China’s voracious appetite for commodities drove the second-biggest monthly haul of crude oil and tripled aluminum imports, but very little steel, aluminum and coal went the other way.

“Industrial production is coming online and demand is rising. But sentiment may be tempered by the view that some of the material is being stockpiled and… consumption hasn’t risen as quickly as imports,” Ben Westmore, commodities economist at National Australia Bank, told Reuters.

Copper imports jumped 6.6% from March to April, to 399,833 tons; iron ore imports soared 9.4% to 57 million tons, and crude oil imports hit 3.93 million barrels per day, a 2% rise, customs data showed.

But China’s exports fell more sharply than most analysts had expected in April. The value of goods and services leaving the country was down 22.6% compared to last year, whereas economists had expected an 18% drop.

The drop in exports is leading some experts to speculate that China’s economy is being sustained solely by the $585 billion stimulus package the government is quickly deploying throughout the country. The stimulus program is heavily laden with infrastructure projects, explaining in part China’s huge demand for raw materials.

But some of that spending is spilling over into sales of construction equipment, much of it imported from the United States. Caterpillar Inc. (NYSE: CAT), the world’s largest maker of bulldozers and excavators, is among several companies already pointing an improvement in sales to China.

“March and April were pretty strong months for sales in China,” Caterpillar Chief Executive Officer James Owens said on an April 21 conference call with analysts.  Owens contends China’s stimulus spending for public works projects is working more quickly than in the U.S.

“When they say ’shovel ready,’ they mean nine weeks, not nine months,” he said.

Still, the drop in exports could put a chill on China’s imports of raw materials and construction products if consumption doesn’t pick up in the West.

“Although the downward trend is in line with our expectations the fall in exports is steeper than we anticipated,” Wang Xiaohui, an analyst at Sinolink Securities in Shaghai told Forbes.“Exports are likely to drop further in the near term as economic indicators in the United States and Europe, such as industrial output and retail sales, are not looking up.”

The U.S. trade gap with China increased to $15.6 billion from $14.2 billion from March to April. The gain in imports from China overshadowed an increase in Chinese demand for American-made goods that pushed U.S. exports to the highest level since October.

But the recent stock market surge and other economic data lead Wang to conclude that the lull in U.S. demand for China’s exports will be short-lived.

“In terms of exports, we’re looking at a better second half than first half, with the U.S economy stabilizing, which will provide support to China,” Wang said.

Source: China Imports Record Amounts of Copper and Iron Ore, but Exports Drop on Slack Global Demand

• A team of economists estimate that China’s January exports likely fell 14% from a year earlier, which would be the biggest monthly decline in a decade, Bloomberg reported. With demand from the United States and Europe waning, “the implications for China’s industrial sector are severe because exports account for close to 20 percent of industrial output,” Isaac Meng, a senior economist at BNP Paribas SA in Beijing, told Bloomberg.

• Sales for appliance maker Whirlpool Corp. (WHR) fell 76% for the quarter, and the company said earnings would continue falling in 2009. Its debt ratings have also been downgraded to a notch about “junk” status, Reuters reported.

• Coffee giant Starbucks Corp. (SBUX) will begin an all-day value meal, pairing its beverages with two new sandwiches starting March 3, MarketWatch reported. “Our customers need to know that we are listening to them by making Starbucks an affordable everyday option,” Michelle Gass, executive vice president of marketing, said in a release.

• Venezuelan President Hugo Chavez said his country’s economy hasn’t been touched by the global economic crisis, despite the country’s second-biggest bank said GDP will expand 0.4% in 2009, down from 4.9% last year. Chavez is campaigning to amend the constitution so that he can seek another presidential term in 2012, Bloomberg reported.

• Defaults on prime-jumbo hybrid adjustable-rate mortgages could double in coming months according to JP Morgan Chase & Co. (JPM) analysts. The share of prime-jumbo mortgages at least 60 days late climbed 0.71% to 5.29% in the month covered by January bond reports.  Losses on so-called hybrid adjustable-rate mortgages backing 2006 and 2007 prime-jumbo securities will reach 8 to 10%, the analysts told Bloomberg.

• Satyam Computer Services Ltd. (ADR: SAY) will decide on a long-term action plan by next week, including a possible sale of the company, its chairman said, as the fraud-marred outsourcer struggles for survival.  Satyam was hit by massive fraud in India’s biggest corporate scandal as it disclosed that profits had been overstated for years.  Its founder and former chairman Ramalinga Raju resigned last month, Reuters reported.

Source: Global Investment News Briefs Tuesday, February 10th, 2009

I had a front row seat. At the time, I ran a technology-transfer business in Southeast Asia and our central office was in Jakarta, Indonesia.

For a while it looked like the crisis might skirt Indonesia. But it didn’t. And when it hit, it hit with a vengeance. The economy had been expanding at an 8-10 percent clip for several years. Companies were expanding to take advantage of soaring sales. And banks were helping companies expand by giving out loans left and right.

The problem was, those loans were in dollars. That was fine as long as the exchange rate was stable. But the Indonesian Rupiah lost 80-90 percent thanks to the crisis. The cost of converting local currency into dollars to pay back these loans skyrocketed. At the same time, sales plummeted as economic growth screeched to a halt.

The subsequent carnage was inevitable. Companies, including banks, went out of business by the hundreds.

Mind you, these companies weren’t over-leveraged. They had not been engaged in reckless debt-driven expansion. They had not made one wrong-headed business decision after another. They were simply victims of a colossal crisis that struck with lightning speed.

And what was the advice of the IMF and the U.S.? Let them fail … spend less in order to lighten public debt … and remove subsidies.

This was the economic orthodoxy of the time. And it couldn’t contrast more with what we’re doing now: Rescuing banks and companies … increasing our debt … and handing out subsidies to undeserving companies and banks.

My five-star hotel room which used to cost $200 now cost only $60. My meals at Jakarta’s best restaurants set me back less than $10. You could go to a local high-end store and buy the most expensive suit for $40.

Yet none of that matters when your business is going down the drain. One by one, my customers withdrew their orders. Accounts receivable went unpaid. And millions of dollars worth of inventory went undelivered.

I was just one small company. Multiply my plight by the thousands and you get an idea what Indonesia went through. The Philippines, Singapore, Taiwan, Korea, and other countries suffered similar upheavals.

And now it’s happening again to these countries in Asia. Only this time China isn’t escaping the economic turmoil. And it’s happening also in the Middle East, South America, and the subcontinent.

Global stock markets have lost roughly $32 trillion of market value since they peaked in October 2007.

And the countries that were flying the highest back then, have been hit the hardest.

China’s growth engine – exports – has gone away. From a more than 22 percent growth rate in 2008, China’s exports plunged to a negative 2.8-percent rate in December.

The 45,000 factories in China’s major export cities of Dongguan, Shenzhen and Guangzhou were running overtime last year at this time. Now, 15,000 of them have been shut down. And it’s just the beginning. American consumers – their main customers – aren’t in a buying mood.

The Middle East has been hit just as hard. Their markets leaked $2.5 trillion in just the past four months. We were giving them almost a trillion dollars a year for their oil in the greatest wealth transfer the world has ever seen. This year? OPEC should ring up about $440 billion in oil revenue.

Now here’s the thing. Over the past 15 months, the Arab oil countries have been the biggest foreign buyers of U.S. Treasuries. They purchased $245 billion worth.

The next biggest buyer is … yes, you guessed it. China. It bought $233 billion worth.

With the U.S. economy in the dumps, these government bonds aren’t as attractive as they used to be. China has already said they want to diversify away from them, though nobody thinks there will be a wholesale dumping of U.S. bonds.

The U.S. government will be stepping up its issuance of bonds to pay for the bailout’s growing bill. But it’s clear we can’t expect these countries to continue buying our bonds like they have been.

We wouldn’t be facing this dilemma if we chose to follow the advice we gave so freely a decade ago to a dozen Asian countries. Something has to give. The interest offered on these bonds will go up. Or the Fed could step in and start buying bonds. Either or both outcomes point to a further debasing of the U.S. dollar, paving the way for the next inflationary storm. It’s only a matter of time.

Source: Letting the Inflationary Beast Out of the Cage

• China’s exports fell 2.2% and imports plummeted by 17.9% in November, pushing its trade surplus to a record $40.09 billion, Bloomberg reported. “The figures are horrifying,” Lu Zhengwei, chief economist at Industrial Bank Co. in Shanghai, said. “Plunging imports show that on top of faltering global demand, domestic demand is also shrinking as the economy cools.”

• Global mining leading Rio Tinto PLC (ADR: RTP) announced it would slash 14,000 jobs (or 13% of its workforce), sell more assets and halve its capital spending. “Drastic times call for drastic measures… They’ve definitely gone into survival mode, which is appropriate given the market circumstances,” Tim Schroeders, portfolio manager at Pengana Capital in Melbourne, told Reuters.

• Despite ascending unemployment numbers, Wells Fargo & Co. (WFC) Chief Executive John Stumpf said Wednesday he is seeing signs of a bottom in the U.S. housing market. “My suspicion is there is some more to go. But we’re starting to see some early signs that maybe we’ve reached the bottom in housing or close to it,” Stumpf said at Goldman Sachs Group Inc.’s (GS) U.S. Financial Services Conference, Reuters said.

• Egypt’s Orascom Telecom Holding landed a contract to provide mobile phone services in North Korea, a company source told Bloomberg. The deal marks the first foreign telecommunications deal on the recluse Communist country’s turf.

• Office Depot Inc. (ODP) will close about 9% of its North American stores and cut 2,200 jobs over the next three months, The Associated Press reported yesterday (Wednesday). The plan to close 112 stores will reduce the chain’s base to 1,163. Office Depot will close 45 stores in the Central United States, 40 in the Northeast and Canada, 19 in the West and eight in the South.

• Solar cell maker JA Solar Holdings Co. (ADR: JASO) yesterday (Wednesday) cut its fourth-quarter revenue and production outlooks as a result of declining demand. The China-based company lowered its revenue forecast to $124 million, from an earlier estimate $191 million to $220 million. The company also cut its estimates for 2008 production output to between 250 and 260 megawatts from 310 megawatts.

Source: Global Investing Roundups Thursday, December 11th, 2008