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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (22444)	11/25/2004 10:11:02 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

More evidence of an unfolding Asian materials and input goods Train Wreck: Chinese maw devouring Japan's supplies The Asahi Shimbun Think Japan's manufacturers are all rejoicing at China's hypergrowth? Speak to executives at Daido Steel Co. The mood is a little more somber. In October, the Nagoya-based maker of special steel products was forced to cut output of some products used in casting molds for auto and electronics parts due to a shortage of rare metals essential to its manufacturing lines. Be assured, Daido's procurers are fighting tooth and nail for raw materials. But rare metals are hard to come by, due mainly to huge demand from Chinese factories. Global prices have soared since the latter half of last year. On five separate occasions this year, the Japanese government has been forced to dip into its own reserves of nickel, manganese and other rare metals to meet the shortfall in the international market. China may be booming, but it is also burning-burning resources, that is, and at a prodigious rate. In so doing, prices of key manufacturing materials, steel and crude oil among them, have risen to record levels. As a result, Japanese manufacturers who depend on these materials face spiraling supply costs. Due to fierce price competition, however, they can't pass these costs on to their customers. That's starting to hurt profitability. For now, Japan's warm embrace of China's economic expansion continues to dominate the headlines. Etsuhiko Shoyama, president of Hitachi Ltd., visited a trade fair in Shanghai in October and announced plans to invest no less than $1 billion (about 105 billion yen) in China over the next three years. Hitachi will plug its yen pipelines into nine promising sectors. It's little wonder China continues to enthrall Japan's manufacturers and suppliers. The fast-growing market of 1.3 billion consumers has proved instrumental in helping domestic companies shake off a decadelong recession. In fiscal 2003, Japanese investment in China totaled 355.3 billion yen, tripling the figure from three years earlier. Automakers, consumer electronics and machinery makers accounted for a significant portion of this outlay. Shiseido Co. is one of those making a big play on the mainland. Facing a saturated market at home, the nation's leading cosmetics maker is targeting annual sales of 100 billion yen in China in 2008, five times the current figure. Auto sales in China are expected to more than double to 10 million units a year by 2010, according to some estimates. Toyota Motor Corp. has taken its time gearing up in China. Mass production started in 2002 with sales of 50,000 units in an alliance with China FAW Group Corp. Japan's leading automaker is now getting into its stride, with plans to start production of high-end models, such as the Crown luxury sedan, as early as 2005. For some Japanese firms, the mainland drive is already bearing fruit. In Shanghai, Suntory Ltd. has overtaken a major local beer brewer to snag a leading market share of 44 percent. The downside of all this growth is starting to be felt on the home front, however. The consumption of steel products in China nearly doubled during the three years through 2003, resulting in a rise in international prices. The escalating price of crude oil is being driven by a number of factors, including the fighting in Iraq. But here again, analysts say, China has become a market mover. According to Marubeni Research Institute, global oil demand in 2003 was up 8.2 million barrels a day from 1995, and a quarter of the increase was attributed to growth in East Asia's awakening giant. China's gross domestic product stands at $1.4 trillion, accounting for less than 5 percent of the global total. However, increases in China's demand for aluminum and natural rubber gum account for almost half the global increases. The materials gold rush has resulted in year-on-year increases in Japan's corporate goods price index since March. According to a survey of about 300 companies by the Ministry of Economy, Trade and Industry, however, about 70-80 percent of automakers, electronics makers and other manufacturers are holding off on raising product prices because of severe competition in their markets.(IHT/Asahi: November 23,2004)