Morning Mumble: Any old iron (or old debts) & reality biting...

Sinosteel woes resurrect China debt concerns By Lucy Hornby in Beijing. What Lucy has missed is the significant of debt within the more private steel and iron ore traders. Sinosteel has been rumoured to be out of the money on a significant level of Iron Ore contracts. All priced around $105-120/t, so the bail out makes sense, especially at $79-80/t.

The problem is multiplying on the basis that Sinosteel supplies the indebted steel mills, that unsurprisingly, cannot make any viable monies at the current steel price. Steel production/demand is slowing, with China popping its head above 800m tonnes of steel this year, the growth has exponentially slowed and the price is slowly rebalancing in light of the drops in iron ore. So is the Chinese Gov+T going to bail out the mills to improve payments to Sinosteel? Not in the slightest, it will however take the loans on or ask the holders to roll the loans over for the larger mills/the ones not emitting the most polluting.

For those wanting to be baffled, Chinese Steel production was 272,8m tonnes in 2004 this year its near 800m/t. No wonder the iron ore price and investments have performed the way they have. My estimates look as though there's no demand above the 800m/t and more than likely 750mts. The figure is based on achievable growth rates. The IMF believe the Chinese "have many tools to maintain the growth rate well above 7 per cent next year" Rhee said. The word tool sums of what is required, healthy (to a degree) from an investment perspective, for sustainable foundation, most people will disagree. 

Thanks to the observant Roger Bade whom was the only one to highlight the story of Vale's 35 Mega-carriers, they've found a purpose for 14 of them . So to top off the Iron Ore saga, we have Vale reintroducing supply to China, also available here: Cosco-Vale deal to end giant ore carrier ban (South China Morning Post). With 11 ports able to handle these characters, what will the Chinese authorities find as an excuse? So with Chinese imports seasonally low, its set to be lower according to Shanghai Metals Market’s. Could September be the low for iron ore? Its more than looking that way...maybe contradicting my view of consolidating at $75/t longer-term.

Royal Mail Group (RMG), UK Mail Group and TNT Express have made it on to my Christmas list today with the top performing short of Sept. With all other carriers/couriers/postal type companies announcing issues i.e. TNT yesterday (TNT Express Link). Now what do traders want more than advance warning of printing cash? I'll quote TNT for parties to realise RMG was a sure bet....

"Since the interim results of July 28, 2014, overall trading conditions in Europe have deteriorated further and competitive pressures have increased. This means that it is no longer prudent to maintain our 2015 guidance – which assumed an economic growth rate in Europe of between 2 and 3% – of an adjusted operating margin of 8% for the combined Europe Main and Other Europe and Americas segments."

Wait the story doesn't end there...UK Mail Group Plc today announces...so it would have been rude not to be short DX Plc as well. 

Continuing yesterdays theme and ML Commentary, I think the market has woken up to the potential of SXX, with parties realises how big the global cabbage market is. On the back of yesterdays news, another further potential for offtake agreement to supply up to 500,000. The UK Gov-t now will be hard pushed to refuse the permission here, as viability is now met! 

On my gold longs, it was surprising to see the shift in Asia with Gold losing $13/oz, 1210.13$/oz this morning.

Initially I thought what were CNE (Cairn Energy) doing farming down Catcher, but when one engaged their brain (me), the CAPEX is reduced significantly. A clever play and congratulations to the management. 

Today I sold down the capital holding in Tung on today's market update. Having held on despite the peek at £4, I sold on the belief its prudent to take the capital off the table after rises. 

The main thought goes to BLT, they should get the award for how to destroy a share price by the lack of in-action on listing the "spin-off" in the UK as well. 

Atb Fraser

Rumours with the caveats of common-sense required: KMK are on the verge of signing a company making contract and BG Group may just improve its shareholders fortunes!