SHANGHAI, China, June 24 /Xinhua-PRNewswire/ — China Precision Steel (the ”Company”) (Nasdaq: CPSL - News), a niche precision steel processing company principally engaged in producing and selling high precision cold-rolled steel products, today announced that the Company’s ultra-thin and high-strength cold-rolled steel strip products were awarded ”Project Converting Advanced New Technological Achievements into Productivity” certifications by the Shanghai Municipal Office for Converting Advanced New Technological Achievements into Productivity in June 2008.

China Precision Steel’s ultra-thin cold-rolled and high-strength cold- rolled strip products utilize patented systems and high technology reduction processing procedures. The certifications include about half of the Company’s ultra-thin and high strength cold-rolled products, used in the manufacture of automobile parts and components, steel roofing, plane friction discs, appliances, food packaging materials, saw blades, textile needles, and microelectronics. Receiving these certifications allows China Precision Steel to take advantage of the preferential treatment provided under the provisions of the Chinese government’s Science and Technology Ministry. Benefits include financing for accredited projects at a discounted interest rate, refunds of land use fees related to accredited projects and special tax treatment for corporate and value added taxes by local tax authority, subject to further approval.

”We focus our efforts on utilizing advanced technology for developing quality products, and the receipt of this prestigious certification recognizes our strength and capabilities,” commented Dr. Wo Hing Li, China Precision Steel’s Chairman and CEO. ”With further approval, by receiving these certifications, we will be able to take advantage of the provisions of the Science and Technology Ministry which will help us deploy our capital more effectively and expand our high-end product offerings.”

Shanghai Municipal Office for Converting Advanced New Technological Achievements into Productivity is involved in setting long-term science and technology development policies in Shanghai. The office has established an accrediting system for projects with the purpose of converting advanced new technological achievements into productivity. Companies are certified on the basis of technological grade, market prospects, risks and intellectual property of projects in Shanghai. Certification is valid for one year.

Several big iron ore contracts are set to expire at the end of this month. According to a recent Financial Times article, “Macquarie, the Australian bank, said Rio was committed to securing a price in excess of the 85-95 per cent the market is expecting. That stance suggests investors should be prepared for an extended and potentially hostile conclusion to the negotiations, it said in a report.” To add salt to the wound, according to this Forbes article, BHP Billiton has also been looking for a “freight premium to reflect the lower cost of shipping ore to China from their mines in Australia than from Brazilian mines.” I had to re-read that last sentence a couple of times. In short, BHP Billiton because it is closer to China (Australia vs. Brazil) wants to make sure that any potential savings the Chinese receive in freight is lost in material (resulting in more profits for BHP Billiton). But Vale, the Brazilian producer only received a 65% increase, according to the same article.

This news should come as no surprise. In fact, we covered it back in early April. Secretly I’m pleased to learn the Chinese aren’t just going to take this and instead, will likely postpone orders for as long as possible in retaliation against the iron ore producers who would then force the Chinese to buy off the [much more] expensive spot markets. The Forbes article quotes Lehman Brothers, “each 10 percent change in the iron ore contract price should result in a 9 percent change in Rio Tinto’s earnings and a 3.5 percent change in BHP Billiton’s earnings.”

I wonder what Lehman’s earnings analysis for Rio Tinto and BHP Billiton looks like when Chinese orders drop off for a quarter or more? Now that would be fun to watch!

A weakening dollar has contributed to China’s inflationary pressure by pushing up commodity prices around the world, said the country’s central bank governor.
Chinese policymakers need to learn from the lessons of U.S. subprime woes, said Zhou Xiaochuan, governor of the People’s Bank of China, also a member of the Chinese delegation attending the two-day session of the Sino-US Strategic Economic Dialogue (SED) in Maryland.
The dialogue, headed by the U.S. Treasury Secretary Henry Paulson and Chinese Vice-Premier Wang Qishan, ended yesterday.
“Emerging economies are feeling the pinch (of rising prices),” he said at a news briefing in Annapolis, Maryland. “A weakening dollar may push up prices of commodities such as crude oil,” which are major imports of China, he said.
The price of crude oil has on one occasion topped 135 dollars a barrel in recent trading sessions.
Raw-material prices have also been hovering at high levels since last year, putting pressure on China’s factory-gate prices, which would in turn pass onto the consumer inflation zone.
In May, China’s producer price index, which gauges factory-gate prices, rose 8.2 percent, the highest in more than three years, feeding concerns that although consumer inflation eased to 7.7 percent in May, down from 8.5 percent the previous month, it may rebound in the coming months.
The central bank yesterday set the mid-point of the yuan’s exchange rate at 6.8823 against the dollar, marking a new historical high since China revalued the yuan by 2.1 percent to 8.11 per dollar in July, 2005. It has appreciated a further 17.84 percent since then.
The yuan has regained momentum of fast appreciation while it is strengthening in the non-deliverable forwards market.
Analysts said the yuan’s strengthening would reduce pressure on China’s “imported inflation”, or inflation incurred by imports, but the effect has proved to be limited. Worse, it has started to push some domestic export-oriented enterprises to the wall.
The appreciation momentum of the yuan may not slow until the Olympic Games in August, said Liu Dongliang, currency analyst of the Shenzhen-based China Merchants Bank. “The post-Olympic trend is not clear yet.”
Zhou also said China will learn from the U.S. financial woes triggered by its subprime problems.
Sovereign wealth fund
Finance Minister Xie Xuren, who was also attending the SED session, said the country’s overseas investment through its 200 billion dollar sovereign wealth fund does not pose a threat to financial markets.
Xie said that the fund is not aimed at short-term speculation but long-term investments that should help the overall economy.
As the U.S. financial market is bogged down by the subprime crisis, the capital injection from investment by the world’s major sovereign wealth funds has helped stabilize the market, but some U.S. politicians fear that such investment will pose a threat to U.S. financial security.

Precious Metals

Gold hung in at $900 until London opened, then declined modestly until about an hour into the New York session, after which it was hammered, falling as low as $873 before making a small comeback during the Globex to finish at $877.00/oz., down $22.90. Overnight, gold has been flat.

Platinum was off sharply in Europe, falling well below the $2000 mark, but clawed its way back in New York to almost retake the level, ending at $1999/oz., down $70. Overnight, platinum has edged lower.

Silver got whacked from London straight through the NYMEX, only leveling off in Globex trading into a close at $16.60/oz., down 81 cents. Overnight, silver has edged higher.

It was a third straight down day for the precious metals, and it was a bad one as gold tumbled to a two-week low.

That it would be a down day was no shocker, considering that falling oil prices and a firming dollar aligned the stars against gold and its sisters. But the extent of the damage may have caught some by surprise.

There was also strength in the equities markets to deal with, as well as an avalanche of selling across the board in commodities.

But analysts were mostly abandoning talk that gold will follow oil, and focusing instead on the role of the dollar, which has been buoyed of late by suggestions that an interest rate hike might come before the end of the year.

“With the dollar stabilizing, gold could fall quite a bit,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There’s a lot of talk about inflation, which works both ways for gold. If the Fed does start tightening, that will strengthen the dollar and could really pop the commodity bubble.”

It’s an interesting equation, for sure. Inflation is dead certain to pick up as the effects of record-high oil and gasoline prices work their way through the economy. One sign of things to come arrived on Wednesday, with the announcement by Dow Chemical that it was raising prices of its products by 20%. Everyone uses Dow products.

So, will gold emerge in its traditional role as a hedge when inflation really starts to pick up? Or will the Fed’s response, which has to be tightening interest rates, hurt gold by propping up the dollar? Stay tuned.

Currencies and Economic News

In the currency market, the dollar firmed for a third straight day against the euro. Late Thursday, the euro was trading at $1.5501 vs. $1.564 on Wednesday.

The direction of interest rates was on everyone’s mind.

Dallas Federal Reserve President Richard Fisher, who has voted against the Fed’s three most-recent rate cuts, hinted in a Wednesday speech that the central bank is done cutting interest rates and is prepared to raise them.

“If inflationary developments and, more important, inflation expectations continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, even in the face of an anemic economic scenario,” Fisher said.

“Those remarks made it more evident that the Fed’s propensity to take the overnight funds rate below 2% [is] smaller and ever smaller,” wrote Dennis Gartman, publisher of the Gartman Letter.

The job market continues to be difficult. The Labor Department reported that initial claims for state unemployment benefits rose 4,000 to 372,000 in the week ended May 24. While, according to Bear Stearns economists, claims haven’t moved into “recession territory … they continue to bounce around close to the 375,000 level that we believe is consistent with mildly recessionary conditions.”

Energy

In the energy market Thursday, crude for July delivery retreated, closing at $126.62/barrel, down $4.41. June reformulated gasoline lost 5 cents, to $3.40/gallon.

The day’s action was more than a bit counterintuitive, since the Energy Information Administration’s weekly inventory report had crude supplies plummeting by 8.8 million barrels for the week ended May 23, the biggest drop since 2004. Analysts were looking for a 750,000 barrel gain in stocks.

However, “Lower oil stocks were due to problems offloading oil in the Gulf of Mexico, and this week’s deficit will show up in next week’s report as the tankers offshore are unloaded,” wrote James Williams of WTRG Economics.

Meanwhile, the Commodity Futures Trading Commission said that it started a wide-ranging investigation of U.S. oil markets six months ago, with a focus on possible price manipulation. The CFTC said it took the unusual step of publicizing the probe “because of today’s unprecedented market conditions.”

In OPEC news, the United Arab Emirates says that current crude prices are going too fast too high, according to a Reuters news report Thursday, and that the UAE is “willing and well prepared” to raise output if there is a supply shortage, according to the report. And Indonesia, struggling to keep up with its oil production quotas within OPEC, said it will withdraw from the cartel by the end of the year.

Base Metals

The base metals endured a serious bloodbath on Thursday. Copper fell off a cliff at the open of the New York session and never recovered, finishing at its intraday low of $3.6416/lb., down 10 1/2 cents. Nickel followed suit, sinking below the $10 mark, but recovered slightly to edge back over it and close at $10.0115/lb., down 22 cents. Zinc was pounded, barely coming off its intraday low to end at $0.8951/lb., down 5 1/4 cents. Aluminum wasn’t spared, shedding 3 1/4 cents to $1.2899/lb., while lead cratered as well, giving up nearly 4 1/2 cents, to $0.8629/lb.

The base metals took an absolute hammering on Thursday, as traders cast an eye on the relationship between rising stockpiles and potentially diminishing demand, and came away with a lot of negative thoughts.

The stock increases are seemingly happening across the board.

Copper inventories monitored by the LME were up 600 metric tons (0.5%) yesterday, to 126,400 tons. It’s the highest level since March 13, and the metal has gained 14% just this month. Analysts are also expecting Shanghai to report an increase of some 7,000 tons this Friday.

Among the other metals, lead inventories showed an increase of 1,550 metric tons yesterday, while zinc was up a hefty 7,850 tons.

Lead is also “weaker at present in part because demand is seasonally soft,” said Lehman Brothers analyst Michael Widmer.

Factor in currency as well. “The stronger dollar is of course undermining [copper],” said Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey. “The bond market is heading down, which means interest rates are going up.”

And Ed Meir, of MF Global, cited “the sluggish pace of recent imports” into China.

In company news, Rio Tinto remained on the offensive against BHP Billiton’s takeover bid. Rio CEO Tom Albanese predicted seven years of near-double-digit annual production growth as he argued that BHP’s bid is too low.

Rio can expect compound annual output growth of 8.6% through to 2015, and the company is well placed to take advantage of an expected doubling of world demand for metals and minerals by 2022, Albanese said.

That’s what’s happening … see you tomorrow!

——————————————————————————–
NEWS YOU CAN USE
——————————————————————————–

First Majestic Silver Corp is committed to building a senior Silver producing mining company based on an aggressive acquisition and development plan with a focus on Mexico. The Company presently owns or operates three silver mines in Mexico: The La Parrilla Silver Mine; The San Martin Silver Mine and the La Encantada Silver Mine. Annual production from these three mines is anticipated to be 5 million ounces in 2007.