Baltic Dry Index. 2486 -76
LIR Gold Target by 2019: $3,000.
"Let China sleep, for when she wakes, she will shake the world."
Napoleon.
China imposed trade sanctions on Japan yesterday and the rest of the world pretended not to notice. This outrageous behaviour, and violation of trade contracts mustn’t be allowed to stand. The rest of the world must stand by Japan and the rule of law, or over the rest of this century, watch each country succumb to China, one by one. Whatever the merits of Japan’s case against the captain of a fishing trawler, Japan follows rule of law and the man will get a fair trail with proper representation, should the case get that far. China’s gross overreaction bodes ill for the future, made worse by the fact that China’s sanctions affect the rare earths needed for our modern world and that China is the sole monopoly supplier of rare earths. Below, the NY Times covers China’s thuggish approach. Some fast leadership is needed from the west.
(Note: Bloomberg has carried a short denial by China, but the NY Times is standing by its story.) The west must develop it's non Chinese sources of REEs.
Amid Tension, China Blocks Crucial Exports to Japan
By KEITH BRADSHER Published: September 22, 2010
HONG KONG — Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has placed a trade embargo on all exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.
Chinese customs officials are halting all shipments to Japan of so-called rare earth elements, industry officials said on Thursday morning.
On Tuesday, Prime Minister Wen Jiabao personally called for Japan’s release of the captain, who was detained after his vessel collided with two Japanese coast guard vessels about 40 minutes apart as he tried to fish in waters controlled by Japan but long claimed by China. Mr. Wen threatened unspecified further actions if Japan did not comply.
A Chinese commerce ministry official declined on Thursday to discuss the country’s trade policy on rare earths, saying only that Mr. Wen’s comments remained the Chinese government’s position.
China mines 93 percent of the world’s rare earth minerals, and more than 99 percent of the world’s supply of some of the most prized rare earths, which sell for several hundred dollars a pound.
Dudley Kingsnorth, the executive director of the Industrial Minerals Company of Australia, a rare earth consulting company, said that several executives in the rare earths industry had already expressed worries to him about the export ban. The executives have been told that the initial ban lasts through the end of the month, and that the Chinese government will reassess then whether to extend the ban if the fishing captain still has not been released, Mr. Kingsnorth said.
“By stopping the shipments, they’re disrupting commercial contracts, which is regrettable and will only emphasize the need for geographic diversity of supply,” he said. He added that in addition to telling companies to halt exports, the Chinese government had also instructed customs officials to stop any exports of rare earth minerals to Japan.
-----Jeff Green, a Washington lobbyist for rare earth processors in the United States, Britain, Canada and Australia, said that China and Japan were the only two sources for the initial, semiprocessed blocks of rare earth magnetic material. If Japan runs out of rare earths from China — and Japanese companies have been stockpiling in the last two years — then the United States will have to buy the semiprocessed blocks directly from China, he said.
“We are going to be 100 percent reliant on the Chinese to make the components for the defense supply chain,” Mr. Green said.
http://www.nytimes.com/2010/09/23/business/global/23rare.html?_r=1&hp
China Takes a Sharper Tone in Dispute With Japan
By IAN JOHNSON Published: September 22, 2010
BEIJING — Chinese Premier Wen Jiabao “strongly urged” Japan to immediately and unconditionally release from custody the captain of a Chinese trawler, threatening further action if Japan refuses.
Mr. Wen’s comments were the first by a senior Chinese official in what is rapidly becoming the most serious territorial dispute China has faced in a decade. The captain and crew were seized earlier this month by Japanese naval vessels, which claimed that the fishing boat rammed them near several uninhabited islands controlled by Japan. The boat and crew were quickly released, but the captain faces charges of obstructing officials from performing their duty and remains in Japanese custody.
China is incensed that Japan would apply its laws to Chinese nationals and argues that the issue is one for diplomacy, not the legal system. Known as Senkaku in Japanese or Diaoyu in Chinese, the islands have been in dispute for decades, but Japan has mostly turned back Chinese vessels that approach too closely.
Mr. Wen made his comments Tuesday night to members of the Chinese-American community in New York, where he is attending a United Nations meeting. The comments were carried Wednesday on the Web site of the Chinese Foreign Ministry.
“This is totally illegal, unreasonable and has already caused much suffering to the family of the captain,” Mr. Wen was quoted as saying. “If Japan clings to its course, China will take further action.”
Mr. Wen’s comments come as China as continued to ratchet up the pressure on Japan. On Tuesday, it announced that Mr. Wen would probably not meet his Japanese counterpart, Naoto Kan, who is also in New York for the United Nations development conference. On Sunday, China suspended many government contacts and other exchanges with Japan.
“Japan holds the key to solving this problem,” the Foreign Ministry spokeswoman, Jiang Yu, said. “The Japanese side should correctly understand the situation and return the captain immediately and unconditionally.”
Some analysts say the issue might blow over next Wednesday when Japan must decide whether to formally charge the captain or release him. If he is charged, the emotional issue could boil over in China, where protests have already taken place and Internet forums are full of anti-Japanese rhetoric.
“Japan will have to release the captain with a warning or something similar,” said a Western diplomat based in Beijing who spoke on condition of anonymity because of the delicacy of the conflict. “It’s hard to imagine them actually charging and trying him.”
Sentiment in Japan, however, has hardened against China in recent years, with some calling for the country to resist a diplomatic solution and enforce its claims by applying Japanese law.
http://www.nytimes.com/2010/09/23/world/asia/23chinajapan.html?_r=1&hp
The big story above today dwarfs all the others, as China reveals its true intentions to the rest of the world. Stay long precious metals. China’s actions speak far louder than its words.
We end for today with other news from Japan, with ominous implications for the USA and UK. Japanese property prices fell again for the 19th year in a row. In the US and UK, we are only in our early years of price decline. If we follow anything like the Japanese pattern, we face a decade of increasing distress ahead. Worse, there’s no sign that Japan’s property prices are bottoming.
Average property prices drop again
Kyodo News Wednesday, Sept. 22, 2010
The average residential land price fell 3.4 percent in the year to July 1, marking the 19th straight year of decline, though the drop was less than the 4 percent fall recorded for the previous year, the government said Tuesday.
The average commercial land price meanwhile decreased 4.6 percent, the third consecutive annual drop, compared with the previous year's 5.9 percent fall in the wake of the 2008 global financial crisis.
Of the 21,786 locations used for the annual land price survey this year and last year, 98.5 percent registered decreases, down only 0.3 percentage points from the previous year.
Just 27 locations registered increased land prices, the second lowest — after last year's three — since the government initiated the survey in 1975.
http://search.japantimes.co.jp/cgi-bin/nb20100922a4.html
“If you do not change direction, you may end up where you are heading.”
Lao Tzu
At the Comex silver depositories Wednesday, final figures were: Registered 53.69 Moz, Eligible 58.34 Moz, Total 112.03 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Yesterday we covered the growing La Nina in the Pacific and the weather disruption it can generate. Today the growing likelihood that the winter wheat crop planting is going badly in Russia. If so, unless we get bumper wheat crops everywhere else, 2011 is going to be a year of massive food price inflation. Food price inflation, historically has toppled governments and generated revolution. 2011 seems to look more troubled with each passing month.
"At this stage there is no substantial recovery in subsoil moisture levels in Russia,"
Global food risk from China-Russia pincer
World food supplies are caught in a pincer as China becomes a net importer of corn for the first time in modern history and Russia's drought inflicts even more damage than expected, raising the risk of a global grain shock in 2011.
By Ambrose Evans-Pritchard Published: 6:52PM BST 22 Sep 2010
The Moscow bank Uralsib said half of Russia's potato crop has been lost and the country's wheat crisis will drag on for a second year, forcing the Kremlin to draw on world stocks.
Wheat prices have risen 70pc since June to $7.30 a bushel as the worst heatwave for half a century ravages crops across the Black Sea region, an area that supplies a quarter of global wheat exports. This has caused knock-on effects through the whole nexus of grains and other foods.
The UN fears a repeat of the price spike in 2008 that set off global food riots. Wheat prices are still far below the $13 peak they reached then, and the global stocks to use ratio is still "safe" at 22pc. However, the outlook is darkening.
"It is not yet a crisis but things are precarious. If there is another bad year in Russia and Ukraine, this will leave us prone to shocks. All it takes then is one piece of bad news," he said.
Chris Weafer, Uralsib's chief economist, said Russia's wheat harvest will be near 60m tonnes this year, far short of the 75m consumed locally. The country has intervention stocks of 9.5m. "We think Russia faces shortfall of 17m tonnes and will have to import next year," he said.
Moscow has already disrupted grain supplies by imposing an export ban until late 2011, but markets have not discounted the risk of Russia becoming a substantial importer.
Luke Chandler at Rabobank said the drought has gone on long enough to hit winter wheat planting and damage yields for next year's spring wheat. "At this stage there is no substantial recovery in subsoil moisture levels in Russia," he said.
-----Ominously, a corn crunch is also creeping up on the world. Global stocks are at their lowest level for 37 years, at a stock to use ratio of 13pc. "This is getting extremely tight," said Mr Chandler, questioning whether the US should divert 36pc of its corn crop into ethanol for fuel.
Corn prices have jumped 40pc since June, reaching $5 a bushel. This was first blamed on lower US crop yields due to bad weather, but China has since revealed that it imported a record 432,000 tonnes in August.
Sudakshina Unnikrishnan from Barclays Capital said China may soon become a "structural" corn importer. While it imported corn in 1994, that was due to bad harvests. This time the cause is a permanent shift towards meat-based diets. This has led to a steady rise in the use of corn for animal feed. More than 70pc of China's corn is now used in feed. It takes about seven kilos of grain to produce one kilo of beef.
There is a widely-held view that roaring "agflation" and record gold prices signal inflation, evidence that ultra-loose monetary policy in the US and Europe is leaking excess liquidity into the world. Japan is the latest country to boost liquidity, launching "unsterilised" yen sales.
A looming clash with China and possible burst of food inflation too. How unlucky can we get.
"Life is really simple, but we insist on making it complicated."
Confucius.
The monthly Coppock Indicators finished August:
DJIA: +243 Down. NASDAQ: +366 Down. SP500: +243 Down.
The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. August is the third down month in a row and “crash season” approaches.
No comments:
Post a Comment