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Feb 2009 - Year End & China

  • Well it was a nice rally over the Christmas/New Year period, it seems hard to believe that Albidon quadrupled to 32c or Panoramic touched $1.42/share, along with many other price rises, before the doom and gloom settled back in, on plenty of negative media releases.
  • Perhaps we should change the western world years to conform to the Chinese ones, after all China has basically been on holiday up until now. The Year of the Ox started on 26 Jan 2009, and China was still on holiday for the week after that. Since China has such a significant impact on world metals’ demand and even if it is only 7% GDP growth on 2008, it is still growth (and in fact about 3 or 4 years’ ago, 7%pa was in fact the target). [Of course, the actual growth rate may still be up to 1.5% higher than an official stated 7% growth rate].
  • We have actually seen a number of positive releases relating to China, along the lines of metal restocking immediately ahead of Chinese New Year, rising spot iron ore prices (its almost doubled from the US$40/t lows of early Nov 08 to about US$75 to US$80/t), Jinchuan forecasting an increase to 125,000t of nickel production (from ~ 110,000t) in 2009, etc. – but virtually none of that appears to have been reported in the Australian press.
  • We possibly were too optimistic with our scenario expectation of the early stages of a commodity market recovery occurring in March/April 2009 (probably led by nickel), but it is still very early in the 2009 year to push that recovery expectation out to 2010, especially as China has not really started yet.
  • At the China Mining Conference in Beijing in November 2008, we attended the commodity sessions, for which the general main points were that;
  • China needs the grade and the orebodies. It is not really bothered about the next 3 years, more how to fill in the growth demand gap from years 20 to 40, and hence wants to control orebodies outside of China to achieve that goal (either by funding companies or controlling them – acquisitions to be done at bargained prices).
  • It also thought that it was criminal to hold countries to ransom (like BHP and RIO) on the iron ore prices, companies can make reasonable profits, not excessive profits.
  • Written by: Keith Goode
  • Tuesday, 03 February 2009

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