Aurelia Butler

BEIJING (Reuters) – Debt problems at a major Chinese property developer have now spilled over into a vital artery of the nation’s industrial engine – the steel sector – and started to ripple through to other critical parts of the world’s second-largest economy. The spreading balance-sheet crisis at real estate firms is a warning for policymakers as a swing in the fortunes of the steel industry would have significant repercussions for China’s economy, with cement, glass, and household appliances all vulnerable to demand drops.Already, steel prices are down from their record highs seen earlier this year due to easing demand from construction activities, which account for over half of the metal’s consumption, while steelmakers’ share prices have also been hurt.Steel’s acute sensitivity to the ebbs and flows in construction and manufacturing makes it a closely-tracked bellwether for China’s economy, which has started to slow down from the second quarter. Steel firms are also massive employers that support a vast supply chain. Hitting steel operations, real estate developers have dialled back investment in projects to conserve cash in a sector squeezed by tighter borrowing regulations that have engulfed indebted companies, most notably China Evergrande Group. “We normally stockpile steel products in winter at relatively lower prices and sell them after the new year holidays when consumption resumes. But we are holding off this year,” said Qi Xiaoliang, a Beijing-based steel trader. “There’s still uncertainty in the real estate market for 2022 and the situation is not expected to be fully reversed for another six to 12 months,” he added. In the final quarter of 2021, the property market took a further hit as the unease in the sector shook already weak buyer sentiment, with unsold housing stock in China’s 100 biggest cities reaching a five-year high in November. Demand for homes is expected to ease further in 2022, hitting downstream manufacturers of household products. Cement production, another construction material, was down around 16% for September-November year-on-year, and was lower versus the same period between 2017 and 2019. Demand for earth excavators has also dropped off in recent months.The broadening spillover impact of the property downturn was also seen elsewhere. In the appliances industry, for example, monthly refrigerator output has been falling since May through to November on an annual basis. REVERSAL IN FORTUNESSteel producers were among the best performers of the entire Chinese economy over the first three quarters of 2021, with China’s 28 major listed mills pocketing over 106 billion yuan ($16.61 billion) in net profits, up 174% year-on-year and 129% higher than in pre-pandemic 2019.But the boom times in the steel sector are over. The paralysis that has struck China’s mammoth construction industry is triggering a rare contraction in building activity across the country. New construction starts by floor area have contracted from a year earlier since July – their longest stretch of declines since 2015. The slowdown in the real estate sector has dented China’s monthly crude steel output by more than 20% since September. The closely-tracked steel equity instruments and commodities futures have captured the reversal of fortunes. After gaining roughly 90% through mid-September, the CSI steel equities index has plunged 27% since, while futures prices for construction materials rebar and wire rod have tumbled 24% and 31% respectively from their historical highs to erase almost all their gains this year. As steel producers hit the brakes, the key inputs used in steelmaking have also taken a shellacking, with Dalian Commodity Exchange iron ore futures down more than 45% from their record in May. Gross profits for steel rebar have started to trend down from the peak seen in late September.UNCERTAIN OUTLOOKProperty-related sectors are the single biggest contributor to China’s economy, accounting for 28% of GDP in 2021, down from a recent peak of 35% in 2016. The GDP share is broken down into a 7% direct contribution from property and a 21% indirect contribution from construction and through sectors along the supply chain such as machinery and equipment, according to Moody’s (NYSE:MCO). A government industry consultancy forecast China’s steel demand will slip 0.7% in 2022, following an expected 4.7% decline this year.[nL1N2T102U]Looking ahead, any extended credit constraints “could reduce demand for metals used in construction as developers lose the ability to pay for raw materials at high prices,” analysts with Fitch Solutions wrote in a recent note to clients.If the contraction in construction spending endures, it will then affect the producers of appliances and white goods that constitute a key part of China’s critical manufacturing base. “Property construction has been the engine of China’s economy for over two decades now,” said Frederic Neumann, Co-Head of Asian Economics Research at HSBC. “With building activity likely to remain depressed for quite some time, growth will inevitably shift down a gear or two.” ($1 = 6.3813 Chinese yuan renminbi) More

(Reuters) -Top asset manager BlackRock Inc (NYSE:BLK) on Tuesday said it wants U.S. companies to aim for a board that is 30% diverse and, for the first time, contains at least one member from an under-represented group.In new guidelines explaining its priorities for 2022 at portfolio companies, posted on its website, the $9.5 trillion asset manager also gave companies new guidance for reporting on climate change. But it said some continued investment in fossil fuels will be needed.Together, the updates showed the influential New York-based firm taking steps similar to other big asset managers pressing portfolio companies on environmental, social and governance considerations. Earlier this month Goldman Sachs Group Inc (NYSE:GS) said it wants big companies to have at least one director from an under-represented group, citing the growing availability of corporate disclosures showing personal diversity data.Boards have been bolstering their diversity by adding new members in recent years, in line with growing attention to the subject from investors, employees and customers.Among S&P 500 companies, 21% of directors are either Black, Asian or Hispanic, according to executive recruiting firm Spencer Stuart. Women now make up 30% of all S&P 500 directors, Spencer Stuart said.The number of U.S. companies disclosing the data likely will keep growing, a BlackRock spokesperson said. According to language sent by the spokesperson, directors from under-represented groups can include racial or ethnic minorities, people who identify as LGBTQ+, people with disabilities and veterans.BlackRock’s guidelines did not specify when it would vote against directors at companies that did not meet its new standards, but they indicated the focus would be on large companies first. A lack of diversity was a major reason the firm voted against more directors in 2021 than in prior years. MORE REPORTING ACCEPTEDOn climate matters, BlackRock previously had pressed companies to report their emissions and other factors under the SASB standards of the Value Reporting Foundation. BlackRock said on Tuesday that companies may use other standards, noting the work of a new international board announced at the United Nations climate summit in Scotland last month.BlackRock also said it would encourage companies to show how their business plans would be resilient amid efforts to limit global warming, and noted the opportunities offered by new energy sources.But it added: “We also recognize that some continued investment is required to maintain a reliable, affordable supply of fossil fuels during the transition.” Companies should disclose how their capital allocation matches emissions reduction targets, BlackRock said.On corporate structures, BlackRock said companies looking to convert to new forms should put the issue to a shareholder vote. Some companies are shifting to structures like “public benefit corporations” to take account of the interests of employees and other stakeholders, a move backed by a growing number of advocates. More

LONDON (Reuters) -British Brexit minister David Frost resigned on Saturday over disillusionment with the direction of Boris Johnson’s government, dealing a major blow to the embattled prime minister https://www.reuters.com/world/uk/british-pm-johnson-faces-rebellion-parliament-over-covid-measures-2021-12-14 as the Omicron variant sweeps the country.The resignation of Frost, a core architect of Johnson’s tumultuous Brexit strategy, raised questions about the future tone of the EU divorce and the immediate course of talks on Northern Ireland. It also added to a sense of turmoil in Johnson’s Conservative government.Frost said he was confident that Brexit was secure, but said he had concerns about the government’s direction.”You know my concerns about the current direction of travel,” Frost told Johnson in a letter released by Downing Street. “I hope we will move as fast as possible to where we need to get to: a lightly regulated, low tax, entrepreneurial economy, at the cutting edge of modern science and economic change.”His resignation was first reported by The Mail on Sunday, which said it was triggered by Johnson’s tougher COVID restrictions but also by a broader discontent with tax rises and the cost of environmental policies.Frost said he had agreed with Johnson earlier this month to leave in January, but because his move had been leaked it should happen with immediate effect.”We also need to learn to live with COVID,” Frost said. “I hope we can get back on track soon and not be tempted by the kind of coercive measures we have seen elsewhere.”Johnson said he was sorry to receive Frost’s resignation.The departure of the British government’s most senior Brexit negotiator comes on top of warnings from some of his Johnson’s own Conservative Party lawmakers that he must improve his leadership or face a challenge.Johnson, who won a landslide election victory in December 2019, is facing the biggest crisis of his premiership after a litany of scandals and missteps, which his opponents say show he is unfit to be prime minister.He has faced a barrage of criticism since a video emerged showing his staff laughing and joking about a Downing Street party during a 2020 Christmas lockdown when such festivities were banned.Downing Street had denied a party took place. Britain’s top civil servant, Simon Case, has stepped down from leading the investigation into alleged parties after it was disclosed that an event had been held in his own office.The loss of a parliamentary seat in an election defeat in a Conservative stronghold earlier this week showed public dismay over the litany of scandals and stepped up pressure on Johnson. [nL1N2T2040]BREXIT FUTUREFrost, a former diplomat who was repeatedly hailed by Johnson as “the greatest Frost since the Great Frost of 1709,” was a committed Brexit supporter who negotiated Johnson’s revised EU divorce deal and a trade agreement.He cast the United Kingdom’s 2016 vote to leave the EU as part of a broader rebellion against the bloc’s transnational collective governance that wanted to revive the nation-state.Having such a true “Brexit believer” at the heart of British power gave reassurance to Brexit supporters in the Conservative Party that Johnson would remain tough on the European Union.Frost, until his resignation, was leading an attempt by London to renegotiate parts of the divorce deal concerning Northern Ireland. Beyond Brexit, though, the 56 year-old Frost was unhappy.In a speech last month, Frost expressed his clear discontent with the course of post-Brexit British policy.”We have not successfully rolled back the frontiers of the European Union from Britain with Brexit, only to import that European model after all this time,” Frost said in a Nov. 22 speech at the Margaret Thatcher Conference on Trade.He disagreed with “those who think we can treat the private sector as just a convenient way of keeping the public sector running.””It isn’t just a source of taxes,” Frost said. “We can’t carry on as we were before, and if after Brexit all we do is import the European social model we will not succeed.”The opposition Labour Party said the government was in chaos and said Johnson should provide clarity on what would happen in talks with the EU over the Northern Irish Protocol, a part of the divorce deal.”Boris Johnson needs to get a grip, tell us his plan for the next few weeks and bring certainty for the people of Northern Ireland by unblocking the stalemate over the Protocol,” said Jenny Chapman, Labour’s shadow minister of state at the Cabinet Office. More