Archive for the ‘guest post’ Category

Bullish future for Chalco

chalcoA number of new reports coming out of China & other industry & economic factors point to the Aluminum Corporation of China Limited (CHALCO) entering into a new growth phase, which has me looking at the ADR from a fairly bullish stance.

Chalco (NYSE:ACH), which is by far the largest domestic producer of finished aluminium & holds a national monopoly on alumina. It runs a national network of 34 subsidiary operations & has a 26.6% stake in Yunnan Copper, the second largest copper producer in China.

Abroad, Chalco has been very active on the acquisition front, in 2007, it acquired development rights in the Aurukun project in Australia, which will be coming online in 2011, which is slated to provide 6.4 mtpa of bauxite & 2.1 mtpa of refined alumina. 2008 saw it acquiring the Peru Copper Company for a snip at $860 million & along with it the development rights for Toromocho which is estimated to hold more than 15 billion tonnes of high grade ore.

Not all has been complete plain sailing, however,  as the company bought into 12% of Australia’s Rio Tinto last year in partnership with Alcoa. But failed this year to acquire a further 18% for a chunky $20Bn after a shareholder revolt & Australian fears that Chinese companies were getting their hands on mineral assets at knock down prices.

To cap off the supply side, as we reported yesterday, it looks as though China has managed to secure access to vast bauxite resources in Guinea, the majority of which will go to supply Chalco refining & smelting operations.

Looking at the Chinese economy as a whole & at one or two of the sectors in more detail, I can see a building demand for aluminium starting in the short term.

China National News has reported trade figures for September that show a marked slowdown in exports, down only by 15.2% from September 2008. Considering that overall, Chinese exports have been on a decrease of around 31% for the year, this is a strong signal that Chinese manufacturing is back on the rise.

Figures released by the China Association of Automobile Manufacturers today, show that the auto sector is still enjoying sustained growth, with more than 1.3 million units being sold in February, as 78% increase on a year ago. So far 9.66 million units have been sold in China in 2009, a jump of 34% on the same period in 2008. With this continued growth in the sector, aluminium demand will also continue to grow in line.

In aviation, China has made some great advances in the last 10 years, moving from maintenance & repair, to engine manufacture & now construction of airliners. We have seen Airbus centre it’s Asian operations for A320 assembly in Tianjin, alongside Eurocopter, whilst Beijing is investing over 10 billion yuan in an “aviation city” that will support aircraft manufacturers. Domestic useage of commercial aircraft has seen astonishing growth this  year, with a 43% rise in passenger air traffic being registered. Now China is looking to build it’s own flagship airline brand to take on incumbents Boeing & Airbus. State-owned Aviation Industry Corp. of China, (Avic) which is producing the ARJ21, recently predicted the country will need 3,796 new passenger planes by 2028 to keep up with domestic demand for air travel, adding to its present fleet of 1,191.

Need I say more ?

Courtesy of Peter Medved at MyStockVoice

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Emerging Idol: Auditions for BRIC Without the “R”

american_idol-judges Today some humour & a guest post from Josh Brown from Reformed Broker …. thanks to Josh for letting us post, you can follow him on Twitter

It may be time to hold auditions to find a replacement for Russia in the BRICcountries.

The other day, the New York Times dropped this delightful little nugget on those believing that Russia is a suitable place to invest:

Russia’s Kemerovo region has notified ArcelorMittal that it will seize two of the world’s largest steel maker’s mines if production levels do not increase, the Siberian region’s government said in a statement.  “If your team is not able to stabilize production at these facilities, then we propose that you hand them over without compensation.”

Nice.  The whole BRIC (Brazil, Russia, India, China) theme may be in need of a makeover as it turns out that the former Soviet Republic is still very much up to it’s old KGB-era strong man routine.

The question becomes, what country could replace Russia that’s got the growth and demographic bona fides but a more conducive business climate for investment?

Let’s hold some auditions, American Idol-style, and see how other emerging economies stack up for membership:

Turkey

Randy: I like what I’m seeing out of Turkey’s National-100 index, a 10.5% advance year-to-date, y’all.  I’d say yes.

Simon: This country has a population of 71 million, two thirds of which are aged 15 to 64…that’s an awful lot of productive workers.

Paula: Yeah but guys, Turkey’s economy is only supposed to show flat growth in 2010.  I’m sorry Turkey, I think you’re great…just not for this competition.

South Africa

Paula: Here’s a perfect example of an exciting country, with a $280 billion economy and booming mineral exports.

Randy: Yes, but a lot of those exports are non-industrial diamonds and gold, not a lot of practical uses for what South Africa produces, man.

Simon: I have to be honest and say that that was one of the most dreadful auditions I’ve ever heard.  And for a supposedly emerging market, the Johannesburg Securities Exchange has barely recovered this year, up only 4% or so.  I’m sorry, South Africa, it’s a No.

Singapore

Randy: Singapore looks like the Real Deal right about now, the Straits Times Index is already up 35% on the year and shows no signs of quitting.  GDP growth for next year is looking like 7 and change percent.

Paula: And didn’t Jimmy Rogers sell his Manhattan townhouse and relocate his whole family there?

Simon: I’m sorry, but I don’t think so.  Singapore is as tied to China as you get, they do about 90 billion a year worth of trade together and have longstanding agreements in place that basically make the two economies inseparable.  I’m going to have to pass on this, we already have enough Chinese representation in BRIC.

Dubai

Randy: I gotta keep it real with this one, Dog.  Aren’t we talking about an economy that’s basically 100% tied to high oil prices?

Simon: I completely agree with Randy, minus some steel exports, that’s exactly like Russia, which we’re trying to replace in BRIC, the last thing we want to do is add it’s mirror image.

Paula: You guys have the Dubai story all wrong, they’ve been redeploying the oil wealth to stimulate other parts of the economy, like the gold-plated Rolls Royce sector, for example.

Australia

Randy: Australia?  I thought this competition was for emerging markets only, y’all.  I know GDP growth for next year is estimated at 6%, but how old are you, Australia?

Paula: You gotta give it up to them, they have a fully developed economy, yet they’re the key supply line to some of the growthiest economies in Asia.  Wait, isgrowthiest a real word?

Simon: For me, it’s a yes.  If we refer to Brazil as the Commodities Supermarketto Chinese growth, then Australia is the Commodities Convenience Store, chock full of metals and minerals, yet right down the street.  And Paula, you should read a book one day.

Peru

Paula:  Look, we all know that the entire economy of Peru is just $127 billion and that’s like 7% of the economy of Brazil.  But I think Peru is going to broaden out.  Just because it doesn’t have a huge population, doesn’t mean it can’t become a big investment theme.  I say Peru deserves a chance.

Randy: It may be small, but it’s growing!  I’m feelin’ the growth!  10% GDP!  Peru, you’re on fire, Dog.  For me it’s a Yes.

Simon: Not to mention a 75% return for the IGBVL stock market so far in 2009, Peru is the very definition of hot.  Congratulations Peru, you’re through to the next round.

Randy: You’re going to Hollywood, Dog!

___

Peru exits ballroom with yellow sheet of paper, vigorously hugs Ryan Seacrestand let’s out celebratory yelp.  Assorted family members wipe tears from eyes.  Cut to Coke commercial.


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