Metals News
Power Consumption by Heavy Industry Slumps, Interest Rates for Small Loans 8 Times As Much as Banks
smm insight
Jan 17,2013

SHANGHAI, Jan. 15 (SMM) – China's base metals prices slumped across the board, with SHFE 1304 copper contract prices plunging by 1.33%. Bernanke was inclined to easing policies, which prompts US Congress to raise debt ceiling, and this converted US domestic focus to negotiations between democratic and republican parties. In China, domestic power consumption growth halved in 2012, with sharp declines of power consumption by the heavy industry. The nonferrous metals industry remained sluggish. Besides, the Diaoyu Island dispute between China and Japan escalated.

★NO 1: Electricity Consumption in 2012 halves 2012 to Hit a 10-Year Low
The industrial structure improvement in 2012 allowed the growth of heavy industry, particularly high energy consuming industry to slow, dragging down electricity consumption. Energy conversation work also made great strides, with unit GDP consumption falling 3.4% in the first three quarters of 2012, with annual energy consumption declines expected to exceed 3.5%.
SMM View: China Economy Grows Modestly

According to the manager of the State Electricity Regulatory Commission, domestic electricity consumption rose for a third straight month since October 2012, indicating economy is improving. Growth of power consumption in the service sector and urban-rural regions was much higher than the average growth, and became a main force pushing power consumption growth. In 2013, domestic demand for power should continue to grow, with increases larger than 2012. Social electricity consumption growth should be higher than economic growth.

In 2012, power consumption by the secondary industry accounted for 73.9% of total domestic power consumption, with growth falling sharply on a YoY basis. Growth in the heavy industry dropped from 12.4% in 2011, to 3.8%, and growth in the light industry fell from 9.3%, to 4.3%. Despite positive macroeconomic data, nonferrous metals industry has yet to improve.

Electricity Consumption in Nonferrous Metals Industry Low
Electricity consumption is considered as a mirror of economic growth. Domestic total electricity consumption in 2011 grew 11.7% YoY in 2011, while the growth in 2012 was 5.5%. That shows China's economic growth slowed, particularly the manufacturing.

★NO 2: Bernanke Supports Easing Policies
The US Federal Reserve Chairman Ben Bernanke said the Fed will continue to assess the effects from quantities easing polices, with influences changing with time and situations.

SMM View: Bernanke's Statement Urges Resolving of Debt Problem
Bernanke reiterated its stand for easing policies. The US Federal Reserve took a mixed attitude, but expectations of easing policies reinforced. Bernanke believes US economy is recovering, but more modestly than expected, and that is why the Fed will not halt easing policies. The market lowered expectations of US economic growth, while its unemployment rate was not high enough to spur QE4 implementation. In this context, US debt will increase to ceiling by the end of February, and the US Federal Reserve will continue its existing monetary policies.

In the meanwhile, market concerns spread as Bernanke warned US going towards debt ceiling will cause economic declines.

★NO 3:Japan To Launch Signal Shell If Chinese Airplane Enters Diaoyu Island
"If the Chinese plane ignores a warning by radio, Japan will then launch the signal shell as a warning." Said Japanese minister of defense on January 15.
SMM View: Diaoyu Island Spat Will Remain Unresolved in the Near Term

Japan will not start a war with China. Japan took a hard-line stance on the Diaoyu Island issue so as to gain Japan's domestic support, convert domestic conflicts and gain support from financial groups.

★ NO 4: Interest Rates for Some Small Loans 8 Times As Much as Banks
Some small loan companies charge management fees and financial consultant fees to increase interest rates, which are almost 8 times as much as those from banks.



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