Business

Aluminum exports from China, the world’s largest producer of the metal, jumped to the highest in more than three years as smelters took advantage of rising global prices.

Sales of the metal and its products rose by 11 percent to 300,000 metric tons in June from a month earlier, customs figures showed yesterday. That’s the highest since December 2004 and the fourth monthly advance, Bloomberg News reported.

“The amount looks big and the growth is led by aluminum alloys which don’t incur export taxes,” Wen Xianjun, director at the aluminum department of China Nonferrous Metals Industry Association, said yesterday by phone from Beijing. Wen said he wasn’t aware if the government was planning to change the tax rules, which applies to just primary aluminum, soon.

Aluminum, used in buildings and cars, has rallied 36 percent this year after power shortages in China and South Africa curbed output. The metal reached a record of US$3,380.15 a ton last week after China’s producers pledged to cut output to help ease a nationwide power shortage.

“More exports are good for the domestic market and could be bearish for London prices,” Li Jingyuan, an analyst at Haitong Futures Co, said in Shanghai. “Yet we believe rising production costs due to a power shortage is what investors are more concerned with than supply-side news.”

Exports of tin and alloys from China, the world’s largest producer and consumer, fell to a record low of 1 ton in June, according to customs data.

A 10-percent duty on tin exports “has worked well so far” in curbing the metal’s overseas sales, Liu Minda, an analyst at Huatai Securities, said yesterday by phone from Nanjing.

(Shanghai Daily July 16, 2008)

Baosteel Group Corp, China’s largest steel mill, acquired an 8-percent stake in Zhanjiang Port Group Co, the South China Morning Post said, citing China Merchants Holdings (International) Co Chairman Fu Yuning.

China Merchants’ stake in the port operator fell to 40 percent following the deal, the Hong Kong-based newspaper said. Zhanjiang Port Authority holds the remainder, it added.

The partners will invest 4 billion yuan (US$586 million) in expanding the port, the report said. The port boosted first-half traffic 35 percent, it added.

(Shanghai Daily July 15, 2008)

Wuhan Iron & Steel Group (Wugang), one of China’s biggest steel mills, posted a one-fifth growth in first-half profit on increased sales and cost-cutting efforts.

The company said its January-June profit rose by 20.48 percent to a record 6.05 billion yuan from a year earlier, laying a solid foundation for its target of earning 10 billion yuan for the whole of the year.

Wugang’s sales revenue reached 63.18 billion yuan in the first six months, up 89.78 percent compared to the same period last year, it said.

Meanwhile, its crude steel production increased by 54.93 percent to 11.26 million tons. The group had earlier said that it expected to produce 22 million tons in 2008.

Wugang said it is also doing its utmost to cut costs mainly by using more home-produced iron ore to fend off price hikes of overseas iron ore as well as other raw materials.

Baosteel Group, China’s top steel producer, which represented the domestic steel industry in talks, recently agreed on an iron ore price surge of as much as 97 percent till March 2009 with BHP Billiton and Rio Tinto, the world’s two major ore providers.

In February, Baosteel also agreed with another iron ore supplier CVRD to raise prices of the raw material by 65 percent.

Analysts said the price hikes were putting great pressure on the country’s steel industry, as China is the world’s largest iron ore importer.

China’s iron ore imports grew by 20 percent to 192.35 million tons in the first five months of this year, according to industry data.

(China Daily July 15, 2008)

China’s 27 lead and zinc smelters agreed to cut production by 10 percent between July and September, in a move to prop up market prices and relieve electricity shortages.

The zinc and lead producers that signed up to the deal included Sichuan Hongda Co Ltd and Henan Yuguang Gold & Lead Group Co Ltd, the Shanghai Nonferrous Metals Trade Association said yesterday. However, the country’s top zinc producers, Hunan Zhuzhou Smelter Group Co Ltd and Huludao Zinc Industry Co Ltd are not on the list.

“When cutting production, companies can make some maintenance work. They can also save some electricity to support the coming Olympic Games and the development of other industries,” the association said in a statement.

“Domestic companies should take further measures such as energy conservation and management improvement to lower their costs,” said the statement. Energy accounts for 25 to 30 percent of the cost of producing zinc, making it the second-most energy-intensive metal after aluminum.

Last week, China’s aluminum smelters agreed to reduce production through September because of power shortages and to ensure supplies for the Beijing Olympics, the China Nonferrous Metals Industry Association said.

Since last year, prices of lead and zinc have seen a sharp decrease on the market. Statistics show that since May 2007 the price of zinc billet has decreased by 53 percent to 15,650 yuan per ton, and the price of lead billet was down by 34.74 percent to 16,500 yuan per ton.

Falling prices have put domestic companies in great difficulties, said Tong Leshen, an analyst with the Shanghai Nonferrous Metals Trade Association. Apart from the smelters, some mining resource companies in the sector are also under big pressure.

There may be a global oversupply of 215,000 tons of zinc this year, the International Lead and Zinc Study Group said in April. Lead may have an excess of 26,000 tons, the group said.

From January to May this year, China’s lead consumption has seen a decrease of 50,000 tons, but the manufacturing capacity continues to see increases, said China Nonferrous Metals Industry Association. This year, provinces such as Shaanxi, Hunan, Yunnan and Gansu have all seen new lead projects come on stream.

Analysts said lead and zinc smelters will continue to see 2008 and 2009 as challenging times with rapid growth in global mine production and slowed growth in demand.

Some analysts suggested that China should build national reserves for lead and zinc, in a move to prevent prices from rising too high or falling too low.

(China Daily July 15, 2008)

Beijing Shougang Group, one of China’s leading steel makers and the capital’s major polluter, is fulfilling its commitment to cut output and pollution by 70 percent for the Olympic Games, a company source said Friday.

The Beijing plants of the group have slashed monthly production to 200,000 tonnes in the third quarter, said the group’s president Zhu Jimin. “This is about 29 percent of our normal output.”

Through June, Shougang had extinguished the fires in three of its four blast furnaces at its Beijing plants.

These plants, which formerly produced 8.2 million tonnes of steel a year, would almost halve their output this year to 4.2 million tonnes, before all their Beijing production was stopped by 2010.

This year’s output cut will put the group’s Beijing plants in the red and slash the group’s annual profits by at least 2 billion yuan (285 million U.S. dollars), Zhu said.

He said the losses would hopefully be offset by the group’s new steel projects, notably its new plant in Caofeidian, an islet in the neighboring Hebei Province that will turn out 4.85 million tonnes of steel a year after its first phase starts operation in October. In two years, the new plant will be producing up to 10 million tonnes a year.

Meanwhile, Shougang’s new cold rolling mill in Shunyi District in northeastern Beijing is producing 1.5 million tons a year.

“We’ll also exploit our advantages in other sectors,” Zhu said. These will include tourism, entertainment and other tertiary industries.

After the relocation, the old factory site in western Beijing will be developed into a complex for tourism and entertainment, cultural business, and commercial and residential compound with an expanded area of 856 hectares from 707 hectares.

“We’ll be responsible for our shareholders and will protect their practical and long-term interests,” Zhu said.

Shougang’s efforts will hopefully pay off with pollution cuts, as it plans to reduce emission of sulfur dioxide, soot and dust by 49.18 percent, 50.32 percent and 49.22 percent, respectively, this year.

Further output cuts in the third quarter will hopefully bring down emissions of the three major pollutants by 70 percent compared with last year, Zhu added.

Founded in 1919, Shougang is widely considered the flagship of China’s heavy industry. With its production base just 17 km west of Tian’anmen Square in central Beijing, it has long been blamed for causing heavy pollution as the plant’s chimneys belch out thick clouds of smoke.

As one of the efforts made by the Chinese government to improve Beijing’s air quality, Shougang Group began in 2005 to relocate its facilities to Hebei Province about 200 km east of Beijing.

Shougang has promised its new facility would use advanced technologies to reduce environmental impact.

(Xinhua News Agency July 11, 2008)

China’s biggest aluminum producers, the largest in the world, agreed to cut output by up to 10 percent to ease a power shortage, sending metal prices to a record.

Aluminum Corp of China Ltd and 19 of its peers signed the agreement yesterday to curb supply by between 5 percent and 10 percent, said a government official who asked not to be identified. Aluminum gained as much as 5 percent to US$3,350 a ton on the London Metal Exchange after the announcement. Norsk Hydro led gains by shares of non-Chinese producers.

The cuts may help alleviate a sixth year of power shortages in the world’s fourth-largest economy and curb Chinese aluminum exports that jumped 43 percent in June. The energy used by China’s aluminum smelters each week is enough to provide power for more than 2 million people for a year.

“The production cut will remove at least 500,000 tons of output, which will significantly change the balance of the aluminum market in China and globally,” Chris Ding, an analyst at China International Capital Corp, told Bloomberg News.

The companies, which account for 70 percent of the country’s output, the Ministry of Commerce and the China Nonferrous Metals Industry Association agreed on the cut at a meeting yesterday in Shandong Province, the official said.

China is grappling with power shortages caused by economic growth that averaged more than 10 percent annually in the past 5 years. Government control of power prices means utilities can’t afford to buy enough coal. Aggravating the shortfall, the government has shut small and unsafe coal mines.

Power takes up from 30 percent to 40 percent of the cost of making aluminum. China produced 12.6 million tons of the metal last year.

Aluminum Corp, the nation’s largest producer, Qingtongxia Aluminum Group Co, Yugang Longquan Aluminum Industrial Co, Yunnan Aluminum Co were present at yesterday’s meeting, the official said.

Zhao Shengmao, deputy general manager of Qinghai Qiaotou Aluminum Electricity Co who was at the meeting, confirmed the agreement. He declined to comment further on the meeting.

“Cutting aluminum supply alleviates the power crisis without hurting the goal of self sufficiency,” Michael Rawlinson, head of mining, resources and energy, at Liberum Capital Ltd, said yesterday.

(Shanghai Daily July 11, 2008)

China National Machinery and Equipment Import and Export Corporation (CMEC) said it has signed an agreement on mineral rights of Belinga iron ore reserves with Gabonese government.

A joint venture company will run the Belinga mine and its supporting infrastructures for 25 years, and is expected to have access to 30 million tons annually.

The exploration and construction costs will be more than $790 million, including the construction of 500 km railways, dams and deepwater ports, according to a report by Shanghai Securities News.

So far, the Belinga iron ore project is China’s largest resource investment in Africa.

The mineral right agreement is part of a pact, which was reached in 2006 between CMEC and the Gabonese government to construct and run the Belinga iron ore reserves.

Under the agreement, Chinese enterprises headed by CMEC will further exploit the Belinga iron ore deposit and construct railways, ports and hydropower plants in cooperation with the Gabonese government.

The Export-Import Bank of China will finance the whole project.

Experts said once completed, the ratio of iron ore imports from Africa in China’s total imports will be largely increased. It not only can diversify the country’s iron ore import channels, but also crucial to its strategic reserves of iron ore.

With China’s booming economy, its iron ore imports reached 380 million tons last year. In 2006 it reached 326 million tons and 275 million tons in 2005.

China’s iron ore imports may exceed 625 million tons by 2012, accounting for about 67 percent of the world’s cross-continent trade, said Zhu Kai, China president of VALE, a global mining company headquartered in Brazil.

“Chinese enterprises have to seek opportunities to exploit iron ore overseas, since it might be a way to obtain overseas resources and escape the impacts of the soaring prices,” said Xu Yingchun, director of Lange Steel Information Research Center.

“Chinese enterprises can invest in foreign resources by setting up joint venture companies,” said Jeremy South, steel specialist of Deloitte.

Belinga iron ore reserves was discovered in 1955 at Belinga, which lies in remote forest hills 500 km east of Libreville, the capital and port on Gabon’s Atlantic coast. It has proven reserves of more than 500 million tons.

(China Daily July 9, 2008)

Baosteel Group Corp, China’s biggest steel maker, will shift a heavy-plate production line from Shanghai to the western region of Xinjiang as the city prepares for the 2010 World Expo.

Baosteel unit Xinjiang Ba Yi Iron & Steel Co will pay 109.9 million yuan (US$16 million) to buy part of the facilities in Shanghai from another Baosteel subsidiary.

(Shanghai Daily July 31, 2008)

Three leading Chinese dot-com firms have won the right to broadcast events of the 2008 Olympic Games, competing with Sohu.com, a sponsor and original holder of the rights, it was announced in Beijing yesterday.

The announcement was another move in the heated battle in the Chinese Internet industry before the Games open next month.

The Olympics are bringing huge business opportunities and the potential for surging advertising income for online firms, industry insiders said.

Nasdaq-listed NetEase.com and Sina Corp as well as Hong Kong-listed Tencent (QQ) said they signed with CCTV.com to get the rights to video broadcast the Olympics and to offer video on demand services online.

PPLive.com also obtained the rights from CCTV to broadcast Beijing Olympics content through its Websites, the second online peer-to-peer video sharing platform after PPS’ partnership with cctv.com, its operator Shanghai Synacast Media Tech Co announced yesterday.

PPLive, which has over 100 million registered users worldwide according to an AC Nielson survey, was ranked first of all Chinese P2P platforms for user scale and exclusiveness, iResearch said in its latest report.

CCTV will use eight channels to broadcast the Olympics with 3,800 hours of television from August 8 to 24, Wang Wenbin, general manager of CCTV.com, said.

The chief executives of the flagship firms, including NetEase’s William Ding, Tencent’s Ma Huateng and Sina’s Charles Chao, declined to reveal financial details yesterday.

“The new media broadcasts of the Olympics, the first time in the history of the global event, will allow even more people access to the event,” Wang said.

Along with Sohu, almost all top Chinese Websites have the rights to broadcast the Olympics.

“It’s the first time the Internet has become the No. 1 distribution channel of the Olympics over CCTV (in China). For most advertisers, the Internet is the major battle field of Olympics promotions,” DCCI said in a report released yesterday.

Advantages

Advantages of the Internet platform include immediacy and interactive content, according to the DCCI (Data Center of the China Internet), an Internet market monitor and data analysis platform.

By the end of the first half of the year, China’s online population reached 221 million and is expected to hit 263 million by the end of this year.

In the first six months, Chinese netizens spent 256.7 billion yuan (US$37.1 billion) on-line, a 58.2-percent growth year-on-year, and the whole-year figure will surpass 587.4 billion yuan, according to DCCI.

The major online players in the Chinese dot-com industry will benefit from the Olympics.

Sina.com and Sohu.com, the country’s top Internet portals, have generated strong advertising?sales with a quarterly growth rate from 18 to 30 percent above previous quarters.

(Shanghai Daily July 16, 2008)

China Mobile has joined the home-grown 3G industry alliance and has cut the telecommunications cost of TD-SCDMA services in a bid to make TD-SCDMA mature enough for commercial use, industry insiders said yesterday.

Ten firms, including China Mobile, have become members of the TD-SCDMA (time division-synchronous code division multiple access) Industry Alliance, the alliance’s Website said yesterday.

Other new members include chipset designer MTK and China’s biggest handset distributor PTAC.

“The move shows China Mobile’s decision on TD-SCDMA. China Mobile’s leading position (in mobile communications), MTK’s strength on chip design and PTAC’s channel advantage will jointly push the industry development,” Shenyin & Wanguo Securities said in a note.

China Mobile started tests of TD-SCDMA services in April and China is expected to issue 3G licenses after the commercial use of TD-SCDMA.

China Mobile has applied to the Ministry of Industry and Information Technology to set up new entry-level package of data services on TD-SCDMA, according to the MIIT Website.

Service packages

To woo more consumers to test the TD-SCDMA data services, TD-SCDMA subscribers are allowed to pay five yuan (72 US cents) for 30 megabytes’ monthly data consumption, 20 yuan for 50M and 30 yuan for 500M. Previously, the data service packages started at 100 yuan.

Data services, such as video call, high-speed Internet access and multimedia download, are killer applications of 3G, industry insiders said.

China Mobile also plans to expand the TD-SCDMA coverage to 38 cities from the present 10 cities soon, according to media reports.

China Mobile, which confirmed it is to upgrade the TD-SCDMA networks to 3.5G, declined to comment.

China has upgraded the existing trial of a 3G network to 3.5G in four cities including Shanghai, which raises 3G phone download speed four-fold.

China Mobile’s big-scale network upgrade is expected to come in the first half next year, according to Shenyin & Wanguo Securities.

(Shanghai Daily July 15, 2008)