Meanwhile Rio Tinto remains confident about Chinalco’s deal and China’s economic recovery, a belief that’s not hard to understand.
If it was to question the health or strength of China’s recovery (such that it is), the next question would be, ‘what about Chinalco?’
The Chinese economy is doing better than in January and February as the $US585 billion of spending stimulates sectors: not all parts of the economy, but it seems enough to lift demand for a growing range of products and commodities.
That’s also helped by continuing strong stockpiling of key commodities by the Chinese state and companies (with government oversight it seems in some sectors, without any controls in imports of iron ore).
That’s helping keep Chinese imports higher than they would be (they are already down 20% on a year).
It’s not responding to higher levels of demand for exports; they are also down more than 20% from a year ago.
Rio’s head of its iron ore business, Sam Walsh, told media yesterday in Canberra that the company’s iron ore business was going flat out and that Chinese demand is strong.
It is: in April China imported a record 57 million tonnes of iron ore. But output was down and exports were weak.
Mr Walsh said the company’s iron ore operations have been running "flat out" in recent weeks after a fall in Chinese production.
He told Reuters and Bloomberg that half of China’s production "has come off".
"We’ve seen about 140 million tonnes of capacity come off in China since June last year.” That has been a good opportunity for us.
"For the last six weeks our operations have been running absolutely flat out."
Mr Walsh also confirmed that Rio’s chairman will soon meet Australian investors and government officials to discuss the proposed $US19.5 billion deal with Chinalco.
He said the talks being led by chairman Jan du Plessis may result in the consideration of a revision of the proposed $US19.5 billion ($A24.94 billion) transaction, which has been criticised by some investors and politicians.
"Once we have heard all the views we will determine a course of action in relation to the Chinalco strategic alliance," Mr Walsh said, according to the media reports.
Figures released last week show that the global steel market isn’t very healthy, nor is China’s steel sector.
World crude steel production for the 66 countries reporting to the World Steel Association was 89 million tonnes (mt) in April, down 23.6% from April 2008.
China’s crude steel production for April 2009 was 43.4 mt, -3.9% lower than April 2008. Japan produced 5.7 mt of crude steel in April 2009, down by -43.6% compared to the same month last year. South Korea showed a decrease of -10.5% from April 2008, producing 4.1 mt of crude steel in April 2009.
In the EU, Germany’s crude steel was 1.9 mt in April 2009, a decrease of -53.1% from April 2008. Spain produced 1.2 mt of crude steel in April 2009, – 38.2% less than the same month last year. France showed a decrease of -50.5% from April 2008, producing 0.8 mt in April 2009.
The US produced 3.9 mt of crude steel in April 2009, a decrease of -53.4% compared to the same month last year. Brazil’s 1.7 mt of crude steel in April was 40.4% lower than in April 2008.
World crude steel production for the first four months of 2009 was 354 mt, down 22.7% over the same period of 2008.
Asia produced 231 mt of crude steel, a decline of -9.5% over the first four months of 2008. The EU produced 40 mt of steel from January to April 2009, down -44.2% on the same months of 2008. North America showed a -48.5% fall, producing 23.5 mt during the first four months of 2009.
China produced 171 mt of crude steel for the first four months of 2009, a slight increase of 0.1%, while all the other major steel producing countries showed a decrease for the first four months of 2009.
And, brokers, Merrill Lynch pointed out yesterday that China’s production of 43.4 million tonnes of crude steel in April, was -3% year on year (yoy) and -4% month on month (mom) was above current expectations.
"April steel production cuts have been minimal in China, despite low steel prices. Given the substantial price correction of key raw materials (iron ore and coking coal) most mills are still profitable at cash flow level.
“Hence, there has been little incentive for production cuts, particularly while the market expects government stimulus packages to revive the steel demand.
"Since late April, spot steel prices have been strengthening and big mills have started to raise prices.
"The higher steel prices are likely to push up steel production rates even higher," Merrill Lynch forecast.
Another small green shoot?
