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Iron ore - supply and demand rides again
Topic Started: 30 May 2014, 03:23 PM (44,272 Views)
Massive
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miw
5 Sep 2014, 02:41 PM
As one food importer said to me the other day, "nobody dares eat lobster these days".
not the best analogy... if i was in beijing id be hitting up this place for a go at its boston lobster mountain

http://www.smartbeijing.com/articles/dining/eat-it-all-the-boston-lobsters
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Bardon
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miw
5 Sep 2014, 02:41 PM
"nobody dares eat lobster these days".
That reminds me of when I lived in Indonesia during the fall of Suharto and the crash. I frequently eat lobster and following the crash I used to buy two for 1200% less (was paid in US$) and gave one to the waiting staff to eat.
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Jimbo
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miw
5 Sep 2014, 02:41 PM
Simply untrue. The affordable end of the spectrum has always been the main focus of construction. There just aren't any journalists who know how to tell the taxi driver the address so they can go have a look. The real story here is that the government is repurposing the luxury builders/developers to go build affordable dwellings. Which is why the index of real estate companies in China is up 22% since April.

I keep in touch with a few of the Chinese I worked with and they all state that their living standards have improved in leaps and bounds over the last few years.

The biggest change has been in working conditions and wages.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Ex BP Golly
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Massive
5 Sep 2014, 06:12 PM
not the best analogy... if i was in beijing id be hitting up this place for a go at its boston lobster mountain

http://www.smartbeijing.com/articles/dining/eat-it-all-the-boston-lobsters
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I shudder at the thought of how many illegal additives are in that mountain!
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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miw
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Ned Flanders
5 Sep 2014, 06:00 PM
How do you build an 'affordable' apartment without fixing the price at which the apartment can be sold? If wealthy people buy these 'affordable' apartments, it will push the price up, making them unaffordable. The government can build public housing, but how do they get the property developers to build apartments that they sell at a loss? Do they have a different land price for 'affordable' apartments?
The price is fixed when they are built. You have to qualify in order to buy one, and there is a multi-year waiting list for people who want to buy them. Once you have one, that's it for life, and I think you have to wait 10 years before you can sell it.

Massive
5 Sep 2014, 06:12 PM
not the best analogy... if i was in beijing id be hitting up this place for a go at its boston lobster mountain

http://www.smartbeijing.com/articles/dining/eat-it-all-the-boston-lobsters
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I'll have to go there and see if lobster is still on the menu. I note that this article was written in January. I had New year's lunch with the guy who said "nobody dares eat lobster" and at that time we were trying to work out what luxuries could be sought out for CNY 2015. His attitude has completely changed now.

Luxury catering is completely in the dumpster in Beijing at the moment. The good news is that the mid-range seems to be on on the rise again. (So my friend who owns a bar hasn't sold a bottle of Blue Label or Royal Salute in 6 months where she used to sell a couple a week, but the demand for a decent single malt and cocktails has gone up.)


Jimbo
5 Sep 2014, 07:09 PM
I keep in touch with a few of the Chinese I worked with and they all state that their living standards have improved in leaps and bounds over the last few years.

The biggest change has been in working conditions and wages.
Tallies up with what I am seeing as well. My friend with the bar used to employ (3 years ago) wait staff at CNY1200/month plus board for 12-hour shifts and 1 day off a month. Now they get CNY2500 + board+bonus, do 8-hour shifts, get 2 days off a month, and she still can't keep them.

But that's Beijing. I bet it's still closer to CNY1200 in Chongqing where half the wait staff in Beijing seem to come from.

If your mates work in manufacturing, they may well have seen even bigger increases. The drop in young working age population is really starting to bite.
Edited by miw, 5 Sep 2014, 08:11 PM.
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Ned Flanders
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miw
5 Sep 2014, 07:58 PM
The price is fixed when they are built. You have to qualify in order to buy one, and there is a multi-year waiting list for people who want to buy them. Once you have one, that's it for life, and I think you have to wait 10 years before you can sell it.
What you've described is not a market, it is public housing. How do private developers get paid the market price for a public housing apartment they sell at a loss?

Edit: Sorry, not trying to be a dick. I know how public housing works in Hong Kong and Singapore, I am trying to understand how the Chinese government gets private developers to build apartments they sell at a loss and stay profitable. Do they get the land for free?

Edited by Ned Flanders, 5 Sep 2014, 11:17 PM.
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" ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility."
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miw
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Ned Flanders
5 Sep 2014, 11:14 PM
What you've described is not a market, it is public housing. How do private developers get paid the market price for a public housing apartment they sell at a loss?

Edit: Sorry, not trying to be a dick. I know how public housing works in Hong Kong and Singapore, I am trying to understand how the Chinese government gets private developers to build apartments they sell at a loss and stay profitable. Do they get the land for free?
I wish I knew the exact way it works. But i *think* it is something like this:

The government issues a fixed-price contract to a construction company, who then sources the land, builds the apts and turns over to the govt, who sell them on to the eligible, along with arranging loans at very favourable terms as well. It is subsidised fairly heavily.

The companies have to buy the land from local govt, who are *supposed* to set aside a portion of buildable land for this kind of housing and sell it to the construction companies at a good price. My understanding is that this particular step has been a big stumbling block in the past. For some reason, land just wasn't available............ (because the local govt could get more money and, incidentally, bribes for selling land at higher prices for villas.)

No. It is not a market. It is a form of social housing. I think there will be 15M apts built under this scheme this year, and for the forseeable future. But adding capacity to this setup has apparently been a nice lifeline for the developers and construction companies because they do get their wedge out of it.
The truth will set you free. But first, it will piss you off.
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Ned Flanders
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miw
5 Sep 2014, 11:28 PM
No. It is not a market. It is a form of social housing. I think there will be 15M apts built under this scheme this year, and for the forseeable future. But adding capacity to this setup has apparently been a nice lifeline for the developers and construction companies because they do get their wedge out of it.
That might hold off rising unemployment for a while, but it otherwise sounds like a disaster.

Still, that doesn't change anything for the roughly 50 million empty apartments that have already been built.
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" ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility."
- Alan Glynn
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miw
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Ned Flanders
5 Sep 2014, 11:57 PM
That might hold off rising unemployment for a while, but it otherwise sounds like a disaster.

Still, that doesn't change anything for the roughly 50 million empty apartments that have already been built.
According to the latest survey I can find (August last year), there were approximately 49M dwellings "sold but vacant" and another 5M in inventory - completed but not sold. i.e. a total of 54M vacant private-sector apts. This sounds massive, but when you factor in the fact that China had 401M households, this comes to approximately 11.8% rate of vacant dwellings (54/(401+54)). By various estimates, nearly 10% of Australia's dwellings are vacant for one reason and another at any one time. I am assuming the vacancy rate on social dwellings is negligible because the demand exceeds supply by so much.

It's not a totally pretty picture, but you have to bear in mind that a new apt is automatically vacant for about a year because they are not liveable when they are completed. I also expect most of the 5M inventory to get soaked up over the next year or so, because while construction activity in the private sphere is down by 20% YoY, sales for the first half of 2014 are only down by 7% YoY and Q2 sales were up 3% on Q1. The increase in social construction means that overall construction activity is down 16% YoY. Hard times for builders, but definitely survivable.

Quite frankly I don't see the focus on social dwellings as a disaster. I see it as pretty necessary given that 200 million people, most of whom were previously subsistence farmers, will be needing new dwellings over the next decade. I don't see that it will keep up with demand. The average household size in China is 3.1 people and falling by about 5% per decade. That means that in the next 10 years 65 million new dwellings would need to be built just to cover urbanisation even if every dwelling built added one dwelling to the stock, which obviously is not the case, since most of these new dwellings are going in over the top of demolitions of old dwellings.

Ned Flanders
5 Sep 2014, 11:57 PM
That might hold off rising unemployment for a while, but it otherwise sounds like a disaster.
BTW rising unemployment is not a problem. At the moment there is a labour *shortage*. And every year the labour force gets smaller.
Edited by miw, 6 Sep 2014, 08:01 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Foxy
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Zero is coming...

Elastic
5 Sep 2014, 11:41 AM
Interested to see what will happen with Roy Hill.
Gina sure is running late for the party.
https://www.youtube.com/watch?v=3yza6XEFUfk
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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