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Chinese Economy "A Lot Worse Than You Think," Bloomberg Says
Meanwhile, in China, things are “a lot worse than you think,” says Bloomberg metals analyst Kenneth Hoffman who recently visited the country to assess the outlook for metals demand. This doesn’t exactly come as a surprise. Falling demand from China has been a major factor in the collapse of iron ore prices which just today caused Australia’s fourth largest miner to suspend production altogether and which last month prompted Fortescue Chairman “Twiggy” Forrest to break out the old “let’s start a cartel” suggestion when discussing how to firm up prices. To let Bloomberg tell it, demand from China for the steelmaking ingredient won’t be picking up anytime soon:
China’s steel and metals markets, a barometer of the world’s second-biggest economy, are “a lot worse than you think,” according to a Bloomberg Intelligence analyst who just completed a tour of the country.
What he saw: idle cranes, empty construction sites and half-finished, abandoned buildings in several cities. Conversations with executives reinforced the “gloomy” outlook.
“China’s metals demand is plummeting,” wrote Kenneth Hoffman, the metals analyst who spent a week traveling across the country, meeting with executives, traders, industry groups and analysts. “Demand is rapidly deteriorating as the government slows its infrastructure building and transforms into a consumer economy.”
Prices for commodities from iron ore to coal are sinking as China’s leadership tries to steer the economy away from debt-fueled property investment and smokestack industries, embracing services and domestic-led consumption. At the same time,
President Xi Jinping is stepping up efforts to combat pollution, further squeezing industry.
“There is a big fear this is going to get worse before it gets better,” Hoffman said in an interview. “It’s as bad as the data looks, if not worse.”
And the data doesn’t look so hot especially after last month’s contraction territory PMI print and collapsing rail freight number. Then there’s rising NPLs which are prompting the country’s largest banks to slash payouts as loans to manufacturers sour in the face of the very same economic transformation cited by Bloomberg. Finally, China has a small smog problem and while Beijing is apparently trying to export some of this to places that can use a little more pollution (like the rainforest), some estimates suggest that cleaning up the country’s air will come at the price of a 40% decline in industrial production.
Considering all of this, it’s no wonder that Credit Suisse is out with the following bearish commentary which supports a rather dire outlook going forward:
We have made fundamental changes to our demand analysis for iron ore. Given sharply weaker regional steel prices, we now assume a reduction in Chinese steel exports over the period to end-2018. Given a weak domestic backdrop for steel consumption, this results in steel production declines over the next three years.
2016 is likely to be even tougher year than 2015 for prices as China steel production declines persist (forecast down 0.6%), Roy Hill mine comes to market, BHP adds 25Mtpa, and Rio Tinto continues its ramp up towards +350Mtpa output. In 2016, we expect the most marginal tonnes will have exited the previous year, so the reduction of China domestic tonnes and the retracement of "Other" seaborne tonnes will have slowed. Another period with aggressive pricing will be needed to clean out the new marginal tonnes. We forecast a price of $45/t CFR for the first two quarters next year.
Our China colleagues expect steel growth rates to be negative. Figure 10 shows how far China's domestic steel consumption has contracted from peak levels of 12 months ago.
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Can you say "hard landing"?
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So chilli sauce -
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Solid.
Fuckstain.
Bloomberg should take a look closer to home?
these china stories are to lull us into complacency me thinks.
Fuck Bloomberg !
who knew public bathroom sex was so lucrative.
You shouldn't pimp out the women in your family
Last year was getting $0.11/pound for steel at recycling center. Now it is less than $.02.
Hugh Hendry
Bloomberg article above
Which one does one feel is more credible here?
the Bloomberg one is hilarious... idle cranes and ghost towns lol
you could see plenty of the same thing during 09-11, too, and yet in general the country was still booming
....that said, I do agree with the general sentiment of the article haha i'm not saying things are good let alone average even
just pointing out how silly this particular article's argument is... ZH does a better job with hard data like power consumption, or the one you referenced pointing out that the need for stimulus and support basically verifies the underlying issues
This is bullish then. This means PBOC can stimulate even more. That's the headline that will be written. What freaking disaster. And people just sitting around like zombies, watching dwts and the masters.
HAHAHA! Don't expect any good news about China from any US MSM.
HAHAHA exactly right, China > building banks - sand islands - submarines - nifty new missiles - giving loans to Venezuela , a very evil country and also known friend of the devil Putin.
It depends on who your asking...
The average Chinese private-sector worker earns about the same as a cleaner in Thailand
http://qz.com/170363/the-average-chinese-private-sector-worker-earns-abo...
You are not taking into account what it buys in China. A factory worker at BYD, or Chang'An or Shanghai GM makes the equivalent of $4.50 an hour. that sounds like very little, but it iss in China not America. It is a secure job with good working conditions that has medical benefits, pension, and pays enough for the employee to save money and enjoy a solid blue-collar life. He can own a home and have a lot of Western style consumer goods. In other worda, he's better off than the GM worker in Detroit that is making $18 an hour.
I trust Chinese data.
I trust US.gov data.
Corollary snarkiness and micro aggressive in a macro aggressive world since 1972 (TM).
But the BRICs are going to save us!!!!!!
/sarc
Indeed they might if they can break the dollar. That doesn't mean they are going to have a rosy time.
bullish
When was the last time Bloomberg visited bankrupt AND decrepit Detroit and thus declared America as 'a lot worse than you think"?
If there is one country that can afford to lose a trillion dollars in this world, it is China, because the rest of the countries are already bankrupt!
Visiting China from overseas for a couple of days gives any METALS ANALYST with a CFA no less, a great perspective without as much as one interview with ANY Govt official and calling it unbiased research is awesome analysis!
If Kenneth can predict the impending collapse of China, then whats his track record on Lehman or 9/11 or sub prime crisis? Did he see Ukraine coming or Syria or the largest bank in Portugal's bankruptcy maybe....? How can he see China collpase coming so clearly but he surely missed the colllapse of coal prices or copper or whatever he is supposed to be an expert in?
He expected gold to be doing just fine thanks to all the money from Private Equity and China to help the mining sector by continuing their spending on iron or mining etc just in Dec 2012....See the predictions of Kenneth from Dec 2012: http://www.bloomberg.com/news/videos/b/3d1f589f-82fb-4a2c-9ad1-ea592fbc2...
I suggest for Kenneth to remian focused on US where he stays and understands a little bit about mining and commodities. And should ask himself, what would have happened had QE not happened in US and EU?
Or if Govt had not bailed out Goldman and AIG?
Or what does SEC do during the working hours in daytime?
And then reflect on what China is doing, in comparison....
Why does US and EU allow Chinese companies to buy real estate, JPM HQ, AMC theatres, Nexen, Peugeot, Volvo, Portugal's largest investment bank, Waldorf in NYC, Motorola, parts of IBM? China should indeed be banned from the rest of the world because it is a lot worse than you think!
If China is about to go bankrupt, somebody please call the largest bank in the world that has grown out of the bottom of the heap to No 1 in the world and tell them that they are about to go bankrupt! Or tell that to the busiest port workers in the world making our shoes and shirts or phones or laptops.....or the Chinese buying cars of over 22 million per annum....or the same bankrupt Chinese who have bought themselvs the largest gold reserves in the world....or the ones who travel outside with close to 400m airplane trips outside China or the one country who spends close to USD 750 billion per annum on the health care of their citizens alone.....or the same Chiense who have almost 80% of all countries as their No 1 trading partner ...or the same bankrupt Chinese who have become the largest trading nation in the world after beating US who held the No 1 position until 2012 since WW2....
Yes...someone tell the same China that they are going bankrupt....and are going to collapse because they dont have the money to pay for stuff!
If you don't work for the Beijing chamber of commerce, you should.
Damn...a new career....I never thought of THAT....Beijing...here I come....
Detroit doesn't need a Chamber Of Commerce any more.
"I suggest for Kenneth to remian focused on US where he stays and understands a little bit about mining and commodities. And should ask himself, what would have happened had QE not happened in US and EU?"
Really? China doesn't have a huge bubble in shadow banking, FX swaps issues or internal QE fiat pumping?
Wake up,and study. All are bubbles. Don't waste your time writing a brief on blown fiat bubbles. Just let the mouth pieces talk their shit......
Pick a piece of dirt, your standing in horribly ran bubble.......
I appreciate your point. However, shadow banking, non depository lending is also present in the US. FX swaps as well.
In China, open QE has not been done. Even US ane UK did stealth QE until open QE became necessary.
GM is closing in Russia. IBM is let go from China like Microsoft. Citibank is selling Japan and closing. Morgan Stanley and Merrill Lynch left Switzerland. US companies are not allowed in Pakistan or Afghanistan or Iraq! US energy assets have been sold to Chinese in Iraq, Afghanistan, Nigeria, Libya etc. Walmart Best Buy and Home Depot have closed in China. Walmart clsoed Germany too. Best Buy in UK too.
However, in China, their banks are opening up overseas. Chinese opened a car factory in Bulgaria in 2013. China bought Peugeot and Volvo. China is building silk road, oil pipelines and creating new infra banks.
One country is shrinking globally and one is rising globally. You can see the facts!
If there was a bubble based on debt, it was in America. China has many decades to go before the negative consequences appear.
Ever been to China before calling it a bubble?
If it was not for China allowing to build iPhones, furniture, laptops, shirts and shoes, most of us would not have any of the same at the prices that we pay!
They can move to Arcadia.
The Chinese government has no more idea what it's doing than does our Fed.
I don't know which economic land mine out there is going to go off first, but I'm confident that China is going to be a very big one when it does.
On what basis do the whacky central planners in China think they can "create" a domestic demand?
An instant middle class economy?
This blurb also mentions China is itself outsourcing domestic jobs to curb costs and pollution. So, where will the income to fuel some kind of new middle class come from?
And no, they don't yet have one; if they did, they wouldn't need to hatch one from scratch. What they have (by all accounts I've seen) are a relative few oligarchs, a few more less well off, and a billion, three hundred million poor peasants slowly losing the only shot at a little prosperity they ever had. Without those smog-producing factory and empty-infrastructure-generating slave-wage gigs...they've got nothing but hopelessness again.
All anyone doubting this has to do is check out a few YouTube videos on the great hordes encamped in tin shanty towns beneath the forests of empty skyscrapers, in dozens (if not hundreds) of mushroomed new cities, that would be completely uninhabited were it not for those same shanty town dwellers...
They aren't going to like a slow swagger back to age-old rice paddy poverty much either. Perhaps...THAT will be the fuse that finally sets it all off.
God help us if that many people raise holy hell at once.
m
So far, China has accomplished everything the wanted, despite the objections of some of the posters here.
bloomberg is a tribal propaganda.
so what does it matter, what they say....
bullish
I believe what you wrote. China is not putting out any true figures, just like any other Government. Take the US, their economy is going great Guns with Workrers having Wallets stuffed with debt Notes and spending like crazy at fast Food Outlets and drinking at Bars in huge numbers. Cheap Outlets like Walmart are loosing Customers to better class outlets and this is also the case with China, as per Government reports. I believe those honest Government reports, dont you all too?
Fuck you. What do you know. China is gonna build another 10,000 main battle tanks, a few more aircraft carriers, and more and moar hardware.
Broken Window Bull Momentum.
http://bastiat.org/en/twisatwins.html
So expect the Chinese stock market to at least double from here then.
Hard landing? Look at the Hang Seng and Shanghai stock exchange.
....Bloomberg says....
Tyler, this zion svine is a credible source for you?
Just another DC fascist/Zionist spin on things. Every country is hopeless except the US that is the largest debtor nation in the whole world. But we are fine becoz we dun give a shit and we BS to the population so they dunno shit. How did the implosion of Russia work out for you? What about the Ruble? DC and its mouth pieces are puking BS on a daily basis as its economic foreign policy/economic war.
Yes, China got its issues, but tell me who does not. Plus when your loaded to the eye balls in cash, things can be solved.
I just love it when the presstitutes get to work.
Going to get more intense as DC blows up the US!
Just looking at the last graph, chinese steel consumption in the 2014-15 period is still way higher than it was the 11 years before. Looks to me to be some sort of complaining at a high level. If the US had the same data set it would be glorified as a economy running hot... But maybe that is just my take and I am all wrong.