LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
HOUSING SLUMP
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
CEMENT CUTS
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
A view shows a makeshift dwelling near an area where hundreds of artisan miners have found a rich seam of copper, in the hills of Tapairihua in Peru’s Andes, October 18, 2022. REUTERS/Marco Aquino/file photo Acquire Licensing Rights
LIMA, Aug 31 (Reuters) – Peruvian miner Minsur (MINSURI1.LM) has announced an investment of at least $2 billion in five years as it expands its copper and tin operations, an executive told Reuters on Thursday.
Minsur is set to invest around $543 million in an underground project in Justa mine, which is owned by the firm and Chilean mining company Copec (COPEC.SN), Minsur corporate affairs executive Gonzalo Quijandria said in a phone interview with Reuters.
Another $381 million will be invested to expand the processing plant and to improve the Justa mine camp, which began operations in 2021, Quijandria said.
The mine produced 126,036 fine metric tons of copper last year and was the world’s seventh most productive copper mine, according to official data.
Peru is the world’s No. 2 copper producer.
Minsur also operates the only mine in Peru for tin, a relatively rare element, and produces about 9% of this metal globally, according to the company.
Regarding such a production, Quijandria said Minsur plans to invest $462 million in its tin production line and another $100 million in tin exploration projects in the country.
“They are sustaining investments that include new tailings dams in the San Rafael mine and improvements in the Pisco smelter,” he said.
Minsur also plans to invest some $342 million in the modernization of its polymetallic producer Minera Raura.
Earlier on Thursday, Peru’s ministry provided a different breakdown of figures from the company, and Reuters did not receive an immediate response to a query about the discrepancy.
The announcement followed a meeting between Minsur CEO Juan Luis Kruger and Peru’s energy and mines minister, Oscar Vera.
The Mina Justa Subterranea project will be the second largest and most modern underground mine in Peru,” the ministry said in a statement, adding that Minsur expects to present the first permits for the project in the first months of next year, with production expected to start in 2027.
Reporting by Marco Aquino; Editing by Brendan O’Boyle, Paul Simao and Leslie Adler
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WASHINGTON, July 27 (Reuters) – The Biden administration on Thursday continued its push to drive down housing prices, announcing steps to reduce zoning and land-use restrictions that often constrain housing construction, especially in low-income areas, and better protect renters.
The moves, which will also expand financing for affordable, energy efficient and resilient housing and promote commercial-to-residential conversion opportunities, are part of a big White House push to boost the supply of affordable housing.
Inflation in rental markets is decelerating, and data show more apartments will be built this year than any year on record, but housing prices remain high across the country.
“Today’s actions … are a down payment on the historic housing investments proposed in the president’s budget that would boost supply, lower costs and cut dangerous climate pollution, promote homeownership, protect renters, and promote fair housing,” the White House said in a statement.
High housing costs and increased homelessness in cities have caused strife in communities across the country, and could be a salient factor in the 2024 presidential election, in which U.S. President Joe Biden is seeking a second term.
The White House last week announced plans with the Department of Housing and Urban Development (HUD) to reduce or eliminate high application charges for renters and other so-called junk fees that can jack up consumers’ costs by 20%.
On Thursday, it shifted focus to zoning regulations that limit where, and how densely, housing can be built – steps that have limited housing supply, perpetuated historical patterns of segregation, and increased energy costs and climate risk.
“Today, we are acting to increase the supply of affordable housing, which is crucial to lowering housing costs,” Housing and Urban Development Secretary Marcia Fudge said.
As part of Thursday’s actions, HUD announced a new $85 million program to help communities identify and remove barriers to affordable housing production and preservation. Communities with acute needs can apply for up to $10 million in funding.
The money could enable a shift to higher-density zoning and rezoning for multifamily and mixed-use housing, while reducing requirements related to parking and other land use restrictions, the White House said.
The actions come after the U.S. Department of Transportation said it would provide up to $3.16 billion for planning and capital construction projects that prioritize disadvantaged communities and improve access to daily destinations.
The Economic Development Administration (EDA) has also updated the guidelines for grants to emphasize efficient land use and concentrate new developments in areas that are accessible to nearby residential density.
Other measures focused on simplifying underwriting for larger multifamily housing loans and streamlining financing for creation of affordable housing.
The administration will also work to leverage federal funds to support commercial-to-resident conversions, and is setting up a new interagency working group to lead that effort.
Such conversions could also help create zero-emissions housing, which will reduce energy costs for residents and cut dangerous climate pollution, the White House said.
The White House also announced plans HUD to boost protections for renters, including ensuring that renters have an opportunity to address incorrect tenant screening reports and get fair notice in advance of any eviction.
HUD will also provide new funding to tenant organizing efforts, the White House said.
Reporting by Andrea Shalal; Editing by Conor Humphries
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June 12 (Reuters) – Rio Tinto (RIO.AX), (RIO.L) will invest $1.1 billion to expand its “low-carbon” aluminum smelter at Complexe Jonquière in Quebec, Canada, the Anglo-Australian mining giant said on Monday.
The investment will boost annual capacity by about 160,000 metric tonnes of primary aluminum, the global miner said, adding it was sufficient to power 400,000 electric cars.
Pressure to cut greenhouse gas emissions has prompted Rio, Alcoa Corp (AA.N), and other aluminum manufacturers to launch a raft of products with lower carbon emissions.
The Canadian government has been involved in such efforts. It has invested in the ELYSIS technology pioneered by Alcoa and Rio Tinto that eliminates all CO2 emissions and replaces them with oxygen.
“This announcement brings us one step closer to the deployment of the first ELYSIS pots, which will make Quebec the leader in greenhouse gas-free aluminum production,” said Pierre Fitzgibbon, Quebec’s minister of economy, innovation and energy.
The Quebec government will provide up to $113 million in support for the latest smelter expansion.
“This is the most significant investment in our aluminum business for more than a decade…,” Rio Tinto CEO Jakob Stausholm said.
Construction will run over two-and-a-half years, with commissioning of the new pots expected to start in the first half of 2026 and the smelter fully ramped up by the end of 2026.
The project will create up to 1,000 jobs during peak construction, with about 100 permanent jobs.
The investment has been factored into the capital expenditure for 2023 to 2025, Rio Tinto said, retaining the capex guidance of $9 billion to $10 billion for 2024 and 2025.
The expansion will coincide with the gradual closure of potrooms at the Arvida smelter on the same site, Rio said.
Rio and the Canadian government also signed a memorandum of understanding (MoU) to strengthen supply chains for low-carbon primary metals, critical minerals and other value-added products, the miner said.
Reporting by Harish Sridharan in Bengaluru; Editing by Sriraj Kalluvila
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BEIJING, May 26 (Reuters) – Steel rebar prices in China hit their lowest in three years this week, underscoring flagging growth in the world’s second-largest economy, particularly in its weak property sector.
The spot price of HRB400 20mm steel rebar – used to reinforce concrete for buildings and infrastructure – fell to 3,510 yuan ($507.80) per tonne in Shanghai on Thursday, data from consultancy Mysteel showed.
That’s the lowest since April 2020, when the start of the COVID-19 pandemic in China had curbed most industrial activity.
Disappointing demand in what is normally the peak construction season during March and April kicked off the decline, reflected in steel rebar futures falling nearly 17% since late March, with any recovery some months off as China enters its typically slow summer months.
“China’s situation is quite bad. The outlook for steel demand in China has deteriorated compared to three months ago,” Takahiro Mori, executive vice president of Japan’s Nippon Steel Corp (5401.T), told Reuters on Wednesday.
Property and infrastructure account for about 60% of demand in the world’s largest steel sector but infrastructure stimulus has slowed and the property market is showing little growth.
China steel demand declined by 3.4% in April from a year earlier versus an increase of 8.7% in March, analysts at Huatai Futures said in a research note on May 21.
Demand in May fell 2.5% on the year, they said.
Also, just 53.11% of new special purpose bonds that are typically used to fund infrastructure projects flowed to the sector in April, down from 56.38% in March and 63.29% in February, analysts at China Future said in a note on May 24.
Investment in the property sector, the largest user of steel, declined by 6.2% year-on-year in the first four months of the year, data from the National Bureau of Statistics showed, worsening from a 5.8% fall for the January-March period.
New construction starts by floor area contracted by 21.2% as well over January-April from a year earlier, worsening from a 19.2% fall during the first three months, according to the NBS.
“The impact of stimulus measures on the property sector is not as good as it was before … Demand (for houses) may contract further,” analysts at Sinolink Securities said in a note on Wednesday.
In addition, the manufacturing sector also unexpectedly contracted last month.
The resultant sluggish demand is increasing pressure on steel mills ahead of the summer months of June-August, when construction in China typically slows as high temperatures and heavy rain in the south hinder outdoor activity.
Only a third of the country’s mills are currently operating at a profit, according to Mysteel, and shares in global miners plunged this week as iron ore prices fell on China’s weak demand.
Steel demand will not improve until September, when weather is more favourable for construction and a raft of economic stimulus measures in place since late last year filter through to the property market, an East China-based steel producer said.
Nippon’s Mori said the outlook could be bleaker than that.
“It could remain weak at least throughout this year or this fiscal year (to March 31, 2024). Therefore, we don’t expect the market to improve quickly,” he said.
($1 = 6.9121 yuan)
Reporting by Amy Lv and Dominique Patton in Beijing; Additonal reporting by Yuka Obayashi in Tokyo; Editing by Tom Hogue
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WASHINGTON, May 3 (Reuters) – Oklahoma is seeing a sharp increase in foreign investment interest, especially in its renewable energy sector, and is on the cusp of signing large new deals with firms in Switzerland and Asia, Governor Kevin Stitt told Reuters on Wednesday.
Stitt said Oklahoma, which just signed a trade agreement with Britain, said foreign governments were increasingly looking to bypass what he called “dysfunction” in the U.S. Congress to forge favorable trade deals with states like his.
“If you want a manufacturing center in the U.S., there’s not a better state to be located in than Oklahoma. We’re dead center located in the middle of the U.S.,” he said, citing a big push by countries and companies to diversify their supply chains and reduce reliance on China.
The state’s low energy costs – about one-third the cost of energy in Europe and the lowest in the United States – were a big draw, Stitt said, adding that Oklahoma derived about 45% of its electricity from renewable sources.
He said he had met recently with officials from Germany, Switzerland, South Korea, Taiwan, France and Qatar, and was in talks with various firms about potential deals valued at around $1 billion, but ranging higher.
One Asian firm was preparing to finalize an investment deal valued at $5 billion, with another deal imminent with a Swiss firm in the “green energy” space, he said.
Stitt, in Washington for the SelectUSA Investment Summit, gave no further details about the companies involved.
Japan’s Panasonic Holdings (6752.T)), a battery supplier to electric vehicle maker Tesla Inc (TSLA.O), said on Sunday it is considering building a battery plant in Oklahoma, its third in the United States.
Stitt said agriculture and rare earths production were other promising areas.
USA Rare Earth is investing heavily in a rare-earth metal manufacturing facility in Stillwater, Oklahoma, Stitt said.
(This story has been refiled to correct the name of the governor in paragraph 1)
Reporting by Andrea Shalal; Editing by Lincoln Feast.
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LAUNCESTON, Australia, April 24 (Reuters) – The spot price of iron ore tumbled to a four-month low as Beijing once again talked down the key steel raw material, but as usual the question is whether the intervention will lead to sustained lower prices.
The spot price for benchmark 62% iron ore for delivery to north China , as assessed by commodity price reporting agency Argus, dropped to $110.25 a tonne on April 21, the lowest since Dec. 20.
The price gave up 7.9% from the close of $119.75 a tonne on April 19, the day China’s state economic planner, the National Development and Reform Commission, said it would monitor the iron ore market closely and limit what it termed irrational price increases.
China produces just over half of the world’s steel and buys more than 70% of seaborne iron ore, with the main exporters being Australia, Brazil and South Africa.
It’s not immediately clear why Beijing picked last week to warn the iron ore market, given that the spot price has been trending down since hitting a nine-month high of $133.40 a tonne on March 15.
In the past such interventions have tended to come during price rallies, especially if the movement has been rapid.
They have also tended to have met with limited success, especially if strong demand was the main reason behind the rally, as opposed to supply issues as happens occasionally during Australia’s cyclone season and Brazil’s wet period.
It’s also the case the outlook for iron ore demand in China is not particularly clear cut, with some positive macro drivers but also areas of concern.
On the bullish front there is ongoing optimism over China’s economic re-opening after Beijing scrapped its strict zero-COVID policy at the end of last year.
Gross domestic product rose 4.5% in the first quarter, beating market expectations for a 4.0% gain, but much of the outperformance was driven by retail spending, which isn’t especially supportive of steel demand.
On the more important construction and infrastructure indicators, the performance was mixed with China’s infrastructure investment rising 8.8% year-on-year in the first quarter, outpacing a 5.1 rise in overall fixed-asset investment, while property investment fell 5.8%.
INVENTORIES SLIP
Another potentially bullish indicator is China’s port iron ore inventories , with data from consultancy SteelHome showing these dropped to 131.7 million tonnes in the week to April 21 from 133.3 million the prior week.
Inventories usually decline after the northern winter as steel output ramps up for the summer construction peak, but it’s worth noting that inventories are now 11.9% below the 148.6 million tonnes in the same week in 2022.
This implies that steel mills may be looking to increase iron ore imports, especially if they plan to keep production at relatively high levels.
Steel output hit a nine-month high of 95.73 million tonnes in March, rising 6.9% from the same month in 2022 amid rising demand and improved profitability among mills.
First quarter production was up 6.1% on year to 261.56 million tonnes, but this may not actually be a positive if Beijing does implement a proposed 2.5% steel output cut for 2023 from 2022’s 1.018 billion tonnes.
If lower production is mandated, it implies that steel mills will have to trim output over the rest of the year given the relatively strong start to 2023.
Overall, the outlook for China’s iron ore and steel demand is less assured than it was at the start of the year, when optimism over the economic re-opening abounded.
For now, iron ore imports appear to be holding up, with commodity analysts Kpler estimating April arrivals at 96.27 million tonnes, which would be down from March’s custom figures of 100.23 million, but relatively stable on a per day basis given April is one day shorter than March.
The opinions expressed here are those of the author, a columnist for Reuters.
Editing by Jacqueline Wong
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
LONDON, March 14 (Reuters) – British supermarket Sainsbury’s (SBRY.L) said on Tuesday it would take full ownership of the Highbury and Dragon store investment vehicles, paying Supermarket Income REIT (SUPR.L) 430.9 million pounds ($524.2 million) for its 51% stake.
Sainsbury’s, Britain’s second largest grocer after Tesco (TSCO.L), has held a 49% interest in Highbury and Dragon, which comprises the freeholds of 26 stores leased to Sainsbury’s, since it was created in 2000.
The deal will result in Sainsbury’s buying the freeholds of 21 stores which will continue to be operated as Sainsbury’s supermarkets.
The remaining five stores will be sold by Sainsbury’s, four of which it will lease back.
Sainsbury’s has also agreed to fully fund Highbury and Dragon’s bond redemptions of 170.5 million pounds on March 20 and 130.4 million pounds on July 13.
It said the acquisition and bond redemptions would be funded by cash resources and a committed unsecured term facility.
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Shares in Sainsbury’s, which trades from over 600 supermarkets and over 800 convenience stores, have increased 17% in 2023 so far.
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Reporting by James Davey, Editing by Paul Sandle
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Feb 21 (Reuters) – Global miner BHP Group (BHP.AX) reported a steeper-than-expected 32% fall in first-half profit owing to a drop in iron ore prices, sending its shares down, although it flagged a brightening outlook in China, its biggest customer.
China’s strict zero-COVID-19 policy curtailed economic activity and dented demand over the past year, driving iron ore prices down from lofty levels, while miners wrestled with surging costs and a tight labour market in Australia.
As a result, the world’s largest listed miner reported underlying profit attributable from continuing operations of $6.6 billion, down from $9.72 billion a year earlier.
That missed a Vuma Financial estimate of $6.82 billion, as earnings from copper and coal came in lower than analysts had expected. BHP’s giant Escondida copper mine was hit by road blockades in Chile that disrupted mining supply deliveries.
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However, its interim dividend of 90 cents per share, while down 40%, beat Vuma Financial’s estimate of 88 cents.
Shares of the global miner fell as much as 2.8% to A$47.11, their lowest since Jan. 6 but recovered to finish down 0.3%, slightly weaker than the broader market (.AXJO).
“We have got BHP as a ‘hold’ primarily because their share price is sitting up at record highs and they are going to have to do pretty well to justify those levels,” said analyst David Lennox of wealth manager Fat Prophets in Sydney.
The miner said it sees “markedly higher” price floors for some commodities than prior to the COVID-19 pandemic given the rising marginal cost of production.
“The lag effect of inflation and continued labour market tightness are expected to impact our cost base into the 2024 financial year,” BHP said, as it logged a $1 billion inflation hit, primarily from diesel costs, for the half.
Analysts at RBC Capital Markets said BHP’s first half was “surprisingly poor, but is a strong indicator of what is a still challenging inflationary environment for the miners”.
BHP also said it expected aggressive global interest rate hikes from last year to slow growth sharply across the developed world.
CHINA GREEN SHOOTS
However, after a difficult first-half, the miner said China appears to be a “source of stability” for commodity demand, as the world’s second-largest economy and top metals consumer reopens and looks to revive its debt-laden property sector.
The company’s comments sparked a rally in iron ore futures, with prices on the Dalian Commodity Exchange jumping more than 3% to their highest since July 2021.
BHP’s confidence in China’s economy was buoyed by green shoots it had seen since the start of the calendar year, including new loans, house prices and business sentiment surveys, Chief Executive Officer Mike Henry said.
“There’s a lot there that is giving us confidence that we will see an acceleration in the Chinese domestic economy,” he told reporters on a conference call.
BHP brought forward first production at its huge Jansen potash project in Canada to late 2026 from 2027.
It also said that it, along with joint venture partner Mitsubishi Development, had decided to put up for sale their Daunia and Blackwater coal mines, two of their seven metallurgical coal mines in Queensland’s Bowen Basin.
BHP has threatened not to invest in Queensland after the state hiked its coal royalties to the highest rate in the world.
Reporting by Sameer Manekar and Himanshi Akhand in Bengaluru, and Melanie Burton in Melbourne; Editing by Jonathan Oatis, Josie Kao and Sonali Paul
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MUMBAI, Feb 14 (Reuters) – Two large companies within India’s embattled Adani Group are likely to repay their short-term commercial paper (CP) debt as they come due over the next few months, instead of rolling them over as is normal, two merchant bankers and a company official directly familiar with the matter said.
The two group companies have about 50 billion rupees ($605 million) worth of CP due to mature through March, data shows, while exchange data shows the flagship Adani Enterprises Ltd (ADEL.NS) has redeemed a total of 2.5 billion rupees of CP since Jan. 25.
That is a day after U.S. short-seller Hindenburg Research accused the group of improper use of offshore tax havens and stock manipulation – allegations the group has denied – that sparked about a $120 billion loss in the group’s market value on concerns including about its ability to refinance debt.
Adani Enterprises and Adani Ports and Special Economic Zone Ltd (APSE.NS) regularly raise funds by issuing CPs – short-term debt instruments issued to meet working capital requirements.
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“We will repay the CPs as and when they mature and are currently not looking to tap the short-term debt market,” an official with one of the companies said on condition of anonymity as they are not authorised to speak to the media.
The official said payments are being made as the securities mature and the company has not got any requests for early redemptions.
“All payments are being made as per schedule,” an Adani group spokesperson said in an e-mail, but did not respond to queries on whether investors are seeking early redemption.
Adani Ports has CPs worth 35 billion rupees due to mature through end March, data from information service provider Prime Database showed.
Adani Enterprises has CP worth close to 15 billion rupees due to mature over February-March and more than 2 billion rupees worth due for redemption from April through January 2024, the data showed.
The Adani Group is unlikely to roll over this debt as it comes due, two bankers said on condition of anonymity as they are not permitted to speak to the media.
“Market sentiment is such that people will be cautious to immediately roll over CPs, and would prefer to cash out. So, we may see them (Adani Group) staying away from the market for some time,” said one banker, who regularly arranges debt issuances for the group.
A second banker, who advises the conglomerate on local borrowings, added the group has not reached out to its bankers asking for a rollover.
“The Adani group generally gets in touch with bankers some days prior to the maturing CPs but has stopped any sort of intimation, hinting that they may look to repay the existing CP holders,” this person said.
Apart from short-term borrowings, Adani Enterprises has not moved forward with plans to launch its debut retail bond issue of up to 10 billion rupees, while Adani Green Energy Ltd (ADNA.NS) has also stayed put on a planned 1.5-billion rupee, 10-year bond offering, according to bankers, including the two mentioned earlier.
“There’s been no communication from the companies on previously proposed bond issuances,” said a merchant banker with a brokerage firm and directly involved in the arrangement.
The Adani Group spokesperson denied media reports that these bond issues have been scrapped, saying this is “speculation” and “not true” in a reply to Reuters’ mail.
($1 = 82.6390 Indian rupees)
Reporting by Bhakti Tambe; Editing by Savio D’Souza
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