china resources quarterly - department of industry ... resources quarterly • southern spring ~...

China Resources Quarterly

So

uth

ern

sprin

g ~

No

rthe

rn a

utu

mn

20

15

China Resources QuarterlySouthern spring ~ Northern autumn 2015


So

uth

ern

sprin

g ~

No

rthe

rn a

utu

mn

20

15


Southern spring ~ Northern autumn 2015

ii China Resources Quarterly • Southern spring ~ Northern autumn

© Commonwealth of Australia 2015

Creative Commons licence With the exception of the Coat of Arms, this publication is licensed under a Creative Commons

Attribution 3.0 Australia Licence. Creative Commons Attribution 3.0 Australia Licence is a standard form license agreement

that allows you to copy, distribute, transmit and adapt this publication provided that you attribute the work.

A summary of the licence terms is available from: http://creativecommons.org/licenses/by/3.0/au/deed.en

The full licence terms are available from: http://creativecommons.org/licenses/by/3.0/au/legalcode

The Commonwealth’s preference is that you attribute this publication (and any material sourced from it) using the following

wording: Source: Licensed from the Commonwealth of Australia under a Creative Commons Attribution 3.0 Australia Licence.

ISSN 978-1-921516-05-4 [Print]

ISSN 978-1-921516-07-8 [PDF]

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced or

altered by any process without prior written permission from the Australian Government. Requests and inquiries concerning

reproduction and rights should be addressed to:

Department of Industry, Innovation and Science

GPO Box 9839

Canberra ACT 2601

or by emailing [email protected]

China Resources Quarterly • Southern spring ~ Northern autumn iii

AcknowledgementsThis publication was jointly undertaken by the Westpac Institutional Bank, a division of the

Westpac Group, and the Australian Government Department of Industry, Innovation and

Science. The relationship is non–commercial. The report was previously published under the

title of the Westpac–BREE China Resources Quarterly.

Editors

Westpac: Huw McKay.

Department of Industry, Innovation and Science: Kate Penney and Ben Witteveen.

Design and production

Julie Doel

Cover image

Shutterstock

This report was fi nalised on November 6 2015.

iv China Resources Quarterly • Southern spring ~ Northern autumn

Acknowledgements iii

Contents iv

Acronyms and abbreviations v

Foreward vi

Executive summary 1

Recent developments in the Chinese

economy2

General macroeconomic indicators 10

Resource related macroeconomic

indicators12

Steel 14

Iron ore 16

Metallurgical coal 20

Energy overview 22

Thermal coal 24

Oil 27

Gas 30

Uranium 32

Gold 34

Silver 37

Copper 38

Aluminium 41

Alumina 43

Bauxite 44

Nickel 46

Zinc 49

Lead 52

Tin 54

Molybdenum 55

Tungsten 56

Cobalt 57

Antimony 58

Platinum and Palladium 59

Mineral sands 60

Rare earth oxides 61

Manganese and Cadium 62

Diamonds and Magnesium 63

Mineral and energy import summary 64

Provincial distribution of energy

and resource related activity

Electricity output & consumption 66

Coal and gas 67

Ferrous metals 68

Alumina and aluminium 69

Copper and gold 70

Nickel and zinc 71

Contents

China Resources Quarterly • Southern spring ~ Northern autumn v

Acronyms and abbreviations

ABS Australian Bureau of Statistics

ASEAN Association of Southeast Asian Nations

AUD, $A Australian dollar

bcm billion cubic metres

CEIC Chinese Economic Information Company

CFR Cost including freight

CNY, CNH Chinese yuan (onshore & off shore)

cm cubic metres

dltu dry long tonne unit

FDI foreign direct investment

FOB free on board

FX Foreign exchange

G3 United States, Europe and Japan

GDP gross domestic product

GFC global fi nancial crisis

GFCF gross fi xed capital formation

GCF gross capital formation

IEA International Energy Agency

IMF International Monetary Fund

koe, mtoe kilogram of oil equivalent, million tonnes of oil equivalent

kgpp kilograms per person

kWh kilowatt hour

LNG liquefi ed natural gas

Mt million tonnes

na not available

NAR net as received

NIEs Newly Industrialised Economies (Singapore, Taiwan, Hong Kong, South Korea)

ODI outward direct investment

OECD Organisation for Economic Cooperation and Development

OPEC Organisation of Petroleum Exporting Countries

PMI Purchasing Managers Index

PPP purchasing–power parity

ppt percentage point

RMB Chinese Renminbi

SHIBOR Shanghai Interbank Off ered Rate

sqkm square kilometres

USD, US$ United States dollar

Growth rate conventions and abbreviations.

“Year–ended growth”, abbreviated %yr, is the level of an indicator in a single period (a month or quarter) versus the corresponding period in the prior year, expressed as a percentage.

The term “smoothed growth” should be understood to represent a 3 month moving average (3mma) of the year– ended growth rate.

“Year–to–date growth”, abbreviated %ytd, is the accumulated level of an indicator at a point in the calendar year (for example year–to–June, year–to–Sep) versus the corresponding point in the prior year, expressed as a percentage.

“Annual average growth”, abbreviated %ann, is the level of an indicator over four quarters, versus the previous four quarter period, expressed as a percentage.

“Month–on–month and quarter–on–quarter growth”, abbreviated %mth or %qtr, is the level of an indicator in one period, versus the immediately prior period, expressed as a percentage.

“Annualised growth or annualised rate”, is the change in an indicator in a single period grossed up to a year, expressed as a percentage. If seasonally adjusted, this may be rendered as %saar.

vi China Resources Quarterly • Southern spring ~ Northern autumn

ForewordWelcome to the Southern spring ~ Northern autumn edition of the China Resources Quarterly

– hereafter the CRQ. The CRQ is a collaborative research venture between the Westpac

Institutional Bank (hereafter Westpac) and the Australian Government Department of Industry,

Innovation and Science.

The CRQ is the primary reference point for public and private sector decision makers seeking

to understand developments in the Chinese economy, with special reference to its demand for

resources.

This edition has been compiled against a discouraging economic backdrop. China’s domestic

demand profi le remains fragile and exports are falling. As a result nominal activity growth is

extremely subdued vis-a-vis the double digit percentage growth rates that were de rigeur for

much of the last decade.

In the resources sphere, the intersection of increasing Australian supply potential and the fact

that it is the most resource and energy intensive parts of the Chinese economy that have slowed

the most, has produced steep declines in the prices of a number of important commodities.

With China’s development model in the midst of a major structural infl ection point, and

Australia’s own commodity cycle having shifted decisively into the supply phase, it is more

vital than ever to trade in fact rather than rumour. The CRQ aims to do its part in this regard by

making available rigorous and empirically grounded analysis of macroeconomic and resource

industry trends.

China is now the world’s largest national economy in purchasing power parity (internationally

comparable volume) terms and the largest producer of industrial value added, however

measured. And it is now a free-trade agreement partner of Australia. These observations

underscore the value of continuing to deepen our collective understanding of the ever–evolving

Chinese economy.

Bill Evans Mark Cully

Chief Economist Chief Economist

Westpac Department of Industry, Innovation &

Science

China Resources Quarterly • Southern spring ~ Northern autumn 1

Executive summary

The Chinese economy grew at a rate below its potential in the first three quarters of 2015. The general impression left by the flow of data since the previous edition of the CRQ has been distinctly underwhelming. Aggregate demand moderated in the September quarter, following on from a weak first half of 2015. The principal sources of weakness remain building activity and heavy industry, with services consumption and infrastructure capex providing partial offsets. Exports, which had been a support for growth in 2014, are now contracting.

Growth in heavy industrial capacity and in mining investment have both slowed significantly in the year to date. Coal mining and ferrous metals smelting are among the weakest segments. Outlays on utilities capex have continued to grow at a healthy pace. Investment in transport infrastructure continues to run at a relatively high level. Public sector capex has stabilized in 2015 to date having experienced steep declines last year, but overall the support for demand from this quarter has been extremely modest.

Real estate construction activity remains weak, while from the point of view of sales turnover the housing market may be at an important inflection point. Dwelling price gains appear to be fading before an aggregate spill-over from the early respondents to policy easing to the smaller, less wealthy, non-coastal cities has been achieved. This earlier than anticipated levelling out in the sales rebound will delay any recovery in building activity until deep into next year.

The heavy industrial sector continues to struggle. The proportion of industrial firms making losses remains historically high; the demand for basic inputs consumed by construction has deteriorated; as a result excess capacity is looking increasingly pronounced in some sub-sectors; and producer prices continue to decline, as they have done since early 2012.

China’s exports have fallen in recent times, with the deterioration evident across the G3, in intra–Asian trade and in shipments to extra-regional emerging markets.

Demand for imported raw materials has been reasonable (albeit volatile) in volume terms, but the overall import bill has declined due to steep falls in metals, energy and certain food prices.

An unexpected shift in exchange rate policy sparked global comment in the quarter just concluded, while financial reforms have come thick and fast in the year to date, with more than half an eye on the RMB’s bid to join the IMF’s SDR basket at the forthcoming review.

Commodity prices exhibited considerable softness during the first half of 2015, following on from the inglorious collapse of 2014. The September quarter saw stability emerge in some markets, but at the time of writing a new downtrend seems to be emerging. Lower prices have been driven largely by the increase in supply, although as noted above and throughout the CRQ, the growth in demand has, in the main, been considerably lower than the norms established in the 2000s.

The global supply trend has been exemplified by Australia’s bulk commodity export volumes, which have continued to increase despite substantially lower prices. Even so, as the period of time that commodity prices spend around their current levels extends, the more pressure will be brought to bear on those mines, in Australia, China and elsewhere, that are operating in the upper quartile of their respective industry cost curves.

2 China Resources Quarterly • Southern spring ~ Northern autumn

The Chinese economy grew at a rate below its potential in the first three quarters of 2015. The general impression left by the flow of data since the previous edition of the CRQ has been distinctly underwhelming. Aggregate demand moderated in the September quarter, following on from a weak first half of 2015. The principal sources of weakness remain building activity and heavy industry, with services consumption and infrastructure capex providing partial offsets. Exports, which had been a

support for growth in 2014, are now contracting.

Real GDP expanded by 6.9% year–on–year in the September quarter alone. That compares to 7.0% in Q1 & Q2, 7.3% in the December quarter; 7.4% for 2014 as a whole and the 7.7% outcome for 2013. Nominal GDP, which has historically exhibited significantly more cyclical amplitude than the volume measure, decelerated to 6.2% in Q3, from 7.1% in Q2, and an upwardly revised 6.6% in the March quarter. With the exception of the GFC period, the recent phase has produced the slowest nominal growth since the deflationary late 1990s. The change in the GDP deflator, a derived estimate of economy-wide prices, was –0.7% year–ended in Q3, versus –0.1% in the first half.

Looking at the breakdown of real activity from the production side of the accounts, on a broad sectoral basis, secondary output slowed 0.1ppts to 6.0%ytd while tertiary activity edged 0.1ppts higher to 8.4%. As for the estimated quarterly contributions on an expenditure basis, they were: 4.0ppts from final consumption (4.0ppts in the corresponding quarter of 2014); 3.0ppts from investment (versus 3.0ppts 2014Q3); and net exports at –0.2ppts (+0.8ppts).

Real urban fixed investment growth (not directly comparable to the national accounts measure) recorded a 12.6% year-ended rate in Q3, versus 11.7% in Q2. In terms of the sectoral composition of investment activity, on a nominal basis, growth in heavy industrial capacity and the extractive industries remains weak. Utilities and transport capex remains at an elevated level, but growth receded somewhat in Q3. Real estate was again a drag. Housing and non–residential building are still in the doldrums (see page 4). State–owned enterprises have contributed a little over a third of the growth in fixed investment in the year to date.

-10

0

10

20

30

40

50

-10

0

10

20

30

40

50

Mar-93 Sep-97 Mar-02 Sep-06 Mar-11 Sep-15

%yr%yr

Total

Secondary

Tertiary

Sources: Westpac Economics, CEIC

-2

-1

0

1

2

3

4

5

6

Investmentppt cont

Consumptionppt cont

Net exportsppt cont

GDP deflator%ytd

%ytd or ppt

Q2 '13 Q3 '13 Q4 '13

Q1 '14 Q2 '14 Q3'14

Q4'14 Q1'15 Q2'15

Q3 '15

Sources: CEIC, Westpac Economics.Dec-13 GDP deflator interpolated.

0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35

Real estate Manuf Transport Utilities Total

%ytd%ytd

Dec-11 Dec-12 Dec-13

Dec-14 Sep-15

Sources: CEIC, Westpac Economics

Figure 1: Nominal GDP: total & broad sectors

Figure 2: Various elements of the national accounts

Figure 3: The investment cycle: a sectoral view

Recent developments in the Chinese economy


Rather than relying on GDP alone to assess the state of the Chinese economy, it is prudent to complement the national accounts with a range of alternative indicators that also correlate with overall activity. Doing so provides a richer and more complete picture of macroeconomic trends. For the real economy (as opposed to the monetary–financial sphere, which will be dealt with subsequently), these data fall into three broad categories. They are (1) nationwide surveys (2) economy-wide measures of intermediate input, and (3) bellwether industry sectors that map the broader economic cycle. Additionally, balance sheet information from government and business contains relevant insights on underlying growth.

In the previous edition of CRQ we argued that a balanced reading of the alternative indicators suggested that aggregate demand growth was a little below the 7% implied by both real and nominal GDP. With real (6.9%) and nominal (6.2%) GDP growth having diverged again in Q3, we argue that the nominal rate is a closer approximation of the underlying reality at present.

The People’s Bank of China’s corporate survey is the most valuable resource in category (1). The largest firms in the country gauge that business conditions deteriorated anew in Q3, pushing them further below long run average levels.

In category (2), alongside the traditional proxy of electricity output, logistics volumes provide additional insight. At the end of Q3 the smoothed year–ended growth rate of these proxies was 1.6% (electricity); –4.2% (terrestrial freight) and 4.6% (aquatic freight). Note that these proxies work best for heavy industry and exports, twin pillars of the ‘old’ model. They do not necessarily capture trends in services, which are now a major source of growth.

In category (3), the real estate industry – especially its construction arm – is the bellwether of choice. It is considered in detail on the following page. Regarding balance sheets, the year–ended growth rate (smoothed) of central government revenues was 8.2% in Q3, up from 7.5% in Q2, while the growth of outlays lifted from 7.1% to 11.1%. The profits of industrial firms (manufacturing, mining & utilities) have declined modestly in the year to date, with weak revenue growth the major factor, as overall margins have been quite stable since May.

80

85

90

95

100

105

110

115

120

125

130

Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-145

10

15

20

25Nominal GDP growth (lhs)Business situation* (rhs)Domestic orders* (rhs)

Sources: CEIC, Westpac Economics. * 5000 enterprise survey. Dec-13 nominal GDP growth interpolated.

% long run average%yr

-30

-15

0

15

30

45

60

-15

0

15

30

45

Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16

Cement (lhs) Steel (lhs)

Electricity (lhs) Exports (rhs)

%yr %yr

Sources: CEIC, Westpac.3mma of year-ended rates.

-10

0

10

20

30

40

50

-10

0

10

20

30

40

50

Mar-93 Sep-97 Mar-02 Sep-06 Mar-11 Sep-15

%yr%yr

Financial services

Real estate services

Tertiary total

Wholesale and Retail

Sources: Westpac Economics, CEIC

Figure 4: Business conditions, orders & GDP

Figure 5: The old model: bellwether sectors

Figure 6: The new model: bellwether sectors


The real estate sector

Real estate represents around one quarter of

nominal urban fixed investment. Real estate

investment itself is split roughly 70/30 between

residential and non–residential. State–owned

enterprises represent around 14% of the total.

In the previous edition of the CRQ we noted that

the real estate slowdown directly accounted for

two-fifths of the 5.9ppt deceleration in investment

growth in the year-to-June 2015. In the year-to

September, its direct contribution to the capex

slowdown increased slightly, to around 45%.

Our interpretation is that the housing market may

be at an important inflection point. The cumulative

evidence implies that the genuine price and

turnover recovery in tier-1 and certain tier-2 cities

seen earlier in 2015, responding to the shift in policy

stance, strong pass through from benchmark rate

cuts to mortgages and the increase in affordability

brought about by the weak performance over

the last year, is no longer broadening out to the

smaller, less wealthy jurisdictions where developer

inventories are most pronounced. In short, the

impetus provided by easier housing policies is fading

before an aggregate spill-over to the smaller, less

wealthy, non-coastal cities has been achieved.

In terms of the pricing detail, the net balance of 70

cities seeing month–on–month price appreciation

in new dwellings improved to +28.6% in September

(40 rising, 20 declining) from –2.9% in June (30 rising

and 32 declining); while the equivalent figures in

secondary markets are +30.0 in September (40 up,

19 down) and +32.9% in June (42 up, 19 down).

The volume of housing sales turnover slowed

to +9%yr in September from +14.7% in August,

while the growth in starts surprisingly spiked from

–16.7% in August to +15.3%. Off-market residential

construction growth remained icy at –21%yr

in September, while commercial developers’

residential activity jumped, consistent with the

starts figure reported above. For the moment we

are content to categorize the move in starts as

noise but the levelling off in sales growth looks

more genuine.

-100

-80

-60

-40

-20

0

20

40

60

80

100

-100

-80

-60

-40

-20

0

20

40

60

80

100

Feb-11 Feb-12 Feb-13 Feb-14 Feb-15

Net % of cities Net % of cities

New

Secondary market

Sources: CEIC,Westpac Economics

90

100

110

120

130

140

150

160

170

180

75

100

125

150

175

200

225

250

275

Aug-06 Aug-08 Aug-10 Aug-12 Aug-14

indexindex

Completions (lhs)

Sales (lhs)

Residential land price (rhs)

Sources: CEIC, Westpac. Aug-2006 = 100.Underlying activity data in sqm.Land price is a spliced series of 100 and 70 city series.

-45

-30

-15

0

15

30

45

60

75

90

105

-45

-30

-15

0

15

30

45

60

75

90

105


%yr%yr

Sales

Starts

Sources: CEIC, Westpac.Underlying data in sqm.3mma of the year-ended growth rate.

Figure 8: Completions, sales & land prices

Figure 9: Housing sales and starts: volumes

Figure 7: 70 city house prices: m/m chg net balance


International trade

Gross value–added attributable to the export sector accounts for approximately 17% of China’s GDP. So while exports are secondary in importance to the domestic construction cycle as a source of economic growth (and ultimately resource demand) they are far from irrelevant. Indeed, given the large amplitude of historical swings in export growth, at certain times external demand can outweigh the domestic story.

Net exports have become a drag on real GDP growth. They subtracted 0.1ppts from year–to-date growth in 2015Q3, which is a major turnaround from the 0.8ppt contribution at the same stage of 2014. A weaker goods export performance and a widening services deficit are the main drivers of this swing. Goods imports are still declining in both value and volume terms. As of Q3, exports to the G3 (–3.3%yr) were performing somewhat better than China’s overall global shipments (–5.9%). Intra–Asian sales are running a touch weaker than the global rate of contraction, while shipments to extra–regional emerging markets have decelerated sharply.

The business surveys describe an external demand environment that is far from supportive. The “new export orders” sub–index in the two most watched manufacturing surveys (where 50 signifies the dividing line between expansion and decline) averaged just 47.5 in the four months to October 2015. Furthermore, the monthly observations deteriorated between CRQs, indicating unfavourable momentum. The 47.5 average compares to 48.8 in the first half of 2015 & 51.0 in the second half of 2014.

Imports of machinery and transport equipment fell by 7.6%yr in Q3, having contracted by 6.3% in the previous quarter. This weak performance jointly reflects the state of the IT product cycle, excess capacity in the onshore machinery sector, declining auto sales amidst mild market share losses for imported vehicles and very subdued domestic equipment outlays.

The growth of food import values rebounded to +15.9%yr in Q3, an impressive recovery after a phase of price driven declines in the year’s first half. The value of imports from commodity producing countries continues to decline heavily, slashing the overall import bill. Imports from the G3 and from Asia ex Japan are also down on a year ago.

25

30

35

40

45

50

55

60

65

25

30

35

40

45

50

55

60

65


indexindex

PBOC foreign orders

Caixin new export orders

NBS new export ordersSources: CEIC, Markit

Figure 10: Trade fl ows by source and destination

Figure 11: Export orders: survey measures

Figure 12: Imports – total & key primary products

-45

-30

-15

0

15

30

45

60

75

90

-45

-30

-15

0

15

30

45

60

75

90

Jan-2001 Jan-2005 Jan-2009 Jan-2013

Exports to US/EU/JPImports from commodity producersImports from NIEsExports to NIEsImports from US/EU/JP

%yr

Sources: Westpac, CEIC. 3mma.

%yr

0

100

200

300

400

500

600

700

800

0

100

200

300

400

500

600

700

800

Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15

indexindex

Total imports

Crude oil

Iron ore

Food

Sources: CEIC, Westpac Economics. Value of total imports and food and volume of raw materials.


The monetary & financial sphere

The monetary policy stance has been characterized by a basic tightening posture since 2011, related to the unwinding of the stimulus era legacy; but periodically interrupted by a cyclical need to underpin growth and/or accommodate smooth refinancing. The annual flow of credit to GDP peaked at 41% in late 2009; hit a local trough of 26% of GDP in early 2012; rebounded to 34% of GDP in early 2013; and has hit another low south of 23% of GDP as of 2015Q2. While traditional bank loans were a major contributor to the stimulus package, much of the cyclical amplitude since has been related to shadow finance, which is dominated by off-balance sheet activity of the banks themselves (figure 13).

Previous editions of the CRQ have argued that the People’s Bank’s reluctance to ease aggressively, in a world where few central banks are exercising such discipline, has led to aggregate financial conditions becoming inappropriately restrictive (figure 14). Notwithstanding the depreciation of the USD/CNY rate in August (see page 7) the real exchange rate remains strong and real interest rates are just a tick below average, despite a series of cuts, the most recent being delivered on October 23. Notably, the People’s Bank directly referenced the corporate debt burden in the statement accompanying this move. Putting the deleveraging ethic together with the absence of inflationary pressures, it seems clear that financial conditions ought to be less restrictive. We await further initiatives in pursuit of this objective.

It is, however, clear that the price and availability of finance are not the main impediments to stronger credit growth. The main culprit is the fact that animal spirits are at a low ebb, which leads to fewer large new projects being pursued, which in turn produces low demand for credit (figure 15). On a sectoral basis, the secular slowdown in credit-intensive heavy industrial investment and the parlous state of building activity are the major proximate causes of diminished demand for loans.

The financial reform agenda ticked off another important milestone in October, with the deposit interest rate now completely liberalised. This is a major step on the path towards the establishment of a short run interest rate corridor as a core instrument for the conduct of monetary policy.

-6

-4

-2

0

2

4

6

8

-15

-10

-5

0

5

10

15

20

Mar-01 Mar-04 Mar-07 Mar-10 Mar-13 Mar-16

%yr

Real effective RMB (%yr, lhs)Real lending rate (ppt deviation from average, rhs)

Sources: CEIC, Westpac Economics.

ppt

Figure 14: Financial conditions in China

Figure 15: Banker confi dence & loan demand

Figure 13: Flow of credit by type, % of GDP

-10

0

10

20

30

40

50

Mar-03 Mar-06 Mar-09 Mar-12 Mar-15-10

0

10

20

30

40

50%GDP%GDP

Off balance sheet*

Loans, including FX

Other^

Total

Sources: CEIC, Westpac. *RBA definition. ^Mainly bond and equity.

4 quarter sum of new flows.

70

85

100

115

130

40

70

100

130

160

Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16

% LR avg% LR avg

Banker confidence (lhs)

Bank assessment of loan demand (rhs)

Sources: Westpac Economics, CEIC.


External finance & the currency

The bilateral exchange rate with the US dollar has

appreciated by a cumulative 27% since the peg

exit in June 2005. The real effective exchange

rate, which measures the nominal trade weighted

move in the CNY while also accounting for relative

inflation, has appreciated by 54% over the same

time frame. The real effective CNY has appreciated

by 9.3% over the year to September 2015, while

USD/CNY has moved 3.4% in the USD’s favour.

The Chinese authorities caught markets off

guard in mid August with a discrete shift in their

fixing policy. This reform was accompanied by a

cumulative –4.7% revaluation against the US dollar

over three trading sessions. While many market

commentators argued this was the beginning of a

major depreciation, USD/CNY has settled a little less

than 4% above its pre-shock level (figure 17). This

adjustment has reduced the degree of appreciation

in the real effective CNY over the last year or so, but

the exchange rate remains a considerable drag on

China’s competitiveness.

China’s bid to gain entry to the IMF’s SDR basket has

generated a considerable amount of reform activity

in the year to date. The change to the fixing regime

is one example. Increasing access to onshore debt

markets for FX reserve managers; signing up to the

IMF’s “special data dissemination standards” (the

SDDS); deposit rate liberalisation; issuing a sovereign

RMB bond in London; & talk of a longer trading day

all directly or indirectly address the ‘free-usability’

criteria as defined by the IMF.

In the last five quarters, the capital flow situation

has boiled down to huge trade surpluses being

more than offset by outflows on the financial

account. FX reserves peaked in June 2014. They

decreased by US$150bn in the second half of

2014. They have declined by a further $US329bn

in 2015 to date (–$US113bn in Q1, –$US36bn in Q2,

–$US180bn in Q3). As RMB internationalisation

proceeds private flows are growing rapidly, with

bank–related activity an increasingly important

channel for surplus recycling, alongside outward

direct investment and a modest but rapidly

growing trickle of portfolio flows. As part of China’s

commitment to the IMF’s SDDS, the FX reserve

position (including gold) is now being released on a

timely monthly schedule.

90

100

110

120

130

140

150

160

90

100

110

120

130

140

150

160

Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13 Jun-15

indexindex

Real effective

Nominal effective

USD per Yuan

Sources: CEIC, BIS.Indices = 100 in July 2005.

4%

path

3%

path

5%

annualised

path

5.9

6.0

6.1

6.2

6.3

6.4

6.5

6.6

5.9

6.0

6.1

6.2

6.3

6.4

6.5

6.6

Aug-11 Aug-12 Jul-13 Jul-14 Jun-15

CNYCNY

Trading band

Fix

Close

Sources: Westpac Economics, Bloomberg.

Band plus/minus 2%Band plus/minus 1%

-140-120-100-80-60-40-20020406080100120

-140-120-100

-80-60-40-20

020406080

100120


USDbnUSDbn

Other

FDI inflow

Trade balance

Change in FX reserves

Sources: CEIC, Westpac.Westpac estimates for FX reserves & “other” for Apr-Jun 2015.

Figure 16: The exchange rate: broad & bilateral

Figure 17: The trading band, the fi x & the close

Figure 18: FX reserves & net capital fl ows by type


Heavy industry

As heavy industrial output (and investment in

new capacity) is essentially a measure of ‘derived

demand’ from other sectors, it ought to behave as

a reactive variable in a medium term forecasting

framework. However, when the time horizon is

shorter, swings in heavy industrial activity can be

responsible for much of the volatility observed

in the aggregate data. Furthermore, with excess

capacity now plaguing a range of basic materials,

extractive and machinery sectors, capex is now

forcibly decoupling - on the weaker side - from

movements in aggregate demand.

As the major direct consumer of raw materials

and a key provider of intermediate goods for use

elsewhere in the supply chain, an understanding

of how these aforementioned forces intersect

in the heavy industrial complex is vital to a full

comprehension of China’s resource demand.

Total industrial value–added (IVA) expanded

at a smoothed year–ended rate of 5.9% as of

September. That compares to 7.2% as of June, 7.6%

at the end of 2014 and 10.0% at the end of 2013. The

growth rate of electricity output at each of those

points was 1.6% (Sep ‘15), 3.9% (Jun ‘15) 2.7% (Dec

‘14) and 10.1% (Dec ’13). The greater amplitude

of the growth rates of power production are

consistent with the fluctuations in the heavy

industrial subset of the wider secondary sector.

However, phases where heavy industrial output

grows more swiftly than total IVA (figure 19) have

become increasingly rare in recent years, just as

total IVA out-growing GDP has become (and will

remain) a rarity.

These trends are indicative of the structural

challenges - slower end-demand growth and

excess capacity to service it - confronting certain

sub-sectors. The non-trivial proportion of

firms now making losses, the well-entrenched

deflationary pulse in producer prices, the ongoing

slowdown in capex (figure 20) and the inability of

some firms to contain their leverage ratios (figure

21), highlight the same basic issues.

In downstream manufacturing, capital goods have

been falling in price since late 2011 and onshore

sales of ‘yellow goods’ have collapsed to levels not

seen since the period prior to the GFC.

-10

0

10

20

30

40

50

-10

0

10

20

30

40

50

Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15

Core heavy industry*

Headline industrial value-added

%yr %yrSources: CEIC, Westpac. 3mma.* Includes interpolated levels for Jan-Feb for non-energy components.

-9

-6

-3

0

3

6

9

12

15

0

7

14

21

28

35

42

49

56


%yr%yr 3mma

Heavy industrial capex (lhs)

Producer price index (rhs)


0

100

200

300

400

500

0

100

200

300

400

500

2003 2005 2007 2009 2011 2013

%%

Median - SOEs Median - private

90th percentile - SOEs 90th percentile - private

Source: IMF.

Figure 20: Heavy industry capex & the PPI

Figure 21: Corporate leverage in China

Figure 19: Core & headline industrial production


The household sector

The major reference point for the CRQ’s analysis of the Chinese household sector is the Westpac MNI China Consumer Sentiment Survey. The most prominent concerns of 2014 - job security, business conditions and the housing market - reportedly improved through the middle of this year, but the October survey was very weak, unwinding half a year of cumulative gains. So while the consumer remains a relative bright spot in the gloom for now, the steep recent decline in household confidence is a troubling development that bears close watching.

Perceptions of family finances improved markedly in the run up to the October confidence crunch. Even so, they remain resilient relative to consumer views on the economy in general. In a similar vein, expected spending on shopping and discretionary services have been tracking closely with retail sales, where growth has held up much better during this slowdown than the official data on manufacturing and investment activity. Uses of household income remain cautious though, with savings running above long run average.

In contrast to the more positive observations seen elsewhere in the survey in the first nine months of this year, perceptions of job security made virtually no net progress over that period. They then fell sharply along with the general trend in October. We attribute this underwhelming performance to the struggles of the labour-intensive export sector as well as the deterioration of blue collar employment prospects in heavy industry and construction. So, while demographic factors are preventing an untoward rise in the rate of unemployment, in absolute terms job security, and its concomitant, the degree of chutzpah that workers carry into wage negotiations, are in both short supply.

Passenger car sales ended Q1 up a healthy 8.7%yr, but since that time growth has slowed abruptly to just 0.5% in Q2 and now –2.2% in Q3. While 17.3% of survey respondents plan to buy a car over the year ahead as of October, versus the long run average of 12.6%, automakers and dealers are probably not holding their collective breath.

In sum, consumer confidence has been jolted, but it is too early to tell if the October retrenchment was a

temporary setback or an outright capitulation.

-3

-2

-1

0

1

2

3

4

5

105

110

115

120

125

130

135

140

Apr-07 Oct-08 Apr-10 Oct-11 Apr-13 Oct-14

stdevsindexWestpac MNI China CSI (lhs)News-based policy uncertainty (rhs)

Source: MNI, Westpac. www.policyuncertainty.com.

70

80

90

100

110

120

70

80

90

100

110

120

Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14

% of sample average

% of sample average

Employment outlook

Expected personal finances

Current personal financesSource: MNI, Westpac. 3mma.

-50

-25

0

25

50

75

100

125

150

-50

-25

0

25

50

75

100

125

150


%yr%yr

Total auto sales Housing sales Passenger only


Figure 22: Confi dence & uncertainty

Figure 23: Family fi nances & jobs: smoothed

Figure 24: Housing and auto sales


Qua

rter

lySe

p–12

Dec

–12

Mar

–13

Jun–

13Se

p–13

Dec

–13

Mar

–14

Jun–

14Se

p–14

Dec

–14

Mar

–15

Jun–

15Se

p–15

Re

al G

DP

%yr

7.4

8.0

7.8

7.5

7.9

7.6

7.3

7.4

7.2

7.2

7.0

7.0

6.9

No

min

al G

DP

%yr

9.1

9.9

10

.39

.41

0.2

10

.48

.38

.58

.57

.66

.67

.16

.2

Co

ntr

ibu

tio

ns

to r

ea

l GD

P p

erc

en

tag

e p

oin

ts y

td

Fin

al c

on

sum

pti

on

exp

en

dit

ure

4.2

4.4

4.3

3.4

3.5

3.7

5.5

4.0

3.6

3.8

4.5

4.2

4.0

Gro

ss c

ap

ita

l fo

rma

tio

n3

.93

.22

.34

.14

.34

.23

.13

.63

.03

.41

.22

.53

.0

Ne

t e

xpo

rts

–0

.40

.11

.10

.1–

0.1

–0

.2–

1.2

–0

.20

.80

.11

.30

.3–

0.1

Se

con

da

ry in

du

stry

%yt

d8

.18

.27

.77

.67

.87

.97

.37

.57

.47

.36

.36

.16

.0

Tert

iary

ind

ust

ry %

ytd

7.7

8.0

8.3

8.3

8.3

8.3

7.6

7.6

7.6

7.8

8.0

8.3

8.4

Cu

rre

nt

Acc

ou

nt

%G

DP

4q

ma

2.6

2.5

2.6

2.4

1.8

1.5

1.2

1.5

1.8

2.1

2.8

2.8

–

GD

P d

efl

ato

r %

yr1

.71

.92

.51

.92

.32

.81

.01

.11

.30

.4–

0.4

0.1

–0

.7

Fixe

d in

vest

me

nt

de

fl a

tor

%yr

0.2

0.3

0.2

–0

.10

.00

.91

.10

.60

.4–

0.1

–0

.9–

1.2

–2

.3

Lan

d p

rice

ind

ex

%yr

1.7

2.6

3.9

5.1

6.2

7.0

7.5

7.2

6.1

5.2

3.8

3.4

3.5

Co

nsu

me

r p

rice

ind

ex

%yr

1.9

2.1

2.4

2.4

2.8

2.9

2.3

2.2

2.0

1.5

1.2

1.4

1.7

Pro

du

cer

pri

ce in

de

x %

yr–

2.8

–1

.7–

2.5

–2

.2–

1.4

–1

.7–

1.9

–1

.1–

2.2

–4

.1–

4.6

–5

.4–

5.9

Ce

ntr

al r

eve

nu

e 4

qm

a %

yr1

0.9

12

.81

0.7

10

.11

0.8

10

.21

0.8

10

.89

.78

.77

.37

.58

.2

Ce

ntr

al e

xpe

nd

itu

res

4q

ma

%yr

18

.21

5.1

11

.61

0.8

7.5

11

.21

1.3

13

.41

4.1

8.5

7.6

7.1

11

.1

Ce

ntr

al o

pe

rati

ng

po

siti

on

4q

ma

%G

DP

–2

.1–

1.6

–1

.7–

1.7

–1

.4–

1.8

–1

.8–

2.3

–2

.4–

1.8

–1

.9–

2.2

–3

.0

Mo

ne

y su

pp

ly M

2 %

yr1

4.8

13

.81

5.7

14

.01

4.2

13

.61

2.1

14

.71

2.9

12

.21

1.6

11

.81

3.1

Ba

nk

loa

ns

(sto

ck)

%yr

16

.21

5.0

14

.91

4.2

14

.31

4.1

13

.91

4.0

13

.21

3.6

14

.71

4.4

15

.8

Tota

l cre

dit

su

pp

ly (

ne

w, r

olli

ng

an

nu

al)

%G

DP

2

8.3

29

.53

3.0

32

.53

1.5

29

.42

8.0

29

.02

6.0

25

.92

4.0

22

.42

3.3

Tabl

e 1:

Gen

eral

mac

roec

onom

ic d

ata

Tabl

e 1

cont

inue

d on

pag

e 11


Qua

rter

lySe

p–12

Dec

–12

Mar

–13

Jun–

13Se

p–13

Dec

–13

Mar

–14

Jun–

14Se

p–14

Dec

–14

Mar

–15

Jun–

15Se

p–15

Exp

ort

s %

yr4

.59

.41

8.9

4.1

3.9

7.5

–4

.75

.01

3.0

8.6

10

.0–

2.2

–5

.9

to G

3–

4.9

–1

.63

.4–

4.9

2.6

9.4

2.8

9.3

10

.53

.87

.6–

1.0

–3

.3

to A

sia

ex

Jap

an

13

.42

1.7

36

.71

5.2

7.5

6.9

–1

0.3

2.8

16

.21

3.3

9.9

–2

.6–

7.4

to A

ust

ralia

7.6

12

.45

.7–

5.3

3.0

–1

.51

.14

.84

.15

.31

4.4

4.2

1.0

to n

on

–A

sia

n e

me

rgin

g m

ark

ets

11

.71

0.2

22

.20

.4–

1.4

5.9

–3

.33

.91

4.6

10

.01

6.6

–5

.0–

10

.0

Imp

ort

s %

yr1

.72

.79

.45

.28

.47

.23

.31

.51

.2–

1.4

–1

7.9

–1

3.5

–1

4.2

fro

m G

3–

0.9

–4

.3–

0.8

–0

.14

.38

.11

1.5

7.4

4.3

2.4

–1

1.8

–1

0.2

–1

3.0

fro

m A

sia

ex

Jap

an

3.8

10

.91

7.5

8.1

7.3

1.5

–4

.71

.73

.5–

0.4

–1

4.1

–1

1.4

–1

4.5

fro

m A

ust

ralia

–8

.3–

8.1

7.5

9.1

19

.03

3.5

24

.82

.4–

1.9

–2

0.5

–2

6.5

–3

0.9

–2

0.5

fro

m n

on

–A

sia

n e

me

rgin

g m

ark

ets

4.9

–1

.7–

0.9

–6

.84

.96

.32

.44

.50

.8–

4.4

–3

6.7

–2

7.6

–2

0.5

Tra

de

ba

lan

ce U

SD

bn

79

.58

3.3

43

.56

5.7

61

.59

0.5

16

.68

5.9

12

8.1

14

9.5

12

3.7

13

9.5

16

3.6

Ch

an

ge

in F

X r

ese

rve

s U

SD

bn

45

26

13

15

41

66

15

91

27

45

–1

06

–4

5–

11

3–

36

–1

80

En

terp

rise

su

rve

y –

ne

t b

ala

nce

, 50

ba

se

Bu

sin

ess

co

nd

itio

ns

61

.16

1.8

62

.65

7.1

56

.35

8.1

55

.35

5.4

54

.95

4.5

52

.85

1.8

49

.4

Pro

fi ta

bili

ty5

1.4

53

.15

2.8

55

.65

5.1

57

.65

0.9

54

.15

5.0

55

.05

1.0

52

.85

1.1

Do

me

stic

ord

ers

47

.44

7.7

48

.85

0.3

48

.24

9.4

44

.44

8.5

46

.94

6.5

42

.54

6.3

43

.3

Fore

ign

ord

ers

47

.54

7.1

46

.64

9.9

50

.14

8.7

45

.44

9.7

49

.94

7.9

44

.24

8.7

46

.3

Ba

nki

ng

clim

ate

– %

of

ave

rag

e

De

ma

nd

fo

r lo

an

s8

5.3

90

.89

8.9

92

.69

5.4

95

.09

9.9

91

.38

5.1

82

.98

7.9

77

.27

2.4

Ea

se o

f p

olic

y st

an

ce1

20

.21

24

.11

29

.41

31

.21

17

.81

21

.31

09

.61

19

.21

31

.61

27

.81

23

.81

06

.31

10

.1

Ba

nke

rs’ c

on

fi d

en

ce le

vel

76

.09

9.7

13

0.7

11

6.0

11

0.4

12

9.1

12

2.4

97

.21

07

.09

5.0

86

.07

8.6

73

.5

We

stp

ac

MN

I Co

nsu

me

r S

en

tim

en

t* –

% o

f av

era

ge

He

ad

line

co

mp

osi

te9

5.0

99

.49

9.3

10

0.3

95

.01

01

.79

7.6

96

.29

3.6

91

.79

2.9

91

.79

6.7

Exp

ec

ted

fa

mily

fi n

an

ces

98

.11

01

.81

00

.71

01

.91

02

.91

02

.71

04

.29

8.5

94

.09

1.4

93

.39

2.3

99

.2

Ho

use

pri

ce e

xpe

cta

tio

ns

10

2.2

10

0.5

10

2.6

10

3.1

10

2.6

10

2.7

10

2.5

10

6.5

10

7.8

10

6.5

10

8.5

10

7.4

10

7.9

Em

plo

yme

nt

ou

tlo

ok

98

.01

01

.81

06

.31

05

.49

5.1

10

7.7

97

.49

7.5

92

.59

1.2

91

.79

1.0

89

.8

So

urc

es:

We

stp

ac

Eco

no

mic

s, C

EIC

, MN

I.

Tabl

e 1:

Gen

eral

mac

roec

onom

ic d

ata

* Q

ua

rte

rly

ob

serv

ati

on

s a

re t

he

3 m

on

th a

vera

ge

.


Mon

thly

Oct

–14

Nov

–14

Dec

–14

Jan–

15Fe

b–15

Mar

–15

Apr

–15

May

–15

Jun–

15Ju

l–15

Aug–

15Se

p–15

Ind

ust

ria

l pro

du

cti

on

%yr

3m

ma

7.5

7.6

7.6

7.3

7.2

6.4

6.1

5.8

6.2

6.3

6.3

5.9

Ele

ctr

icit

y2

.73

.62

.76

.03

.82

.8–

0.1

2.5

3.9

2.6

2.8

1.6

Pro

cess

ed

cru

de

oil

6.3

6.6

5.7

7.5

5.4

5.5

4.8

8.2

7.2

6.2

5.6

4.7

Ce

me

nt*

1.6

–0

.7–

0.8

na

na

–2

1.2

–1

4.4

–1

1.6

–6

.6–

5.7

–5

.1–

4.1

Ste

el p

rod

uc

ts*

2.8

2.3

4.4

na

na

2.6

3.4

2.9

2.1

–0

.2–

0.9

–1

.4

No

n–

ferr

ou

s m

eta

ls*

8.1

7.9

10

.3n

an

a1

7.3

19

.92

1.1

23

.52

2.6

21

.21

8.4

Au

tom

ob

iles*

3.9

3.6

1.7

na

na

3.7

–0

.6–

2.6

–5

.2–

8.9

–1

0.6

–1

2.3

Civ

ilia

n s

hip

s*–

7.8

–7

.7–

20

.3n

an

a2

6.9

11

.07

.0–

1.7

–1

.9–

0.7

–2

.3

Me

tal c

utt

ing

to

ols

*3

3.2

28

.32

7.6

na

na

4.6

6.9

5.2

9.7

2.5

–1

.7–

14

.9

Oct

–14

Nov

–14

Dec

–14

Jan–

15Fe

b–15

Mar

–15

Apr

–15

May

–15

Jun–

15Ju

l–15

Aug–

15Se

p–15

Fixe

d a

sse

t in

vest

me

nt

%yr

3m

ma

12

.91

2.9

13

.31

3.3

13

.41

3.6

12

.21

0.9

10

.41

0.5

10

.28

.6

Ma

nu

fac

turi

ng

, of

wh

ich

10

.01

0.3

13

.11

3.3

12

.91

0.5

9.9

9.9

9.3

8.7

7.7

6.4

He

avy

ind

ust

ry8

.71

0.1

11

.91

2.7

11

.58

.77

.56

.87

.16

.25

.43

.4

Ha

rd in

fra

stru

ctu

re, o

f w

hic

h1

8.5

18

.01

8.4

17

.61

9.6

22

.02

0.5

18

.51

7.3

17

.31

8.8

16

.6

Hig

hw

ays

14

.99

.81

9.1

21

.02

9.2

24

.42

1.9

20

.52

1.1

18

.41

4.9

12

.2

Ra

ilway

s3

1.5

30

.81

8.0

14

.61

1.9

33

.33

4.5

44

.32

3.7

26

.71

2.3

3.4

Uti

litie

s2

0.5

18

.91

3.9

15

.31

8.2

21

.92

0.5

18

.11

5.7

15

.81

5.8

14

.2

Re

al e

sta

te, o

f w

hic

h1

0.1

9.3

5.8

5.4

6.3

9.1

5.8

3.2

2.1

2.9

1.7

–0

.4

Dw

elli

ng

s7

.26

.74

.03

.95

.26

.93

.50

.60

.72

.31

.7–

0.1

No

n–

resi

de

nti

al

16

.81

5.2

9.7

8.4

8.8

14

.01

0.9

8.7

5.1

4.3

1.9

–1

.1

Off

–m

ark

et

urb

an

co

nst

ruc

tio

n–

1.7

–1

8.3

–3

2.4

–2

7.7

–1

8.7

–5

.5–

10

.3–

20

.9–

13

.7–

29

.8–

27

.2–

37

.5

Oct

–14

Nov

–14

Dec

–14

Jan–

15Fe

b–15

Mar

–15

Apr

–15

May

–15

Jun–

15Ju

l–15

Aug–

15Se

p–15

Va

lue

of

ne

w p

roje

ct

sta

rts

12

.11

0.3

11

.58

.13

.72

.38

.89

.9–

0.2

–4

.5–

3.8

1.2

Nu

mb

er

of

ne

w p

roje

ct

sta

rts

9.5

4.7

7.6

5.8

5.2

6.0

8.7

12

.21

1.3

18

.01

7.5

23

.6

Loca

l go

vern

me

nt

pro

jec

ts1

3.2

13

.91

5.4

15

.21

4.8

13

.81

2.4

11

.01

1.0

10

.81

0.7

8.9

Ce

ntr

al g

ove

rnm

en

t p

roje

cts

9.2

0.9

–1

0.4

–8

.5–

2.7

10

.58

.37

.7–

2.9

2.8

0.3

3.2

Sta

te o

wn

ed

en

terp

rise

inve

stm

en

t1

1.0

11

.09

.51

0.6

12

.41

4.5

12

.01

0.1

10

.71

1.9

12

.51

0.2

Tabl

e 2:

Res

ourc

e re

late

d ec

onom

ic in

dica

tors

Tab

le 2

co

nti

nu

ed

on

pa

ge

13

. * O

utp

ut

for

the

se s

ec

tors

wa

s n

ot

rele

ase

d f

or

the

mo

nth

s o

f Ja

nu

ary

an

d F

eb

rua

ry. A

s a

co

nse

qu

en

ce, w

e h

ave

en

tere

d n

a f

or

tho

se t

wo

mo

nth

s a

nd

re

po

rte

d t

he

un

smo

oth

ed

ye

ar–

en

de

d r

ate

fo

r M

arc

h.


Mon

thly

%

yr 3

mm

a u

nle

ss o

the

rwis

e s

pe

cifi

ed

Oct

–14

Nov

–14

Dec

–14

Jan–

15Fe

b–15

Mar

–15

Apr

–15

May

–15

Jun–

15Ju

l–15

Aug–

15Se

p–15

Vo

lum

e o

f h

ou

sin

g s

tart

s1

6.3

3.8

–4

.8–

25

.0–

20

.5–

18

.3–

17

.4–

15

.7–

14

.2–

16

.4–

17

.7–

7.6

Vo

lum

e o

f h

ou

sin

g s

ale

s–

8.1

–7

.7–

5.6

–1

0.5

–1

2.2

–1

1.4

–3

.66

.81

2.7

16

.61

6.6

14

.2

Va

lue

of

ho

usi

ng

sa

les

– N

ati

on

wid

e–

10

.6–

10

.1–

9.1

–1

1.4

–1

3.8

–1

4.2

–9

.4–

2.1

5.3

11

.61

6.1

17

.9

Ea

ste

rn p

rov

ince

s–

15

.8–

15

.1–

13

.6–

13

.6–

13

.8–

13

.0–

8.4

–0

.68

.81

7.0

22

.92

5.1

Ce

ntr

al p

rov

ince

s–

1.0

–1

.9–

2.2

–9

.8–

16

.8–

19

.2–

12

.3–

3.6

1.7

5.9

9.0

10

.8

We

ste

rn p

rov

ince

s–

2.7

–2

.1–

1.7

–6

.1–

10

.5–

12

.7–

9.5

–5

.1–

1.6

1.7

3.9

4.5

Vo

lum

e o

f la

nd

sa

les

31

.06

.77

.6–

35

.8–

24

.4–

32

.4–

43

.5–

41

.7–

44

.5–

30

.6–

32

.6–

33

.6

70

cit

y ne

w d

we

llin

g p

rice

s n

et

% r

isin

g m

–o

–m

–1

00

.0–

97

.1–

91

.4–

88

.6–

90

.0–

50

.0–

41

.4–

32

.9–

2.9

1.4

18

.62

8.6

70

cit

y se

cond

ary

dw

elli

ng

pri

ces

ne

t %

ris

ing

m–

o–

m–

90

.0–

75

.7–

75

.7–

78

.6–

75

.7–

48

.6–

7.1

17

.13

2.9

34

.33

4.3

30

.0

Au

to s

ale

s, o

f w

hic

h3

.12

.56

.07

.66

.83

.60

.90

.8–

1.1

–3

.3–

4.1

–2

.7

pa

sse

ng

er

cars

7.1

5.8

9.0

10

.31

0.9

8.7

6.5

4.8

0.5

–2

.9–

4.4

–2

.2

Exc

ava

tor

sale

s–

31

.4–

33

.9–

34

.9–

31

.0–

43

.3–

45

.4–

49

.7–

36

.5–

33

.6–

32

.2–

32

.3–

31

.0

Terr

est

ria

l fre

igh

t7

.87

.67

.37

.39

.87

.76

.72

.11

.7–

0.5

–2

.3–

4.2

Aq

ua

tic

fre

igh

t2

3.0

21

.82

2.5

18

.21

3.0

5.2

1.2

0.8

1.6

4.1

4.1

4.6

Inte

rna

tio

na

l air

fre

igh

t6

.35

.57

.38

.01

3.7

11

.09

.33

.75

.85

.13

.92

.6

Nov

–14

Dec

–14

Jan–

15Fe

b–15

Mar

–15

Apr

–15

May

–15

Jun–

15Ju

l–15

Aug–

15Se

p–15

Oct

–15

Ma

nu

fac

turi

ng

PM

I – in

de

x –

of

wh

ich

50

.35

0.1

49

.84

9.9

50

.15

0.1

50

.25

0.2

50

.04

9.7

49

.84

9.8

Ou

tpu

t5

2.5

52

.25

1.7

51

.45

2.1

52

.65

2.9

52

.95

2.4

51

.75

2.3

52

.2

Ne

w o

rde

rs5

0.9

50

.45

0.2

50

.45

0.2

50

.25

0.6

50

.14

9.9

49

.75

0.2

50

.3

Ne

w e

xpo

rt o

rde

rs4

8.4

49

.14

8.4

48

.54

8.3

48

.14

8.9

48

.24

7.9

47

.74

7.9

47

.4

Raw

ma

teri

al i

nve

nto

rie

s4

7.7

47

.54

7.3

48

.24

8.0

48

.24

8.2

48

.74

8.4

48

.34

7.5

47

.2

Fin

ish

ed

go

od

s in

ven

tori

es

47

.24

7.8

48

.04

7.0

48

.64

8.0

47

.54

7.7

47

.44

7.2

46

.84

7.2

Pu

rch

ase

s o

f in

pu

ts5

0.5

50

.14

9.6

49

.44

9.7

50

.15

1.0

50

.95

0.3

49

.44

8.6

48

.8

Imp

ort

s4

7.3

47

.84

6.4

47

.54

8.1

47

.84

7.6

48

.04

7.8

47

.24

8.1

47

.5

Ne

w o

rde

rs t

o fi

nis

he

d g

oo

ds

inve

nto

rie

s ra

tio

1.0

81

.05

1.0

51

.07

1.0

31

.05

1.0

71

.05

1.0

51

.05

1.0

71

.07

So

urc

es:

We

stp

ac

Eco

no

mic

s, C

EIC

.

Tabl

e 2:

Res

ourc

e re

late

d ec

onom

ic in

dica

tors


Steel

• The pace of decline in Chinese steel prices

accelerated in Q3, as falling demand outpaced

reductions in output. Crude steel production

was down 5.9 Mt (2.9%yr) in Q3, while

consumption was down 12.9 Mt (7.0%yr).

• Prices for all steel products declined

substantially in Q3, particularly hot-rolled sheet

(down 36.7%yr), plate (down 36.0%yr) and cold-

rolled sheet (down 32.1%yr). Prices continued

to fall in October and ended the month 60%

below their 2011 peaks.

• Lower consumption growth was largely

attributable to falling demand from the

construction and machinery sectors. Lower

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15

RMB/tRMB/t

hot-rolled sheetrebarplatewire rodcold-rolled sheet (rhs)

Source: Bloomberg

250

300

350

400

450

500

550

600

650

700

30405060708090

100110120130140150160170

May-10 Apr-11 Mar-12 Feb-13 Jan-14 Dec-14 Nov-15

USD/tIndex USD

Australian inputs index (lhs)

Chinese rebar (rhs)

Sources: Westpac Economics, Bloomberg

Input index based on 120kg of scrap, 770kg of met coal & 1400kg of iron ore to produce 1 tonne crude steel

*Australian spot prices for iron ore & coking coal.

-200

-150

-100

-50

0

50

100

150

200

250

-15

0

15

30

45

60

75

90

105

120

Mar-91 Mar-96 Mar-01 Mar-06 Mar-11

%yr Mt

Crude steel output (rolling 3mth sum, rhs)Growth rate (rhs)

Source: CEIC

Figure 25: Benchmark steel prices

Figure 26: Crude steel output: level & growth Figure 27: The rebar price and input costs

Table 3: Steel prices (quarterly averages).

Domestic RMB/t Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Rebar 3527 3507 3527 3348 3258 3078 2940 2577 2435 2226

Hot–rolled sheet 3623 3609 3489 3399 3392 3272 3008 2636 2425 2071

Cold–rolled sheet 4697 4460 4342 4214 4096 4001 3898 3582 3160 2719

Plate 3676 3599 3455 3433 3448 3270 2962 2588 2404 2091

Wire rod 3526 3509 3519 3394 3347 3155 2952 2605 2471 2265

Benchmarks USD/t

Rebar benchmarker 476 474 477 454 431 408 392 344 314 274

HRC benchmarker 493 494 480 466 454 442 410 359 325 271

CRC benchmarker 629 613 611 597 562 551 534 489 424 356

Source: Bloomberg.


output of steel products in July and August was

driven primarily by rebar (down 2.1 Mt yr) and

wire rod (down 1.8 Mt yr).

• Despite falling consumption, steel inventories

in China declined by 10.8%yr in Q3. Wire rod

inventories fell particularly sharply, down 27.8%yr.

• In response to lower domestic consumption

Chinese producers have been exporting

considerable amounts of crude steel, which

reached a record 11.2 Mt in September.

• According to the China Iron and Steel

Association, medium and large-sized steel mills

incurred combined losses of US$4.4 billion in the

first nine months of 2015.

0

200

400

600

800

1000

1200

1400

10 20 30 40 50 60GDP per person (thousands of PPP international dollars)

China

India

Japan

South Korea

USA

Sources: World Steel Association; IMF

Consumption, kgpp

Figure 31: Steel demand per head

Construction68%

Machinery18%

Autos7%

Shipbuilding2%

Rail2%

Other3%

Source: Bloomberg

-15

0

15

30

45

-3 0 3 6 9 12

inventories%yr

Sales%yr

Nov-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Dec-13

Jun-14

Jul-14

Sep-14

Aug-14

Oct-14

Nov-14

Jan-15Dec-14

Feb-15

Mar-15

Apr-15

Jul-15

Jun-15

Sep-15

-30

-15

0

15

30

45

-10

0

10

20

30

40

Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15

%yr 3mma%yr 3mma

Real estate plus hard infra investment (lhs)Steel product output* (rhs)Cement output* (rhs)

Sources: CEIC, Westpac Economics.*Jan-Feb interpolated in 2014 and 2015.

Figure 28: Steel end–use by sector

Figure 30: Steel inventory–to–sales scatter plot

Figure 32: Construction, cement and steel

Figure 29: Steel inventories by product type

50

150

250

350

450

50

150

250

350

450Mt Mt

hot rolled long production

Sources: Westpac Economics, Bloomberg

30

40

50

60

70

50

70

90

110

130

Oct-08 Jan-10 Apr-11 Jul-12 Oct-13 Jan-15

cold rolled (rhs)

steel plate (lhs)


Table 4: Iron ore prices (USD/t, 62% ferrous metal content unless otherwise indicated).

TSI spot price, CFR Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Quarter average 126.7 133.6 134.9 120.5 103.0 90.4 74.4 62.5 58.5 54.9

Quarter end 116.6 131.4 134.7 116.6 94.0 78.1 71.3 51.4 59.4 56.3

Quarter high 142.1 144.18 140.28 135.27 119.82 98.35 84.17 71.49 65.61 59.2

Quarter low 110.79 118.28 130.35 103.99 89.48 78.0 66.8 51.4 47.1 44.6

TSI in CNY terms, CFR 779.9 818.1 821.8 735.2 641.9 557.7 457.3 389.6 362.8 346.1

IODEX Aust FOB 117.9 122.2 122.6 110.8 93.9 81.4 66.1 57.6 53.2 48.8

IODEX Brazil FOB 106.5 106.9 107.2 95.9 80.4 67.3 54.3 50.9 46.5 40.4

Sources: Bloomberg; Platts. CFR is cost including freight. FOB is free on board.

• Iron ore prices averaged US$55 (CFR) a tonne

in Q3, down 6.2%qtr and 39.3%yr. The iron ore

market recorded its lowest price this decade—

US$44.6 (CFR) a tonne—on 8 July, amidst

concerns over the Chinese stock market. While

prices quickly rebounded from this trough,

they have since resumed their downward

trajectory, driven by increasing supply amid

weakening demand from China’s steel industry.

• China’s iron ore port stocks rose 9.1%qtr, to end

Q3 at 81 Mt. They are down 21.6%yr.

• China’s domestic iron ore production fell by

8.5%yr to 250 Mt in July and August. High

cost domestic concentrate continues to be

20

40

60

80

100

120

140

160

180


USD/t62% CFR QingdaoSGX 3 month forwardSGX 12 month forward

Source: Bloomberg

200

300

400

500

600

700

800

900

40

60

80

100

120

140

160

180

Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15

USD/tUSD/t

Iron ore 62% CFR (lhs)

rebar (rhs)

Source: Bloomberg

Figure 33: Iron ore prices: spot and forward

Figure 34: Iron ore prices and rebar steel Figure 35: Port inventories versus end demand

Iron ore

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

ratioratio

To pig iron production

To crude steel production

Sources: CEIC, Bloomberg, Westpac Economics


displaced by low cost seaborne iron ore.

• Despite falling prices, the world’s top three

iron ore producers - Vale, Rio Tinto and BHP -

have continued to raise output. Production at

Vale totalled 88 Mt in Q3 (up 2.9%yr); Rio Tinto

totalled 69 Mt (up 15%yr); while BHP totalled 61

Mt (up 7%yr).

• China’s iron ore imports increased 1.8%yr to

246 Mt in Q3, worth US$14.8 billion. Although

China’s imports from Australia (6.1%yr) and

Brazil (11.9%yr) have increased strongly, imports

from all other sources declined 21.4%yr.

• Over 2015 Australia’s share of the seaborne

market into China increased from 61.7% to

China67%

Japan11%

Europe11%

South Korea

5% other6%

Imports

Source: AME

Australia 50%

Brazil24%

South Africa

4%

Ukraine3%

Canada3%

other16%

Exports

Figure 39: World trade in iron ore – seaborne

0

15

30

45

60

75

90

0

15

30

45

60

75

90

Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15

% shareMtAust (lhs)Brazil (lhs)Other (lhs)

Source: Bloomberg

50

75

100

125

150

175

200

0

2

4

6

8

10

12


USD/tUSDbnAust (lhs) Brazil (lhs)Other (lhs) 62% CFR Qingdao (rhs)Import unit value (rhs)

Source: Bloomberg

Australia34%

Other22%

Brazil19%

China16%

India5%

Russia4%

Source: AME

Figure 36: Chinese import volumes by source

Figure 38: Chinese imports, unit values & prices

Figure 40 : Shares of world iron ore output

Figure 37: Australian iron ore exports to China

0

1

2

3

4

5

6

7

8

9

10

10

15

20

25

30

35

40

45

50

55

60


AUDbnMt

volume (lhs) value (rhs)

Source: ABS


0 225 450 675 900 1125 1350 1575 1800 2025

USD/t

Others

Sierra Leone

Russia

Canada

China

India

Australia

Brazil

Sources: AME, Westpac. Includes mining, royalties, freight from mine to port, administration and processing.

Cumulative export supply, mt

0

5

10

15

20

25

30

0

5

10

15

20

25

30

May-07 Nov-08 May-10 Nov-11 May-13 Nov-14

% share% share

Number of Chinese ferrous mining firmsmaking a loss, % of total


Figure 44: Chinese iron ore miners: loss–makers Figure 45: Seaborne iron ore cost curve

64.4%, while Brazil’s increased from 18.2% to

20.3% supported by record production by Vale.

• The first shipment from the Roy Hill project in

Australia has been delayed and is now expected

to leave Port Headland in November. The

project is expected to produce 55 Mtpa of iron

ore for more than 20 years. Its position on the

cost curve has been widely debated.

• Australia’s iron ore export volumes to China

increased 6%qtr and 9%yr to 164 Mt in Q3, while

values decreased 14%yr to $A10 billion.

• India, previously a major exporter but absent

from the seaborne trade for some years, may

soon return, albeit on a modest scale.

0

50

100

150

200

250

0

50

100

150

200

250million tmillion t

Total

Domestic

Imports

Source: CEIC, Westpac.

0

10

20

30

40

50

60

0

10

20

30

40

50

60


% share% share

Rest of worldAustralia

Import share of total supply

Total ore supply by source

-40

-20

0

20

40

60

80

-40

-20

0

20

40

60

80

Sep-07 Mar-09 Sep-10 Mar-12 Sep-13 Mar-15

%yr%yr

Imports

Domestic production

Change in inventories

Sources: Westpac Economics, Bloomberg.Data smoothed.

400

500

600

700

800

900

1000

1100

1200

1300

4

6

8

10

12

14

16

18

20

22

24

Sep-07 Sep-09 Sep-11 Sep-13 Sep-15

CNY/tmargin %

Ferrous metal mining margin (lhs)

Domestic ore prices ytd ave (rhs)


Figure 42: Chinese iron ore miners’ margins Figure 43: Chinese output, imports & stocks

Figure 41: China’s total iron ore supply


Iron

ore

un

itJu

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15

Ch

ina

imp

ort

sM

t1

98

.02

16

.72

19

.12

22

.02

35

.32

42

.12

33

.62

27

.12

26

.02

46

.3

Au

stra

liaM

t1

02

.61

11

.81

12

.91

18

.21

38

.21

49

.41

42

.71

44

.41

46

.81

58

.5

Bra

zil

Mt

32

.14

0.5

44

.44

1.6

38

.94

4.7

45

.84

1.8

42

.35

0.1

va

lue

US

Db

n2

6.3

26

.32

8.1

28

.42

5.7

21

.91

8.5

15

.81

3.2

14

.8

Raw

pro

du

cti

on

*M

t3

56

.63

87

.04

05

.43

04

.23

93

.64

10

.63

89

.32

80

.63

50

.2n

.a

Iro

n o

re s

tock

s a

t p

ort

s, e

nd

of

qtr

Mt

71

.57

0.1

81

.31

03

.81

05

.71

03

.29

5.2

93

.37

4.1

80

.9

we

eks

of

imp

ort

sw

ee

ks4

.24

.14

.86

.16

.26

.15

.65

.54

.44

.8

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

10

7.9

11

3.8

12

6.8

12

2.2

14

5.8

14

9.7

15

2.2

14

3.7

15

4.6

16

3.9

va

lue

AU

Db

n1

2.3

13

.61

5.6

14

.41

3.4

11

.91

0.9

9.8

9.5

10

.2

Met

allu

rgic

al c

oal

Ch

ina

imp

ort

sM

t1

8.1

19

.42

0.7

13

.01

8.1

13

.41

8.0

10

.91

0.7

14

.8

va

lue

US

Dm

n2

49

7.9

24

14

.02

41

8.0

16

33

.61

81

2.4

12

70

.31

73

6.1

98

0.2

88

2.6

11

62

.8

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

9.8

12

.41

4.0

10

.11

1.6

11

.21

3.4

7.7

11

.18

.8

va

lue

AU

Dm

n1

29

61

54

71

82

31

24

81

23

81

14

41

51

39

56

11

63

10

13

So

urc

es:

Blo

om

be

rg, A

BS

, IH

S, C

EIC

. * R

aw m

ine

ou

tpu

t w

ith

a lo

w ir

on

co

nte

nt.

Tabl

e 5:

Iron

ore

& m

etal

lurg

ical

coa

l sum

mar

y da

ta


Metallurgical coal

• Metallurgical coal prices fell sharply in Q3 as

falling steel output and poor profitability in

China’s steel sector affected demand. The

price of Low volatility HCC CFR China averaged

US$91/t in Q3, down 26%yr and 4%qtr. The

price of PCI CFR China fell 29%yr and 11%qtr

to average US$72/t, while semi-soft declined

17%yr and 6%qtr to average US$73/t.

• Australian benchmark prices for high-quality

metallurgical coal delivered in the December

quarter 2015 settled at US$89 a tonne (FOB),

down from US$93 a tonne in the prior quarter.

• China’s imports of metallurgical coal

rebounded from the sharp fall recorded in Q2

and increased 38%qtr and 10%yr to 15 Mt in

50

100

150

200

250

300

350

400

50

100

150

200

250

300

350

400

May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15

USD/tUSD/t

Low Vol PCI Semi Soft Prem Low Vol HCC

Source: Platts

China53%

Australia17%

USA7%

Russia7%

India5%

Other11%

Production

Source: IEA.

China61%

other12%

India10%

other OECD

7%

Japan5%

Russia5%

ConsumptionChina21%

Japan17%

OECD Europe

19%

India17%

Other11%

South Korea12%

Ukraine3%

Imports Australia56%United

States18%

Canada10%

Russia6%

Mongolia3%

Other7%

Exports

Source: IEA

Figure 46: Met coal spot prices

Figure 47: World trade in met coal Figure 48: Met coal use and supply by country

Table 6: Metallurgical coal prices (quarterly average spot prices).

unit Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Prem Low Vol HCC CFR China USD/t 155.0 154.7 156.3 135.0 124.3 123.3 121.8 111.8 94.5 90.8

Low Vol PCI CFR China USD/t 127.2 125.9 129.0 115.9 108.7 102.1 101.3 99.9 81.0 72.2

Semi Soft CFR China USD/t 114.5 109.1 110.9 101.1 92.8 87.7 89.7 86.6 76.9 72.5

Prem Low Vol HCC FOB Aust USD/t 141.5 140.9 140.5 120.6 111.4 110.7 110.0 104.0 86.8 82.7

Prem Low Vol HCC FOB Aust AUD/t 142.6 155.4 155.3 133.3 123.1 122.4 121.5 114.9 95.9 91.4

Source: Platts. CFR is cost including freight. FOB is free on board. HCC is hard coking coal.


Q3, supported by an increase in stocks prior to

the China National Day holiday.

• China’s imports from Australia increased to 8.7

Mt in Q3 and, as a result, Australia’s share of

China’s total imports increased to 59% in Q3

from 44% at the same time a year ago. China’s

imports from Mongolia fell 7%yr to 3 Mt.

• Australia exported 8.8 Mt of metallurgical coal

to China in Q3, down 22%yr (noting time lags

between the respective customs’ data). The

value of these exports decreased 11%yr to $A1

billion, weighed down by adverse shifts in both

price and volume.

0 50 100 150 200 250 300

USD/t

Other Canada

United States Mongolia

Mozambique Australia

Sources: AME, Westpac. include s mining, royalties, freight from mine to port,

administration and processing.


Figure 52: Seaborne met coal cost curve

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

0

1

2

3

4

5

6

7

8

9


USDbnMtAust. (lhs) Mongolia (lhs) Canada (lhs)Russia (lhs) Other (lhs) Value (rhs)

Sources: IHS, CEIC.

60

70

80

90

100

110

120

130

140

150

160

170


70

80

90

100

110

120

130

140

150

160

170100kt mth100kt mth

Hard met coal exports, all destinations

Source: ABS, CoalPortal.com. Seasonally adjusted by Westpac Economics.

0

150

300

450

600

750

900

0

1

2

3

4

5

6


AUDmnMt

volume (lhs) value (rhs)

Source: ABS

0 30 60 90 120

USD/t

Other

Canada

United States

Mongolia

Mozambique

Australia

Sources: AME, Westpac. Includes mining, royalties, freight from mine to port, administration and processing.


Figure 49: Chinese met coal import volumes

Figure 51: Australian met coal exports: total Figure 50: Aust met coal exports to China

Figure 53 : Seaborne hard coking coal cost curve


Developments in China’s energy policy

• The National Energy Administration

announced it would spend around US$14.7

billion on electricity upgrades to achieve

nationwide electricity coverage. Around 40,000

people in Qinghai Province remain off the grid.

• China participated in a joint US Smart Cities

Summit in Los Angeles in September. State,

Provincial and City leaders from Beijing,

Guangzhou and Zhejiang committed to

achieve a peak in CO2 emissions by 2020 (much

earlier than the national target) while Shanghai

and Shenzhen pledged to do so by 2022.

• Reductions in emissions will be targeted

through a nationwide CO2 ‘cap and trade’

system which is expected to be introduced

in 2017, creating a carbon market for power

generation, steel, cement and other industries.

China already has seven carbon exchanges in

Hubei, Guangdong, Beijing, Tianjin, Shanghai,

Shenzhen and Chongqing.

• In its Energy Efficiency Market Report released

in October, the International Energy Agency

ranked China as the second highest investor in

energy-efficiency for buildings.

• In September the government announced

its intention to spend up to US$315 billion

to improve China’s power grid infrastructure

over the next five years. The upgrade will

allow for electricity to be transmitted cross-

country from the west coast to the east coast,

adding to existing long-distance ultra-high

voltage power lines. This development will

be an important contributor to the needed

improvement in the air quality of major coastal

cities by creating a larger physical separation

between generation and consumption.

• While thermal sources account for the bulk of

China’s electricity generation, the government

is continuing to encourage the development

of renewable energy sources. According to the

National Energy Authority, China added 9.9 GW

of solar PV capacity in the first nine months of

2015. By the end of September China had 24.14

GW of nuclear power capacity and 108 GW of

wind power capacity.

• In October state-owned China National

Nuclear Corporation (CNNC) announced that

it would collaborate with Bill Gates’ nuclear

power company, TerraPower, on advanced

nuclear technologies that address safety,

environmental and cost issues.

• The National Development and Reform

Commission announced it would expand trial

electricity pricing reforms from two to seven

regions as it seeks to move to a more market

driven price system. The reforms may change

how power generation enterprises operate,

possibly requiring an application for an

electricity sales license and an open bidding

process for the awarding of contracts.

• New energy vehicle output increased to 24,500

vehicles in August, 3.7 times more than a year

ago. Growth in the energy vehicle sector over

the past two years has been supported by

government subsidies and tax cuts. The sector

is attractive not only as a way to cut emissions

and conserve energy; it is a high-value added

sector consistent with the administration’s goal

to ascend the technology value chain.

Electricity trends

• China generated 1.5 trillion kWh of electricity

in Q3, up 1.7%yr and 7.5%qtr. The quarterly

increase reflects the seasonal uptick in

consumption during the summer. Year on year

increases were registered across all sources of

electricity generation, except for hydro which

declined by 7%yr.

• Investment in new generating capacity

increased 3%yr in Q3, driven by increased

thermal investment (up 44%yr). Investment in

hydro declined 29%yr and nuclear declined by

6%yr.

• China’s electricity consumption increased

0.2%yr to 1.5 trillion kWh in Q3. Consumption

in the secondary industry declined 1.8%yr as

the economy continues to shift away from

energy intensive sectors. Conversely tertiary,

residential and primary sector electricity

use increased by 6%yr, 4.3%yr and 5%yr,

respectively.


-15

0

15

30

45

-15

0

15

30

45

Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14

Contribution from other sourcesContribution from thermal generationElectricity production

%yr/ppt %yr/pptSources: CEIC,

Westpac

Figure 58: Chinese electricity growth: broad source

other non-OECD34%

China19%

other OECD12%

United States14%

Russia 10%

Saudi Arabia

4%

India4%

Indonesia3%

Source: IEA

other Non-OECD25%

China23%other OECD

18%

United States17%

India6%

Russia6%

Japan3%

Germany2%

Source: IEA

0

300

600

900

1200

1500

1800

Jun-12 Jun-13 Jun-14 Jun-15

Billion kWh

secondary industry residentialtertiary industry primary industry

Source: CEIC.

0

200

400

600

800

1000

1200

1400

1600

Jun-98 Jun-01 Jun-04 Jun-07 Jun-10 Jun-13

Billion kWh

thermal hydro nuclear wind

Source: CEIC

0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

0.6

0.8

1.0

Thermal(7%)

Hydro(9%)

Nuclear(17%)

Wind(40%)

Solar(303%)

Billion kWBillion kW

2009 2010 2011

2012 2013 2014

Sources: CEIC, Westpac Economics. Number in parenthesesare CAGRs for the period 2009 to 2014.

Figure 55: World energy productionFigure 54: World energy consumption

Figure 57: Chinese electricity use by sectorFigure 56: Chinese electricity output by source

Figure 59: China’s generating capacity by type


Thermal coal

• Key thermal coal FOB prices were generally

lower in Q3, due principally to lower import

demand from China and excess capacity.

Newcastle spot prices increased 1%qtr,

Qinhuangdao (QHD) decreased by 9%qtr, Baltic

decreased 8%qtr and Richard’s Bay decreased

by 11%qtr.

• Shenhua, China’s largest coal producer, cut

prices for its domestic customers multiple

times over the last four months.

• China’s coal consumption declined by 4.6%yr

to 2.7 billion tonnes in the first three quarters

of 2015. Consumption has been affected by

slowing economic growth, policies to diversify

the fuel mix and increased hydropower.

40

60

80

100

120

140

160

180

200

40

60

80

100

120

140

160

180

200


USD/tUSD/t

Richards Bay 6000kcal

Baltic 6000kcal

Newcastle 6000kcal

QHD 5800kcal

Source: IHS

0 100 200 300 400 500 600 700

USD/t

Other

Russia

United States

Indonesia

South Africa

Australia

Sources: AME, Westpac. includes mining, royalties, freight from mine to port,

administration and processing.


0

5

10

15

20

25

30

35


MtQHD Caofeidian JintangTianjin Guangzhou Other

Source: Bloomberg

Figure 60: Thermal coal prices

Figure 61: Thermal coal stocks: ports & generators Figure 62: Export thermal coal cost curve

Table 7: Thermal coal prices (USD/t, NAR unless otherwise indicated).

Quarterly averages Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

QHD 5800kcal 112.8 105.8 106.1 105.8 100.3 92.8 96.1 87.4 74.9 68.4

QHD 5800kcal RMB/t 694.4 647.8 646.8 645.2 624.8 571.9 590.5 544.9 464.3 430.6

Newcastle 6000kcal 85.4 77.1 82.0 77.4 72.7 68.0 63.0 63.0 57.8 58.4

Newcastle 6000kcal AUD/t 86.7 84.3 88.6 86.5 77.9 73.5 73.7 80.1 74.4 80.4

Richards Bay 6000kcal 80.5 73.0 83.1 78.7 75.0 70.2 65.8 61.5 61.2 54.7

Baltic 6000kcal 75.5 71.4 78.2 74.3 69.4 69.7 68.7 56.9 55.2 50.6

Sources: IHS. NAR stands for net as received.


• China’s proposed cap-and-trade emissions

program (planned for 2017) will apply to the

power generation and cement industries.

• China’s thermal coal imports decreased 16%yr

to 42 Mt in Q3. Imports from Australia declined

32%yr to 12 Mt, while imports from Indonesia

fell a lesser 8%yr, to 20 Mt.

• Australia’s share of China’s thermal coal imports

declined to 29% in Q3, down from 35% a year

ago. However, China’s imports of thermal coal

from Australia have more than doubled over

five years, from 5 Mt in 2010 to 12 Mt today.

• Australia’s exports to China declined by 34%yr

to 7.8 Mt in Q3. The value of these exports

declined by 36%yr to $A476 million.

China41%

USA16%

Indonesia9%

OECD Europe

7%

India8%

Aust4%

Other15%

Producers

Source: IEA.Note: Includes brown coal.

China43%

USA16%

Other non-OECD11%

Indonesia2%

India12%

Australia2%

Other OECD14%

Consumers

Figure 66: Thermal coal use and supply by country

230

260

290

320

350

380

410

440

0

5

10

15

20

25

30

35

Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15

billion kWhMtOther (lhs)Australia (lhs)Indonesia (lhs)

Sources: CEIC; IHS.

-40

-20

0

20

40

60

80

-40

-20

0

20

40

60

80


%yr%yr

Power generation

Coal extraction


0

50

100

150

200

250

300

350

400

450

500

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


AUDmnMtvolume (lhs)value (rhs)

Source: ABS.

China18%

India23%

OECD Europe

18%

Japan11%

South Korea

8%

Other 22%

Imports

Source: IEA.Note: Includes brown coal.

Indonesia46%

Australia16%

Russia11%

Colombia6%

South Africa6%

other15%

Exports

Figure 63: Thermal coal imports

Figure 65: Capex: coal mining vs power generationFigure 64: Aust thermal coal exports to China

Figure 67: World trade in thermal coal


Tabl

e 8:

The

rmal

coa

l sum

mar

y da

ta

unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

sM

t6

0.5

60

.96

7.6

71

.05

8.1

49

.75

0.4

38

.14

0.1

41

.7

Ind

on

esi

aM

t2

9.4

27

.83

2.8

35

.72

6.1

21

.42

2.5

19

.01

7.4

19

.7

Au

stra

liaM

t1

2.2

17

.01

5.9

15

.41

5.2

17

.51

5.1

10

.61

2.6

12

.0

va

lue

US

Dm

n4

67

94

64

74

97

35

14

54

06

93

34

63

15

62

25

52

24

42

09

5.8

En

d o

f q

ua

rte

r st

ock

s a

t p

ort

sM

t3

1.5

25

.12

2.5

27

.53

1.4

26

.32

9.4

32

.42

7.8

23

.3

we

eks

of

imp

ort

s6

.85

.44

.35

.07

.06

.97

.61

1.0

9.0

7.2

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

11

.31

1.7

11

.61

1.4

12

.91

1.8

11

.11

0.0

9.9

7.8

va

lue

AU

Dm

n8

27

.68

92

.28

30

.48

62

.38

70

.27

41

.87

08

.06

64

.36

22

.24

75

.6

So

urc

es:

AB

S, B

loo

mb

erg

, IH

S.


Oil

• Since June world oil prices have declined

substantially due to ongoing excess supply,

pessimism around emerging market growth

prospects, including China’s, financial volatility

and the prospect of increased supply from Iran

following the nuclear accord.

• WTI prices averaged US$46.48/bbl in Q3, down

20%qtr. Brent prices declined by 19%qtr to

average US$51.30/bbl and average Tapis prices

declined 19%qtr to US$53/bbl.

• China’s benchmark gasoline and diesel prices

were adjusted just once in Q3. Gasoline prices

ended Q3 2.9%qtr lower while diesel prices

declined 3.3%qtr.

35

50

65

80

95

110

125

140

35

50

65

80

95

110

125

140


USD/bblUSD/bbl

Brent WTI Tapis

Source: Bloomberg.

other OPEC24%

other non-OPEC24%Saudi

Arabia13%

Russia13%

United States12%

China5%

Canada5%

Iran4%

Production

Source: BP.

other non-

OECD28%

other OECD24%

United States20%

China12%

Japan5%

India4%

Russia4%

Brazil3%

Consumption

Transport51%

other21%

Industry14%

Residential6%

Services4%

Agri4%

China

Source: IEA.

Transport64%

Other17%

Industry9%

Residential5%

Services2%

Agri3%

World

Figure 68: Oil prices

Figure 69: Oil use by sector: China & the World Figure 70: Oil use and supply by country

Table 9: Crude oil spot prices (USD/bbl, quarterly).

Brent Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15Quarter average 103.3 109.7 109.4 107.9 109.8 103.5 77.1 55.1 63.5 51.3

Quarter end 102.2 108.4 110.8 107.8 112.4 94.7 57.3 55.1 63.6 49.6

Quarter high 111.1 116.6 112.6 111.2 115.1 112.3 94.2 62.6 67.8 62.1

Quarter low 97.7 103.0 103.5 105.8 104.8 94.7 57.3 46.6 55.0 42.7

TapisQuarter average 108.9 115.9 117.2 114.3 115.0 106.2 79.5 56.1 64.6 52.6

Quarter end 109.7 114.5 120.7 113.2 117.0 100.2 58.6 55.9 63.3 53.0

Quarter high 116.1 122.2 121.7 118.6 119.4 115.0 98.4 64.2 70.3 64.7

Quarter low 103.8 109.1 110.8 111.7 110.1 98.7 58.6 47.4 56.8 43.8

West Texas intermediateQuarter average 94.1 105.8 97.6 98.7 103.1 97.6 73.2 48.5 57.8 46.5

Quarter end 96.6 102.3 98.4 101.6 105.4 91.2 53.3 47.6 59.5 45.4

Quarter high 98.4 110.5 104.1 104.9 107.3 107.6 91.0 53.5 61.4 57.0

Quarter low 86.7 98.0 92.3 91.7 99.4 91.2 53.3 43.5 49.1 38.1

Source: Bloomberg.


0

100

200

300

400

500

600


China

India

Japan

South Korea

USA

Passenger cars per 1000 residents

Figure 74: Automobile penetration

0

5

10

15

20

25

30

35 MtOther Saudi Arabia AngolaRussia Iran Oman

Source: CEIC.

other OECD32%

other non-

OECD21%

United States15%

China10%

Japan7%

India6%

South Korea

5%

Singapore4%

Imports

other non-

OECD41%

other OECD18%

Saudi Arabia

13%

Russia10%

United States

5%

Canada5% UAE

4%

Kuwait4%

Exports

Source: IEA

0

100

200

300

400

500

600

700

0

100

200

300

400

500

600

700


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


China IndiaJapan South KoreaUSA

Consumption toe per capita

Sources: IMF, IEA.

Figure 71: Chinese oil import volumes

Figure 73: World trade in oilFigure 72: Chinese imports of Australian oil

Figure 75: Oil demand per capita

• China’s imports of crude oil reached a five-year

high of 85 Mt in Q3, up 11%yr and 2.7%qtr as

private refineries (now allowed higher import

quotas) increased their import demand and

attractive prices encouraged stockpiling.

• China’s imports of crude oil from Saudi Arabia,

it’s largest single import source, declined 2.9%yr

to 12 Mt in Q3. It is reported that some of this

supply was displaced by Russia, who increased

volumes by 36%yr. Imports from Angola and

Oman increased 8%yr and 21%yr respectively.

• China’s crude oil imports from Australia

declined 27%yr to 541 kt in Q3. Import values

declined 58%yr to US$252 million.


Oil

unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

sM

t6

9.2

73

.27

0.8

74

.77

7.2

76

.57

9.9

80

.38

3.0

85

.3

Sa

ud

i Ara

bia

Mt

13

.01

3.9

13

.01

2.7

11

.51

2.4

13

.11

2.8

13

.61

2.1

An

go

laM

t1

0.4

10

.59

.41

0.7

10

.29

.51

0.4

9.9

9.2

10

.2

Ru

ssia

Mt

6.4

6.1

6.0

7.5

7.8

8.0

9.8

8.6

10

.91

0.9

Ira

nM

t5

.55

.55

.46

.98

.75

.86

.16

.77

.96

.3

Om

an

Mt

5.7

6.8

7.4

6.0

8.5

7.6

7.7

7.8

6.5

9.2

oth

er

Mt

28

.23

0.4

29

.53

1.0

30

.53

3.3

32

.93

4.6

35

.03

6.6

Ch

ina

pro

du

cti

on

Cru

de

Mt

52

.35

1.4

53

.25

1.3

52

.25

2.0

53

.95

2.2

53

.85

4.0

Ga

solin

eM

t2

4.0

24

.02

5.4

26

.62

6.9

26

.82

8.7

28

.73

0.6

30

.9

Die

sel

Mt

42

.14

2.7

44

.04

2.3

42

.94

3.5

46

.04

3.8

45

.64

4.8

Ch

ine

se im

po

rts

fro

m A

ust

ralia

kt7

98

.31

23

3.7

46

1.8

73

0.9

71

1.9

74

4.2

54

0.3

60

0.4

55

7.2

54

1.2

va

lue

US

Dm

n6

30

.81

05

2.3

39

3.3

59

9.8

56

7.1

59

4.8

34

2.1

24

7.3

26

9.1

25

1.8

Gas

Ch

ina

pip

elin

e im

po

rts

Mt

4.9

5.2

5.4

4.9

5.9

6.0

6.2

6.7

5.7

5.8

Ch

ina

LN

G im

po

rts

kt4

16

04

56

05

14

05

62

94

29

74

81

15

15

55

12

74

39

24

62

7.3

Qa

tar

kt1

43

2.2

16

18

.31

78

4.8

25

70

.01

38

0.5

13

28

.71

45

8.3

13

22

.77

11

.31

15

2.7

Au

stra

liakt

97

4.2

83

3.9

90

6.2

84

2.5

90

4.6

11

62

.29

02

.11

09

3.8

12

86

.31

67

1.8

Ind

on

esi

akt

78

8.4

60

5.5

67

6.6

61

7.4

60

8.3

67

6.3

65

2.9

67

2.4

74

5.3

81

7.3

Ma

lays

iakt

64

5.3

67

9.0

68

5.0

84

2.9

69

8.1

62

2.6

82

9.4

82

0.0

11

28

.44

73

.9

oth

er

kt3

19

.88

23

.31

08

7.4

75

6.2

70

5.2

10

21

.01

31

1.7

12

18

.45

21

.15

11

.7

Ch

ina

pro

du

cti

on

Bcm

26

.92

6.4

30

.23

2.3

29

.02

9.2

33

.53

3.6

29

.23

0.1

Ch

ine

se im

po

rts

fro

m A

ust

ralia

kt9

74

.28

33

.99

06

.28

42

.59

04

.61

16

2.2

90

2.1

10

93

.81

28

6.3

16

71

.8

va

lue

US

Dm

n1

82

.91

45

.71

59

.61

46

.41

59

.72

39

.11

73

.12

70

.94

33

.34

85

.4

So

urc

e: C

EIC

.

Tabl

e 10

: Oil

and

gas

sum

mar

y da

ta


Gas

• China’s LNG import values decreased 38%yr in

Q3. Pipeline values were down 27%yr.

• In October, BP announced exploration and

production cooperation plans in the Sichuan

Basin; fuel retailing ventures in China; and a

US$10 billion LNG supply deal. The deal will

deliver up to 1 Mt of LNG annually over 20

years to Huadian, China’s largest gas-fired

power generator.

• Around US$18.5 billion worth of oil and gas

deals between the two nations were signed

during President Xi Jinping’s visit to the UK.

• In September, Russia’s second-largest gas

producer Novatek signed a framework

100

200

300

400

500

600

700

Dec-09 Mar-11 Jun-12 Sep-13 Dec-14

USD/t

LNG pipeline

Source: CEIC.

Industry31%

Residential30%

other17%

Transport and

agriculture13%

Services9%

Source: IEA

Industry37%

Residential30%

Services14%

Other11.5%

Transport7%

Agriculture0.5%

Source: IEA

Figure 76: Gas unit values in China

Figure 77: Gas use by sector: World Figure 78: Gas use by sector: China

other non-

OECD33%

USA21%

Russia17%

other OECD10%

Qatar5%

Iran5%

Canada5%

China4%

Production

Other Non-OECD28%

USA22%

other OECD21%

Russia12%

China6%

Iran5%

Japan3%

Saudi Arabia

3%

Consumption

Source: BP

0.0

0.5

1.0

1.5

2.0


China IndiaJapan South KoreaUSA

Consumption toe per capita

Sources: IEA, IMF

Figure 80: Gas use and supply by countryFigure 79: Gas demand per capita


agreement allowing China’s Silk Road Fund

(a sovereign investment vehicle) to purchase

a 9.9% stake (US$1.4 billion) in its Yamal LNG

project. It is the Fund’s first investment in Russia.

• China’s LNG imports decreased 3.8%yr to 4.6

Mt in Q3 and pipeline imports decreased 4%yr

to 5.8 Mt. LNG imports from Qatar declined

13%yr to 1.2 Mt and imports from Malaysia

also declined 24%yr to 474 kt. Imports from

Indonesia increased 21%yr to 817 kt.

• China’s LNG imports from Australia accounted

for the largest share of their LNG imports in Q3

at 36%. Imports from Australia increased 44%yr

to a record high of 1.7 Mt in Q3. Their value

increased 103%yr to US$485 million.

ROW23%

Russia22%

Qatar12%

other Asia Pacific

12%

Norway10%

other Africa8%

Canada8%

Netherlands5%

Source: BP.

Figure 84: World gas exports by country

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


Mt

LNG Pipeline

Source: CEIC

0

40

80

120

160

200

240

280

320

360

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9


Mt USDmn

volume (lhs)

value (rhs)Source: CEIC.

other Europe

38%

other Asia Pacific12%

Japan11%

ROW11%

Germany9%

United States

8%

Italy6%

China5%

Source: BP

Figure 81: China’s gas imports by type

Figure 83: Chinese LNG imports from Australia

Figure 85: World gas imports by country

Figure 82: Chinese LNG imports by source

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8


MtQatar AustraliaIndonesia MalaysiaOther

Source: CEIC


Uranium

0

100

200

300

400

500

600

700

800

0

20

40

60

80

100

120

140

160

Oct 04 Oct 06 Oct 08 Oct 10 Oct 12 Oct 14

index USD/lb

USD price (lhs)

USD price index (rhs)

RMB price index (rhs)

Sources: LME, Bloomberg

0

3000

6000

9000

12000

15000

0

300

600

900

1200

1500

Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

USDmn

Volume (rhs)

Value (lhs)

Source: CEIC, China Petroleum and Chemical Industry Federation

Tonnes

Other31%

United States28%

France15%

China10%

Russia8%

South Korea

8%

Source: World Nuclear Association.

Kazakhstan37%

Other20%

Canada15%

Australia12%

Niger8%

Namibia8%

Production

Source: World Nuclear Association, OECD NEA & IAEA.

Kazakhstan12%

Other35%

Canada9%

Australia31%

Niger8%

Namibia5%

Reserves*

*Reasonably Assured and Inferred, recoverable at US$130 per tonne U3O8

Figure 86: Uranium prices

Figure 88: Global uranium output & reserves

Figure 87: China’s uranium imports

Figure 89: Uranium use by country

Table 11: Uranium summary data.

Units Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Uranium spot price U3O

8USD/lb 35 35 35 29 32 37 38 36 36

China nuclear power output bn kWh 30 30 27 28 38 37 35 42 50

Investment in nuclear RMBbn 15 20 11 13 14 19 10 11 13

China uranium imports t 9069 6216 4045 6801 4985 9281 2041 5659 7505

Value USDmn 931 677 396 675 482 810 210 587 721

Source: CEIC, Cameco, The Ux Consulting Company, Trade Tech.


• In contrast to the bearish sentiment that

adversely affected the price of most

commodities in Q3, the spot price for uranium

increased by 14%yr to average US$36/lb.

• China’s nuclear power output increased 18%qtr

and 31%yr to 50 billion kWh in Q3.

• China’s investment in new nuclear capacity

declined 6%yr in Q3 to RMB13.1 billion.

• State-owned China National Nuclear

Corporation announced plans to collaborate

with TerraPower on advanced nuclear

technologies.

• China imported 7505 tonnes of uranium in Q3,

an increase of 51%yr. These imports were worth

US$721 million, an increase of 49%yr.

0

5

10

15

20

25

30

Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15

RMB bn

Source: CEIC

Figure 93: China’s nuclear construction spending

0

20000

40000

60000

80000

China OtherAsia

EasternEurope

NorthAmerica

WesternEurope

Africa -Middle

East

SouthAmerica

MWe

Under Construction

Planned

Source: World Nuclear Association

0

1

2

3

4

Oil Gas Coal Nuclear Other Total

1990 to 2013

2013 to 2035Source: BP

Compound annual growth rate %

Figure 90: Chinese nuclear generation growth

Figure 92: Chinese nuclear generation capacity

Figure 94: Growth in world energy by source

Figure 91: New capacity: planned & underway

0

2

4

6

8

10

12

14

16

18

20

1998 2000 2002 2004 2006 2008 2010 2012 2014

Million kW

Source: CEIC

-5

0

5

10

15

20

25

30

-20

0

20

40

60

80

100

120


Nuclear generation (lhs)

Total electricity generation (rhs)

%yr* %yr*

Sources: CEIC, Westpac. * 12mma.


Gold

• LBMA gold prices averaged US$1125 an ounce

in Q3, down 5.7%qtr and 12.2%yr. Gold prices

reached their lowest level in five years during

the quarter on the back of a stronger US

dollar, itself a function of expectations for a US

interest rate rise later in the year. Gold prices

increased slightly during October, closing at

US$1164 on 27 October, following a ‘no change’

decision at the US Fed’s September meeting.

• According to the World Metal Statistics,

world gold mine production fell 4.1%yr to

1923 tonnes in the first eight months of 2015.

Production in China—the world’s largest

producer—rose 0.8%yr to 307 tonnes.

• According to the World Gold Council, global

consumption declined 12% to a six-year low

of 915 tonnes in Q2. Almost half of the decline

was attributed to lower consumer demand

in India and China. Consumption in China

declined by 3%yr to 217 tonnes in Q2. Its

jewellery consumption declined 5%yr in Q2 to

174 tonnes, which offset higher demand for bar

and coin, up 6%yr to 42 tonnes.

• The Chinese Government’s gold reserves

increased by 50 tonnes to 1709 tonnes in Q3,

up 62.1%yr. It is reported that gold accounts for

only 1.7% of China’s total foreign reserves. That

is consistent with the relatively low holdings

among other Asian central banks.

0

100

200

300

400

500

0

400

800

1200

1600

2000

Apr 06 Apr 08 Apr 10 Apr 12 Apr 14

RMB/gUSD/oz

LBMA

SGE

Sources: LBMA, Bloomberg

0

75

150

225

300

375

0

50

100

150

200

250

Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15

RMB/gtonnes

Import Volume (lhs)

SGE Price (rhs)

Sources: CEIC, Bloomberg.

Figure 95: Gold prices, London & Shanghai

Figure 96: Chinese gold imports via Hong Kong

Table 12: Gold prices (USD/oz unless specifi ed otherwise)

LBMA spot prices Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Quarter average 1417 1330 1272 1292 1290 1282 1201 1219 1194 1125

Quarter end 1235 1329 1206 1284 1327 1208 1185 1184 1172 1115

Quarter high 1600 1418 1353 1383 1328 1339 1249 1302 1226 1170

Quarter low 1201 1223 1189 1201 1244 1208 1141 1150 1172 1085

Shanghai avg RMB/g 286 265 251 256 259 255 238 246 239 229

Shanghai avg USD/g 46 43 41 42 41 41 39 39 38 36

Sources: LBMA, Bloomberg.


• China’s reported gold imports via Hong Kong

totalled 132 tonnes in July and August, an

increase of 71%yr.

• ETF stockholdings closed at 1541 tonnes on 26

October (down 6.6%yr), after reaching a 6 year

low of 1514 tonnes on 21 September. Lower ETF

holdings suggest a possible decline in interest

amongst investors in gold backed financial

assets as a store of value now that US interest

rates may be on the rise.

• Australia’s gold export volumes to China

increased 90%yr to 56 tonnes in Q3, while the

value of gold exports increased 112%yr to $A2.8

billion.

Other40%

India23%

China28%

USA5%

Turkey3%

Source: World Gold Council.

Figure 100: Gold fabrication cons. by country

0

5

10

15

20

25

0

250

500

750

1000

1250

Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

tonnesAUDmn

Volume (rhs)

Value (lhs)

Source: ABS

Other36%

Other Africa15%

China15%

Australia9%

Russia8%

USA7%

South Africa5%

Peru5%

Source: World Bureau of Metal Statistics-20%

-15%

-10%

-5%

0%

5%

10%

15%

-8%

-6%

-4%

-2%

0%

2%

4%

6%


PriceETF

ETF Stocks %mth (lhs)

Price %mth (rhs)

Sources: Bloomberg, LBMA

Jewellery67%

Physical bar investment

20%

Electronics8%

Official Coins

5%

Industrial and other

0.4%

Source: World Gold Council.

Figure 97: Australian gold exports to China

Figure 99: Gold output by countryFigure 98: Gold exchange traded funds

Figure 101: Gold end–use by sector


Gol

dun

itJu

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15

Ch

ina

imp

ort

s (v

ia H

on

g K

on

g)

t3

65

.73

77

.03

81

.93

33

.52

04

.11

68

.83

89

.12

29

.01

78

.8n

.a

Do

me

stic

pro

du

cti

on

t1

02

.91

15

.01

20

.49

6.5

11

4.6

14

0.7

10

0.1

11

0.7

11

8.0

n.a

Au

stra

lian

exp

ort

s to

Ch

ina

t4

4.5

43

.35

0.9

47

.04

0.1

29

.74

2.5

39

.44

0.1

56

.4

va

lue

AU

Dm

n2

06

4.1

20

32

.32

25

4.7

21

74

.11

77

3.9

13

17

.81

89

9.0

19

51

.91

97

6.6

27

99

.4

Silv

erC

hin

a im

po

rts

t8

5.5

99

.97

8.1

67

.89

0.5

83

.77

6.3

11

7.7

21

7.0

33

1.9

Do

me

stic

pro

du

cti

on

t9

77

97

79

77

91

89

18

91

89

18

91

89

18

91

8

So

urc

es:

CE

IC, A

BS

, Wo

rld

Me

tal S

tati

stic

s.

Tabl

e 13

: Gol

d an

d si

lver

sum

mar

y da

ta


Other35%

Mexico22%

China13%

Peru14%

Aust7%

Russia5%

Poland4%

Production

Other32%

USA12%China

24%

India20%

Japan7%

South Korea3%

Germany2%

Fabrication

Source: The Silver Institute, Thomson Reuters GFMS.

0

3

6

9

12

15

0

10

20

30

40

50

Aug 09 Oct 10 Dec 11 Feb 13 Apr 14 Jun 15

RMB/gUSD/oz

London Bullion Market spot

Changjiang Silver

Source: Bloomberg

Jewellery20%

Electronics25%

Alloys and Solders

6%Silverware6%

Coins and bars18%

Photographic use4%

other uses29%

Source: The Silver Institute, Thomson Reuters GFMS0

2000

4000

6000

8000

2003 2005 2007 2009 2011 2013

tonnes

Unwrought Powder Semi-manufactured Other

Source: CEIC

Figure 103: Silver output & fabrication demandFigure 102: Silver prices, London & Changjiang

Figure 104: Chinese silver import volumes: annual Figure 105: Silver end–use by sector

Silver

Table 14: Silver prices (USD/oz unless specifi ed otherwise)

LBMA spot prices Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Quarter average 23.2 21.5 20.8 20.5 19.7 19.7 19.7 16.6 16.5 14.9

Quarter end 19.7 21.7 19.5 19.8 21.0 17.0 15.7 16.7 15.7 14.5

Quarter high 28.0 24.5 22.8 22.0 21.1 21.4 21.4 18.3 17.7 15.8

Quarter low 18.5 18.9 19.1 19.2 18.8 17.0 17.0 15.5 15.7 14.7

Changjiang RMB/g 4.72 4.28 4.24 4.15 4.15 4.22 3.59 3.58 3.54 3.31

Changjiang USD/g 0.76 0.70 0.70 0.68 0.67 0.68 0.59 0.57 0.57 0.53

Sources: LBMA, Bloomberg.


Copper

• The average LME copper price declined 13.0%qtr to US$5259/t in Q3. LME copper closed at US$4888/t on 24 August—a six year low—but has since increased following Glencore’s decision to suspend operations at two mines in Zambia and the Democratic Republic of Congo, which will take about 400,000 tonnes out of the market. LME prices remained relatively steady in October, closing at US$5136/t. The SHFE copper price declined 9.4%qtr to RMB 39,913 in Q3.

• LME copper inventories were 313 kt at the end of Q3— down 3.4%qtr and up 105%yr. LME inventories hit a 21 month high in August but then fell sharply in September. SHFE inventories were up 91%yr to end Q3 at 156 kt.

• China’s refined copper production decreased

35

40

45

50

55

60

65

70

3

4

5

6

7

8

9

10

Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15

‘000 RMB/t‘000 USD/tLME Spot (lhs)

LME 3mth forward (lhs)

SHFE spot (rhs)


Other38%

China34%

Chile12%

Japan7%

USA5%

Russia4%

Producers

Source: World Bureau of Metal Statistics

China50%

Other29%

USA8%

Germany5%

Japan5%

South Korea

3%

Consumers

0

200

400

600

800

1000

5000

6000

7000

8000

9000

10000

Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15

ktUSD/t

end of month inventories (rhs)LME spot (lhs, month average)

Sources: LME, Bloomberg.

Figure 106: Copper prices, London & Shanghai

Figure 107: LME prices & inventories Figure 108: Copper use and supply by country

Table 15: Copper prices (USD/t unless specifi ed otherwise)

LME spot prices Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Quarter average 7148 7073 7153 7041 6787 6994 6624 5818 6043 5259

Quarter end 6751 7291 7395 6636 6955 6736 6359 6051 5721 5093

Quarter high 7547 7341 7395 7440 7035 7184 6860 6309 6448 5762

Quarter low 6638 6719 6939 6435 6600 6736 6306 5391 5646 4888

3 Month forward 7180 7096 7161 7008 6757 6976 6568 5790 6046 5261

Shanghai avg RMB/t 52782 51690 51555 49403 49328 50273 47525 42391 44074 39913

Shanghai avg USD/t 8578 8438 8468 8097 7915 8156 7729 6799 7104 6335



4.6%yr in Q3 to 2.0 Mt. Jiangxi and Anhui were the highest producing regions in the first eight months of 2015, producing 933 kt and 870 kt respectively.

• In Q3, China’s total copper imports increased 9.4%yr to 1886 kt. Imports from Chile totalled 580 kt, up 32.4%yr. Chile remains the principal source of China’s copper imports with a 31% market share.

• Australia’s copper export volumes increased 12%yr to 141 kt in Q3. Export values increased 17%yr to $A1 billion.

Other Provinces

34%

Jiangxi17%

Shandong14%

Shandong14%

Gansu11%

Yunnan6%

Zhejiang1%

Source: Bloomberg

Figure 112: Copper demand per capita

0

100

200

300

400

500

600

700

800

Feb 12 Oct 12 Jun 13 Feb 14 Oct 14 Jun 15

kt Other Chile Peru Australia

Scaled by metal content

Sources: Bloomberg, DIS.

Sources: IMF, World Bureau of Metal Statistics.

0

2

4

6

8

10

12

14

16

18

20

10 20 30 40 50GDP per person (thousands of PPP international dollars)

China India Japan South Korea USA

Consumption kgpp

0

100

200

300

400

500

600

700

800

Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-150

10

20

30

40

50

60

70

80AUDmnkt

Volume (lhs)Value (rhs)

Source: ABS

Figure 109: Chinese copper import volumes

Figure 111: Copper end–use by sectorFigure 110: Australian copper exports to China

Figure 113: Copper output by Chinese province

Building construction

44%

Electric and electronic products

20%

Transportation equipment

17%

Consumer and general

products12%

Industrial machinery and

equipment7%

Source: United States Geological Survey.


unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

skt

13

80

17

31

18

19

18

36

16

99

17

25

19

35

17

29

17

74

18

86

Au

stra

liakt

15

71

35

12

81

65

14

41

40

15

21

16

14

21

23

Ch

ilekt

38

35

19

57

45

42

53

84

38

62

95

69

55

85

80

Pe

rukt

12

02

00

21

31

82

18

21

96

20

51

72

19

22

67

oth

er

kt7

20

87

79

04

94

68

34

95

09

49

87

28

83

91

6

Re

fi n

ed

pro

du

cti

on

kt1

69

31

71

51

90

91

65

11

82

32

02

72

32

11

83

41

95

12

00

9

Wo

rld

sto

cks

kt1

31

91

11

09

16

90

96

94

70

07

69

96

48

65

86

6

we

eks

of

sto

cks

we

eks

3.3

2.7

2.1

2.2

1.5

1.6

1.7

2.3

1.9

n.a

Au

stra

lian

exp

ort

s to

Ch

ina

kt1

36

12

31

54

12

11

28

12

61

38

10

91

23

14

1

va

lue

AU

Dm

n9

79

88

81

20

99

61

88

19

02

10

45

77

89

32

10

51

So

urc

es:

Blo

om

be

rg, W

orl

d M

eta

l Sta

tist

ics,

AB

S.

Tabl

e 16

: Cop

per

sum

mar

y da

ta


Aluminium

• The LME aluminium spot price averaged

US$1580/t in Q3, down 10%qtr, a function of

excess supply. In August the LME price reached

a six year low of $US1468/t. Even so, LME stocks

continued their year to date decline, also

reaching a six year low of 3179 kt at the end of

the quarter.

• Mirroring trends on the LME, the SHFE price

also declined to a six year low of RMB 11,620/t

as of 30 September.

• In Q3, aluminium production increased 3%qtr

and 37%yr to 8.3 Mt. Nearly half of this output

was from Shandong and Xinjiang provinces

where production costs are low due to cheap

energy. Together with cutting-edge smelting

10

12

14

16

18

1.0

1.5

2.0

2.5

3.0

Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15

‘000 RMB/t ‘000 USD/t

LME Spot (lhs)


SHFE spot (rhs)


Other29%

China52%

Russia7%

Canada5%

UAE4%

India3%

Producers


Other28%

China51%

USA10%

Germany4%

Japan4%India

3%

Consumers

1000

2000

3000

4000

5000

6000

1500

1800

2100

2400

2700

3000

Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15

ktUSD/tend of month inventories (rhs)LME spot (lhs, month average)


Figure 114: Aluminium prices, LME & Shanghai

Figure 115: LME prices & inventories Figure 116: Aluminium use & supply by country

Table 17: Aluminium and Alumina prices (USD/t unless specifi ed otherwise)


Quarter average 1835 1781 1769 1708 1798 1987 1966 1800 1765 1580

Quarter end 1731 1803 1765 1731 1851 1935 1832 1789 1647 1536

Quarter high 1939 1877 1849 1768 1871 2114 2099 1872 1919 1693

Quarter low 1720 1730 1695 1642 1715 1838 1828 1742 1642 1468

3 Month forward 1870 1827 1815 1752 1836 2008 1974 1813 1787 1621


Shanghai avg 2336 2345 2357 2158 2107 2283 2197 2061 2090 1905

Aust FOB Alumina 327 318 323 328 317 323 355 342 337 292

China Alumina RMB/t 2513 2500 2504 2438 2353 2439 2732 2624 2439 2270



technology, China’s locally manufactured

aluminium remains very competitive.

• Lower prices contributed to a contraction

in China’s aluminium exports. Shipments of

unwrought aluminium and products declined

10%yr and 19%qtr to 1050 kt.

• Despite increased domestic supply and lower

premium prices, China’s aluminium imports

rose 53%qtr and 36%yr to 70 kt in Q3. Imports

from Australia increased 376%qtr to 12.7 kt,

which increased Australia’s share of China’s total

imports to 18%, up from 6% in Q2.

• In Q3, Australia’s aluminium exports to China

increased 256%yr to 19 kt and export earnings

increased by 246%yr to $A47 million.

Other30%

Shandong25%

Xinjiang19%

Henan10%

Gansu8%

Inner Mongolia

8%

Source: Bloomberg

Figure 121: Aluminium output by province

0

15

30

45

60

75

90


ktOther RussiaAustralia TaiwanUAE

Source: Bloomberg

0

5

10

15

20

25

30


China India Japan

South Korea USA

Consumption kgpp

Sources: IMF, World Bureau of Metal Statistics

0

4

8

12

16

20

0

10

20

30

40

50


ktAUDmn

Volume (rhs)

Value (lhs)

Source: ABS

Figure 117: Chinese aluminium import volumes

Figure 120: Aluminium demand per head

Figure 118: Australian aluminium exports to China Figure 119: Aluminium end–use by sector

Transportation manufacturing

38%

Packaging22%

Construction13%

Electrical9%

Machinery8%

Consumer durables

7%

Other3%

Source: United States Geological Survey


• The closure of several smelters led to a sharp

decline in alumina prices in Q3. Prices (FOB

Australia) declined by 13%qtr to average US$292

a tonne in Q3.

• Chalco and Shenhua Group signed an

agreement in mid-September for the joint

construction of a 2 Mt alumina project in Hebei

Province. The $US1.6 billion project is to be

completed in 2016.

• In Q3, China’s alumina imports increased

51%qtr and 15%yr to 1329 kt, supported by a

sharp increase in imports during July. Australia

remained the largest source of imports, at 869

kt, up 57%qtr and 66%yr.

Shandong33%

Henan24%

Shanxi19%

Guangxi15%

Other9%

Source: Bloomberg

Figure 126: China’s alumina output by province

2000

2250

2500

2750

3000

250

300

350

400

450


RMB/tUSD/t

AUS Fob (lhs)

CHN Met grade (rhs)

Source: Bloomberg

China47%

Oceania19%

South America13%

North America6%

Africa & Asia (ex China)

6%

West Europe5%

East & Central Europe

4%

Source: International Aluminium Institute

Australia45%

Brazil22%

Other18%

USA5%

Ireland5%

Jamaica5%

Exports


Other38%

China19%

Canada15%

Russia12%

Norway8%

UAE7%

Imports

Figure 122: Alumina prices

Figure 125: World alumina output

Figure 123: World alumina trade Figure 124: China’s alumina imports

0

100

200

300

400

500

600

700

800


kt

Australia Other Brazil India Vietnam

Source: Bloomberg

Alumina


• China imported 16.5 Mt of bauxite in Q3, up

31%qtr and 95%yr, to support increased alumina

production.

• Following the Indonesian export ban in early

2014, China has continued to diversify its supply

sources. Malaysia has emerged as a key supplier

during 2015 and became the largest source of

China’s imports in Q2. During Q3, China sourced

8 Mt of bauxite from Malaysia, up 46%qtr and

649%yr.

• A Chinese consortium has developed a

US$200 million bauxite project in Guinea that

will export its output to China. The project is

expected to ship up to 5 Mt of bauxite to China

in 2015, increasing to 30 Mt in two years.

• Indonesia’s government has investigated

the legal and environmental implications

of overturning its ban on bauxite exports.

However, it was confirmed in a stimulus package

announced in September that the government

does not intend to remove the ban.

• Australia is also a key source of China’s bauxite

imports with a market share of 34%. In Q3,

Australia exported 5.2 Mt of bauxite, up 10%yr.

Earnings from bauxite exports increased 47%yr

to $A268 million.

Figure 130: World bauxite trade

0

1

2

3

4

5

6

7

8

9


MtIndonesia Australia Other India Malaysia

Source: Bloomberg

Australia30%

China25%

Other16%

Brazil14%

India8%

Guinea7%


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


10

20

30

40

50

60

70

80

90

100Mt AUDmn

Volume (lhs)Value (rhs)

Source: ABS

Figure 129: World bauxite output

Figure 128: Australia’s bauxite exports to China

Australia38%

Guinea22%

Brazil19%

India12%

Other9%

Exports

Source: World Bureau of Metal Statistics,

China53%

USA18%

Other12%

Ireland6%

Canada6%

Ukraine5%

Imports

Bauxite

Figure 127: China’s bauxite import by source


Alu

min

ium

unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

skt

82

.81

37

.71

93

.01

75

.59

6.1

51

.53

0.5

34

.44

5.9

70

.0

Au

stra

liakt

14

.33

1.7

31

.54

8.0

18

.97

.05

.67

.72

.71

2.7

Ind

iakt

2.9

13

.11

7.7

19

.10

.70

.81

.66

.62

.00

.0

Ru

ssia

kt2

8.1

28

.94

6.1

29

.62

4.2

16

.92

.11

.54

.34

.5

oth

er

kt3

7.6

64

.09

7.7

78

.85

2.3

26

.82

1.2

18

.63

6.8

52

.9

Re

fi n

ed

pro

du

cti

on

kt5

36

55

62

65

83

95

75

55

74

76

04

56

39

37

20

58

01

08

25

4

Wo

rld

sto

cks

kt7

43

97

08

97

17

17

35

67

18

56

73

86

42

84

80

74

54

9n

a

we

eks

of

sto

cks

we

eks

8.4

7.9

8.0

8.2

7.6

7.0

6.4

4.5

4.0

na

Au

stra

lian

exp

ort

s to

Ch

ina

kt1

22

83

53

41

05

63

31

9

va

lue

AU

Dm

n2

56

27

67

32

11

41

89

94

7

Alu

min

a

Ch

ina

imp

ort

skt

61

2.5

82

9.3

13

54

.41

48

3.7

12

80

.71

15

8.1

13

53

.99

33

.18

79

.81

32

9.1

Au

stra

liakt

60

2.7

76

6.5

11

77

.01

18

3.7

65

4.9

52

3.0

79

0.7

45

5.4

55

4.5

86

9.0

Ch

ine

se p

rod

uc

tio

nM

t1

1.0

11

.61

1.2

11

.21

1.5

11

.71

2.6

13

.31

4.2

na

Baux

ite

Ch

ina

imp

ort

sM

t1

9.0

21

.11

7.6

13

.16

.68

.48

.41

0.1

12

.61

6.5

Au

stra

liaM

t4

.04

.23

.43

.13

.74

.74

.24

.94

.55

.6

Ind

on

esi

aM

t1

2.4

14

.71

2.4

8.7

0.1

0.0

0.0

0.0

0.0

0.0

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

4.1

4.2

4.0

2.5

3.9

4.7

5.0

4.7

5.1

5.2

va

lue

AU

Dm

n1

38

.01

49

.51

50

.68

7.0

14

0.9

18

1.7

22

7.5

23

4.7

25

6.9

26

7.7

So

urc

es:

Blo

om

be

rg, W

orl

d M

eta

l Sta

tist

ics,

AB

S.

Tabl

e 18

: Alu

min

ium

, alu

min

a an

d ba

uxite

sum

mar

y da

ta


Nickel

• The LME nickel price averaged US$10,561 in

Q3, down 43%yr and 19%qtr. This is the lowest

quarterly price recorded since the height of

the GFC in Q1 2009. The nickel price has been

weighed down by persistently high LME stocks,

an increase in China’s refined nickel production

and bearish commodity market sentiment.

• At current prices, some analysts estimate that

around 70% of China’s refined nickel producers

are operating at a loss.

• LME stocks declined by 1%qtr to a still very

high 453 kt during Q3.

• China’s port stocks of nickel ore are estimated

to have declined by 5%qtr to finish Q3 at 17 Mt.

40

80

120

160

200

5

10

15

20

25

Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15

‘000 RMB/t‘000 USD/t

LME Spot (lhs)LME 3mth forward (lhs)SHFE Spot (rhs)

Sources: LME; Bloomberg

China34%

Other31%

Russia13%

Japan9%

Australia7%

Canada6%

Producers


China45%

Other27%

Japan9%

USA9%

South Korea

6%

Germany4%

Consumers

75

175

275

375

475

5

10

15

20

25

Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15

kt‘000 USD/t

end of month inventories (rhs)LME spot (lhs, month average)


Figure 131: Nickel prices, London & Shanghai

Figure 132: LME prices & inventories Figure 133: Nickel use and supply by country

Table 19: Nickel prices (USD/t unless specified otherwise)


Quarter average 14963 13916 13909 14643 18465 18576 15799 14338 13008 10561

Quarter end 13680 13860 13970 15735 18715 16505 14935 12460 11680 10070

Quarter high 16390 14775 14635 16225 21200 19795 16825 15455 14415 12060

Quarter low 13560 13160 13270 13365 15780 16505 14650 12460 11680 9305

3 Month forward 15039 13996 13979 14693 18512 18669 15877 14400 13055 10611





• China’s refined nickel production increased

3%yr in the first eight months of 2015 to 238 kt.

• The value of China’s nickel imports decreased

16%yr in Q3 to US$2.0 billion. China’s nickel

imports from Russia increased by 98%yr to

US$784 million. China’s imports from the

Philippines and Australia fell 56%yr and 1%yr

respectively to US$612 million and US$97

million.

• The value of Australia’s nickel exports is

estimated to have increased by less than 1%yr in

Q3 to $A1 billion.

Other42%

Gansu39%

Jiangxi11%

Guangxi5%

Xinjiang3%

Source: Bloomberg

Figure 137: Nickel demand per capita

0

250

500

750

1000

1250

Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15

USDmn

Indonesia Russia PhilippinesAustralia Other Canada

Source: Bloomberg

Stainless and alloy

steel production

45%Nonferrous alloys and

superalloys43%

Electroplating7%

Other5%


0.0

0.5

1.0

1.5

2.0

2.5


ChinaIndiaJapanSouth KoreaUSA

Consumption kgpp


Figure 134: Chinese nickel import values

Figure 136: Nickel end–use by sectorFigure 135: Nickel output by province

Figure 138: World trade in nickel

Russia40%

Other18%

Australia15%

Canada13%

Norway9%

Singapore5%

Exports


Other37%

China21%

USA18%

Germany12%

Singapore6%

India6%

Imports


unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

sU

SD

mn

18

42

17

66

20

95

15

85

16

25

23

14

12

51

90

41

91

81

95

1

Au

stra

liaU

SD

mn

18

91

19

11

26

71

12

99

71

81

87

97

Ca

na

da

US

Dm

n1

07

86

89

96

85

10

25

77

21

07

98

Ru

ssia

US

Dm

n2

57

27

02

33

32

64

02

39

61

46

19

36

55

78

4

Ind

on

esi

aU

SD

mn

62

95

21

91

47

12

28

81

00

1

Ph

ilip

pin

es

US

Dm

n4

42

48

24

48

17

17

20

13

75

69

42

94

56

26

12

oth

er

US

Dm

n2

17

28

72

99

21

22

76

33

42

82

26

55

07

35

9

Re

fi n

ed

pro

du

cti

on

*kt

60

69

87

75

90

99

10

28

29

3n

a

LME

sto

cks

kt2

07

24

82

82

28

43

05

35

84

15

43

34

57

45

3

we

eks

of

sto

cks

we

eks

6.3

7.2

7.6

8.5

9.1

10

.71

3.8

14

.71

1.3

16

.2

Au

stra

lian

exp

ort

s to

Ch

ina

kt6

66

7.2

59

.24

8.7

50

57

62

48

53

na

va

lue

AU

Dm

n9

46

82

17

36

73

19

29

10

02

94

88

73

75

61

01

1*

So

urc

es:

Blo

om

be

rg, W

orl

d M

eta

l Sta

tist

ics,

Inte

rna

tio

na

l Nic

kel S

tud

y G

rou

p.,

CE

IC

* N

ote

: Re

fi n

ed

pro

du

cti

on

da

ta s

eri

es

no

lon

ge

r in

clu

de

s sm

elt

er

ou

tpu

t a

nd

ha

s b

ee

n r

ev

ise

d.

Tabl

e 20

: Nic

kel s

umm

ary

data


Zinc

• The LME zinc spot price declined through Q3

to end September at US$1657, on the back of

a fall of 16%qtr and 20%yr. Prices have been

weighed down by a fall in China’s raw steel

production, an increase in stocks and general

market pessimism.

• LME stocks increased 27%qtr to end the

September quarter at 591 kt. The rise marked

a turnaround from the historic lows recorded

in June 2015. However, LME stocks were still

down 6% from the start of 2015 and 21% since

Q3 2014. SHFE stocks declined 7%qtr to 167 kt.

• China’s refined zinc output increased 12%yr to

4.1 Mt in the first eight months of 2015. Growth

was particularly strong in Shaanxi (up 18%yr to

639 kt) and Gansu (up 87%yr to 270 kt).

10

15

20

25

1.5

2.0

2.5

3.0


‘000 RMB/t ‘000 USD/t

LME Spot (lhs)


SHFE spot (rhs)


China43%

Other36%

South Korea7%

India5%

Canada5% Japan

4%

Producers


China47%

Other32%

USA7%

South Korea

5%

India5% Japan

4%

Consumers

400

600

800

1000

1200

1400

1500

1700

1900

2100

2300

2500


ktUSD/tend of month inventories (rhs)

LME spot (lhs, month average)Sources: LME, Bloomberg.

Figure 139: Zinc prices, London & Shanghai

Figure 140: LME prices & inventories Figure 141: Zinc use and supply by country

Table 21: Zinc prices (USD/t unless specifi ed otherwise)


Quarter average 1840 1859 1907 2029 2073 2311 2235 2080 2190 1847

Quarter end 1823 1877 2086 1981 2205 2290 2167 2076 1994 1657

Quarter high 1925 1956 2116 2156 2205 2420 2335 2184 2405 2096

Quarter low 1784 1793 1828 1942 2073 2194 2114 1985 1994 1587

3 Month forward 1875 1896 1932 2027 2079 2314 1932 2092 2192 1855





• China’s total zinc imports (refined and ore)

increased 11%yr in the first eight months of 2015

to 1.1 Mt. Imports from Australia increased 8%yr

to 358 kt. Peruvian supply increased by 65%yr to

268 kt. Imports from Turkey fell 60%yr to 5.7 kt.

• In response to low prices Glencore will

temporarily suspend or reduce production

at their Australian operations, including Lady

Loretta, George Fisher and McArthur River.

Worldwide, Glencore plans to cut annual zinc

production by 500 kt.

• Australia’s zinc exports (by metal content) to

China increased 149%yr to 224 kt, while export

earnings grew 129%yr to $A343 million in Q3.

Other28%

Hunan21%Yunnan

19%

Shaanxi15%

Guangxi8%

Inner Mongolia

9%

Source: Bloomberg

Figure 145: Zinc demand per capita

0

50

100

150

200

250

Apr 12 Dec 12 Aug 13 Apr 14 Dec 14 Aug 15

kt

Other Australia Kazakhstan Peru Turkey

Source: ILZSG


0

30

60

90

120

150

180

0

20

40

60

80

100

120


AUDmnkt

Volume (lhs) Value (rhs) Source: ABS

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


China

India

Japan

South Korea

USA

Consumption kgpp


Figure 142: Chinese zinc import volumes

Figure 144: Australian zinc exports to China

Figure 146: Zinc output by province

0

50

100

150

200

250

Apr 12 Dec 12 Aug 13 Apr 14 Dec 14 Aug 15

kt

Ores and concentrates (metal content) Refined

Source: ILZSG


Figure 143: Chinese zinc imports by type


unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

skt

37

4.4

34

5.5

42

7.9

43

1.0

34

7.2

35

3.0

37

0.3

39

1.0

41

0.3

na

Au

stra

liakt

86

.37

5.1

14

2.8

13

8.5

11

9.5

11

1.4

12

5.1

11

6.7

14

1.2

na

Ka

zakh

sta

nkt

35

.14

1.6

39

.64

9.9

34

.15

2.5

40

.63

6.6

53

.0n

a

Pe

rukt

58

.74

1.2

55

.65

7.5

65

65

.79

8.5

11

7.0

84

.7n

a

Turk

ey

kt1

1.5

16

.29

.55

.55

.35

.53

.33

.11

.8n

a

oth

er

kt1

82

.71

71

.51

80

.31

79

.61

23

.31

17

.91

02

.81

17

.61

29

.6n

a

Re

fi n

ed

pro

du

cti

on

kt1

32

5.7

13

40

.71

44

4.6

12

59

.31

40

5.6

15

08

.11

60

7.3

14

58

.11

61

2.7

na

Wo

rld

sto

cks

kt1

75

71

58

91

47

21

51

11

28

31

33

01

19

21

10

81

11

1n

a

we

eks

of

sto

cks

we

eks

7.0

6.2

5.6

6.2

4.9

4.9

4.5

4.5

4.0

na

Au

stra

lian

exp

ort

s to

Ch

ina

kt1

55

11

61

90

11

99

19

02

04

10

91

85

22

4

va

lue

AU

Dm

n2

14

17

52

82

19

51

52

15

03

50

18

93

02

34

3

So

urc

es:

Blo

om

be

rg, W

orl

d M

eta

l Sta

tist

ics,

Inte

rna

tio

na

l Le

ad

an

d Z

inc

Stu

dy

Gro

up

, AB

S.

Tabl

e 22

: Zin

c su

mm

ary

data


Lead

0

20

40

60

80

100

120

140


kt

Other Peru USARussia Australia

Source: ILZSG

100

175

250

325

400

475

1500

1800

2100

2400

2700

3000

Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15

ktUSD/tend of month inventories (rhs)

LME spot (lhs, month average)Sources: LME, Bloomberg

Other49%

Australia12%

South Korea12%

Canada11%

Belgium8%

Mexico8%

Exports


Other47%

USA28%

South Korea

8%

Germany6%

India6%

Spain5%

Imports

0

20

40

60

80

100

120

0

10

20

30

40

50

60

70


kt AUDmn

volume (lhs) value (rhs) Source: ABS

Figure 148: Chinese lead import volumesFigure 147: LME prices & inventories

Figure 149: Australian lead exports to China Figure 150: World trade in lead

Table 23: Lead prices (USD/t unless specifi ed otherwise).


Quarter average 2053 2102 2111 2106 2096 2181 2000 1806 1942 1714

Quarter end 2058 2075 2206 2041 2129 2083 1853 1808 1754 1656

Quarter high 2247 2238 2259 2212 2160 2269 2095 1882 2140 1857

Quarter low 1949 2017 2027 2008 2016 2051 1814 1696 1742 1625

3 Month forward 2066 2116 2134 2127 2120 2194 2009 1817 1952 1725





unit

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Ch

ina

imp

ort

skt

16

4.2

22

7.9

24

2.5

22

4.0

21

3.8

28

4.8

27

3.0

22

0.4

19

7.0

na

Au

stra

liakt

13

.42

5.7

29

.64

9.6

28

.84

7.8

52

.03

9.1

31

.6n

a

Pe

rukt

17

.71

0.8

9.0

17

.62

.61

8.3

26

.11

8.4

27

.2n

a

Ru

ssia

kt2

7.4

30

.94

0.0

23

.12

5.9

14

.83

4.2

23

.61

9.9

na

US

Akt

0.1

44

.04

6.5

6.1

26

.66

6.9

67

.82

5.5

23

.5n

a

Me

xico

kt9

.27

.06

.76

.81

3.6

8.9

17

.31

3.5

6.1

na

oth

er

kt9

6.4

11

1.4

11

0.6

12

0.8

11

6.3

12

8.1

75

.61

00

.38

8.7

na

Re

fi n

ed

pro

du

cti

on

kt1

20

2.6

11

52

.01

14

0.8

10

55

.71

10

5.2

10

50

.51

06

4.7

99

5.2

10

71

.6n

a

Wo

rld

sto

cks

kt6

00

60

35

86

56

25

42

57

7.3

56

0.1

54

6.4

46

7.6

na

we

eks

of

sto

cks

we

eks

3.0

3.0

2.9

2.8

2.6

3.0

2.8

2.9

2.4

na

Au

stra

lian

exp

ort

s to

Ch

ina

kt3

9.5

37

.89

0.8

79

.61

20

.89

0.2

12

2.9

55

.44

4.2

58

.5

va

lue

AU

Dm

n7

16

31

32

12

41

47

13

11

96

10

49

11

06

So

urc

es:

Blo

om

be

rg, W

orl

d M

eta

l Sta

tist

ics,

Inte

rna

tio

na

l Le

ad

an

d Z

inc

Stu

dy

Gro

up

, AB

S.

Tabl

e 24

: Lea

d su

mm

ary

data


Yunnan51%

Hunan23%

Jiangxi16%

Guangxi8%

Other2%

Source: Bloomberg

Figure 156: China’s tin output by province

0

6

12

18

24

30

10

15

20

25

30

35


kt‘000 USD/t

end of month inventories (rhs)

LME spot (lhs, month average)


Cans and containers

23%

Construction18%

Transport equipment

17%

Electrical12%

Other30%


Other12%

China51%

Indonesia20%

Peru6%

Bolivia6%

Myanmar5%

Producers


Other26%

China50%

USA8%

Japan7%

Germany5%

South Korea

4%

Consumers

50

100

150

200

250

10

15

20

25

30


‘000 RMB/t‘000 USD/tLME Spot (lhs)


SHFE spot (rhs)


Figure 152: LME prices and inventory

Figure 155: Tin use by sector

Figure 153: World tin producers and consumers

Figure 151: Tin prices

Figure 154: China’s tin imports by source

0

1

2

3

4

5


kt

Other Indonesia Singapore South Korea Taiwan

Source: Bloomberg

Tin


China43%

USA22%

Chile16%

Other9%

Peru6%

Mexico4%


Figure 162: World molybdenum output

0

10

20

30

40

50

60

0.0

0.5

1.0

1.5

2.0

2.5

3.0


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

0

2

4

6

8

10

12

14


kt

Source: CEIC, DIS

0

5

10

15

20

25

30

35

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7


USDmnktVolume (lhs)Value (rhs)

Source: CEIC

Figure 158: China’s molybdenum ore imports

Figure 161: China’s molybdenum production

Figure 159: China’s molybdenum articles exports Figure 160: China’s molybdenum ore exports

0

7

14

21

28

35

42

0.0

0.5

1.0

1.5

2.0

2.5

3.0



Source: CEIC

Molybdenum

10

15

20

25

30

35

40


‘000 USD/t

LME Spot


Figure 157: Molybdenum prices


0.0

0.5

1.0

1.5

2.0

2.5

3.0


20

40

60

80

100

120kt USDmn

Volume (rhs)Value (lhs)

Source: Bloomberg

Figure 168: China’s tungsten output (metal content)

0

3

6

9

12

15

18

21

0

10

20

30

40

50

60

70


USDmntonnes

Volume (lhs)

Value (rhs)

Source: CEIC

China 87%

Russia3%

Other4%

Canada3%

Rwanda2%

Bolivia1%


0

4

8

12

16

20

24

28

32

36

0

50

100

150

200

250

300

350

400

450


USDmntonnes

Volume (lhs)

Value (rhs)

Source: CEIC

0.00

4.00

8.00

12.00

16.00

20.00

24.00

0.0

0.2

0.4

0.6

0.8

1.0

1.2



Source: CEIC

Figure 164: China’s tungsten articles imports

Figure 167: World tungsten output

Figure 165: China’s tungsten and articles exports

Figure 163: China’s tungsten ore imports

Figure 166: China’s tungsten products exports

0

2

4

6

8

10

12


kt

Source: CEIC, DIS

Tungsten


Superalloys47%

Chemical applications

27%

Metallic applications

17%

Cemented carbides

9%


Figure 174: Cobalt use by sector

0

15

30

45

60

0

8

16

24

32

Apr-12 Jan-13 Oct-13 Jul-14 Apr-15

USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

China46%

Other24%

Finland13%

Canada 6%

Zambia5%

Australia6%

Source: World Metal Statistics

0

25

50

75

100

125

0

5

10

15

20

25


USDmnktVolume (lhs) Value (rhs)

Source: CEIC

Figure 170: China’s cobalt ore imports

Figure 173: World cobalt refi ned output

Figure 171: China’s cobalt articles imports Figure 172: World cobalt mine output

Congo50%

Other26%

Canada6%

China6%

Russia6%

Australia6%


Cobalt

150

200

250

300

350

400

20

25

30

35

40

45

Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15


LME Spot (lhs)


SHFE spot (rhs)


Figure 169: Cobalt prices


China78%

Other8%

Tajikistan5%

Russia4%

Bolivia4%

Myanmar1%


Figure 180: World antimony mine output

0

6

12

18

24

30

0

2

4

6

8

10


USDmnkt

Volume (lhs)

Value (rhs)Source: CEIC

0

5

10

15

20

25

30

35

40

45


kt

Source: CEIC

0

5

10

15

20

25

30

0.0

0.5

1.0

1.5

2.0

2.5

3.0


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

40

60

80

100

120

6

9

12

15

18



Metal Bulletin China Free Market (lhs)

SHFE spot (rhs)

Source: Bloomberg

Figure 176: China’s antimony ores imports

Figure 179: China’s antimony mine output

Figure 177: China’s unwrought antimony exports

Figure 175: Antimony prices

Figure 178: Australian antimony exports to China

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-150.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0kt AUDmn

volume(lhs)

value (rhs)

Source: ABS

Antimony


Autocatalysts37%

Jewellery31%

Glass7%

Chemical6%

Investment6%

Electrical3% Medical and

biomedical3%

Petroleum3%

Other4%


Figure 186: Platinum end use by sector

400

500

600

700

800

900

1000

100

120

140

160

180

200

220


RMB/gUSD/troy oz

Spot (lhs)SHFE spot (rhs)

Source: Bloomberg

South Africa66%

Russia17%

Zimbabwe9%

Canada4%

USA3%

Other1%


0

2

4

6

8

10

12

14


tonnesOther Germany JapanRussia South Africa Switzerland

Source: Bloomberg

Figure 182: Palladium prices

Figure 185: World platinum output

Figure 183: China’s platinum imports Figure 184: China’s platinum exports

0

5

10

15

20

25

30

0

100

200

300

400

500

600


USDmnkg

Volume (lhs)

Value (rhs)

Source: Bloomberg

Platinum & Palladium

900

1000

1100

1200

1300

1400

1500

1600

1700

1800


USD/troy oz

Spot

Source: Bloomberg

Figure 181: Platinum prices


0

10

20

30

40

50

0

50

100

150

200

250

H109 H110 H111 H112 H113 H114 H115

%kt

Volume (lhs)

Share to China (rhs)

Source: Based on ABS

Figure 192: Australian ilmenite exports to China

0

25

50

75

100

125

150

0

10

20

30

40

50

60


USDmnkt

Titanium white Value (rhs)Source: CEIC

0

10

20

30

40

50

60

70

80

0

50

100

150

200

250

300

350

400

H109 H110 H111 H112 H113 H114 H115

%ktVolume (lhs)Share to China (rhs)


0

3

6

9

12

15

18

21

0

1

2

3

4

5

6

7


AUDmnkt

Volume (lhs)

Value (rhs)

Source: ABS

0

18

36

54

72

90

0

5

10

15

20

25


USDmnktTitanium whiteOtherValue (rhs)

Source: CEIC

Figure 188: China’s titanium dioxide exports

Figure 191: Australian zirconium exports to China

Figure 189: Aust titanium dioxide exports to China

Figure 187: China’s titanium dioxide imports

Figure 190: Australian rutile exports to China

0

4

8

12

16

20

24

28

32

0

5

10

15

20

25

30

35

40

H109 H110 H111 H112 H113 H114 H115

%kt

Volume (lhs)

Share to China (rhs)


Mineral Sands


0

4

8

12

16

20

0

0.1

0.2

0.3

0.4

0.5

Jun-12 Mar-13 Dec-13 Sep-14 Jun-15

USmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

Figure 198: Yttrium oxide exports

0

3

6

9

12

15

18

21

24

27

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9


USmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

0

1

2

3

4

5

6

7

8

0

0.0005

0.001

0.0015

0.002

0.0025

0.003

0.0035

0.004


USmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

0

13

25

38

50

63

75

88

100

0

0.5

1

1.5

2

2.5

3

3.5

4


USmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

Figure 194: Cerium oxide & hydroxide exports

Figure 197: Europium oxide exports

Figure 195: Lanthanum oxide exports Figure 196: Neodymium oxide exports

0

4

8

12

16

20

0

0.04

0.08

0.12

0.16

0.2


USmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

China’s exports of rare earth oxides

0

1

2

3

4

5

6

Jun-12 Jun-13 Jun-14 Jun-15

Kt

Cerium Oxide and HydroxideLanthanum OxideYttrium OxideNeodymium OxideEuropium Oxideother

Source: CEIC

Figure 193: China’s total rare earth oxides exports


China33%

Belgium31%

Other15%

Japan12%

Sweden6%

USA3%


Figure 204: World cadmium consumption

100

150

200

250

300

350

400

600

850

1100

1350

1600

1850

2100

Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15

USDmnkt

Volume (lhs) Value (rhs)Source: Bloomberg

China33%

Other30%

South Korea17%

Japan8%

Kazakhstan6%

Mexico6%


0

20

40

60

80

100

120

140

160

0

100

200

300

400

500

600

700

800

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

AUDmnkt

Volume (lhs) Value (rhs)

Source: ABS

50

100

150

200

250

300

350

0

5

10

15

20

25

30

Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15

‘000 USD/t‘000 RMB/tMaganese - Shanghai price (lhs)

Metal Bulletin Cadmium price (rhs)

Source: Bloomberg

Figure 200: China’s manganese ore imports

Figure 203: World cadmium production

Figure 201: Australian manganese exports to China

Figure 199: Manganese & cadmium prices

Figure 202: World manganese mine output

China26%

South Africa26%

Other22%

Australia14%

Gabon7%

Brazil5%

Source: World Bureau of Metal Statistics.

Manganese & Cadmium


China88%

USA4%

Russia3%

Israel3%

Kazakhstan2%


Figure 210: Shares of world magnesium output

India38%

UAE17%

China4%

Israel3%

other9%

Volume

European Community

29%

India30%

UAE11%

UAE9%

Israel9%

Botswana7%

China5%

Value

European Community

28%

Source: Kimberley Process Certification Scheme

35

50

65

80

95

110

125

10

15

20

25

30

35

40


USDmnktVolume (lhs)

Value (rhs)Source: CEIC

Russia41%

Other11%

Congo, Democratic Republic of

8%

Canada6%

Australia5%

Zimbabwe3%

Volume

Botswana26%

Russia34%

Canada9%

Angola9%

Other6%

South Africa

6%

Namibia5%

Value

Botswana33%


Figure 206: World diamond imports

Figure 209: China’s magnesium exports

Figure 207: World diamond output Figure 208: Magnesium prices

5

10

15

20

25

1800

2200

2600

3000

3400


‘000 RMB/tUSD/tonne

Metal Bulletin Spot (lhs)

SHFE spot (rhs)

Source: Bloomberg

Diamonds & Magnesium

UAE16%

India8%

Russia9%

Botswana12%

Congo, Republic

of3%

Other24%

VolumeUAE14%

Botswana16%

Russia8%

Israel7%

Switzerland5%

Other23%

ValueEuropean

Community29%

European Community

27%


Figure 205: World diamond exports


Table 25: China mineral and energy import summary

unit Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Iron ore Mt 219.1 222.0 235.3 242.1 233.6 227.1 226.0 246.3

from Australia Mt 112.9 118.2 138.2 149.4 142.7 144.4 146.8 158.5

Australian share % 52 53 59 61.7 61.1 63.6 65.0 64.4

Thermal coal Mt 67.6 71.0 58.1 49.7 50.4 38.1 40.1 41.7


Australian share % 24 22 26 35 30 28 32 29

Metallurgical coal Mt 20.7 13.0 18.1 13.4 18.0 10.9 10.7 14.8



Aluminium kt 193.0 175.5 96.1 51.5 30.5 34.4 45.9 70.0

from Australia kt 31.5 48.0 18.9 7.0 5.6 7.7 2.7 12.7


Alumina kt 1354 1484 1281 1158 1354 933 880 1329

from Australia kt 1177 1184 655 523 791 455 555 869


Bauxite Mt 17.6 13.1 6.6 8.4 8.4 10.1 12.6 16.5



Copper kt 1819 1836 1699 1725 1935 1729 1774 1886



Table 25 continued on page 65


Table 25 continued:

unit Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

Oil Mt 70.8 74.7 77.2 76.5 79.9 80.3 83.0 85.3


Australian share % 0.7 1.0 0.9 1.0 0.7 0.7 0.7 0.6

Gas (LNG) kt 5140 5629 4297 4811 5155 5127 4392 4627



Zinc kt 427.9 431.0 347.2 353.0 370.3 391.0 410.3 na

from Australia kt 142.8 138.5 119.5 111.4 125.1 116.7 141.2 na

Australian share % 33 32 34 32 34 30 na na

Nickel USDmn 2095 1585 1625 2314 1251 904 1918 1951

from Australia USDmn 112 67 112 99 71 81 87 97


Lead kt 242.5 224.0 213.8 284.8 273.0 220.4 197.0 na

from Australia kt 29.6 49.6 28.8 47.8 52.0 39.1 31.6 na

Australian share % 12 22 13 17 19 18 na na

Tin kt 2.1 2.0 2.0 2.3 2.5 1.6 2.9 3.0

from Australia kt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


Uranium t 6216 4045 6801 4985 9281 2041 5659 7505

Sources: CEIC, Bloomberg, IHS.


Electricity generation and consumption

<80 billion KWh

80–160 billion KWh


>300 billion KWh Hainan

N/A or negligible

Source: CEIC

Figure 212: Electricity consumption by region, 2014

Figure 211: Electricity generation by region, 2014

<100 billion KWh



>300 billion KWh Hainan

N/A or negligible

Source: CEIC


Coal and gas

<0.5 Bcm

0.5–3 Bcm

3–10 Bcm

>10 Bcm Hainan

N/A or negligible

Source: CEIC

<15 Mt

15–30 Mt

30–45 Mt

>45 Mt Hainan

N/A or negligible

Source: CEIC

Figure 214: Gas production by region, 2014

Figure 213: Coal production by region, 2015 to date


Ferrous metals

<15 Mt

15–20 Mt

20–30 Mt

>30 Mt Hainan

N/A or negligible

Source: Bloomberg

Figure 216: Crude steel production by region, 2014

Hainan

N/A or negligible

<10 Mt

10–20 Mt

20–35 Mt

>35 Mt Source: Bloomberg

Figure 215: Iron ore production by region, 2014


Alumina and aluminium

<100 kt

100–500 kt

500–2000 kt

>2000 kt Hainan

N/A or negligible

Source: Bloomberg

<2 Mt

2–5 Mt

5–10 Mt

>10 Mt Hainan

N/A or negligible

Source: Bloomberg

Figure 218: Aluminum production by region, 2014

Figure 217: Alumina production by region, 2014


Copper and gold

<1.5t

1.5-2.5t

2.5-10t

>10t Hainan

N/A or negligible

Source: CEIC

Figure 220: Mined gold production by region, 2014

<50 kt

50–200 kt

200–500 kt

>500 kt Hainan

N/A or negligible

Source: Bloomberg

Figure 219: Copper production by region, 2014


Nickel and zinc

<30 kt

30–100 kt

100–400 kt

>400 kt Hainan

N/A or negligible

Source: Bloomberg

Figure 222: Zinc production by region, 2014

<2 kt

2–5 kt

5–20 kt

>20 kt Hainan

N/A or negligible

Source: Bloomberg

Figure 221: Nickel production by region, 2014


© Copyright 2015 Westpac Bank Corporation

Terms and conditions.

1. WIBIQ is a service provided by Westpac Institutional Bank (Westpac Banking Corporation ABN 33 007 457 141 AFSL and ACL

233714) here referred to as “Westpac”. 2. Your access to this service is subject to these terms and conditions, the Westpac Privacy

Statement, notices, disclaimers and any other statements contained on this website. 3. You agree that any view or opinions

expressed in the articles or podcasts contained in WIB IQ are the author’s own and may not necessarily reflect the view or

opinions of Westpac. 4. You agree that any commentary contained in WIBIQ is not intended as personal advice and should not

be relied upon as such by you. 5. WIB IQ may contain information in relation to certain financial products. Westpac makes no

recommendation to buy, hold or sell these financial products, nor does it make any representations or warranties regarding the

financial products. You should make your own decision in relation to the financial products based on your own enquiries, the

information contained in the relevant disclosure documents, and the suitability of the relevant financial products to your own

investment objectives, financial situation and particular needs.

Westpac disclaimer

Things you should know: Each time someone visits our site, data is captured so that we can accurately evaluate the quality of

our content and make improvements for you. We may at times use technology to capture data about you to help us to better

understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to

allow us to provide suggestions regarding other reading material which may be suitable for you.

If you are located in Australia, this material and access to this website is provided to you solely for your own use and in your own

capacity as a wholesale client of Westpac Institutional Bank being a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL

233714 (‘Westpac’). If you are located outside of Australia, this material and access to this website is provided to you as outlined below.

This material and this website contain general commentary only and does not constitute personal advice. Certain types of

transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable

for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any

investment decision. This information has been prepared without taking account of your objectives, financial situation or needs.

This material and this website may contain material provided by third parties. While such material is published with the necessary

permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such

material. Although we have made every effort to ensure the information is free from error, none of Westpac or its related entities

warrants the accuracy, adequacy or completeness of the information, or otherwise endorses it in any way. Except where contrary

to law, Westpac and its related entities intend by this notice to exclude liability for the information. The information is subject to

change without notice and none of Westpac or its related entities is under any obligation to update the information or correct

any inaccuracy which may become apparent at a later date. The information contained in this material and this website does

not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or

to enter a legally binding contract. Past performance is not a reliable indicator of future performance. The forecasts given in this

material and this website are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which

the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and

uncertainties. The ultimate outcomes may differ substantially from these forecasts.

Additional information if you are located outside of Australia

New Zealand: The current disclosure statement for the New Zealand division of Westpac Banking Corporation ABN 33 007 457 141

or Westpac New Zealand Limited can be obtained at the internet address www.westpac.co.nz. Westpac Institutional Bank products

and services are provided by either Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (New Zealand

division) or Westpac New Zealand Limited. For further information please refer to the Product Disclosure Statement (available from

your Relationship Manager) for any product for which a Product Disclosure Statement is required, or applicable customer agreement.

Download the Westpac NZ QFE Group Financial Advisers Act 2008 Disclosure Statement at www.westpac.co.nz.

China, Hong Kong, Singapore and India: This material has been prepared and issued for distribution in Singapore to

institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations)

only. Recipients in Singapore of this material should contact Westpac Singapore Branch in respect of any matters arising from, or

in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by

the Monetary Authority of Singapore. Westpac Hong Kong Branch holds a banking license and is subject to supervision by the

Hong Kong Monetary Authority. Westpac Hong Kong branch also holds a license issued by the Hong Kong Securities and Futures

Commission (SFC) for Type 1 and Type 4 regulated activities. This material is intended only to “professional investors” as defined

in the Securities and Futures Ordinance and any rules made under that Ordinance. Westpac Shanghai and Beijing Branches hold

banking licenses and are subject to supervision by the China Banking Regulatory Commission (CBRC). Westpac Mumbai Branch

holds a banking license from Reserve Bank of India (RBI) and subject to regulation and supervision by the RBI.

UK: The contents of this communication, which have been prepared by and are the sole responsibility of Westpac banking

Corporation London (“WBC”) and Westpac Europe Limited. WBC (a) has its principal place of business in the United Kingdom at

Camomile Court, 23 Camomile Street, London EC3A 7LL, and is registered at Cardiff in the UK (as Branch No. BR00106), and (b)


authorised and regulated by the Australian Prudential Regulation Authority in Australia. WBC is authorised in the United Kingdom

by the Prudential Regulation Authority. WBC is subject to regulation by the Financial Conduct Authority and limited regulation by

the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available

from us on request. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised by the

Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

This communication is being made only to and is directed at (a) persons who have professional experience in matters relating

to investments who fall within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the

“Order”) or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within

Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). Any person who is not a

relevant person should not act or rely on this communication or any of its contents. The investments to which this communication

relates are only available to and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments

will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely upon this

communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible

counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail

clients”. With this in mind, Westpac expressly prohibits you from passing on the information in this communication to any third

party. In particular this communication and, in each case, any copies thereof may not be taken, transmitted or distributed, directly

or indirectly into any restricted jurisdiction.

U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller

of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but

is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. Westpac Capital Markets,

LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934

(‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). This communication is provided for

distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange

Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail

investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of

this communication. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone

regarding any security mentioned herein, please contact WCM on +1 212 389 1269. All disclaimers set out with respect to Westpac

apply equally to WCM.

Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks.

The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States.

Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not subject to

audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any

investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is

subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or

related derivative instruments.

The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative,

or associated person under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any

State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the

information, views or analysis expressed by Westpac and/or its affiliates.

For the purposes of Regulation AC only: Each analyst whose name appears in this report certifies that (1) the views expressed in this

report accurately reflect the personal views of the analyst about any and all of the subject companies and their securities and (2) no part

of the compensation of the analyst was, is, or will be, directly or indirectly related to the specific views or recommendations in this report.

For XYLO Foreign Exchange clients: This information is provided to you solely for your own use and is not to be distributed

to any third parties. XYLO Foreign Exchange is a division of Westpac Banking Corporation ABN 33 007 457 141 and ACL 233714.

Information is current as at date shown on the publication. This information has been prepared without taking account of your

objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness,

having regard to your objectives, financial situation or needs. XYLO Foreign Exchange’s combined Financial Services Guide and

Product Disclosure Statement can be obtained by calling XYLO Foreign Exchange on 1300 995 639, or by emailing customercare@

XYLO.com.au.

The information may contain material provided directly by third parties, and while such material is published with permission,

Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac

intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac

is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Past

performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character.

Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts

may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ

substantially from these forecasts.

china resources quarterly - department of industry ... resources quarterly • southern spring ~...

Documents