schminkie

China, Shipping and the Great Commodity Carry Trade

i like this article. it touches on parts of a situation which has been for me a puzzlement. whati want to know is what deals were cut when the pres of brazil went to peijing. a few little points...

in observing the chinese commodities purchases at bargain prices per shipping one might look at china cosco. they bought over 450 dry bulk ships last year from cosco group, their mother-ship as it were. their capacity plus underpinning of the prc gov't make it a safe bet although with caveats. they travel inland rivers, the china coast and the oceans.

drys made a bet on oil and invested in hugely expensive drilling vessels when both ship building, oil prices and drilling leases were in the 2008 stratosphere. but then things changed and that plan lost value. they are working out their debt, debt covenants, payments etc now but their debt and these decisions by management make me uncomfortable.

one of the mainstays of the chinese economy now is or at least would be producing and assembling products [using imported parts] for american companies. with that plus vast infrastructure contracts, china will be reliant on foreign economies for the foreseeable decades. therein go the commodities they are scooping up.

don't forget they are also selling or licensing extraction of commodities within china to american and other companies. also there is resistance to their buying large parts of overseas commodities companies.

if walmart starts printing money i'll worry more!

Recent World Events Are Bullish for Metals

i think your coal analysis is not really on the mark. first of all different types of coal have different functions in industry / economy and have different rates of scarcity. everything i see says that as long as steel demand persists the demand for metallurgical coal will exist and that is the scarcest coal and/or the hardest to mine, transport, etc. as long as power generation climbs coal use will climb. notice that several coal producing nations are trying to stop exports with extreme tariffs.

the quality of coal varies a lot. it seems that some of the largest unmined sources are in the powder river area. this coal is not of high quality and is costly to move, esp abroad.

i admit some things driving coal up will abate; i refer to the weather damage in australia which was severe. however the demand for coal per steel and per good quality coal for electricity, steam will maintain. demand is in fact a great deal more than supply vis a vis specific as above. large numbers of coal users including in the u.s.a. are scrambling.

i think a more interesting question is that of an agenda to unify dry bulk shipping, coal, iron ore and steel production within the same company [see SID of braqzil} this begs many interesting angles to study.

finally eskom. i have never been to s.a. reading several s.a. papers however i get the distinct impression that eskom is the victim of bureaucracy and stone-dense stupidity, shortsightedness and dismal failures in planning. to me it looks as though the chiefs of eskom did not buy coal for the future generation of power fearing looking bad given that high cost of coal would be beyond estimates and would cause a deficit and no doubt criticism from the government, threatening job security at eskom upper management. looks like while coal was rocketing into record costs these guys were in their hot tubs. just a surmise on my part but i feel like i am thinking in the right direction.

don't be surprised if the government cedes new consessions to foreign mining investors in particular. these are branches of huge multinational corps. perhaps such firms would even spend money to prop up eskom just to be able to function.