David Llewellyn-Smith


Coking coal still sliding

From the ANZ: Newcastle FOB physical thermal coal prices were steady last week at USD89.05/t. Although market activity remained subdued, the end of the Muslim holiday of Eid al-Fitr in Indonesia should see more movement this week. Having hit a low of a low of USD81-82/t in late July, thermal coal prices have held up well. The same cannot be


Macro Investor Volume 1, number 9

Macro Investor Vol 1, No 9. is now available at the website and in PDF. War is peace, ignorance is strength, there was no mining boom… The mining boom has transformed Australia’s political economy in ways that will be felt for years to come as what has been forecast as a structural revolution will, in


Credit crunch seizes iron ore price

Friday’s ore price movements showed some stabilisation: With 12 month swaps catching a break, there is some hope that last’s week’s heavy dump was the capitulation phase for the ore price. There is not much hope in the fundamentals, however, with rebar falling to a new low and little discussion so far of Chinese steel-makers


A history of terms of trade errors

The government spent the weekend in damage control about the forthcoming black hole in the Budget. Apparently: Australia’s mining boom is not even halfway over, federal Trade Minister Craig Emerson has declared, days after his cabinet colleague Martin Ferguson said the boom in commodity prices had reached its peak. “We’ve got a lot of projects


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 8 MACRO: Running with the Draghi put Risk, Europe and equity markets are running with an enthusiasm that would impress even the crowds at Pamplona. Nonetheless, investors will need much more


“Keep taking the pills, Nev”

Fresh and cross-posted  from FT Alphaville, comes this unusually frank assessment of Fortescue and iron ore. Remember the joke about the $120 iron ore price floor? How we laughed. And for continued amusement here’s Nev Power, chief executive of Fortescue Metals,the highly-leveraged poster child of the Australian resources boom, discussing iron ore at Wednesday’s annual results announcement. From


Glenn Stevens in the Parliament

Capt’ Glenn this morning. More of nothing, really. At least on economics. I must say, though, the one statement that has a gigantic question mark over it is this: After that the rate of resource investment is likely to decline, while the export shipments of the resources themselves will pick up. By then we might


My endless boom

By David Llewellyn-Smith It’s playing out as expected with the Pascometer leading off a chorus of nay-saying insiders yesterday afternoon and today. The boom isn’t over. Oh no! This is the endless boom, don’t you know. It’s entering a new phase, a third, fourth,fifth…twelfth stage. The AFR is wall-to-wall miner drivel this morning. The consensus now


China Flash PMI tanks

Uh oh. The HSBC China Flash PMI for August is out and the world economy is in trouble: Flash China Manufacturing PMI™ at 47.8 (49.3 in July). 9-month low. Flash China Manufacturing Output Index at 47.9 (50.9 in July). 5-month low. Here’s the chart: That’s not a happy trend. And the internals are ugly: Where’s


HIA: Housing affordability improves (and?)

From the HIA comes this quarter’s improved housing affordability measure: The improvement in housing affordability continued unabated in the June 2012 quarter, said the Housing Industry Association, the voice of Australia’s residential building industry. “Excluding the GFC period when interest rates dropped sharply, housing affordability is at its healthiest level since 2003,” said HIA Chief Economist, Dr


Fortescue embraces the hope

Fortescue is out with a good result. With the market giving it 3%: But from the annual report the following is woefully inadequate: That’s the Fortescue assessment for iron ore prices. I know ore is going to bounce some time, perhaps soon, but this is ridiculously thin coverage of the primary risk facing the company.


And now for coking coal…

I have been a bit confused by some of the spot versus contract pricing going in the market for coking coal. It appears I got my quarters mixed up. From ANZ today, there’s clarity, sadly: Newcastle Sept coal futures fell mildly to USD91.5/t. China’s total coal imports fell 10.3% m/m to 20.2mt in July, but is still


Government at a loss

A few Ministers are out this morning trying to make sense of the growing questions around mining investment. First they seem unable to get their story straight. According to the AFR, Martin Ferguson has said: Resources Minister Martin Ferguson has declared the mining boom is over, a day after BHP Billiton shelved the $US20 billion-plus


Iron ore crash goes on

Ore got walloped and swaps got monstered again yesterday: Here’s the latest on market internals from Reuters: Shanghai steel futures hit a record low on Wednesday, exerting more pressure on prices of the raw material iron ore whose freefall has forced Chinese steel producers to skip contracted cargoes. Chinese mills, the world’s biggest iron ore


FOMC Minutes turn dovish

Find the full FOMC Minutes below with highlighted key passages. This looks a bit more promising for QE3 yet is still very vague. So far the Fed has done a nice job of giving us virtual QE3 via the jawbone. This does not yet look like a decisive shift to actual QE. To be honest,


Olympic damn!

BHP has canned Olympic Dam. I have no idea why. The company has $4.7 billion in cash (albeit from $10 billion last year), almost no debt and can borrow at 3% for twelve year bonds. Copper and uranium are supposed to be a part of the next wave of Chinese growth, with copper a central


Leading index improves

From Westpac this morning: The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 2.4% in June 2012, below its long term trend of 2.7%. The annualised growth rate of the Coincident Index, which gives a pulse of current activity, was 3.7%, above its


Japan’s trade data adds to global slowdown fears

From Bloomie: Japan reported a wider-than-expected trade deficit in July as Europe’s sovereign debt crisis and austerity measures dragged down exports and higher oil prices boosted imports. The shortfall was 517.4 billion yen ($6.5 billion), after a revised surplus of 60.3 billion yen in June, the Finance Ministry said in Tokyo today. The median forecast in a


Macro Investor: CBA is not worth the risk

Commonwealth Bank of Australia Ltd (ASX:CBA) is the nation’s largest bank, providing banking, life insurance and related services for individuals, small businesses and medium sized commercial enterprises. It also provides corporate and general banking, international financing, institutional banking, stock broking via Commsec and funds management. On the surface, CBA looks great – record profit, improving


End of an era for iron ore?

The world steel association released its July production report overnight and the news is not especially good: World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) was 130 million tonnes (Mt) in July 2012, an increase of 2.0% compared to July 2011. China’s crude steel production for July 2012


China chart pack

Find below ANZ’s excellent monthly China chart pack. The only observation I’d make is that the bank continues to apply a Western paradigm to the PBOC response to economic weakness, forecasting large cuts in reserve ratio requirements and interest rates. The evidence to date is that a more modest easing is coming, if China wishes


August 22 links

United States: Lockhardt kills QE3. Zero Hedge, Tim Duy Risk off. Zero Hedge Structured by cows. Dealbreaker Europe: Concessions for Greece. Bloomberg Asia: China’s unprecedented liquidity operation. Alphaville More China links in the daily post from Sinocism Local: RBA exposes low doc loans. The Oz Port Hedland strife. The Oz Coalition’s radical Federalism. AFR RBA