|Bid||35.100 x 0|
|Ask||35.150 x 0|
|Day's range||34.900 - 36.100|
|52-week range||24.350 - 40.650|
|Beta (5Y monthly)||0.60|
|PE ratio (TTM)||29.98|
|Earnings date||26 Aug 2020|
|Forward dividend & yield||0.20 (0.56%)|
|Ex-dividend date||05 Jun 2020|
|1y target est||28.62|
(Bloomberg Opinion) -- After years of slow deterioration, diplomatic relations between China and Australia have taken a sharp turn for the worse. The disputes range from pressure on journalists, to spying allegations, to an investigation of Australia’s wine exports. Beijing holds most of the cards, but Australia does have one doomsday weapon at its disposal. It’s better not used.The conflict echoes China’s widening disputes with other countries. Two journalists working for Australian Broadcasting Corp. and the Australian Financial Review newspaper fled China this week, after a third Australian working for state-run China Global Television Network was detained. For their part, Australia’s intelligence services have interviewed at least one Chinese journalist in a probe of alleged covert foreign influence of a state legislator, according to reports in Xinhua news agency and the Sydney Morning Herald. Recent years have been a minefield of clashes over Australia’s foreign-influence laws, China’s human rights record and response to Covid-19, and even competitive swimming.These diplomatic disagreements are spilling into the economic arena. Having slapped tariffs as high as 80.5% on Australian barley exports in May over alleged dumping, China has now started an equally improbable investigation of the wine industry. Canberra last month prevented China Mengniu Dairy Co. from buying local milk, juice and beer producer Lion from its Japanese owner Kirin Holdings Co. for reasons that aren’t really clear. Through all this, the bedrock of their trading relationship has been surprisingly solid. China's imports from Australia are up 75% year-to-date on the same period of 2016, the last time there was a meeting between the country’s leaders.The core of this is a product that’s absolutely central to Beijing’s ability to direct the Chinese economy: iron ore. The 700 million metric tons China imported from Australia over the last 12 months is more than double the levels that prevailed when relations were stronger in the early 2010s. That’s a source of surprising vulnerability for China — but like any nuclear option, it’s a weapon that Australia would be wise not to use.As we’ve written in the past, pushing the button on giant engineering and real estate projects is to China what cutting interest rates is to other countries. Private sector-dominated manufacturing and retail sectors are still reeling from the impact of the coronavirus, with fixed-asset investment down on levels that were already subdued last year. State-dominated construction and engineering sectors such as power generation and real estate are where all the growth is. Keeping the economy ticking over through 2020 is going to involve adding further to that teetering pile.This economic machine runs on steel — and Australia has a crucial role there. Its mines provide about two-thirds of China’s iron ore imports, as well as a significant chunk of the coking coal used to turn that ore into usable metal. Were Canberra ever to attempt to turn that supply chain into a weapon in the diplomatic spat between the two countries — by imposing spurious paperwork, for instance, as Chinese customs officials applied to Australian coal last year, according to some reports — it would be aiming at the heart of Beijing’s economic management.China’s addiction to industrial stimulus and Australia’s desire to work as its dealer are unhealthy dynamics for both economies. Still, it’s notable that their current fight has focused on agricultural and food produce, which attracts a lot of attention but ultimately counts for relatively few dollars. That's probably because touching heavy industry would represent a doomsday weapon that would be quite as damaging to an export-dependent Australia as it is to an import-hungry China.Australia has spent decades building up a reputation as a reliable supplier of raw materials to the rest of the world. As the U.S. learned the hard way, consumers of commodities have alternatives if they don’t trust their trading partners. American attempts to use soybeans as a weapon of trade diplomacy in the 1970s encouraged Japan to foster a rival export industry in Brazil. Similarly, a consortium of Chinese companies in June signed a deal to develop the Simandou iron ore project in Guinea, a country that might be more reliably compliant than Australia if relations with Canberra sour further.Economists and historians have often argued that war is impossible between deeply integrated capitalist economies because of the countervailing forces encouraging commerce. The expectation of future trade is “essential for peace by trade to work,” said Erich Weede, a professor at the University of Bonn. Amid the rapid decline of diplomatic relations between Australia and China, the ongoing strength of imports and exports should be a source of hope. Trade with a foreign country leaves you exposed and dependent upon trust, but that’s an attribute that both countries need to restore at the moment, not flee from. When the dust stirred up by the wolf warriors and trade war-mongers dies down, China and Australia — and the U.S. — have far more to gain from working together than from threatening each other.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Australia, the most China-reliant economy in the world, is bracing for further disruptions to its commodities sector amid tensions with Beijing that’ve already jolted beef, wine and barley producers.The trading partner is Australia’s key market for goods exports, accounting for about 39% of all shipments in the most recent fiscal year, according to Bloomberg Economics. Its dependence puts products including coal and dairy, where China has domestic supplies or alternative import sources, at risk.“China has got a very clear strategy to retaliate for Australia’s political views,” said Tim Murray, managing partner of China-focused J Capital Research Ltd., who previously worked for Australia’s trade department. “That hurts us significantly because they are key exports for us, but they’re not key imports for them.”Ties between the trading partners deteriorated after Australia’s government called for an independent inquiry into the origins of the coronavirus pandemic. Australia has also banned Huawei Technologies Co. from participating in its 5G network and passed a law to stem foreign interference that was aimed at China.Here are the key commodities involved, and the prospects that they could be ensnared in the dispute:CoalCoal has been a consistent target in trade tiffs, most recently in 2019 when shipments became subject to port delays. It’s one of the few commodities in which China is largely self-sufficient, as it mines and burns about half the world’s supply, and its power plants use imports for just a small fraction of their fuel.Australia has accounted for less than a quarter of China’s thermal coal imports this year, behind Indonesia which sells cheaper, lower-quality supplies. China is also supporting companies in opening more advanced coal mines so it can boost its production capacity in the coming years, making imports an even more susceptible target to trade disputes.Higher-quality coking coal is a different story, as China’s mines produce less of it and the country’s steel-making giants are still reliant on imports. Australia is a dominant supplier in that market, accounting for more than 60% of the total this year.DairyAustralia’s dairy industry is on high alert, after people familiar suggested it could be marked for trade restrictions. Evidence of strain has already emerged after China Mengniu Dairy Co. last month scrapped its plans to buy Kirin Holdings Co.’s Australian beverage unit after being told the deal would likely be blocked.China is the world biggest importer of dairy products and was Australia’s top export market in 2018-19 after doubling over five years. Demand has been weaker this year amid coronavirus lockdowns, which have curbed restaurant dining.Recent price weakness is expected to continue for Australian and New Zealand dairy exporters for some time, as China’s domestic production ramps up, Rabobank said in August. China’s milk output is tipped to have risen 4%-4.5% in the first half of this year, and its dairy herd is forecast to grow in the coming years, based on the number of projects reported to be in planning and construction.Iron OreWhile the state-linked Global Times earlier this year raised the possibility that Australian iron ore supply could be targeted, it’s likely to be low on the list of possibilities. The country dominates China’s iron ore supply, accounting for more than 60% of its imports, with next-biggest supplier Brazil making up less than 20% so far this year.In fact, the trade is booming, with China importing a record amount of Australian iron ore in July. Still, investors will keep a close eye on any sign of tensions spilling over as even small moves to restrict the movement of Australia’s most valuable commodity -- worth about A$100 billion this fiscal year -- would send a powerful signal.LNGAustralia has accounted for just less than half of China’s liquefied natural gas imports this year. The proportion has grown in recent years as new Australian projects came online, including two in Queensland in which Chinese oil majors are partners.Those partnerships, along with long-term contracts that obligate Chinese buyers to purchase millions of tons of LNG a year from Australia well into the 2030s, make the trade flow a more complicated candidate for disruption.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- China Mengniu Dairy Co. scrapped its plans to buy Kirin Holdings Co.’s Australian beverage unit after being told the deal would likely be blocked, amid increasingly strained relations between Canberra and Beijing.Australia’s Treasurer Josh Frydenberg said in a statement he’d informed the Chinese dairy giant he’d reached a preliminary view that the proposed purchase “would be contrary to the national interest.”The companies reached a deal last year for the Chinese firm to buy Kirin’s Lion Dairy & Drinks business for about 45.6 billion yen ($430 million). The companies said in separate statements Tuesday that they were ending the agreement as it hadn’t received regulatory approval.Strained TiesThe scrapped deal is being viewed in local media through the prism of strained diplomatic ties between Australia and China. Relations between the two countries have been fraught since the government in Canberra barred Huawei Technologies Co. from participating in Australia’s 5G network. China also responded angrily after Australia’s push for an independent inquiry into the origins of the Covid-19 outbreak.China has started an anti-dumping investigation into Australian wine, halted some beef imports and placed tariffs on Australia’s barley exports after the conclusion of an earlier anti-dumping probe. It has also cautioned its citizens against studying in or holidaying in Australia.“It was probably politically untenable for Frydenberg to approve a deal of this size at a time when China is sanctioning Australia on multiple fronts,” said Richard McGregor, a senior fellow at Sydney-based think tank the Lowy Institute. “It’s another spin in the cycle downwards in these nations’ relations.”The collapse of the Kirin deal shows a reversal of sentiment from a year ago, when Mengniu won approval to buy organic infant formula maker Bellamy’s Australia Ltd. for A$1.5 billion ($1.1 billion). The Australian Competition & Consumer Commission said in February that it wasn’t opposed to the Kirin deal.Chinese Foreign Ministry spokesman Zhao Lijian declined to comment on the specifics of this case, but said, “We hope Australia will provide a fair and unbiased business environment for Chinese companies operating there.”Australia announced on March 29 that due to the national security impacts of the coronavirus pandemic it would tighten restrictions on foreign takeovers, with all deals needing government approval, regardless of size. Covid-19 has dealt a heavy blow to Australia’s economy and unemployment.On June 5, Scott Morrison’s government announced it would seek to implement permanent tougher screening measures on foreign investors seeking to buy sensitive assets from Jan. 1. Yet to be legislated, the changes would see telecommunications, energy, technology and defense-manufacturing companies be included in the zero-dollar threshold for screening.Tougher ScreeningThe changes will include a new national security test and give the treasurer last-resort powers to force asset sales.Australia isn’t alone in ramping up its foreign investment screening -- in recent years, economies including the U.S., Japan and the European Union have toughened their own laws to protect national security.Mengniu said it was disappointed the transaction could not be completed, as the Lion business created potential to build up its dairy supply chain in Oceania and Southeast Asia. The company’s shares fell as much as 2.7% in Hong Kong trading Tuesday before closing 0.7% lower.“Mengniu has a stable dairy supply chain in Australia and New Zealand, and will continue to pursue its international strategy and take advantage of the existing resources in both domestic and international markets,” the company said in a written statement to Bloomberg.Mengniu has been eyeing overseas acquisitions as China’s appetite for milk grows with its middle class. At the same time, China has been seeking to boost the industry and restore confidence after a milk scandal in 2008 killed six children and poisoned 300,000 others.The termination of the Lion deal will slow Mengniu’s push to go upmarket, said Bloomberg Intelligence analyst Kevin Kim.“Geopolitical tension can drag on Chinese companies’ overseas M&A attempts, especially if the targets are based in countries where China faces political tension,” Kim said. “For overseas deals to be successful, the general opinion is very important, especially for critical sectors for the nation.”Kirin shares slipped 1.2% in Tokyo.“Although this was an unfortunate outcome, we’ll continue to discuss the best potential scenario for Lion,” a Kirin spokesman said.McGregor said the development “signals to China that any substantial investment in Australia will come under increased scrutiny and be seen in the context of the tensions in the bilateral relationship” -- resulting in a possible worsening of ties.“China will probably see this as another example of Australia’s bad faith,” he said.(Adds comments from Chinese foreign ministry spokesman in eighth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.