Miners burnt as China cools

Investors’ dwindling appetite for risk has prompted a sharp sell-off in commodity markets, with Australian miners expected to come under pressure as market prices fast approach their costs of production, according to the Australian Financial Review.

Metals and energy prices continued to tumble after a week of poor economic data and a failure to produce more stimulus spending from the world’s two biggest economies, the US and China.

Deutsche Bank chief economist Darren Gibbs said actual demand for thermal coal remained weak at China’s biggest power stations, indicating China could be well stocked.

“Weekly coal consumption by the major Chinese power companies was still down on a year earlier in the first three weeks of June,” he said.

Weak energy markets have extended their influence across thermal coal, with Australian exporters likely to feel more margin pain once the minerals resource rent tax is introduced on July 1.

“There are some commodities – including thermal coal – that are approaching key cost support levels,” Citigroup analyst Daniel Hynes said.

Labor caves in to smelter

The federal government is expected to announce a $42 million payment to Alcoa within days to help keep open its Point Henry aluminium operations near Geelong, Victoria, and save 600 jobs, according to the Australian Financial Review.

It is believed the bailout, to be delivered this financial year to protect the budget surplus next year, is more than enough to cover the plant’s carbon tax obligations and will also help offset the impact of a high dollar.

Sources said Alcoa demanded the assistance ahead of the start of Labor’s emissions reduction scheme next Sunday.

But Industry Minister Greg Combet said Alcoa’s difficulties had nothing to do with the carbon tax.

Business fears $23 carbon starting price

A large majority of companies are critical of key design features of the carbon tax although there is still support for action on climate change, according to the Australian Financial Review.

A survey of companies that will pay the tax from July 1 and detailed interviews found businesses divided in their response to the tax, with their strategies running the gamut from virulent opposition to embracing a low­carbon future.

The $23 fixed starting price is the biggest bone of contention, with even companies positive about climate action, such as Toyota, pointing to the big gap between Australia’s carbon price and the market price under the European trading system.

But corporate responses to the tax are as varied as business itself, with even companies in the same industry taking apparently opposite positions.

Resources sector slows down

The number of resource projects under construction will drop from 98 now to just 13 by 2015 if the worsening global outlook prevents further projects getting the go-ahead, according to The Australian.

This estimate by the federal Bureau of Resources and Energy Economics underlines the vulnerability of the investment boom that is lifting Australia's economy above its global peers.