EoW March 2010

Russia’s foreign exchange reserves, the world’s third largest, stood at $439 billion at the end of last year. These stockpiles have grown by 14% since the start of the rally on global asset markets in March 2009 as rising commodity prices have lled the co ers of mineral-rich Russia. China, which has more than US$700 billion in its foreign ❈ currency reserve, the world’s largest, recently called for the creation of a new global currency to replace the US dollar. But John Greenwood of Canada’s Financial Post points out that the greenback is still by far the reserve currency of choice, accounting for 64% of total central bank holdings, and that diversi cation out of it holds some perils. The worry, he wrote on 25 th January, is that the trend toward diversi cation “could turn into a disorderly ight, with potentially devastating currency volatility especially for the smaller countries that get caught in the cross re.” Analysts consulted by Mr Greenwood said they believe this is the last thing Russia and China want, as it would devalue their US holdings. Apropos of Canada, Axel Merk, chief investment o cer at Merk Mutual Funds in Palo Alto, California, noted that because of the small size of Canadian dollar issuance relative to other currencies, the nation doesn’t come close to providing any kind of a solution for Russia and others looking to get away from US exposure. “Central banks are trying to diversify but it’s very di cult because the US dollar is the deepest and most liquid market in the world,” Mr Merk told the Financial Post . “Nevertheless they try, and Canada is one of the bene ciaries.” Global crude steel production dropped 8% in 2009, but ❈ analysts expect a rise of around 10% this year. The pace of growth will likely be faster in the developed world, which saw falls of over 30% in output last year. The hardest-hit region in terms of steel production was North America, where output dropped by almost 34%. The US total fell 36.4%, as compared with a 22.8% drop for Europe. Figures released 22 nd January by the Brussels-based World Steel Association, whose members account for 85% of steel output, show production worldwide of 1.22 billion metric tons of crude steel in 2009. Once again China dominated the sector, with production up 13.5% for a record high of 567.8 million metric tons. This represents 46.5% of total world output for the year. Japan followed China as the world’s second-largest producer, while Russia has taken over third place from the United States. US Steel (Pittsburgh), the largest of the domestic steel ❈ makers, reported improved results for the last quarter of 2009 as compared with the third quarter, attributed mainly to higher shipments and average realised prices, and better utilisation rates for the company’s at-rolled operations. The at-rolled segment raised its capacity utilisation to 64% from the 58% rate of the third quarter. Steel

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EuroWire – March 2010