HONG KONG: China, unfazed by failures to invest in Rio Tinto Group and Unocal, will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.
State-owned Yanzhou Coal Mining on Thursday agreed to buy Australia's Felix Resources
for about A$3.5 billion ($4.3 billion), a day after Sinochem, China's biggest chemicals trader, offered to buy Emerald Energy for £532 million ($1.2 billion) to gain oil fields in Syria and Colombia.
China National Petroleum's plan to buy Repsol's Argentine unit may push Chinese purchases of overseas commodity assets to US$43 billion ($61.7 billion) this year, a 48 per cent increase on 2008, according to data compiled by Bloomberg.
"The Chinese don't have enough nickel, don't have enough oil and they don't have enough copper," said Jim Rogers, chairman of Rogers Holdings and the author of books including Investment Biker and Adventure Capitalist. "There's a crisis coming. They are going around the world buying up what they can. They're preparing for a rainy day."
Bids for resources by China, whose currency reserves of US$2.1 trillion are the world's largest, have met opposition in the US and Australia. Neither concern over its growing influence nor the arrest of four Rio Tinto executives in Shanghai has stopped Chinese companies from buying assets abroad.
The Reuters/Jefferies CRB Index, which tracks 19 raw materials, dropped 36 per cent last year, the biggest annual decline since at least 1957. The measure has gained 15 per cent this year on signs that the recession may be ending.
Chinese energy companies have spent at least US$13 billion on overseas assets since December as they take advantage of lower valuations.
China consumes more than a third of the world's aluminum output, a quarter of its copper production, almost one-tenth of its oil and accounts for more than half of trading in iron ore. Last year, China bought US$211 billion worth of iron ore, refined copper, crude oil and alumina.
- BLOOMBERG
