China Resources · China Resources Quarterly • Southern winter ~ Northern summer 1 Executive summary The Chinese economy lost momentum through 2015 and in Q1 2016. However,

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China Resources QuarterlySouthern winter ~ Northern summer 2016

China Resources Quarterly

Southern winter ~ Northern summer 2016

ii China Resources Quarterly • Southern winter ~ Northern summer

© Commonwealth of Australia 2016

Creative Commons licence With the exception of the Coat of Arms, this publication is licensed under a Creative Commons Attribution 3.0 Australia Licence. Creative Commons Attribution 3.0 Australia Licence is a standard form license agreement that allows you to copy, distribute, transmit and adapt this publication provided that you attribute the work.

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The Commonwealth’s preference is that you attribute this publication (and any material sourced from it) using the following wording: Source: Licensed from the Commonwealth of Australia under a Creative Commons Attribution 3.0 Australia Licence.

ISSN 978–1–921516–05–4 [Print]

ISSN 978–1–921516–07–8 [PDF]

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced or altered by any process without prior written permission from the Australian Government. Requests and inquiries concerning reproduction and rights should be addressed to:

Department of Industry, Innovation and ScienceGPO Box 9839Canberra ACT 2601

or by emailing [email protected]

China Resources Quarterly • Southern winter ~ Northern summer iii

AcknowledgementsThis publication was jointly undertaken by the Westpac Institutional Bank, a division of the Westpac Group, and the Australian Government Department of Industry, Innovation and Science. The relationship is non–commercial. The report was previously published under the title of the Westpac–BREE China Resources Quarterly.

Editors

Westpac: Elliot Clarke and Justin Smirk. Department of Industry, Innovation and Science: Gayathiri Bragatheswaran, Nicole Thomas, Nikolai Drahos, Thuong Nguyen, Monica Philalay, Joseph Moloney, Jay Hammond, Mark Gibbons and Ross Lambie.

Design and production

Julie Doel

Cover image

Shutterstock

This report was fi nalised on 8 August 2016.

iv China Resources Quarterly • Southern winter ~ Northern summer

Acknowledgements iii

Contents iv

Acronyms and abbreviations v

Foreword vi

Executive summary 1

Recent developments in the Chinese

economy2

General macroeconomic indicators 6

Resource related macroeconomic

indicators8

Steel 10

Iron ore 13

Metallurgical coal 17

Energy overview 18

Thermal coal 21

Oil 23

Gas 27

Uranium 29

Gold 31

Silver 33

Copper 34

Aluminium 37

Alumina 39

Bauxite 41

Nickel 42

Zinc 45

Lead 49

Tin 50

Molybdenum 54

Tungsten 52

Cobalt 53

Antimony 55

Platinum and Palladium 56

Mineral sands 57

Rare earth oxides 58

Manganese and Cadmium 59

Diamonds and Magnesium 60

Mineral and energy import summary 61

Provincial distribution of energy

and resource related activity

Electricity output & consumption 62

Coal and gas 63

Ferrous metals 64

Alumina and aluminium 65

Copper and gold 66

Nickel and zinc 67

Contents

China Resources Quarterly • Southern winter ~ Northern summer v

Acronyms and abbreviations

ABS Australian Bureau of Statistics

ASEAN Association of Southeast Asian Nations

AUD, $A Australian dollar

bcm billion cubic metres

CEIC Chinese Economic Information Company

CFR Cost including freight

CNY, CNH Chinese yuan (onshore & off shore)

cm cubic metres

dltu dry long tonne unit

FDI foreign direct investment

FOB free on board

FX Foreign exchange

G3 United States, Europe and Japan

GDP gross domestic product

GFC global fi nancial crisis

GFCF gross fi xed capital formation

GCF gross capital formation

IEA International Energy Agency

IMF International Monetary Fund

koe, mtoe kilogram of oil equivalent, million tonnes of oil equivalent

kgpp kilograms per person

kWh kilowatt hour

LNG liquefi ed natural gas

Mt million tonnes

na not available

NAR net as received

NIEs Newly Industrialised Economies (Singapore, Taiwan, Hong Kong, South Korea)

ODI outward direct investment

OECD Organisation for Economic Cooperation and Development

OPEC Organisation of Petroleum Exporting Countries

PMI Purchasing Managers Index

PPP purchasing–power parity

ppt percentage point

RMB Chinese Renminbi

SHIBOR Shanghai Interbank Off ered Rate

sqkm square kilometres

USD, US$ United States dollar

Growth rate conventions and abbreviations.

“Year–ended growth”, abbreviated %yr, is the level of an indicator in a single period (a month or quarter) versus the corresponding period in the prior year, expressed as a percentage.

The term “smoothed growth” should be understood to represent a 3 month moving average (3mma) of the year– ended growth rate.

“Year–to–date growth”, abbreviated %ytd, is the accumulated level of an indicator at a point in the calendar year (for example year–to–June, year–to–Sep) versus the corresponding point in the prior year, expressed as a percentage.

“Annual average growth”, abbreviated %ann, is the level of an indicator over four quarters, versus the previous four quarter period, expressed as a percentage.

“Month–on–month and quarter–on–quarter growth”, abbreviated %mth or %qtr, is the level of an indicator in one period, versus the immediately prior period, expressed as a percentage.

“Annualised growth or annualised rate”, is the change in an indicator in a single period grossed up to a year, expressed as a percentage. If seasonally adjusted, this may be rendered as %saar.

vi China Resources Quarterly • Southern winter ~ Northern summer

ForewordWelcome to the Southern winter ~ Northern summer edition of the China Resources Quarterly – hereafter the CRQ. The CRQ is a collaborative research venture between the Westpac Institutional Bank (hereafter Westpac) and the Australian Government Department of Industry, Innovation and Science.

The CRQ is the primary reference point for public and private sector decision makers seeking to understand developments in the Chinese economy, with special reference to its demand for resources.

This edition has been compiled against an underwhelming economic backdrop, albeit with an improved risk appetite across global markets. China’s domestic demand impulse remains narrow and external demand is limited. As a result, nominal activity growth is subdued vis–a–vis the double–digit percentage growth rates that were common place for much of the last decade.

In the resources sphere, despite the weak tone of end demand, the rally in key commodities which commenced in Q1 has continued through to August. Speculation and the sustained depreciation of the Renminbi are likely playing a signifi cant role behind the scenes. A reversal of these gains seems likely later in 2016 as supply continues to weigh on diminishing underlying demand.

With China’s development model in the midst of a major structural infl ection point, and Australia’s own commodity cycle having shifted decisively into the supply phase, it is more vital than ever to have access to key data. The CRQ aims to do its part in this regard by making available rigorous and empirically grounded analysis of macroeconomic and resource industry trends.

China is now the world’s largest national economy in purchasing power parity (internationally comparable volume) terms and the largest producer of industrial value added, however measured. And it is now a free–trade agreement partner of Australia. These observations underscore the value of continuing to deepen our collective understanding of the ever–evolving Chinese economy.

Bill Evans Mark CullyChief Economist Chief EconomistWestpac Department of Industry, Innovation & Science

China Resources Quarterly • Southern winter ~ Northern summer 1

Executive summary

The Chinese economy lost momentum through 2015 and in Q1 2016. However, since the previous edition of the CRQ, aggregate growth stabilised at 6.7% in Q2 2016. This respite may prove short lived as a result of substantial downside risks.

The secondary sector remains the principal source of concern, i.e. manufacturing and construction. Nominal growth did pick up in Q2, but it remains weak at just 3.5%yr. Contrast this result to the 2012–2014 average of 7.0%yr and 2009–2011’s 15.0%yr.

For manufacturing, weak external demand and domestic construction are the primary headwinds. For the former, a sustained depreciation on a trade-weighted basis over the past year has done little to boost momentum.

For construction, while we have seen a material improvement in residential property prices and consequent robust growth in new residential construction, this activity has been concentrated in the developed tier-1 cities and a few of the larger, well-located tier-2 cities.

To prove sustainable and justify a follow-up expansion of capacity by manufacturers and service-related firms, this momentum must broaden geographically. Yet there is little evidence of this taking place. Annual price gains in tier-2 cities are a fraction of those in tier-1, while price growth in tier-3 cities is little better than flat.

Regardless, supporting urbanisation, the public sector continues to invest heavily in key infrastructure, offsetting the absence of private spending. Worthy of note is that state-owned enterprises are currently responsible for over 80% of total investment. Utilities capex remains the focus for authorities; but growth in transport infrastructure is also robust.

Turning to services, growth has maintained a solid pace in 2016 to date, annual growth coming in at 10.6%yr in Q2 2016. However, within this sector, there remains a diverse range of circumstances. Growth in financial services has slowed abruptly, offsetting strengthening momentum in real estate services. Also, an uptrend in wholesale & retail trade is in place, but it remains modest. The outlook for aggregate activity; employment; and wages depends on this burgeoning sector of the economy.

On matters financial, the past three months have seen much calmer market conditions, both with respect to the Renminbi and Chinese equities. This is in part due to the more sanguine global backdrop; but Chinese authorities have also played their part, improving China’s competitiveness by depreciating the currency.

Following the declines of 2014–2015, commodity prices have experienced a sharp rally which has been sustained since the last CRQ. The real demand backdrop; inventory levels; and anecdotes all indicate that speculation has provided considerable support to prices during this period. If this is true, and weak end-demand persists, these gains will reverse.

Australian bulk commodity producers have taken great strides in lowering their production costs and increasing capacity, putting them in a strong position to weather adverse conditons. Those further up the cost curve are in a much more precarious position.

2 China Resources Quarterly • Southern winter ~ Northern summer

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%yr%yr

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Secondary

Tertiary

Sources: Westpac Economics, CEIC

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Investment

ppt cont

Consumption

ppt cont

Net exports

ppt cont

GDP deflator

%ytd

%ytd or ppt

Q1 '14 Q2 '14

Q3'14 Q4'14

Q1'15 Q2'15

Q3 '15 Q4'15

Q1'16 Q2'16

Sources: CEIC, Westpac Economics.

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%ytd%ytd

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Dec-15 Jun-16

Sources: CEIC,

Westpac

Economics

Figure 1: Nominal GDP: total & broad sectors

Figure 2: Various elements of the national accounts

Figure 3: The investment cycle: a sectoral view

Recent developments in the Chinese economy

Many questions remain regarding China. Aggregate momentum continues to depend heavily on the services sector, with manufacturing restricted by soft global conditions and construction by an unwillingness amongst firms and developers to invest outside tier-1 cities.

Following the reported 1.2% lift in GDP in Q1, Q2’s 1.8% result means average quarterly growth through the first half of 2016 stands at 1.5%, two ticks lower than 2015’s 1.7% quarterly-average.

Annual growth in real GDP of 6.7% over the year to Q2 2016 is unchanged from Q1 and contrasts poorly with 6.8%yr at Q4 2015; 7.0%yr at Q2 2015; and 7.5%yr at Q2 2014. Taking a longer historical perspective, annual growth through the first half of 2016 is the weakest it has been since Q3 2009 and before that Q4 1999.

Nominal growth has seen an improvement over the past six months, the annual gain rising from 6.4%yr to Q4 2015 to 7.3%yr to Q2 2016.

Having surged in Q1 2016 on the back of a rebound in commodity prices, annual nominal growth in the primary sector moderated in Q2, from 13.3%yr to 6.4%yr. But offsetting this deceleration in primary sector momentum was robust growth in the services sector (10.6%yr) and a lift in the secondary sector impulse, from 1.0%yr to 3.5%yr.

In a structural sense, the consumer continues to take over as the driver of aggregate growth. Year-to-date in 2016, consumption has added 4.9ppts to annual growth, twice investment’s contribution of 2.5ppts. Contrast the current experience to that of two years ago, when consumption and investment respectively contributed a roughly equal 4.0ppts and 3.6ppts to headline growth.

Nominal investment in heavy industrial and extractive industries remains weak but is being partly offset by utilities and transport as well as (concentrated) gains for housing in tier-1 cities. To see aggregate growth strengthen, there needs to be a greater willingness amongst private firms to invest and less crowding out of those firms who do want to borrow by the public sector. Note that over 80% of investment is currently being undertaken by State-owned Enterprises.


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Nominal GDP growth (lhs)

Business situation* (rhs)

Domestic orders* (rhs)Sources: CEIC, Westpac Economics.

* 5000 enterprise survey. Dec-13 nominal GDP growth interpolated.

% long run average%yr

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0

15

30

45

60

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0

15

30

45


Cement (lhs) Steel (lhs)

Electricity (lhs) Exports (rhs)

%yr %yr

Sources: CEIC, Westpac.

3mma of year-ended

rates.

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50

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%yr%yr

Financial services

Real estate services

Tertiary total

Wholesale and Retail

Sources: Westpac Economics, CEIC

Figure 4: Business conditions, orders & GDP

Figure 5: The old model: bellwether sectors

Figure 6: The new model: bellwether sectors

It is constructive to complement the national accounts with a range of alternative indicators which also correlate with overall activity. Doing so provides a richer and more complete picture of key macroeconomic trends.

Beginning with the People’s Bank of China’s corporate survey, we see that the largest firms across the nation believe conditions remained challenging in the second quarter of 2016 – an improvement in domestic orders notwithstanding.

The survey’s ‘business situation’ measure has now been below its long–run average for ten consecutive quarters – and twelve of the past thirteen. Weakness in domestic orders has been a key factor, so the Q2 bounce gives hope that conditions are stabilising and that a sustained improvement might be in view. But risks to the outlook are clearly skewed to the downside.

Other measures of aggregate activity point to still-weak conditions in the old bellwether sectors of manufacturing and construction. Q1 gains for cement (following a sharp contraction) already seem to be fading; meanwhile, growth in electricity and steel production also remains historically weak. Sluggish investment by the private sector and the narrow focus of property investment in tier-1 cities lead us to expect continued soft demand for these materials.

As noted in our discussion of GDP, in stark contrast to weak conditions in the secondary sector, services momentum is robust.

Being job intensive, and given China’s stage of development, services growth is the key to sustained income gains for the urbanising population.

However, there is clearly room for improvement. Growth in financial services has slowed abruptly from 26.6%yr in Q2 2015 to 7.7%yr, as financial market exuberance petered out. Real estate services growth has only provided a partial offset, strengthening from 10.6%yr to 15.0%yr, having peaked at 17.6%yr in Q1. Further, the uptrend in wholesale & retail trade has been modest, only improving from 5.8%yr to 6.9%yr.


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New

Secondary market

Sources: CEIC,

Westpac Economics

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indexindex

Completions (lhs)

Sales (lhs)

Residential land price (rhs)

Sources: CEIC, Westpac. Aug-2006 = 100.

Underlying activity data in sqm.

Land price is a spliced series of 100 and 70 city series.

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Underlying data in sqm.

3mma of the year-ended growth rate.

Figure 8: Completions, sales & land prices

Figure 9: Housing sales and starts: volumes

Figure 7: 70 city house prices: m/m chg net balanceThe real estate sector

Real estate investment itself is split roughly 70/30 between residential and non–residential. State–Owned Enterprises represent circa 16% of the total.

In the previous edition of the CRQ, we noted that the real estate slowdown (which directly accounted for 47% of the near 5ppt deceleration in investment growth in 2015) had partly reversed, with year-to-date growth in real estate investment strengthening from 2.5% at end-2015 to 8.2% in March 2016.

It was hoped that this momentum would strengthen further in Q2, but to no avail. Having peaked at 8.4% in April, year-to-date growth has since eased back to 7.2%. Further highlighting the headwinds this sector faces, sales and starts volumes also look to have lost momentum in recent months. Annual growth looks to have peaked in early-Q2 at a pace broadly in line with 2013.

Key for housing is the geographical breadth of activity. This is best highlighted by the 70-city house price detail.

Splitting the 70 cities into three development-based tiers, tier-1 clearly continues to experience a robust pace of price growth, an average of 28.5%yr for new housing and 30.6%yr for the secondary market.

Within this tier, Shenzhen new property price growth has slowed from 62.5%yr in April to (a still very strong) 46.8%yr; Shanghai has plateaued circa 28%yr; while Beijing and Guangzhou have strengthened modestly, to around 19.5%yr. Similar trends are apparent in the established market.

Tier-2 cities saw starkly lower price growth for new and established housing, 7.1%yr and 6.2%yr respectively. The uptrend is intact but modest. This is even more the case in tier-3, where new and secondary house prices rose by just 3.1%yr and 2.1%yr.

Until such time as the growth impulse broadens, housing’s contribution to growth will remain fragile and limited in scale. Of course demand for housing in these cities depends heavily on job opportunities. Here there is considerable work to be done.


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%yr

Real effective RMB (%yr, lhs)

Real lending rate (ppt deviation from average, rhs)

Sources: CEIC,

Westpac Economics.

ppt

Figure 10: Flow of credit by type, % of GDP

Figure 11: Financial conditions in China

Figure 12: FX reserves & net capital fl ows by type

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Other^

Total

Sources: CEIC, Westpac. *RBA definition. ^Mainly bond and equity.

4 quarter sum of new flows.

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Westpac estimates for FX

reserves & “other” for Apr-

Jun 2015.

Monetary & financial conditions

The monetary policy stance has had a basic tightening posture since 2011, related to the unwinding of the stimulus–era legacy periodically interrupted by a cyclical need to underpin growth and/or accommodate smooth refinancing. The annual flow of credit to GDP peaked at 40% in late 2009; hit a local trough of 25% of GDP in early 2012; rebounded to 33% of GDP in early 2013; then fell to a new low circa 21% of GDP at Q2 2016. While traditional bank loans were a major contributor to the stimulus package, much of the cyclical amplitude since has been related to shadow finance, dominated by the off–balance sheet activity of the banks themselves.

Turning to the currency, last August authorities altered the way in which the Renminbi was managed, focusing on stability against a basket of currencies rather than the USD bilateral rate. However, what has transpired since has been a sustained depreciation, with the Renminbi around 7% lower against the USD and almost 8% on a trade-weighted basis.

Coupled with real interest rates which are marginally below average, the actions taken by authorities on the currency have improved domestic financial conditions, reducing pressure on Chinese exporters. More recently, their management of the currency has also seen the downtrend in China’s FX reserves abate, further reducing uncertainty over the near-term outlook.

However, it is also worth bearing in mind that global financial conditions have been more supportive of authorities aims of late. A renewed spate of global risk aversion and/or anxieties over growth in China could once again put pressure on FX reserves.

Taking a longer-term perspective, it should be kept in mind that there are other factors restricting China’s FX reserve accumulation, namely: a rise in foreign loans made by Chinese banks and outward FDI by Chinese corporates and citizens at a time of weaker export receipts. As development and internationalisation proceeds, bank–related activity; outward direct investment; rapid growth in portfolio flows (from a very low base); and a growing services deficit will all become increasingly important avenues for goods’ surplus recycling.


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p–

14

De

c–1

4M

ar–

15

Jun

–1

5Se

p–

15

De

c–1

5M

ar–

16

Jun

–1

6

Exp

ort

s %

yr4

.13

.97

.5–

4.7

5.0

13

.08

.61

0.0

–2

.2–

5.9

–5

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8.6

–4

.3

to G

3–

4.9

2.6

9.4

2.8

9.3

10

.53

.87

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1.0

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4.2

–6

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6.3

to A

sia

ex

Jap

an1

5.2

7.5

6.9

–1

0.3

2.8

16

.21

3.3

9.9

–2

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7.4

–4

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9.0

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to A

ust

ralia

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.33

.0–

1.5

1.1

4.8

4.1

5.3

14

.44

.21

.02

.0–

1.0

–9

.4

to n

on

–A

sian

em

erg

ing

mar

kets

0.4

–1

.45

.9–

3.3

3.9

14

.61

0.0

16

.6–

5.0

–1

0.0

–1

4.7

–1

6.1

–6

.6

Imp

ort

s %

yr5

.28

.47

.23

.31

.51

.2–

1.4

–1

7.9

–1

3.5

–1

4.2

–1

2.0

–1

3.4

–6

.6

fro

m G

3–

0.1

4.3

8.1

11

.57

.44

.32

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11

.8–

10

.2–

13

.0–

11

.0–

9.8

–3

.3

fro

m A

sia

ex

Jap

an8

.17

.31

.5–

4.7

1.7

3.5

–0

.4–

14

.1–

11

.4–

14

.5–

9.2

–1

2.9

–7

.2

fro

m A

ust

ralia

9.1

19

.03

3.5

24

.82

.4–

1.9

–2

0.5

–2

6.5

–3

0.9

–2

0.5

–1

8.5

–3

0.8

–0

.3

fro

m n

on

–A

sian

em

erg

ing

mar

kets

–6

.84

.96

.32

.44

.50

.8–

4.4

–3

6.7

–2

7.6

–2

0.5

–2

3.0

–1

1.3

–6

.4

Trad

e b

alan

ce U

SDb

n6

5.7

61

.59

0.5

16

.68

5.9

12

8.1

14

9.5

12

3.7

13

9.5

16

3.6

17

4.8

12

5.7

14

3.4

Ch

ang

e in

FX

re

serv

es

USD

bn

54

16

61

59

12

74

5–

10

6–

45

–1

13

–3

6–

18

0–

18

4–

11

8–

7

Ente

rpri

se s

urv

ey

– n

et

bal

ance

, 50

bas

e

Bu

sin

ess

co

nd

itio

ns

57

.15

6.3

58

.15

5.3

55

.45

4.9

54

.55

2.8

51

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9.4

48

.44

6.7

48

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Pro

fi ta

bili

ty5

5.6

55

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7.6

50

.95

4.1

55

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5.0

51

.05

2.8

51

.15

0.5

47

.25

2.7

Do

me

stic

ord

ers

50

.34

8.2

49

.44

4.4

48

.54

6.9

46

.54

2.5

46

.34

3.3

42

.53

9.1

46

.6

Fore

ign

ord

ers

49

.95

0.1

48

.74

5.4

49

.74

9.9

47

.94

4.2

48

.74

6.3

43

.74

1.0

46

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Ban

kin

g c

limat

e –

% o

f av

era

ge

De

man

d fo

r lo

ans

92

.69

5.4

95

.09

9.9

91

.38

5.1

82

.98

7.9

77

.27

2.4

72

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72

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Ease

of

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licy

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ce9

1.5

72

.67

3.6

68

.77

4.1

84

.39

0.3

96

.91

18

.71

10

.11

21

.01

15

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09

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Ban

kers

’ co

nfi

de

nce

leve

l1

16

.01

10

.41

29

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22

.49

7.2

10

7.0

95

.08

6.0

78

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3.5

68

.66

9.0

79

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We

stp

ac M

NI C

on

sum

er

Sen

tim

en

t* –

% o

f av

era

ge

He

adlin

e c

om

po

site

10

1.9

96

.51

03

.39

9.1

97

.79

5.0

93

.19

4.3

93

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7.2

93

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5.8

96

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Exp

ect

ed

fam

ily fi

nan

ces

10

3.9

97

.11

04

.39

8.3

99

.99

5.4

92

.79

4.6

93

.69

9.6

93

.99

7.1

95

.5

Ho

use

pri

ce e

xpe

ctat

ion

s9

9.6

10

3.6

10

2.1

10

5.6

10

4.4

10

5.6

10

4.4

10

6.3

10

5.2

10

7.3

10

3.7

10

5.4

10

3.7

Emp

loym

en

t o

utl

oo

k1

07

.99

7.3

11

0.2

99

.69

9.7

94

.79

3.3

93

.89

3.1

90

.79

0.0

88

.19

3.2

Sou

rce

s: W

est

pac

Eco

no

mic

s, C

EIC

, MN

I.

Tabl

e 1:

Gen

eral

mac

roec

onom

ic d

ata

* Q

uar

terl

y o

bse

rvat

ion

s ar

e t

he

3 m

on

th a

vera

ge.


Mo

nth

ly

Jul–

15

Au

g–

15

Sep

–1

5O

ct–

15

No

v–1

5D

ec–

15

Jan

–1

6Fe

b–

16

Mar

–1

6A

pr–

16

May

–1

6Ju

n–

16

Ind

ust

rial

pro

du

ctio

n %

yr 3

mm

a6

.36

.35

.95

.85

.85

.95

.85

.65

.96

.16

.36

.1

Ele

ctri

city

*2

.62

.81

.61

.41

.41

.4n

.a.

n.a

.5

.92

.92

.51

.6

Pro

cess

ed

cru

de

oil*

6.2

5.6

4.7

3.3

2.2

2.8

n.a

.n

.a.

0.5

2.1

1.6

2.8

Ce

me

nt*

–5

.7–

5.1

–4

.1–

3.6

–4

.3–

4.3

n.a

.n

.a.

24

.81

4.2

10

.42

.9

Ste

el p

rod

uct

s*–

0.2

–0

.9–

1.4

–0

.90

.0–

0.7

n.a

.n

.a.

1.7

1.0

1.0

1.2

No

n–

ferr

ou

s m

eta

ls*

22

.62

1.2

18

.41

6.1

13

.69

.9n

.a.

n.a

.3

.82

.82

.10

.0

Au

tom

ob

iles*

–8

.9–

10

.6–

12

.3–

7.0

0.1

8.8

n.a

.n

.a.

4.2

4.6

4.8

6.2

Civ

ilian

sh

ips*

–1

.9–

0.7

–2

.30

.3–

9.8

–9

.1n

.a.

n.a

.–

14

.7–

20

.9–

20

.2–

17

.9

Me

tal c

utt

ing

to

ols

*2

.5–

1.7

–1

4.9

–1

6.4

n.a

.n

.a.

n.a

.n

.a.

n.a

.n

.a.

n.a

.n

.a.

Fixe

d a

sse

t in

vest

me

nt

%yr

3m

ma

10

.51

0.2

8.6

8.4

9.0

9.0

9.3

9.1

10

.51

0.5

9.6

8.3

Man

ufa

ctu

rin

g, o

f w

hic

h8

.77

.76

.46

.87

.47

.47

.16

.56

.96

.24

.12

.1

He

avy

ind

ust

ry6

.25

.43

.44

.94

.95

.74

.44

.14

.44

.02

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0.6

Har

d in

fras

tru

ctu

re, o

f w

hic

h1

7.3

18

.81

6.6

15

.51

6.7

15

.41

6.3

13

.91

7.8

19

.42

0.8

20

.7

Hig

hw

ays

18

.41

4.9

12

.21

3.8

15

.71

3.4

10

.87

.68

.91

0.3

11

.61

4.6

Rai

lway

s2

6.7

12

.33

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10

.2–

10

.7–

13

.6–

13

.4–

17

.4–

8.7

3.1

18

.73

0.4

Uti

litie

s1

5.8

15

.81

4.2

12

.81

4.5

17

.51

8.8

18

.11

9.0

23

.42

2.9

24

.5

Re

al e

stat

e, o

f w

hic

h2

.91

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0.4

–2

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3.5

–3

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1.3

1.4

5.2

7.5

8.6

6.6

Dw

elli

ng

s2

.31

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0.1

–1

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2.9

–3

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1.9

0.3

3.8

6.8

8.8

6.9

No

n–

resi

de

nti

al4

.31

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1.1

–3

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4.8

–3

.4–

0.2

3.6

8.2

8.9

8.3

5.9

Off

–m

arke

t u

rban

co

nst

ruct

ion

–2

9.8

–2

7.2

–3

7.5

–6

.51

7.0

–6

.8–

24

.0–

46

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32

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30

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32

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37

.0

Val

ue

of

ne

w p

roje

ct s

tart

s–

4.5

–3

.81

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0.2

3.9

5.7

19

.22

7.6

40

.33

8.4

31

.12

1.1

Nu

mb

er

of

ne

w p

roje

ct s

tart

s1

8.0

17

.52

3.6

23

.32

7.9

24

.03

2.1

41

.84

6.8

38

.62

8.4

25

.8

Loca

l go

vern

me

nt

pro

ject

s1

0.8

10

.78

.99

.19

.89

.29

.59

.21

1.0

10

.69

.37

.9

Ce

ntr

al g

ove

rnm

en

t p

roje

cts

2.8

0.3

3.2

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4.0

5.3

4.4

5.1

0.1

9.9

15

.11

7.7

Stat

e o

wn

ed

en

terp

rise

inve

stm

en

t1

1.9

12

.51

0.2

10

.61

1.7

9.7

12

.61

4.5

22

.12

3.5

24

.22

3.6

Tabl

e 2:

Res

ourc

e re

late

d ec

onom

ic in

dica

tors

Tab

le 2

co

nti

nu

ed

on

pag

e 9

. * O

utp

ut

for

the

se s

ect

ors

was

no

t re

leas

ed

for

the

mo

nth

s o

f Ja

nu

ary

and

Fe

bru

ary.

As

a co

nse

qu

en

ce, w

e h

ave

en

tere

d n

a fo

r th

ose

tw

o m

on

ths

and

re

po

rte

d t

he

un

smo

oth

ed

ye

ar–

en

de

d r

ate

for

Mar

ch.


Mo

nth

ly

%yr

3m

ma

un

less

oth

erw

ise

sp

eci

fi e

dJu

l–1

5A

ug

–1

5Se

p–

15

Oct

–1

5N

ov–

15

De

c–1

5Ja

n–

16

Feb

–1

6M

ar–

16

Ap

r–1

6M

ay–

16

Jun

–1

6

Vo

lum

e o

f h

ou

sin

g s

tart

s–

16

.4–

17

.7–

7.6

–8

.6–

10

.0–

17

.4–

4.7

6.9

18

.12

2.1

21

.11

3.8

Vo

lum

e o

f h

ou

sin

g s

ale

s1

6.6

16

.61

4.2

9.7

7.7

5.2

12

.81

9.3

31

.33

6.6

35

.32

7.6

Val

ue

of

ho

usi

ng

sal

es

– N

atio

nw

ide

11

.61

6.1

17

.91

8.3

18

.01

7.5

27

.93

8.3

52

.95

7.0

58

.45

3.1

East

ern

pro

vin

ces

17

.02

2.9

25

.12

5.4

24

.72

3.7

36

.24

8.9

67

.87

2.7

73

.76

5.0

Ce

ntr

al p

rovi

nce

s5

.99

.01

0.8

12

.01

3.2

13

.62

1.2

28

.33

7.1

41

.04

4.4

45

.1

We

ste

rn p

rovi

nce

s1

.73

.94

.54

.44

.13

.99

.41

4.7

21

.62

3.2

24

.22

2.5

Vo

lum

e o

f la

nd

sal

es

–3

0.6

–3

2.6

–3

3.6

–3

7.1

–3

4.9

–2

6.6

–2

1.8

–1

9.6

–1

1.3

–2

.02

.93

.7

70

cit

y ne

w d

we

llin

g p

rice

s n

et

% r

isin

g m

–o

–m

1.4

18

.62

8.6

–8

.61

1.4

20

.02

0.0

45

.77

7.1

85

.78

0.0

64

.3

70

cit

y se

cond

ary

dw

elli

ng

pri

ces

ne

t %

ris

ing

m–

o–

m3

4.3

34

.33

0.0

27

.13

4.3

14

.31

7.1

8.6

58

.65

8.6

51

.44

8.6

Au

to s

ale

s, o

f w

hic

h–

3.3

–4

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2.7

3.6

11

.31

5.8

14

.57

.55

.34

.88

.41

0.4

pas

sen

ge

r ca

rs–

2.9

–4

.4–

2.2

4.4

13

.41

8.5

17

.28

.85

.95

.09

.31

2.0

Exca

vato

r sa

les

–3

2.2

–3

2.3

–3

1.0

–3

1.6

–2

9.2

–2

8.4

–1

7.8

4.0

19

.71

4.5

1.9

–2

.2

Terr

est

rial

fre

igh

t4

.74

.04

.03

.94

.45

.31

.0–

4.6

–8

.6–

7.7

–5

.8–

5.6

Aq

uat

ic f

reig

ht

4.1

4.1

4.6

5.3

5.9

4.7

2.0

0.5

0.9

2.2

2.3

2.2

Inte

rnat

ion

al a

ir f

reig

ht

5.1

3.9

2.6

2.3

3.6

4.8

8.5

2.1

2.8

–0

.55

.55

.5

Jul–

15

Au

g–

15

Sep

–1

5O

ct–

15

No

v–1

5D

ec–

15

Jan

–1

6Fe

b–

16

Mar

–1

6A

pr–

16

May

–1

6Ju

n–

16

Man

ufa

ctu

rin

g P

MI –

ind

ex

– o

f w

hic

h5

0.0

49

.74

9.8

49

.84

9.6

49

.74

9.4

49

.05

0.2

50

.15

0.1

50

.0

Ou

tpu

t5

2.4

51

.75

2.3

52

.25

1.9

52

.25

1.4

50

.25

2.3

52

.25

2.3

52

.5

Ne

w o

rde

rs4

9.9

49

.75

0.2

50

.34

9.8

50

.24

9.5

48

.65

1.4

51

.05

0.7

50

.5

Ne

w e

xpo

rt o

rde

rs4

7.9

47

.74

7.9

47

.44

6.4

47

.54

6.9

47

.45

0.2

50

.15

0.0

49

.6

Raw

mat

eri

al in

ven

tori

es

48

.44

8.3

47

.54

7.2

47

.14

7.6

46

.84

8.0

48

.24

7.4

47

.64

7.0

Fin

ish

ed

go

od

s in

ven

tori

es

47

.44

7.2

46

.84

7.2

46

.74

6.1

44

.64

6.4

46

.04

5.5

46

.84

6.5

Pu

rch

ase

s o

f in

pu

ts5

0.3

49

.44

8.6

48

.84

8.3

50

.34

9.0

47

.95

2.6

51

.05

1.2

50

.5

Imp

ort

s4

7.8

47

.24

8.1

47

.54

6.7

47

.64

6.4

45

.85

0.1

49

.54

9.6

49

.1

Ne

w o

rde

rs t

o fi

nis

he

d g

oo

ds

inve

nto

rie

s ra

tio

1.0

51

.05

1.0

71

.07

1.0

71

.09

1.1

11

.05

1.1

21

.12

1.0

81

.09

Sou

rce

s: W

est

pac

Eco

no

mic

s, C

EIC

.

Tabl

e 2:

Res

ourc

e re

late

d ec

onom

ic in

dica

tors


Steel

• Steel prices continued to increase at the start of Q2 as a result of the Chinese government’s stimulus measures implemented at the start of the year and efforts to reduce excess capacity. The rebar price peaked on 26 April at RMB3150, the highest it has been since November 2014.

• Despite ongoing issues of domestic overcapacity, a modest recovery in prices has been supported by sustained demand from the property sector, reflected in very low inventories (down 32%yr in Q2).

• China’s steel production increased 1.3%yr in Q2 to 209 Mt—the highest level in two years. Despite higher production, China’s steel consumption fell marginally by 0.1%yr in Q2.

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16

RMB/tRMB/tHot-rolled sheetRebarPlateWire rodCold-rolled sheet (rhs)

Source: Bloomberg

200

250

300

350

400

450

500

550

600

650

700

25

35

45

55

65

75

85

95

105

115

125

135

145

155

165

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

USD/tIndex USD

Australian inputs index (lhs)

Chinese rebar (rhs)

Sources: Westpac Economics,

Bloomberg

Input index based on 120kg of scrap, 770kg of met coal & 1400kg of iron

ore to produce 1 tonne crude steel

*Australian spot prices for iron ore & coking coal.

-200

-150

-100

-50

0

50

100

150

200

250

-15

0

15

30

45

60

75

90

105

120


%yr Mt

Crude steel output (rolling 3mth sum, rhs)

Growth rate (lhs)

Source: CEIC

Figure 13: Benchmark steel prices

Figure 14: Crude steel output: level & growth Figure 15: The rebar price and input costs

Table 3: Steel prices (quarterly averages).

Domestic RMB/t Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Rebar 3348 3258 3078 2940 2577 2435 2226 2055 2180 2597

Hot–rolled sheet 3399 3392 3272 3008 2636 2425 2071 1882 2188 2725

Cold–rolled sheet 4214 4096 4001 3898 3582 3160 2719 2423 2892 3271

Plate 3433 3448 3270 2962 2588 2404 2091 1916 2202 2621

Wire rod 3394 3347 3155 2952 2605 2471 2265 2083 2196 2657

Benchmarks USD/t

Rebar benchmarker 454 431 408 392 344 314 274 251 261 319

HRC benchmarker 466 454 442 410 359 325 271 245 274 350

CRC benchmarker 597 562 551 534 489 424 356 322 364 429

Source: Bloomberg.


• Production in Hebei, accounting for a quarter of steel production in China, increased 7%yr in Q2. At the end of Q2, Baosteel and Wuhan Iron & Steel, two of China’s top steel producers, announced the start of ‘strategic restructuring’ talks. The possible merger could make significant inroads to consolidating the domestic steel industry.

• Despite ongoing concerns from global competitors in regard to unfair competition, China’s steel exports continued to grow 11%yr to 29 Mt in Q2.

0

200

400

600

800

1000

1200

1400

10 20 30 40 50 60

GDP per person (thousands of PPP international dollars)

China

India

Japan

South Korea

USA

Sources: World Steel

Association, IMF

Consumption, kgpp

Figure 19: Steel demand per head

Construction

& others

75%

Machinery

14%

Autos

7%

Appliances

2%

Rail

1%

Shipbuilding

1%

Source: Bloomberg

-30

-15

0

15

30

45

-7 -4 -1 2 5 8 11

inventories

%yr

Sales%yr

Nov-13

Jan-14

May-14

Jan-15

Dec-13Sep-14

Aug-14

Jan-16

Mar-15

Oct-15

Jun-15

Mar-16Source: CEIC, Westpac Economics

-30

-15

0

15

30

45

-10

0

10

20

30

40

Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16

%yr 3mma%yr 3mma

Real estate plus hard infra investment (lhs)

Steel product output* (rhs)

Cement output* (rhs)

Sources: CEIC, Westpac Economics.

*Jan-Feb interpolated in 2014, 2015 and 2016.

Figure 16: Steel end–use by sector

Figure 18: Steel inventory–to–sales scatter plot

Figure 20: Construction, cement and steel

Figure 17: Steel inventories by product type

50

150

250

350

450

50

150

250

350

450Mt Mt

hot rolled long production

Sources: Westpac Economics, Bloomberg

30

40

50

60

70

50

70

90

110

130

Jul-09 Oct-10 Jan-12 Apr-13 Jul-14 Oct-15

cold rolled (rhs)

steel plate (lhs)


Table 4: Iron ore prices (USD/t, 62% ferrous metal content unless otherwise indicated).

Qingdao spot price, CFR Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Quarter average 121 103 90 74 62 58 55 47 49 55

Quarter end 117 94 78 71 51 59 56 44 54 56

Quarter high 135 120 98 84 71 66 59 57 64 70

Quarter low 104 89 78 67 51 47 45 38 40 48

Qingdao price in CNY terms, CFR 736 642 558 457 390 363 346 299 318 363

IODEX Aust FOB 110.8 93.9 81.4 66.1 57.6 53.2 48.8 41.8 45.0 52.5

Sources: Bloomberg. CFR is cost including freight. FOB is free on board.

• Iron ore prices averaged US$55 a tonne (CFR) in Q2, up 12%qtr but down 5%yr, because of higher demand from China’s steel sector.

• Price volatility remained high in Q2 and into early Q3, with iron ore trading between a peak of US$70/t on 21 April and a low of $US48/t on 2 June. Speculative activity on the Dalian Commodities exchange, which may have contributed to the volatility, has since slowed because of measures implemented by exchanges to address overheating markets, including trading restrictions and increased commission fees and margin requirements.

• Prices steadily increased in early Q3 and while prices have been somewhat volatile,

20

40

60

80

100

120

140

160

180


USD/t

62% CFR Qingdao

SGX 3 month forward

SGX 12 month forward

Source: Bloomberg

250

350

450

550

650

30

50

70

90

110

130

150

170


USD/tUSD/t

Iron ore 62% CFR (lhs) Rebar (rhs)

Source: Bloomberg

Figure 21: Iron ore prices: spot and forward

Figure 22: Iron ore prices and rebar steel Figure 23: Port inventories versus end demand

Iron ore

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

ratioratio

To pig iron production

To crude steel production

Sources: CEIC, Bloomberg, Westpac Economics


in responce to weakening sentiment towards China’s property market due to an absence of any further government stimulus, they were around US60/t on August 5.

• Import demand from the domestic steel industry has grown, supported by a fall in China’s iron ore production (run of mine), which was down 5%yr in Q2.

• Iron ore production from Rio Tinto increased 8%yr in Q2, while production from Vale and BHP Billiton fell 2.8%yr and 7%yr, respectively.

• China’s imports of iron ore increased by 12%yr in Q2, due to growth in imports from Australia

China

65%EU 11%

Japan

10%

South

Korea

5%other

9%

Imports

Source: World Steel Association

Australia

50%

Brazil

23%

South

Africa

4%

Ukraine

3%

Canada

2%

other

18%

Exports

Figure 27: World trade in iron ore – seaborne

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16

% shareMt

Aust (lhs) Brazil (lhs)Other (lhs) Aust market share (rhs)

Source: Bloomberg

25

50

75

100

125

150

175

0

2

4

6

8

10

12


USD/tUSDbn

Aust (lhs)

Brazil (lhs)

Other (lhs)

62% CFR Qingdao (rhs)

Import unit value (rhs)

Source: Bloomberg

Australia

36%

Brazil

20%

China

10%

India

6%

Russia

5%

other

23%

Source: World Steel Association

Figure 24: Chinese import volumes by source

Figure 26: Chinese imports, unit values & prices

Figure 28 : Shares of world iron ore output

Figure 25: Australian iron ore exports to China

0

1

2

3

4

5

6

7

8

9

10

10

15

20

25

30

35

40

45

50

55

60

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

AUDbnMt

Volume (lhs) Value (rhs)

Source: ABS


0 225 450 675 900 1125 1350 1575

USD/t

Others

South Africa

Russian Federation

Canada

China

India

Australia

Brazil

current TSI $62/t cfr

Sources: WoodMcKenzie, Westpac Economics. Includes

mining, royalties, freight from mine to port,

administration and processing.

Cumulative export supply, mt

0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35


% share% share

Number of Chinese ferrous mining firms

making a loss, % of total

Sources: CEIC, Bloomberg,

Westpac Economics

Figure 32: Chinese iron ore miners: loss–makers Figure 33: Seaborne iron ore cost curve

(up 7%yr), Brazil (up 14%yr), and the rest of the world (up 27%yr). Australia’s share of the seaborne market was 62% in Q2, compared with 19% for Brazil and 18% for the rest of the world.

• Iron ore port stocks increased 6%qtr and 28%yr to 95 Mt in Q2.

• Australia’s iron ore export volumes into China increased 8%qtr and 7%yr to 165 Mt. Export earnings increased by 26%qtr and by 14%yr to A$10.8 billion.

0

50

100

150

200

250

0

50

100

150

200

250million tmillion t

Total

Domestic

Imports

Source: CEIC, Westpac.

0

10

20

30

40

50

60


% share

Rest of world

Australia

Import share of total supply

Total ore supply by source

-40

-20

0

20

40

60

80

-40

-20

0

20

40

60

80

Dec-08 Jun-10 Dec-11 Jun-13 Dec-14 Jun-16

%yr%yr

Imports

Domestic production

Change in inventories

Sources: Westpac Economics, Bloomberg.

Data smoothed.

350

450

550

650

750

850

950

1050

1150

1250

4

6

8

10

12

14

16

18

20

22

24


CNY/tmargin %

Ferrous metal mining margin (lhs)

Domestic ore prices ytd ave (rhs)

Sources: CEIC, Bloomberg,

Westpac Economics

Figure 30: Chinese iron ore miners’ margins Figure 31: Chinese output, imports & stocks

Figure 29: China’s total iron ore supply


Iro

n o

reu

nit

Mar

–1

4Ju

n–

14

Se

p–

14

De

c–1

4M

ar–

15

Jun

–1

5S

ep

–1

5D

ec–

15

Mar

–1

6Ju

n–

16

Ch

ina

imp

ort

sM

t2

22

.02

35

.32

42

.12

33

.62

27

.12

26

.02

46

.32

53

.92

41

.62

52

.3

Au

stra

liaM

t1

18

.21

38

.21

49

.41

42

.71

44

.41

46

.81

58

.51

57

.91

50

.11

57

.4

Bra

zil

Mt

41

.63

8.9

44

.74

5.8

41

.84

2.3

50

.15

7.5

53

.64

8.3

valu

eU

SDb

n2

8.4

25

.72

1.9

18

.51

5.8

13

.21

4.8

14

.11

0.8

14

.2

Raw

pro

du

ctio

n *

Mt

30

4.2

39

3.6

41

0.6

38

9.3

28

0.6

35

0.2

38

1.6

36

2.6

26

0.0

33

1.2

Iro

n o

re s

tock

s at

po

rts,

en

d o

f q

trM

t1

03

.81

05

.71

03

.29

5.2

93

.37

4.1

80

.98

9.3

89

.49

4.9

we

eks

of

imp

ort

sw

ee

ks6

.16

.26

.15

.65

.54

.44

.85

.35

.35

.6

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

12

2.2

14

5.8

14

9.7

15

2.2

14

3.7

15

4.6

16

3.9

16

1.9

15

2.4

16

5.4

valu

eA

UD

bn

14

.41

3.4

11

.91

0.9

9.8

9.5

10

.59

.08

.61

0.8

Me

tallu

rgic

al c

oa

l

Ch

ina

imp

ort

sM

t1

3.0

18

.11

3.4

18

.01

0.9

10

.71

4.8

11

.61

1.4

15

.6

valu

eU

SDm

n1

63

41

81

21

27

01

73

69

80

88

31

16

37

91

74

29

82

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

10

.11

1.6

11

.21

3.4

7.7

11

.08

.69

.19

.31

0.4

valu

eA

UD

mn

12

48

12

38

11

43

15

14

95

71

16

09

26

89

29

53

10

50

Sou

rce

s: B

loo

mb

erg

, AB

S, C

EIC

. * R

aw m

ine

ou

tpu

t w

ith

a lo

w ir

on

co

nte

nt.

Tabl

e 5:

Iron

ore

& m

etal

lurg

ical

coa

l sum

mar

y da

ta


Metallurgical coal

• After declining over the previous few quarters, spot prices for metallurgical coal increased over Q2, driven by increased activity in China’s construction and steel making sectors. Australian premium hard coking coal (FOB) averaged US$91 a tonne, up 15%qtr and 1%yr.

• Australian benchmark prices for high-quality metallurgical coal delivered in Q3 2016 settled higher than expected at US$92.50 a tonne, up from around US$84 a tonne in Q2.

• China imported 15.6 Mt of metallurgical coal in Q2, up 46%yr. Australia remained the primary source of China’s metallurgical coal imports, accounting for 46%. China’s imports from

0

40

80

120

160

200

0

40

80

120

160

200

Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16

USD/tUSD/t

Australian Premium Hard CokingCoal (FOB East Coast)

Australian Premium Hard Coking

Coal (CFR East Coast to China)

Source: Bloomberg

China

53%

Australia

17%

USA

7%

Russia

7%

India

5%

Other

11%

Production

Source: IEA

China

61%other

12%

India

10%

other

OECD

7%

Japan

5%

Russia

5%

Consumption

China

21%

Japan

17%

OECD

Europe

19%

India

17%

Other

11%

South

Korea

12%

Ukraine

3%

Imports

Source: IEA

Australia

56%United

States

18%

Canada

10%

Russia6%

Mongolia3%

Other

7%

Exports

Figure 34: Met coal spot prices

Figure 35: World trade in met coal Figure 36: Met coal use and supply by country

Table 6: Metallurgical coal prices (quarterly average spot prices).

unit Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Aus Premium Hard FOB East Coast

USD/t 125 115 114 113 108 90 84 77 79 91

Aus Premium Hard CFR East Coast to China

USD/t 136 125 123 122 114 96 91 83 82 95

Source: Bloomberg.


Mongolia, China’s second largest source of imported metallurgical coal, increased 89%yr to 5.9 Mt.

• Australia exported 10.4 Mt of metallurgical coal to China in Q2, an increase of 12%qtr but a decline of 6%yr. Export values declined 9%yr to $A1.1 billion, however increased 10%qtr due to higher prices.

0 20 40 60 80 100 120 140 160 180

USD/t

NZD

Qld

NSW

current spot US$102/t

Sources: WoodMacKenzie, Westpac Economics. include s mining, royalties, freight from mine to port,

administration and processing.


Figure 40: Seaborne met coal cost curve

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

0

1

2

3

4

5

6

7

8

9

Dec-12 Sep-13 Jun-14 Mar-15 Dec-15

USDbnMt

Aust. (lhs) Mongolia (lhs) Canada (lhs)

Russia (lhs) Other (lhs) Value (rhs)

Sources: IHS Inc, CEIC

60

70

80

90

100

110

120

130

140

150

160

170

May-03 May-05 May-07 May-09 May-11 May-13 May-1560

70

80

90

100

110

120

130

140

150

160

170100kt mth100kt mth

Hard met coal exports, all destinations

Source: ABS, CoalPortal.com. Seasonally adjusted by Westpac Economics.

0

150

300

450

600

750

900

0

1

2

3

4

5

6


AUDmnMt

Volume (lhs) Value (rhs)Source: ABS

0

50

100

150

200

250

300

350

Jul-08 Jul-10 Jul-12 Jul-14 Jul-16

0

50

100

150

200

250

300

350USD/tUSD/t

Spot Qld HCC

90th percentile prod. cost

90th percentile Aust. miners

Aust ave met coal price

Low Vol PCI

Source: Westpac Economics, Bloomberg, AME, WoodMacKenzie

Figure 37: Chinese met coal import volumes

Figure 39: Australian met coal exports: total Figure 38: Aust met coal exports to China

Figure 41 : Seaborne hard coking coal cost curve


Developments in China’s energy policy

• The National Energy Administration (NEA) has urged China’s northeast region to cancel or postpone coal-fired power generation projects with a joint capacity of over 7.5 million kilowatts due to excess power generation. An 800 kilovolt direct current power transmission project in the northeast region will be completed in 2017 to send the region’s power to other parts of the country.

• During Angela Merkel’s visit to Beijing in June for the fourth-round of China-Germany intergovernmental consultation, Premier Li Keqiang called for both countries to use innovation to expand common interests and energy cooperation.

• To improve Beijing’s air quality, the Beijing Municipal Environmental Protection Bureau announced in June that subsidies will be provided to gas boilers that are able to reduce emission of nitrogen by at least 50 percent from their renovations. The subsidies will cover one fourth to one third of renovation costs. To reach an emission standard of no more than 80 milligrams per cubic meter by April 2017, 10,000 gas-fired boilers in the city proper, mainly in the six urban districts, will be renovated.

• In June, through the 7th Clean Energy Ministerial global forum, President Xi Jinping outlined China’s policy intention to continue boosting and coordinating innovative green and low-carbon developments. While President Jinping was unable to attend the forum, he sent a letter which highlighted China’s plans to optimise its industrial structure, set up a low-carbon energy system, promote green buildings and low-carbon transport, and establish a national carbon emission trading market.

• In late May, the State owned, China Southern Power Grid announced that it will install 25,000 charging posts for electric vehicles by 2020. This follows a similar decision in December 2015 by northern China’s distributor State Grid Corp to install 120,000 charging posts over the next few years. The 3 billion yuan plan for 25,000 posts would require building

674, multiple-post charging stations in the provinces of Guangdong, Yunnan, Guizhou and Hainan and the Guangxi Zhuang Autonomous Region.

• During the 13th meeting of the China-Russia Energy Cooperation Committee in May, Chinese Vice-Premier Zhang Gaoli and his Russian counterpart, Arkady Dvorkovich, agreed to increase and build energy cooperation between the countries. This agreement comes on the back of development of energy trade between the countries and substantial progress on major strategic energy projects since the last meeting in November 2015.

• The National Government Offices Administration announced in May that over half the new vehicles in China’s Central State Departments will be new energy vehicles (partially or fully powered by electricity) within five years to encourage environmentally friendly means of travel.

Electricity trends

• China generated 1.4 trillion kWh of electricity in Q2, a 1.7%yr increase relative to the same period in 2015. Over the same period, generation increased across all energy sources except for thermal, which declined by 1.7%yr. Hydro, nuclear and wind electricity generation increased by 11%yr, 18%yr and 26.4%yr respectively.

• Investment in new generation capacity decreased 9.5%yr in Q2 relative to the same period in 2015, to RMB 277.6 billion. Investment declined in hydro, thermal and wind electricity generation by 19%yr, 9%yr, and 34%yr respectively. Conversely, investment in nuclear generation capacity was up by 5.8%yr.

• Overall electricity consumption in China increased 3.8%yr to 1422 billion kWh in Q2 relative to the same period in 2015. Consumption across all sectors increased with primary, secondary, tertiary and residential electricity use up by 8%yr, 3%yr, 7%yr and 4%yr respectively.


-15

0

15

30

45

-15

0

15

30

45


Contribution from other sources

Contribution from thermal generation

Electricity production

%yr/ppt %yr/pptSources: CEIC,

Westpac

Figure 46: Chinese electricity growth: broad source

other non-

OECD34%

China

19%

other OECD

12%

United States

14%

Russia

10%

Saudi

Arabia4%

India

4%

Indonesia

3%

Source: IEA

other Non-

OECD25%

China

23%other OECD

18%

United States

17%

India

6%

Russia

6%

Japan

3% Germany

2%

Source: IEA

0

300

600

900

1200

1500

1800

Mar-13 Mar-14 Mar-15 Mar-16

Billion kWh

Secondary industry Residential

Tertiary industry Primary industry

Source: CEIC

0

200

400

600

800

1000

1200

1400

1600

Sep-99 Sep-02 Sep-05 Sep-08 Sep-11 Sep-14

Billion kWh

Thermal Hydro Nuclear Wind

Source: CEIC

0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

0.6

0.8

1.0

Thermal

(7%)

Hydro

(8%)

Nuclear

(19%)

Wind

(34%)

Solar

(178%)

Billion kWBillion kW

2010 2011 2012

2013 2014 2015

Sources: CEIC, Westpac Economics. Number in parentheses

are CAGRs for the period 2009 to 2014.

Figure 43: World energy productionFigure 42: World energy consumption

Figure 45: Chinese electricity use by sectorFigure 44: Chinese electricity output by source

Figure 47: China’s generating capacity by type


Thermal coal

• While key thermal coal FOB prices in Q2 are down on the previous year, Q2 prices increased relative to the previous quarter, attributable to coal mine closures and cut backs and increased import demand from China. Newcastle spot prices increased 1%qtr and Richard’s Bay increased 4.7%qtr.

• As part of the Chinese Government’s supply side structural reform agenda, China’s Premier publicly reiterated in late June that China will take action to reduce its excess coal capacity. Market reports indicate that China is well on its way in achieving its target of eliminating 500 million tonnes of coal production over the next three to five years.

40

60

80

100

120

140

160

180

200

40

60

80

100

120

140

160

180

200

Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 Jun-16

USD/tUSD/t

Richards Bay 6000kcal

Baltic 6000kcal

Newcastle 6000kcal

QHD 5800kcal

Source: IHS

0 20 40 60 80 100 120

USD/t

Qld

NSW

current spot (US69/t)

Sources: WoodMacKenzie, Westpac. includes

mining, royalties, freight from mine to port, administration and processing.


0

5

10

15

20

25

30

35

Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16

Mt

QHD Caofeidian JintangTianjin Guangzhou Other Source: Bloomberg

Figure 48: Thermal coal prices

Figure 49: Thermal coal stocks: ports & generators Figure 50: Export thermal coal cost curve

Table 7: Thermal coal prices

Quarterly averages Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Newcastle 6000 kcal USD/t 78.7 73.1 68.6 63.7 65.7 59.1 58.8 53.0 50.5 51.2

Newcastle 6000 kcal AUD/t 87.4 78.2 74.0 75.1 83.8 76.1 81.3 73.5 69.9 68.6

Sources: Bloomberg.


• While China’s coal fired power plants under construction will proceed, China’s National Development and Reform Commission has banned approvals for all new coal-fired power projects in oversupplied regions.

• China’s imports of thermal coal increased 9%yr to 44 Mt in Q2, reflective of domestic capacity closures. Indonesia accounted for the majority of China’s total thermal coal imports in Q2, at 51%, while Australia accounted for 22%.

• Australia’s exports to China decreased by 10%yr to 9 Mt in Q2 and values declined 18%yr to $510 million.

China

41%

USA

16%

Indonesia

9%

OECD

Europe

7%

India

8%

Aust

4%

Other

15%

Producers

Source: IEA

Note: Includes brown coal

China

43%

USA

16%

Other non-

OECD

11%

Indonesia

2%

India

12%

Australia

2%

Other

OECD14%

Consumers

Figure 54: Thermal coal use and supply by country

230

260

290

320

350

380

410

440

0

5

10

15

20

25

30

35

Oct-12 Jun-13 Feb-14 Oct-14 Jun-15 Feb-16

billion kWhMtIndonesia (lhs)Australia (lhs)Other (lhs)Thermal electricity generation (rhs)

Sources: CEIC, IHS

-40

-20

0

20

40

60

80

-40

-20

0

20

40

60

80

Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15

%yr%yr

Power generation

Coal extraction

Sources: CEIC, Westpac Economics

0

50

100

150

200

250

300

350

400

450

500

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


AUDmnMt

Volume (lhs)

Value (rhs)

Source: ABS

China

18%

India

23%

OECD

Europe18%

Japan

11%

South

Korea

8%

Other

22%

Imports

Source: IEANote: Includes brown coal

Indonesia

46%

Australia

16%

Russia

11%

Colombia6%

South Africa6%

other

15%

Exports

Figure 51: Thermal coal imports

Figure 53: Capex: coal mining vs power generationFigure 52: Aust thermal coal exports to China

Figure 55: World trade in thermal coal


Tabl

e 8:

The

rmal

coa

l sum

mar

y da

ta

un

itM

ar–

14

Jun

–1

4S

ep

–1

4D

ec–

14

Mar

–1

5Ju

n–

15

Se

p–

15

De

c–1

5M

ar–

16

Jun

–1

6

Ch

ina

imp

ort

sM

t7

1.0

58

.14

9.7

50

.43

8.1

40

.14

1.7

36

.23

7.0

43

.9

valu

eU

SDm

n5

14

4.6

40

69

.33

34

6.4

31

56

.32

25

4.7

22

43

.52

09

5.8

16

82

.01

56

7.6

19

03

.2

EOQ

sto

cks

at p

ort

sM

t2

7.5

31

.42

6.3

29

.43

2.4

27

.82

3.3

16

.31

4.8

15

.1

we

eks

of

imp

ort

sw

ee

ks5

.07

.06

.97

.61

1.0

9.0

7.2

5.9

5.2

4.5

Exp

ort

s to

Ch

ina

Mt

11

.41

2.9

11

.81

1.1

10

.01

0.0

8.1

6.9

6.6

9.0

valu

eA

UD

mn

86

1.2

87

0.7

74

2.0

70

8.2

66

4.3

62

2.2

49

3.0

39

1.0

36

0.9

50

9.8

Sou

rce

s: A

BS,

CEI

C &

Blo

om

be

rg.


Oil

• Oil prices increased in Q2 as concerns about the outlook for global consumption abated slightly, and unscheduled production outages in Canada and a number of OPEC economies relieved pressure on storage capacity.

• WTI prices increased 36%qtr to average US$46/bbl. Brent prices increased 34%qtr to average US$47/bbl, and Tapis increased 31%qtr to average US$47/bbl. However, oil prices remained well down on the levels recorded a year earlier.

• China’s benchmark gasoline and diesel prices were raised several times in Q2 by the National Development and Reform Commission (NDRC). China’s benchmark gasoline prices ended

20

35

50

65

80

95

110

125

140

20

35

50

65

80

95

110

125

140

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

USD/bblUSD/bbl

Brent Tapis WTI

Source: Bloomberg

other

OPEC

24%

other

non-

OPEC

23%Saudi

Arabia

13%

United

States

13%

Russia

13%

China5%

Canada5%

Iran4%

Production

Source: BP

other

non-

OECD

29%

other

OECD

23%

United

States

20%

China

13%

India

5%

Japan4%

Russia3%

Brazil3%

ConsumptionTransport

51%

Other

21%

Industry14%

Residential6%

Services4%

Agriculture4%

China

Source: IEA

Transport

64%Other

17%

Industry

9%

Residential5%

Services2%

Agri3%

World

Figure 56: Oil prices

Figure 57: Oil use by sector: China & the World Figure 58: Oil use and supply by country

Table 9: Crude oil spot prices (USD/bbl, quarterly).

Brent Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Quarter average 107.9 109.8 103.5 77.1 55.1 63.5 51.3 44.7 35.2 47.0

Quarter end 107.8 112.4 94.7 57.3 55.1 63.6 48.4 37.3 39.6 49.7

Quarter high 111.2 115.1 112.3 94.2 62.6 67.8 62.1 53.1 41.8 52.5

Quarter low 105.8 104.8 94.7 57.3 46.6 55.0 42.7 36.1 27.9 37.7

TapisQuarter average 114.3 115.0 106.2 79.5 56.1 64.6 52.6 44.2 36.2 47.4

Quarter end 113.2 117.0 100.2 58.6 55.9 63.3 48.2 35.6 40.7 50.3

Quarter high 118.6 119.4 115.0 98.4 64.2 70.3 64.7 53.7 42.9 52.2

Quarter low 111.7 110.1 98.7 58.6 47.4 56.8 43.8 35.6 27.7 38.5

West Texas IntermediateQuarter average 98.7 103.1 97.6 73.2 48.5 57.8 46.5 42.0 33.4 45.5

Quarter end 101.6 105.4 91.2 53.3 47.6 59.5 45.1 37.0 38.3 48.3

Quarter high 104.9 107.3 107.6 91.0 53.5 61.4 57.0 49.6 40.2 51.2

Quarter low 91.7 99.4 91.2 53.3 43.5 49.1 38.1 34.7 26.2 35.7

Source: Bloomberg.


0

100

200

300

400

500

600

10 20 30 40 50 60


China

India

Japan

South Korea

USA

Passenger cars per 1000 residents

Sources: IMF, IEA

Figure 62: Automobile penetration

0

5

10

15

20

25

30

35Mt

Other Saudi Arabia Angola

Russia Iran Oman

Source: CEIC

other

OECD

32%

other

non-

OECD

21%

United

States

15%

China

10%

Japan

7%

India6%

South Korea

5%

Singapore4%

Imports

Source: IEA

other

non-

OECD

41%

other

OECD

18%

Saudi

Arabia

13%

Russia

10%

United States

5%

Canada5% UAE

4%

Kuwait

4%

Exports

0

100

200

300

400

500

0

100

200

300

400

500


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

10 20 30 40 50 60


China India

Japan South Korea

USA

Consumption toe per capita

Sources: IMF, IEA

Figure 59: Chinese oil import volumes

Figure 61: World trade in oilFigure 60: Chinese imports of Australian oil

Figure 63: Oil demand per capita

Q2 7%qtr higher while diesel prices increased 8%qtr.

• China’s crude oil output declined 7%yr in Q2 to 50 Mt as China continued its shift towards consumer-led growth, and key producers shut unprofitable fields due to persistent low prices.

• China’s imports of crude oil increased 15%yr in Q2 to 95 Mt, partly because of declining domestic output.

• China’s crude oil imports from Australia increased 65%yr in Q2 to 0.9 Mt. The value of China’s imports from Australia increased 21%yr to US$326 million.


Oil

un

itM

ar–

14

Jun

–1

4S

ep

–1

4D

ec–

14

Mar

–1

5Ju

n–

15

Se

p–

15

De

c–1

5M

ar–

16

Jun

–1

6

Ch

ina

imp

ort

sM

t7

4.7

77

.27

6.5

79

.98

0.3

83

.08

5.3

86

.99

1.1

95

.4

Sau

di A

rab

iaM

t1

2.7

11

.51

2.4

13

.11

2.8

13

.61

2.1

12

.11

3.7

12

.8

An

go

laM

t1

0.7

10

.29

.51

0.4

9.9

9.2

10

.29

.51

1.4

10

.8

Ru

ssia

Mt

7.5

7.8

8.0

9.8

8.6

10

.91

0.9

12

.11

2.1

14

.2

Iran

Mt

6.9

8.7

5.8

6.1

6.7

7.9

6.3

5.7

6.4

8.6

Om

anM

t6

.08

.57

.67

.77

.86

.59

.28

.68

.18

.9

oth

er

Mt

31

.03

0.5

33

.33

2.9

34

.63

5.0

36

.63

8.9

39

.34

0.2

Ch

ina

pro

du

ctio

n

Cru

de

Mt

51

.35

2.2

52

.05

3.9

52

.25

3.8

54

.05

3.9

51

.25

0.0

Gas

olin

eM

t2

6.6

26

.92

6.8

28

.72

8.7

30

.63

0.9

31

.03

0.7

32

.5

Die

sel

Mt

42

.34

2.9

43

.54

6.0

43

.84

5.6

44

.84

5.4

42

.94

3.7

Ch

ine

se im

po

rts

fro

m A

ust

ralia

kt7

30

.97

11

.97

44

.25

40

.36

00

.45

57

.25

41

.26

89

.77

08

.79

16

.6

valu

eU

SDm

n5

99

.85

67

.15

94

.83

42

.12

47

.32

69

.12

51

.82

46

.02

16

.83

26

.5

Ga

sC

hin

a p

ipe

line

imp

ort

sM

t4

.95

.96

.06

.26

.75

.75

.86

.58

.46

.9

Ch

ina

LNG

imp

ort

skt

56

29

42

97

48

11

51

55

51

27

43

92

46

27

.35

52

2.1

60

10

.05

53

0.0

Qat

arkt

25

70

.01

38

0.5

13

28

.71

45

8.3

13

22

.77

11

.31

15

2.7

16

27

.61

89

0.7

59

9.1

Au

stra

liakt

84

2.5

90

4.6

11

62

.29

02

.11

09

3.8

12

86

.31

67

1.8

15

00

.22

02

3.8

28

10

.9

Ind

on

esi

akt

61

7.4

60

8.3

67

6.3

65

2.9

67

2.4

74

5.3

81

7.3

63

0.8

46

5.7

74

2.9

Mal

aysi

akt

84

2.9

69

8.1

62

2.6

82

9.4

82

0.0

11

28

.44

73

.98

29

.76

42

.66

23

.0

oth

er

kt7

56

.27

05

.21

02

1.0

13

11

.71

21

8.4

52

1.1

51

1.7

93

3.8

98

7.3

75

4.1

Ch

ina

pro

du

ctio

nB

cm3

2.3

29

.02

9.2

33

.53

3.6

29

.23

0.1

34

.01

2.3

31

.6

Ch

ine

se im

po

rts

fro

m A

ust

ralia

kt8

42

.59

04

.61

16

2.2

90

2.1

10

93

.81

28

6.3

16

71

.81

50

0.2

20

23

.82

81

0.9

valu

eU

SDm

n1

46

.41

59

.72

39

.11

73

.12

70

.94

33

.34

85

.44

44

.36

00

.48

58

.8

Sou

rce

: CEI

C.

Tabl

e 10

: Oil

and

gas

sum

mar

y da

ta


Gas

• China’s LNG import and gas pipeline unit values decreased in Q2 by 10%qtr and 11%qtr, respectively.

• China’s natural gas production increased 8%yr in Q2. China is aiming to increase natural gas output by 13% in 2016, according to National Energy Administration guidelines released in April. China National Petroleum Corporation (CNPC), the country’s largest oil and gas producer, announced it plans to sell over 750 billion cubic meters of gas over the next five years, a 40% increase on the past five years.

• In April, CNPC and BP agreed to jointly develop the Neijiang-Dazu shale-gas block in the Sichuan Basin. The development of shale-gas reserves in China remains in the relatively early stages.

100

200

300

400

500

600

700


USD/t

LNG Pipeline

Source: CEIC

Industry

31%

Residential

30%

Other

17%

Transport and

agriculture13%

Services

9%

Source: IEA

Industry

37%

Residential

30%

Services

14%

Other

11.5%

Transport

7%

Agriculture

0.5%

Source: IEA

Figure 64: Gas unit values in China

Figure 65: Gas use by sector: World Figure 66: Gas use by sector: China

other

non-

OECD

33%

USA

22%

Russia

16%

Other

OECD

10%

Iran5%

Qatar5%

Canada5%

China4%

Production

Other

non-

OECD

28%

USA

22%other

OECD

21%

Russia

11%

China6%

Iran6%

Japan3%

Saudi Arabia

3%

Consumption

Source: BP

0.0

0.5

1.0

1.5

2.0

10 20 30 40 50 60


China India

Japan South Korea

USA

Consumption toe per capita

Sources: IEA, IMF

Figure 68: Gas use and supply by countryFigure 67: Gas demand per capita


• In Q2, the Yamal LNG project in Russia, which is scheduled to commence operations in 2017, secured more than $12 billion in loans from Chinese state-run banks. China is expected to be a major recipient of gas from the project.

• China’s LNG imports increased 26%yr in Q2 to 5.5 Mt. China imported around 0.6 Mt from both Qatar and Malaysia, a decline of 16%yr and 45%yr respectively, while imports from Indonesia remained stable at 0.7 Mt.

• China sourced 51% of its total LNG imports from Australia in Q2. Imports from Australia increased 119%yr in Q2 to 2.8 Mt. The value of these imports rose 98%yr to US$859 million.

ROW

28%

Russia

20%Qatar

12%

Norway

11%

other Asia

Pacific

11%

Canada

7%

Other CIS

6%

US

5%

Source: BP

Figure 72: World gas exports by country

0

1

2

3

4

5

6


Mt

LNG Pipeline

Source: CEIC

0

60

120

180

240

300

360

0

0.2

0.4

0.6

0.8

1

1.2


Mt USDmn

Volume (lhs)

Value (rhs)

Source: CEIC

ROW

43%

Japan

11%

Other

Europe

10%

Germany

10%

Other Asia

Pacific11%

Unite States

7%

China

6%

Italy

5%

Source: BP

Figure 69: China’s gas imports by type

Figure 71: Chinese LNG imports from Australia

Figure 73: World gas imports by country

Figure 70: Chinese LNG imports by source

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8


MtQatar Australia Indonesia Malaysia Other

Source: CEIC


Uranium

0

100

200

300

400

500

600

700

800

0

20

40

60

80

100

120

140

160

Jul 05 Jul 07 Jul 09 Jul 11 Jul 13 Jul 15

index USD/lb

USD price (lhs)

USD price index (rhs)

RMB price index (rhs)

Sources: LME, Bloomberg

0

3000

6000

9000

12000

15000

0

300

600

900

1200

1500


USDmn

Volume (rhs) Value (lhs)

Source: CEIC, China Petroleum and Chemical Industry Federation

Tonnes

Other

31%

United States

28%

France

14%

China

9%

Russia

10%

South Korea

8%

Source: World Nuclear Association

Kazakhstan41%

Other21%

Canada16%

Australia9%

Niger7%

Namibia6%

Production

Kazakhstan12%

Other38%

Canada8%

Australia29%

Niger7%

Namibia6%

Reserves*

*Reasonably Assured and Inferred, recoverable at US$130 per tonne U3O8

Source: World Nuclear Association, OECD NEA & IAEA

Figure 74: Uranium prices

Figure 76: Global uranium output & reserves

Figure 75: China’s uranium imports

Figure 77: Uranium use by country

Table 11: Uranium summary data.

Units Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Uranium spot price U3O

8USD/lb 29 32 37 38 36 36 35 32 27

China nuclear power output bn kWh 28 38 37 35 42 50 45 na na

Investment in nuclear RMBbn 13 14 19 10 11 13 23 9 13

China uranium imports t 6801 4985 9281 2041 5659 7505 7439 na 6533

Value USDmn 675 482 810 210 587 721 691 na 640

Sources: CEIC, Cameco.


• The average spot price for uranium fell by 16%qtr and 25%yr in Q2 to US$27/lb, as a result of high world inventories and abundant supply.

• China’s investment in new nuclear capacity rose by 18%yr to RMB 12.8 billion in Q2.

• Currently just above 3 percent of electricity in China comes from nuclear generation. At the end of Q2 one-third of all reactors under construction were located in China. China’s 13th Five Year Plan includes a target of 6–8 new reactor approvals each year.

• China has just completed construction of another reactor, bringing the total number of operational reactors to 33, with a further 21 under construction and 42 in the planning stage.

0

5

10

15

20

25

30

Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16

RMB bn

Source: CEIC

Figure 81: China’s nuclear construction spending

0

20000

40000

60000

80000

China Other

Asia

Eastern

Europe

North

America

Western

Europe

Africa -

Middle

East

South

America

MWe

Under Construction

Planned

Source: World Nuclear Association

0

1

2

3

4

Oil Gas Coal Nuclear Other Total

1990 to 2013

2013 to 2035

Source: BP

Compound annual growth rate %

Figure 78: Chinese nuclear generation growth

Figure 80: Chinese nuclear generation capacity

Figure 82: Growth in world energy by source

Figure 79: New capacity: planned & underway

0

5

10

15

20

25

30

1999 2001 2003 2005 2007 2009 2011 2013 2015

Million kW

Source: CEIC

-5

0

5

10

15

20

25

30

-20

0

20

40

60

80

100

120

Jun-02 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16

Nuclear generation (lhs)

Total electricity generation (rhs)

%yr* %yr*

Sources: CEIC, Westpac. * 12mma.


Gold

• The average LBMA gold price increased 6%qtr in Q2 to US$1258 a troy ounce. The unexpected decision by the UK to leave the EU added to the attractiveness of gold (seen as a safe asset during periods of economic volatility), which reached a two year high of over US$1366 in early July. Shanghai Gold Exchange prices averaged RMB 265 a gram, up 7%qtr.

• The volume of gold contracts on the Shanghai Futures Exchange has averaged over 20 million contracts per month over the first half of the year, down 24%yr as investors adjust to the new yuan denominated benchmark price launched in April. China’s gold reserves increased to 58.62 million fine troy ounces at the end of June, the highest recorded level in more than 15 years. Several countries, including China, have substantially increased their gold reserves over the last 18 months.

• World physical gold demand declined 22%yr during Q2 to 715 tonnes, attributed to rapidly rising prices. Jewellery demand in China declined 24%yr in Q2 to around 84 tonnes, due to higher prices, and weaker consumer sentiment.

0

100

200

300

400

500

0

400

800

1200

1600

2000

Jan 08 Jan 10 Jan 12 Jan 14 Jan 16

RMB/gUSD/oz

LBMA (lhs)

SGE (rhs)

Sources: LBMA, Bloomberg

0

75

150

225

300

375

0.0

50.0

100.0

150.0

200.0

250.0

Jun-12 Jan-13 Aug-13 Mar-14 Oct-14 May-15 Dec-15

RMB/gtonnes

Import Volume (lhs)

SGE Price (rhs)

Sources: CEIC, Bloomberg

Figure 83: Gold prices, London & Shanghai

Figure 84: Chinese gold imports via Hong Kong

Table 12: Gold prices (USD/troy oz unless specifi ed otherwise)

LBMA spot prices Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Quarter average 1292 1290 1282 1201 1219 1194 1125 1104 1182 1258

Quarter end 1284 1327 1208 1185 1184 1172 1115 1061 1233 1322

Quarter high 1383 1328 1339 1249 1302 1226 1170 1184 1272 1325

Quarter low 1201 1244 1208 1141 1150 1172 1085 1051 1061 1206

Shanghai avg RMB/g 256 259 255 238 246 239 229 228 248 265

Shanghai avg USD/g 42 41 41 39 39 38 36 36 38 41

Sources: LBMA, Bloomberg.


• Production in China—the world’s largest producer—fell 1.8%yr in the first five months of the year. The lower production is due to closures or curtailed production at numerous small mines over the last 12 months.

• China’s gold imports via Hong Kong were 365 tonnes in the first five months of 2016, up 1.4%yr.

• Australia exported 32 tonnes of gold to China in Q2 2016, down 13%qtr and down 19%yr. The value of gold exports was A$1.8 billion, down 9%qtr as higher prices offset some of the decline in volume.

China

36%

India

30%

Other

27%

USA

5%

Turkey

3%

Source: World Gold Council

Figure 88: Gold jewellery cons. by country

0

5

10

15

20

25

0

250

500

750

1,000

1,250


tonnesAUDmn

Volume (rhs)

Value (lhs)

Source: ABS

Other

35%

Other

Africa

15%

China

15%

Australia

9%

Russia

8%

USA

7%

South Africa

5%

Peru

5%

Source: World Bureau of Metal Statistics

-20%

-15%

-10%

-5%

0%

5%

10%

15%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

PriceETF

ETF Stocks %mth (lhs)

Price %mth (rhs)

Sources: Bloomberg, LBMA

Jewellery

64%

Physical bar

investment19%

Electronics

7%

Official

coins

6%

Industrial

and other

4%

Source: World Gold Council

Figure 85: Australian gold exports to China

Figure 87: Gold output by countryFigure 86: Gold exchange traded funds

Figure 89: Gold end–use by sector


Go

ldu

nit

Mar

–1

4Ju

n–

14

Se

p–

14

De

c–1

4M

ar–

15

Jun

–1

5S

ep

–1

5D

ec–

15

Mar

–1

6Ju

n–

16

Ch

ina

imp

ort

s (v

ia H

on

g K

on

g)

t3

33

.52

04

.11

68

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89

.12

29

.01

78

.82

41

.93

43

.11

68

.8n

a

Do

me

stic

pro

du

ctio

nt

96

.51

14

.61

40

.71

00

.11

10

.71

18

.01

10

.71

10

.71

11

.6n

a

Au

stra

lian

exp

ort

s to

Ch

ina

t4

7.0

40

.12

9.7

42

.53

9.4

40

.15

6.4

52

.43

7.2

32

.3

valu

eA

UD

mn

21

74

.11

77

3.9

13

17

.81

89

9.0

19

51

.91

97

4.6

28

00

.72

55

9.7

19

43

.51

76

3.7

Silv

er

Ch

ina

imp

ort

st

67

.89

0.5

83

.77

6.3

11

7.7

21

7.0

33

1.9

23

0.2

21

9.5

97

.0

Do

me

stic

pro

du

ctio

nt

91

89

18

91

89

18

91

89

18

91

89

18

89

2n

a

Sou

rce

s: C

EIC

, AB

S, W

orl

d M

eta

l Sta

tist

ics.

Tabl

e 13

: Gol

d an

d si

lver

sum

mar

y da

ta


Other

40%

Mexico

21%

Peru

15%

China

12%

Russia

6%

Australia

6%

Production

Other

25%

India

21%USA

21%

China

19%

Japan

8%

Canada3%

Germany3%

Fabrication

Source: The Silver Institute, Thomson Reuters GFMS

0.0

3.0

6.0

9.0

12.0

15.0

0

10

20

30

40

50

Apr 11 Jun 12 Aug 13 Oct 14 Dec 15

RMB/gUSD/oz

London Bullion Market spot (lhs)

Changjiang Silver (rhs)

Source: Bloomberg

Electronics

32%

Other uses

31%

Jewellery

15%

Alloys and

solders15%

Coins

and

medals

2%

Silverware2%

Source: Thomson Reuters GFMS, (World Silver Survey 2016)

0

2000

4000

6000

8000

2003 2005 2007 2009 2011 2013 2015

tonnes

Unwrought Powder Semi-manufactured Other

Source: CEIC

Figure 91: Silver output & fabrication demandFigure 90: Silver prices, London & Changjiang

Figure 92: Chinese silver import volumes: annual Figure 93: Silver end–use by sector

Silver

Table 14: Silver prices (USD/oz unless specifi ed otherwise)

LBMA spot prices Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Quarter average 20.5 19.7 19.7 16.5 16.7 16.5 14.9 14.8 14.9 16.8

Quarter end 19.8 21.0 17.0 15.7 16.7 15.7 14.5 13.9 15.4 18.7

Quarter high 22.0 21.1 21.4 17.5 18.3 17.7 15.2 16.1 15.9 18.7

Quarter low 19.2 18.8 17.0 15.3 15.5 15.7 14.4 13.7 13.8 14.9

Changjiang RMB/g 4.15 4.15 4.22 3.60 3.58 3.54 3.31 3.28 3.32 3.62

Changjiang USD/g 0.68 0.67 0.68 0.58 0.57 0.57 0.53 0.51 0.51 0.55

Sources: LBMA, Bloomberg.


Copper

• The average LME copper price increased by 1.2%qtr in Q2 to be US$4729 a tonne—continuing to rise after declining to a six year low in Q1. The SHFE copper price increased by 0.4%qtr to RMB 36,311 a tonne.

• World copper stocks were down 8%yr in May. SHFE stocks hit a nine month low of 162kt at the end of June as higher consumption materialised in Q2.

• China’s refined copper consumption was 4.8 Mt in the first five months of 2016, up 10%yr, supported by China’s growing construction sector.

• China’s refined copper production was just over 2 Mt in Q2, up 6%yr. Despite lower prices production has increased in line with higher

30

35

40

45

50

55

60

65

3

4

5

6

7

8

9

10

Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16

‘000 RMB/t‘000 USD/t

LME Spot (lhs)

LME 3mth forward (lhs)

SHFE spot (rhs)


Other

39%

China

34%

Chile

12%

Japan

6%

USA

5%

Russia

4%

Producers


China

50%Other

29%

USA

8%

Germany

5%

Japan

5%South

Korea

3%

Consumers

0

200

400

600

800

1000

4000

5000

6000

7000

8000

9000

Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16

ktUSD/t

End of month inventories (rhs)

LME spot (lhs, month average)


Figure 94: Copper prices, London & Shanghai

Figure 95: LME prices & inventories Figure 96: Copper use and supply by country

Table 15: Copper prices (USD/t unless specifi ed otherwise)

LME spot prices Mar–14 Jun–14 Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Quarter average 7041 6787 6994 6624 5818 6043 5259 4892 4672 4729

Quarter end 6636 6955 6736 6359 6051 5721 5093 4702 4856 4827

Quarter high 7440 7035 7184 6860 6309 6448 5762 5344 5103 5045

Quarter low 6435 6600 6736 6306 5391 5646 4888 4516 4311 4504

3 Month forward 7008 6757 6976 6568 5790 6046 5261 4885 4665 4722

Shanghai avg RMB/t 49403 49328 50273 47525 42391 44074 39913 36954 36165 36311

Shanghai avg USD/t 8097 7915 8156 7729 6799 7104 6335 5779 5532 5557

Sources: LME, Bloomberg.


consumption and copper imports.

• China’s total copper imports increased 24%yr in Q2. Australia was the third largest source of China’s imports with a 5% market share. Chile accounted for 34% of China’s imports and Peru accounted for 16%. Peru has substantially increased its copper exports to China, increasing 91%yr for the first six months of 2016 as new and expanded mines ramp up production.

• Australia’s copper export volumes (metal content) to China increased 14%qtr to 125 kt in Q2 2016. While export earnings increased 14%qtr to A$813 million in Q2, they declined 12%yr.

Other

Provinces

33%

Jiangxi

17%Anhui

16%

Shandong

14%

Gansu

11%

Yunnan

7%

Zhejiang

2%

Source: Bloomberg

Figure 100: Copper demand per capita

0

100

200

300

400

500

600

700

800

900

1000


kt

Other Chile Peru Australia

Scaled by metal contentSources: Bloomberg, Department of Industry,

Innovation and Science

0

2

4

6

8

10

12

14

16

18

20

10 20 30 40 50


China India Japan South Korea USA

Consumption kgpp

Sources: IMF, World Bureau of Metal Statistics

0

100

200

300

400

500

600

700

800

Mar-12 Nov-12 Jul-13 Mar-14 Nov-14 Jul-15 Mar-16

0

10

20

30

40

50

60

70

80AUDmnkt

Volume (lhs)

Value (rhs)

Source: ABS

Figure 97: Chinese copper import volumes

Figure 99: Copper end–use by sectorFigure 98: Australian copper exports to China

Figure 101: Copper output by Chinese province

Building

construction43%

Electric and

electronic products

19%

Transportation

equipment

19%

Consumer and

general products

12%

Industrial

machinery and

equipment

7%

Source: United States Geological Survey


un

itM

ar–

14

Jun

–1

4S

ep

–1

4D

ec–

14

Mar

–1

5Ju

n–

15

Se

p–

15

De

c–1

5M

ar–

16

Jun

–1

6

Ch

ina

imp

ort

skt

18

36

16

99

17

25

19

35

17

29

17

74

18

86

23

24

23

20

21

92

Au

stra

liakt

16

51

44

14

01

52

11

61

42

12

31

74

13

41

05

Ch

ilekt

54

25

38

43

86

29

56

95

58

58

07

17

70

27

36

Peru

kt1

82

18

21

96

20

51

72

19

22

67

30

03

46

34

9

oth

er

kt9

46

83

49

50

94

98

72

88

39

16

11

33

11

38

10

02

Re

fi n

ed

pro

du

ctio

nkt

16

51

18

23

20

27

23

21

18

34

19

51

20

09

22

05

19

87

20

60

Wo

rld

sto

cks

kt9

09

69

47

00

76

91

03

79

34

96

39

11

10

27

na

we

eks

of

sto

cks

we

eks

2.2

1.5

1.6

1.7

2.5

2.1

2.3

2.0

2.4

na

Au

stra

lian

exp

ort

s to

Ch

ina

kt1

21

12

81

26

13

81

09

12

21

39

15

81

10

12

5

valu

eA

UD

mn

96

18

81

90

21

04

57

78

92

11

00

21

06

47

11

81

3

Sou

rce

s: B

loo

mb

erg

, Wo

rld

Me

tal S

tati

stic

s, A

BS.

Tabl

e 16

: Cop

per

sum

mar

y da

ta


Aluminium

• In Q2, SHFE and LME aluminium spot prices averaged RMB 12,332 and US$1572 a tonne, up 12%qtr and 3.7%qtr respectively, because of production cuts in China and other large producing countries. Cuts to global production since late 2015 contributed to a 15%qtr reduction in LME stocks in Q2, reaching a multi-year low of 2370 kt at the end of June 2016.

• China’s aluminium production was 7.9 Mt in Q2, up 11%qtr and down 1%yr, as Chinese smelters restarted idled capacity and lifted output in response to the recovery of aluminium prices in H1 2016.

• China’s exports of unwrought aluminium

10

12

14

16

18

1.0

1.5

2.0

2.5

3.0

Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15 Apr 16

‘000 RMB/t ‘000 USD/t

LME Spot (lhs)


SHFE spot (rhs)


Other

27%

China

55%

Russia

6%

Canada

5%

UAE

4%India

3%

Producers


Other

27%

China

54%

USA

9%

Germany4%

Japan

3%India

3%

Consumers

2000

3000

4000

5000

6000

7000

1200

1400

1600

1800

2000

2200


ktUSD/t




Figure 102: Aluminium prices, LME & Shanghai

Figure 103: LME prices & inventories Figure 104: Aluminium use & supply by country

Table 17: Aluminium and Alumina prices (USD/t unless specifi ed otherwise)


Quarter average 1708 1798 1987 1966 1800 1765 1591 1495 1516 1572

Quarter end 1731 1851 1935 1832 1789 1647 1562 1508 1492 1635

Quarter high 1768 1871 2114 2099 1872 1919 1693 1608 1622 1673

Quarter low 1642 1715 1838 1828 1742 1642 1486 1424 1453 1481

3 Month forward 1752 1836 2008 1974 1813 1787 1621 1509 1516 1582


Shanghai avg 2158 2107 2282 2197 2060 2090 1904 1642 1686 1887

Aust FOB Alumina 328 318 323 355 342 337 292 233 221 253

China Alumina RMB/t 2438 2353 2435 2737 2630 2442 2272 1853 1721 1923



and aluminium products were 1200 kt in Q2, up 11%qtr and down 7%yr as the Chinese Government aimed to turn its aluminium industry to an export powerhouse by providing subsidies on power and logistics to China’s aluminium exporters.

• Despite increased domestic supply, China’s aluminium imports increased 36%qtr to 35.7 kt in Q2. Imports from Australia decreased 49%qtr, however increased 7%yr. Australia’s share of China’s total imports decreased from 22% in Q1 to 8% in Q2.

• Australia’s aluminium exports to China increased 115%yr, to over 7 kt in Q2 and export earnings increased 74%yr to just over $A15 million.

Other

39%

Xinjiang

17%

Henan

14%

Inner

Mongolia10%

Shandong

10%

Qinghai

10%

Source: Bloomberg

Figure 109: Aluminium output by province

0

15

30

45

60

75

90


kt

Australia RussiaUAE TaiwanOther

Source: Bloomberg

0

5

10

15

20

25

30

10 20 30 40 50 60


China India Japan

South Korea USA

Consumption kgpp


0

4

8

12

16

20

0

10

20

30

40

50

Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16

ktAUDmn

Volume (rhs)

Value (lhs)

Source: ABS

Figure 105: Chinese aluminium import volumes

Figure 108: Aluminium demand per head

Figure 106: Australian aluminium exports to China Figure 107: Aluminium end–use by sector

Transportation manufacturing

39%

Packaging

20%

Construction

14%

Electrical

9%

Consumer

durables

8%

Machinery

7%

Other

3%



• Alumina prices averaged US$253 a tonne in Q2, up 15%qtr and down 25%yr, due to reduced supply availability in China, following the introduction of ‘supply side reform’ policies.

• China’s refiners were required to curtail production under this policy, leading to a reduction in alumina production of nearly 6% in the first four months of 2016, to nearly 18 Mt. China, imported 439 kt of alumina in Q2, down 65%qtr and 50%yr, due to increased alumina prices.

• Alumina imports from Australia decreased 50%qtr and 36%yr to 354 kt in Q2. Australia remained the principal source of China’s alumina imports with a market share of 81%.

Shandong

33%

Henan

23%

Shanxi

19%

Guangxi

15%

Other

10%

Source: Bloomberg

Figure 114: China’s alumina output by province

1500

1750

2000

2250

2500

2750

3000

150

200

250

300

350

400

450


RMB/tUSD/t

AUS Fob (lhs)

CHN Met grade (rhs)

Source: Bloomberg

China51%

Oceania18%

North America6%

Africa & Asia (ex. China)

5%

West Europe5%

East & Central Europe

4%

Other11%

Source: International Aluminium Institute

Other

33%

China

18%

Russia

17%

Canada

16%

Norway

10%

Iceland

6%

ImportsAustralia

39%

Brazil

20%

Jamaica

16%

USA 5%

Ireland 4%

Other

16%

Exports


Figure 110: Alumina prices

Figure 113: World alumina output

Figure 111: World alumina trade Figure 112: China’s alumina imports

0

100

200

300

400

500

600

700


kt

Australia Brazil India Vietnam Other

Source: Bloomberg

Alumina


• China, the world’s second largest bauxite producer, produced 27 Mt in the first five months of 2016.

• China imported 11.8 Mt of bauxite in Q2, down 13%qtr and 6%yr. Despite this fall in imports, Australia’s share of China’s total imports increased from 29% in Q1 to 47% in Q2, at 5.5 Mt.

• Malaysia’s market share of China’s bauxite imports decreased 25%qtr to 8% in Q2 as Malaysia’s Government limited supply growth to address socio-environmental concerns. The Government announced the ban on bauxite mining in Pahang, the largest producing state, is to be extended until September 2016.

• Guinea’s bauxite exports to China increased 70%qtr in Q2 to 2.9 Mt. The country overtook Malaysia as the second largest bauxite exporter to China in Q2.

• Indonesia’s ban on unprocessed mineral exports remains in place, despite the announcement in May 2016 by the Asahan Authority that it would take ‘a more realistic approach’ to exports of bauxite and other minerals. Should the ban be lifted, it will put further pressure on Australia’s bauxite exporters.

• Australia is the principal source of China’s bauxite imports with a market share of 47%. In Q2, bauxite exports from Australia were 5.4 Mt, up 6%qtr and 6%yr. Earnings from bauxite exports decreased 10%yr to $A232 million.

Figure 118: World bauxite trade

0

1

2

3

4

5

6

7

8

9


Mt

Indonesia Guinea Australia Malaysia Other

Source: Bloomberg

Australia

28%

China

23%Other

22%

Brazil

11%

India

9%

Guinea

7%


0.0

0.4

0.8

1.2

1.6

2.0

2.4


0

20

40

60

80

100

120Mt AUDmn

Volume (lhs)

Value (rhs)

Source: ABS

Figure 117: World bauxite output

Figure 116: Australia’s bauxite exports to China

Malaysia

39%

Australia

28%

Brazil

13%

India11%

Other9%

Exports China

63%USA

13%

Other

14%

Ireland

5%

Ukraine

5%

Imports


Bauxite

Figure 115: China’s bauxite import by source


Alu

min

ium

un

itM

ar–

14

Jun

–1

4S

ep

–1

4D

ec–

14

Mar

–1

5Ju

n–

15

Se

p–

15

De

c–1

5M

ar–

16

Jun

–1

6

Ch

ina

imp

ort

skt

17

5.5

96

.15

1.5

30

.53

4.4

45

.97

0.0

73

.42

6.3

35

.7

Au

stra

liakt

48

.01

8.9

7.0

5.6

7.7

2.7

12

.71

5.3

5.7

2.9

Ind

iakt

19

.10

.70

.81

.66

.62

.00

.00

.80

.13

.2

Ru

ssia

kt2

9.6

24

.21

6.9

2.1

1.5

4.3

4.5

0.7

0.3

1.6

oth

er

kt7

8.8

52

.32

6.8

21

.21

8.6

36

.85

2.9

56

.82

0.3

28

.0

Re

fi n

ed

pro

du

ctio

nkt

57

54

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74

6.7

60

45

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39

3.0

72

05

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01

0.4

81

84

.67

88

9.0

71

70

.07

93

0.0

Wo

rld

sto

cks

kt7

37

7.4

71

45

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73

7.5

64

27

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80

9.4

45

51

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14

9.4

37

87

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65

2.8

32

99

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of

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cks

we

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7.2

6.8

6.5

6.3

4.5

4.0

3.7

3.5

3.5

4.4

Au

stra

lian

exp

ort

s to

Ch

ina

kt3

3.9

9.7

5.4

6.4

3.2

3.3

19

.21

1.4

1.4

7.1

valu

eA

UD

mn

73

.12

1.1

13

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8.2

9.1

9.0

47

.42

6.9

3.2

15

.7

Alu

min

a

Ch

ina

imp

ort

skt

14

83

.71

28

0.7

11

58

.11

35

3.9

93

3.1

87

9.8

13

29

.11

51

1.5

12

39

.74

38

.8

Au

stra

liakt

11

83

.76

54

.95

23

.07

90

.74

55

.45

54

.58

69

.09

86

.97

03

.43

53

.8

Ch

ine

se p

rod

uct

ion

Mt

11

.21

1.5

11

.71

2.6

13

.31

4.2

14

.31

4.5

na

na

Ba

uxi

te

Ch

ina

imp

ort

sM

t1

3.1

6.6

8.4

8.4

10

.11

2.6

16

.51

7.0

13

.61

1.8

Au

stra

liaM

t3

.13

.74

.74

.24

.94

.55

.64

.54

.05

.5

Ind

on

esi

aM

t0

.00

.21

.12

.02

.55

.58

.08

.24

.50

.9

Au

stra

lian

exp

ort

s to

Ch

ina

Mt

2.5

3.9

4.7

5.0

4.7

5.1

5.2

4.8

5.1

5.4

valu

eA

UD

mn

87

.01

40

.91

81

.72

27

.52

34

.72

56

.92

67

.72

50

.72

19

.22

31

.8

Sou

rce

s: B

loo

mb

erg

, Wo

rld

Me

tal S

tati

stic

s, A

BS.

Tabl

e 18

: Alu

min

ium

, alu

min

a an

d ba

uxite

sum

mar

y da

ta


Nickel

• The LME nickel price averaged US$8823 a tonne in Q2, down 32%yr but up 3.8%qtr. The price rapidly increased at the end of Q2 and start of Q3, reaching US$10,665 a tonne on 21 July, the highest it has been since mid-October 2015.

• Prices have been supported by stronger demand in China as a result of government stimulus boosting the transport and infrastructure sectors, in combination with concerns about potential supply shortages.

• LME stocks declined by 12%qtr and 17%yr to 379 kt in Q2, while SHFE stocks increased 35%qtr to 99 kt.

40

80

120

160

200

5

10

15

20

25

Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16


LME Spot (lhs)


SHFE Spot (rhs)


China

30%

Russia

12%

Japan

10%Canada

8%

Australia

7%

Other

33%

Producers


China

50%

Japan

9%

U.S.A.

8%

South

Korea

4%

Taiwan

5%

Germany

3%

Other

21%

Consumers

75

175

275

375

475

5

10

15

20

25


kt‘000 USD/t




Figure 119: Nickel prices, London & Shanghai

Figure 120: LME prices & inventories Figure 121: Nickel use and supply by country

Table 19: Nickel prices (USD/t unless specified otherwise)


Quarter average 14643 18465 18576 15799 14338 13008 10561 9437 8499 8823

Quarter end 15735 18715 16505 14935 12460 11680 10070 8665 8280 9415

Quarter high 16225 21200 19795 16825 15455 14415 12060 10710 9375 9555

Quarter low 13365 15780 16505 14650 12460 11680 9305 8160 7710 8275

3 Month forward 14693 18512 18669 15877 14400 13055 10611 9481 8542 8867





• China’s port stocks of nickel ore are estimated to have increased by 6%yr to 13.8 Mt at the end of Q2.

• China’s nickel production decreased by 32%yr in Q2 to 63kt.

• The value of China’s nickel imports decreased by 23%yr in Q2 to US$1.5 billion. China’s nickel imports from Russia increased by 17%yr to US$766 million in Q2.

• Australia’s nickel exports declined 24%yr to 55kt, while the value of Australia’s nickel exports to China fell 45%yr to $A64 million.

Gansu

45%

Jiangxi

6%

Guangxi

1%

Xinjiang

3%

Other

45%

Source: Bloomberg

Figure 125: Nickel demand per capita

0

250

500

750

1000

1250

Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16

USDmn

Indonesia Russia Philippines

Australia Canada Other

Source: Bloomberg

Stainless

and alloy

steel

production

45%

Nonferrous

alloys and superalloys

43%

Electroplating

7%

Other

5%


0.0

0.5

1.0

1.5

2.0

2.5

10 20 30 40 50 60


China India Japan South Korea USA

Consumption kgpp


Figure 122: Chinese nickel import values

Figure 124: Nickel end–use by sectorFigure 123: Nickel output by province

Figure 126: World trade in nickel

Russia

31%

Australia

21%

Canada

18%

Norway

14%

Other

16%

Exports

China

31%

USA

13%

Singapore8%

India

8%

Germany

6%

Other

34%

Imports

Source: Bloomberg, World Bureau of Metal Statistics


un

itM

ar–

14

Jun

–1

4S

ep

–1

4D

ec–

14

Mar

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5Ju

n–

15

Se

p–

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De

c–1

5M

ar–

16

Jun

–1

6

Ch

ina

imp

ort

sU

SDm

n1

58

51

62

52

31

41

25

19

04

19

18

19

51

15

10

12

01

14

71

Au

stra

liaU

SDm

n6

71

12

99

71

81

87

97

48

71

60

Can

ada

USD

mn

96

85

10

25

77

21

07

98

87

86

93

Ru

ssia

USD

mn

32

64

02

39

61

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19

36

55

78

46

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65

47

66

Ind

on

esi

aU

SDm

n7

12

28

81

00

10

00

Ph

ilip

pin

es

USD

mn

17

17

20

13

75

69

42

94

56

26

12

31

31

01

24

4

oth

er

USD

mn

21

22

76

33

42

82

26

55

07

35

94

18

28

73

09

Re

fi n

ed

pro

du

ctio

n*

kt7

59

09

91

02

82

93

91

77

22

63

LME

sto

cks

kt2

85

30

53

56

41

34

34

45

64

52

44

14

32

37

9

we

eks

of

sto

cks

we

eks

8.4

9.5

10

.21

3.9

14

.71

1.5

11

.21

1.3

13

.01

4.6

Au

stra

lian

exp

ort

s to

Ch

ina

kt7

17

81

03

85

67

72

81

83

80

55

valu

eA

UD

mn

13

11

62

21

91

82

13

21

17

14

91

37

10

46

4

Sou

rce

s: B

loo

mb

erg

, Wo

rld

Me

tal S

tati

stic

s, In

tern

atio

nal

Nic

kel S

tud

y G

rou

p, C

EIC

.

* N

ote

: Re

fi n

ed

pro

du

ctio

n d

ata

seri

es

no

lon

ge

r in

clu

de

s sm

elt

er

ou

tpu

t an

d h

as b

ee

n r

evi

sed

.

Tabl

e 20

: Nic

kel s

umm

ary

data


Zinc

• The LME zinc spot price averaged US$1918 a tonne in Q2, an increase of 14%qtr but a decline of 12%yr. Zinc prices increased faster than anticipated because of a rapid tightening of supply. Production cuts and mine closures contributed to a 5% decrease in LME stockpiles since the end of 2015, reaching a multi-year low of 380kt in mid-June 2016. The market tightening was also evident in the large decline in SHFE stocks in Q2, down 24%qtr to just over 206kt.

• China’s refined zinc production decreased 1%yr to total 2.48 Mt in the first five months of 2016 as Chinese smelters, which account for more than 43% of global refined zinc production,

5

10

15

20

25

30

0

0.5

1

1.5

2

2.5

3


‘000 RMB/t‘000 USD/tLME spot (lhs)


SHFE spot (rhs)Sources: LME, Bloomberg

China

44%

South

Korea

7%India

6%

Canada

5%

Japan

4%

Other

34%

Producers


China

47%

USA

7%

South

Korea

5%

India

4%

Japan

3%

Other

34%

Consumers

0

300

600

900

1200

1500

1400

1600

1800

2000

2200

2400


ktUSD/tEnd of month inventories (rhs)

LME spot (lhs, month average) Sources: LME,

Bloomberg

Figure 127: Zinc prices, London & Shanghai

Figure 128: LME prices & inventories Figure 129: Zinc use and supply by country

Table 21: Zinc prices (USD/t unless specifi ed otherwise)


Quarter average 2029 2073 2311 2235 2080 2190 1847 1613 1679 1918

Quarter end 1981 2205 2290 2167 2076 1994 1657 1600 1785 2103

Quarter high 2156 2205 2420 2335 2184 2405 2096 1835 1860 2103

Quarter low 1942 1962 2194 2114 1985 1994 1587 1462 1454 1743

3 Month forward 2027 2079 2314 2241 2092 2192 1855 1634 1683 1925





were forced to cut production due to reduced availability of zinc ore and concentrates.

• In the first five months of 2016, China’s total zinc imports (refined and ore) decreased 7%yr to 632 kt due to increased zinc prices. Imports from Peru and Kazakhstan fell 38% and 28%yr to 110 and 59 kt respectively. Despite these falls in imports, imports from Australia in this period increased 27%yr to 243 kt.

• Australia’s zinc exports (by metal content) to China decreased 51%yr to 95 kt, with export earnings falling by 36%yr to A$200 million in Q2.

Hunan

19%

Yunnan

18%

Shaanxi

16%Guangxi

8%

Inner

Mongolia9%

Other

30%

Source: Bloomberg

Figure 133: Zinc demand per capita

0

50

100

150

200

250


kt

Other Australia Kazakhstan Peru Turkey

Source: ILZSG

Scaled by metal content

0

30

60

90

120

150

180

210

0

20

40

60

80

100

120


AUDmnkt


Source: ABS

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

10 20 30 40 50 60GDP per person (thousands of PPP international dollars)

China

India

Japan

South Korea

USA

Consumption kgpp


Figure 130: Chinese zinc import volumes

Figure 132: Australian zinc exports to China

Figure 134: Zinc output by province

0

50

100

150

200

250


kt

Ores and concentrates (metal content) Refined

Source: ILZSG

Scaled by metal content

Figure 131: Chinese zinc imports by type


un

itM

ar–

14

Jun

–1

4S

ep

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4D

ec–

14

Mar

–1

5Ju

n–

15

Se

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15

De

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5M

ar–

16

Jun

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6

Ch

ina

imp

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43

13

47

35

33

70

39

14

10

50

66

08

44

9n

a

Au

stra

liakt

13

91

20

11

11

25

11

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32

14

82

79

18

4n

a

Kaz

akh

stan

kt5

03

45

34

13

65

24

13

33

6n

a

Peru

kt5

86

56

69

91

06

10

01

01

12

29

0n

a

Turk

ey

kt6

56

30

41

52

na

oth

er

kt1

80

12

31

18

10

31

37

12

32

16

17

01

36

na

Re

fi n

ed

pro

du

ctio

nkt

12

59

14

06

15

08

16

07

14

58

16

13

15

74

15

51

na

na

Wo

rld

sto

cks

kt1

51

11

28

31

33

01

19

21

10

81

11

11

21

51

11

21

14

4n

a

we

eks

of

sto

cks

we

eks

6.2

4.9

4.9

4.5

4.5

4.0

4.5

4.1

4.6

na

Au

stra

lian

exp

ort

s to

Ch

ina

kt1

43

10

61

11

20

51

15

19

22

28

30

51

93

95

valu

eA

UD

mn

23

91

78

18

33

52

20

13

12

37

95

24

36

02

00

Sou

rce

s: B

loo

mb

erg

, Wo

rld

Me

tal S

tati

stic

s, In

tern

atio

nal

Le

ad a

nd

Zin

c St

ud

y G

rou

p, A

BS.

Tabl

e 22

: Zin

c su

mm

ary

data


Lead

0

20

40

60

80

100

120

140

160

Nov 12 May 13 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16

kt

Other Peru USA

Russia AustraliaSource: ILZSG

100

175

250

325

400

475

1500

1800

2100

2400

2700

3000

Jan 13 Sep 13 May 14 Jan 15 Sep 15 May 16

ktUSD/t




Other

51%

Australia

12%

South

Korea

11%

Canada

10%

Belgium

8%

United

Kingdom

8%

Exports


Other

48%

USA

27%

South

Korea

8%

Germany

6%

India

6%

Czech

Republic

5%

Imports

0

20

40

60

80

100

0

5

10

15

20

25

30

35

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

kt AUDmn


Source: ABS

Figure 136: Chinese lead import volumesFigure 135: LME prices & inventories

Figure 137: Australia’s lead exports to China Figure 138: World trade in lead

Table 23: Lead prices (USD/t unless specifi ed otherwise).


Quarter average 2106 2096 2181 2000 1806 1942 1714 1613 1744 1719

Quarter end 2041 2129 2083 1853 1808 1754 1656 1600 1705 1780

Quarter high 2212 2160 2269 2095 1882 2140 1857 1835 1897 1796

Quarter low 2008 2016 2051 1814 1696 1742 1625 1462 1597 1646

3 Month forward 2127 2120 2194 2009 1817 1952 1725 1634 1745 1724





un

itM

ar–

14

Jun

–1

4S

ep

–1

4D

ec–

14

Mar

–1

5Ju

n–

15

Se

p–

15

De

c–1

5M

ar–

16

Jun

–1

6

Ch

ina

imp

ort

skt

22

4.0

21

3.8

28

4.8

27

3.0

22

0.4

19

7.0

23

8.3

34

9.5

28

8.6

na

Au

stra

liakt

49

.62

8.8

47

.85

2.0

39

.13

1.6

28

.94

5.8

17

.1n

a

Peru

kt1

7.6

2.6

18

.32

6.1

18

.42

7.2

30

.13

9.7

42

.7n

a

Ru

ssia

kt2

3.1

25

.91

4.8

34

.22

3.6

19

.92

1.8

38

.24

9.2

na

USA

kt6

.12

6.6

66

.96

7.8

25

.52

3.5

62

.28

5.0

28

.6n

a

Me

xico

kt6

.81

3.6

8.9

17

.31

3.5

6.1

13

.11

6.1

9.2

na

oth

er

kt1

20

.81

16

.31

28

.17

5.6

10

0.3

88

.79

4.4

12

4.7

14

1.8

na

Re

fi n

ed

pro

du

ctio

nkt

10

55

.71

10

5.2

10

50

.51

06

4.7

99

5.2

10

62

.38

98

.19

54

.26

36

.9n

a

Wo

rld

sto

cks

kt5

62

54

25

77

.35

60

.15

46

.44

67

.64

48

.94

73

.04

36

.1n

a

we

eks

of

sto

cks

we

eks

2.8

2.6

3.0

2.8

2.9

2.4

2.4

2.5

2.2

na

Au

stra

lian

exp

ort

s to

Ch

ina

kt4

5.7

63

.75

4.5

59

.43

4.5

33

.33

3.8

48

.35

.60

valu

eA

UD

mn

86

10

59

71

23

72

75

77

11

43

0

Sou

rce

s: B

loo

mb

erg

, Wo

rld

Me

tal S

tati

stic

s, In

tern

atio

nal

Le

ad a

nd

Zin

c St

ud

y G

rou

p, A

BS.

Tabl

e 24

: Lea

d su

mm

ary

data


Yunnan

51%

Hunan

25%

Jiangxi

13%

Guangxi

7%

Other

4%

Source: Bloomberg

Figure 144: China’s tin output by province

0

6

12

18

24

10

15

20

25

30


kt‘000 USD/t




Cans and

containers

23%

Construction

18%

Transport

equipment

17%

Electrical

12%

Other

30%


Other

12%

China

51%

Indonesia20%

Peru6%

Bolivia6%

Myanmar

5%

Producers


Other

26%

China

50%

USA8%

Japan7%

Germany

5%

South Korea

4%

Consumers

50

100

150

200

250

10

15

20

25

30

Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16

‘000 RMB/t‘000 USD/tLME Spot (lhs)


SHFE spot (rhs)


Figure 140: LME prices and inventory

Figure 143: Tin use by sector

Figure 141: World tin producers and consumers

Figure 139: Tin prices

Figure 142: China’s tin imports by source

0.0

0.5

1.0

1.5

2.0


kt

Other Indonesia Singapore South Korea Taiwan

Source: Bloomberg

Tin


China

44%

USA

18%

Chile

18%

Other

9%

Peru

7%

Mexico

4%


Figure 150: World molybdenum output

0

10

20

30

40

50

60

0.0

0.5

1.0

1.5

2.0

2.5

3.0


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

0

2

4

6

8

10

12

14

Oct 12 Jun 13 Feb 14 Oct 14 Jun 15 Feb 16

kt

Sources: Bloomberg, CEIC, Department of Industry, Innovation and Science

0

5

10

15

20

25

30

35

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

Figure 146: China’s molybdenum ore imports

Figure 149: China’s molybdenum production

Figure 147: China’s molybdenum articles exports Figure 148: China’s molybdenum ore exports

0

7

14

21

28

35

42

0.0

0.5

1.0

1.5

2.0

2.5

3.0


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

Molybdenum

0

5

10

15

20

25

30

35

40


‘000 USD/t

LME Spot


Figure 145: Molybdenum prices


0.0

0.5

1.0

1.5

2.0

2.5

3.0


0

20

40

60

80

100

120kt USDmn

Volume (rhs)

Value (lhs)

Source: Bloomberg

Figure 156: China’s tungsten output (metal content)

0

3

6

9

12

15

18

21

0

10

20

30

40

50

60

70USDmntonnes

Volume (lhs)

Value (rhs)

Source: CEIC

China

82%

Russia

3%

Other

11%

Canada

2%

Bolivia

2%


0

4

8

12

16

20

24

28

32

36

0

50

100

150

200

250

300

350

400

450USDmntonnes

Volume (lhs)

Value (rhs) Source: CEIC

0

4

8

12

16

20

24

0.0

0.2

0.4

0.6

0.8

1.0

1.2


USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

Figure 152: China’s tungsten articles imports

Figure 155: World tungsten output

Figure 153: China’s tungsten and articles exports

Figure 151: China’s tungsten ore imports

Figure 154: China’s tungsten products exports

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15

kt

Sources: CEIC, Department of Industry, Innovation and Science

Tungsten


Superalloys

46%

Chemical

applications27%

Metallic

applications18%

Cemented

carbides9%


Figure 162: Cobalt use by sector

0

15

30

45

60

0

8

16

24

32

Jun-13 Mar-14 Dec-14 Sep-15 Jun-16

USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

China

50%

Other

27%

Finland

9%

Canada

6%

Zambia

3%

Australia

5%

Source: World Metal Statistics

0

25

50

75

100

125

0

5

10

15

20

25


USDmnkt


Source: CEIC

Figure 158: China’s cobalt ore imports

Figure 161: World cobalt refi ned output

Figure 159: China’s cobalt articles imports Figure 160: World cobalt mine output

Congo

51%Other

28%

Canada

5%

China

6%

Russia

5%

Australia

5%


Cobalt

150

175

200

225

250

275

300

20.0

22.5

25.0

27.5

30.0

32.5

35.0

Nov 13 Jul 14 Mar 15 Nov 15 Jul 16


LME Spot (lhs)


SHFE spot (rhs)


Figure 157: Cobalt prices


China

76%

other

10%

Russia

4%

Tajikistan

4%

Turkey

3%

Bolivia

3%


Figure 168: World antimony mine output

0

6

12

18

24

30

0

2

4

6

8

10

Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16

USDmnkt

Volume (lhs)

Value (rhs)Source: CEIC

0

5

10

15

20

25

30

35

40

45

Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15

kt

Source: CEIC

0

5

10

15

20

0.0

0.5

1.0

1.5

2.0

Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

0

20

40

60

80

100

120

0

3

6

9

12

15

18

Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16


Metal Bulletin China Free Market (lhs)

SHFE spot (rhs)

Source: Bloomberg

Figure 164: China’s antimony ore imports

Figure 167: China’s antimony mine output

Figure 165: China’s unwrought antimony exports

Figure 163: Antimony prices

Figure 166: Australia’s antimony exports to China

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16

0

2

4

6

8

10

12

14

16

18

20kt AUDmn

Volume(lhs)

Value (rhs)

Source: ABS

Antimony


Autocatalysts37%

Jewellery31%

Glass7%

Chemical6%

Investment6%

Electrical3% Medical &

biomedical3%

Petroleum3%

Other4%


Figure 174: Platinum end use by sector

100

120

140

160

180

200

220

400

500

600

700

800

900

1,000

Aug 13 Feb 14 Aug 14 Feb 15 Aug 15 Feb 16

RMB/gUSD/troy oz

Spot (lhs)

SHFE spot (rhs)

Source: Bloomberg

South

Africa

64%

Russia

16%

Zimbabwe

8%

Canada

6%

USA

2%

Other

4%


0

2

4

6

8

10

12

14


tonnesOther Germany Japan

Russia South Africa Switzerland

Source: Bloomberg

Figure 170: Palladium prices

Figure 173: World platinum output

Figure 171: China’s platinum imports Figure 172: China’s platinum exports

0

5

10

15

20

25

0

50

100

150

200

250

300

350

400

450

500

Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16

USDmnkg

Volume (lhs)

Value (rhs)

Source: Bloomberg

Platinum & Palladium

800

900

1000

1100

1200

1300

1400

1500

1600

Aug 13 Feb 14 Aug 14 Feb 15 Aug 15 Feb 16

USD/troy oz

Source: Bloomberg

Figure 169: Platinum prices


0

10

20

30

40

50

0

50

100

150

200

250

H109 H110 H111 H112 H113 H114 H115

%kt

Volume (lhs)

Share to China (rhs)

Source: Based on ABS

Figure 180: Australian ilmenite exports to China

0

20

40

60

80

100

120

140

0

10

20

30

40

50

60

70

80


USDmnkt

Titanium white Other Value (rhs)Source: CEIC

0

10

20

30

40

50

60

70

80

0

50

100

150

200

250

300

350

400

H109 H110 H111 H112 H113 H114 H115

%kt

Volume (lhs)



0.0

3.0

6.0

9.0

12.0

15.0

18.0

21.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0


AUDmnkt

Volume (lhs)

Value (rhs)

Source: ABS

0

18

36

54

72

90

0

5

10

15

20

25


USDmnktTitanium whiteOtherValue (rhs)

Source: CEIC

Figure 176: China’s titanium dioxide exports

Figure 179: Australian zirconium exports to China

Figure 177: Aust titanium dioxide exports to China

Figure 175: China’s titanium dioxide imports

Figure 178: Australian rutile exports to China

0

4

8

12

16

20

24

28

32

0

5

10

15

20

25

30

35

40

H109 H110 H111 H112 H113 H114 H115

%kt

Volume (lhs)



Mineral Sands


0

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4

6

8

10

12

14

0.0

0.1

0.2

0.3

0.4

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0.6

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USDmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

Figure 186: Yttrium oxide export

0

3

6

9

12

15

18

21

24

27

30

0.0

0.2

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Volume (lhs)

Value (rhs)

Source: CEIC

0.0

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0.6

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1.0

1.2


USD mn

Source: CEIC

0

13

25

38

50

63

75

88

100

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


USDmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

Figure 182: Cerium oxide & hydroxide exports

Figure 185: Europium oxide exports

Figure 183: Lanthanum oxide exports Figure 184: Neodymium oxide exports

0

4

8

12

16

20

0.0

0.0

0.1

0.1

0.2

0.2


USDmnKt

Volume (lhs)

Value (rhs)

Source: CEIC

China’s exports of rare earth oxides

0

1

2

3

4

5

6


KtCerium Oxide and Hydroxide

Lanthanum Oxide

Yttrium Oxide

Neodymium Oxide

Europium Oxide

Other

Source: CEIC

Figure 181: China’s total rare earth oxides exports


China

40%

Other

22%

Japan

18%

Sweden

9%

Poland

6%

Belgium

5%


Figure 192: World cadmium consumption

70

120

170

220

270

320

370

420

600

850

1100

1350

1600

1850

2100

Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

USDmnkt

Volume (lhs) Value (rhs)Source: Bloomberg

China

33%

Other

29%

South Korea

18%

Japan

8%

Kazakhstan

6%

Mexico

6%


0

20

40

60

80

100

120

140

160

0

100

200

300

400

500

600

700

800

Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15

AUDmnkt


Source: ABS

50

100

150

200

250

300

350

0

5

10

15

20

25

30

Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16

‘000 USD/t‘000 RMB/t

Maganese - Shanghai price (lhs)

Metal Bulletin Cadmium price (rhs)

Source: Bloomberg

Figure 188: China’s manganese ore imports

Figure 191: World cadmium production

Figure 189: Australian manganese exports to China

Figure 187: Manganese & cadmium prices

Figure 190: World manganese mine output

China

30%

South

Africa

30%

Other

16%

Australia

14%

Gabon

7%

Brazil

3%


Manganese & Cadmium


China82%

USA4%

Russia3%

Israel2%

Other9%

Source: World Bureau of Metal Statistics.

Figure 198: Shares of world magnesium output

India38%

European Union30%

UAE18%

China4%

Israel4%

Botswana2%

Other5%

Volume

India32%

European Union28%

UAE13%

Israel8%

Botswana5%

China4%

Other10%

Value

Source: Kimberley Process Certification Scheme

35

50

65

80

95

110

125

10

15

20

25

30

35

40USDmnkt

Volume (lhs)

Value (rhs)

Source: CEIC

Russia33%

Botswana16%Congo,

Democratic Republic of

13%

Canada9%

Australia11%

Angola7%

Other11%

Volume

Russia31%

Botswana21%Canada

12%

Angola8%

South Africa10%

Namibia9%

Other 9%

Value


Figure 194: World diamond imports

Figure 197: China’s magnesium exports

Figure 195: World diamond output Figure 196: Magnesium prices

10

12.5

15

17.5

20

1800

2200

2600

3000

3400


‘000 RMB/tUSD/tonne

Metal Bulletin Spot (lhs)

SHFE spot (rhs)

Source: Bloomberg

Diamonds & Magnesium

European Union28%

UAE

18%

Botswana6%

Russia

9%

India10%

Congo, Republic

of4%

other

25%

Volume

European Union27%

Botswana11%

UAE

18%

Russia

8%

Israel7%

Switzerland4%

other

25%

Value


Figure 193: World diamond exports


Table 25: China mineral and energy import summary

unit Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Iron ore Mt 242.1 233.6 227.1 226.0 246.3 253.9 241.6 252.3

from Australia Mt 149.4 142.7 144.4 146.8 158.5 157.9 150.1 157.4

Australian share % 61.7 61.1 63.6 65.0 64.4 62.2 62.2 62.4

Thermal coal Mt 49.7 50.4 38.1 40.1 41.7 36.2 37.0 43.9

from Australia Mt na na na na na na na na

Australian share % na na na na na na na na

Metallurgical coal Mt 13.4 18.0 10.9 10.7 14.8 11.6 11.4 15.6

from Australia Mt na na na na na na na na

Australian share % na na na na na na na na

Aluminium kt 51.5 30.5 34.4 45.9 70.0 73.4 26.3 35.7

from Australia kt 7.0 5.6 7.7 2.7 12.7 15.3 5.7 2.9

Australian share % 14 18 22 6 18 21 22 8

Alumina kt 1158 1354 933 880 1329 1512 1240 439

from Australia kt 523 791 455 555 869 987 703 354


Bauxite Mt 8.4 8.4 10.1 12.6 16.5 17.0 13.6 11.8



Copper kt 1725 1935 1729 1774 1886 2324 2320 2192



Table 25 continued on page 61


Table 25 continued:

unit Sep–14 Dec–14 Mar–15 Jun–15 Sep–15 Dec–15 Mar–16 Jun–16

Oil Mt 76.5 79.9 80.3 83.0 85.3 86.9 91.1 95.4


Australian share % 1.0 0.7 0.7 0.7 0.6 0.8 0.8 1.0

Gas (LNG) kt 4811 5155 5127 4392 4627 5522 6010 5530



Zinc kt 353.0 370.3 391.0 410.3 506.1 607.9 448.9 183.5



Nickel USDmn 2314 1251 904 1918 1951 1510 1201 1471

from Australia USDmn 99 71 81 87 97 48 71 60


Lead kt 284.8 273.0 220.4 197.0 238.3 349.5 288.6 na

from Australia kt 47.8 52.0 39.1 31.6 28.9 45.8 17.1 na

Australian share % 17 19 18 16 12 13 6 na

Tin kt 24.5 27.4 17.1 31.2 32.4 31.9 26.2 19.9



Uranium t 4985 9281 2041 5659 7505 7439 na 6533

Sources: CEIC, Bloomberg


Electricity generation and consumption

Figure 200: Electricity consumption by region, 2014

Figure 199: Electricity generation by region, 2015


Coal and gas

Figure 202: Gas production by region, 2015

Figure 201: Coal production by region, 2015 estimate


Ferrous metals

Figure 204: Crude steel production by region, 2015

Figure 203: Iron ore production by region, 2015


Alumina and aluminium

<100 kt

100–500 kt

500–2000 kt

>2000 kt Hainan

N/A or negligible

Source: Bloomberg

<2 Mt

2–5 Mt

5–10 Mt

>10 Mt Hainan

N/A or negligible

Source: CEIC

Figure 206: Aluminum production by region, 2015

Figure 205: Alumina production by region, 2015


Copper and gold

<1.5t

1.5-2.5t

2.5-10t

>10t Hainan

N/A or negligible

Source: CEIC

Figure 208: Mined gold production by region, 2015

<50 kt

50–200 kt

200–500 kt

>500 kt Hainan

N/A or negligible

Source: Bloomberg

Figure 207: Copper production by region, 2015


Nickel and zinc

Figure 210: Zinc production by region, 2015

Figure 209: Nickel production by region, 2015


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70 China Resources Quarterly • Southern winter~ Northern summer

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