plawolf
Lieutenant General
And this is related to Chinese economics, how?
Chinese Economics Thread
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And this is related to Chinese economics, how?
Hendrik_2000
Lieutenant General
Trade war what trade war? Trumph tariff barely notice
China Churns Out Most Steel Ever as Prices Hit Six-Year High
Bloomberg News
August 13, 2018, 9:30 PM CDT Updated on August 13, 2018, 10:33 PM CDT
Photographer: Qilai Shen/Bloomberg
China, supplier of more than half the world’s steel, produced a record amount in July as mills boost runs to benefit from healthy margins amid a boom in prices to the highest level in six years.
Output of crude steel climbed 7.2 percent on year to 81.24 million metric tons, according to data from the National Bureau of Statistics on Tuesday. The daily rate was 2.62 million tons versus an high of 2.673 million tons in June. Production rose 6.3 percent to 532.9 million tons in the first seven months. Aluminum output virtually matched an all-time high.
China’s steel mills are smashing output records by pushing furnaces beyond typical limits, offsetting closures, to Goldman Sachs Group Inc. Margins are high as prices rise and policy makers vow to boost infrastructure investment, brightening prospects for demand, just as inventories slide.
While China has trumpeted reforms in the past two years that have shuttered aging and illegal plants, and curbed winter output in the most polluted cities, official data shows output rising. That’s partly because mills are using iron-rich ores to boost productivity, and raising the portion of steel scrap in their feed-stock, according to Goldman’s Hong Kong-based analyst Trina Chen.
At the same time, producers are facing increased risks from an intensifying trade war between the U.S. and China and a potential economic slowdown. Exports shrank 14 percent to 41.3 million tons in the first seven months of the year, according to customs data last week.
Output of primary aluminum jumped 12 percent on year to 2.93 million tons in July, almost matching the record level in June 2017, bureau data show. Production in the first seven months increased 3 percent to 19.4 million tons.
China Churns Out Most Steel Ever as Prices Hit Six-Year High
Bloomberg News
August 13, 2018, 9:30 PM CDT Updated on August 13, 2018, 10:33 PM CDT
-
Mills push furnaces beyond typical limits on strong margins -
Aluminum output virtually matches record as exports expand
Photographer: Qilai Shen/Bloomberg
China, supplier of more than half the world’s steel, produced a record amount in July as mills boost runs to benefit from healthy margins amid a boom in prices to the highest level in six years.
Output of crude steel climbed 7.2 percent on year to 81.24 million metric tons, according to data from the National Bureau of Statistics on Tuesday. The daily rate was 2.62 million tons versus an high of 2.673 million tons in June. Production rose 6.3 percent to 532.9 million tons in the first seven months. Aluminum output virtually matched an all-time high.
China’s steel mills are smashing output records by pushing furnaces beyond typical limits, offsetting closures, to Goldman Sachs Group Inc. Margins are high as prices rise and policy makers vow to boost infrastructure investment, brightening prospects for demand, just as inventories slide.
While China has trumpeted reforms in the past two years that have shuttered aging and illegal plants, and curbed winter output in the most polluted cities, official data shows output rising. That’s partly because mills are using iron-rich ores to boost productivity, and raising the portion of steel scrap in their feed-stock, according to Goldman’s Hong Kong-based analyst Trina Chen.
At the same time, producers are facing increased risks from an intensifying trade war between the U.S. and China and a potential economic slowdown. Exports shrank 14 percent to 41.3 million tons in the first seven months of the year, according to customs data last week.
Output of primary aluminum jumped 12 percent on year to 2.93 million tons in July, almost matching the record level in June 2017, bureau data show. Production in the first seven months increased 3 percent to 19.4 million tons.
- Aluminum last month rose to the highest level in more than three years following a spike in global prices as U.S. sanctions on United Co. Rusal cut supplies, customs data show.
- Output may ease from now on as mills after environmental checks tightened bauxite supply and boosted alumina prices.
Hendrik_2000
Lieutenant General
Instead of looking at stock market all those western pundit need to see the real estate sector .Because it make a large segment of Chinese investment I will be worry if this sector take a hit. But sofar anything but
Now that most of 2nd and 3rd tier cities are connected by HSR price boom in these cities
China's New Home Price Growth Hits Two-Year High as Small Cities Boom
By Reuters
Aug. 15, 2018BEIJING — China's new home prices accelerated at their fastest pace in almost two years in July, led by smaller cities and highlighting challenges policymakers face in stimulating a slowing economy without fuelling a property bubble
Average new home prices in China's 70 major cities rose 1.1 percent in July from a month earlier, according to Reuters calculations based on an official survey on Wednesday, the fastest pace since October 2016 and up from the previous month's reading of 1 percent.
Outside the recent boom periods of 2016 and early 2013, monthly price gains of more than 1 percent have been rare in China's official home price data.
The July increase also marks the 39th straight month of gains, Reuters calculations showed, despite tougher curbs designed to rein in a more-than-two-year real estate boom.
"It is not a good time to relax existing curbs now and policymakers should continue to step up property controls," Zhang Yiping, an analyst with China Merchants Securities said after Wednesday's data release.
The majority of the 70 cities surveyed by the National Bureau of Statistics (NBS) still reported monthly price increases for new homes. 65 cities reported higher prices in July, up from 63 in June.
Yang Yewei, an analyst at Southwest Securities, said declining housing inventory combined with still robust demand has exacerbated a housing supply shortage.
Compared with a year earlier, new home prices rose 5.8 percent, the fastest pace since September 2017 and quickening from June's 5 percent gain.
Analysts say a spill-over effect from Beijing's efforts to step up credit support to smaller firms in the economy may have buoyed demand and quickened sales in the real estate sector.
Despite Beijing's determination to maintain property curbs, funding appears to be easing for property developers as Beijing pumps more credit into the economy to cushion the impact of a tit-for-tat trade war with the United States.
China's property investment growth sped up to its quickest pace in nearly two years in July, data showed on Tuesday, with year-on-year sales growth more than doubling from the previous month.
The resort city of Sanya, a tier-3 city in the island province of Hainan, was the top price performer in the month, rising 3.7 percent on-month, NBS data showed.
Tier-3 cities collectively posted a robust month-on-month price increase of 1.5 percent for new homes, the NBS said in a statement accompanying the data on Wednesday. That was more than double their 0.7 percent price gain in June.
Figures from the latest central bank monetary policy implementation report last Friday showed that the weighted average lending rate for individual home buyers rose 18 basis points in the second quarter, versus a 16 basis point rise in the previous quarter.
However, Southwest Securities' Yang said while China's mortgage lending rates have gradually risen, credit remains easily accessible in smaller cities.
(Reporting by Yawen Chen and Ryan Woo; Additional Reporting by Cheng Fang; Editing by Sam Holmes)
Now that most of 2nd and 3rd tier cities are connected by HSR price boom in these cities
China's New Home Price Growth Hits Two-Year High as Small Cities Boom
By Reuters
Aug. 15, 2018BEIJING — China's new home prices accelerated at their fastest pace in almost two years in July, led by smaller cities and highlighting challenges policymakers face in stimulating a slowing economy without fuelling a property bubble
Average new home prices in China's 70 major cities rose 1.1 percent in July from a month earlier, according to Reuters calculations based on an official survey on Wednesday, the fastest pace since October 2016 and up from the previous month's reading of 1 percent.
Outside the recent boom periods of 2016 and early 2013, monthly price gains of more than 1 percent have been rare in China's official home price data.
The July increase also marks the 39th straight month of gains, Reuters calculations showed, despite tougher curbs designed to rein in a more-than-two-year real estate boom.
"It is not a good time to relax existing curbs now and policymakers should continue to step up property controls," Zhang Yiping, an analyst with China Merchants Securities said after Wednesday's data release.
The majority of the 70 cities surveyed by the National Bureau of Statistics (NBS) still reported monthly price increases for new homes. 65 cities reported higher prices in July, up from 63 in June.
Yang Yewei, an analyst at Southwest Securities, said declining housing inventory combined with still robust demand has exacerbated a housing supply shortage.
Compared with a year earlier, new home prices rose 5.8 percent, the fastest pace since September 2017 and quickening from June's 5 percent gain.
Analysts say a spill-over effect from Beijing's efforts to step up credit support to smaller firms in the economy may have buoyed demand and quickened sales in the real estate sector.
Despite Beijing's determination to maintain property curbs, funding appears to be easing for property developers as Beijing pumps more credit into the economy to cushion the impact of a tit-for-tat trade war with the United States.
China's property investment growth sped up to its quickest pace in nearly two years in July, data showed on Tuesday, with year-on-year sales growth more than doubling from the previous month.
The resort city of Sanya, a tier-3 city in the island province of Hainan, was the top price performer in the month, rising 3.7 percent on-month, NBS data showed.
Tier-3 cities collectively posted a robust month-on-month price increase of 1.5 percent for new homes, the NBS said in a statement accompanying the data on Wednesday. That was more than double their 0.7 percent price gain in June.
Figures from the latest central bank monetary policy implementation report last Friday showed that the weighted average lending rate for individual home buyers rose 18 basis points in the second quarter, versus a 16 basis point rise in the previous quarter.
However, Southwest Securities' Yang said while China's mortgage lending rates have gradually risen, credit remains easily accessible in smaller cities.
(Reporting by Yawen Chen and Ryan Woo; Additional Reporting by Cheng Fang; Editing by Sam Holmes)
Hendrik_2000
Lieutenant General
When the civil war end in China the KMT carted off all the gold to Taiwan leaving the national treasury in Beijing with nothing But throught the hard work of pioneering geologist China start prospecting for gold and soon find mother lode in Ling long mine in Jiaodong peninsula Shandong with output of 400 tonne per year .
When China start industrialization after the chaos of CR money was tight but luckily they have gold to buy new
equipment and services
From empty treasury to beginning of prosperity all backed by gold
Modern prospecting, refining and technology breakthrough in gold mining of low yield and difficult to extract gold ore only 1 gram in 1 tonne of dirt
A fascinating look at SGE(Shanghai gold exchange) for first time China has an gold exchange priced in RMB(Yuan)
befitting the largest producer of gold in the world . It is interesting that in the early year of PRC private citizen is not allowed to own gold China has come a long way since then
The SGE prod local gold companies to modernized since now they can trade gold to the world and has to compete with the best. Part of series from "across china" with Eng subtitle
Gold in Space and China certification office to register and authenticate the gold grade
China modern and green( environmentally friendly mining). The process of leaching gold from ore involve Cyanide a highly poison substance and this video tell how they recycle the cyanide And return mine tailing back to the mine as well as bringing back land scared by gold mining
I am just surprise they are still using underground mine because modern gold mining is open pit mining with huge excavator and dump truck Modern gold mining is highly efficient using high pressure and high temperature autoclave. It can recover minute amount of gold
When China start industrialization after the chaos of CR money was tight but luckily they have gold to buy new
equipment and services
From empty treasury to beginning of prosperity all backed by gold
Modern prospecting, refining and technology breakthrough in gold mining of low yield and difficult to extract gold ore only 1 gram in 1 tonne of dirt
A fascinating look at SGE(Shanghai gold exchange) for first time China has an gold exchange priced in RMB(Yuan)
befitting the largest producer of gold in the world . It is interesting that in the early year of PRC private citizen is not allowed to own gold China has come a long way since then
The SGE prod local gold companies to modernized since now they can trade gold to the world and has to compete with the best. Part of series from "across china" with Eng subtitle
Gold in Space and China certification office to register and authenticate the gold grade
China modern and green( environmentally friendly mining). The process of leaching gold from ore involve Cyanide a highly poison substance and this video tell how they recycle the cyanide And return mine tailing back to the mine as well as bringing back land scared by gold mining
I am just surprise they are still using underground mine because modern gold mining is open pit mining with huge excavator and dump truck Modern gold mining is highly efficient using high pressure and high temperature autoclave. It can recover minute amount of gold
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Jura The idiot
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Jura The idiot
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Jura The idiot
General
Hendrik_2000
Lieutenant General
Now we have discussion sometime ago about profitability of SOE and I said that they generate puny profit and loaded up debt.Some one actually do the accounting of China railway and as I said it generate little profit but It does not really matter because there are plenty of external benefit just as this author said
Here is the accounting via mr unknown
Here is his conclusion
A few things are evident here:
Rail networks are classic high upfront investment businesses with extremely long useful lives. Significant capital is required to build out rail lines, train stations, intermodal links, depots, signaling systems, electrification equipment, relocation expenses for residents affected by construction, capitalized interest on construction loans etc.
For these types of businesses, perhaps the most significant financial driver is something called capacity utilization. High fixed-cost businesses need to be utilized so that the up-front construction cost may be amortized across variable usage. In the case of rail networks, this takes the form of trying to lower your depreciation charge per passenger-km.
Once operational, new rail lines often have long ramp-up periods. This is because people, businesses and habits need time to adjust to this new transport alternative. People adjust their commutes, perhaps switching from air travel to high-speed rail. Local businesses sprout up around the new train stations. New residents move in, attracted by proximity to the station and all the new activity. Tourists find it easier to travel for fun. Lower costs or commute times gradually enable new ways of doing business that eventually result in productivity growth.
Even after a line is fully operational and mature on its own, it may still not be working at full capacity because the rest of the rail network has not yet been fully completed. As new lines are extended connecting existing lines to new regions, there will be new spur/transfer traffic coming from the new line that benefits the existing line. So until a rail network is fully built out, there will always be room for further improvement in potential capacity utilization and yield.
Low capacity utilization is a common feature in the early years because all of these adjustments take time. If the project wasn’t a complete disaster, capacity utilization should gradually rise over time as people find more reasons to use the new rail line.
Low capacity utilization during the ramp-up period translates into sub-par financial results. New rail lines are simply not going to be as profitable as more mature rail lines that have reached their planned capacity targets. Financial losses during the ramp-up period should not be surprising for new rail lines.
China’s high-speed rail network appears to be following this trend.
After the Global Financial Crisis, high-speed rail projects that had been on the docket were fast-tracked. This sparked the first huge boom in high-speed rail construction from 2009 to 2011. The 968-km line opened up in late 2009. was completed in mid-2011. By 2011, China had topped 8,000 km in HSR track, already making it the world’s largest network.
After the in July 2011, a moratorium was placed on construction but by early 2012, things were back on track. At the end of 2013, China had close to 15,000 km of operational track. There was another big investment boom starting in 2014. By the end of 2016, the number had topped 20,000 km and as of today (August 2018), it is approaching 30,000.
With so many new lines ramping up their capacity, capacity utilization was relatively low in the early years. But as the lines have matured, capacity utilization rates have shot up. In 2012, the average occupancy rate of HSR in China was 57%. This percentage steadily increased from 65% in 2013 to 72% by 2016. Today the number is even higher as the pace of new HSR line construction has moderated somewhat while existing lines have ramped up towards — and in some cases exceeded — their original intended capacity targets. For example, it took the Beijing-Shanghai line almost four years to reach operational breakeven in 2015 and today it is the most profitable line in the system.
With the steady rise in capacity utilization, CR’s profitability and financial metrics have improved. And they should continue to improve as the HSR network matures and as the economy “digests” new rail lines. The freight and real estate business had clearly been subsidizing HSR in the early years but it looks like HSR — now the fastest-growing part of CR’s business — is rapidly improving its profitability metrics as capacity utilization continues to rise across the system.
The other thing that needs to be said about high-speed rail and public infrastructure projects in general is that GAAP financials often do not accurately capture the total societal benefit. There are many positive externalities that are associated with public transportation infrastructure ranging from reduction of pollution/carbon to better quality of life to the network effect value of encouraging more economic interaction and connections.
Most governments recognize these positive externalities and often look to subsidize their rail operations. East Japan Railway is relatively healthy with a 16% EBIT margin. SNCF (France) runs at about a 6% operating margin. Amtrak (U.S.) runs at a major operating loss. But I would argue that all — even loss-making Amtrak — are overall positives for their respective economies due to the positive externalities they provide that do not show up explicitly in their operating metrics.
So even as HSR runs at a lower profitability margin than CR’s overall ~20% level, one needs to take into account the fact that many lines are still ramping up as well as the societal benefits that are not captured in the financials alone.
Here is the accounting via mr unknown
Here is his conclusion
A few things are evident here:
- As passenger revenue grew — driven by growth in high-speed rail — the gross margin of the business declined significantly from 2013 to 2016.
- Part of this appears to be driven by a general slowdown in the non-HSR business e.g. the freight business. Nonetheless, the data suggests that rapid HSR growth was contributing to a decline in profitability in the business, at least at the gross margin level, over that time period.
- This suggests that from 2013 to 2016, HSR was less profitable than the other operations, such that growth in HSR lowered the gross margin of the overall business.
- However, in 2017, as passenger revenue continued to grow at a healthy clip (driven entirely by HSR), the gross profit and operating margins in the business began to pick up. Based on the most recent operating data(through July 2018), HSR appears to still be following this path.
Rail networks are classic high upfront investment businesses with extremely long useful lives. Significant capital is required to build out rail lines, train stations, intermodal links, depots, signaling systems, electrification equipment, relocation expenses for residents affected by construction, capitalized interest on construction loans etc.
For these types of businesses, perhaps the most significant financial driver is something called capacity utilization. High fixed-cost businesses need to be utilized so that the up-front construction cost may be amortized across variable usage. In the case of rail networks, this takes the form of trying to lower your depreciation charge per passenger-km.
Once operational, new rail lines often have long ramp-up periods. This is because people, businesses and habits need time to adjust to this new transport alternative. People adjust their commutes, perhaps switching from air travel to high-speed rail. Local businesses sprout up around the new train stations. New residents move in, attracted by proximity to the station and all the new activity. Tourists find it easier to travel for fun. Lower costs or commute times gradually enable new ways of doing business that eventually result in productivity growth.
Even after a line is fully operational and mature on its own, it may still not be working at full capacity because the rest of the rail network has not yet been fully completed. As new lines are extended connecting existing lines to new regions, there will be new spur/transfer traffic coming from the new line that benefits the existing line. So until a rail network is fully built out, there will always be room for further improvement in potential capacity utilization and yield.
Low capacity utilization is a common feature in the early years because all of these adjustments take time. If the project wasn’t a complete disaster, capacity utilization should gradually rise over time as people find more reasons to use the new rail line.
Low capacity utilization during the ramp-up period translates into sub-par financial results. New rail lines are simply not going to be as profitable as more mature rail lines that have reached their planned capacity targets. Financial losses during the ramp-up period should not be surprising for new rail lines.
China’s high-speed rail network appears to be following this trend.
After the Global Financial Crisis, high-speed rail projects that had been on the docket were fast-tracked. This sparked the first huge boom in high-speed rail construction from 2009 to 2011. The 968-km line opened up in late 2009. was completed in mid-2011. By 2011, China had topped 8,000 km in HSR track, already making it the world’s largest network.
After the in July 2011, a moratorium was placed on construction but by early 2012, things were back on track. At the end of 2013, China had close to 15,000 km of operational track. There was another big investment boom starting in 2014. By the end of 2016, the number had topped 20,000 km and as of today (August 2018), it is approaching 30,000.
With so many new lines ramping up their capacity, capacity utilization was relatively low in the early years. But as the lines have matured, capacity utilization rates have shot up. In 2012, the average occupancy rate of HSR in China was 57%. This percentage steadily increased from 65% in 2013 to 72% by 2016. Today the number is even higher as the pace of new HSR line construction has moderated somewhat while existing lines have ramped up towards — and in some cases exceeded — their original intended capacity targets. For example, it took the Beijing-Shanghai line almost four years to reach operational breakeven in 2015 and today it is the most profitable line in the system.
With the steady rise in capacity utilization, CR’s profitability and financial metrics have improved. And they should continue to improve as the HSR network matures and as the economy “digests” new rail lines. The freight and real estate business had clearly been subsidizing HSR in the early years but it looks like HSR — now the fastest-growing part of CR’s business — is rapidly improving its profitability metrics as capacity utilization continues to rise across the system.
The other thing that needs to be said about high-speed rail and public infrastructure projects in general is that GAAP financials often do not accurately capture the total societal benefit. There are many positive externalities that are associated with public transportation infrastructure ranging from reduction of pollution/carbon to better quality of life to the network effect value of encouraging more economic interaction and connections.
Most governments recognize these positive externalities and often look to subsidize their rail operations. East Japan Railway is relatively healthy with a 16% EBIT margin. SNCF (France) runs at about a 6% operating margin. Amtrak (U.S.) runs at a major operating loss. But I would argue that all — even loss-making Amtrak — are overall positives for their respective economies due to the positive externalities they provide that do not show up explicitly in their operating metrics.
So even as HSR runs at a lower profitability margin than CR’s overall ~20% level, one needs to take into account the fact that many lines are still ramping up as well as the societal benefits that are not captured in the financials alone.