Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Five Chinese Commodity Buys You Should Worry About


Country's strategic investments may be larger than ever.

China's appetite for commodities shows no signs of ceasing.

1. A US$13.2 to US$14.5 billion offer by China National Petroleum (SNP) for 75% of the Argentine unit of Spanish oil company Repsol YPF (REP) this week.

2. On July 3, China Investment Corporation (CIC) made a C$1.7 billion investment for 17.2% share of Canada's largest base-metal miner, Teck Resources (TCK).

3. On June 24, Sinopec (SHI) purchased Swiss oil explorer Addax (ADXTF) for US$7.2 billion. Addax had recently announced some amazing results from their TT-10 well in Kurdistan where several zones flowed rates of 10-20,000 barrels/day. Addax also has a significant presence in West Africa.

4. On a smaller scale, China National Nuclear Corporation (CNNC) recently took over small Canadian-listed Western Prospector Group for C$31 million in order to control their uranium assets in Mongolia.

5. What will happen when the rest of the world wakes up to the fact that China has tied up significant supplies of strategic metals? The most extreme situation occurs in an obscure family of difficult to pronounce elements known as the "rare earths" (dysprosium, anyone?), in which China has a lock on nearly 100% of the world's supply. Rare earths are critical to green power, hybrid-vehicle, and defense applications.

There have been many other significant Chinese strategic investments in companies with iron ore, rare-earths, and zinc assets. While one could argue that China has done an admirable job of supplying the world with rare earths, that situation may not persist. Advanced rare-earth mines and refineries in Malaysia, Australia, and Brazil have all seen significant Chinese investment. Investments in rare-earth opportunities outside of the Chinese cartel are vulnerable to predatory pricing, which may render them uneconomic over private investors' time horizons.

If a global shortage of rare earths materializes, we will see increased government interest to secure adequate supplies and an IUM bull market.

On June 23, 2009, the US and EU filed a World Trade Organization (WTO) case against China for its export restraints on raw materials including bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc.

It should be clear to any casual observer that China's going to great lengths to secure commodity supplies. Indeed, the global scale of China's coordinated commodity investments (at prices not seen since 2003) could be viewed as one of the largest strategic investments in history.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.






Featured Videos