Shanghai avg
15760
RMB/t
Shanghai avg
2485
USD/t
Sources: LME, Bloomberg.
Jun-12
1974
1796
2156
1744
1984
Sep12
1975
2300
2300
1817
1985
Dec12
2199
2340
2340
2002
2200
Mar13
2301
2094
2448
2089
2314
Jun-13
2053
2058
2247
1949
2066
Sep13
2102
2075
2238
2017
2116
Dec13
2111
2206
2259
2027
2134
Mar14
2106
2041
2212
2008
2127
Jun-14
2096
2129
2160
2016
2120
15363
15212
15043
14734
13943
14141
14109
13928
13922
2435
2401
2368
2360
2238
2308
2317
2282
2234
47
Table 24: Lead summary data
unit
Mar-12
Jun-12
Sep-12
Dec-12
China imports
kt
229.2
208.8
321.3
279.5
Australia
kt
15.8
16.4
33.6
24.0
Peru
kt
38.9
40.6
51.2
29.6
Russia
kt
21.0
35.7
33.6
30.7
USA
kt
48.8
15.2
16.9
48.8
Mexico
kt
7.6
15.4
15.9
16.3
other
kt
97.0
85.5
170.1
130.1
Refined production
kt
899.9
1142.8
1296.1
1307.1
World stocks
kt
634
614
533
627
weeks of stocks
weeks
3.5
3.1
2.5
2.9
Australian exports to China
kt
15
26
24
33
value
AUDmn
41
47
48
92
Sources: Bloomberg, World Metals Statistics, International Lead and Zinc Study Group.
48
Mar-13
194.1
12.6
20.3
20.7
28.0
11.9
100.6
1058.8
680
3.5
18
27
Jun-13
164.2
13.4
17.7
27.4
0.1
9.2
96.4
1187.5
600
3.0
28
59
Sep-13
227.9
25.7
10.8
30.9
44.0
7.0
111.4
1136.9
603
3.0
22
47
Dec-13
242.5
29.6
9.0
40.0
46.5
6.7
110.6
1117.2
586
2.9
52
97
Mar-14
224.0
49.6
17.6
23.1
6.1
6.8
120.8
1055.7
562
2.8
46
84
Jun-14
na
na
na
na
na
na
na
1093.9
na
na
69
105
Tin
Figures 151–156
Please refer to page 54 of The Westpac-BREE China Resources Quarterly PDF version.
Molybdenum
Figures 157–162
Please refer to page 55 of The Westpac-BREE China Resources Quarterly PDF version.
Tungsten
Figures 163–168
Please refer to page 56 of The Westpac-BREE China Resources Quarterly PDF version.
Cobalt
Figures 169–174
Please refer to page 57 of The Westpac-BREE China Resources Quarterly PDF version.
Antimony
Figures 175–180
Please refer to page 58 of The Westpac-BREE China Resources Quarterly PDF version.
Platinum & Palladium
Figures 181–186
Please refer to page 59 of The Westpac-BREE China Resources Quarterly PDF version.
Mineral Sands
Figures 187–192
Please refer to page 60 of The Westpac-BREE China Resources Quarterly PDF version.
49
China’s exports of rare earth oxides
Figures 193–198
Please refer to page 61 of The Westpac-BREE China Resources Quarterly PDF version.
Magnesium & Cadmium
Figures 199–204
Please refer to page 62 of The Westpac-BREE China Resources Quarterly PDF version.
Diamonds and Magnesium
Figures 205–210
Please refer to page 63 of The Westpac-BREE China Resources Quarterly PDF version.
Table 25: China mineral and energy import summary
unit
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Iron ore
Mt
185.3
193.1
186.5
198.0
216.7
219.1
222.0
235.3
Australia
Mt
91.6
94.3
89.8
102.6
111.8
112.9
118.2
138.2
share
%
49
49
48
52
52
52
53
59
Thermal coal
Mt
54.4
68.5
62.8
60.5
60.9
67.6
71.0
58.1
Australia
Mt
11.3
14.8
12.9
12.2
17.0
15.9
15.4
15.2
share
Metallurgical
coal
%
21
22
21
20
28
24
22
26
Mt
8.9
17.0
17.2
18.1
19.4
20.7
13.0
18.1
Australia
Mt
1.7
5.5
7.9
5.4
7.7
9.2
6.5
8.6
share
%
19
33
46
30
40
44
50
47
Aluminium
kt
179.8
104.6
67.8
82.8
137.7
193.0
175.5
96.1
Australia
kt
25.5
21.6
14.5
14.3
31.7
31.5
48.0
18.9
share
%
14
21
21
17
23
16
27
20
Alumina
kt
1255
1299
1035
612
829
1354
1484
1281
Australia
kt
1224
1292
1028
603
767
1177
1184
655
share
%
97
99
99
98
92
87
80
51
Bauxite
Mt
5.1
9.3
14.0
19.0
21.1
17.6
13.1
6.6
Australia
Mt
3.0
2.3
2.7
4.0
4.2
3.4
3.1
3.7
Share
%
58
24
19
21
20
19
24
56
Copper
kt
1403
1477
1356
1380
1731
1819
1836
1699
Australia
kt
80
78
97
157
135
128
165
144
share
%
6
5
7
11
8
7
9
8
Oil
Mt
60.3
70.7
69.0
69.2
73.2
70.8
74.7
77.2
Australia
Mt
0.6
1.0
0.5
0.8
1.2
0.5
0.7
0.7
share
%
1.0
1.4
0.8
1.2
1.7
0.7
1.0
0.9
Gas (LNG)
kt
3800
4230
4180
4160
4560
5140
5629
4297
Australia
kt
904
972
842
974
834
906
843
905
50
share
%
24
23
20
23
18
18
15
21
Zinc
kt
359.9
374.5
347.0
374.4
345.5
427.9
431.0
na
Australia
kt
155.0
103.3
119.0
86.3
75.1
142.8
138.5
na
share
%
43
28
34
23
22
33
32
na
Nickel
US$m
1890
2376
2149
1842
1766
2095
1585
1625
Australia
US$m
158
147
172
189
119
112
67
112
share
%
8
6
8
10
7
5
4
7
Lead
kt
321.3
279.5
194.1
164.2
227.9
242.5
224.0
na
Australia
kt
33.6
24.0
12.6
13.4
25.7
29.6
49.6
na
share
%
10
9
7
8
11
12
22
na
Tin
kt
9.7
7.5
5.4
3.7
3.1
2.1
2.1
2.0
Australia
kt
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
share
%
0
0
0
0
0
0
0
0
Uranium
t
2510
10734
4516
2567
9069
6216
4045
6801
Sources: CEIC and Bloomberg
China maps
(Figures 211–222) Please refer to pages 66–71 of The Westpac-BREE China Resources
Quarterly PDF version.
51
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56