TODAY'S BRIEFS 26 June 2008

TODAY'S BRIEFS 26 June 2008

WSJ: China's forex reserves up $40b in May
China's foreign exchange reserves grew by US$40 billion to US$1.797 trillion in May, the Wall Street Journal reported, citing a source familiar with the data. The increase was slower than that reported in April, when a record of nearly US$75 billion was added to the reserves. China's merchandise trade surplus in May was US$20.21 billion, and foreign direct investment totaled US$7.76 billion. Those numbers left US$12.33 billion unexplained, down from the US$50.2 billion in increases not covered by trade and FDI in April. The reduction is considered a sign that speculative capital inflows, a source of concern for the government, are slowing.

China becomes 2nd-largest crude importer
China passed Japan in May to become the world's second-largest importer of crude oil, Reuters reported. China imported 118.25 million barrels of crude in May, up 25% from the same period a year ago. Crude imports are expected to receive a boost from Beijing's decision on June 20 to increase gasoline and diesel prices by up to 18%. Higher fuel prices will encourage oil refiners to import more oil and boost production to make up for existing shortages. China's crude imports in January-May were up 12.7% from the same period a year ago. The United States remains the world's largest importer of crude.

Shell, PetroChina, Qatar Petroleum mull new China refinery
Royal Dutch Shell has signed a letter of intent with PetroChina and a Qatari firm to consider building a new refinery and petrochemical complex in China, the Wall Street Journal reported. Under the potential framework, Shell and Qatar Petroleum International will each hold a 24.5% stake in the facility, with PetroChina holding 51%. The location of the possible complex has not been determined, but the paper quoted a PetroChina executive as saying in May that his company was in talks with Qatar Petroleum to build a refinery in Zhejiang province. Shell, Qatar Petroleum and PetroChina earlier this year inked a 25-year agreement to supply China with Qatari liquefied natural gas.

BHP wants more than 96.5% increase in iron ore price
Australian miner BHP Billiton said it wanted more than the 96.5% price increase for iron ore agreed to by its competitor Rio Tinto and Chinese steelmakers, the South China Morning Post reported. BHP said the price negotiated by Baosteel Group, China's largest steelmaker, with Rio Tinto did not provide an adequate freight premium. "We're delighted to see the progress," said Marcus Randolph, chief executive for ferrous and coal at BHP. "But it doesn't actually cover the full difference." BHP's argument for freight premiums is based on spot freight rates, but an analyst noted that most steelmakers have long-term contracts with ore suppliers at lower freight rates. Chinese officials are reportedly mulling a boycott of BHP iron ore imports to discourage the miner from raising prices.

Zoomlion wins bid for Italian CIFA
Construction machinery manufacturer Changsha Zoomlion has won a joint bid with Goldman Sachs and two other investors for Italian construction firm Compagnia Italiana Forme Acciaio SpA (CIFA), Reuters reported. The US$422 million deal will see Zoomlion pay US$255 million for a 60% stake in CIFA. The remaining 40% will be held by Goldman Sachs, Mandarin Capital Partners and Hony Capital, a Chinese private equity firm. Earlier this year, Zoomlion's competitor Sany Heavy Industry said it would invest US$100 million in a new American facility, in a similar effort to expand into developed markets. Zoomlion's Shanghai-traded shares fell by the daily limit of 10% to RMB18.94 (US$2.76) on Wednesday.

Chinese coal demand to boost CO2 emissions 50% by 2030
Rising Chinese demand for coal will push worldwide carbon dioxide emissions up more than 50% between 2005 and 2030, Reuters reported. The forecast, by the US Energy Information Administration (EIA), said global carbon emissions will reach 42 billion tons by 2030. China's annual carbon emissions are expected to reach 12 billion tons by 2030, compared to 5.3 billion tons in 2005. The EIA raised its new 2030 forecast for China by 6.8% over its outlook released last year. The EIA expects China's coal demand to increase by 3.2% annually. Some analysts challenged the predictions, noting that China has already begun emphasizing the development of less emissions-intensive industries.

PBOC survey: 66.1% bankers disapprove of tight policy
A majority of mainland bankers say that China's central bank has gone too far in restricting credit, the South China Morning Post reported. According to a survey by the People's Bank of China (PBOC), 66.1% of 2,900 surveyed bankers criticized China's tight monetary policy, while only 31.2% said the policy was appropriate. In an attempt to fight growing inflationary pressures, the PBOC has raised banks' reserve requirement ratios 15 times since last year, and commercial banks must now keep 17.5% of their deposits as reserves. Interest rates have been steady this year after six increases in 2007. The PBOC said bankers believe current interest rate levels to be appropriate, without providing details. While the results of the survey would pressure the PBOC to relax its policies, ongoing inflationary pressures would discourage the bank from taking any immediate action, the paper said.