Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Reasons Why China Will Continue To Gobble Up Natural Resources

Companies / China Stocks Jul 15, 2009 - 03:20 PM GMT

By: Uncommon_Wisdom

Companies

Best Financial Markets Analysis ArticleTony Sagami writes: Alcoa is always one of the first companies to report its quarterly earnings, so the Wall Street crowd is typically very eager to hear what the aluminum giant has to say.


Well … Alcoa reported better-than-expected results, and that made the bulls very happy. As always though, the devil is in the details …

First, Alcoa lost a bundle of money — $454 million and a painful 44 percent drop in year-over-year earnings — so business still stinks … just not as bad as Wall Street was expecting.

Second, this is the third quarter in a row that Alcoa has lost money, so being an Alcoa shareholder hasn’t been rewarding. Alcoa was over $40 last summer but is now less than $10 a share.

And if it weren’t for China, Alcoa’s share price would probably be a lot lower.

In fact, China is the only region in which Alcoa expects to see some growth. Alcoa CEO Klaus Kleinfeld, said that while global demand for aluminum is expected to decline by 7 percent in 2009, but that figure would balloon to -10 percent if not for China.

That means that China is one of the few parts of the world where business is improving.

“China is clearly out of the woods. Things are bottoming out, and they are even coming back in some sectors,” Kleinfield said.

The underlying reality is simple — countries with growing economies consume lots of natural resources.

Aluminum isn’t the only natural resource that China is gobbling up. For example, China’s copper consumption grew from about 1.8 million tons in 2000 to nearly 5 million tons in 2008. China consumed 13 percent of the global supply of cooper in 2000, but increased that to 28 percent in 2008.

China is also the world’s largest consumer of zinc, lead, nickel, and aluminum in the world.

As I mentioned in my Saturday video update, China just spent $1.5 billion to buy a 17 percent stake in Teck Resources (TCK), a Canadian gold, copper, zinc, and coal mining giant.

What about energy? In 2003, China passed Japan to become the second-largest consumer of energy after the United States. That’s why the Chinese government said it will increase its strategic crude oil reserves by 160 percent to 270 million barrels in the next five years and spend $4.4 billion to build those storage facilities.

Two Reasons Why China Will Continue To Gobble Up Natural Resources

As an investor, you need to ask yourself whether or not China will continue to gobble up natural resources at that hungry pace?

The answer is ‘yes’ because of two things: (1) 1.4 billion citizens and (2) $1.9 trillion of cold hard cash that is burning a hole in the Chinese government’s pockets.

Whether you’re talking about basic materials, energy, or food, there is no question China is going to keep on consuming a bigger piece of the global natural resource pie and push the prices of those commodities higher.

What you need to do is get ahead of that Chinese buying binge and get ‘long’ whatever the Chinese are buying. In the case of my Asia Stock Alert subscribers, we already own stocks like Yanzhou Coal (YZC) and Sino Gold (SGX).

Don’t forget to connect the dots to other businesses that will benefit from China’s appetite for natural resources:

  • Shipping companies that deliver those natural resources to China i.e. Genco Shipping & Trading (GNK)
  • Construction companies that build the power plants i.e. ABB Ltd. (ABB)
  • Food companies that feed those 1.4 billion hungry mouths i.e. Zhongpin (HOGS)
  • Construction equipment makers i.e. Komatsu (KMTUY)
  • Alternative energy companies i.e. Trina Solar (TSL)
  • Companies that help provide clean water i.e. Duoyuan Global Water (DGW)

If you’re more of a mutual fund kind of investor, take a look at U.S. Global China Opportunity (USCOX), a China-focused mutual fund that has a heavy weighting of natural resources and commodity stocks.

There are lots of ways to profit from the coming natural resource boom. How you do it is up to you, but I strongly suggest that you get ‘long’ whatever the Chinese are buying. It should be one of the most profitable moves you could make.

Regards,

Tony

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.

Uncommon Wisdom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules