Shares for commodity producers are falling as China announces lower energy imports.
Data just out of China today shows major reductions in both imports and exports, and a growing trade surplus that is leading to a profound effect on shares for the world’s leading hard commodity producers – BHP Billiton and Glencore.
Chinese exports year-on-year for November were 4.7%, well below the predicted figure of 7.9% and October’s figure of 11.6%.
Chinese Imports year-on-year for November was -6.7%, significantly lower than the expected 3.5% and last month’s figure of 4.6%.
The Chinese Trade Balance for November reflected these figures, reporting 54.47B versus expectations of 43.15B and previous of 45.41B.
As China is one of the largest importers of hard commodities, the low import figures recording November’s crude oil imports falling to $16.4bn from $17bn in October, which itself was down from $20.5bn in September, spelt a slowdown for large production companies.
Glencore has seen a drop in share price this month as demand weakened, from 337.90 to 314.85. Glencore has international operations comprising 150 mining and metallurgical sites, offshore oil production assets, farms and agricultural facilities, they handle the physical supply of around 3% of the world's daily oil consumption. Listed on the UK100 [FTSE100], the exchange has also been dragged down by the commodity companies fall: Trading 0.5% lower at 6,712 early on after closing out last week at 6,742.84, its highest close since 21 November.
BHP Billiton, the world’s largest mining company, saw their share price starting to fall in July 2014, as it declined from 37515 to 25860. In the last investors report, Billiton said that levels of investment are expected to decline to US$14.2 billion in FY15 and US$13.0 billion in FY16 with no impact on growth. However they also report a ramp-up of major growth projects and that their productivity agenda will deliver another year of record operational performance in FY15, with iron ore production of 225 Mt, up 11%, copper production of 1.8 Mt, up 5%2, petroleum liquids production of 122 MMboe3, up 15%2, and metallurgical coal production of 47 Mt, up 4%. The sustainability of these targets following China’s import decrease is now in question.
Next week, the closed-door meeting for China’s annual Central Economic Work Conference (CEWC) will be held in Beijing. Analysts are predicting that the meeting will reduce the country’s growth target to 7%, bringing it to its slowest growth rate for 10 years.
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