Australia's Whitehaven warns weather to drive coal prices higher as quarterly output falls
April 29 (Reuters) - Australia's Whitehaven Coal (WHC.AX), opens new tab warned on Tuesday that weather conditions would put pressure on both metallurgical and thermal coal prices in the near term, while reporting a 5% sequential decline in its third-quarter production, ahead of analysts' expectations.
Parts of the northeastern Australian state of Queensland experienced heavy rainfall during the March quarter.
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"Recent weather-related supply disruptions and possible supply curtailments may create some upward price pressure," Whitehaven said in its statement.
Thermal coal, Whitehaven's primary product, is used for electricity generation while metallurgical is used in steel production.
The coal miner recorded managed run-of-mine (ROM) coal production of 9.2 million metric tons for the three months ended March 31, compared with 9.7 million tons reported in the previous quarter.
The production exceeded a Visible Alpha consensus estimate of 8.5 million tons.
The Narrabri mine, the company's only underground operation, reported a 31% fall in ROM production due to equipment failures, which took time to resolve, resulting in decreased output.
The overhaul move, which started in April, would take around eight weeks to complete, leading to lower production and sales volumes from the mine in the second half of fiscal 2025, the miner added.
Operations in Queensland — consisting of the Daunia and Blackwater mines — saw a 3% drop in ROM production during the March quarter to 4.5 million tons.
The Daunia mine's output for the period declined by 18% from the previous quarter, largely due to excessive rainfall in Queensland.
Blackwater mines, however, shrugged off seasonal weather woes to produce higher coal for the quarter.
Whitehaven acquired both the Daunia and Blackwater mines from global miner BHP (BHP.AX), opens new tab for $4.1 billion in 2024.
Shares of Whitehaven were up 3.8%, hitting a two-week high, as of 0059 GMT.
($1 = 1.5564 Australian dollars)
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4 hours ago
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Exclusive: Local Chinese governments promote 'zero mileage' used car exports, inflating sales, growth figures
BEIJING/SHANGHAI, June 24 (Reuters) - China's auto industry has inflated car sales for years through a burgeoning government-backed grey market that registers new cars right off the assembly line and then ships them overseas as "used" vehicles. These so-called "zero-mileage" cars have never been driven but they are being exported as used to markets like Russia, Central Asia and the Middle East, allowing Chinese automakers to show growth and to dispose of cars that it would be difficult to sell domestically, according to a Reuters review of government documents and interviews with five auto dealers and car traders. "This is the outcome of an almost-four-year price war that has made companies desperate to book any sales possible," said Tu Le, Michigan-based founder of consultancy Sino Auto Insights. The practice only gained national attention after the boss of Chinese automaker Great Wall Motor ( opens new tab criticized the sale of zero-mileage used cars within China in May. On June 10 the People's Daily newspaper condemned the sale of zero-mileage used cars domestically. The paper, which often signals the positions of China's top Communist Party leaders, blamed these fake used cars for driving down prices amid a withering domestic price war and called for "tough regulatory action" to restore order. But the export and sale of fake used cars is actively encouraged by regional governments in China, according to a Reuters review of state media reports and government documents. Local governments have embraced the practice as vital to meeting ambitious targets for economic growth set by Beijing, according to a Reuters review of local policy documents and state media articles. Reuters has identified 20 local governments in China - including major export hubs like Guangdong and Sichuan - that have described their support for the export of zero-mileage used cars in publicly available government documents. The tactics include creating extra licenses for the export of zero-mileage used cars, fast-tracking tax rebate claims, investing in export infrastructure, and funding networking events to encourage zero-mileage used-car exports, the government documents showed. The zero-mileage used car export market works like this: as a fresh car emerges from the assembly line, an exporter buys the car either directly from the automaker or from a dealer, registers it with a Chinese license plate, and then immediately marks it as a second-hand car for shipping abroad. Along the way, the automaker books the car as sold and logs the revenue. The show of support from local governments would make little sense anywhere outside China's centrally planned economy. But here, showing rapid growth in sales and employment can bring about promotion or unlock new funding while missing economic targets that trickle down from Beijing can lead to demotions of local officials. Because these export firms both purchase and sell a single car, the transaction value is double that of new or used-car purchases, so local governments court them to set up shop on their turf to quickly and artificially boost their GDP statistics, two Chinese auto industry executives said. The tactic is only one sign that China's car industry – the world's largest – is allowing production to outpace demand, driving a protracted domestic price war and spurring accusations of automotive "dumping" abroad. CuiDongshu, the secretary general of the China Passenger Car Association, praised the practice earlier this month during an online panel discussion hosted by Tencent's news portal, saying it was an alternative channel for automakers in China to access certain markets overseas that they may not be able to access due to rising trade barriers globally. He added that it also helped to satisfy overseas demand for China-made cars in countries where Chinese brands had yet to enter. Reuters contacted all the local governments mentioned in this article for comment but none responded. China's State Council and commerce ministry did not respond to a request for comment. Local government support has taken various forms, from simplifying paperwork, to allocating extra quotas for local vehicle registrations, to setting up free warehouses for zero-mileage used cars close to China's land and maritime borders, the Chinese documents showed. In February 2024, the planning commission of the southern city of Shenzhen, one of China's richest cities and a tech hub that is home to Huawei and Tencent, pledged to expand the export of zero-mileage used cars as part of efforts to reach an annual target to export 400,000 vehicles of all kinds. Nearby, the southern Chinese metropolis Guangzhou announced earlier this year it had created a mechanism to support and accelerate the export of zero-mileage gasoline vehicles by allocating extra quotas for local registrations that are otherwise capped to mitigate traffic congestion and air pollution in the city. Xinmi, a district of Zhengzhou, the provincial capital of China's third-most populous province of Henan, said in February that it helped local firm Xinjiasheng Supply Chain Management Co., Ltd to "promote zero-mileage used car exports, in order to use exports to drive domestic sales." Reuters found a dozen municipalities were boosting the export of zero-mileage used cars as part of their strategy or core to their plans for growth. Sichuan province, one of China's most important economic engines, said in October in a policy document it had supported the creation of an "online export ecosystem for zero-mileage used NEVs" by promoting e-commerce platforms like Alibaba International, where 100 Sichuan-based used-car sellers are now active. Xinjiasheng Supply Chain Management and Alibaba did not respond to requests for comment. The practice began sometime after 2019 when China allowed used cars to be exported to other countries. Now thousands of traders are involved in passing off new cars as used to qualify for the channel, according to Wang Meng, a consultant for the China Automobile Dealers Association. Of the 436,000 used passenger and commercial vehicles exported by China in 2024, 90% are estimated to be "zero-mileage," Wang said. China overtook Japan to become the world's largest exporter of new cars in 2023 and exported 6.41 million vehicles last year, according to the China Passenger Car Association. Of these, about 6% would have actually been zero-mileage used cars, according to Wang's estimates. Two dealers and two industry experts said the majority of zero-mileage used cars are gasoline powered and thus less desirable in the Chinese market. But electric vehicles, which are subject to generous government-funded purchase subsidies, also make up a significant portion. Huanyu Auto, a used-car seller in China's west metropolis of Chongqing, expanded to the zero-mileage used-car business in 2022. The returns were so good in 2022 and 2023 that they were able to earn 10,000 yuan ($1,400) in profit off an electric sedan that they had purchased in China for 40,000 yuan by selling it in Central Asia, said William Ng, director of the firm's international market division. Criticism has started to mount. 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Reuters
6 hours ago
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TRADING DAY All aboard the 'risk on' rollercoaster
ORLANDO, Florida, June 23 (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist Stocks flew, oil sank, and bond yields tumbled on Monday in a highly volatile start to the week, as traders digested Iran's response to the U.S. strikes on its nuclear sites and a string of dovish remarks from Federal Reserve officials. In my column today I ask a simple question, one which has several plausible answers: Who's selling the dollar? More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves All aboard the 'risk on' rollercoaster Early on Monday, oil prices were up 6% at a five-month peak on fears that Iran could seriously disrupt global crude supplies by closing the Strait of Hormuz. Several Middle East countries closed their airspace, and the dollar was rallying strongly. The reversal by the close of U.S. trading was remarkable - oil fell 7% and broke below its 200-day moving average, stocks closed firmly in the green and the dollar ended lower. What was the catalyst? There were probably two. The first was Tehran's response to Washington's attacks on its nuclear facilities on Saturday. Iran attacked a U.S. military base in Qatar, but took no action to disrupt oil and gas tanker traffic through the Strait of Hormuz. Oil's stunning 13 percentage point swing on Monday was an indication of the premium that had been built into the price on fears that global supply could be disrupted. If supply is maintained, the collective sigh of relief will extend to businesses, households, and policymakers around the world. And this is where the second catalyst comes in - inflation expectations and monetary policy. Two Federal Reserve officials struck a dovish tone in their public remarks on Monday, Chicago Fed President Austan Goolsbee and Vice Chair for Supervision Michelle Bowman. They come on the heels of Governor Christopher Waller on Friday. Goolsbee and Waller are perhaps the two most dovish of all the Fed's 19 policymakers, while Bowman has for years been at the opposite end of the 'hawk-dove' spectrum. But on Monday she said she would consider voting for a rate cut as early as next month as long as inflation pressures remained contained. If the worst of the oil price spike has now been and gone - that's a big 'if', given how fragile and fluid the situation in the Middle East is - then disinflationary forces and soft growth and labor market dynamics could take on more significance for policymakers and investors alike. That's all very hypothetical at this stage, but Monday's sharp moves are an indication of where positioning and sentiment have been building in recent weeks. Next up is Fed Chair Jerome Powell, who delivers his semi-annual testimony to Congress on Tuesday and Wednesday. Will he nod to the Waller-Goolsbee-Bowman view, repeat the hawkish signals from last week's revised 'dot plot', or hold the narrowing middle line between the two? Who's selling? Breaking down the dollar's breakdown With the dollar poised for its worst first-half performance since 1986, the selling may seem to be coming from everyone, everywhere, across every asset class. To some extent, that's true. Investors globally appear to be gradually reducing their exposure to dollar-denominated assets, driving the greenback down to its lowest level against a basket of major currencies in three and a half years. But some pressure points are greater than others. Unsurprisingly, non-U.S. investors are responsible for the bulk of the selling, with equity-related selling pressure concentrated among European investors and fixed income-based selling mostly coming from Asia. According to Bank of America's FX strategy team, European "real money" investors - institutions like pension funds and insurance companies - are the main drivers of the dollar's selloff in the second quarter, slashing their dollar positioning to the lowest since 2022 in a matter of weeks. But the story might not be so straightforward. While European investors increasing their dollar hedge ratios have garnered much attention recently, research shows that most of the dollar's average daily declines in the last few months have come in Asian trading hours, suggesting Asian holders of U.S. bonds may also be increasing their dollar hedges. So which is the bigger drag on the dollar: equity-led geographic diversification or fixed income selling? And where is the selling mostly coming from: Europe or Asia? At first glance, one might pin the blame on equities, as foreign holdings of U.S. stocks are larger than their U.S. debt assets in nominal terms. But percentage-wise, overseas investors' footprint in the U.S. fixed income markets is larger. Foreigners own just over $31 trillion of U.S. securities, with $17.6 trillion in equities and $13.6 trillion of bond holdings, according to the Bank for International Settlements. That represents around 18% of the overall U.S. equity market, compared with 21% of the U.S. agency and corporate bond market and a third of the U.S. Treasury market. Analysts at UBS estimate that euro zone investors account for 25% of the foreign-owned U.S. equity universe, having loaded up on U.S. stocks in recent years. This makes the dollar particularly vulnerable if Wall Street continues to underperform European and Asian markets, they reckon. Breaking down these exposures even further, they find that foreign investors' total net unhedged dollar asset exposure is $23.5 trillion. Of this, investors in G10 countries hold $13.4 trillion, with $9.3 trillion in equities and $4.1 trillion in fixed income. These are vast numbers, and it wouldn't require much of a switch to trigger large cross-border flows. UBS calculates that a hypothetical 5% reduction in G10 countries' dollar position would equate to around $670 billion of dollar selling. Most G10 countries, of course, are in Europe, so the bulk of that selling would come from there. While European investors have mostly been unloading equities thus far, it's good to remember that the region's investors significantly increased their exposure to U.S. bonds over the last decade too, particularly the 2014-2022 years when the European Central Bank's main interest rates were negative. UBS analysts estimate euro zone investors bought $3.4 trillion in foreign debt since 2014. So even a modest rebalancing away from U.S. bonds could have a meaningful impact on prices. Ultimately though, Asian investors still appear to wield more muscle in the U.S. bond market, owning around a third of foreign-held U.S. Treasuries and agency debt. And that figure is probably much higher given that euro zone, Caribbean and UK holdings include assets held on behalf of Asian countries, notably China. Up until this point, there has been no wholesale dumping of U.S. assets, and neither is there likely to be. But it is notable that U.S. assets are increasingly being held by private sector investors, who have replaced central banks as the main buyers of U.S. assets in recent years. The private sector is typically considered more price-sensitive than the official sector. That means these positions may prove less sticky than in the past, especially if the idea of waning "U.S. exceptionalism" truly takes root. What could move markets tomorrow? Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.
Reuters
9 hours ago
- Reuters
Escalating Hormuz tensions drive up Middle East war risk insurance costs, sources say
LONDON, June 23 (Reuters) - U.S. and Israeli attacks on Iran and Tehran's reprisals have doubled the price of insuring shipments to the Middle East and the Gulf in the last week, insurance sources said on Monday. War risk insurance premiums for shipments to the Middle East Gulf have jumped to 0.5% from around 0.2-0.3% a week ago, as risks grow to the critical Strait of Hormuz, the sources said. The cost of a seven-day voyage is based on the value of the ship and the increase will add tens of thousands of dollars each day in additional costs. While underwriters typically price risk and rates individually, the current 0.5% level reflected rates on Monday, the sources told Reuters and The Insurer, a Reuters publication. "The position (on rates) is subject to constant change," said David Smith, head of marine with insurance broker McGill and Partners. Iran carried out a missile attack on a U.S. airbase in Qatar on Monday after the U.S. bombed Iranian nuclear sites at the weekend. The conflict has raised concerns Iran could close Hormuz, the strait between Iran and Oman through which around 20% of global oil and gas demand flows. That has spurred forecasts of oil surging to $100 a barrel. Shipping rates for supertankers, which can carry 2 million barrels of oil, have also soared, more than doubling in a week to over $60,000 a day, freight data shows. War risk rates have hovered around the 0.3% level in the Gulf for many months. Rates in the Red Sea area spiked to 1% in 2024 after Iran-backed Houthis launched attacks on commercial ships which they said were in solidarity with Palestinians fighting Israel in Gaza. War risk rates for Israeli ports have soared in recent days, quoted as much as 1%. London's marine insurance market opted on June 18 not to widen waters around the Gulf deemed high risk, which is closely watched by underwriters. "The listed areas have been left unchanged as ships calling or transiting most of the Middle East already have to notify underwriters, who can then assess such voyages on their merits," said Neil Roberts, secretary of the Joint War Committee, which comprises syndicate members from the Lloyd's Market Association and representatives from the London insurance company market.
