In the last three months, China is importing more and more raw materials, such as copper, iron ore, steel, nickel etc. The China PMI index rose the second time in a row. According to a news briefing on Monday, China's electricity consumption in Janunary was also rising by 4.4% compared to same period in 2008. It is clear that more signs are pointing to recovery in China. There has been a significant rise in Chinese demand for refined Copper imports since the last three consecutive months. Imports reached a record 211,527 tonnes in December 2008, up 89 percent more than December 2007 and 49 percent higher than November 2008. Many analysts are starting to believe China's stimulus package is working as planned, which signals to investors that US $787B stimulus will also work.
OK, Who is doing raw material business in China?
Rio Tinto (RTP), The company's products include aluminum, copper, diamond, coal, uranium, gold, borax, nickel, zinc, lead, silver, borate, potash. The company operates worldwide with a primary focus in Asia and North America. Its Asian division sees strong growth from China in the recently years. The compay is well positioned to benefit from China's first recovery in this recession as a world power.
Cliffs Natural Resources (CLF), The company produces iron ore pellets and supplies metallurgical coal to the steelmaking industry primarily in North America and Asia. The company also owns Portman Limited, an iron ore mining company in Australia. In addition, it has a 30% interest in the Amapa Project, a Brazilian iron ore project; and a 45% economic interest in the Sonoma Project, an Australian coking and thermal coal project. In the recent Q4 earning call, the company said: "we are maintaining the operating levels at over 8 million tons of production as we are seeing signs of demand on a customer-by-customer basis in China". The company realized a 73% increase in revenues from Asia-pacific, mainly from China. Also recently the company has reopened West Virginia coal mines as ore inventory comes down and demand is coming back.
Freeport-McMoRan Copper & Gold Inc. (FCX) The company engages in the exploration, mining, and production of mineral resources. The company's portfolio of assets includes the Grasberg minerals district in Indonesia; mining operations in North and South America; and the Tenke Fungurume development project in the Democratic Republic of Congo. FCX does not have mines in China, however with copper price firming in recent months and China demand rising steadily, FCX should be well positioned to benefit from China's stimulus package in 2009.
There are some other AG commodity plays which have a China connection, such as Potash (POT), Monsanto (MON), Mosaic (MOS). But these AG names are still unclear if they can benefit from China because China has not had a food shortage since 2003. So the upside may be limited.
Disclosure: no positions