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- The US economy posted its best performance in 4 years in the second quarter this year. Annualized GDP growth came in at 4.2% which was a revision of the 4.1% Q2 annualized growth reported in July. Meanwhile, US unemployment reached its lowest level in forty years at 3.9%.
- A new OECD paper on long term economic growth – and by long term them mean beyond 2050 – has come out with some fascinating forecasts. This includes a prediction that China’s share of world economic growth will peak in 2030. Chinese economic growth between 2030 and 2060 will average 1.8% annualized and US growth will be 2% annualized. This means that around 2030 China will replace the US as the world’s largest economy, but then the US will retake the crown over the preceding decades.
- UK manufacturing orders declined in August. The UK’s manufacturing PMI was 52.8 in August down from 53.8 in July. This is the lowest UK manufacturing PMI since July 2016. Meanwhile, Michael Barnier stated last week that EU automotive companies should start to reduce their supply chain exposure to UK manufacturers assuming the UK would be leaving the EU single market. This is because if they use parts manufactured in a non-EU country for export outside of the EU those exports may be blocked due to trade agreement single origin rules.
- Tencent, a Chinese multinational holding company with a myriad of internet-based interests, lost $20bn in value last week after Chinese government increased its crackdown on online gaming. The Chinese Ministry of Education ordered the country’s publishing regulator to limit the number of new games and restrict how long Chinese students could play these games. Tencent has lost $160bn in market value since January due to tightening restrictions on China’s online gaming industry.
- Iraq has begun applying new US sanctions on its neighbour Iran. Iraq is Iran’s second largest trading partner after Turkey, with Iranian made consumer goods holding a significant market share in Iraq’s cities. The Iraqi government does not, however, control all the land and sea borders between it and Iran. Many are held by non-government militias, especially in Iraqi Kurdistan, which means that there will be significant smuggling.
- Six cases of African swine fever have been recorded in China prompting the country to ban exports from those areas and shutdown live pig markets. China is the world’s top pork producer. The disease is a highly virulent strain of haemorrhagic fever that affects domesticated and wild pigs. Outbreaks of the disease have been reported from the far north-east of China to the central-eastern part of the country. Pig slaughtering has also been halted boosting farmer livestock levels. The disease has no vaccine but does not affect humans. It will, however, likely cause severe hardship to the country’s pig farming industry.
- Brazil is considering approaching the WTO over Chinese tariffs on sugar imports. China started levying extra tariffs on out-of-quota sugar imports from any non-domestic source at the beginning of August. This came a year after the country put penalties on Brazilian and Thai sugar. China allows for 1.94m tonnes of sugar imports per year at a normal tariff rate as part of the WTO quota system. Chinese sugar prices have fallen this year pushing Chinese domestic sugar mills to approach the government for protection against imports.
- In the UK the British government is mulling over if it will follow the Chinese government’s approach. When Britain leaves the European Union it will also leave the EU’s sugar quota and tariff regime. This means that Britain can decide if it wants a more liberal trade regime or if it wants to directly protect 3,000 local sugar beet farmers and indirectly people those farmers support, such as local farming communities and British sugar refineries geared towards processing beet sugar. Within the EU, Britain’s sugar consumers could only buy tariff free product from 3% of the global sugar market. Sugar #11 is trading around 10.63 c/lb today.
- The Indian Government is allowing Indian state refineries to purchase crude oil from Iran if it’s done via Iranian organized tankers and insurance (i.e. purchasing on a CIF basis.) This comes after private Indian shipping companies stopped shipping Iranian crude to India due to US sanctions. Buyers in China are also using tankers owned by Iranian entities. India and China are the two largest importers of Iranian crude and this latest development means the United States sanctions on Iranian crude will be less effective.
- The nascent Shanghai crude futures offering on the Shanghai International Energy exchange is gaining market from the longstanding WTI and Brent crude contracts. The contract was launched to provide an Asian energy benchmark. Front month volume in July was 2.8m lots, giving it a share of crude oil future volume at 14.4% vs the 56.7% that WTI holds. However, right now there is less industry buy-in for the Shanghai crude market and its more of a speculators market. Shanghai crude is trading around ¥503/bbl today.
- China’s Ganfeng Lithium company is applying for listing on the Hong Kong stock exchange. The company has the world’s largest lithium production capacity and has backed several Australian ASX listed firms. Lithium carbonate prices have fallen by 38% this year due to new supply streams coming online. Listing on the Hong Kong exchange allows Ganfeng to tap into international capital markets, and in turn allows non-Chinese investors to buy into it.
- Congolese copper and cobalt outputs were 8% and 38% higher in the first half of the year respectively. 60% of the world’s cobalt is mined in the Democratic Republic of the Congo’s Katanga province. Cobalt is a key battery metal and increasing use of electric vehicles will make the metal increasingly sought after…
- … which means that it’s not altogether unsurprising that some 112 tonnes of cobalt with a market value of around $7.2m were stolen from warehouses in Rotterdam in July. The metal was stolen from warehouses owned by Cobalt 27 and Vollers. Cobalt for 3-Month delivery on the LME is trading around $64,750/tonne.