Baoshan Iron & Steel , China's top listed steelmaker, expects the country's apparent consumption of crude steel to drop to 680 million tonnes this year from 698 million in 2015, Dai Zhihao, its general manager, told an online briefing.

The forecast from Baoshan Iron & Steel, or Baosteel, comes at a time when China, the world's top producer of the alloy, is stepping up efforts to slash a huge overcapacity that has boosted cheap exports amid slowing demand at home.

~Baoshan, yesterday online briefing.
China’s crude steel production for July 2016 was 66.8 Mt, an increase of 2.6% compared to July 2015. 
~World Steel Association 22.08.2016

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Activity in China's manufacturing sector unexpectedly expanded at its fastest pace in nearly two years in August as construction boomed, suggesting the economy is steadying in response to stronger government spending.

The best factory reading since late 2014 may reinforce growing views that China's central bank will be in no hurry to cut interest rates or banks' reserve requirements, for fear of adding to high debt levels or fuelling asset bubbles.

But the official factory survey also highlighted growing lopsidedness in the world's second-largest economy, with larger firms expanding, likely thanks to Beijing's largesse, while smaller manufacturers continued to struggle.

"Our view is that the People's Bank of China doesn't really have any reason to ease until we start to see clear signs of another downturn," Julian Evans-Pritchard, China Economist at Capital Economics said, saying it is concerned such action could aggravate economic imbalances and credit risks.

"I think eventually they'll come under pressure to ease further, but given the economy is still stable, I don't think it'll happen this year," he said, predicting the factory strength could last through the end of the year.

The official Purchasing Managers' Index (PMI) rose to 50.4 in August from 49.9 in July, and above the 50-point mark that separates growth from contraction on a monthly basis.

Analysts had expected a reading of 49.9 for the second month in a row, and some thought there would be added weakness after Beijing ordered many plants around Hangzhou to close to clear the air ahead of China's first summit of G20 leaders Sept 4-5.

Yet factory output growth accelerated, with the index rising to 52.6, the highest this year, from 52.1 in July. Total new orders expanded sharply, though export orders continued to shrink, albeit at a more modest pace.

"While many factories have been shut down before the G20 summit, overall manufacturing activities are still elevated, reflecting improving growth momentum," said Zhou Hao, senior economist at Commerzbank AG in Singapore.

Buoyed by a government infrastructure building spree and a housing boom, Shanghai futures prices for steel bars used in construction have surged about 43 percent so far this year, coaxing steel mills to keep output at high levels even as Beijing tries to cut overcapacity in the sector.

But analysts are divided over how much domestic demand is actually improving, with China's steel exports on track for record highs, and prolonged weakness in imports.

In another sign that business conditions remain tough, factories continued to cut staff, though at a slightly slower pace than in July.

China has vowed to quicken the pace of cutting excess steel and coal capacity after falling behind this year, raising the risk of more layoffs and debt defaults in coming months, which could further strain the banking system.

SMALLER FIRMS STRUGGLE

The divergence of performance between smaller and larger enterprises is also a concern if struggling smaller firms have more trouble servicing their debt burdens, some analysts said, noting recently introduced debt-for-equity swaps are likely to help bloated state companies more than private ones.

Smaller firms showed a sharp contraction in activity in August, while one for larger companies showed a solid expansion, suggesting state-owned enterprises, though often inefficient, remain the backbone sustaining China's economic growth.

"Fiscal expansion will likely need to continue at a strong pace, to ensure stable growth in the coming months," HSBC economists said in a note.

"We still see challenges in the second half, from further moderation in the housing sector to uncertainties about private investment. Therefore despite some upside surprise, withdrawal of policy stimulus at this stage would be highly premature."

A private PMI survey focusing more on small and mid-sized firms reinforced the picture of a two-track economy. The survey suggested that activity at smaller manufacturers stagnated in August as output and new orders both grew at a softer pace.

The Caixin/Markit Manufacturing Purchasing Managers' index (PMI) slipped to 50.0, the no-change mark which separates expansion of activity from contraction on a monthly basis.

An official survey on the services sector showed the sector continued to expand at a rapid pace, though slightly more modestly than in July.

China is counting on growth in services to offset persistent weakness in manufacturing and exports that dragged economic growth to a 25-year low.

http://www.reuters.com/article/us-china-economy-pmi-factory-official-idUSKCN1173BA

Brazil's Senate ousted President Dilma Rousseff on Wednesday, ending an impeachment process that polarized Latin America's biggest country amid a massive corruption scandal and brutal economic crisis.

Senators voted 61-20 to convict the country's first female president for illegally using money from state banks to bankroll public spending, marking the end of 13 years of leftist Workers Party rule.

Rousseff's opponents hailed her removal as paving the way for a change of fortunes for Brazil. Her conservative successor, Michel Temer, the former vice president who has run Brazil since her suspension in May, inherits a bitterly divided nation with voters in no mood for the austerity measures needed to heal public finances.

In his first televised address to the nation after being sworn in as president through 2018, Temer called on Brazilians to unite behind him in working to rescue the economy from a fiscal crisis and over 11 percent unemployment.

"This moment is one of hope and recovery of confidence in Brazil. Uncertainty has ended," Temer said in the speech broadcast after his departure for a G20 summit in China.

Until just a few years ago, Brazil was booming economically and its status was rising on the global stage.

The country then slid into its deepest recession in decades, and a graft scandal at state oil company Petrobras tarnished Rousseff's coalition. Millions took to the streets this year to demand her removal, less than two years after she was re-elected.

A string of corruption scandals, led by the Petrobras scheme, has engulfed vast swaths of Brazil’s political class and business elites over the past 2-1/2 years.

Temer will likely face tough opposition from the Workers Party both on the streets and in Congress to his agenda of privatizations, reforms to Brazil's generous pension and welfare laws and a public spending ceiling he hopes lawmakers will pass this year.

For the third straight day, pro-Rousseff demonstrators in Sao Paulo, Brazil's largest city, clashed with riot police, who used tear gas to clear the streets.

Defiant to the end, Rousseff, a former leftist guerrilla who was tortured and jailed under military dictatorship in 1970, vowed to fight on in defense of Brazil's workers.

Standing outside the presidential residence flanked by supporters, she insisted on her innocence and said her removal was a "parliamentary coup" backed by the economic elite that would roll back social programs that lifted millions of Brazilians out of poverty over the last decade.

"They think they have beaten us but they are mistaken," Rousseff said, adding that she would appeal the decision using every legal means. "At this time, I will not say goodbye to you. I am certain I can say 'See you soon'."

The end of the Workers Party's long grip on power sparked angry reactions from leftist governments across the region.

Venezuela, Bolivia and Ecuador withdrew their ambassadors, and Brazil responded by recalling its envoys for consultations. Cuba's Communist government branded Rousseff's ouster part of an "imperialist" offensive against progressive governments in Latin America.

The U.S. State Department voiced confidence that strong bilateral relations with Brazil would continue, adding the country's democratic institutions had acted within the constitutional framework.

In an unexpected move, Brazil's Senate voted 42-36 to allow Rousseff to retain the right to hold public office - a break with Brazilian law that specifies a dismissed president should be barred from holding any government job for eight years.

The move appeared to demonstrate unease among some senators, notably within Temer's own fractious Brazilian Democratic Movement Party (PMDB), over whether a budgetary sleight of hand that is common in Brazil was truly an impeachable offense.

Visibly annoyed in televised remarks at his first cabinet meeting, Temer said he would not tolerate divisions in his coalition as he quickly tried to quash the first sign of splits that could grow as allies press him to deliver on austerity.

Aecio Neves, leader of the center-right PSDB party that backs Temer, said the divisions had caused acute concern among his allies, but he denied there was any prospect of a split.

"Brazil has given itself a new chance, to look to the future and construct an agenda for reform in line with the economic crisis," said Neves, who narrowly lost the 2014 election to Rousseff.

HONKING HORNS, FIREWORKS

Motorists honked car horns in the Brazilian capital to mark the removal of a president whose popularity had dwindled to single figures since winning re-election in 2014. In Brazil's largest city, Sao Paulo, fireworks exploded in celebration after the vote.

Temer has vowed to boost an economy that has shrunk for six consecutive quarters and implement austerity measures to plug a record budget deficit, which cost Brazil its investment-grade credit rating last year.

An upturn in corporate investment in the second quarter provided a glimmer of economic hope for Temer and economists expect a return to growth before the end of the year.

Brazil's stocks and real currency slightly accelerated gains following the Senate's decision but the reaction was muted as most traders were already counting on the result. Market analysts said investors would now be looking to Temer to quickly deliver on his promises of reform, notably a constitutional change to limit spending increases in coming years.

"What changes now, with Temer definitively confirmed, is that the pressure will increase on him to deliver," said Newton Rose, chief economist at Sulamerica Investimentos. "The honeymoon is over, and the market wants to know now how capable he is to govern and put the government accounts in order."

Temer's government risks entanglement in the ongoing investigation into kickbacks at Petrobras, which ensnared dozens of politicians in Rousseff's coalition. Three of Temer’s ministers have already had to step down due to links to the scandal, which could hobble efforts to restore confidence.

Rousseff became the first Brazilian leader dismissed from office since 1992, when Fernando Collor de Mello resigned before a final vote in his impeachment trial for corruption.

http://www.reuters.com/article/us-brazil-impeachment-idUSKCN114071

Brazilian oil company Petroleo Brasileiro SA said on Wednesday it will spend 10.5 million reais ($3.25 million) to buy marketing rights to the financially troubled Rio de Janeiro Paralympic Games.

The decision allows Petrobras, as the state-controlled company is known, to become an official sponsor of the event about a week before it is set to begin on Sept. 7. Petrobras joins companies such as Toyota Motor Co, BP Plc, Visa and Samsung in getting marketing benefits in exchange for financial support.

Reuters reported on Aug. 18 that Petrobras was willing to buy marketing rights valued in the "low millions" of dollars to help the Paralympics.

The Games, which feature athletes with physical and mental disabilities, was forced to make budget cuts as the city and state of Rio de Janeiro, mired in a major Brazilian recession, struggled to pay the 40 billion reais ($12.4 billion) price tag for the 2016 Olympics and Paralympics.

Petrobras' money brings 205 million reais ($92 million) in extra funds Games organizers can draw on, said Mario Andrada the games communication director on a conference call on Wednesday.

The bulk, 150 million reais, is from the City of Rio de Janeiro. The rest, 55 million reais is from Petrobras, the lottery unit of Caixa Economica Federal, a Brazilian government bank, and Apex, Brazil's Trade and Investment Promotion Agency.

Petrobras, which is facing financial difficulties of its own and has debt of nearly $125 billion, was one of several state-owned or controlled companies asked by the government to help meet the Paralympic shortfall.

Petrobras' money will come from its existing 98 million real sports budget for 2016.

The sponsorship deal will allow Petrobras to run advertisements on TV, radio and social media mentioning the Games and featuring "Team Petrobras" athletes it is sponsoring for the Paralympics during the Games themselves, the company said in a statement.

Petrobras will also be able to display its logo at Paralympic venues, set up a stand in the Olympic Park and have its name mentioned in an opening ceremony video, rights normally reserved for sponsors that signed up long ago.

Without new funds, the Rio 2016 organizing committee would not be able to pay national Paralympic bodies for travel, food and uniforms, preventing some countries from competing, a judge, who overturned an injunction prohibiting the use of new public money for the Games, said earlier in August.

http://www.reuters.com/article/us-paralympics-rio-petrobras-idUSKCN1162OI