Published at 04:08 (GMT) 23 Jul
WSJ: Japanese trading houses Itochu Corp and Sumitomo Corp are seeking to sell a stake in an Australian coal project, the latest example of overseas investors scaling back mining bets amid a deep downturn in commodity prices.
Itochu and Sumitomo have hired advisers to sell a combined 45% interest in the Glencore-run NCA Project, which includes the Newlands and Collinsville mines in central Queensland state and access to a berth at the Abbot Point coal port.
Prices of Australian thermal coal are hovering around US$70 a metric ton-well down on 2008 highs above US$190-and analysts say many mines in Queensland are losing money. The downturn in prices has led many investors to scale back exposure to Australian coal either through closing mines or selling assets.
On FX, some focus on the above, as major firms offload, or divest some Aussie mining projects/ stakes. Could see outflows from AUD - so 2-way flows instead of just inflows into AUD. Good to watch. AUD/USD at 0.9430-35, inflated by CPI data to 2-week highs of 0.9439 from 0.9385-90. AUD still vulnerable to downside as CPI rise is still within 2-3% RBA target, and RBA will still pause, with possibility of rate cuts - given concerns over impact of mining slowdown, economy - as seen above.
Good to note post UK CPI GBP moves, which AUD may mirror. GBP extended gains to 6-year highs of 1.7192 from 1.7075-85 on July 15 after the higher 1.9% UK CPI vs 1.6% expected, though still below 2.0% BoE Target. Only to see GBP fall back to 2-week lows of 1.7036 on Friday as BoE seen in no rush to hike Repo Rate.
So AUD/USD vulnerable as well, as RBA will not hike rates anytime, and may still cut Cash Rate on growth, China concerns.
AUD/JPY at 95.60-70, vulnerable to any Japanese trading houses divestment in Aussie projects. Offers 95.80-00, bids at 95.20-30, stops below 95.00. Vulnerable to any risk aversion. WL
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