China is Heating Up!
The evidence that China will lead the world out of this commodity demand slump continues to pile up convincingly, and POSCO's ability to remain profitable while cutting far less production than its global counterparts is a primary indication that related regional economies like South Korea will feel a major bump from China's relative strength.
The Sheriff of Steel Strikes Again
This is essentially an update of an investment hypothesis I laid out back in December here and here, when the prevailing assumption was that China was taking a similar beating as the rest of the world, that its stimulus initiative was basically just theatrics, and that any talk of decoupling had been proven irrelevant. I believe that decoupling remains a highly relevant topic for analysis, and expect China to rev up its industrial engines substantially as we move later into 2009 and especially into 2010. By contrast, I expect Europe and North America to remain hogtied by true and lasting demand destruction. An epic shift in the balance of global economic power as seen through the lens of industrial activity is beginning to take shape.
This could be your last-best oppportunity to consider equities with exposure to Chinese industrial activity. Japan's $150 billion stimulus, announced over the weekend, comes into play here as well. See the above-linked article for more evidence, like the fact that lending in China has increased dramatically as stimulus spending there shifts into gear. Vale confirmed that China's demand for iron ore is back on the rise, indicating this could be more than just a momentary re-stocking phenomenon as previously suggested.
Keep your eyes on the shippers, the miners, metal prices, and the Chinese markets for later-stage confirmation of the emerging trend. People have been so quick to write China off given the rate of contraction in the early months of this crisis, but time is required in all such events to gauge the extens to which markets and manufacturers overshoot with their reactions.
Teck is Less of a Wreck - for the robust benchmark pricing for met coal. POSCO confirmed in its earnings release that both iron ore and met coal appear set to be priced at 2007 levels... well off last year's lofty levels, but still amazingly high under the circumstances.
The Ultimate Commodity Update
Rogue Wave Swamps DryBulk Shippers
Get the best bang for your yuan
The case for coal in 2009
POSCO's Steely Resolve
Fog is Clearing for a Steel Recovery
Productionj is Falling Off a Cliff
Bursting the Boom to Bust Bubble
The Chinese Stimulus Package is the Real Deal