THE Shanxi Taigang Stainless Steel Company is expanding production by a third this year, and by another two-thirds in 2006. "So what", is the comment stifled by the collective yawn heard by Briefcase. An awful lot is the answer, if you’re interested in looking for signs that the speculative end of the stock market has bottomed and that the China miracle has not really come to a grinding halt.
Shanxi Taigang is China’s biggest stainless steel producer and a major consumer of Australian nickel. Its general manager, Chai Zhiyong, told a metals conference in Shanghai last week that Beijing’s credit clampdown on manufacturing was aimed at small producers, not him, and he planned to go on growing.
The lesson for Australia is that real demand in China, as opposed to speculative hype, remains strong and will continue to drive demand for nickel, iron ore, copper and a host of other commodities.
That does not mean the nickel price will suddenly surge back to $US17,000 a tonne from its current low level of $US11,000 – but it also means that a further slide is unlikely and the painful price correction we have seen over the past three months has probably run its course.
Briefcase, of course, could be accused of looking for a silver lining on every cloud. But that charge cannot explain other tell-tale indications of continued strength in the global economy, especially Asia. Perhaps China’s growth will slip back from a rampant 10 per cent to a more manageable 7 per cent, a move which will be more than compensated by Japan growing at an annualised 5.6 per cent, as shown in the March quarter.
The bears who control the stock market today do not want to see the changing sentiment. They will ignore Shanxi Taigang’s demand for nickel and a prediction on the same day from Russia’s Norilsk Nickel that falls in copper and nickel prices have "comforted" customers and that "physical demand for copper is booming", and a report that cobalt demand (a by-product of laterite nickel production) is outstripping supply because of a pickup in aerospace and rechargeable battery production.
The froth of last year’s boom has been blown off by the price corrections seen since January. The bubble remains intact, and is growing.
LISTEN carefully and you can hear the pips squeaking across the economy. Fuel costs, especially for anyone running a business that involves road, rail or air transport, are crushing profits and, potentially, killing some industries.
No-one has (yet) admitted to being in financial trouble because of the $US40 a barrel oil price, or having to pay $1-plus a litre for petrol. But, Briefcase has been around long enough to know that there are late night meetings around Perth as managers try desperately to find a way out of the fuel cost squeeze.
Some may find costs to cut but in a state the size of Western Australia there really is no way around the dilemma of having to use liquid fuels for all forms of transport.
As an example, consider the problem of a big opencut gold mine. Over the past few months diesel costs to haul out the ore have risen by 30 per cent-plus, and the price of gold (in US dollars) has dropped around 10 per cent. Currency changes have been neutral because the falling Australian dollar has lifted the local gold price, while negating that win because of an opposite effect on the local oil price.
For anyone with a dark sense of humour the game now is to spot the company (or project) in trouble. Briefcase is too polite, and too concerned about a writ, to name his favoured victims of the oil price squeeze but he can think of a number of businesses which will be watching their profits shrivel, and planned mining projects where the numbers are being carefully re-calculated.
BANK bashing is not a game that Briefcase often plays because it recognises that banks are a business, not a charity, and in general they provide the service you pay for. However, an experience with Westpac last week deserves telling if only to show how brainless a bank can be.
The problem started with a scratched credit card. It still worked when swiped but the end was in sight. Solution: phone the bank and arrange for a replacement – first mistake. Sorry, said the voice at the end of the ‘phone, before doing that you have to prove who you are. Fine, ask me personal questions and the matter is settled.
No, said Westpac. We’ve dropped the personal questions for bank-related questions. First, how many accounts have you got with Westpac? Good grief, after a lifetime with the same bank, and not having the statements easily available how could anyone know that. Bad reply. One last chance. What is you credit card limit? Once again, without the paperwork at hand, and given that the limit changes annually (or more often) the question cannot be answered.
Oh, in that case, said the bank, we can’t deal with you, and by the way, your access to telephone banking is cancelled because you either (a) couldn’t answer the questions or (b) you complained too loudly.
Unimpressed, to say the least, Briefcase contacted its regular manager, received a sympathetic hearing, had matters rectified and was told that the questions were a bit steep because there were quite a few people in the bank who wouldn’t know precisely how many accounts they had, especially after including housing loans, credit card, cheque and savings accounts.
So, to the tool at Westpac who made life so hard, and who claims to go by the name of Danny (no surname, naturally) Briefcase says keep up the good work, you’re a credit to your profession as a banker.
Journalist: "A man who lies in the sun all day, then goes home to his typewriter to lie some more." Frank Sinatra.