PPI

In September, the producer price index (PPI) for manufactured goods increased 3.5 percent over the year-earlier period, according to the National Bureau of Statistics (NBS). Of the total, purchasing prices of raw materials, fuels and power rose by 6.9 percent year on year.

Producer prices of capital goods registered a growth rate of 4.4 percent from a year ago, while those of consumer goods inched up 0.6 percent (see graph 1).

In September, producer prices of crude oil went up 22.3 percent over a year ago. Among refined oil products, prices of gasoline, kerosene and diesel edged up 14.9 percent, 16.4 percent and 13.2 percent, respectively, year on year.

During this month, producer prices of the coal mining and washing industry climbed 2.5 percent compared with the same period last year, of which those of raw coal went up 2.2 percent from a year ago. Prices of smelting and pressing of ferrous metals saw a decline of 2.1 percent compared with the same period last year, while those of smelting and pressing of non-ferrous metals rose 28.5 percent.

During September, purchasing prices of fuel power, non-ferrous metal materials and chemicals grew 10.9 percent, 38.8 percent and 3.9 percent, respectively, year on year, while those of ferrous metal materials slid 1 percent from a year ago.

From January to September, the PPI went up 2.9 percent compared with the same period last year and purchasing prices of raw materials, fuels and power increased 6.3 percent over a year ago.

Industrial Profits

In the first three quarters, the total volume of profits made by all state-owned enterprises as well as non-public enterprises with annual sales revenue exceeding 5 million yuan (industrial enterprises above designated size) stood at 1.3 trillion yuan, up 29.6 percent compared with the same period last year, said the NBS (see graphs 2 and 3).

During the January-September period, taxes paid by industrial enterprises above designated size totaled 968 billion yuan, growing 23.3 percent year on year. Of the total, state-owned and state-holding enterprises contributed 544.8 billion yuan, up 18.8 percent.

In the first nine months, the sales revenue generated by industrial enterprises above designated size reached 22 trillion yuan, up 26.3 percent year on year. Among this total, the amount earned by state-owned and state-holding enterprises hit 7.26 trillion yuan, up 20.3 percent.

By the end of September, stockpiles of finished products of all state-owned enterprises as well as non-public enterprises with annual sales revenue exceeding 5 million yuan were valued at 1.42 trillion yuan, a rise of 17.6 percent over a year ago. Of the total, those of state-owned and state-holding enterprises accounted for 383.7 billion yuan, up 11.8 percent from a year ago. The overdue receivables in industrial enterprises above designated size stood at 3.1 trillion yuan, growing 19.7 percent compared with the same period last year. Of this total, state-owned and state-holding enterprises had a share of 784.4 billion yuan, up 9.1 percent over the year-earlier period.

Corporate Commodity Prices

In the third quarter, corporate commodity prices monitored by the People's Bank of China, the country's central bank, were up 1.2 percent over the second quarter and rose 3 percent year on year (see graph 4).

In July, August and September, prices of agricultural produce went up 0.3 percent, 1.1 percent and 1.1 percent on a monthly basis and rose 3 percent, 4.2 percent and 5.6 percent, respectively, year on year (see graph 5).

In the third quarter, prices of iron ore gained 2.4 percent from the second quarter but dropped 0.4 percent from a year ago, while those of rolled steel were 4.4 percent lower than in the previous quarter and slid 4.8 percent compared with the same period last year. During this period, prices of non-ferrous metals climbed 6.8 percent over the second quarter and shot up 42 percent over the year-earlier period.

During this quarter, energy prices climbed 2.9 percent over the previous quarter and were 10.2 percent higher than a year ago (see graph 6).

In the third quarter, prices of building materials increased 1.8 percent over the previous quarter and were 3.5 percent higher than the same period last year. Of this total, cement prices went up 2.5 percent over the second quarter and increased 4.2 percent compared with the year-earlier period.

Iron Ore Market

The supply and demand at the international iron ore market was balanced, as the supply of iron ore increased and demand decreased, and the prices of iron ore on the international market will also regress to be reasonable, said Lu Jianhua, Director of the Department of Foreign Trade of the Ministry of Commerce.

According to Lu, China's imports of iron ore in the first three quarters stood at 247 million tons, a rise of 24.2 percent year on year, which was 7 percentage points lower than that in the same period last year. It was the first time that the growth rate of iron ore imports came under 30 percent.

It was predicted that total imports of iron ore in 2006 would hit 320 million tons, but the rate of increase would fall 12 percentage points. China's imports of iron ore have transitioned from high-speed growth into steady growth. The average price of iron ore in the first nine months was $62.70 per ton, down 7.2 percentage points.

Lu pointed out that the output of China's iron ore increased rapidly in 2006, which helped enhance the capacity of domestic supply and strengthen the industry's competitiveness. According to NBS statistics, China's iron ore output in the first nine months amounted to 406 million tons, surging 37.7 percent on a year-on-year basis. Now, the market price of Chinese iron ore shows a decreasing momentum.

Lu predicted that the iron ore market would see a new round of supply exceeding demand and that the price would come down. In recent years, continuous iron ore price hikes have driven up the investment and production of the mining industry worldwide, and the output of China's iron ore has increased by a big margin. Major mines in the world are expected to release their production capacity in the coming two years.