China Resources Quarterly - MacroBusiness · Platinum and Palladium 63 Mineral sands 64 ......
Transcript of China Resources Quarterly - MacroBusiness · Platinum and Palladium 63 Mineral sands 64 ......
China Resources Quarterly Southern w
inter ~ N
orthern summ
er 2015
China Resources QuarterlySouthern winter ~ Northern summer 2015
China Resources Quarterly
Southern winter ~ Northern summer 2015
ii China Resources Quarterly • Southern winter ~ Northern summer
© Commonwealth of Australia 2015
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ISSN 978-1-921516-05-4 [Print]
ISSN 978-1-921516-07-8 [PDF]
This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced or altered by any process without prior written permission from the Australian Government. Requests and inquiries concerning reproduction and rights should be addressed to:
Department of Industry and ScienceGPO Box 9839Canberra ACT 2601
or by emailing [email protected]
China Resources Quarterly • Southern winter ~ Northern summer iii
AcknowledgementsThis publication was jointly undertaken by the Westpac Institutional Bank, a division of the Westpac Group, and the Australian Government Department of Industry and Science. The relationship is non–commercial. The report was previously published under the title of the Westpac–BREE China Resources Quarterly.
Editors
Westpac: Huw McKay. Department of Industry and Science: Kate Penney and John Barber.
Design and production
Julie Doel
Cover image
Shutterstock
This report was finalised on 10 August 2015.
iv China Resources Quarterly • Southern winter ~ Northern summer
Acknowledgements iii
Contents iv
Acronyms and abbreviations v
Foreward vi
Executive summary 1
Recent developments in the Chinese economy
2
General macroeconomic indicators 10
Resource related macroeconomic indicators
12
China’s equity market & the real economy
14
Steel 18
Iron ore 20
Metallurgical coal 24
Energy overview 26
Thermal coal 28
Oil 31
Gas 34
Uranium 36
Gold 39
Silver 41
Copper 42
Aluminium 45
Alumina 47
Bauxite 48
Nickel 50
Zinc 53
Lead 56
Tin 58
Molybdenum 59
Tungsten 60
Cobalt 61
Antimony 62
Platinum and Palladium 63
Mineral sands 64
Rare earth oxides 65
Manganese and Cadium 66
Diamonds and Magnesium 67
Mineral and energy import summary 68
Provincial distribution of energy and resource related activity
Electricity output & consumption 70
Coal and gas 71
Ferrous metals 72
Alumina and aluminium 73
Copper and gold 74
Nickel and zinc 75
Contents
China Resources Quarterly • Southern winter ~ Northern summer v
Acronyms and abbreviations
ABS Australian Bureau of Statistics
ASEAN Association of Southeast Asian Nations
AUD, $A Australian dollar
bcm billion cubic metres
CEIC Chinese Economic Information Company
CFR Cost including freight
CNY, CNH Chinese yuan (onshore & offshore)
cm cubic metres
dltu dry long tonne unit
FDI foreign direct investment
FOB free on board
FX Foreign exchange
G3 United States, Europe and Japan
GDP gross domestic product
GFC global financial crisis
GFCF gross fixed capital formation
GCF gross capital formation
IEA International Energy Agency
IMF International Monetary Fund
koe, mtoe kilogram of oil equivalent, million tonnes of oil equivalent
kgpp kilograms per person
kWh kilowatt hour
LNG liquefied natural gas
Mt million tonnes
na not available
NAR net as received
NIEs Newly Industrialised Economies (Singapore, Taiwan, Hong Kong, South Korea)
ODI outward direct investment
OECD Organisation for Economic Cooperation and Development
OPEC Organisation of Petroleum Exporting Countries
PMI Purchasing Managers Index
PPP purchasing–power parity
ppt percentage point
RMB Chinese Renminbi
SHIBOR Shanghai Interbank Offered Rate
sqkm square kilometres
USD, US$ 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.
vi China Resources Quarterly • Southern winter ~ Northern summer
ForewordWelcome to the Southern winter ~ Northern summer edition of the China Resources Quarterly – hereafter the CRQ. The CRQ is a collaborative research venture between the Westpac Institutional Bank (hereafter Westpac) and the Australian Government Department of Industry and Science.
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 that, on balance, is moderately better than that described in its predecessor. Even so, China’s domestic demand profile remains fragile and nominal activity growth is extremely subdued vis-a-vis the double digit percentage growth rates that were de rigeur for much of the last decade.
In the resources sphere, the intersection of increasing Australian supply potential and the fact that it is the most resource and energy intensive parts of the Chinese economy that have slowed the most, has produced steep declines in the prices of a number of important commodities.
With China’s development model in the midst of a major structural inflection point, and Australia’s own commodity cycle having shifted decisively 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 industry trends. A special section on the Chinese equity market and its relationship to the real economy is included in this edition, echoing this spirit.
China is now the world’s largest national economy in purchasing power parity (internationally comparable volume) terms and the largest producer of industrial value added, however measured. And it is now a free-trade agreement partner of Australia. These observations underscore the value of continuing to deepen our collective understanding of the ever–evolving Chinese economy.
Bill Evans Mark Cully
Chief Economist Chief Economist
Westpac Department of Industry & Science
China Resources Quarterly • Southern winter ~ Northern summer 1
Executive summary
The Chinese economy grew at a rate below its potential in the first half of 2015. The general impression left by the flow of data since the previous edition of the CRQ has been of modest improvement off a low base. Aggregate demand stabilized in the June quarter, following on from a weak second half of 2014 that spilled over into 2015Q1. The principal sources of weakness remain building activity and heavy industry, with services consumption and infrastructure capex providing partial offsets. Exports, which had been a support for growth in 2014, have slowed.
Growth in heavy industrial capacity and in mining investment both slowed significantly in the first half of 2015. Coal mining and ferrous metals smelting are among the weakest segments. Outlays on utilities capex have continued to grow at a healthy pace. Investment in transport infrastructure continues to run at a relatively high level. Public sector capex has stabilized in 2015 to date having experienced steep declines last year, but overall the support for demand from this quarter has been extremely modest.
Real estate construction activity remains weak, but housing sales turnover has begun to firm on the back of policy support. Dwelling prices are rising again in the wealthy coastal metropoli and in a meaningful number of smaller cities. However, the supply imbalance in lower tier jurisdictions remains large, which will delay any recovery in building activity until well into next year.
The heavy industrial sector continues to struggle. The proportion of industrial firms making losses remains historically high; the demand for basic inputs consumed by construction has deteriorated; as a result excess capacity is looking increasingly pronounced in some sub-sectors; and producer prices continue to decline, as they have done since early 2012.
China’s exports have slowed in recent times, with the deterioration evident across the G3, in intra–Asian trade and in shipments to extra-regional emerging markets. Chinese exporters gained global market share in 2014, despite the considerable appreciation of the real exchange rate, but its shipments are presently undershooting the aggregate growth in international trade.
The Chinese equity market dominated the news cycle in late June and early July. In recognition of this, we have included a supplementary discussion on the macroeconomic import of the dramatic volatility in stocks.
Demand for imported raw materials has been reasonable (albeit volatile) in volume terms, but the overall import bill has declined due to steep falls in metals, energy and certain food prices. China and Australia signed a Free Trade Agreement during the inter-CRQ period. References to the commodity specific elements of the FTA are sprinkled through the report.
Commodity prices exhibited considerable softness during the first half of 2015, following on from the inglorious collapse of 2014. Lower prices have been driven largely by the increase in supply, although as noted above and throughout the CRQ, the growth in demand has, in the main, been considerably lower than the norms established in the 2000s.
The global supply trend has been exemplified by Australia’s bulk commodity export volumes, which have continued to increase despite substantially lower prices. Even so, as the period of time that commodity prices spend around their current levels extends, the more pressure will be brought to bear on those mines, in Australia, China and elsewhere, that are operating in the upper quartile of their respective industry cost curves.
2 China Resources Quarterly • Southern winter ~ Northern summer
The Chinese economy grew at a rate below its potential in the first half of 2015. The general impression left by the flow of data since the previous edition of the CRQ has been of modest improvement off a low base. Aggregate demand stabilized in the June quarter, following on from a weak second half of 2014 that spilled over into 2015Q1. The principal sources of weakness remain building activity and heavy industry, with services consumption and infrastructure capex providing partial offsets. Exports, which had been a support for growth in 2014, have slowed of late.
Real GDP expanded by 7.0% year–on–year in the June quarter alone. That compares to 7.0% in Q1, 7.3% in the December quarter; 7.4% for 2014 as a whole and the 7.7% outcome for 2013. Nominal GDP, which has historically exhibited significantly more cyclical amplitude than the volume measure, picked up to 7.1% in Q2, from the very weak 5.8% of the March quarter. 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 – was +0.1% year–ended in Q2, up from –1.1% in Q4.
Looking at the breakdown of real activity from the production side of the accounts, on a broad sectoral basis, secondary output slowed 0.3ppts to 6.1%ytd while tertiary activity was 0.5ppts higher at 8.4%. As for the estimated quarterly contributions on an expenditure basis, they were: 4.2ppts from final consumption (4.0ppts in the corresponding quarter of 2014); 2.5ppts from investment (versus 3.6ppts 2014Q2); and net exports at +0.3ppts (–0.2ppts).
Real urban fixed investment growth (including land purchases, so not directly comparable to the national accounts measure) fell away by 2.6ppts in Q2. In terms of the sectoral composition of investment activity, on a nominal basis, growth in heavy industrial capacity and the extractive industries remains weak. Growth in utilities capex has picked up a little from an already high level, while transport fell back modestly. Real estate was again a drag. Housing and non–residential building are still in the doldrums (see page 4).
State–owned enterprises contributed 32.8% of the growth in fixed investment in 2015Q2, their highest share since 2010.
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The development of the investment cycle
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Figure 1: Nominal GDP: total & broad sectors
Figure 2: Various elements of the national accounts
Figure 3: The investment cycle: a sectoral view
Recent developments in the Chinese economy
China Resources Quarterly • Southern winter ~ Northern summer 3
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 also 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 government and business contain relevant insights on underlying growth.
In the previous edition of CRQ we argued that a balanced reading of the alternative indicators suggested that aggregate demand growth was running somewhere between the real (7.0%) and nominal (5.8%) estimates of GDP growth. In Q2, these two measures have converged on 7%, which feels perhaps a tick high, but no more than that.
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 deteriorated in the first half of 2015, leaving them far below average levels. The details of the Q2 survey, however, argue that both domestic and external demand conditions improved vis-a-vis Q1.
In category (2), alongside the traditional proxy of electricity output, logistics volumes provide additional insight. At the end of Q2 the smoothed year–ended growth rate of these proxies was 3.9% (electricity); 1.7% (terrestrial freight) and 1.6% (aquatic freight). Note that these proxies work best for heavy industry and exports, twin pillars of the ‘old’ model. They do not necessarily capture trends in services, which are now a major source of growth.
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 year–ended growth rate (smoothed) of central government revenues was 7.5% in Q2, against outlays running at 7.1%. The profits of industrial firms (manufacturing, mining & utilities) declined in year-ended terms in the first half, but margins were showing signs of firming at the end of Q2.
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China: business conditions, orders & GDP
Aggregate activity proxies: volume
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Figure 4: Business conditions, orders & GDP
Figure 5: Selected aggregate activity proxies
Figure 6: Selected aggregate activity proxies
4 China Resources Quarterly • Southern winter ~ Northern summer
The real estate sectorReal 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 14% of the total.
In the previous edition of the CRQ we noted that the real estate slowdown directly accounted for half of the 4.7ppt deceleration in investment growth in 2014. Real estate’s direct contribution to the year-to-June 2015 slowdown of 5.9ppts is around two-fifths.
The volume of housing sales declined heavily across all regions in 2014 and early 2015, but a clear turnaround has now emerged in the secondary (established) market in Tier-1 cities and in a number of smaller locations. The market for new dwellings has lagged behind, reflecting the inventory overhang, but even there some healing is evident. The continued presence of excess stock is driving a major wedge between the raw growth rate of sales (+16%yr) and starts (–15%yr), and will continue to serve as a headwind for price appreciation in the new market. Even so, with sales turnover on the up and the rate of new completions now declining visibly, the cyclical fundamentals of the market are much improved from where they began the year.
In the background, we note that the renewed policy emphasis on urban renewal and public housing has not as yet revived activity in the under–the–radar off–market segment. Off–market construction accounts for around a third of the urban total. It has declined consistently since April 2014 leaving a large hole in construction activity. We await a consolidation in this area with fiscal policy turning more expansionary and state-owned enterprises awakening from their recent slumber.
Given the policy support now in place (the Sept 2014 package; multiple rate cuts; maximum mortgage loan-to-value ratio increases, cessation of most buying restrictions) the shift in sentiment towards real estate has been slow and timid relative to previous instances of policy easing. The weak policy multiplier, especially vis-a-vis the rebooting of construction activity, highlights that there are structural aspects to the current slowdown, over and above the cyclical-policy nexus.
70 city house prices: net balance m/m chg
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Figure 8: Completions, sales & land prices
Figure 9: Housing sales and starts: volumes
Figure 7: 70 city house prices: m/m chg net balance
China Resources Quarterly • Southern winter ~ Northern summer 5
International tradeGross 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 were a support for real GDP growth in the first half of 2015, but they fell back from a +1.3ppts contribution to year–to-date growth in 2015Q1, to just +0.3ppts in Q2. A weaker export performance was the main driver of this lower contribution, as imports are still declining in both value and volume terms. As of Q2, exports to the G3 (–1.0%yr) were performing somewhat better than China’s overall global shipments (–2.2%). Intra–Asian sales are running at close to the global rate of contraction, while shipments to extra–regional emerging markets have decelerated sharply.
The business surveys describe an external demand environment that is distinctly underwhelming. The “new export orders” sub–index in the two most watched manufacturing surveys (where 50 signifies the dividing line between expansion and decline) averaged just 48.4 in the four months to July 2015. Furthermore, the monthly observations deteriorated between CRQs, indicating unfavourable momentum. The 48.4 average compares to 51.0 in the second half of 2014 and 49.0 in the first four months of 2015.
Imports of machinery and transport equipment fell by 6.3%yr in Q2, having contracted by 3.1% in the previous quarter. They increased by 3.7% in 2014Q2. These subdued growth rates reflect the state of the IT product cycle, excess capacity in the onshore machinery sector, weak auto sales amidst mild market share losses for imported vehicles and subdued domestic equipment outlays.
The growth of food import values rebounded to +11.1%yr in June, which brought a price driven eight–month run of negative year–ended growth outcomes to an end. The value of imports from commodity producing countries continues to decline heavily, slashing the overall import bill. Imports from the G3 and from Asia ex Japan are also declining.
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Figure 10: Trade flows by source and destination
Figure 11: Export orders: survey measures
Figure 12: Imports – total & key primary products
Chinese trade: uneven outcomes
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6 China Resources Quarterly • Southern winter ~ Northern summer
The monetary & financial sphereThe monetary policy stance has been characterized by a basic tightening posture since 2011, related to the unwinding of the stimulus era legacy; but this has been periodically interrupted by a cyclical need to underpin growth and/or accommodate smooth refinancing. The annual flow of credit to GDP peaked at 41% in late 2009; hit a local trough of 26% of GDP in early 2012; rebounded to 34% of GDP in early 2013; and has hit another low south of 23% of GDP as of 2015Q2. While traditional bank loans were a major contributor to the stimulus package, much of the cyclical amplitude since has been related to shadow finance, which is dominated by off-balance sheet activity of the banks themselves (figure 13).
The previous edition of the CRQ argued that the People’s Bank’s reluctance to ease aggressively, in a world where few central banks are exercising such discipline, has led to aggregate financial conditions becoming inappropriately restrictive (figure 14). The real exchange rate has appreciated sharply and real interest rates are still above average, despite muliple cuts in the one-year benchmark lending rate. Furthermore, with FX reserves declining in each of the last four quarters, the growth in broad money, and the monetary authority’s own balance sheet, has also slowed. The diminished growth rate of the central bank’s balance sheet reflects both the impact of net capital outflows (that manifest as declining FX reserves) and the relative passivity of its domestic monetary activities in the cycle to date. Given the absence of inflationary pressures, financial conditions ought to be less restrictive. We await further initiatives in pursuit of this objective.
It is, however, clear that the price and availability of finance are not the main impediments to stronger credit growth. The main culprit is the fact that animal spirits are at a low ebb, which leads to fewer new projects being pursued, which in turn produces low demand for credit (figure 15). On a sectoral basis, the secular slowdown in credit-intensive heavy industrial investment and the parlous state of building activity are the major proximate causes of diminished demand for loans.
Finally, the equity market was in a bull-run at the time of the last CRQ. Few readers will be unaware of what has happened since. Reflecting the elevated degree of interest in the stock market, an extended discussion has been included on pages 14-17.
Financial conditions in China
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Figure 14: Financial conditions in China
Figure 15: Banker confidence & loan demand
Figure 13: Flow of credit by type, % of GDPTotal credit supply – new flows, % of GDP
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China Resources Quarterly • Southern winter ~ Northern summer 7
External finance & the currencyThe bilateral exchange rate with the US dollar has appreciated by a cumulative 33% 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 53% over the same time frame. The real effective CNY appreciated by 14.0% over the year to June 2015, while USD/CNY is close to unchanged over that timeframe.
The above figures highlight that the movement in the USD/CNY rate is a poor proxy for the shift in Chinese competitiveness over the last year. The surge in the real effective CNY, which is a joint function of the flat USD/CNY and the steep appreciation of the US dollar against a wide range of both major & emerging market currencies, looks inappropriate given China’s weak cyclical position.
In a world where the central banks administering the four SDR currencies have all expanded their balance sheets considerably since the GFC, the balance sheet of the People’s Bank has contracted by almost 12% of GDP since early 2011, albeit from a much higher level. Little wonder then that the exchange rate has appreciated substantially over this period, despite the major contraction in China’s current account surplus from above 10% of GDP in 2007 to around 2-3% of GDP in recent years.
In the last four quarters, the capital flow situation boiled down to huge trade surpluses being more than offset by considerable net outflows on the financial account. Foreign exchange reserves decreased by US$150bn in the second half of 2014, (–$US106bn in Q3 and –$US45bn in Q4) and they fell a further $US149bn in 2015H1 (–$US113bn in Q1 and –$US36bn in Q2) . We note that as RMB internationalisation proceeds, and the People’s Bank participates in fewer FX transactions, private cross border flows are increasing, with bank–related flows an increasingly important channel for surplus recycling, alongside outward direct investment and a modest but rapidly growing trickle of portfolio flows. China now produces very detailed quarterly balance of payments data, but this report is not yet available for Q2. We can observe though that foreign currency deposits held at Chinese banks increased by $US88bn over the year to June but they fell by $US14bn in Q2 alone.
The path of the Chinese exchange rate
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Figure 16: The exchange rate: broad & bilateral
Figure 17: Relative central bank balance sheets
Figure 18: FX reserves & net capital flows by type
8 China Resources Quarterly • Southern winter ~ Northern summer
Heavy industryAs heavy industrial output (and investment in new capacity) is essentially a measure of ‘derived demand’ from other sectors, it ought to behave as a reactive variable in a 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. Furthermore, with excess capacity now plaguing a range of basic materials, extractive and machinery sectors, capex is now forcibly decoupling - on the weaker side - from movements in aggregate demand.
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 how these aforementioned forces intersect in the heavy industrial complex is vital to a full comprehension of China’s resource demand.
Total industrial value–added (IVA) expanded at a smoothed year–ended rate of 6.2% as of June. That compares to 7.6% at the end of 2014, 8.9% as of June ‘14, and 10.0% at the end of 2013. The growth rate of electricity output at each of those points was 3.9% (Jun ‘15) 2.7% (Dec ‘14); 7.2% (June ‘14); and 10.1% (Dec ’13). The greater amplitude of the growth rates of power production are consistent with the fluctuations in the heavy industrial subset of the wider secondary sector. However, phases where heavy industrial output grows more swiftly than total IVA (figure 19) have become increasingly rare in recent years, just as total IVA out-growing GDP is becoming a rarity (figure 21). Those twin observations are indicative of the structural challenges - slower end-demand growth and excess capacity to service it - confronting certain sub-sectors. The rising proportion of firms now making losses, the well-entrenched deflationary pulse in producer prices and the ongoing slowdown in capex (figure 20) highlight the same basic issues. The slowdown in heavy industrial capex in the year to Jun ‘15 explained one-fifth of the economy-wide investment deceleration.
In downstream manufacturing, capital goods have been falling in price since late 2011; onshore sales of ‘yellow goods’ are significantly beneath the levels of a year ago; while domestic-made auto sales declined in June for the first time since early 2012.
Industrial production: core & headline
-10
0
10
20
30
40
50
-10
0
10
20
30
40
50
Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15
Core heavy industry*
Headline industrial value-added
%yr %yrSources: CEIC, Westpac. 3mma.* Includes interpolated levels for Jan-Feb for non-energy components.
China: heavy industrial investment & the PPI
-9
-6
-3
0
3
6
9
12
15
0
7
14
21
28
35
42
49
56
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
%yr%yr 3mma
Heavy industrial capex (lhs)
Producer price index (rhs)
Sources: CEIC, Westpac Economics.
10
20
30
40
50
10
20
30
40
50
5 10 15 20 25
GDP per person, ‘000s.
Sources: CEIC, Japanese Statistician, Westpac. * Manufacturing & mining, nominal.
Industrial production*, % GDP
China1978 to 2014
South Korea1955 to 2014
Japan1955 to 1998
Secondary industry share & living standards
Figure 20: Heavy industry capex & the PPI
Figure 21: Industry share & living standards
Figure 19: Core & headline industrial production
China Resources Quarterly • Southern winter ~ Northern summer 9
The household sectorThe major reference point for the CRQ’s analysis of the Chinese household sector is the Westpac MNI China Consumer Sentiment Survey. The most prominent themes in late 2014 were deepening concerns with respect to job security, family finances and the housing market. These inter–related themes remain a source of anxiety in an absolute sense as of mid 2015, but the degree of pessimism expressed in relation to family finances and housing has lessened visibly.
Counter to that more positive observation, perceptions of job security have made virtually no net progress in the first seven months of this year. Further, more consumers have been nominating ‘future loss of income or employment’ as their main motivation for saving of late. Collectively, that implies there has been little cyclical improvement in labour market conditions since late last year, despite the gains made in other areas of the survey. We attribute the re-emergence of such concerns to the poor performance of the labour-intensive export sector in recent months. So, while demographic factors are preventing an untoward rise in the rate of unemployment, in absolute terms job security, and its concomitant, the degree of chutzpah that workers carry into wage negotiations, are both in short supply.
Expected spending on shopping and discretionary services had been in a clear downtrend dating back to the onset of the anti-corruption drive. This trend was closely mapped by the deceleration in retail sales. More recently, attitudes have been more positive, on balance, and retail sales have accordingly been able to stabilise amidst a resilient performance from national accounts consumption. Uses of household income (figure 24) remain cautious though, with savings running above long run average. Consumers’ preferred investment vehicles have also tilted in a risk averse direction recently. This latter development is no doubt related, in part, to the equity market. See the dicussion on pages 14-17 for more on this issue.
Passenger car sales ended Q1 up 8.7%yr, but growth slowed to just 0.5% in Q2. While 18.3% of survey respondents plan to buy a car over the year ahead as of July, versus the long run average of 12.6%, automakers are probably not holding their breath.
Housing and auto sales
-50
-25
0
25
50
75
100
125
150
-50
-25
0
25
50
75
100
125
150
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
%yr%yr
Total auto sales Housing sales Passenger only
Sources: CEIC, Westpac Economics.
70
80
90
100
110
120
70
80
90
100
110
120
Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14
% of sample average
% of sample average
Employment outlook
Expected personal finances
Current personal financesSource: MNI, Westpac. 3mma.
Westpac-MNI employment & family finances
15202530354045
15202530354045
% of income% of income
Sample average
Use of household income in China
0
5
10
15
20
0
5
10
15
20
Sample average
0246810
02468
10
Apr-07 Oct-08 Apr-10 Oct-11 Apr-13 Oct-14
Sample average
DEBT SERVICE
INVESTMENTS
SAVINGS
Figure 22: Housing and auto purchases
Figure 23: Consumer sentiment: income & jobs
Figure 24: Uses of household income
10 China Resources Quarterly • Southern winter ~ Northern summer
Qua
rter
lyJu
n–12
Sep–
12D
ec–1
2M
ar–1
3Ju
n–13
Sep–
13D
ec–1
3M
ar–1
4Ju
n–14
Sep–
14D
ec–1
4M
ar–1
5Ju
n–15
Real
GD
P %
yr7.
67.
47.
97.
87.
57.
97.
67.
47.
57.
37.
37.
07.
0
Nom
inal
GD
P %
yr10
.29.
110
.410
.28.
611
.210
.27.
99.
08.
57.
75.
87.
1
Cont
ribut
ions
to re
al G
DP
perc
enta
ge p
oint
s yt
d
Fina
l con
sum
ptio
n ex
pend
iture
4.7
4.2
4.4
4.3
3.4
3.5
3.7
5.5
4.0
3.6
3.7
4.5
4.2
Gro
ss c
apita
l for
mat
ion
4.0
3.9
3.2
2.3
4.1
4.3
4.2
3.1
3.6
3.0
3.6
1.2
2.5
Net
exp
orts
–0.9
–0.4
0.1
1.1
0.1
–0.1
–0.2
–1.2
–0.2
0.8
0.1
1.3
0.3
Seco
ndar
y in
dust
ry %
ytd
8.4
8.2
8.2
7.8
7.6
7.9
7.9
7.3
7.4
7.4
7.3
6.4
6.1
Tert
iary
indu
stry
%yt
d7.
57.
78.
08.
38.
38.
48.
37.
87.
97.
98.
17.
98.
4
Curr
ent A
ccou
nt %
GD
P 4q
ma
2.3
2.7
2.6
2.8
2.6
2.1
1.9
1.5
1.7
2.0
2.2
2.4
na
GD
P de
flato
r %yr
2.6
1.7
2.5
2.4
1.1
3.3
2.6
0.5
1.5
1.2
0.4
–1.1
0.1
Fixe
d in
vest
men
t defl
ator
%yr
1.6
0.2
0.3
0.2
–0.1
0.0
0.9
1.1
0.6
0.4
–0.1
–0.9
–1.2
Land
pric
e in
dex
%yr
2.3
1.7
2.6
3.9
5.1
6.2
7.0
7.5
7.2
6.1
5.2
3.8
3.4
Cons
umer
pric
e in
dex
%yr
2.9
1.9
2.1
2.4
2.4
2.8
2.9
2.3
2.2
2.0
1.5
1.2
1.4
Non
–foo
d %
yr1.
51.
51.
71.
81.
61.
61.
61.
71.
71.
51.
00.
81.
0
Cent
ral r
even
ue 4
qma
%yr
14.7
10.9
12.8
10.7
10.1
10.8
10.2
10.8
10.8
9.7
8.7
7.3
7.5
Cent
ral e
xpen
ditu
res
4qm
a %
yr18
.118
.215
.111
.610
.87.
511
.211
.313
.414
.18.
57.
67.
1
Cent
ral o
pera
ting
posi
tion
4qm
a %
GD
P–1
.6–2
.1–1
.6–1
.7–1
.7–1
.4–1
.8–1
.8–2
.3–2
.4–1
.8–1
.9–2
.2
Mon
ey s
uppl
y M
2 %
yr13
.614
.813
.815
.714
.014
.213
.612
.114
.712
.912
.211
.611
.8
Bank
loan
s (s
tock
) %yr
16.0
16.2
15.0
14.9
14.2
14.3
14.1
13.9
14.0
13.2
13.6
14.7
14.4
Tota
l cre
dit s
uppl
y (n
ew, r
ollin
g an
nual
) %G
DP
25.3
28.5
29.5
33.1
32.6
31.6
29.4
28.1
29.0
26.1
25.9
24.0
22.6
Tabl
e 1:
Gen
eral
mac
roec
onom
ic d
ata
Tabl
e 1
cont
inue
d on
pag
e 11
China Resources Quarterly • Southern winter ~ Northern summer 11
Qua
rter
lyJu
n–12
Sep–
12D
ec–1
2M
ar–1
3Ju
n–13
Sep–
13D
ec–1
3M
ar–1
4Ju
n–14
Sep–
14D
ec–1
4M
ar–1
5Ju
n–15
Expo
rts
%yr
10.5
4.5
9.4
18.9
4.1
3.9
7.5
–4.7
5.0
13.0
8.6
10.0
–2.2
to G
36.
8–4
.9–1
.63.
4–4
.92.
69.
42.
89.
310
.53.
87.
6–1
.0
to A
sia
ex Ja
pan
12.1
13.4
21.7
36.7
15.2
7.5
6.9
–10.
32.
816
.213
.39.
9–2
.6
to A
ustr
alia
15.1
7.6
12.4
5.7
–5.3
3.0
–1.5
1.1
4.8
4.1
5.3
14.4
4.2
to n
on–A
sian
em
ergi
ng m
arke
ts16
.711
.710
.222
.20.
4–1
.45.
9–3
.33.
914
.610
.016
.6–5
.0
Impo
rts
%yr
6.5
1.7
2.7
9.4
5.2
8.4
7.2
3.3
1.5
1.2
–1.4
–17.
9–1
3.5
from
G3
1.6
–0.9
–4.3
–0.8
–0.1
4.3
8.1
11.5
7.4
4.3
2.4
–11.
8–1
0.2
from
Asi
a ex
Japa
n3.
23.
810
.917
.58.
17.
31.
5–4
.71.
73.
5–0
.4–1
4.1
–11.
4
from
Aus
tral
ia19
.0–8
.3–8
.17.
59.
119
.033
.524
.82.
4–1
.9–2
0.5
–26.
5–3
0.9
from
non
–Asi
an e
mer
ging
mar
kets
24.6
4.9
–1.7
–0.9
–6.8
4.9
6.3
2.4
4.5
0.8
–4.4
–36.
7–2
7.6
Trad
e ba
lanc
e U
SDbn
68.8
79.5
83.3
43.5
65.7
61.5
90.5
16.6
85.9
128.
114
9.5
123.
713
9.5
Cha
nge
in F
X re
serv
es U
SDbn
–65
4526
131
5416
615
912
745
–106
–45
–113
–36
Ente
rpris
e su
rvey
– n
et b
alan
ce, 5
0 ba
se
Busi
ness
con
ditio
ns63
.761
.161
.862
.657
.156
.358
.155
.355
.454
.954
.552
.851
.8
Profi
tabi
lity
52.6
51.4
53.1
52.8
55.6
55.1
57.6
50.9
54.1
55.0
55.0
51.0
52.8
Dom
estic
ord
ers
50.2
47.4
47.7
48.8
50.3
48.2
49.4
44.4
48.5
46.9
46.5
42.5
46.3
Fore
ign
orde
rs48
.847
.547
.146
.649
.950
.148
.745
.449
.749
.947
.944
.248
.7
Bank
ing
clim
ate
– %
of a
vera
ge
Dem
and
for l
oans
87.4
82.5
87.8
95.6
89.5
92.2
91.9
96.5
88.3
82.2
80.1
84.9
77.2
Ease
of p
olic
y st
ance
121.
813
0.2
134.
514
0.2
142.
212
7.7
131.
511
8.7
129.
114
2.6
138.
413
4.1
106.
3
Bank
ers’
confi
denc
e le
vel
107.
277
.110
1.2
132.
611
7.7
112.
013
0.9
124.
198
.610
8.5
96.4
87.2
78.6
Wes
tpac
MN
I Con
sum
er S
entim
ent*
– %
of a
vera
ge
Hea
dlin
e co
mpo
site
100.
495
.099
.499
.310
0.3
95.0
101.
797
.696
.293
.691
.792
.991
.7
Expe
cted
fam
ily fi
nanc
es99
.398
.110
1.8
100.
710
1.9
102.
910
2.7
104.
298
.594
.091
.493
.392
.3
Hou
se p
rice
expe
ctat
ions
95.8
102.
210
0.5
102.
610
3.1
102.
610
2.7
102.
510
6.5
107.
810
6.5
108.
510
7.4
Empl
oym
ent o
utlo
ok10
7.4
98.0
101.
810
6.3
105.
495
.110
7.7
97.4
97.5
92.5
91.2
91.7
91.0
Sour
ces:
Wes
tpac
Eco
nom
ics,
CEI
C, M
NI.
Tabl
e 1:
Gen
eral
mac
roec
onom
ic d
ata
* Q
uart
erly
obs
erva
tions
are
the
3 m
onth
ave
rage
.
12 China Resources Quarterly • Southern winter ~ Northern summer
Mon
thly
Jul–
14Au
g–14
Sep–
14O
ct–1
4N
ov–1
4D
ec–1
4Ja
n–15
Feb–
15M
ar–1
5A
pr–1
5M
ay–1
5Ju
n–15
Indu
stria
l pro
duct
ion
%yr
3m
ma
9.0
8.4
8.0
7.5
7.6
7.6
7.3
7.2
6.4
6.1
5.8
6.2
Elec
tric
ity6.
94.
13.
42.
73.
62.
76.
03.
82.
8–0
.12.
53.
9
Proc
esse
d cr
ude
oil
3.6
3.9
4.9
6.3
6.6
5.7
7.5
5.4
5.5
4.8
8.2
7.2
Cem
ent*
3.9
3.9
3.2
1.6
–0.7
–0.8
nana
–21.
2–1
4.4
–11.
6–6
.6
Stee
l pro
duct
s*6.
25.
23.
42.
82.
34.
4na
na2.
63.
42.
92.
1
Non
–fer
rous
met
als*
7.0
8.2
9.2
8.1
7.9
10.3
nana
17.3
19.9
21.1
23.5
Aut
omob
iles*
9.6
7.1
5.1
3.9
3.6
1.7
nana
3.7
–0.6
–2.6
–5.2
Civ
ilian
shi
ps*
–19.
6–1
6.5
–11.
0–7
.8–7
.7–2
0.3
nana
26.9
11.0
7.0
–1.7
Met
al c
uttin
g to
ols*
28.7
33.9
36.6
33.2
28.3
27.6
nana
4.6
6.9
5.2
9.7
Jul–
14Au
g–14
Sep–
14O
ct–1
4N
ov–1
4D
ec–1
4Ja
n–15
Feb–
15M
ar–1
5A
pr–1
5M
ay–1
5Ju
n–15
Fixe
d as
set i
nves
tmen
t %yr
3m
ma
16.8
15.6
13.5
12.9
12.9
13.3
13.3
13.4
13.6
12.2
10.9
10.4
Man
ufac
turin
g, o
f whi
ch14
.113
.811
.310
.010
.313
.113
.312
.910
.59.
99.
99.
3
Hea
vy in
dust
ry13
.313
.311
.48.
810
.311
.812
.611
.28.
77.
56.
87.
1
Har
d in
frast
ruct
ure,
of w
hich
24.0
20.1
18.0
18.5
18.0
18.4
17.6
19.6
22.0
20.5
18.5
17.3
Hig
hway
s19
.316
.212
.114
.99.
819
.121
.029
.224
.421
.920
.521
.1
Railw
ays
27.1
32.8
37.1
31.5
30.8
18.0
14.6
11.9
33.3
34.5
44.3
23.7
Util
ities
16.3
14.7
18.1
20.5
18.9
13.9
15.3
18.2
21.9
20.5
18.1
15.7
Real
est
ate,
of w
hich
11.6
11.4
10.1
10.1
9.3
5.8
5.4
6.3
9.1
5.8
3.2
2.1
Dw
ellin
gs10
.89.
97.
97.
26.
74.
03.
95.
26.
93.
50.
60.
7
Non
–res
iden
tial
13.3
14.8
15.3
16.8
15.2
9.7
8.4
8.8
14.0
10.9
10.3
5.1
Off–
mar
ket u
rban
con
stru
ctio
n–1
8.4
–18.
6–1
5.7
–1.7
–18.
3–3
2.4
–27.
7–1
8.7
–5.5
–10.
3–2
0.9
–13.
7
Jul–
14Au
g–14
Sep–
14O
ct–1
4N
ov–1
4D
ec–1
4Ja
n–15
Feb–
15M
ar–1
5A
pr–1
5M
ay–1
5Ju
n–15
Valu
e of
new
pro
ject
sta
rts
16.2
17.7
16.3
12.1
10.3
11.5
8.1
3.7
2.3
8.8
9.9
–0.2
Num
ber o
f new
pro
ject
sta
rts
8.6
15.1
9.5
9.5
4.7
7.6
5.8
5.2
6.0
8.7
12.2
11.3
Loca
l gov
ernm
ent p
roje
cts
16.9
15.8
13.8
13.2
13.9
15.4
15.2
14.8
13.8
12.4
11.0
11.0
Cent
ral g
over
nmen
t pro
ject
s16
.113
.78.
09.
20.
9–1
0.4
–8.5
–2.7
10.5
8.3
7.7
–2.9
Stat
e ow
ned
ente
rpris
e in
vest
men
t15
.012
.512
.111
.011
.09.
510
.612
.414
.512
.010
.110
.7
Tabl
e 2:
Res
ourc
e re
late
d ec
onom
ic in
dica
tors
Tabl
e 2
cont
inue
d on
pag
e 13
. * O
utpu
t for
thes
e se
ctor
s w
as n
ot re
leas
ed fo
r the
mon
ths
of Ja
nuar
y an
d Fe
brua
ry. A
s a
cons
eque
nce,
we
have
en
tere
d na
for t
hose
two
mon
ths
and
repo
rted
the
unsm
ooth
ed y
ear–
ende
d ra
te fo
r Mar
ch.
China Resources Quarterly • Southern winter ~ Northern summer 13
Mon
thly
%
yr 3
mm
a un
less
oth
erw
ise
spec
ified
Jul–
14Au
g–14
Sep–
14O
ct–1
4N
ov–1
4D
ec–1
4Ja
n–15
Feb–
15M
ar–1
5A
pr–1
5M
ay–1
5Ju
n–15
Volu
me
of h
ousi
ng s
tart
s–3
.01.
74.
716
.33.
8–4
.8–2
5.0
–20.
5–1
8.3
–17.
4–1
5.7
–14.
2
Volu
me
of h
ousi
ng s
ales
–9.1
–9.6
–13.
0–8
.1–7
.7–5
.6–1
0.5
–12.
2–1
1.4
–3.6
6.8
12.7
Valu
e of
hou
sing
sal
es –
Nat
ionw
ide
–10.
0–1
0.2
–10.
8–1
0.6
–10.
1–9
.1–1
1.4
–13.
8–1
4.2
–9.4
–2.1
5.3
East
ern
prov
ince
s–1
5.8
–16.
0–1
6.3
–15.
8–1
5.1
–13.
6–1
3.6
–13.
8–1
3.0
–8.4
–0.6
8.8
Cent
ral p
rovi
nces
2.2
1.6
0.1
–1.0
–1.9
–2.2
–9.8
–16.
8–1
9.2
–12.
3–3
.61.
7
Wes
tern
pro
vinc
es–1
.9–2
.4–3
.2–2
.7–2
.1–1
.7–6
.1–1
0.5
–12.
7–9
.5–5
.1–1
.6
Volu
me
of la
nd s
ales
–1.5
0.5
–1.5
31.0
6.7
7.6
–35.
8–2
4.4
–32.
4–4
3.5
–41.
7–4
4.5
70 c
ity n
ew d
wel
ling
pric
es n
et %
risi
ng m
–o–m
–88.
6–9
5.7
–98.
6–1
00.0
–97.
1–9
1.4
–88.
6–9
0.0
–50.
0–4
1.4
–32.
9–2
.9
70 c
ity se
cond
ary
dwel
ling
pric
es n
et %
risi
ng m
–o–m
–91.
4–9
5.7
–100
.0–9
0.0
–75.
7–7
5.7
–78.
6–7
5.7
–48.
6–7
.117
.132
.9
Aut
o sa
les,
of w
hich
6.8
5.3
4.4
3.1
2.5
6.0
7.6
6.8
3.6
0.9
0.8
–1.1
pass
enge
r car
s11
.79.
98.
27.
15.
89.
010
.310
.98.
76.
54.
80.
5
Exca
vato
r sal
es–2
7.5
–26.
4–2
9.5
–31.
4–3
3.9
–34.
9–3
1.0
–43.
3–4
5.4
–49.
7–3
6.5
–33.
6
Terr
estr
ial f
reig
ht8.
18.
18.
07.
87.
67.
37.
39.
87.
76.
72.
11.
7
Aqu
atic
frei
ght
19.3
21.2
21.1
23.0
21.8
22.5
18.2
13.0
5.2
1.2
0.8
1.6
Inte
rnat
iona
l air
freig
ht6.
86.
65.
96.
35.
57.
38.
013
.711
.09.
33.
75.
8
Aug–
14Se
p–14
Oct
–14
Nov
–14
Dec
–14
Jan–
15Fe
b–15
Mar
–15
Apr
–15
May
–15
Jun–
15Ju
l–15
Man
ufac
turin
g PM
I – in
dex
– of
whi
ch51
.151
.150
.850
.350
.149
.849
.950
.150
.150
.250
.250
.0
Out
put
53.2
53.6
53.1
52.5
52.2
51.7
51.4
52.1
52.6
52.9
52.9
52.4
New
ord
ers
52.5
52.2
51.6
50.9
50.4
50.2
50.4
50.2
50.2
50.6
50.1
49.9
New
exp
ort o
rder
s50
.050
.249
.948
.449
.148
.448
.548
.348
.148
.948
.247
.9
Raw
mat
eria
l inv
ento
ries
48.6
48.8
48.4
47.7
47.5
47.3
48.2
48.0
48.2
48.2
48.7
48.4
Fini
shed
goo
ds in
vent
orie
s48
.147
.247
.947
.247
.848
.047
.048
.648
.047
.547
.747
.4
Purc
hase
s of
inpu
ts51
.951
.250
.750
.550
.149
.649
.449
.750
.151
.050
.950
.3
Impo
rts
48.5
48.0
47.9
47.3
47.8
46.4
47.5
48.1
47.8
47.6
48.0
47.8
New
ord
ers
to fi
nish
ed g
oods
inve
ntor
ies
ratio
1.09
1.11
1.08
1.08
1.05
1.05
1.07
1.03
1.05
1.07
1.05
1.05
Sour
ces:
Wes
tpac
Eco
nom
ics,
CEI
C.
Tabl
e 2:
Res
ourc
e re
late
d ec
onom
ic in
dica
tors
14 China Resources Quarterly • Southern winter ~ Northern summer
Equities & the household sectorThe July edition of the Westpac MNI China Consumer Sentiment Survey was conducted whilst the Chinese equity markets was in free fall to its early July trough (figure 25). This accident of timing transformed the July survey into a near-perfect experiment testing the importance of the equity market for the collective consumer psyche. Ergo, the July survey can be interpreted as a referendum on the question “Is the equity market an important factor in the collective psyche of Chinese households?” The fact that the survey’s headline indicator increased strongly in the month, alongside broadly positive details, indicates that the answer to that hypothetical question is a decisive “no”.
The fact that the household sector offered a collective shrug at the stock market turmoil of June/July is internally consistent with the weak state of consumer confidence reported during the market’s boom phase in 2014 and early 2015. It seems that both dramatic gains and spectacular busts in equities can pass by relatively unheeded by the overwhelming majority of Chinese households. In short, there was no discernible wealth or confidence effect from the upswing in the equity market, so there was nothing to unwind when the bust arrived.
In the year to June 2015, despite the massive stock price appreciation in 2014, the low inflation adjusted returns paid by deposits, the poor performance of the housing market and a string of interest rate cuts, an average of just 5% of respondents to the survey gauged that the stock market was the “wisest place for their savings” over that period (figure 26). That compares to the 17% that nominated housing; the 37% that nominated bank deposits; and the 20% advocating for wealth management products (which have had reputational issues of their own). Those relativities are reflected in the fact that savings deposits account for approximately 54% of GDP, while household equity holdings account for less than one third of that amount.
All of the above should go a long way towards proving the point that the gyrations of the equity market should not be of primary concern to those with an interest in Chinese consumer behaviour.
China’s share market & the Westpac MNI CSI sampling period
3000
3500
4000
4500
5000
5500
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jul-151000
1500
2000
2500
3000
3500index index
Sampling period
Shenzhen Composite (rhs)
Shanghai Composite (lhs)
Sources: CEIC, Westpac Economics, MNI.Final observation is close of 28-7-2015.
0
10
20
30
40
Bankdeposits
WMPs LocalHousing
ForeignHousing
Localshares
Funds &bonds
Pay downdebt
Other
% of total
Source: MNI, Westpac. Other includes “don’t know”.
Average year to June 2015.
Chinese consumers: wisest place for savings
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
Apr-07 Apr-09 Apr-11 Apr-13 Apr-15
% of total% of totalPercent reporting annual gainsPercent reporting annual losses
Source: MNI, Westpac.
Stock market self-declared profit & loss
Figure 25: Stocks & the July surveying period
Figure 26: ‘Wisest place for savings”: year to Jun-15
Figure 27: Self-declared trailing profit or loss
China’s equity market & the real economy
China Resources Quarterly • Southern winter ~ Northern summer 15
Equities & the financing of businessThe market crunch will no doubt scupper, for now, the plans of firms who were hoping to raise funds directly through this channel. This will be a blow for those firms looking towards a capital-raising to lower their leverage ratios. However, even in the midst of the boom, equity was a small proportion of total financing for China Inc., never exceeding 5%, so from an aggregate point of view (figures 28 & 29) this can be put down as an inconvenience, not a major impost.
Further to the above points, contrary to western practice, loan covenants or ‘triggers’ linked to stock prices are essentially non-existent in China. As the stock market has historically exhibited only the most tenuous link to underlying profitability and the economy at large it would be irrational for financiers to link lending decisions to its gyrations, or for individuals firms to be held accountable for the same. Access to traditional forms of finance should thus be relatively unaffected, although on this point we note that demand for credit is presently weak, which is limiting the impact of monetary policy easing to date (see page 6).
Anecdotes suggest that even if traditional covenants are rare, some firms without access to traditional collateral have apparently pledged shares in exchange for financing from ‘shadow’ banks. This issue comes back to the highly unbalanced nature of the equity price boom itself. Highly speculative start-up ventures were bid up to extravagant price-to-earnings (P-E) ratios in the lead-up to the crash, but blue chips with an actual historical record of profitability and a relatively transparent balance sheet and operating model (such as the banks) continued to trade at rather unflattering P-E ratios. Couple this obviously vulnerable micro pricing constellation to the rapid increase in margin loans set against these stretched valuations and you have a recipe for major volatility.
Taking a step back, figure 30 depicts Chinese market capitalisation to GDP against living standards, with Japan and Korea as comparators. This style of presentation highlights the modest nature of the 2014-15 episode versus 2007, as well as the volatile boom-bust nature of equity markets over the course of the economic development process and the financial maturation that comes with it.
Total social financing: share of the stock
0
20
40
60
80
100
120
0
20
40
60
80
100
120
Dec-02 Dec-05 Dec-08 Dec-11 Dec-14
%%
Other Bond and equityBank loans (including FX) Off balance sheet
Total social financing: stock as a % of GDP
0
25
50
75
100
125
150
175
200
0
25
50
75
100
125
150
175
200
Dec-02 Dec-05 Dec-08 Dec-11 Dec-14
% GDP%GDP
Other
Off balance sheet
Bank loans (including FX)
0
30
60
90
120
150
0
30
60
90
120
150
5 10 15 20 25
GDP per person, ‘000s.
Sources: CEIC, Westpac.
Market capitalisation, % GDP
ChinaFrom 1995
South KoreaFrom 1971
JapanFrom 1960
Equity market cap & living standards
Figure 28: Total financing by type, stock, % share
Figure 29: Total financing by type, stock, % of GDP
Figure 30: Market cap % of GDP & living standards
16 China Resources Quarterly • Southern winter ~ Northern summer
Equities & structural changeThe final point on the previous page referenced the linkage between economic development and financial maturation. This page and the next will draw out that theme with reference to a) the changing structure of the real economy as China attempts to navigate the middle income phase of its development, and b) the interaction between these factors and financial reform and maturation, with reference to the role of the equity market.
Figure 31 depicts the share of financial services in GDP in a sample of East Asian economies. The history traced by Japan and Korea shows that that financial services become increasingly more important to overall economic activity right up to the low reaches of high income level around the $20k of GDP per head mark, at which point they account for around 6% of GDP. Interestingly though, China has deviated well above the path traced by Japan and Korea in this regard, and is presently residing above 7% of GDP at $10k GDP per head. That is despite the fact that it is widely ackowledged that the share of manufacturing in Chinese GDP has been unusually high and service sector activity accordingly low.
The key to understanding these apparently contradictory points is that the provision of financial services encompasses both investment and savings decisions, the management of assets and the creation of liabilities, and China has been remarkably adept at generating both over the course of its high growth era. China’s gross saving generation as a share of GDP since WTO entry has been unprecedented for a large non-oil exporting economy and it has managed to put a very large proportion of those savings to work at home in high yielding investments. This has created a virtuous circle of wealth creation, which spilled back into high demand for the services of the financial system. China has accordingly achieved a much greater degree of financial deepening at its current stage of development than relevant peer economies. Looking ahead, as the underlying growth rate slows and both investment and savings shares decline (the other side of the rebalancing coin regarding consumption), financial services may rise no faster than overall GDP for some years. However, within the system household liability generation will become more important, and corporate debt liabilities less so.
0
2
4
6
8
10
0
1
2
3
4
5
6
7
8
9
10
5 10 15 20 25
GDP per person, ‘000s.
Sources: CEIC, Japanese Statistician, Westpac.
Financial services, % GDP
China1978 to 2014
South Korea1955 to 2013
Japan1955 to 1998
Financial industry share & living standards
Shares of nominal GDP
0
3
6
9
12
15
18
0
3
6
9
12
15
18
Construction Real estateservices
Finance Farm Commerce &hospitality*
Dec-00 Dec-05Dec-10 Dec-14
Sources: CEIC, Westpac Economics.* Wholesale, retail, accommodation & catering.
38404244464850
38404244464850
Dec-00 Dec-05 Dec-10 Dec-15
%GDP%GDPSecondary Tertiary
Investment & savings % the ICOR
0
4
8
12
16
25
30
35
40
45
50
55
1994 1997 2000 2003 2006 2009 2012 2015
Ratio% GDP
Investment efficiency* (rhs)
Savings share (lhs)
Investment share (lhs)
Sources: IMF, Westpac Economics.*ICOR: incremental capital to
Figure 32: Structural change, selected industries
Figure 33: The investment-led model has matured
Figure 31: Financial services, % of GDP
China Resources Quarterly • Southern winter ~ Northern summer 17
Equities & financial reformThis page links the aforementioned strands of argument together under the financial reform banner in both its domestic and international aspects. Consider figure 34, which presents a stylised view of the debt load carried by various segments of the Chinese economy. Note on the previous page the discussion was general and considered financial ‘liabilities’, whereas figure 34 considers debt alone, which is a subset of total liabilities. The concern for China is that the structure of its total liabilities is far too skewed towards debt, and the debt itself is too narrowly held. Faced with a stylized situation like this, in the abstract, one might advice state owned firms to privatise through IPO (or sell/release more shares if already listed) and pay down debt with the proceeds; and local government to conduct asset sales and use those proceeds to also pay down debt. A side element would encourage local governments to refinance bank debt tied to individual projects with bond financing tied to general revenues.
These points are, in fact, a quick summation of the Chinese leadership’s basic plan to rebalance the economy’s liability stock in a fashion that better suits the assets held by the system’s biggest borrowers, while tilting the financial system in a direction more amenable to the middle income phase of development. This ties in with the objective of replacing the old monetary policy regime (a hybrid mixing monetary aggregate targeting with an FX anchor) with the favoured high income economy method of short run interest rate setting that transmits through a floating exchange rate and the yield curve.
These desires explain why the equity market was given policy support in the first place, which is what jolted it higher over the course of 2014 despite the weak performance of the real economy. If a large and sustained increase in the supply of equity liabilities is to absorbed, it is best to encourage investors with a strong positive price signal. Bringing in new investors, such as onshore insurers and offshore fund managers, was another element of the plan. There has been a sharp increase in inward portfolio quotas over the last year (figure 36). Greater openness to inbound investment has also extended to the fixed income sphere, encompassing the interbank and sovereign, semi-sovereign and corporate bond markets.
Financial assets by country and region
0
100
200
300
400
500
USA Japan WesternEurope
Otherdeveloped
China Other EMAsia
India
% GDPEquity
Financial bonds
GovernmentbondsLoans -SecuritizedCorporatebondsLoans -Unsecuritized
Sources: McKinsey, Westpac.2012Q2. Excludes deposits.
% GDP
Figure 34: Debt by sector in China: stylized facts
Figure 35: Financial liability stocks by country
Figure 36: Portfolio flow quotas by program
Debt in the Chinese economy: stylized facts
Sector Characterisation of debt load
Urban households Low – mortgage exposure < 20% of GDP
Rural households Very low - property rights & collateral issue
State owned firms Too much – ease of access to banks
Private firms Low – difficulty of access to banks
Central government Low – but has huge contingent liabilities
Local government Too much – vertical fiscal imbalance & stimulus era hangover.
The nation Huge international creditor
Source: Westpac Economics
QFII, RQFII, QDII & Shanghai-HK connect
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
May-03 May-05 May-07 May-09 May-11 May-13 May-15
USDbnUSDbn
RQFII
QFII
QDII
Northbound SH-HK Connect
Southbound SH-HK Connect
Sources: CEIC, Westpac,Dragonomics.
18 China Resources Quarterly • Southern winter ~ Northern summer
Steel
• Steel prices in China continued to fall in Q2 and ended the quarter 35% below the peak recorded during the GFC. The drop was aided by another weak quarter for China’s residential construction sector and slowing auto manufacturing growth.
• Prices for all steel products fell in Q2, led by plate, which was down 30%yr to average RMB2404. Hot-rolled sheet fell 29%yr to RMB2425 and rebar fell 25% to RMB2435.
• China’s steel production fell 1%yr in H1 2015 to 408 Mt, driven by the central regions of Hubei, Hunan and Henan, where year-on-year output fell 4%, 4% and 1%, respectively. Output grew
Benchmark steel prices
2500
3000
3500
4000
4500
5000
5500
6000
2000
2500
3000
3500
4000
4500
5000
5500
Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15
RMB/tRMB/t
hot-rolled sheet
rebar
plate
wire rod
cold-rolled sheet (rhs)
Source: Bloomberg
The rebar steel price & input costs
250
300
350
400
450
500
550
600
650
700
30405060708090
100110120130140150160170
May-10 Apr-11 Mar-12 Feb-13 Jan-14 Dec-14
USD/tIndex USD
Australian inputs index (lhs)
Chinese rebar (rhs)
Sources: Westpac Economics, Bloomberg
Input index based on 120kg of scrap, 770kg of met coal & 1400kg of iron ore to produce 1 tonne crude steel
*Australian spot prices for iron ore & coking coal.
China crude steel output: level & growth
-200
-150
-100
-50
0
50
100
150
200
250
-15
0
15
30
45
60
75
90
105
120
Mar-91 Mar-96 Mar-01 Mar-06 Mar-11
%yr Mt
Crude steel output (rolling 3mth sum, rhs)Growth rate (rhs)
Source: CEIC
Figure 37: Benchmark steel prices
Figure 38: Crude steel output: level & growth Figure 39: The rebar price and input costs
Table 3: Steel prices (quarterly averages).
Domestic RMB/t Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Rebar 3749 3527 3507 3527 3348 3258 3078 2940 2577 2435
Hot–rolled sheet 4043 3623 3609 3489 3399 3392 3272 3008 2636 2425
Cold–rolled sheet 4865 4697 4460 4342 4214 4096 4001 3898 3582 3160
Plate 3934 3676 3599 3455 3433 3448 3270 2962 2588 2404
Wire rod 3697 3526 3509 3519 3394 3347 3155 2952 2605 2471
Benchmarks USD/t
Rebar benchmarker 503 476 474 477 454 431 416 392 344 314
HRC benchmarker 545 493 494 480 466 454 450 410 359 325
CRC benchmarker 647 629 613 611 597 562 552 534 489 424
Source: Bloomberg.
China Resources Quarterly • Southern winter ~ Northern summer 19
modestly in other key producing regions, with Hebei, Jiangsu and Liaoning recording gains of 1%yr over the same period.
• In response to persistent weakness in the construction sector China’s rod and bar output fell by 9%yr in H1 2015. However, production of hot and cold rolled sheet increased by 7%yr over the same period.
• Steel exports increased by 28%yr to 52 Mt in H1 2015. Around 13% of China’s steel production was exported (up from 10% in 2014). In response, the EU, India, the US and Canada implemented additional duties on Chinese steel exports or initiated dumping investigations.
0
200
400
600
800
1000
1200
1400
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China
India
Japan
South Korea
USA
Sources: World Steel Association; IMF
Consumption, kgpp
Steel demand per headFigure 43: Steel demand per head
Steel end-use by sector
Construction68%
Machinery18%
Autos7%
Shipbuilding2%
Rail2%
Other3%
Source: Bloomberg
Steel inventory cycle: Nov-13 to Feb-15.
-15
0
15
30
45
-3 0 3 6 9 12
inventories%yr
Sales%yr
Nov-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Dec-13
Jun-14
Jul-14
Sep-14
Aug-14
Oct-14
Nov-14
Jan-15Dec-14
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Chinese construction, steel & cement
-30
-15
0
15
30
45
-10
0
10
20
30
40
Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14
%yr 3mma%yr 3mma
Real estate plus hard infra investment (lhs)Steel product output* (rhs)Cement output* (rhs)
Sources: CEIC, Westpac Economics.*Jan-Feb interpolated in 2014 and 2015.
Figure 40: Steel end–use by sector
Figure 42: Steel inventory–to–sales scatter plot
Figure 44: Construction, cement and steel
Figure 41: Steel inventories by product typeChinese steel inventories by product
50
150
250
350
450
50
150
250
350
450Mt Mt
hot rolled long production
Sources: Westpac Economics, Bloomberg
30
40
50
60
70
50
70
90
110
130
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
cold rolled (rhs)
steel plate (lhs)
20 China Resources Quarterly • Southern winter ~ Northern summer
Table 4: Iron ore prices (USD/t, 62% ferrous metal content unless otherwise indicated).
TSI spot price, CFR Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 148.2 125.8 132.6 134.9 120.4 102.7 90.3 74.4 62.5 58.5
Quarter end 137.3 116.5 131.4 134.2 116.8 93.8 78.1 71.3 51.4 59.4
Quarter high 158.9 141 142.8 139.7 135 119.4 98 84.17 71.49 65.6
Quarter low 132.9 110.4 116.9 131.2 104.7 89.0 78.0 66.8 51.4 47.1
TSI in CNY terms, CFR 922.4 774.3 812.0 821.4 734.5 639.7 556.9 457.3 389.6 362.8
IODEX Aust FOB 140.5 117.9 122.2 122.6 110.8 93.9 81.4 66.1 57.6 53.2
IODEX Brazil FOB 129.0 106.5 106.9 107.2 95.9 80.4 67.3 54.3 50.9 46.5
Sources: Bloomberg; Platts. CFR is cost including freight. FOB is free on board.
• The price of iron ore fluctuated significantly during Q2. It averaged US$59 (CFR) a tonne, down 6%qtr and 43%yr. On 8 July the spot price fell 10.1% (US$5.25) to US$44.6/t. The price subsequently recovered to hover around US$49/t through the remainder of July.
• China’s iron ore port stocks fell sharply during Q2 to finish at 74.1 Mt, down 21%qtr and 30%yr. The drawdown in China’s port stocks provided support to prices through May and early June.
• China’s imports of iron ore fell 4%yr in Q2 to 226 Mt with import values down 48%yr to US$13 billion. Iron ore imports from Australia increased in Q2, despite the overall decline in
Iron ore prices: spot and forward
40
60
80
100
120
140
160
180
Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
USD/tTSI 62% CFR Tianjin
SGX 3 month forward
SGX 12 month forward
Source: Bloomberg
Iron ore prices and rebar steel
200
300
400
500
600
700
800
900
40
60
80
100
120
140
160
180
Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
USD/tUSD/t
Iron ore TSI 62% CFR (lhs)
Rebar steel (rhs)
Source: Bloomberg
Figure 45: Iron ore prices: spot and forward
Figure 46: Iron ore prices and rebar steel Figure 47: Port inventories versus end demand
Iron ore
Chinese port ore inventories scaled by demand
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
ratioratio
To pig iron production
To crude steel production
Sources: CEIC, Bloomberg, Westpac Economics
China Resources Quarterly • Southern winter ~ Northern summer 21
volumes, and were up 6%yr to 147 Mt. As a result Australia’s share of China’s seaborne market increased to 65% from 59% a year ago.
• Brazil’s exports to China were steady in Q2 at 42 Mt, which equates to a 19% market share.
• Brazil’s export potential received a boost in Q2 following an announcement from China’s Transport Ministry that Vale’s 400 000 dwt vessel, the ‘Valemax’, will be permitted to dock at the Qingdao, Dalian, Tangshan and Ningbo ports. Vale estimates that the Valemax will reduce shipping costs by US$4–6/t. Over the last year, Australia’s freight advantage averaged US$8/t, so this is a material development.
World trade in iron ore - seaborne
China67%
Japan11%
Europe11%
South Korea
5% other6%
Imports
Source: AME
Australia 50%
Brazil24%
South Africa
4%
Ukraine3%
Canada3%
other16%
Exports
Figure 51: World trade in iron ore – seaborne
Chinese import volumes by source
0
20
40
60
80
100
0
20
40
60
80
100
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
% shareMtAust (lhs)
Brazil (lhs)
Other (lhs)
Aust market share (rhs)
Source: Bloomberg
Chinese iron ore imports
50
75
100
125
150
175
200
0
2
4
6
8
10
12
14
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USD/tUSDbnAust (lhs) Brazil (lhs) Other (lhs)
TSI 62% CFR (rhs) Import unit value (rhs)
Source: Bloomberg
Shares of world iron ore output
Australia34%
Other22%
Brazil19%
China16%
India5%
Russia4%
Source: AME
Figure 48: Chinese import volumes by source
Figure 50: Chinese imports, unit values & prices
Figure 52 : Shares of world iron ore output
Figure 49: Australian iron ore exports to ChinaAustralian iron ore exports to China
0
1
2
3
4
5
6
7
8
9
10
10
15
20
25
30
35
40
45
50
55
60
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
AUDbnMt
volume (lhs) value (rhs)
Source: ABS
22 China Resources Quarterly • Southern winter ~ Northern summer
Iron ore mine cost curve
0 225 450 675 900 1125 1350 1575 1800 2025
USD/tOthers
Sierra Leone
Russia
Canada
China
India
Australia
Brazil
indicative spot cfr $56/t
Sources: AME, Westpac. Includes mining, royalties, freight from mine to port, administration and processing.
Cumulative export supply, mt
Chinese ferrous metal miners making losses
0
5
10
15
20
25
30
0
5
10
15
20
25
30
May-07 Nov-08 May-10 Nov-11 May-13 Nov-14
% share% share
Number of Chinese ferrous mining firmsmaking a loss, % of total
Sources: CEIC, Bloomberg, Westpac Economics
Figure 56: Chinese iron ore miners: loss–makers Figure 57: Seaborne iron ore cost curve
• China’s imports of iron ore from minor producers (countries other than Australia and Brazil) fell by 37%yr to 37 Mt in Q2. As a result, their share of China’s iron ore imports fell to 16% (from an average of 24% in 2014).
• China’s domestic iron ore production fell by 11%yr to 350 Mt in Q2 as high cost domestic concentrate continues to be displaced by low cost seaborne iron ore.
• Australia’s iron ore export volumes to China increased 6%yr to 155 Mt in Q2 while values decreased 30%yr to $A9.4 billion.
Total supply of iron ore by source
0
50
100
150
200
250
0
50
100
150
200
250million tmillion t
Total
Domestic
Imports
Source: CEIC, Westpac.
0
10
20
30
40
50
60
0
10
20
30
40
50
60
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
% share% share
Rest of worldAustralia
Import share of total supply
Total ore supply by source
Iron ore inventories & supply growth
-40
-20
0
20
40
60
80
-40
-20
0
20
40
60
80
Sep-07 Mar-09 Sep-10 Mar-12 Sep-13 Mar-15
%yr%yr
Imports
Domestic production
Change in inventories
Sources: Westpac Economics, Bloomberg.Data smoothed.
Ferrous mining profit margins in China
400
500
600
700
800
900
1000
1100
1200
1300
4
6
8
10
12
14
16
18
20
22
24
Sep-07 Sep-09 Sep-11 Sep-13 Sep-15
CNY/tmargin %
Ferrous metal mining margin (lhs)
Domestic ore prices ytd ave (rhs)
Sources: CEIC, Bloomberg, Westpac Economics
Figure 54: Chinese iron ore miners’ margins Figure 55: Chinese output, imports & stocks
Figure 53: China’s total iron ore supply
China Resources Quarterly • Southern winter ~ Northern summer 23
Iron
ore
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
-15
Jun-
15
Chi
na im
port
sM
t18
6.5
198.
021
6.7
219.
122
2.0
235.
324
2.1
233.
622
7.1
226.
0
Aus
tral
iaM
t89
.810
2.6
111.
811
2.9
118.
213
8.2
149.
414
2.7
144.
414
6.8
Braz
ilM
t38
.432
.140
.544
.441
.638
.944
.745
.841
.842
.3
valu
eU
SDbn
24.2
26.3
26.3
28.1
28.4
25.7
21.9
18.5
15.8
13.2
Raw
pro
duct
ion
*M
t28
7.4
356.
638
7.0
405.
430
4.2
393.
741
0.6
389.
328
0.6
350.
2
Iron
ore
stoc
ks a
t por
ts, e
nd o
f qtr
Mt
68.1
71.5
70.1
81.3
103.
810
5.7
103.
295
.293
.374
.1
wee
ks o
f im
port
sw
eeks
4.8
4.7
4.2
4.8
6.1
6.2
6.1
5.6
5.5
4.4
Aus
tral
ian
expo
rts
to C
hina
Mt
92.9
107.
911
3.8
126.
812
2.2
145.
814
9.7
152.
214
3.7
155.
0
valu
eAU
Dbn
11.2
12.3
13.6
15.6
14.4
13.4
11.9
10.9
9.8
9.4
Met
allu
rgic
al c
oal
Chi
na im
port
sM
t17
.218
.119
.420
.713
.018
.113
.418
.010
.910
.7
valu
eU
SDm
n24
3124
9824
1424
1816
3418
1212
7017
3698
088
3
Aus
tral
ian
expo
rts
to C
hina
Mt
9.1
9.8
12.4
14.0
10.1
11.6
11.2
13.4
7.7
10.8
valu
eAU
Dm
n12
8412
9615
4718
2312
4812
3811
4415
1395
613
20
Sour
ces:
Bloo
mbe
rg, A
BS, I
HS,
CEI
C. *
Raw
min
e ou
tput
with
a lo
w ir
on c
onte
nt.
Tabl
e 5:
Iron
ore
& m
etal
lurg
ical
coa
l sum
mar
y da
ta
24 China Resources Quarterly • Southern winter ~ Northern summer
Metallurgical coal
• Metallurgical coal prices declined rapidly in Q2. Lower import demand from China was the key driver, as steel mills reduced their output while simultaneously utilising more domestic coal. Low volatility HCC CFR China averaged US$95/t in Q2, down 24%yr and 15%qtr.
• Australian benchmark prices for high-quality metallurgical coal delivered in Q3 2015 settled at US$93/t, 15% (US$16.50) lower than in Q2.
• Australia and China signed a Free Trade Agreement in Q2. Under the agreement the 3% tariff on metallurgical coal imports from Australia will be removed immediately.
• China’s total metallurgical coal imports fell 0
50
100
150
200
250
0
50
100
150
200
250
Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15
USD/tUSD/t
Low Vol PCI Semi Soft Prem Low Vol HCC
Source: Platts
Met coal spot prices
Met coal use and supply by country
China52%
Australia16%
USA8%
Russia7%
India4%
Other13%
Production
Source: IEA.
China61%other
13%
India8%
other OECD
8%
Japan5%
Russia5%
Consumption
World trade in met coal
China26%
Japan18%OECD
Europe17%
India13%
Other11%
South Korea11%
Ukraine4%
ImportsAustralia
51%
United States20%
Canada11%
Russia7%
Mongolia5%
Other6%
Exports
Source: IEA
Figure 58: Met coal spot prices
Figure 59: World trade in met coal Figure 60: Met coal use and supply by country
Table 6: Metallurgical coal prices (quarterly average spot prices).
unit Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Prem Low Vol HCC CFR China USD/t 179.7 155.0 154.7 156.3 135.0 124.3 123.3 121.8 111.8 94.5
Low Vol PCI CFR China USD/t 154.9 127.2 125.9 129.0 115.9 108.7 102.1 101.3 99.9 81.0
Semi Soft CFR China USD/t 132.6 114.5 109.1 110.9 101.1 92.8 87.7 89.7 86.6 76.9
Prem Low Vol HCC FOB Aust USD/t 165.9 141.5 140.9 140.5 120.6 111.4 110.7 110.0 104.0 86.8
Prem Low Vol HCC FOB Aust AUD/t 159.6 142.6 155.4 155.3 133.3 123.1 122.4 121.5 114.9 95.9
Source: Platts. CFR is cost including freight. FOB is free on board. HCC is hard coking coal.
China Resources Quarterly • Southern winter ~ Northern summer 25
by 41%yr to 11 Mt in Q2. Total imports in the month of May were the lowest since the GFC. It is reported that some large steel mills intend to stop importing metallurgical coal in the short term because they have ample stocks and they expect further price declines.
• Of China’s major suppliers, Mongolia was hardest hit by the large decline in imports in Q2. China’s imports from Mongolia declined by 43%yr to a mere 3 Mt. Imports from Australia declined by a relatively smaller 36%yr to 5.5 Mt.
• Australia exported 10.8 Mt of metallurgical coal to China in Q2, down 7%yr (noting time lags between the respective customs data). The value of these exports increased 7%yr to $A1.3 billion, partly reflecting currency depreciation.
Met coal seaborne cost curve
0 50 100 150 200 250 300
USD/t
Other Canada
United States Mongolia
Mozambique Australia
Sources: AME, Westpac. include s mining, royalties, freight from mine to port,
administration and processing.
Cumulative export supply, mt
Figure 64: Seaborne met coal cost curve
Chinese met coal import volumes
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
0
1
2
3
4
5
6
7
8
9
10
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDbnMt
Aust. (lhs) Mongolia (lhs) Canada (lhs)
Russia (lhs) Other (lhs) Value (rhs)
Sources: IHS, CEIC.
Total hard met coal exports: Australia
60
70
80
90
100
110
120
130
140
150
160
170
Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Sep-1560
70
80
90
100
110
120
130
140
150
160
170100kt mth100kt mth
Hard met coal exports, all destinations
Source: ABS, CoalPortal.com. Seasonally adjusted by Westpac Economics.
Aust met coal exports to China
0
150
300
450
600
750
900
0
1
2
3
4
5
6
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
AUDmnMt
volume (lhs) value (rhs)
Source: ABS
Hard coking coal seaborne cost curve
0 30 60 90 120
USD/t
Other
Canada
United States
Mongolia
Mozambique
Australia
Sources: AME, Westpac. Includes mining, royalties, freight from mine to port, administration and processing.
Cumulative export supply, mt
Figure 61: Chinese met coal import volumes
Figure 63: Australian met coal exports: total Figure 62: Aust met coal exports to China
Figure 65 : Seaborne hard coking coal cost curveTable 6: Metallurgical coal prices (quarterly average spot prices).
unit Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Prem Low Vol HCC CFR China USD/t 179.7 155.0 154.7 156.3 135.0 124.3 123.3 121.8 111.8 94.5
Low Vol PCI CFR China USD/t 154.9 127.2 125.9 129.0 115.9 108.7 102.1 101.3 99.9 81.0
Semi Soft CFR China USD/t 132.6 114.5 109.1 110.9 101.1 92.8 87.7 89.7 86.6 76.9
Prem Low Vol HCC FOB Aust USD/t 165.9 141.5 140.9 140.5 120.6 111.4 110.7 110.0 104.0 86.8
Prem Low Vol HCC FOB Aust AUD/t 159.6 142.6 155.4 155.3 133.3 123.1 122.4 121.5 114.9 95.9
Source: Platts. CFR is cost including freight. FOB is free on board. HCC is hard coking coal.
26 China Resources Quarterly • Southern winter ~ Northern summer
Developments in China’s energy policy
• Australia and China signed a Free Trade Agreement in June. Under the agreement tariffs will be removed from almost all resource and energy products. The 3% tariff on metallurgical coal will be removed immediately and the 6% tariff on thermal coal will be phased out over two years.
• As part of China’s COP21 commitments, Premier Li Keqiang promised that China would reduce the emissions intensity of its economy by 60–65% from 2005 levels and increase the share of non-fossil fuels in total primary energy consumption to 20% by 2030. The government has estimated that it will cost more than US$6.6 trillion to meet these goals.
• China and India reached an agreement on climate change during Narendra Modi’s visit to Beijing in May. Under the agreement, China and India will enhance bilateral co-operation on clean energy technology, energy efficiency, energy conservation, renewable energy, sustainable transportation and low carbon urbanisation.
• The National Energy Administration (NEA) released an action plan for the clean and efficient use of coal between 2015 and 2020. The plan includes increasing coal quality, retrofitting coal-fired power plants, industrial boilers and coal chemical operations, and controlling residential use. To improve coal quality, China will invest in large-scale washing capacity to ensure that 70% of raw coal is washed by 2017 and more than 80% by 2020, up from around 40% currently.
• It is reported that the National Development and Reform Commission (NDRC) is considering the sale of China National Petroleum Corporation and China Petrochemical Corporation’s oil and gas pipelines. These assets would be turned into independent businesses as part of plans to improve market competition, and enhance efficiency and transparency.
• In early July the Shanghai Petroleum and Gas Exchange was launched to promote market-based pricing and structural reform. The NDRC and NEA will oversee the exchange, which will focus on both pipeline gas and LNG. Around 40% of gas is presently sold at market prices.
• The State Council approved the merger of China Power Investment Corporation and State Nuclear Power Technology Corporation to form the State Power Investment Corporation. The newly merged company has an installed generation capacity of 98 GW.
Electricity trends
• China generated 1.4 trillion kWh of electricity in Q2, up 3.9%yr and 5.2%qtr. Electricity generation increased in May and June in the lead-up to summer when consumption typically peaks. Strong growth in hydro generation, up 12%yr, squeezed out thermal needs, leading to a 0.6%yr decline from that source.
• According to the China Electricity Council, investment in new electricity generation capacity is largely being directed to thermal plants. As at the end of May, 172 GW of new capacity was under construction. This included 108 GW of thermal power, 36 GW of nuclear, 19 GW of wind power and 3.6 GW of hydropower.
• The growth of investment in new electricity generation capacity increased 2.8%yr in Q2, driven by a 15%yr increase in thermal generation investment. Investment in hydro and nuclear power declined by 21%yr and 18%yr, respectively.
• China’s electricity consumption increased 1.6%yr to 1.4 trillion kWh in Q2. Consumption in the secondary industry declined 0.4%yr due to weakness in manufacturing activity as the economy shifts away from energy-intensive sectors. Tertiary and residential electricity use increased by 9%yr and 7%yr, respectively.
China Resources Quarterly • Southern winter ~ Northern summer 27
Shares of energy output growth
-15
0
15
30
45
-15
0
15
30
45
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14
Contribution from other sourcesContribution from thermal generationElectricity production
%yr/ppt %yr/pptSources: CEIC,
Westpac
Figure 70: Chinese electricity growth: broad source
World energy production
other non-OECD34%
China19%
other OECD12%
United States13%
Russia 10%
Saudi Arabia
4%
India4%
Indonesia3%
Source: IEA
World energy consumption
other Non-OECD26%
China22%other OECD
18%
United States16%
India6%
Russia6%
Japan4%
Germany2%
Source: IEA
Chinese electricity use by sector
0
300
600
900
1200
1500
1800
Mar-12 Mar-13 Mar-14 Mar-15
Billion kWh
secondary industry residentialtertiary industry primary industry
Source: CEIC.
Chinese electricity output by source
0
200
400
600
800
1000
1200
1400
1600
Mar-98 Mar-01 Mar-04 Mar-07 Mar-10 Mar-13
Billion kWh
thermal hydro nuclear wind
Source: CEIC
Generation capacity by source
0.0
0.2
0.4
0.6
0.8
1.0
0.0
0.2
0.4
0.6
0.8
1.0
Thermal(7%)
Hydro(9%)
Nuclear(17%)
Wind(40%)
Solar(303%)
Billion kWBillion kW
2009 2010 2011
2012 2013 2014
Sources: CEIC, Westpac Economics. Number in parenthesesare CAGRs for the period 2009 to 2014.
Figure 67: World energy productionFigure 66: World energy consumption
Figure 69: Chinese electricity use by sectorFigure 68: Chinese electricity output by source
Figure 71: China’s generating capacity by type
28 China Resources Quarterly • Southern winter ~ Northern summer
Thermal coal
• Key thermal coal FOB prices continued to decline in Q2 due to weak Chinese import demand and ongoing oversupply. Newcastle spot prices declined 8.3%qtr, Qinhuangdao (QHD) by 14%qtr, Baltic 3.1%qtr and Richard’s Bay 0.5%qtr.
• China released its Clean Coal Action Plan 2015–2020, which is aimed at increasing coal quality and retrofitting existing coal-fired facilities.
• Australia and China signed a Free Trade Agreement in Q2. Under the agreement the 6% tariff on thermal coal imports from Australia will be phased out over two years.
• Reduced demand and government directives to reduce production contributed to lower
50
70
90
110
130
150
170
190
210
50
70
90
110
130
150
170
190
210
Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
USD/tUSD/t
Richards Bay 6000kcal
Baltic 6000kcal
Newcastle 6000kcal
QHD 5800kcal
Source: IHS
Thermal coal prices
Thermal seaborne cost curve
0 100 200 300 400 500 600 700
USD/t
Other
Russia
United States
Indonesia
South Africa
Australia
indicative spot fob NEWC US$64
Sources: AME, Westpac. includes mining, royalties, freight from mine to port,
administration and processing.
Cumulative export supply, mt
Thermal coal stocks: ports & generators
0
5
10
15
20
25
30
35
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
MtQHD Caofeidian JintangTianjin Guangzhou Other
Source: Bloomberg
Figure 72: Thermal coal prices
Figure 73: Thermal coal stocks: ports & generators Figure 74: Export thermal coal cost curve
Table 7: Thermal coal prices (USD/t, NAR unless otherwise indicated).
Quarterly averages Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
QHD 5800kcal 114.9 112.8 105.8 106.1 105.8 100.3 92.8 96.1 87.4 74.9
QHD 5800kcal RMB/t 715.2 694.4 647.8 646.8 645.2 624.8 571.9 590.5 544.9 464.3
Newcastle 6000kcal 91.3 85.4 77.1 82.0 77.4 72.7 68.0 63.0 63.0 57.8
Newcastle 6000kcal AUD/t 88.0 86.7 84.3 88.6 86.5 77.9 73.5 73.7 80.1 74.4
Richards Bay 6000kcal 84.8 80.5 73.0 83.1 78.7 75.0 70.2 65.8 61.5 61.2
Baltic 6000kcal 82.0 75.5 71.4 78.2 74.3 69.4 69.7 68.7 56.9 55.2
Sources: IHS. NAR stands for net as received.
China Resources Quarterly • Southern winter ~ Northern summer 29
output in H1 2015 from Shenhua and China Coal, two of China’s largest coal producers. Shenhua’s output declined 10%yr to 139 Mt in H1. China Coal’s output fell 22%yr to 46 Mt.
• China’s thermal coal imports declined 31%yr to 40 Mt in Q2 as a joint function of low domestic prices, reduced industrial activity, increased regulatory measures and strong hydropower output. Imports from Indonesia were the most affected, declining 33%yr to 17 Mt. Imports from Australia declined by a lesser 17%yr to 13 Mt.
• Australia’s exports to China declined by 23%yr to 10 Mt in Q2. The value of these exports declined 27%yr to $A635 million.
Thermal coal use and supply by country
China39%
USA17%
Indonesia10%
OECD Europe
7%
India8%
Aust4%
Other15%
Producers
Source: IEA.Note: Includes brown coal.
China39%
USA17%
Other non-OECD14%
Indonesia10%
India8%
Australia4%
Other OECD
8%
Consumers
Figure 78: Thermal coal use and supply by country
Thermal coal imports
230
260
290
320
350
380
410
440
0
5
10
15
20
25
30
35
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
billion kWhMtIndonesia (lhs)Australia (lhs)Other (lhs)Thermal electricity generation (rhs)
Sources: CEIC; IHS.
Power generation & coal extraction: capex
-40
-20
0
20
40
60
80
-40
-20
0
20
40
60
80
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
%yr%yr
Power generation
Coal extraction
Sources: CEIC, Westpac Economics.
Aust thermal coal exports to China
0
50
100
150
200
250
300
350
400
450
500
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
AUDmnMt
volume (lhs)
value (rhs)
Source: ABS.
World trade in thermal coal
China21%
India19%
OECD Europe
17%
Japan12%
South Korea
8%
Other 23%
Imports
Source: IEA.Note: Includes brown coal.
Indonesia48%
Australia15%
Russia10%
Colombia6%
South Africa6%
other15%
Exports
Figure 75: Thermal coal imports
Figure 77: Capex: coal mining vs power generationFigure 76: Aust thermal coal exports to China
Figure 79: World trade in thermal coal
30 China Resources Quarterly • Southern winter ~ Northern summer
Tabl
e 8:
The
rmal
coa
l sum
mar
y da
ta
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
sM
t62
.860
.560
.967
.671
.058
.149
.750
.438
.140
.1
Indo
nesi
aM
t33
.129
.427
.832
.835
.726
.121
.422
.519
.017
.4
Aus
tral
iaM
t12
.912
.217
.015
.915
.415
.217
.515
.110
.612
.6
valu
eU
SDm
n48
4646
7946
4749
7351
4540
6933
4631
5622
5522
44
End
of q
uart
er s
tock
s at
por
tsM
t26
.831
.525
.122
.527
.531
.426
.329
.432
.427
.8
wee
ks o
f im
port
s5.
56.
85.
44.
35.
07.
06.
97.
611
.09.
0
Aus
tral
ian
expo
rts
to C
hina
Mt
7.9
11.3
11.7
11.6
11.4
12.9
11.8
11.1
10.0
9.9
valu
eAU
Dm
n56
1.7
827.
689
2.2
830.
486
2.3
870.
274
1.8
708.
066
4.3
634.
7
Sour
ces:
ABS
, Blo
ombe
rg, I
HS.
China Resources Quarterly • Southern winter ~ Northern summer 31
Oil
• World oil prices increased throughout April and May in response to growing demand in Asia, the beginning of the driving season in the US and expectations of slower production growth. Prices then proceeded to declined again in June and July as output continued to outpace expectations and sanctions on Iran were lifted, creating the potential for further supply gains.
• In Q2, WTI prices averaged US$57.80/bbl (up 19%qtr), Brent around US$63.5/bbl (15%qtr) and Tapis around US$64.60/bbl (15%qtr).
• China’s benchmark gasoline and diesel prices were adjusted four times in Q2. Gasoline and diesel prices ended the quarter 8% and 9% higher than in Q1, respectively.
Oil prices
45
60
75
90
105
120
135
150
45
60
75
90
105
120
135
150
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
USD/bblUSD/bbl
Brent WTI Tapis
Source: Bloomberg.
Oil use and supply by country
other OPEC24%
other non-OPEC24%Saudi
Arabia13%
Russia13%
United States12%
China5%
Canada5%
Iran4%
Production
Source: BP.
other non-
OECD28%
other OECD24%
United States20%
China12%
Japan5%
India4%
Russia4%
Brazil3%
Consumption
Oil use by sector: China & the world
Transport52%
other21%
Industry14%
Residential6%
Services4%
Agri4%
China
Source: IEA.
Transport64%
Other17%
Industry8%
Residential6%
Services2%
Agri3%
World
Figure 80: Oil prices
Figure 81: Oil use by sector: China & the World Figure 82: Oil use and supply by country
Table 9: Crude oil spot prices (USD/bbl, quarterly).
Brent Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15Quarter average 112.6 103.3 109.7 109.4 107.9 109.8 103.5 77.1 55.1 63.5Quarter end 110.0 102.2 108.4 110.8 107.8 112.4 94.7 57.3 55.1 63.6Quarter high 118.9 111.1 116.6 112.6 111.2 115.1 112.3 94.2 62.6 67.8Quarter low 107.5 97.7 103.0 103.5 105.8 104.8 94.7 57.3 46.6 55.0TapisQuarter average 118.3 108.9 115.9 117.2 114.3 115.0 106.2 79.5 56.1 64.6Quarter end 116.0 109.7 114.5 120.7 113.2 117.0 100.2 58.6 55.9 63.3Quarter high 125.2 116.1 122.2 121.7 118.6 119.4 115.0 98.4 64.2 70.3Quarter low 113.7 103.8 109.1 110.8 111.7 110.1 98.7 58.6 47.4 56.8West Texas intermediateQuarter average 94.3 94.1 105.8 97.6 98.7 103.1 97.6 73.2 48.5 57.8Quarter end 97.2 96.6 102.3 98.4 101.6 105.4 91.2 53.3 47.6 59.5
Quarter high 97.9 98.4 110.5 104.1 104.9 107.3 107.6 91.0 53.5 61.4
Quarter low 90.1 86.7 98.0 92.3 91.7 99.4 91.2 53.3 43.5 49.1Source: Bloomberg.
32 China Resources Quarterly • Southern winter ~ Northern summer
0
100
200
300
400
500
600
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China
India
Japan
South Korea
USA
Passenger cars per 1000 residents
Passenger cars per 1000 residentsFigure 86: Automobile penetration
Chinese oil import volumes
0
5
10
15
20
25
30
35 MtOther Saudi Arabia AngolaRussia Iran Oman
Source: CEIC.
World trade in oil
other OECD28%
other non-
OECD25%
United States16%
China9%
Japan7%
India6%
South Korea
5%
Nether-lands
4%
Imports
other non-
OECD42%
other OECD18%
Saudi Arabia
13%
Russia11%
Canada5%
United States
4%Kuwait
4%
UAE4%
Exports
Source: IEA
Chinese imports of Australian oil
0
100
200
300
400
500
600
700
0
100
200
300
400
500
600
700
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnkt
Volume (lhs)
Value (rhs)
Source: CEIC.
Oil demand per capita
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China IndiaJapan South KoreaUSA
Consumption toe per capita
Sources: IMF, IEA.
Figure 83: Chinese oil import volumes
Figure 85: World trade in oilFigure 84: Chinese imports of Australian oil
Figure 87: Oil demand per capita
• After falling to a 16 month low in May, China’s crude oil imports increased 27%mth in June to 29 Mt, challenging the US as the world’s largest importer as the first half closed.
• China’s imports of crude oil increased 7.5%yr to 83 Mt in Q2 as a whole. Imports from Russia and Saudi Arabia increased by 38%yr and 19%yr to 11 Mt and 14 Mt, respectively. Lower imports from Oman (down 24%yr) and Angola (10%yr) were offset by ‘other’ (up 15%yr to 35 Mt).
• China’s imports of crude oil from Australia declined 22%yr to 557 kt in Q2, while import values declined 53%yr to US$269 million.
China Resources Quarterly • Southern winter ~ Northern summer 33
Oil
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
sM
t69
.069
.273
.270
.874
.777
.276
.579
.980
.383
.0
Saud
i Ara
bia
Mt
14.0
13.0
13.9
13.0
12.7
11.5
12.4
13.1
12.8
13.6
Ang
ola
Mt
9.7
10.4
10.5
9.4
10.7
10.2
9.5
10.4
9.9
9.2
Russ
iaM
t6.
06.
46.
16.
07.
57.
88.
09.
88.
610
.9
Iran
Mt
5.0
5.5
5.5
5.4
6.9
8.7
5.8
6.1
6.7
7.9
Om
anM
t5.
65.
76.
87.
46.
08.
57.
67.
77.
86.
5
othe
rM
t28
.728
.230
.429
.531
.030
.533
.332
.934
.635
.0
Chi
na p
rodu
ctio
n
Cru
deM
t17
.752
.351
.453
.251
.352
.252
.053
.952
.253
.8
Gas
olin
eM
t8.
324
.024
.025
.426
.626
.926
.828
.728
.730
.6
Die
sel
Mt
14.8
42.1
42.7
44.0
42.3
42.9
43.5
46.0
43.8
45.6
Chi
nese
impo
rts
from
Aus
tral
iakt
531.
979
8.3
1233
.746
1.8
730.
971
1.9
744.
254
0.3
600.
455
7.2
valu
eU
SDm
n45
2.6
630.
810
52.3
393.
359
9.8
567.
159
4.8
342.
124
7.3
269.
1
Gas
Chi
na p
ipel
ine
impo
rts
Mt
4.5
4.9
5.2
5.4
4.9
5.9
6.0
6.2
6.7
5.7
Chi
na L
NG
impo
rts
kt41
8041
6045
6051
4056
2942
9748
1151
5551
2743
92
Qat
arkt
1932
.714
32.2
1618
.317
84.8
2570
.013
80.5
1328
.714
58.3
1322
.771
1.3
Aus
tral
iakt
842.
397
4.2
833.
990
6.2
842.
590
4.6
1162
.290
2.1
1093
.812
86.3
Indo
nesi
akt
362.
878
8.4
605.
567
6.6
617.
460
8.3
676.
365
2.9
672.
474
5.3
Mal
aysi
akt
648.
464
5.3
679.
068
5.0
842.
969
8.1
622.
682
9.4
820.
011
28.4
othe
rkt
393.
931
9.8
823.
310
87.4
756.
270
5.2
1021
.013
11.7
1218
.452
1.1
Chi
na p
rodu
ctio
nBc
m9.
926
.926
.430
.232
.329
.029
.233
.533
.629
.2
Chi
nese
impo
rts
from
Aus
tral
iakt
842.
397
4.2
833.
990
6.2
842.
590
4.6
1162
.290
2.1
1093
.812
86.3
valu
eU
SDm
n14
3.4
182.
914
5.7
159.
614
6.4
159.
723
9.1
173.
127
0.9
433.
3
Sour
ce: C
EIC
.
Tabl
e 10
: Oil
and
gas
sum
mar
y da
ta
34 China Resources Quarterly • Southern winter ~ Northern summer
Gas
• LNG import values decreased by 21%yr in Q2 and pipeline values were down by 17%yr.
• As part of efforts to promote market-based pricing in China’s gas industry, the Shanghai Petroleum and Gas Exchange was launched in July. It is expected that 5–6 bcm of gas futures contracts will be exchanged through the platform in H2 2015.
• China’s gas consumption increased by 2.1%yr to around 91 bcm in H1 2015.
• China began construction of its part of the ‘Power of Siberia’ gas pipeline that will run almost 4000 kilometres from Heilongjiang province to Shanghai.
Gas unit values in China
100
200
300
400
500
600
700
Jun-08 Sep-09 Dec-10 Mar-12 Jun-13 Sep-14
USD/t
total gas LNG pipeline
Source: CEIC.
Gas use by sector: China
Industry31%
Residential30%
other17%
Transport and agriculture
13%
Services9%
Source: IEA
Gas use by sector: World
Industry36%
Residential29%
Services13%
Other14%
Transport7%
Agriculture1%
Source: IEA
Figure 88: Gas unit values in China
Figure 89: Gas use by sector: World Figure 90: Gas use by sector: China
Gas use and supply by country
other non-
OECD33%
USA21%
Russia17%
other OECD10%
Qatar5%
Iran5%
Canada5%
China4%
Production
Other Non-OECD28%
USA22%
other OECD21%
Russia12%
China6%
Iran5%
Japan3%
Saudi Arabia
3%
Consumption
Source: BP
Gas demand per capita
0.0
0.5
1.0
1.5
2.0
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China IndiaJapan South KoreaUSA
Consumption toe per capita
Sources: IEA, IMF
Figure 92: Gas use and supply by countryFigure 91: Gas demand per capita
China Resources Quarterly • Southern winter ~ Northern summer 35
• China’s LNG imports increased by 2%yr to 4.4 Mt in Q2. Pipeline imports declined by 3.9%yr to 5.7 Mt. LNG imports from Malaysia increased 62%yr to 1.1 Mt, with lower prices arguably lifting demand from that source, while imports from Qatar declined 48%yr to 711 kt.
• LNG imports from Australia increased 42%yr to 1.3 Mt in Q2. The value of these imports increased 171%yr to US$433 million. The Queensland Curtis LNG project began operation in Q2 and is expected to provide China with up to 3.6 Mt of LNG a year for the next 20 years. China National Offshore Oil Corporation (CNOOC) is the second largest investor in the project.
World gas exports by country
ROW23%
Russia22%
Qatar12%
other Asia Pacific
12%
Norway10%
other Africa8%
Canada8%
Netherlands5%
Source: BP.
Figure 96: World gas exports by country
China’s gas imports by type
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Mt
LNG Pipeline
Source: CEIC
Chinese LNG imports from Australia
0
30
60
90
120
150
180
0
0.1
0.2
0.3
0.4
0.5
0.6
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Mt USDmn
volume (lhs)value (rhs)
Source: CEIC.
World gas imports by country
other Europe
38%
other Asia Pacific12%
Japan11%
ROW11%
Germany9%
United States
8%
Italy6%
China5%
Source: BP
Figure 93: China’s gas imports by type
Figure 95: Chinese LNG imports from Australia
Figure 97: World gas imports by country
Figure 94: Chinese LNG imports by source
Chinese LNG imports by source
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
MtQatar Australia IndonesiaMalaysia Other
Source: CEIC
36 China Resources Quarterly • Southern winter ~ Northern summer
UraniumUranium prices
0
100
200
300
400
500
600
700
800
0
20
40
60
80
100
120
140
160
Oct 04 Oct 06 Oct 08 Oct 10 Oct 12 Oct 14
index USD/lb
USD price (lhs)
USD price index (rhs)
RMB price index (rhs)
Sources: LME, Bloomberg
China’s uranium imports
0
3000
6000
9000
12000
15000
0
300
600
900
1200
1500
Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15
USDmn
Volume (rhs)
Value (lhs)
Source: CEIC, China Petroleum and Chemical Industry Federation
Tonnes
Uranium use by country
Other31%
United States28%
France15%
China10%
Russia8%
South Korea
8%
Source: World Nuclear Association.
Global uranium output &reserves
Kazakhstan37%
Other20%
Canada15%
Australia12%
Niger8%
Namibia8%
Production
Source: World Nuclear Association, OECD NEA & IAEA.
Kazakhstan12%
Other35%
Canada9%
Australia31%
Niger8%
Namibia5%
Reserves*
*Reasonably Assured and Inferred, recoverable at US$130 per tonne U3O8
Figure 98: Uranium prices
Figure 100: Global uranium output & reserves
Figure 99: China’s uranium imports
Figure 101: Uranium use by country
Table 11: Uranium summary data.
Units Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Uranium spot price U3O
8USD/lb 41 35 35 35 29 32 37 38 36
China nuclear power output bn kWh 24 30 30 27 28 38 37 35 42
Investment in nuclear RMBbn 14 15 20 11 13 14 19 10 11
China uranium imports t 2567 9069 6216 4045 6801 4985 9281 2041 5659
Value USDmn 292 931 677 396 675 482 810 210 587
Source: CEIC, Cameco, The Ux Consulting Company, Trade Tech.
China Resources Quarterly • Southern winter ~ Northern summer 37
• The bearish market sentiment that has pushed commodity prices lower in 2015 has had little impact on uranium due to its relatively tighter market balance. Nevertheless, the average uranium spot price fell 5%qtr in Q2 to US$36/lb.
• China’s nuclear power generation has grown substantially in the past 12 months following a period of heavy investment. Nuclear power output increased 48%yr to 42 billion kWh in Q2.
• Investment in new nuclear power generating capacity in China is starting to taper. In Q2 total investment decreased 18%yr to RMB11 billion.
• China’s uranium imports totalled 5659 tonnes in Q2, worth US$587 million. Those figures are down 17%yr and 13%yr, respectively.
China’s nuclear power construction expenditure
0
5
10
15
20
25
30
Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15
RMB bn
Source: CEIC
Figure 105: China’s nuclear construction spending
New capacity: planned & underway
0
20000
40000
60000
80000
China OtherAsia
EasternEurope
NorthAmerica
WesternEurope
Africa -Middle
East
SouthAmerica
MWe
Under Construction
Planned
Source: World Nuclear Association
Growth in world energy by source
0
1
2
3
4
Oil Gas Coal Nuclear Other Total
1990 to 2010
2010 to 2030Source: BP
Compound annual growth rate %
Figure 102: Chinese nuclear generation growth
Figure 104: Chinese nuclear generation capacity
Figure 106: Growth in world energy by source
Figure 103: New capacity: planned & underway
Chinese nuclear generation capacity
0
2
4
6
8
10
12
14
16
18
20
1998 2000 2002 2004 2006 2008 2010 2012 2014
Million kW
Source: CEIC
China’s nuclear generation growth keep
-5
0
5
10
15
20
25
30
-20
0
20
40
60
80
100
120
Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Sep-15
Nuclear generation (lhs)
Total electricity generation (rhs)
%yr* %yr*
Sources: CEIC, Westpac. * 12mma.
38 China Resources Quarterly • Southern winter ~ Northern summer
Gold
• Lower gold consumption and expectations that the US Federal reserve will raise interest rates later this year, which has led the US dollar higher, contributed to a decline in average gold prices in Q2. Even the recent turmoil in Europe did little to assist gold prices.
• In Q2 LBMA gold prices averaged US$1194 an ounce, down 2.1%qtr. On 20 July the gold price hit a 5½ year low of US$1096/oz.
• On 17 July the Chinese Government announced its gold reserves had increased by 60% to 1658 tonnes since it last released data on its holding in 2009. While that is a substantial increase, the announcement fell well short of analysts’ expectations. Shortly after the announcement, trading on the Shanghai Gold Exchange surged.
• ETF stockholdings decreased 0.6%qtr and 7.3%yr as of the end of June, to 1594 tonnes. Lower ETF holdings suggest a possible decline in interest amongst investors in gold backed financial assets.
• According to the World Gold Council, world gold consumption declined 5%yr in Q1 2015 to 854 tonnes. Jewellery accounted for 45% of total gold consumption in Q1 2015. China’s bar and coin consumption increased 3%yr to 60 tonnes, while its jewellery consumption decreased 10%yr to 213 tonnes.
Figure 95: Gold prices, London & Shanghai
0
100
200
300
400
500
0
400
800
1200
1600
2000
Jul 05 Jul 07 Jul 09 Jul 11 Jul 13 Jul 15
RMB/gUSD/oz
LBMA
SGE
Sources: LBMA, Bloomberg
Figure 96: Gold imports via Hong Kong
0
75
150
225
300
375
0
50
100
150
200
250
Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Jan-15
RMB/gtonnes
Import Volume (lhs)
SGE Price (rhs)
Sources: CEIC, Bloomberg.
Figure 107: Gold prices, London & Shanghai
Figure 108: Chinese gold imports via Hong Kong
Table 12: Gold prices (USD/oz unless specified otherwise)
LBMA spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 1632 1417 1330 1272 1292 1290 1282 1201 1219 1194
Quarter end 1597 1235 1329 1206 1295 1317 1225 1185 1184 1172
Quarter high 1693 1600 1418 1353 1383 1328 1339 1249 1302 1226
Quarter low 1565 1201 1223 1189 1201 1244 1208 1141 1150 1172
Shanghai avg RMB/g 329 286 265 251 256 259 255 238 246 239
Shanghai avg USD/g 53 46 43 41 42 41 41 39 39 38
Sources: LBMA, Bloomberg.
China Resources Quarterly • Southern winter ~ Northern summer 39
• China’s reported gold imports via Hong Kong were down 25%yr to 360 tonnes for the first five months of 2015. The decline in imports is likely due to the increase in direct gold imports to China, which are not published at present.
• According to the World Metal Statistics gold mine production in China increased 9.6%yr in the first four months of 2015 to 148 tonnes. Chinese companies are seeking global partnerships to expand their resource base.
• Australia’s gold export volumes to China were similar to Q2 2014 at 40.1 tonnes but the value increased 11%yr to $A1977 million, reflecting the lower Australian dollar.
Figure 100: Gold fabrication cons. by country
Other40%
India23%
China28%
USA5%
Turkey3%
Source: World Gold Council.
Figure 112: Gold fabrication cons. by country
Figure 97: Australian gold exports to China
0
5
10
15
20
25
0
250
500
750
1000
1250
Apr-12 Nov-12 Jun-13 Jan-14 Aug-14 Mar-15
tonnesAUDmnVolume (rhs)
Value (lhs)
Source: ABS
Figure 99: Gold output by country
Other36%
China15%
Other Africa16%
Australia9%
USA7%
Russia7%
South Africa5%
Peru5%
Source: World Bureau of Metal Statistics
Figure 98: Gold exchange traded funds
-20%
-15%
-10%
-5%
0%
5%
10%
15%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
PriceETF
ETF Stocks %mth (lhs)
Price %mth (rhs)
Sources: Bloomberg, LBMA
Figure 101: Gold end-use by sector
Jewellery66%
Physical bar investment
19%
Electronics7%
Official Coins
5%
Industrial and other
3%
Source: World Gold Council.
Figure 109: Australian gold exports to China
Figure 111: Gold output by countryFigure 110: Gold exchange traded funds
Figure 113: Gold end–use by sector
40 China Resources Quarterly • Southern winter ~ Northern summer
Gol
dun
itM
ar–1
3Ju
n–13
Sep–
13D
ec–1
3M
ar–1
4Ju
n–14
Sep–
14D
ec–1
4M
ar–1
5Ju
n–15
Chi
na im
port
s (v
ia H
ong
Kong
)t
371.
936
5.7
377.
038
1.9
333.
520
4.1
118.
938
9.1
229.
0na
Dom
estic
pro
duct
ion
t90
.390
.311
5.0
120.
396
.410
4.8
140.
710
0.2
110.
7na
Aus
tral
ian
expo
rts
to C
hina
t36
.944
.543
.350
.947
.040
.129
.742
.539
.440
.1
valu
eAU
Dm
n18
45.3
2064
.120
32.0
2254
.321
75.8
1773
.913
17.2
1899
.819
50.0
1976
.6
Silv
erC
hina
impo
rts
t83
.685
.599
.978
.167
.890
.583
.776
.311
7.7
217.
0
Dom
estic
pro
duct
ion
t97
797
797
797
791
891
891
891
891
8na
Sour
ces:
CEI
C, A
BS, W
orld
Met
al S
tatis
tics.
Tabl
e 13
: Gol
d an
d si
lver
sum
mar
y da
ta
China Resources Quarterly • Southern winter ~ Northern summer 41
Figure 103: Silver output & fabrication demand
Other35%
Mexico22%
China13%
Peru14%
Aust7%
Russia5%
Poland4%
Production
Other32%
USA12%China
24%
India20%
Japan7%
South Korea3%
Germany2%
Fabrication
Source: The Silver Institute, Thomson Reuters GFMS.
Figure 102: Silver prices, London & Changjiang
0
3
6
9
12
15
0
10
20
30
40
50
Feb 09 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15
RMB/gUSD/oz
London Bullion Market spot
Changjiang Silver
Source: Bloomberg
Figure 105: China’s silver end-use by sector
Jewellery20%
Electronics25%
Alloys and Solders
6%Silverware6%
Coins and bars18%
Photographic use4%
other uses21%
Source: The Silver Institute, Thomson Reuters GFMS
Figure 104: China silver import volumes: annual
0
2000
4000
6000
8000
2003 2005 2007 2009 2011 2013
tonnes
Unwrought Powder Semi-manufactured Other
Source: CEIC
Figure 115: Silver output & fabrication demandFigure 114: Silver prices, London & Changjiang
Figure 116: Chinese silver import volumes: annual Figure 117: Silver end–use by sector
Silver
Table 14: Silver prices (USD/oz unless specified otherwise)
LBMA spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 30.1 23.2 21.5 20.8 20.5 19.7 19.7 19.7 16.6 16.5
Quarter end 28.5 19.7 21.7 19.5 19.8 21.0 17.0 15.7 16.7 15.7
Quarter high 32.3 28.0 24.5 22.8 22.0 21.1 21.4 21.4 18.3 17.7
Quarter low 28.4 18.5 18.9 19.1 19.2 18.8 17.0 17.0 15.5 15.7
Changjiang RMB/g 6.11 4.72 4.28 4.24 4.15 4.15 4.22 3.59 3.58 3.54
Changjiang USD/g 0.98 0.76 0.70 0.70 0.68 0.67 0.68 0.59 0.57 0.57
Sources: LBMA, Bloomberg.
42 China Resources Quarterly • Southern winter ~ Northern summer
Copper
• The average LME copper price increased 3.9%qtr to US$6043/t in Q2. Prices declined in July though, mainly due to mounting concerns over China’s demand amidst bearish sentiment stemming from the stock market turmoil. At the end of July the LME traded at US$5200/t while the SHFE traded at RMB 39,850.
• LME copper inventories at the end of June were 313 kt, down slightly from Q1 but up 102%yr. SHFE inventories were down 54%qtr to 113 kt but they were still up 43%yr.
• The International Copper Study Group expects a copper surplus in 2015. According to their April report, world consumption is forecast to be flat in 2015 at 23 Mt. China’s apparent use is expected to rise just 1% to around 11 Mt.
Figure 106: Copper prices, London & Shanghai
40
45
50
55
60
65
70
75
5
6
7
8
9
10
11
12
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t‘000 USD/tLME Spot (lhs)
LME 3mth forward (lhs)
SHFE spot (rhs)
Sources: LME, Bloomberg
Figure 108: Copper use and supply by country
Other38%
China35%
Chile12%
Japan6%
USA5%
Russia4%
Producers
Source: World Bureau of Metal Statistics
Other29%
China50%
USA8%
Germany5%
Japan5%
South Korea
3%
Consumers
Figure 107: LME Prices & inventories
100
300
500
700
900
5500
6500
7500
8500
9500
Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15
ktUSD/t
end of month inventories (rhs)LME spot (lhs, month average)
Sources: LME, Bloomberg.
Figure 118: Copper prices, London & Shanghai
Figure 119: LME prices & inventories Figure 120: Copper use and supply by country
Table 15: Copper prices (USD/t unless specified otherwise)
LME spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 7931 7148 7073 7153 7041 6787 6994 6624 5818 6043
Quarter end 7583 6751 7291 7395 6636 6955 6736 6359 6051 5721
Quarter high 8243 7547 7341 7395 7440 7035 7184 6860 6309 6448
Quarter low 7539 6638 6719 6939 6435 6600 6736 6306 5391 5646
3 Month forward 7964 7180 7096 7161 7008 6757 6976 6568 5790 6046
Shanghai avg RMB/t 57189 52778 51690 51545 49731 49328 50273 47525 42391 44074
Shanghai avg USD/t 9161 8473 8438 8465 8164 7915 8156 7729 6799 7104
Sources: LME, Bloomberg.
China Resources Quarterly • Southern winter ~ Northern summer 43
• China’s refined copper production decreased 7%yr in Q2 to 1.95 Mt. The provinces of Jiangxi and Anhui were the highest producing regions during H1 2015, with 718 kt and 663 kt, respectively.
• In Q2 China’s total copper imports increased 4.4%yr to 1774 kt. Imports from Chile totalled 558 kt, up 3.6%yr. Chile remains the principal single source of China’s copper imports with a 31% market share.
• Australia’s copper export volumes increased 0.7%yr to 124 kt in Q2. Export values increased 7.1%yr to $A944 million.
Figure 113: Copper output by Chinese province
Other Provinces
31%
Jiangxi17%Shandong
14%
Gansu11%
Anhui17%
Yunnan7%
Zhejiang3%
Source: Bloomberg
Figure 124: Copper demand per capita
Figure 109: China’s copper import volumes
0
100
200
300
400
500
600
700
800
Nov 11 Jul 12 Mar 13 Nov 13 Jul 14 Mar 15
kt Other Chile Peru Australia
Scaled by metal content
Sources: Bloomberg, DIS.
Figure 112: Copper demand per capita
0
2
4
6
8
10
12
14
16
18
20
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China India Japan South Korea USA
Consumption kgpp
Sources: IMF, World Bureau of Metal Statistics.
Figure 110: Australian copper exports to China
0
100
200
300
400
500
600
700
800
Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-150
10
20
30
40
50
60
70
80AUDmnkt
Volume (lhs)
Value (rhs)
Source: ABS
Figure 121: Chinese copper import volumes
Figure 123: Copper end–use by sectorFigure 122: Australian copper exports to China
Figure 125: Copper output by Chinese province
Figure 111: Copper end-use by sector (2014)
Building construction
43%
Electric and electronic products
19%
Transportation equipment
19%
Consumer and general
products12%
Industrial machinery and
equipment7%
Source: United States Geological Survey.
44 China Resources Quarterly • Southern winter ~ Northern summer
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
skt
1356
1380
1731
1819
1836
1699
1725
1935
1729
1774
Aus
tral
iakt
9715
713
512
816
514
414
015
211
614
2
Chi
lekt
436
383
519
574
542
538
438
629
569
558
Peru
kt17
112
020
021
318
218
219
620
517
219
2
othe
rkt
652
720
877
904
946
834
950
949
872
883
Refin
ed p
rodu
ctio
nkt
1484
1693
1715
1909
1651
1823
2027
2321
1834
1951
Wor
ld s
tock
skt
1297
1319
1107
902
899
694
706
765
1027
na
wee
ks o
f sto
cks
wee
ks3.
43.
32.
72.
12.
21.
61.
61.
72.
5na
Aus
tral
ian
expo
rts
to C
hina
kt10
914
212
315
412
112
312
513
710
912
4
valu
eAU
Dm
n84
499
188
812
0996
288
290
711
0179
394
4
Sour
ces:
Bloo
mbe
rg, W
orld
Met
al S
tatis
tics,
ABS
.
Tabl
e 16
: Cop
per
sum
mar
y da
ta
China Resources Quarterly • Southern winter ~ Northern summer 45
Aluminium
• In Q2 LME aluminium spot prices averaged $US1765 a tonne, down 2%qtr, due to an ongoing global market surplus. Despite this apparent excess supply LME stocks fell by 9%qtr to 3574 kt. Prices dropped significantly towards the end of the quarter, with prices at the end of June and early July around 16 month lows. The SHFE average price increased 1%qtr to RMB 12,964 in Q2, although it reached historical lows in July of RMB 12,040.
• China’s aluminium production increased by 39%yr to 8 Mt in Q2. Around 27% of production came from Shandong, where significant new capacity came on line, increasing Q2 production by 284%yr. Production also grew strongly in far inland Xinjiang, up 36%yr.
Aluminium prices, LME and Shanghai
10
12
14
16
18
1.0
1.5
2.0
2.5
3.0
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t ‘000 USD/t
LME Spot (lhs)
LME 3mth forward (lhs)
SHFE spot (rhs)
Sources: LME, Bloomberg.
Aluminium use and supply by country
Other30%
China49%
Russia7%
Canada6%
USA3%
UAE5%
Producers
Source: World Bureau of Metal Statistics
Other28%
China49%
USA11%
Germany5%
Japan4% India
3%
Consumers
Aluminium – LME Prices and Inventories
1000
2000
3000
4000
5000
6000
1500
1800
2100
2400
2700
3000
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
ktUSD/tend of month inventories (rhs)LME spot (lhs, month average)
Sources: LME, Bloomberg.
Figure 126: Aluminium prices, LME & Shanghai
Figure 127: LME prices & inventories Figure 128: Aluminium use & supply by country
Table 17: Aluminium and Alumina prices (USD/t unless specified otherwise)
LME spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 2003 1835 1781 1769 1708 1798 1987 1966 1800 1765
Quarter end 1882 1731 1803 1765 1731 1851 1935 1832 1789 1647
Quarter high 2123 1939 1877 1849 1768 1871 2114 2099 1872 1919
Quarter low 1868 1720 1730 1695 1642 1715 1838 1828 1742 1642
3 Month forward 2042 1870 1827 1815 1752 1836 2008 1974 1813 1787
Shanghai avg RMB/t 14722 14551 14363 14353 13168 13133 14069 13507 12849 12964
Shanghai avg 2358 2336 2345 2357 2158 2107 2283 2197 2061 2090
Aust FOB Alumina 341 327 318 323 328 317 323 355 342 337
China Alumina RMB/t 2571 2513 2500 2504 2438 2353 2439 2732 2624 2439
Sources: LME, Bloomberg.
46 China Resources Quarterly • Southern winter ~ Northern summer
• Strong growth in domestic production at a time of modest local needs contributed to a steep rise in China’s aluminium exports. Exports of unwrought aluminium and aluminium products exports grew 28%yr in Q2, to 1.3 Mt.
• China’s aluminium imports were 46 kt in Q2, down 52%yr, as domestic production continued to displace imports. In Q2 imports from Australia were 2.7 kt, which reduced Australia’s share of total imports to 6%, from 22% in Q1.
• Australia’s aluminium exports to China dropped 67%yr, to 3.3 kt in Q2 and export earnings fell by 57%yr to $A9 million.
Chinese aluminium output by province
Other 30%
Xinjiang19% Shandong
24%
Henan11%
Inner Mongolia
9%
Gansu8%
Source: Bloomberg
Figure 133: Aluminium output by province
Chinese aluminium import volumes
0
15
30
45
60
75
90
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
ktOther RussiaAustralia TaiwanUAE
Source: Bloomberg
0
5
10
15
20
25
30
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China India Japan
South Korea USA
Consumption kgpp
Sources: IMF, World Bureau of Metal Statistics
Aluminium demand per head
Figure 118: Australian aluminium exports to China
0
4
8
12
16
20
0
10
20
30
40
50
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
ktAUDmn
Volume (rhs)
Value (lhs)
Source: ABS
Figure 129: Chinese aluminium import volumes
Figure 132: Aluminium demand per head
Figure 130: Australian aluminium exports to China Figure 131: Aluminium end–use by sectorAluminium end-use by sector (2014)
Transportation manufacturing
38%
Packaging22%
Construction13%
Electrical9%
Machinery8%
Consumer durables
7%
Other3%
Source: United States Geological Survey
China Resources Quarterly • Southern winter ~ Northern summer 47
• Low aluminium prices and reduced smelting margins led to lower alumina prices in Q2 (FOB Australia). Prices dropped 2%qtr and averaged $US337 a tonne, highlighting the uncertainty in China’s domestic alumina market and recent increases in domestic supply.
• China’s alumina imports totalled 1041 kt in Q2, down 19%yr due to higher domestic supply and moderate consumption growth.
• Alumina imports from Australia decreased 15%yr to 555 kt. Even so, Australia remained the principal source of China’s alumina imports.
China’s alumina output by province (2014)
Henan26%
Shandong26%Shanxi
19%
Guangxi17%
Other12%
Source: Bloomberg
Figure 138: China’s alumina output by province
Alumina Prices
2000
2250
2500
2750
3000
250
300
350
400
450
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
RMB/tUSD/t
AUS Fob (lhs)
CHN Met grade (rhs)
Source: Bloomberg
China47%
Oceania19%
South America13%
North America6%
Africa & Asia (ex China)
6%
West Europe5%
East & Central Europe
4%
Source: International Aluminium Institute
World alumina output
World alumina trade
Australia45%
Brazil22%
Other18%
USA5%
Ireland5%
Jamaica5%
Exports
Source: World Bureau of Metal Statistics
Other38%
Canada15%
China19%
Russia12%
Norway8%
USA6%
Imports
Figure 134: Alumina prices
Figure 137: World alumina output
Figure 135: World alumina trade Figure 136: China’s alumina imports
China’s alumina imports
0
100
200
300
400
500
600
700
800
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
kt
Australia Other Brazil India
Source: Bloomberg
Alumina
48 China Resources Quarterly • Southern winter ~ Northern summer
• China imported 12.6 Mt of bauxite in Q2, up 91%yr. The market continues to adjust to the prohibition on Indonesian exports, which has removed the historically largest source of imports from the equation since early 2014 (see figure 139), at a time of strongly expanding aluminium production in China.
• Imports from Australia were up 23%yr in Q2 to 4.5 Mt. Imports from Malaysia have increased considerably over the last year, from 154 kt in Q2 2014 to 5.5 Mt in Q2 2015. In Q2 Malaysia became the principal source of China’s bauxite imports, with a market share of 44%, despite having been a negligible provider when Indonesia was still a participant in the trade.
• China continued to invest in developing its domestic bauxite reserves, utilising lower grade deposits to increase domestic supply.
• Bauxite exports from Australia were up to 5 Mt in Q2, an increase of 30%yr. Earnings from bauxite exports increased further, by 82%yr to $A257 million. Export volumes reached a historic high of 2 Mt for the month of May alone.
Figure 142: World bauxite trade
China’s bauxite imports by source
0
1
2
3
4
5
6
7
8
9
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
MtIndonesia Australia Other India Malaysia
Source: Bloomberg
World bauxite output (2014)
Australia31%
China25%
Other15%
Brazil12%
India8%
Guinea7%
Source: World Bureau of Metal Statistics
Figure 128: Australia’s bauxite exports to China
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-150
10
20
30
40
50
60
70
80
90
100Mt AUDmn
Volume (lhs)Value (rhs)
Source: ABS
Figure 141: World bauxite output
Figure 140: Australia’s bauxite exports to China
World bauxite trade (2014)
Australia28%
Guinea27%
Jamaica16%
Brazil14%
India9%
Other7%
Exports
Source: World Bureau of Metal Statistics,
China53%
USA18%
Other12%
Ireland6%
Spain5%
Canada6%
Imports
Bauxite
Figure 139: China’s bauxite import by source
China Resources Quarterly • Southern winter ~ Northern summer 49
Alu
min
ium
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
skt
67.8
82.8
137.
719
3.0
175.
596
.151
.530
.534
.445
.9
Aus
tral
iakt
14.5
14.3
31.7
31.5
48.0
18.9
7.0
5.6
7.7
2.7
Indi
akt
0.0
2.9
13.1
17.7
19.1
0.7
0.8
1.6
6.6
2.0
Russ
iakt
18.1
28.1
28.9
46.1
29.6
24.2
16.9
2.1
1.5
4.3
othe
rkt
35.2
37.6
64.0
97.7
78.8
52.3
26.8
21.2
18.6
36.8
Refin
ed p
rodu
ctio
nkt
5215
5365
5626
5839
5755
5747
6045
6393
7205
8010
Wor
ld s
tock
skt
7400
7439
7089
7171
7356
7185
6738
6428
4807
na
wee
ks o
f sto
cks
wee
ks8.
78.
47.
98.
08.
27.
67.
06.
44.
6na
Aus
tral
ian
expo
rts
to C
hina
kt10
1228
3534
105
63
3
valu
eAU
Dm
n23
2562
7673
2114
189
9
Alu
min
a
Chi
na im
port
skt
1034
.961
2.5
829.
313
54.4
1483
.712
80.7
1158
.113
53.9
1072
.310
41.1
Aus
tral
iakt
1028
.560
2.7
766.
511
77.0
1183
.765
4.9
523.
079
0.7
455.
455
4.5
Chi
nese
pro
duct
ion
Mt
10.3
11.0
11.6
11.2
11.2
11.5
11.7
12.6
13.3
14.2
Baux
ite
Chi
na im
port
sM
t14
.019
.021
.117
.613
.16.
68.
48.
410
.112
.6
Aus
tral
iaM
t2.
74.
04.
23.
43.
13.
74.
74.
24.
94.
5
Indo
nesi
aM
t9.
212
.414
.712
.48.
70.
10.
00.
00.
00.
0
Aus
tral
ian
expo
rts
to C
hina
Mt
2.8
4.1
4.2
4.0
2.5
3.9
4.7
5.0
5.3
5.1
valu
eAU
Dm
n82
.013
8.0
149.
514
9.0
87.0
140.
918
1.7
227.
526
6.1
256.
9
Sour
ces:
Bloo
mbe
rg, W
orld
Met
al S
tatis
tics,
ABS
.
Tabl
e 18
: Alu
min
ium
, alu
min
a an
d ba
uxite
sum
mar
y da
ta
50 China Resources Quarterly • Southern winter ~ Northern summer
Nickel
• The LME nickel price averaged US$13,008 in Q2, down 9%qtr, because of historically high inventories, an oversupply of refined nickel and generally bearish commodity market sentiment.
• LME stocks reached a record high of 470 kt in early June despite a long held consensus of an aggregate shortage in the wake of the Indonesian unprocessed ore ban.
• China’s port stocks of nickel ore remained around 18 Mt at the end of Q2. In contrast to the uplift in LME warehouse stocks, China’s port stocks steadily declined in early 2015 before steadying from March onwards.
Nickel prices, London and Shanghai
40
80
120
160
200
5
10
15
20
25
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t‘000 USD/t
LME Spot (lhs)LME 3mth forward (lhs)SHFE Spot (rhs)
Sources: LME; Bloomberg
Nickel end use and supply by country
China34%
Other31%
Russia13%
Japan9%
Australia7%
Canada6%
Producers
Source: World Bureau of Metal Statistics
China45%
Other27%
Japan9%
USA9%
South Korea
6%
Germany4%
Consumers
LME prices and inventories
75
175
275
375
475
10
15
20
25
30
Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
kt‘000 USD/t
end of month inventories (rhs)LME spot (lhs, month average)
Sources: LME, Bloomberg
Figure 143: Nickel prices, London & Shanghai
Figure 144: LME prices & inventories Figure 145: Nickel use and supply by country
Table 19: Nickel prices (USD/t unless specified otherwise)
LME spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 17314 14963 13916 13909 14643 18465 18576 15799 14338 13008
Quarter end 16540 13680 13860 13970 15735 18715 16505 14935 12460 11680
Quarter high 18600 16390 14775 14635 16225 21200 19795 16825 15455 14415
Quarter low 16425 13560 13160 13270 13365 15780 16505 14650 12460 11680
3 Month forward 17387 15039 13996 13979 14693 18512 18669 15877 14400 13055
Shanghai avg RMB/t 121306 106053 98866 96850 96380 128595 128862 109421 106548 98129
Shanghai avg USD/t 19432 17026 16139 15905 15785 20634 20905 17792 17089 15817
Sources: LME, Bloomberg.
China Resources Quarterly • Southern winter ~ Northern summer 51
• China’s refined nickel production increased by 7%yr to 141 kt in the first five months of 2015. Production in Gansu increased 5%yr to 59 kt while Jiangxi saw an 8%yr decrease to 14.6 kt.
• The value of China’s nickel imports increased 18%yr to US$1.9 billion in Q2. The rise was supported by imports from Russia which increased 63%yr to US$655 million and as a result displaced the Philippines as China’s primary supplier. China’s imports from the Philippines fell 22%yr to US$562 million in Q2.
• In Q2 the value of Australia’s nickel total exports fell 1%yr to $A923 million.
Nickel output by province
Other42%
Gansu39%
Jiangxi11%
Guangxi5%
Xinjiang3%
Source: Bloomberg
Figure 149: Nickel demand per capita
Chinese nickel import values
0
250
500
750
1000
1250
Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15
USDmn
Indonesia Russia PhilippinesAustralia Other Canada
Source: Bloomberg
Nickel end-use by sector
Stainless and alloy
steel production
45%Nonferrous alloys and
superalloys43%
Electroplating7%
Other5%
Source: United States Geological Survey
Nickel demand per capita
0.0
0.5
1.0
1.5
2.0
2.5
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China
India
Japan
South Korea
USA
Consumption kgpp
Sources: IMF, World Bureau of Metal Statistics
Figure 146: Chinese nickel import values
Figure 148: Nickel end–use by sectorFigure 147: Nickel output by province
Figure 150: World trade in nickelWorld trade in nickel
Russia40%
Other18%
Australia15%
Canada13%
Norway9%
Singapore5%
Exports
Source: World Bureau of Metal Statistics
Other37%
China21%
USA18%
Germany12%
Singapore6%
India6%
Imports
52 China Resources Quarterly • Southern winter ~ Northern summer
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
sU
SDm
n21
4918
4217
6620
9515
8516
2523
1412
5190
419
18
Aus
tral
iaU
SDm
n17
218
911
911
267
112
9971
8187
Cana
daU
SDm
n14
310
786
8996
8510
257
7210
7
Russ
iaU
SDm
n45
625
727
023
332
640
239
614
619
365
5
Indo
nesi
aU
SDm
n95
262
952
191
471
228
81
00
Phili
ppin
esU
SDm
n16
844
248
244
817
172
013
7569
429
456
2
othe
rU
SDm
n25
821
728
729
921
227
633
428
226
550
7
Refin
ed p
rodu
ctio
n*kt
6860
6987
7590
9910
282
na
LME
stoc
kskt
186
207
248
282
284
305
358
415
433
457
wee
ks o
f sto
cks
wee
ks5.
56.
37.
27.
68.
59.
110
.713
.821
.5na
Aus
tral
ian
expo
rts
to C
hina
kt60
6667
.259
.248
.750
5762
62na
valu
eAU
Dm
n85
194
682
173
673
192
910
0294
887
392
3
Sour
ces:
Bloo
mbe
rg, W
orld
Met
al S
tatis
tics,
Inte
rnat
iona
l Nic
kel S
tudy
Gro
up.,
CEI
C
* N
ote:
Refi
ned
prod
uctio
n da
ta s
erie
s no
long
er in
clud
es s
mel
ter o
utpu
t and
has
bee
n re
vise
d.
Tabl
e 20
: Nic
kel s
umm
ary
data
China Resources Quarterly • Southern winter ~ Northern summer 53
Zinc
• In Q2 the LME zinc spot price averaged $US2190, up 5%qtr, following a strong price recovery from the start of the quarter. However, towards the end of Q2 and into July prices declined in response to a loss of confidence precipitated by financial volatility.
• LME zinc stocks continued to decline in Q2 and dropped 10%ytd to 436 kt as of the end of July. This historical low for LME stocks coincided with several recent mine closures. However, stocks have been stable or rising in other warehousing facilities such as the SHFE, where they were up 29%qtr to 180 kt.
• In Q2 the SHFE zinc price averaged RMB 16,399, up 2%qtr, while in July prices dropped to the lowest point in twelve months.
Figure 139: Zinc prices, London and Shanghai
10
15
20
25
1.5
2.0
2.5
3.0
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t ‘000 USD/t
LME Spot (lhs)
LME 3mth forward (lhs)
SHFE spot (rhs)
Sources: LME, Bloomberg
Figure 141: Zinc use and supply by country (2014)
China43%
Other36%
South Korea7%
India5%
Canada5% Japan
4%
Producers
Source: World Bureau of Metal Statistics
China47%
Other32%
USA7%
South Korea
5%
India5% Japan
4%
Consumers
Figure 140: LME prices & inventories
400
600
800
1000
1200
1400
1500
1700
1900
2100
2300
2500
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
ktUSD/tend of month inventories (rhs)
LME spot (lhs, month average)Sources: LME, Bloomberg.
Figure 151: Zinc prices, London & Shanghai
Figure 152: LME prices & inventories Figure 153: Zinc use and supply by country
Table 21: Zinc prices (USD/t unless specified otherwise)
LME spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 2033 1840 1859 1907 2029 2073 2311 2235 2080 2190
Quarter end 1871 1823 1877 2086 1981 2205 2290 2167 2076 1994
Quarter high 2188 1925 1956 2116 2156 2205 2420 2335 2184 2405
Quarter low 1854 1784 1793 1828 1942 2073 2194 2114 1985 1994
3 Month forward 2057 1875 1896 1932 2027 2079 2314 1932 2092 2192
Shanghai avg RMB/t 15330 14596 14726 14969 14953 15155 16542 16655 16127 16399
Shanghai avg USD/t 2456 2343 2404 2459 2450 2432 2683 2709 2586 2643
Sources: LME, Bloomberg.
54 China Resources Quarterly • Southern winter ~ Northern summer
• China’s refined zinc output continued to grow in Q2, up 15%yr to 1.6 Mt, as a result of higher production in almost all provinces. Production in Inner Mongolia was up 33%yr to 139 kt, Gansu rose 65%yr to 111 kt and Shaanxi increased 13%yr to 244 kt.
• In the first five months of the year China’s imports of zinc ores and concentrates increased 52%yr to 504 kt. Imports from Australia increased 30%yr to 192 kt, followed by imports from Peru, which increased 127%yr to 173 kt.
• Australia’s zinc exports (by metal content) to China increased 106%yr to 187kt, with export earnings growing 101%yr to $A303 million in Q2.
Figure 146: Zinc output by province
Other28%
Hunan21%Yunnan
19%
Shaanxi15%
Guangxi8%
Inner Mongolia
9%
Source: Bloomberg
Figure 157: Zinc demand per capita
Figure 142: China’s zinc import volumes
0
50
100
150
200
250
Jan 12 Sep 12 May 13 Jan 14 Sep 14 May 15
kt
Other Australia Kazakhstan Peru Turkey
Source: ILZSG
Scaled by metal content
Figure 144: Australian zinc exports to China
0
30
60
90
120
150
180
0
20
40
60
80
100
120
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
AUDmnkt
Volume (lhs) Value (rhs) Source: ABS
Figure 145: Zinc demand per capita
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
10 20 30 40 50 60GDP per person (thousands of PPP international dollars)
China
India
Japan
South Korea
USA
Consumption kgpp
Sources: IMF, World Bureau of Metal Statistics
Figure 154: Chinese zinc import volumes
Figure 156: Australian zinc exports to China
Figure 158: Zinc output by province
Figure 143: China’s zinc imports by type
0
50
100
150
200
250
Jan 12 Sep 12 May 13 Jan 14 Sep 14 May 15
kt
Ores and concentrates (metal content) Refined
Source: ILZSG
Scaled by metal content
Figure 155: Chinese zinc imports by type
China Resources Quarterly • Southern winter ~ Northern summer 55
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
skt
347.
037
4.4
345.
542
7.9
431.
034
7.2
353.
037
0.3
391.
0na
Aus
tral
iakt
119.
086
.375
.114
2.8
138.
511
9.5
111.
412
5.1
116.
7na
Kaza
khst
ankt
46.5
35.1
41.6
39.6
49.9
34.1
52.5
40.6
36.6
na
Peru
kt65
.058
.741
.255
.657
.565
65.7
98.5
117.
0na
Turk
eykt
12.4
11.5
16.2
9.5
5.5
5.3
5.5
3.3
3.1
na
othe
rkt
104.
118
2.7
171.
518
0.3
179.
612
3.3
117.
910
2.8
117.
6na
Refin
ed p
rodu
ctio
nkt
1241
.513
25.7
1340
.714
44.6
1259
.314
05.6
1508
.116
07.3
1458
.116
12.7
Wor
ld s
tock
skt
1903
1757
1589
1472
1511
1283
1330
1192
1108
na
wee
ks o
f sto
cks
wee
ks8.
27.
06.
25.
66.
24.
94.
94.
54.
5na
Aus
tral
ian
expo
rts
to C
hina
kt11
015
511
619
011
991
9020
211
318
7
valu
eAU
Dm
n17
621
417
528
219
515
215
034
318
930
3
Sour
ces:
Bloo
mbe
rg, W
orld
Met
al S
tatis
tics,
Inte
rnat
iona
l Lea
d an
d Zi
nc S
tudy
Gro
up, A
BS.
Tabl
e 22
: Zin
c su
mm
ary
data
56 China Resources Quarterly • Southern winter ~ Northern summer
LeadFigure 148: China’s lead import volumes
0
20
40
60
80
100
120
140
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
ktOther Peru USA
Russia AustraliaSource: ILZSG
Figure 147: LME prices & inventories
100
175
250
325
400
475
1500
1800
2100
2400
2700
3000
Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
ktUSD/tend of month inventories (rhs)
LME spot (lhs, month average)Sources: LME, Bloomberg
Figure 150: World trade of lead
Other49%
Australia12%
South Korea12%
Canada11%
Belgium8%
Mexico8%
Exports
Source: World Bureau of Metal Statistics
Other47%
USA28%
South Korea
8%
Germany6%
India6%
Spain5%
Imports
Figure 149: Australia’s lead exports to China
0
20
40
60
80
100
120
0
5
10
15
20
25
30
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
kt AUDmn
volume (lhs) value (rhs) Source: ABS
Figure 160: Chinese lead import volumesFigure 159: LME prices & inventories
Figure 161: Australian lead exports to China Figure 162: World trade in lead
Table 23: Lead prices (USD/t unless specified otherwise).
LME spot prices Mar–13 Jun–13 Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Quarter average 2301 2053 2102 2111 2106 2096 2181 2000 1806 1942
Quarter end 2094 2058 2075 2206 2041 2129 2083 1853 1808 1754
Quarter high 2448 2247 2238 2259 2212 2160 2269 2095 1882 2140
Quarter low 2089 1949 2017 2027 2008 2016 2051 1814 1696 1742
3 Month forward 2314 2066 2116 2134 2127 2120 2194 2009 1817 1952
Shanghai avg RMB/t 14734 13943 14141 14109 13928 13922 14208 13452 12494 13494
Shanghai avg USD/t 2360 2238 2308 2317 2282 2234 2305 2184 2004 2175
Sources: LME, Bloomberg.
China Resources Quarterly • Southern winter ~ Northern summer 57
unit
Mar
–13
Jun–
13Se
p–13
Dec
–13
Mar
–14
Jun–
14Se
p–14
Dec
–14
Mar
–15
Jun–
15
Chi
na im
port
skt
194.
116
4.2
227.
924
2.5
224.
021
3.8
284.
827
3.0
220.
4na
Aus
tral
iakt
12.6
13.4
25.7
29.6
49.6
28.8
47.8
52.0
39.1
na
Peru
kt20
.317
.710
.89.
017
.62.
618
.326
.118
.4na
Russ
iakt
20.7
27.4
30.9
40.0
23.1
25.9
14.8
34.2
23.6
na
USA
kt28
.00.
144
.046
.56.
126
.666
.967
.825
.5na
Mex
ico
kt11
.99.
27.
06.
76.
813
.68.
917
.313
.5na
othe
rkt
100.
696
.411
1.4
110.
612
0.8
116.
312
8.1
75.6
100.
3na
Refin
ed p
rodu
ctio
nkt
1074
.012
02.6
1152
.011
40.8
1055
.711
05.2
1050
.510
64.7
995.
210
71.6
Wor
ld s
tock
skt
680
600
603
586
562
542
577.
356
0.1
546.
4na
wee
ks o
f sto
cks
wee
ks3.
53.
03.
02.
92.
82.
63.
02.
82.
9na
Aus
tral
ian
expo
rts
to C
hina
kt18
2822
5246
6455
5934
33
valu
eAU
Dm
n27
5947
9786
105
9612
672
77
Sour
ces:
Bloo
mbe
rg, W
orld
Met
al S
tatis
tics,
Inte
rnat
iona
l Lea
d an
d Zi
nc S
tudy
Gro
up, A
BS.
Tabl
e 24
: Lea
d su
mm
ary
data
58 China Resources Quarterly • Southern winter ~ Northern summer
China’s tin output by province
Yunnan58%Hunan
24%
Jiangxi10%
Guangxi8%
Other0%
Source: Bloomberg
Figure 168: China’s tin output by province
LME prices and inventory
5
10
15
20
25
30
10
15
20
25
30
35
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
kt‘000 USD/t
end of month inventories (rhs)
LME spot (lhs, month average)
Sources: LME, Bloomberg
Tin use by sector
Cans and containers
23%
Construction18%
Transport equipment
17%
Electrical12%
Other30%
Source: United States Geological Survey
World tin producers and consumers (no change)
Other13%
China51%
Indonesia20%
Bolivia5%
Brazil4%
Peru7%
Producers
Source: World Bureau of Metal Statistics
Other26%
China50%
USA8%
Japan7%
Germany5%
South Korea
4%
Consumers
Tin prices
100
150
200
250
300
10
15
20
25
30
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t‘000 USD/tLME Spot (lhs)
LME 3mth forward (lhs)
SHFE spot (rhs)
Sources: LME, Bloomberg
Figure 164: LME prices and inventory
Figure 167: Tin use by sector
Figure 165: World tin producers and consumers
Figure 163: Tin prices
Figure 166: China’s tin imports by source
China Tin Imports
0
1
2
3
4
5
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
kt
Other Indonesia Singapore South Korea Taiwan
Source: Bloomberg
Tin
China Resources Quarterly • Southern winter ~ Northern summer 59
World molybdenum output
China43%
USA21%
Chile16%
Other9%
Peru6%
Mexico5%
Source: World Bureau of Metal Statistics
Figure 174: World molybdenum output
China’s molybdenum ore imports
0
10
20
30
40
50
60
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnkt
Volume (lhs)
Value (rhs)
Source: CEIC
China’s molybdenum production
0
2
4
6
8
10
12
14
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
kt
Source: CEIC, DIS
China’s molybdenum articles exports
0
5
10
15
20
25
30
35
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnktVolume (lhs)Value (rhs)
Source: CEIC
Figure 170: China’s molybdenum ore imports
Figure 173: China’s molybdenum production
Figure 171: China’s molybdenum articles exports Figure 172: China’s molybdenum ore exports
China’s molybdenum ore exports
0
7
14
21
28
35
42
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnktVolume (lhs)Value (rhs)
Source: CEIC
Molybdenum
Molybdenum prices
10
15
20
25
30
35
40
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 USD/t
LME Spot
Sources: LME, Bloomberg
Figure 169: Molybdenum prices
60 China Resources Quarterly • Southern winter ~ Northern summer
China’s tungsten product exports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-150
20
40
60
80
100
120kt USDmn
Volume (rhs)Value (lhs)
Source: Bloomberg
Figure 180: China’s tungsten output (metal content)
China’s tungsten articles imports
0
3
6
9
12
15
18
21
0
10
20
30
40
50
60
70
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmntonnes
Volume (lhs)
Value (rhs)
Source: CEIC
World tungsten output
China 87%
Russia3%
Other4%
Canada3%
Rwanda2%
Bolivia1%
Source: World Bureau of Metal Statistics
China’s tungsten and articles exports
0
4
8
12
16
20
24
28
32
36
0
50
100
150
200
250
300
350
400
450
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmntonnes
Volume (lhs)
Value (rhs)
Source: CEIC
China’s tungsten ore imports
0
4
8
12
16
20
24
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnktVolume (lhs)Value (rhs)
Source: CEIC
Figure 176: China’s tungsten articles imports
Figure 179: World tungsten output
Figure 177: China’s tungsten and articles exports
Figure 175: China’s tungsten ore imports
Figure 178: China’s tungsten products exports
China’s tungsten output (metal content)
0
2
4
6
8
10
12
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
ktSource: CEIC, DIS
Tungsten
China Resources Quarterly • Southern winter ~ Northern summer 61
Cobalt use by sector
Superalloys47%
Chemical applications
27%
Metallic applications
17%
Cemented carbides
9%
Source: United States Geological Survey
Figure 186: Cobalt use by sector
China’s cobalt ores imports
0
15
30
45
60
0
8
16
24
32
Jan-12 Oct-12 Jul-13 Apr-14 Jan-15
USDmnkt
Volume (lhs)
Value (rhs)
Source: CEIC
World cobalt refined output
China46%
Other24%
Finland13%
Canada 6%
Zambia5%
Australia6%
Source: World Metal Statistics
China’s cobalt and articles imports
0
25
50
75
100
125
0
5
10
15
20
25
Jan-12 Oct-12 Jul-13 Apr-14 Jan-15
USDmnktVolume (lhs) Value (rhs)
Source: CEIC
Figure 182: China’s cobalt ore imports
Figure 185: World cobalt refined output
Figure 183: China’s cobalt articles imports Figure 184: World cobalt mine outputWorld cobalt mine output
Congo50%
Other26%
Canada6%
China6%
Russia6%
Australia6%
Source: United States Geological Survey
Cobalt
Cobalt Prices - daily
150
200
250
300
350
400
20
25
30
35
40
45
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t‘000 USD/t
LME Spot (lhs)
LME 3mth forward (lhs)
SHFE spot (rhs)
Sources: LME, Bloomberg
Figure 181: Cobalt prices
62 China Resources Quarterly • Southern winter ~ Northern summer
World antimony mine output
China78%
Other8%
Tajikistan5%
Russia4%
Bolivia4%
Myanmar1%
Source: World Bureau of Metal Statistics
Figure 192: World antimony mine output
China’s antimony ore imports
0
6
12
18
24
30
0
2
4
6
8
10
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnkt
Volume (lhs)
Value (rhs)
Source: CEIC
China’s antimony mine output
0
5
10
15
20
25
30
35
40
45
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
kt
Source: CEIC
China’s unwrought antimony exports
0
5
10
15
20
25
30
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnkt
Volume (lhs)
Value (rhs)
Source: CEIC
Antimony prices
40
60
80
100
120
6
9
12
15
18
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 RMB/t‘000 USD/t
Metal Bulletin China Free Market (lhs)
SHFE spot (rhs)
Source: Bloomberg
Figure 188: China’s antimony ores imports
Figure 191: China’s antimony mine output
Figure 189: China’s unwrought antimony exports
Figure 187: Antimony prices
Figure 190: Australian antimony exports to China
Australian antimony exports to China
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-150.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0kt AUDmn
volume(lhs)
value (rhs)
Source: ABS
Antimony
China Resources Quarterly • Southern winter ~ Northern summer 63
Autocatalysts37%
Jewellery31%
Glass7%
Chemical6%
Investment6%
Electrical3% Medical and
biomedical3%
Petroleum3%
Other4%
Source: United States Geological Survey
Platinum end uses by sectorFigure 198: Platinum end use by sector
Palladium prices
400
500
600
700
800
900
1000
100
120
140
160
180
200
220
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
RMB/gUSD/troy oz
Spot (lhs)SHFE spot (rhs)
Source: Bloomberg
World platinum output
South Africa66%
Russia17%
Zimbabwe9%
Canada4%
USA3%
Other1%
Source: World Bureau of Metal Statistics
China’s platinum Imports
0
2
4
6
8
10
12
14
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
tonnesOther Germany JapanRussia South Africa Switzerland
Source: Bloomberg
Figure 194: Palladium prices
Figure 197: World platinum output
Figure 195: China’s platinum imports Figure 196: China’s platinum exports
China’s platinum exports
0
5
10
15
20
25
30
0
100
200
300
400
500
600
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnkg
Volume (lhs)
Value (rhs)
Source: Bloomberg
Platinum & Palladium
Platinum prices
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
USD/troy oz
Spot
Source: Bloomberg
Figure 193: Platinum prices
64 China Resources Quarterly • Southern winter ~ Northern summer
Australian ilmenite exports to China
0
10
20
30
40
50
0
50
100
150
200
250
H109 H110 H111 H112 H113 H114 H115
%kt
Volume (lhs)
Share to China (rhs)
Source: Based on ABS
Figure 204: Australian ilmenite exports to China
China’s titanium dioxide exports
0
25
50
75
100
125
150
0
10
20
30
40
50
60
Apr-12 Jan-13 Oct-13 Jul-14 Apr-15
USDmnkt
Titanium white Value (rhs)Source: CEIC
Australian zirconium exports to China
0
10
20
30
40
50
60
70
80
0
50
100
150
200
250
300
350
400
H109 H110 H111 H112 H113 H114 H115
%kt
Volume (lhs) Share to China (rhs)
Source: Based on ABS
Aust titanium dioxide exports to China
0
3
6
9
12
15
18
21
0
1
2
3
4
5
6
7
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
AUDmnkt
Volume (lhs)
Value (rhs)
Source: ABS
China’s titanium dioxide imports
0
18
36
54
72
90
0
5
10
15
20
25
Apr-12 Jan-13 Oct-13 Jul-14 Apr-15
USDmnktTitanium whiteOtherValue (rhs)
Source: CEIC
Figure 200: China’s titanium dioxide exports
Figure 203: Australian zirconium exports to China
Figure 201: Aust titanium dioxide exports to China
Figure 199: China’s titanium dioxide imports
Figure 202: Australian rutile exports to ChinaAustralian rutile exports to China
0
4
8
12
16
20
24
28
32
0
5
10
15
20
25
30
35
40
H109 H110 H111 H112 H113 H114 H115
%kt
Volume (lhs)
Share to China (rhs)
Source: Based on ABS
Mineral Sands
China Resources Quarterly • Southern winter ~ Northern summer 65
Yttrium oxide exports
0
4
8
12
16
20
0
0.1
0.2
0.3
0.4
0.5
Mar-12 Dec-12 Sep-13 Jun-14 Mar-15
USmnKt
Volume (lhs)
Value (rhs)
Source: CEIC
Figure 210: Yttrium oxide exports
Cerium oxide & hydroxide exports
0
3
6
9
12
15
18
21
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Mar-15 Dec-12 Sep-13 Jun-14 Mar-15
USmnKt
Volume (lhs)
Value (rhs)
Source: CEIC
Europium oxide exports
0
5
10
15
20
25
30
35
0
0.001
0.002
0.003
0.004
0.005
0.006
0.007
Mar-12 Dec-12 Sep-13 Jun-14 Mar-15
USmnKt
Volume (lhs)
Value (rhs)
Source: CEIC
Lanthanum oxide exports
0
13
25
38
50
63
75
88
100
0
0.5
1
1.5
2
2.5
3
3.5
4
Mar-12 Dec-12 Sep-13 Jun-14 Mar-15
USmnKt
Volume (lhs)
Value (rhs)
Source: CEIC
Figure 206: Cerium oxide & hydroxide exports
Figure 209: Europium oxide exports
Figure 207: Lanthanum oxide exports Figure 208: Neodymium oxide exports
Neodymium oxide exports
0
4
8
12
16
20
0
0.04
0.08
0.12
0.16
0.2
Mar-12 Dec-12 Sep-13 Jun-14 Mar-15
USmnKt
Volume (lhs)
Value (rhs)
Source: CEIC
China’s exports of rare earth oxidesChina’s total rare earth oxides exports
0
1
2
3
4
5
6
Mar-12 Mar-13 Mar-14 Mar-15
Kt
Cerium Oxide and HydroxideLanthanum OxideYttrium OxideNeodymium OxideEuropium Oxideother
Source: CEIC
Figure 205: China’s total rare earth oxides exports
66 China Resources Quarterly • Southern winter ~ Northern summer
World cadmium consumption
China33%
Belgium31%
Other15%
Japan12%
Sweden6%
USA3%
Source: World Bureau of Metal Statistics
Figure 216: World cadmium consumption
China’s manganese ore imports
100
150
200
250
300
350
400
600
850
1100
1350
1600
1850
2100
Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
USDmnkt
Volume (lhs) Value (rhs)Source: Bloomberg
World cadmium production
China33%
Other30%
South Korea17%
Japan8%
Kazakhstan6%
Mexico6%
Source: World Bureau of Metal Statistics
Australian manganese exports to China
0
20
40
60
80
100
120
140
160
0
100
200
300
400
500
600
700
800
Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14
AUDmnkt
Volume (lhs) Value (rhs)
Source: ABS
Manganese and Cadmium Prices
50
100
150
200
250
300
350
0
5
10
15
20
25
30
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
‘000 USD/t‘000 RMB/tMaganese - Shanghai price (lhs)
Metal Bulletin Cadmium price (rhs)
Source: Bloomberg
Figure 212: China’s manganese ore imports
Figure 215: World cadmium production
Figure 213: Australian manganese exports to China
Figure 211: Manganese & cadmium prices
Figure 214: World manganese mine outputWorld Manganese mine output
China26%
South Africa26%
Other22%
Australia14%
Gabon7%
Brazil5%
Source: World Bureau of Metal Statistics
Manganese & Cadmium
China Resources Quarterly • Southern winter ~ Northern summer 67
Shares of world magnesium output
China89%
USA4%
Russia3%
Israel3%
Brazil1%
Source: World Bureau of Metal Statistics
Figure 223: Shares of world magnesium output
World diamond imports
India38%
UAE17%
China4%
Israel3%
other9%
Volume
European Community
29%
India30%
UAE11%
UAE9%
Israel9%
Botswana7%
China5%
Value
European Community
28%
Source: Kimberley Process Certification Scheme
China’s magnesium exports
35
50
65
80
95
110
125
10
15
20
25
30
35
40
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USDmnkt
Volume (lhs)
Value (rhs)
Source: CEIC
World diamond output
Russia41%
Other11%
Congo, Democratic Republic of
8%
Canada6%
Australia5%
Zimbabwe3%
Volume
Botswana26%
Russia34%
Canada9%
Angola9%
Other6%
South Africa
6%
Namibia5%
Value
Botswana33%
Source: Kimberley Process Certification Scheme
Figure 218: World diamond imports
Figure 221: China’s magnesium exports
Figure 219: World diamond output Figure 220: Magnesium pricesMagnesium Prices
5
10
15
20
25
1800
2200
2600
3000
3400
Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15
‘000 RMB/tUSD/tonne
Metal Bulletin Spot (lhs)
SHFE spot (rhs)
Source: Bloomberg
Diamonds & MagnesiumWorld diamond exports
UAE16%
India8%
Russia9%
Botswana12%
Congo, Republic
of3%
Other24%
VolumeUAE14%
Botswana16%
Russia8%
Israel7%
Switzerland5%
Other23%
ValueEuropean
Community29%
European Community
27%
Source: Kimberley Process Certification Scheme
Figure 217: World diamond exports
68 China Resources Quarterly • Southern winter ~ Northern summer
Table 25: China mineral and energy import summary
unit Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Iron ore Mt 216.7 219.1 222.0 235.3 242.1 233.6 227.1 226.0
from Australia Mt 111.8 112.9 118.2 138.2 149.4 142.7 144.4 146.8
Australian share % 52 52 53 59 62 61 64 65
Thermal coal Mt 60.9 67.6 71.0 58.1 49.7 50.4 38.1 40.1
from Australia Mt 17.0 15.9 15.4 15.2 17.5 15.1 10.6 12.6
Australian share % 28 24 22 26 35 30 28 32
Metallurgical coal Mt 19.4 20.7 13.0 18.1 13.4 18.0 10.9 10.7
from Australia Mt 7.7 9.2 6.5 8.6 5.9 10.3 5.3 5.5
Australian share % 40 44 50 47 44 57 49 51
Aluminium kt 137.7 193.0 175.5 96.1 51.5 30.5 34.4 45.9
from Australia kt 31.7 31.5 48.0 18.9 7.0 5.6 7.7 2.7
Australian share % 23 16 27 20 14 18 22 6
Alumina kt 829 1354 1484 1281 1158 1354 1072 1041
from Australia kt 767 1177 1184 655 523 791 455 555
Australian share % 92 87 80 51 45 58 42 53
Bauxite Mt 21.1 17.6 13.1 6.6 8.4 8.4 10.1 12.6
from Australia Mt 4.2 3.4 3.1 3.7 4.7 4.2 4.9 4.5
Australian share % 20 19 24 56 55 50 49 36
Copper kt 1731 1819 1836 1699 1725 1935 1729 1774
from Australia kt 135 128 165 144 140 152 116 142
Australian share % 8 7 9 8 8 8 7 8
Table 25 continued on page 69
China Resources Quarterly • Southern winter ~ Northern summer 69
Table 25 continued:
unit Sep–13 Dec–13 Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15
Oil Mt 73.2 70.8 74.7 77.2 76.5 79.9 80.3 83.0
from Australia Mt 1.2 0.5 0.7 0.7 0.7 0.5 0.6 0.6
Australian share % 1.7 0.7 1.0 0.9 1.0 0.7 0.7 0.7
Gas (LNG) kt 4560 5140 5629 4297 4811 5155 5127 4392
from Australia kt 834 906 843 905 1162 902 1094 1286
Australian share % 18 18 15 21 24 18 21 29
Zinc kt 345.5 427.9 431.0 347.2 353.0 370.3 na na
from Australia kt 75.1 142.8 138.5 119.5 111.4 125.1 na na
Australian share % 22 33 32 34 32 34 na na
Nickel USDmn 1766 2095 1585 1625 2314 1251 904 1918
from Australia USDmn 119 112 67 112 99 71 81 87
Australian share % 7 5 4 7 4 6 9 5
Lead kt 227.9 242.5 224.0 213.8 284.8 273.0 na na
from Australia kt 25.7 29.6 49.6 28.8 47.8 52.0 na na
Australian share % 11 12 22 13 17 19 na na
Tin kt 3.1 2.1 2.0 2.0 2.3 2.5 1.6 2.9
from Australia kt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Australian share % 0 0 0 0 0 0 0 0
Uranium t 9069 6216 4045 6801 4985 9281 2041 5659
Sources: CEIC, Bloomberg, IHS.
70 China Resources Quarterly • Southern winter ~ Northern summer
Electricity generation and consumption
Electricity consumption by region, 2013
<80 billion KWh
80–160 billion KWh
160–300 billion KWh
>300 billion KWh Hainan
N/A or negligible
Source: CEIC
Figure 212: Electricity consumption by region, 2013
Figure 211: Electricity generation by region, 2014
Electricity generation by region, 2013
<100 billion KWh
100–200 billion KWh
200–300 billion KWh
>300 billion KWh Hainan
N/A or negligible
Source: CEIC
China Resources Quarterly • Southern winter ~ Northern summer 71
Coal and gas
Gas production by region, 2014
<0.5 Bcm
0.5–3 Bcm
3–10 Bcm
>10 Bcm Hainan
N/A or negligible
Source: CEIC
Coal production by region, Q2 2015
<15 Mt
15–30 Mt
30–45 Mt
>45 Mt Hainan
N/A or negligible
Source: CEIC
Figure 214: Gas production by region, 2014
Figure 213: Coal production by region, 2015 to date
72 China Resources Quarterly • Southern winter ~ Northern summer
Ferrous metals
Crude steel production by region, 2014
<15 Mt
15–20 Mt
20–30 Mt
>30 Mt Hainan
N/A or negligible
Source: Bloomberg
Figure 216: Crude steel production by region, 2014
Iron ore production by region, 2014
Hainan
N/A or negligible
<10 Mt
10–20 Mt
20–35 Mt
>35 Mt Source: Bloomberg
Figure 215: Iron ore production by region, 2014
China Resources Quarterly • Southern winter ~ Northern summer 73
Alumina and aluminium
Aluminium production by region, 2014
<100 kt
100–500 kt
500–2000 kt
>2000 kt Hainan
N/A or negligible
Source: Bloomberg
Alumina production by region, 2013
<2 Mt
2–5 Mt
5–10 Mt
>10 Mt Hainan
N/A or negligible
Source: Bloomberg
Figure 218: Aluminum production by region, 2014
Figure 217: Alumina production by region, 2014
74 China Resources Quarterly • Southern winter ~ Northern summer
Copper and gold
Mined gold production by region, 2014
<1.5t
1.5-2.5t
2.5-10t
>10t Hainan
N/A or negligible
Source: CEIC
Figure 220: Mined gold production by region, 2014
Copper production by region, 2014
<50 kt
50–200 kt
200–500 kt
>500 kt Hainan
N/A or negligible
Source: Bloomberg
Figure 219: Copper production by region, 2014
China Resources Quarterly • Southern winter ~ Northern summer 75
Nickel and zinc
Zinc production by region, 2014
<30 kt
30–100 kt
100–400 kt
>400 kt Hainan
N/A or negligible
Source: Bloomberg
Figure 222: Zinc production by region, 2014
Nickel production by region, 2014
<2 kt
2–5 kt
5–20 kt
>20 kt Hainan
N/A or negligible
Source: Bloomberg
Figure 221: Nickel production by region, 2014
76 China Resources Quarterly • Southern winter ~ Northern summer
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78 China Resources Quarterly • Southern winter ~ Northern summer
China Resources Quarterly Southern w
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orthern summ
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