It is reported that gold demand has fallen dramatically in the UAE and jeweller closures are “inevit-able” the World Gold Council said in a report.

The UAE saw demand fall by 39 per cent in the third quarter of this year compared to the third quarter of last year, the council said.

“A combination of high gold prices, declining tourist numbers and a sharp downturn in the property sector were responsible for the drop off in demand,” according to the report, released yesterday.

In the Middle East as a whole, jewellery demand fell by 34 per cent, while investment demand dropped by 11 per cent.

However, in the UAE, jewellery demand was down 38 per cent and investment dem-and 52 per cent, compared to the third quarter of 2008.

However, the third quarter of 2008 was an exceptionally strong quarter.

When compared to a five year average of third quarters, total demand in the UAE was down six per cent, the report said.

Despite this, the council said that jewellers in the UAE were at risk of closure.

“The jewellery trade, most particularly in Dubai, is under pressure. As with many residents in the UAE, many jewellers had invested their profits in the property sector.

“Left with cashflow problems jewellery retailers have been forced to liquidate inventories to meet margin calls and make repayments on gold loans. As yet, there have not been any notable closures of jewellers, but this is probably inevitable if demand conditions do not improve,” the council’s report said.

It is reported that the gold price in Hong Kong went up 100 HK dollars to open at 10,960 HK dollars per tael on Thursday, according to the Bank of China (Hong Kong).

The price is equivalent to 1,188.40 U.S. dollars a troy ounce, up 10.77 U.S. dollars at Thursday’s exchange rate of one U.S. dollar against 7.7415 HK dollars.

It is reported that the CISA (China Iron and Steel Association) will soon publish supplements for the self-regulation convention of China’s iron ore imports, which were first issued in February.

According to a CISA insider, the supplements will set stricter standards for iron ore import orders, which will involve the list of the 70 steel plants and 42 traders licensed for import.

Obviously, China is stepping up measures to curb surplus imports and prevent hoarding of iron ores for speculative purposes, which will help China during the annual iron ore negotiations with the world’s iron ore suppliers.

Xu Xiangchun, a senior analyst with MySteel, said this signals that related government departments will probably post more regulations concerning the country’s iron ore import market, so as to build a fairer trading environment for the domestic market.

Currently, speculative iron ore imports are pushing domestic demand out of equilibrium.

China’s iron ore imports in October dropped almost 30 percent on month to 45.47 million metric tons, according to the latest statistics from China Customs.

According to a Customs official, the sharp fluctuations in China’s monthly iron ore imports may be a result of speculative activities.

According to the latest Customs statistics, October’s iron ore imports dropped almost 30 percent on month to 45.47 million metric tons (tonnes), but the iron ore imports increased nearly 30 percent month on month in September.

The import fluctuations are connected with price changes. The iron ore import price dropped to 73.7 US dollars per tonne in June, the year’s lowest, which led to an increase in the iron ore imports. After that prices kept rising to 88.6 dollars per tonne in October, while imports diminished.

The official said that enterprises may hoard iron ores for speculative purposes, which would push up the steel industry’s costs and possibly cast negative influence over China’s annual iron ore negotiations with the world’s iron ore suppliers.

The China Iron and Steel Association will soon publish supplements for the self-regulation convention of China’s iron ore imports, including setting stricter standards for iron ore import licenses, which were first issued in February.

It is reported by the CISA(China Iron and Steel Association) that China would produce 600 million tonnes of crude steel this year, far higher than last year’s 500 million and this year’s target output of 460 million.

China’s daily crude steel output remained at a high level in the first 10 days of November, though it dropped moderately from that in October.

Data from CISA show that the country’s 71 mid- and large-sized steel enterprises produced 1.62 million metric tonnes of crude steel every day in the first 10-day of this month, down 2.9 percent from October.

Crude steel output amounted to 472 million tonnes in the first 10 months, jumping 10.5 percent year on year.

The slight decline of daily output in early November was partly due to a seasonal overhaul. Analysts said that steel plants are unlikely to cut output significantly for this year’s remainder as present steel prices still allow them to make profits.

It is reported that China’s National Development and Reform Commission, the top economic planning agency, announced on Thursday an electricity price rise for non-residential use of 0.028 yuan (0.4 US cents) per kilowatt hour on average nationwide effective Friday. The electricity tariff rise is estimated to increase the production costs of electrolytic aluminum by nearly 400 yuan per metric ton (tonne).

Currently, producing one tonne of electrolytic aluminum consumes about 14,500 kWh of electricity. Thus, given an average price rise of 0.028 yuan/kWh, the production costs for electrolytic aluminum will be raised by around 400 yuan/tonne.

“The power adjustment scheme of each province hasn’t come out yet, so the influence on aluminum producers in different regions cannot yet be estimated,” said Lan Ke, analyst of the nonferrous industry with Southwest Securities.

This is definitely not good news for large power consumers such as Chalco and Jiangxi Copper.

China’s current production costs of electrolytic aluminum stand at around 13,500 yuan/tonne, almost half of which is attributed to power.

For producers with captive power plants, including Shenhuo, Zhongfu, and Jiaozuo Wanfang, the power price hike won’t have such a strong negative impact. Furthermore, those producers will enjoy the benefit of rising aluminum prices caused by the power price hike.

Aluminum prices in the near future probably little affected by costs hikeLan said that the higher production costs caused by the electricity price rise, in turn, will push aluminum prices higher.

On Thursday, Chalco, the listed arm of China’s top aluminum producer Chinalco, raised its ex-factory price for aluminum ingots by 100 yuan/tonne to 15,200 yuan/tonne. The price has risen by 200 yuan/tonne since the beginning of November.

Meanwhile, the benchmark aluminum contract on the Shanghai Futures Exchange (SHFE) closed up 0.62 percent to 15,651 yuan/tonne on Friday.

However, market watchers also say the power price rise was widely anticipated, and has been priced into futures contracts for the power-hungry metal over the past two weeks. “Along with gains in other metals, the official announcement just became a lame duck,” Tong Changzhen, an analyst with Great Wall Futures, told Dow Jones on Friday.

Meanwhile, analysts said high stocks and an oversupply are the main factors that could slow or reserve aluminum’s upward momentum in the near and medium future.

China’s aluminum capacity currently under operation stands at around 15 million tonnes, according to statistics from Southwest Securities. As the aluminum price stabilizes above 15,000 yuan/tonne, there will be more production capacity entering into operation. Chalco forecasted in its Q3 report that China would see about 18 million tonnes of production capacity under operation by the end of this year, returning to its pre-financial crisis level.

Direct power supply talks unclear nowIn late October, Fushun Aluminum, a subsidiary of Chinalco, was approved of direct power purchase from Huaneng Yimin power plant, saving Fushun Aluminum about 0.07 yuan/kWh in electricity consumption.

It was the first trial direct power purchase in China since the Chinese government announced to carry out direct power purchase on a trial basis in 15 aluminum enterprises, 9 of which are Chinalco subsidiaries.

Chinalco achieved a cooperative agreement for direct power purchases with China Guodian Corporation on October 13. Chinalco, the largest aluminum producer in China, revealed a strong desire to achieve direct power supply for other subsidiaries by the end of 2009.

“However, at this time, even if they get direct power supply, the preferential margin won’t be large,” said an industry analyst.

As the profit per tonne of aluminum already reaches between 1,000 and 2,000 yuan, and the operation rate of power generators is rising, it has become difficult for aluminum producers to lead the negotiations for direct power supply.