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 Posted: Thu Oct 29, 2009 5:59 pm |
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deflation:Japan Consumer Prices Fall 2.3%, Companies are cutting
prices to attract customers whose wages are tumbling, Globally,
companies are feeling they can’t keep their market share unless they
take part in this discounting race
what recovery? deflation is affecting almost the whole world. there
is a real huge glut of unsold steel in china, just waiting to be
dumped on anyone stupid enough to still be free trading.
http://www.bloomberg.com/apps/news?pid=20601110&sid=a_.XlI.Nb0RE
Japan Consumer Prices Fall 2.3%, Easing From Record (Update1)
By Mayumi Otsuma
Oct. 30 (Bloomberg) -- Japan’s consumer prices fell at a near-record
pace in September, a sign that deflation is likely to remain a drag on
the economic recovery.
Prices excluding fresh food slid 2.3 percent from a year earlier after
dropping an unprecedented 2.4 percent in August, the statistics bureau
said today in Tokyo. The median estimate of 28 economists surveyed was
for a 2.4 percent decline.
Companies are cutting prices to attract customers whose wages are
tumbling. The Bank of Japan will probably forecast today that consumer
prices will keep falling through fiscal 2011, signaling there will be
little chance to raise interest rates for a year at least, economists
said.
“The economy’s momentum will definitely remain weaker than last year
and continue to weigh on demand,” said Kiichi Murashima, chief
economist at Citigroup Global Markets Ltd. in Tokyo. “Globally,
companies are feeling they can’t keep their market share unless they
take part in this discounting race.”
Other reports today showed Japan’s recovery may be solidifying. The
unemployment rate unexpectedly declined to 5.3 percent from a record
5.7 percent only two months earlier. The ratio of jobs for each
applicant rose for the first time in more than two years. Household
spending climbed 1 percent.
The yen traded at 91.51 per dollar at 8:52 a.m. in Tokyo from 91.47
before the reports. Japanese stock futures opened higher after a U.S.
report showed the world’s biggest economy grew for the first time in
more than a year last quarter.
BOJ Outlook
Central bank policy makers will release their semiannual outlook for
the economy and prices at 3 p.m. in Tokyo. The board members are
likely to stress they will have to keep borrowing costs near zero to
bolster economic growth.
“The outlook report will likely warn that risks to the economy are
still to the downside and core prices will remain below zero,” said
Izuru Kato, chief market economist at Totan Research Co. in Tokyo. The
report will help to quash any investor expectations that rates may
rise soon, he said.
The central bank will keep the benchmark overnight lending rate at 0.1
percent at least through the end of 2010, according 15 of 16
economists surveyed by Bloomberg last week. Governor Masaaki Shirakawa
said this month the bank will maintain “very low” interest rates to
ensure the recovery will be sustained.
Retailers are cutting prices more aggressively to attract consumers
whose wages have slid for 15 months.
Cheaper Jeans
Don Quijote Co., a discount store operator, started selling jeans for
690 yen ($7.50) this month, undercutting Aeon Co. and Seiyu Ltd.,
Japan’s two largest supermarket chains, which have been offering them
for about $9. Fast Retailing Co., the operator of Uniqlo stores, began
the battle in March with pairs at $11.
Seiyu, which is owned by U.S.-based Wal-Mart Stores Inc., also started
to market a business suit for men for 5,000 yen this month.
“We’ve been observing deflation in food, and now it’s spreading to
clothing,” said Yasunari Ueno, chief market economist at Mizuho
Securities Co. in Tokyo. “Retailers are trying to respond to
households’ efforts to pare back basic expenditure, and that’s fueling
deflation in daily necessities.”
Much of the drop in consumer prices reflects last year’s peak in oil
costs. Crude has dropped more than 40 percent since it reached an
unprecedented $147.27 a barrel last July.
Even though the oil effect will wane in coming months, weakening
demand will continue to pull down consumer prices, said economist
Yoshiki Shinke.
“The pace of declines will keep slowing, and we’ll see that more
clearly from October,” said Shinke, a senior economist at Dai-Ichi
Life Research Institute in Tokyo. “Even so, core prices won’t surface
above zero through 2010.”
To contact the reporter on this story: Mayumi Otsuma in Tokyo at
motsuma at (no spam) bloomberg.net
Last Updated: October 29, 2009 19:53 EDT
----------------------------------------------------------------------------------------
http://www.bloomberg.com/apps/news?pid=20601110&sid=a1L_ySGqioCo
Baoshan Steel Profit Rebound to Stall on Overcapacity (Update1)
By Bloomberg News
Oct. 30 (Bloomberg) -- Baoshan Iron & Steel Co. and Angang Steel Co.,
posting the best quarterly profit in at least a year, now face slower
growth as oversupply in the world’s largest steel-producing nation
reduces prices.
Demand is easing amid “rising pressure from overcapacity,” Baoshan,
the largest Chinese mill, said yesterday. Angang Steel Co. said Oct.
27 that earnings this quarter will be less than net income in the past
three months.
Benchmark Chinese steel prices have fallen 21 percent from a 10-month
high on Aug. 4 as production overwhelmed demand fueled by the nation’s
4 trillion-yuan ($586 billion) stimulus spending. Steel output in
China reached highs in four months this year, spurring record imports
of iron ore from producers such as Rio Tinto Group and Vale SA.
“The severe overcapacity creates cutthroat competition among Chinese
steelmakers, giving them little pricing power,” said Fu Hao, a
Guangzhou-based fund manager at E Fund Management Co., which manages
the equivalent of about $16.1 billion. “There is good steel demand,
but prices are bad because of the excess competition.”
Baoshan fell 1.6 percent to 6.75 yuan in Shanghai yesterday. Liaoning-
based Angang, the second-largest Chinese mill by market value,
declined 5.7 percent to HK$14.36 in Hong Kong.
Steel inventories held by large Chinese companies rose 10 percent this
year to 7.2 million metric tons as at the end of September, the
nation’s industry ministry said. BHP Billiton Ltd., the world’s
largest mining company, said yesterday it was seeing signs of a
pullback in commodity demand from China.
Rising Pressure
Shanghai-based Baoshan Steel may post earnings per share of 0.13 yuan
in the fourth quarter, according to the mean estimate of three
analysts compiled by Bloomberg, down 24 percent from the 0.17 yuan for
the three months ended Sept. 30. Baoshan’s third-quarter profit was
its highest in five quarters.
“There is rising pressure from overcapacity and demand growth is
slowing down,” Baoshan Steel said in its statement yesterday. “Steel
inventories are at high levels. Demand is weak for steel pipes and
heavy plates in the fourth quarter.”
Angang Steel may report a profit of as much as 1.17 billion yuan or
lose as much as 330 million yuan in the three months ending Dec. 31,
based on figures derived from a range of full- year forecasts. Third-
quarter net income was 1.89 billion yuan, the highest in a year.
Close to Costs
Baoshan and Angang Steel “are cautious on the sector, mainly on
capacity oversupply concerns,” Goldman Sachs analysts led by Song Shen
wrote in an Oct. 23 note, after a conference call with executives.
“Producers’ cautious stance is in line with our expectation as they
are facing close to cash cost-level prices.”
Maanshan Iron & Steel Co., the second-biggest Chinese mill listed in
Hong Kong, probably had its best earnings for the year in the third
quarter, Morgan Stanley analyst Charles Spencer said Oct. 28. The mill
said Oct. 27 that third-quarter profit rose 2 percent to 802.3 million
yuan.
The Chinese government is working on plans to close obsolete mills and
promote mergers, Deng Qilin, chairman of the steel association, said
Oct. 13. Some mills have incurred losses at current prices which won’t
rebound this year, he said.
Baoshan has cut monthly prices twice since September. Hebei Iron &
Steel Group, China’s second-biggest mill, and Jiangsu Shagang Group
Co. have also dropped prices.
Chinese steelmakers will be forced to cut output for the rest of the
year, Jiangsu Shagang, the nation’s fifth-largest mill, said this
month. Steel demand growth in China may slow to 5 percent next year,
down from an expected 19 percent this year, the World Steel
Association said Oct. 12.
Full Capacity
Goldman Sachs said the steel mills are still seeing strong demand from
builders and makers of cars and appliances. Baoshan and Angang have
orders covering 100 percent of capacity to the end of the year, the
brokerage had said.
Volkswagen AG, the biggest overseas carmaker in China, sold a record
number of vehicles in September in the country. The Asian nation may
boost sales 28 percent to 12 million units, the National Development
and Reform Commission said last month.
“Demand for steel is still good, but an industry overcapacity will
keep prices at low levels,” said Luo Wei, an analyst with China
International Capital Corp.
--Helen Yuan. Editors: Tan Hwee Ann, Richard Dobson.
To contact the Bloomberg News Staff on this story: Helen Yuan in
Shanghai at hyuan at (no spam) bloomberg.net
Last Updated: October 29, 2009 20:58 EDT |
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