China becomes L America's privileged partner: ECLAC official

Xinhua news reports,

China has become a "privileged partner of Latin America," and the region needs to define a joint strategy to develop its ties with China, an official of the Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday.

The "post- (economic) crisis will find a bigger and more important China than the one it has been in the world economy," said Osvaldo Rosales, ECLAC's director for international trade and integration.

Citing the World Trade Organization's report on Tuesday that China had displaced Germany in the first half of 2009 as a leading exporter, Rosales observed that "this has been reflected in its (China's) growing relative presence in the world's trade, mainly in Latin America."
"The numbers of destinations and exporters show that China has become a privileged partner of Latin America," Rosales told Xinhua in an interview.

This was because the Chinese government had "already defined the strategy for Latin America in its white book," Rosales explained, adding that the region needed to do the same.

Regarding bilateral trade relations, Rosales worried about Latin America's export structure, which focused on a few products and natural resources. He called for a diversification of the export basket.

"Latin America is in some ways linked with China, the world economy's engine of the 21st century, but it is doing that with an export structure from the 20th century," Rosales observed.

Click here to read the full story from Xinhua

Asian smelters to benefit from Doe Run Peru shutdown

Doe Run Peru shut down its lead and zinc smelter on June 2 after the company ran out of money and credit, therefore rendering it unable to buy the raw materials being produced at near by mines.

According to this Bloomberg article, guess who's stands poised to benefit from this? You guessed it Asia's smelters, who despite the global slow down remain hungry for
more.

Alex Emery in Lima down in Lima writes:

Glencore International AG, the world's biggest commodities trader, and Trafigura Beheer BV are benefiting as suppliers of Doe Run Peru's shut lead and zinc smelter seek international traders to sell their concentrates.

"We're looking for more clients abroad, particularly Asian smelters," to buy the extra production, Glencore's Peruvian manager Fernando Cafe said in a July 3 interview.

Cia. De Minas Buenaventura SA, Pan American Silver Corp. and about 30 other miners in the central Peruvian Andes have had to seek alternative buyers after the Renco Group Inc. unit smelter ran out of cash and halted all operations on June 2...

To read the complete article please visit the complete Bloomberg article.

[Commodities] -- Is the rally over?

Commodity Rally May Falter on Supply, Speculators

June 29 (Bloomberg) -- Commodities, heading for the first quarterly advance in a year, may struggle to repeat their gains in the next three months as supply expands and speculators sell.

Nickel may average 29 percent less in the third quarter than now, crude oil 16 percent, copper 14 percent and gasoline 10 percent, analyst estimates compiled by Bloomberg show. Hedge funds and speculators cut their bets on higher prices by 23 percent in the two weeks ended June 23, the first back-to-back drop since March, based on an index using U.S. Commodity Futures Trading Commission data. The World Bank said June 22 the global recession will be deeper than it expected three months ago.

“Commodities have gotten a little ahead of themselves,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “As long as there’s uncertainty about growth, that’s going to be headwind commodities won’t be able to overcome.”

Commodities rose 14 percent this quarter, led by nickel, oil and sugar, after three consecutive declines, according to the Reuters/Jefferies CRB Index of 19 raw materials. This year’s 57 percent advance in oil costs, combined with widening budget deficits, may cause another global slump, said Nouriel Roubini, the New York University economics professor who predicted the financial crisis.

Click here to access the full article from Bloomberg

Newswire: Commodities with a added bit of South-South Energy Cooperation

[Uranium] -- India Bids for Stakes in Russian, Kazakh Uranium Mines to Fuel Reactors
Nuclear Power Corp. of India is bidding for stakes in uranium mines in Russia and Kazakhstan, and offered to build reactors in central Asia, Chief Executive Officer S.K. Jain said.

“We’re trying to achieve stakes in mines,” Jain said today in an interview at a Moscow nuclear forum organized by Rosatom Corp., the country’s nuclear holding company. The company is discussing buying into sites including the untapped Elkon deposit in Russia’s Far East, he added.

India, which suffers peak power shortages of as much as 17 percent, needs uranium to fuel 28 planned reactors and meet a target of adding 40,000 megawatts of nuclear generation by 2020. The second most-populous nation will seek an annual 1,500 metric tons of uranium for 60 years to fuel new reactors, Jain said.

“We’re exploring the possibility of a long-term partnership and not only for uranium supplies,” he said. India proposed building 220- to 500-megawatt reactors in Kazakhstan, which doesn’t yet have any nuclear power plants, he added.


[Crude Oil] -- Crude Oil Advances as U.S. Consumer Confidence Increases, Equities Climb
Crude oil rose to a six-month high after a report showed that U.S. consumer confidence jumped to the highest level since September, signaling demand may rebound.


[Copper] -- Copper Climbs in N.Y. as U.S. Consumer Sentiment Jumps Most in Six Years
Copper prices rose in New York and London after a report showed U.S. consumer sentiment jumped this month to the most positive since September.



[Gold] -- Gold May Climb to Record $1,250, Standard Bank Says: Technical Analysis
Gold may target a record $1,250 an ounce as a continuation head-and-shoulders pattern may be forming within a longer-term trend, Standard Bank Group Ltd. said, citing trading patterns.


[Platinum, Palladium] -- Platinum, Palladium Fall in New York on Weak Auto-Industry Demand Outlook
Platinum fell the most in two weeks in New York on concern that auto-industry demand for the metal will take longer to recover than other parts of the economy. Palladium futures also declined.


[Corn] -- Corn Falls as Dry Spell Allows U.S. Farmers to Accelerate Delayed Planting
Corn fell, erasing an earlier gain, on speculation that Midwest farmers accelerated plantings delayed by rain, improving prospects for output in the U.S., the world’s largest exporter.

China marks 1 year anniversary of Sichuan Earthquake

One year ago, Sichuan Province was struck by a devastating 8.0 magnitude earthquake. Thousands of visitors flocked to Sichuan province to pay their respects to the victims of the May 12th earthquake which killed over 80,000 people.

In Beichuan, a valley town totally wiped out by the 8.0 magnitude quake, family and friends gathered to light incense and ritual paper money to comfort the dead.

“I feel that this earthquake is not over yet, every time I see something related to the earthquake I feel like crying."
~ 20 year old XiaoYao who lost her brother and sister

“I feel so sad and heart broken and it hurts in my heart. I did not want to come back to this town. It brings back so many bad memories.”
~ 46 year old Xiao Caigui who lost over 30 relatives

The worst devastation was in Wenchuan where nearly 24,000 died or went missing and Beichuan county where 20,000 of its 160,000 residents perished in the quake.





Last year China hosted the Olympic games. It was also forced to deal paralyzing snow storms, worse than usual flooding during monsoon season (their equivalent of hurricanes) and oh yes... the most devastating earthquake in terms of power and damage since the quake which caused the Tsunami in few years back.

I think some credit is due. Good job China!

Newswire: Commodities

[Crude Oil] -- Oil Falls in New York on Speculation Increased Supplies Will Limit Gains
Crude oil fell on speculation that last week’s 10 percent advance will be undone as U.S. inventories climb and fuel consumption declines.

Oil followed equity markets lower today, reversing gains made last week after the U.S. economy lost fewer jobs than expected. Crude inventories rose to the highest since 1990 in the week ended May 1 as fuel consumption tumbled, an Energy Department report showed last week.


[Natural Gas] -- Natural Gas Declines on Speculation 22% Advance Was Excessive
Futures fell for the first time in four days on speculation last week’s 22 percent rally was unjustified.


[Copper] -- Copper Futures Decline for Third Straight Session as China's Demand Eases
Copper prices fell for the third straight session in New York on signs that demand may ease in China, the world’s biggest user of industrial metals.


[Precious Metals] -- Gold, Silver Fall in N.Y. as Investment Demand Slips on Signs of Recovery
Gold and silver prices dropped in New York on speculation that investment demand will decline as more signs emerge that the global recession may have touched bottom.

Lets talk CHINA GOLD

Last week the Internet was a buzz with news that China officially announced that it would increase its gold reserves.

Newsworthy yes, but as Otto over at IncaKolaNews in this article magnificently articulates... major news reports and analysis seemed to miss the bigger picture.

I myself posted a small analysis on this topic last Friday, April 24, 2009.

I may have mislead readers slightly with the gold chart I included. I was not suggesting gold is a good investment at the moment. I am no gold expert, and I definitely am not in any position to say whether China's move to buy more gold will affect the global price of gold.

However, I have read a good deal about gold in history text books and in the news in recent months with the global slowdown. It is clear gold remains as it has throughout history, a store of value.

My analysis simply to articulate the following:

China is concerned about the possibility of inflation eroding the value of the money countries like the United States will eventually have to pay back. As developed economies lower interest rates and print money to spur growth their currencies will eventually weaken as money floods the global economy. Likewise, the RMB (Yuan) will likely continue appreciating as China's economy continues to develop. and modernize. All this is not good news for the money China has stashed away in its rainy day fund.

I highly recommend readers who periodically access this site for commodity or China related news or who have simply stumbled upon this post READ -- Otto's analysis on the impact China's gold purchases on the greater market.

China's gold reserves growing, and fast... What does it mean?

China's gold reserves have nearly doubled over the past five years, according to the country's foreign exchange administration.

At the moment China holds about 1000 tons of gold, up from 600 tons in 2003 according to Hu Xiaolian who is head of the State Administration of Foreign Exchange (SAFE). Take note, the last time China released such information was in 2003, so this is not exactly a every day occurrence.

Definitely big news, especially for the United States which at the moment is the major beneficiary of China's massive foreign exchange reserves, most of which are held in U.S Dollar denominated assets.

“China still has only a very small percentage of its forex reserves held in gold, much less than the United States or other developed countries,” said Paul Atherley, Beijing-based managing director of Leyshon Resources. “Those holdings are still too low in terms of the size of its economy and the growing significance of its currency.”

At the moment, China's total gold reserves only account for roughly 1.6% of its entire accumulated FOREX reserves. The total value of its gold holdings are currently reported as $31 billion (211.6 billion yuan).

Furthermore, according to this FT article the move coincidentally comes as many European central banks are selling their gold and as the International Monetary Funds discusses selling a considerable portion of its own gold reserves.

“This is probably the most significant central bank announcement since the Central Bank of Russia announced at the LBMA gold conference in Johannesburg in 2005 that it wanted to hold 10 per cent of its foreign exchange reserves in gold,” said John Reade of UBS.

Check out this chart of how gold has performed over the past five years.


Gold has traditionally been viewed as a store of value and a safe heaven for wealth in volatile times, and these are indeed volatile times.

China recently hinted that it would like in a perfect world that the global economy adopt a single currency. The Political Satire, the Daily Show articulately described in last nights episode, this is just not going to happen (Note the link provided takes you to a video from last nights episode that contains some questionable language).

In reality it is hard to believe China legitimately thinks the United States would consider adopting a single currency. What China was really aiming to do was send a message that the United States better make sure that it not only pays back all the money China has lent it over the years but that it also pays it back at a premium.

If inflation goes through the roof because of low interest rates and the massive amounts of money the United States is printing, China is going to be paid back in a very devalued currency, and this will make for a very unhappy China.

Recent headlines relating to China's planned gold purchases sends yet another clear message to the United States.

"Make sure you get your house in order!"

China's FOREX reserves have grown from $623 billion at the start of 2005 to a whoppin' $1.906 trillion at the end of September of 2008. Growth however did slow tremendously in the first quarter of 2009, growing a mere $7.7 billion.

With its current stock of 1000 tons of gold, China has the fifth largest holdings of gold in the world. Hou Huimin, vice general secretary of the China Gold Association suggested in his opinion China should build it reserves to 5,000 tons.

One thing is clear, China is going to be very careful where its stores it wealth in the coming years.