Cash (the Dollar) Is King

[Bardon]

Russia is world leader in iron ore and steels production

Russia, the world's second largest oil exporter behind Saudi Arabia and supplier of a quarter of Europe's gas needs is also one of the world's largest steel and metals producers.

Steel

Russia is the world's fourth largest steel producer, behind China, Japan and the United States. It produced 72.2 million tonnes in 2007, or 5.3% of global production of 1.34 billion tonnes.

Iron ore

Russia is the world's fifth-largest iron ore miner, behind China, Brazil, Australia and India. It produced 110 million tonnes in 2007, or 5.8% of global production of approximately 1.9 billion tonnes. Russia's reserve base, however is the largest in the world in terms of iron content with 31 billion tonnes or 19% of global reserves of 160 billion tonnes based on iron content.

Russian carmaker GAZ net income in 2007 up by 20% YoY

RIA Novosti reported that GAZ Group’s net income calculated to International Financial Reporting Standards increased 20% YoY in 2007 to RUB 7.2 billion.

GAZ, which exports cars to 35 countries, said revenues in the reporting period up by 27% to RUB152.8 billion.

Vietnam billet imports in 5 months jump by 23.6% YoY

According to the General Statistics Office, Vietnam's billet imports reached 1,778 million tonnes in the January to May 2008 period up by 23.6% YoY.

The General Statistics Office said that imports of billet from China jumped by 150% to some 450,000 tonnes since the beginning of the year. However there were around 300,000 tonnes of steel being hold up at some ports.

TATA Steel announces 2007-08 fiscal results

TATA Steel Limited has announced the following audited results for the year ended March 31st 2008

TATA Steel has posted a net profit of INR 46870.30 million for the year ended March 31st 2008 up by 11% YoY as compared to INR 42221.50 million for the year ended March 31st 2007. Total income has increased from INR 179847.60 million for the year ended March 31st 2007 to INR 200282.80 million for the year ended March 31st 2008, registering a growth of 11.3% YoY.

The consolidated results are as follows

TATA Steel has posted a profit after minority interest & share of profits of associates of INR 123499.80 million for the year ended March 31st 2008 up by 195.6% YoY as compared to INR 41772.70 million for the year ended March 31st 2007. Total income has increased from INR 256504.50 million for the year ended March 31st 2007 to INR 1321100.90 million for the year ended March 31st 2008, registering a growth of 415% YoY.

Addressing the media, Mr B Muthuraman MD of TATA Steel said that the TATA Steel group vision was to set a global benchmark in value creation and to increase the return on capital invested to 30% by 2012. He added that "Our aspiration in due course is to become a 50 million tonne plus steel company. Our bearings and tubular divisions are working on products for the TATA Nano."

Chinese industrial profits in 5 months up by 20.9% YoY

According to National Bureau of Statistics, China's industrial firms reported CNY 1.09 trillion in profits in the first five months of this year up by 20.9% YoY. The growth rate was 4.4 percentage points higher than figure for January and February, but 21.2 percentage points lower than the first five months of last year.

The National Bureau of Statistics covered the profits of major industrial enterprises defined as those with more than CNY 5 million in revenues from their main business annually. The NBS said the profits of state owned industrial companies only rose 1.5% to CNY 424.6 billion largely affected by the weak energy and oil refining sectors.

Power utilities profits down by 74%YoY. Oil refineries and coking plants moved to a loss of CNY 44.3 billion from a profit of CNY 35.2 billion at the same time last year. But other sectors, including oil, gas, coal and construction material production, saw profits surge more than 50%. Profits of steel companies rose 25.6% and those of chemical plants rose 26%.

The National Bureau of Statistics also reported profits for privately owned industrial firms were up 51% and foreign-funded companies up 22.4%.

[Bardon]

June 29, 2008

Indian Coal Industry Outlook till 2012

“Indian Coal Industry Outlook till 2012” is the new market research report by RNCOS on one of the earliest fossil fuels used by the mankind, coal. India has been relying on coal for its energy requirements since long and this report provides extensive research and objective analysis on the extensive coal sector in India.

It reviews the performance of the Indian coal industry in recent years and focuses on the driving factors, future prospects and issues associated with it. Detailed data and analysis given in the report will help investors to comprehend the rapidly changing dynamics of the coal industry.

The Indian coal industry is the fourth largest in terms of coal reserves and third largest in terms of coal production in the world. But despite its huge resource base, till date, India has not been able to minimize its coal deficit.

Coal has been recognized as the most important source of energy for electricity generation and industries such as steel, cement, fertilizers and chemicals are major sectors of coal consumption. So in order to satisfy the coal demand, the Indian coal industry needs more investment and private players to raise its production level. The coal washeries have to take bigger role in the industry to produce less moisture and ash based coal to sustain in strict environment regulations.

Some of the salient points are

1. Coal requirement for the power utility will grow at a CAGR of around 10% during 2007-08 to 2011-12.

2. Private coal washeries have rapidly increased the production of washed non coking coal in India during 2002-03 to 2006-07.

3. High coking coal demand by the Indian steel industry and low reserve base has boosted the import of coking coals.

4. Coal demand from the Indian cement industry looks bright and it is expected that coal requirement by the industry will rise steadily from 2007-08 to 2011-12.

5. Coking coal requirement in steel production is expected to touch over 85.34 million tonnes in 2011-12.

[VedantaTrader]

short term - next week

I see $ weakness as the G8 comuniqu did no tmention us strengh but i think it may be capped at 1.56

med term - i see intervention

US and china buy US$ saudis sell oil

why not now... well not the market is short... intervention works better if the market is long 8) think about it....

long term

$ wil re gain strength as europe falls apart sorry guys europe will fall apart how can you run a currency under depression state of affairs with out pain from 20 odd finance ministers...

cant happen...

CHF and USD strength will return

This is absolute nonsense...

What on earth are you on about? Midterm you see intervention? So how will the US support the USD exactly? The US dollar has 75 billion in foreign reserves...this is on of the lowest reserve rates in the world...less than Poland!!!! This amounts to 1% of the worlds reserves...

So what will the US use to support the USD? They have nothing to back up the currency...a measly 75 billion in reserves...

China has been intervening in the currency markets for years, buying dollars to stop the yuan from rising. Has China intervention and buying of USD worked in the past, so why would more intervention work now. Also China is trying to fight inflation and cool the economy, why would they want to exacerbate the very problem they are trying to control?

Sorry, your post makes no sense.

[Bardon]

July 16, 2008

Chinese mills profit in H1 of 2008 up by 50.8% YoY - NDRC

According to China’s National Development & Reform Commission, Chinese steel industry has continued to post robust growth in January to may 2008 bolstered by rising steel prices. The sector has realized a total profit of CNY 142.6 billion in the period up by 50.8% YoY from same time of last year and the growth rate gains 12.2 percentage points from that of January to February.

According to Shanghai Securities News, China's steel output amounts to 216.11 million tonnes in the first five months up by 9.4% YoY or 18.63 million tonnes from the year ago. However, the growth rate dips 10.5 percentage points on YoY comparison. Meanwhile, steel export has dropped considerably as a result of export tax adjustment and strengthening yuan.

The report also reveals that steel exporters are inclined to circumvent the new export tax policy. For example, commercial wire rod & bar and angle & section shipment has fallen 45.9% and 37.9% in the first four months respectively due to the export duty, while those tax-free alloyed bar and section export has soared 170.9% YoY and 240.6% YoY respectively. It's the same case with steel plate export.

Domestic steel price has risen swiftly in the first half, with steel price index up 31.49 points or 25.1% from the year start to 156.86 in late May. The price rally has been underpinned by high growth rate of national overall economy and fixed-assets investment and spiking raw materials prices as well. The benchmark ore price rises 65% to 71% and coke price doubled to CNY 2400 per tonne. Moreover, surging international steel price has also lent support to domestic price. By the end of May, international steel price index jumps to 268, up by 55.5% YoY from same time of last year, 17.1 percentage points higher than domestic price rally.

NDRC said that investment in iron and steel sector has shown sign of rebounding in the first five months. Steel investment has increased 22.4% YoY to CNY 96.55 billion in the review period, gaining 17.5 percentage points from the growth rate of last year.

Steel mills have stepped up efforts in consolidation while leading mills are scrambling to set up Greenfield plants in coastal regions. However, M&A in the sector are mostly restricted within the same province; therefore, the mills would have limited capability to optimize the resource deployment across the country.

[carseller]

It looks as the dollar sentiment have changed.

[kilroy]

It looks as the dollar sentiment have changed.

looks like an oversold bounce. Cable has effectively dropped from 2 to 1.75 in a straight line. A bounce was more than overdue

[carseller]

I think all the smart money are out of the short dollar trade. Warren Buffet, and the other gurus are out of this trade. I think the Euro will drop 30 % against the dollar from these levels. (not in a straight line of course), making the currencies around equal, or it might overshoot to the advantage to the dollar.

Edited September 12, 2008 by carseller

[carseller]

It's easy to see why the dollar will be going to go on doing great.

Gold, oil, real estate, emerging markets, asset markets, art, stock markets, bubbles everywhere.

The only thing that will hold is of course the dollar, and now that the commodity bubble is over, and everything going down, the dollar will go on rising, doing the opposite of what have happened the last years.

[Wol]

today's bounce is jitters over leh, wm and perhaps 20 other significant banks. and worry over another cut (yes, cut). if the fed won't bail, will it print? will it need to? some people think so. gold up 3%.

[carseller]

today's bounce is jitters over leh, wm and perhaps 20 other significant banks. and worry over another cut (yes, cut). if the fed won't bail, will it print? will it need to? some people think so. gold up 3%.

Actually, all the bank problems are dollar supportive as a safe haven. But the best case for the dollar is about relative performance. Now Euro zone is hitting the problems the US started facing 1 year ago, and the interest rates elsewhere have to go down, making the dollar and the yen attractive now as the rates there already is low. The money they use for bail out are limited by the balance sheet of the federal reserve. But the dollar have risen fast, so I think Marc Faber is right it could correct to 1.50 against the euro.

I am not sure about the relationship. But let's say the base rate of the ECB is at 2,5 % and the fed at 1 % 6 month from now. I think that would be dollar supportive.

Edited September 12, 2008 by carseller

[domo]

Credit denominated in dollars is contracting faster than the rest of world, that's why the dollar is now rallying. I would think the dollar is a little overbought and commodities a little oversold on a short term right now, although I haven't done any fact checking to support this, maybe we will have a sell-off in dollar/stocks and commodity rally for the next couple of months?

[carseller]

I don't know. I don't think there will be no new high in commodities for quite a long time, the baltic dry that is a very good indicator have already had a double top formation. But there will probably be a bear market rally anytime. All the data for the 10 year and 30 year bonds suggest the market is very worried about deflation now. So money are just flowing out from commodities.

Edited September 12, 2008 by carseller

[carseller]

The dollar is stronger than ever. The dollar is the anti bubble when everything come tumbling down.

[Mikhail Liebenstein]

The dollar is stronger than ever. The dollar is the anti bubble when everything come tumbling down.

I tend to agree that the Dollar will continue to strengthen. Right now the Euro is looking like it is going to get weaker and the UK recession is only just getting underway. Give it a few days post bailout to settle and the US will start to recover - it sort of feels like the US has had its darkest hour already.

[Errol]

The dollar is living on borrowed time. The only way is down.

The dollar index will trade at .62 and then .52 before 2011.

[narco]

During this disinflationary period the dollar has done well but there is new statistical evidence that the monetary choppers are ready for take off.

The dollar is on borrowed time.

Edited October 4, 2008 by narco

[carseller]

I don't agree. I think there is 20-30 dollar oil on it's way. At least 50 dollar. Oil and gold have tracked the baltic dry index, a real indicator, it's down from 12000 to 3000, if oil follows, it will go to 35 dollars ,but the baltic dry might have further to go. Gold below 600 dollars, probably it will go down even more. For any real inflation to happen the bailouts needs to be in the 3 trillion dollar class directly to consumers to outweighs the total lack of new money entering the economy . These kinds of packages will probably happen, it will not take many months before the next bailouts coming, but it will not be in the 3 trillion class for consumers. 3 trillions are needed to replace the effects of credit cards, housing atm's and the flow of credit. There are 3 trillion less demand in the economy now compared to only 1 year ago. If the government started a company called the bridges to nowhere project, and hired all unemployed there, and burned 3 trillions a year, then you might see some inflation coming, if the rest of the world were doing the same thing in their countries as well. Giving money to the banks, will not help, they can even double it to 6 trillion, will not help, just adding money to "dead zombie banks" will not help , unless the banks get a mad rush to start filling their customers accounts. But that will not happen. The money for these banks just offset losses, and offset the deflationary effects that otherwise would had been much worse.The trouble in Europe is that the banks are to big to be bailed out. In Iceland, the banks are just 3 times GDP, to big to be bailed out. So Iceland could go bankrupt. Their currency have dropped more than 50 % against the dollar, just 20 % the last week alone. This could happen to the Euro. But probably on a less scale. A 30 % drop against the dollar are more likely.

The same thing holds true for many european banks. To big to be saved. Much worse than in the US. The dollar is going to get even stronger against the euro as rates are slashed by the ECB down to the level in the US. So how can the dollar weaken? Won't happen. The FED are even tightening. They have a short term rate at 2 %, but the market tries to make this rate 0 %, because of this, the fed have to take money out of the system to get the short term rates at 2 %, so they are tightening quite badly.

If the market had tried making the rate around let's say 3 %, and the fed worked for holding it at 2, it would work expansionary , but as it stands now, they are contracting the money supply just as they did during the great depression. The measures they take with liquidity have the effect of making the the deflationary effects, less deflationary than otherwise would had been the case. But not inflationary.

Edited October 4, 2008 by carseller

[Peter Hun]

I don't agree. I think there is 20-30 dollar oil on it's way. At least 50 dollar.

Thats impossible, there is a significant part of production that becomes uneconomic below $70. When the price falls below that there will be shortages again which will shore up the price. Even with all the talk of a crash oil is around $90.

[carseller]

Thats impossible, there is a significant part of production that becomes uneconomic below $70. When the price falls below that there will be shortages again which will shore up the price. Even with all the talk of a crash oil is around $90.

I think that is an insignificant and small part of the production compared to demand destruction, and it's not true for the Opec countries, as their costs are far, far less. Oil was around 70 dollars 1 year ago, and I am sure demand for oil is less now, and supply is not significantly less. In 2002 most gold mining companies were loosing money. Hecla mining, one of the bigger silver mining companies, when was the last time they made any profit for their shareholders?

It does not mean they stop selling silver.

And I think you should remember, that there is a bigger loss for an oil company to not pump their oil, than taking a loss for each barrel, even if it sounds insane, I think that's how it works. they can choose to go bankrupt the day their profit turn to a loss, telling their bank, sorry but we cannot meet our debt because we find it immoral to pump oil at a loss or they will try to hang on (of course they will try to hang on. So to imply that these companies (with a cost level above 70) will create shortages of oil if oil goes below 70, is not necessary true as they will probably make oil at a loss.

Edited October 4, 2008 by carseller

[docus]

I'd be very interested to know people's thoughts on the prospects for the euro (about half my STR fund is in €)...

[carseller]

I'd be very interested to know people's thoughts on the prospects for the euro (about half my STR fund is in €)...

I think the interest rates will be at around 2 % 1 year from now. ECB will start cutting already at the next meeting, or before. The Japanese yen will perform better, the dollar will perform better. The advantage with the yen, is that people will come to the yen, the next time the FED cut rates. But both the dollar and the yen will outperform the euro. Bank of Japan don't have the tools to weaken the yen. the ECB have a lot of room to lower interest rates, that will weaken the euro. If interest rates is the same in the euro and in the US, I think the currencies will be around 1:1

Edited October 4, 2008 by carseller

[docus]

Thanks very much for your super-quick reply! Very interesting thoughts. But I still don't know what to do with my € stash! Since I live and plan to buy (eventually...) in the UK what matters to me is the FX rate between € and £, which has done me proud in recent times... but perhaps it's time to realise these gains and sell EUR for GBP? Any thoughts gratefully received!

[carseller]

Thanks very much for your super-quick reply! Very interesting thoughts. But I still don't know what to do with my € stash! Since I live and plan to buy (eventually...) in the UK what matters to me is the FX rate between € and £, which has done me proud in recent times... but perhaps it's time to realise these gains and sell EUR for GBP? Any thoughts gratefully received!

pound is even worse than the euro, pound 5%, Euro 4,25 %, Dollar 2 % , yen 0,5 %

bang for the buck is yen and dollar. Everyone is going to lower rates ! I have no doubt about this.

The Bank of England is just slow to catch on. So the smartest thing would be to sell pounds to buy dollars, yen, swiss franc, why not all 3, split your money in 3 accounts, just make sure it's covered by the insurance

Edited October 4, 2008 by carseller

[Pindar]

The US administration is deliberately devaluing the dollar in order to mitigate unprecedented indebtedness to foreign lenders. The devaluation won't help the little people though, it will make life more expensive for the average punter because all those imports will suddenly become more expensive, particularly with some oil producers switching to Euros and making people cut back on their spending thus creating a deflation of the kind not seen since the great depression.

The deflation will be at the expense of countries like China who've been heavily dependent on exports to the US and who hold massive dollar reserves. This will make the Chinese seek ways of exchanging their dollar holdings for a stake in the US banks' mortgaged assets.

I believe this is what the result of the so called bailout will be - Chinese investors will exchange a lot of their dollar reserves for assets and anything else mortgaged by US banks that can't be paid. It's like being reposessed, only the people reposessing you are Chinese banks. Once news of this get out, there will be massive civil unrest - part of the reason that US troops are being brought back home.

I still think the gold is a good long term way of storing purchasing power and if cash really does become king again, then it won't matter if the price of gold has fallen because the money I can get for it will have more buying power.

[izzy]

I agree completely with the OP here. The Dollar has hit it's bottom and is going to move up from here. US IRs are very close to the lowest they'll go, there is pressure in the FOMC to stop cutting rates.

This Dollar strength, combined with a global deflationary recession, are about to massacre commodity prices.

Phase 2 began on Tuesday.

Excuse my ignorance, but what are the reasons to expect the dollar to rise in value? Are large increases in US interest rates anticipated?

My own personal view is that the only thing we know for sure is that we are in very uncertain times and almost a anything could happen. Maybe the dollar will come through, but exactly which sound fundamentals would attract investment in the dollar I don't know.