David Llewellyn-Smith


Coking coal still falling

From ANZ this morning: Newcastle FOB physical thermal coal were down 0.7% last week to USD88.41/t. Although Chinese domestic prices were steady, supported by the ongoing falls in coal inventories – Qinhuangdao stocks down 3.7% w/w. Expected supply disruptions are also supporting China’s domestic coal price, as scheduled maintenance is performed on the Daqin railway. Coking coal also fell 1.9% w/w


Roy Morgan unemployment remains elevated

From Roy Morgan this morning: In August 2012 an estimated 1.205 million Australians (9.8%, up 0.1% in a month) were unemployed, and the Australian workforce* was 12,279,000, (up 160,000 in a month) — comprising 7,263,000 full-time workers (down 169,000); 3,811,000 part-time workers (up 295,000) and 1,205,000 looking for work (up 34,000) according to Roy Morgan.


TD inflation jumps

TD Securities monthly inflation jumped in August. From Bloomie: Consumer prices increased 0.6 percent last month from July, when they gained 0.2 percent, an index compiled by TD Securities Inc. and the Melbourne Institute released in Sydney today showed. From a year earlier, prices advanced 2.2 percent, within the central bank’s 2 percent to 3 percent target range for


Manufacturing recession eases

The August PMI is out and shows some improvement in a slowing recession, though the trend still looks awful: In an encouraging sign, new orders were up strongly to only shrinking slightly! If we look at the sectoral split we get a hint of what may be happening: The three big improvers are all retail


Westpac: Offshore borrowing too risky

The AFR has really good article today about bank funding. It begins: The favoured euphemism for Australian credit growth is “anaemic”….despite the pressure this puts on bank earnings, it should be good news for the ranks of usually foreign analysts who fly over Australia at 30,000 feet and put out reports about a housing bubble, banks


Macro Investor Volume 1, Number 10

Macro Investor Vol 1, No 10. is now available at the website and in PDF. Having skirted the edges of the GFC, Australia, the Australian dollar and our banks, bonds and miners have benefitted from positive investment inflows. But as questions now surface about the mining boom, the terms of trade and Chinese growth, the


The long term price of iron ore

Here is today’s iron ore update: Hints of stabilisation on Friday but it’s still anyone’s guess if this is the bottom. I’m pretty skeptical so long as Chinese steel prices are still falling. Meanwhile my views on iron ore have been perfectly captured in a note by Ric Deverell, the widely respected head of commodities at


Macro Investor this week

Find below the contents page of the past week’s Macro Investor report for you to consider a 21 day free trial subscription. Macro Investor Volume 1, No 9 The Wrap this week looked at the confusion that is overwhelming the mining boom. Data examined Asia’s descent into a new European periphery. Technicals examined the weakness underlying bullish hopes of


Q2 RMBS arrears mixed

From Moodys: Sydney, August 31, 2012 — The prime 30-plus arrears rate remained steady in the second quarter at 1.66% in June, and unchanged from March. In addition, the rate has not moved much from the same period last year when it was at 1.67%. While the overall index is at 1.66%, considerable variation exists within the market. Historically,


GDP preview

Find below Westpac’s take on next week’s June quarter GDP figure. At 0.8% it looks reasonable to me, though let me reiterate that guessing GDP is a fool’s errand. Still, the components look right. It’s the following two quarters that are the ones to watch as consumption pulls back as carbon rebates unwind and net


Secret austerity comes to Canberra

From the AFR: Federal cabinet ministers have been told that departments face another round of big staffing cuts, in a move that will blunt Labor’s attack on state Coalition governments for slashing public service numbers. Cabinet ministers have been told the expenditure review committee of cabinet will impose a further “efficiency dividend” on the federal


FT takes an axe to our China assumptions

Last night, Kate Mackenzie of FTAlphaville single-handedly did what the entire government, financial markets and media of Australia have failed to do. She used reason to consider a wider framework for future Chinese growth paths than the mantra of steel intensity and urbanisation forever that has come to define Australia’s elite. Under a new series


China links

Courtesy of Sinocism. FT Alphaville has two interesting posts in a “China Myth” series.  The ever-increasing hunger for steel and The rapid march towards urbanisation both challenge some of the assumptions that underlie the more positive predictions for China’s economy. Some Chinese economists are very bearish, with one, Li Zuojun, an economist at the Development Research Center of the


Japanese PMI and industrial production weaken

More dour news for north Asian growth this morning with Japan’s August PMI contracting more swiftly on the month: After adjusting for seasonal factors, the headline Markit/JMMA Purchasing Managers’ Index™ (PMI™) posted 47.7 in August, down from 47.9 one month previously, signalling the sharpest worsening of Japanese manufacturing sector operating conditions since April 2011. Moreover, the


Moody’s slaps Fortescue onto downgrade watch

Gosh darn it, things are moving fast. Fortescue is officially at risk: Sydney, August 30, 2012 — Moody’s Investors Service has today placed on review for possible downgrade the Ba3 corporate family rating of Fortescue Metals Group Limited (FMG) and the Ba3 senior unsecured rating of FMG Resources (August 2006) Pty Ltd. RATINGS RATIONALE “The rating action reflects


CISA puts the boot into iron ore price

Amid the dreadful iron ore coverage around the place today, there are a couple of articles worth reading. The first is from Bloomberg: China’s iron ore output probably fell about 10 percent this month as tumbling prices squeezed out costly producers and steelmakers used cheaper imports, the China Metallurgical Mining Enterprise Association said. Production will


Howard ghosts Abbott, again

It seems that wherever Tony Abbott goes, Howard follows. From the AFR today: Foreign investment should be welcomed “without any sense of conditionality”, John Howard told a conference in China, just days after Opposition Leader Tony Abbott flagged a tougher approach to investment by state-owned enterprises in a speech in Beijing. The Australian Financial Review has


Down, down, prices are down!

I was accused this morning of gloating over the accident that’s transpiring in Australia’s bulk commodities. Happily a bevy of readers came to my defence. But there is someone that is gloating over the accident and that’s FTAlphaville, which posted the following on the falling iron ore price today: We can laugh at ourselves can’t we?


Kevin Rudd joins the China bulls

Find below the text of speech given by Kevin Rudd today. More of the same China commodity intensity forever guff, though at least Garnaut’s China caution gets a mention. What seems to have passed our entire elite by is the possibility that China will be fine and will continue to grow happily but we won’t


Coking coal hits new low

From the ANZ today: Newcastle Sep coal futures lost 0.4% to USD89.9/t, while iron ore again fell heavily, losing 4.7% to USD90.3/t. Chinese steel prices continue to weigh on iron ore. Hot-rolled coil is nearing a month long losing streak, while the most active rebar contract on the SFE hit an all time low yesterday with open interest at record


Charlie Aitken defends the ore price

Via FT Alphaville comes this quote from Charlie Aitken: Right here right now the spot markets are in turmoil as Vale dumps cargoes, traders who have been caught long at higher prices cut that trading inventory, and Chinese steel mills sit on their hands and run down inventories. It is estimated that Chinese steel mill


CBA to buy Standard Chartered?

Last night FTAlphaville speculated on a truly remarkable possibility. The cross post is below: As fantasy banking M&A goes — this isn’t such an outlandish idea, we reckon. But see what you think: Following their strong share price performance in 2012, an obvious question arises as to how the Australian major banks can use their


Bloxo puts the commodities bull case

Paul Bloxham of HSBC  recently released a very good piece of research arguing that the global economy had made a structural shift towards emerging markets growth that would continue a powerful surge in infrastructure growth and support high prices for commodities for decades. I agreed with his note but disagreed with its conclusion, that this


Iron ore price assumptions collapse

By David Llewellyn-Smith The iron ore complex tanked again yesterday: Perhaps some hope in the contango with the 12month which did signal the bottom in last year’s crash: But Chinese steel prices are still falling too: Here are some choice iron ore quotes from Reuters: “We believe that China is in the middle of a


The surplus is history

By David Llewellyn-Smith The AFR has a respectable take on the growing structural deficit of the Federal Budget today: Future governments may need to raise $120 billion – or almost $20,000 for the average four-person family – by the end of the decade to pay for Labor’s spending commitments. …These include the National Disability Insurance


Construction work done solid

The ABS June quarter Construction Work Done figures are out and show a decent quarter at a 0.2% fall, below consensus of a 0.5% rise. Offsetting the miss was a large upwards revision to the March quarter from 5.5%% to 7.8%. The dollar fell about 20 pips on the release. JUNE KEY FIGURES  Jun qtr