[Heavy industry in the
country, the world’s second-largest economy, is suffering a much sharper
downturn than was apparent or expected even several weeks ago. That slowdown
seems to be mirrored to a lesser extent in other sectors. But the full scope of
China’s economic weakness is obscured by limited data, as the country prepares
for a nationwide, weeklong holiday beginning Feb. 18, in observance of the
Lunar New Year.]
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A construction site in Beijing. Steel prices
in Beijing have fallen sharply, and iron
ore imports are down.CreditGreg Baker/Agence
France-Presse — Getty Images
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HONG KONG — Steel prices in China
have fallen 12 percent in the first five weeks of this year — almost as much as
in all of last year — as demand dwindles.
China’s imports of
rubber, oil, iron ore and other industrial materials also fell sharply in
January. And the global market for bulk freighter charters is in free fall,
already below levels in the worst days of the global financial crisis in late
2008 and early 2009.
”In the past two months,
it has been more or less a vertical correction, and this is a proxy for China,”
said Basil M. Karatzas, a Manhattan ship broker.
Heavy industry in the
country, the world’s second-largest economy, is suffering a much sharper
downturn than was apparent or expected even several weeks ago. That slowdown
seems to be mirrored to a lesser extent in other sectors. But the full scope of
China’s economic weakness is obscured by limited data, as the country prepares
for a nationwide, weeklong holiday beginning Feb. 18, in observance of the
Lunar New Year.
”It’s too early to be
saying we’re moving toward disaster, but there’s nothing in this data to be
cheery about,” said Louis Kuijs, the chief China economist at the Royal Bank of
Scotland.
Following its standard
practice, China’s National Bureau of Statistics will not release a wide range
of monthly economic statistics for January — a month in which the timing of the
Lunar New Year, from late January to mid-February, can distort figures. So
investors, business executives and others will get only limited, partial
figures on industrial production, real estate investment, retail sales and
other crucial barometers until mid-March, when figures for all of January and
February are scheduled to be released.
The People’s Bank of
China, the central bank, signaled its concern last week,when it unexpectedly cut the
proportion of assets that banks must hold as reserves, freeing the banks to
lend about $100 billion to businesses and consumers. The reserve requirement
had not been cut since 2012.
China’s General
Administration of Customs released trade data on Sunday that showed a slight
dip in exports. Imports plunged, although that was partly because the effect of
falling tonnages of key commodities was compounded considerably by lower
commodity prices.
The statistics agency
plans to release inflation data on Tuesday morning in Beijing. Producer prices
have been falling faster and faster since last July, partly because of lower
commodity prices, and are expected to be down close to 4 percent in January
compared with a year earlier. Consumer prices have nearly stopped rising.
Some businesses selling
consumer products are complaining of weak sales this winter. “Our business has
slowed down in recent months; I think it has to do with the overall economic
slowdown in China, as well as internationally,” said Fred Zhang, the sales
manager at the Qingdao Oulang Hair Product Company, a small maker of wigs in
Qingdao.
China has many tools to
halt a slowdown, although all of the tools have potentially undesirable side
effects. The banking system is still under tight central government control and
can be told to step up lending further. Overall credit, though, has already
grown faster as a share of economic output since 2009 than practically anywhere
except Ireland. Some restrictions on housing market speculation have been
lifted, at the risk of making homes more expensive.
A slowdown in home
construction and car sales has contributed to trouble in the steel and iron ore
sectors and in the energy sector. The tonnage of iron ore imports is down 9.3
percent in January from a year ago, while the tonnage of imports of refined
products like gasoline and diesel was down 37.6 percent.
Some of the slowdown in
industrial commodity imports last month may reflect that many Chinese companies
built above-average stockpiles in the autumn as prices were falling, and now
find themselves with scant room to store more. They also face losses on their
earlier purchases, as prices have continued to drop.
In the iron ore sector
last autumn, “they bought every single cargo, and they were able to buy at
lower and lower prices,” said Jeffrey Landsberg, a commodity analyst and
managing director of Commodore Research & Consultancy in New York.
With the purchases
slowing, ship charters have slowed to a crawl. Large freighters that cost
$8,000 to $9,000 a day to operate, plus $20,000 or more a day in interest
payments and other ownership costs, are now leasing for about $4,000.
The daily cost to charter
a so-called capesize freighter, a large ship particularly used to supply China,
has fallen fastest of all, down 75 percent since mid-November.
“It’s pretty grim at the
moment,” said Tim Huxley, the chief executive of Wah Kwong Maritime Transport,
a large Hong Kong shipping line. “The bulk carrier market is at the lowest it
has been in 30 years.”
