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Private Briefingwith WILLIAM PATALON III, Executive Editor
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China announced industrial production data for October today (Friday), showing industrial value-added up 9.6% year-on-year, up from 9.2% in September and 8.9% in August.
This is great news for mining companies.
"Data out today provides convincing evidence that the modest macro recovery we've been anticipating is well underway," wrote Shanghai-based Andy Rothman, China Macro Strategist for CLSA Asia-Pacific Markets. "Industrial value-added, power generation, retail sales and new home sales all improved in October, while inflation remains so low that it is not a policy factor."
Infrastructure investment in October was up 24.9% year-on-year, continuing the rebound begun in September.
Rothman explained, "...this infrastructure rebound is the result of the government fixing approval and financing bottlenecks for projects originally scheduled to be built this year, not due to a stimulus."
Looking at prices, industrial input prices fell by 1.7% year-on-year in October, an improvement from the 4.1% decline seen in September.
"We are starting to see a bit of a bump up in both input and output prices, which is consistent with our view that the growth rate of industrial inventory levels has slowed and a modest macro recovery is underway," Rothman concluded.
This has led some economists to believe that this increase in industrial production in China will be positive for commodity prices, including Li-Gang Liu and Hao Zhou who work for Australian bank ANZ.
If this is the case, it'll benefit the global "mega miners" that have seen their share prices tumble since the slowdown in China began back in 2011.
BHP Billiton (NYSE: BHP), based in Australia, is the world's largest mining company and sells iron ore, base metals, potash, aluminum, metallurgical coal, thermal coal, manganese and oil products to China.
BHP is China's third-largest supplier of iron ore where growing stockpiles in China due to sluggish production had undermined pricing.
But this is starting to change.
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