China PMI Drops to Lowest in Almost 3 Years

A Chinese manufacturing index dropped to the lowest level since February 2009, bolstering the case for fiscal or monetary loosening to support the expansion of the world’s second-biggest economy.

The Purchasing Managers’ Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today. That was lower than any of 16 economist estimates in a Bloomberg News survey that had a median forecast of 51.8. A reading above 50 indicates expansion.

An index of export orders contracted for the second time in three months as Europe’s failure to resolve its debt crisis dims the outlook for shipments to China’s biggest market. South Korea reported today the weakest export growth since 2009 and Taiwan’s government said yesterday that the island’s economy expanded by the least in two years.

The PMI reading “is a reflection of slowing momentum in the economy” and exports may “slow sharply in coming months,” said Wang Tao, a Hong Kong-based economist at UBS AG. “Policy will ease more visibly in the first quarter of 2012.”

A separate manufacturing index released today by HSBC Holdings Plc and Markit Economics rose to 51 from 49.9. The surveys have different sample sizes and methodologies.

Premier Wen Jiabao said last week that economic policies will be “fine-tuned” as needed. That fueled speculation that the government may ease reserve requirements for smaller banks and add fiscal stimulus, putting growth ahead of inflation risks.

‘Weak’ Figure

The MSCI Asia Pacific Index fell 0.9 percent as of 11:07 a.m. in Tokyo. The benchmark Shanghai Composite Index rose 0.3 percent on speculation that more easing is possible after the government last month offered tax breaks for smaller companies that have been hardest hit by lending curbs and slowing growth.

“The weak PMI figure may prompt the government to loosen policies going forward such as a cut in reserve-requirement ratios for small banks and that’ll be positive for stocks,” Liu Li-Gang, head of GreaterChina Economics at Australia & New Zealand Banking Group Ltd., said in an interview in Bloomberg’s Shanghai office. “China’s economy is poised for a soft landing in the fourth quarter rather than a hard landing.”

On Oct. 26, the government announced a trial of changes to value-added taxes, a move that HSBC Holdings Plc economist Qu Hongbin said heralds the “official start” of selective easing. The finance ministry yesterday raised the threshold for payment of VAT and business taxes.

Exports, Orders

The manufacturing index from the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers in more than 820 companies in 20 industries. The gauge hasn’t fallen below 50, the level dividing expansion from contraction, since February 2009.

The gauge of new export orders declined to 48.6 from 50.9 the previous month. The new orders index fell to 50.5 from 51.3 in September, the lowest reading since February 2009. A measure of output dropped to 52.3 from 52.7 in September.

The data “indicate fourth-quarter economic growth will continue to slow,” Zhang Liqun, a senior researcher at the Development Research Center of the State Council, said in today’s statement. “Export and investment growth will continue to fall.”

China’s economy grew 10.4 percent in 2010 and 9.4 percent in the first nine months of this year.

Shipyard Orders Drop

Positive signs for policy makers include a decline in a measure of input prices to 46.2 in October from 56.6 the previous month, the first reading below 50 since March 2009.

The drop suggests cost pressures on companies are decreasing, although it may also signal destocking is increasing because of expectations prices will fall, Zhang said.

In a sign manufacturing growth is moderating, new orders placed at Chinese shipyards in the first nine months of the year dropped 42.8 percent, the Ministry of Industry and Information Technology said on its website on Oct. 20. Guangzhou Shipyard International Co. said last week its third-quarter net income dropped 45 percent from a year earlier due to higher costs and an impairment provision for shipbuilding contracts.

--Zheng Lifei, Victoria Ruan, With assistance from Ailing Tan in Singapore, Regina Tan in Beijing and Zhang Shidong in Shanghai. Editors: Nerys Avery, Paul Panckhurst

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at +86-10-6649-7560 orlzheng32@bloomberg.net;

China Online Sales Triple; Warehouses Surge

China’s largest online retailers expect sales to as much as triple next year, setting off a rush for warehouse space that’s pushing up rents in the world’s fastest-growing major economy.

“Everyone wants more warehouses,” Ji Wenhong, chief executive officer of luxury goods seller xiu.com, said in an interview. “Any warehouse bigger than 20,000 square meters will be leased the second it’s out on the market.”

Wal-Mart Stores Inc (WMT).-backed Yihaodian is looking for more space in anticipation of need. 360buy.com, China’s second- largest e-commerce company by sales, plans to invest as much as 6 billion yuan ($943 million) over the next three years to build seven distribution centers as the Beijing-based company expects 2011 sales to triple from last year to 30 billion yuan.

Yihaodian sells items from Nokia cell phones to Pampers diapers and Kewpie mayonnaise online and targets a tripling of revenue to 7.5 billion yuan for 2012 from at least 2.5 billion yuan this year. The growth would come after the Shanghai-based company learned from the mistake of not having enough storage space to accommodate rising demand, Yu Gang, president of the company said in an interview.

“Our sales may have gained another 10 to 20 percent if the business was not limited by the lack of warehouse and personnel during the first four months of this year,” he said. “We have learned the lesson.”

Still Need More

The company has increased warehouse space to 220,000 square meters (2.4 million square feet) from 40,000 square meters at the start of the year, a buildup that will suffice only until the beginning of next year, Yu said.

“We will need even more after the Chinese lunar new year,” he said.

Storage and logistics facilities are needed in Beijing and Guangzhou, and probably Jinan, Xiamen, Xi’an and Shenyang over the next year to at least double the company’s total to more than 400,000 square meters, according to Yu.

“This is part of a significant shift in the way China shops,” said Michael Cole, managing director of RightSite.asia, an online marketplace for industrial real estate in China. “I would expect to see this demand continue to increase for the next several years.”

The number of searches for warehouse space on his site “clearly outnumbers” searches for manufacturing or office space, Cole said.

Rising Rents

Demand is also raising costs. Rent on warehouses this year has already climbed about 5 percent for Yihaodian, Yu said.

Leasing costs rose in 2010 as well, gaining 7.7 percent on average and as much as 20 percent in high-demand areas including Guangzhou city, according to data compiled by Colliers International.

“The vacancy rate for good quality logistics space is best described as very tight, averaging only 7 percent,” Nigel Ingham, director of industrial services for East China at Colliers International, said in an e-mail response to questions. The market expects rents will rise as much as 7 percent for the first half this year as demand increase at “double digit” rates, he said.

Online retail sales in China, with about 485 million Internet users, soared to more than 80 billion yuan in 2010, compared with 5.5 million yuan five years earlier, according to estimates compiled by researcher Euromonitor International. Consumer electronics is the best-selling online category, contributing 8.2 million yuan, followed by media products at 6.2 million yuan, and clothing and footwear at 5.9 million yuan, according to Euromonitor.

iPhones and Chanel

The surge in online sales is drawing money. Investment in China’s e-commerce industry has more than doubled to $2.2 billion this year as of the end of September, compared with $950 million for 2010, according to data from Beijing-based Zero2IPO Research Center.

360buy, which sells goods from Apple Inc.’s iPhone 4 handsets to Chanel SA handbags, raised $1.5 billion in April from investors including Russia’s Digital Sky Technologies, a Facebook shareholder, and the Tiger Fund. The company may publicly sell shares in the U.S. next year, according to two people with direct knowledge of the matter.

Xiu.com in August received a $100 million investment from U.S. private-equity funds Warburg Pincus and KPCB China as it expects to double warehouse space to 80,000 square meters by year-end, adding to facilities in Shenzhen, Beijing and Shanghai. Sales will probably more than quadruple to 1.2 billion yuan in 2011 from 250 million yuan this year, Ji estimates.

‘Vicious Circle’

As sales climb, online retailers that don’t secure enough warehouse space may lose market share in a “vicious circle” as orders can’t be filled quickly, frustrating customers, said Richard Ding, chief executive officer of Royal China Group, a Shanghai-based investment and consulting company in retail and property. “Sales growth depends heavily on product offerings. Therefore, warehouses play a particularly important role.”

Internet and conventional retailers are expanding in China as urban per capita income rose 7.8 percent in real terms in the first nine months of 2011. Retail sales have grown an average of 17 percent a month in the year through September as the government aims to shift an economic expansion model driven more by consumption and less reliant on exports.

Chinese consumers will account for the world’s biggest share of luxury spending by next year, according to an HSBC Holdings Plc report in August.

Demand for retail space helped drive a 42 percent surge in commercial real estate investments in the country last year, according to Cushman & Wakefield Inc.

“Customer satisfaction is the number one priority in this business,” xiu.com’s Ji said. “Logistics is the final step and the most direct impression an online retailer gives to customers.”

US Morning Market Analysis: Asian aromatics finish week stronger

Asian benzene prices continued to rise October 28, achieving a $10/mt day on day gain on an FOB Korea basis to close at $1000.50/mt. However the rebound continued to be slower than gains in the US, where benzene on October 27 was assessed at $952.30/mt FOB USG. (See chart 1)

Europe has also firmed to be assessed at $928/mt CIF ARA on October 27. With Europe is still in an excess supply situation, traders watched to see if shipments would be sent from there to Asia.

Asian mixed xylene climbed $12.50 overnight to $1,293/mt FOB Korea. The continued strength in the Asian MX market widened the potential arbitrage from the US. The US price was assessed October 27 at $1,145/mt FOB USG, putting the spread between the US and Asia at nearly $150/mt. (See chart 2)

Freight rates were estimated near $70/mt. The arb to Asia has actually been open since October 12, but sources said vessel space was limited from the US to Asia for November.

Asian paraxylene edged $2.50/mt higher day on day October 28 to close at $1,547.50/mt CFR Taiwan/China. Week on week, PX gained $83.50/mt or 5.7% as prompt buyers were out in force to seek cargoes with just days to go before November expiry.

For the week, PX has managed to stay above $1,500/mt as November PX Asia Contract Price nominations were made in a range of $1,590-1,620/mt CFR. The proposals will expire October 31 and a settlement is widely expected. There was no October ACP settlement as buyers and sellers failed to reach consensus. PX's rebound was in tandem with downstream purified terephthalic acid, which saw a 5.79% rebound from the previous week. PTA closed October 28 at $1,150/mt CFR China for Taiwan origin cargoes.

In the US, the PX price on October 27 was assessed at $1,517.50/mt FOB SUG. The European PX price was the lowest globally at $1,455/mt FOB Rdam. (See chart 3)

Asian styrene monomer prices moved up on the back of firming demand, especially in the China market. Buying interest was seen increasing by several sources due on a slightly improved outlook for the macro economy. Nevertheless, demand from downstream end-users was not seen as that bullish and it remains to be seen if the current uptick will continue.

On an FOB Korea basis, the price climbed to $1,297/mt for H1 December material on October 28. Some sources were expecting that the European market was attractive for US-origin SM due to cheaper freight rates compared with Asia, which could tighten supply early 2012. The US prompt price was assessed October 27 at $1,240/mt FOB USG. The European price for November was assessed October 27 at $1,330/mt FOB Rdam. (See chart 4)

All of the charts featured were built on Platts on the Net. The formulas we use are estimates to illustrate industry-wide trends. Subscribers to Platts on the Net can modify the formulas to better reflect their own assumptions. If you are a Platts on the Net subscriber, and would like access to these charts or the formulas used to build them, or for more information about Platts on the Net, please contact Jim Foster atjim_foster@platts.com.

ullish options in GDX near all-time high, bullish for gold stocks

NEW YORK (Commodity Online): Gold stocks have been lagging behind gold prices, but if options data are to be believed, investor interest in these gold stocks may be turning bullish soon.

As per data by Trade Alert, bullish options activity in the Market Vectors Gold Miners ETF (GDX) has almost double and is near its all time highs. Last Friday, the GDX Put-Call ratio hit the lowest in 2 years at 0.61-to-1, a significant shift which indicates that the bullish call options now makes up a major chunk of GDX positions.

GDX is an ETF that seeks to replicate as closely as possible the price and yield performance of the NYSE Arca Gold Miners Index.

The increasing bullishness in options data had made some investors believe that gold mining stocks may be set for a rally.

However, price-pattern wise, GDX has been forming a bearish broadening pattern. We might see an immediate rally to the upside (the red line).

But, one should give close attention to the immediate support (blue line), which has been relevant for the entire year. The break of either the support or Resistance lines could decide the future trend.

Chinese coal industry looking strong in Q3

The coal output in the first three quarters of 2011 has hit 2.69 billion tons, up by 11.6 percentover the same period a year earlier. Its sales volume hit 2.64 billion tons, a 13.1 percentincrease compared to the same period of 2010.

Coal export volume has dropped slightly this quarter while its import volume continues toincrease. The market price of the coal has been quite stable.

Experts say that the domestic demand for coal will grow steadily but at a lower pace.Meanwhile, the productivity of the coal will increase and the 2011 Chinese coal output mayexceed 3.5 billion tons

น้ำท่วม

http://hilight.kapook.com/view/63607

China regrets US anti-dumping probe applications

The coal output in the first three quarters of 2011 has hit 2.69 billion tons, up by 11.6 percent over the same period a year earlier. Its sales volume hit 2.64 billion tons, a 13.1 percent increase compared to the same period of 2010.

Coal export volume has dropped slightly this quarter while its import volume continues to increase. The market price of the coal has been quite stable.

Experts say that the domestic demand for coal will grow steadily but at a lower pace. Meanwhile, the productivity of the coal will increase and the 2011 Chinese coal output may exceed 3.5 billion tons.

China regrets US anti-dumping probe applications

China's Ministry of Commerce on Oct 21 said that it regretted and was deeply concerned aboutanti-dumping and anti-subsidy probe applications by several US solar product makers whichasked the US government to investigate Chinese exports of solar panels.

A senior official with the Bureau of Fair Trade for Imports and Exports of the ministry toldXinhua that China currently registered a trade deficit of $1.88 billion with the US in the trade ofsolar products and the raw materials and equipment in making clean energy products.

The official warned that if the US slapped punitive tariffs on Chinese exports of solar panels, itwould also hurt US exports of raw materials and manufacturing equipment to China.

He said that if the US. decided to launch the probe, it would risk sending a "wrong signal" oftrade protectionism to the entire industry around the globe.

Imported iron ore stocks fall in China

BEIJING -- Inventories of China's iron ore at 25 major ports dipped 0.12 percent week-on-weekto 93.07 million metric tons in the week ending Oct 17, according to the Xinhua-China Iron OrePrice Index released on Tuesday.

Last week's supplies of imported iron ore were 110,000 metric tons lower than that of theprevious week, according to the index.

The price index for 63.5-percent-purity and 58-percent-purity iron ore imports both dropped 10points to 167 points and 138 points, respectively.

The downward trend in China's iron ore price will continue due to sluggish demand from steelmanufacturers and the global economic downturn, according to Xinhua analysts.

The weakening domestic demand from industries such as construction, automobiles andrailway construction will continue to weigh on imported iron ore prices, as a wait-and-seeapproach has become common among downstream companies, according to the analysts.

Iron ore producer giant Vale of Brazil recently said it would scale down its contracting prices ofiron ore with Chinese steel companies in the fourth quarter

China's farm produce prices down

BEIJING -- Farm produce prices in China fell in the week ending Oct 16 compared to theprevious week, the Ministry of Commerce (MOC) said in a report released on Tuesday.

Vegetable prices posted the sharpest declines. The wholesale prices of 18 staple vegetableswere down 5 percent on average during the week.

Meanwhile, the price of pork fell 1.2 percent and beef was down 0.4 percent.

The price of eggs continued to drop for a third week as supplies increased. The egg price wasdown 0.4 percent from the previous week, and down 0.9 percent in the past three weeks.

Eight kinds of sea products also saw an average price drop of 0.5 percent.

Prices of rice and edible oil rose slightly, both up 0.2 percent.

The general price decline of farm products is further decreasing the pressure on inflation,which began easing in July.

The country's consumer price index (CPI), a main gauge of inflation, climbed 6.1 percent year-on-year in September from 6.2 percent in August and 6.5 percent in July, which was a 37-month high.

Despite the eases, inflation remains stubbornly high -- far exceeding the government's full-yeartarget of 4 percent for 2011.

Sheng Laiyun, spokesman of the National Bureau of Statistics (NBS), said that the likelihood ofCPI growth further dropping in the fourth quarter was very high.

The government has made controlling consumer prices a top priority this year by tighteningmonetary policies which included raising the benchmark interest rates three times and hikingbanks' reserve requirement ratio six times since the start of the year.

NBS data showed that the economy expanded 9.1 percent year-on-year in the third quarter,the slowest pace in two years.

The slowing economic growth and tight monetary polices all pointed to an inflation decrease,Sheng said at a press conference Tuesday in Beijing.

He said that a bumper harvest this year and declining international commodity prices wouldalso ease price pressure in the coming months.