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Good morning. Welcome to the

program. I'm Whitney Fitzsimmons. In 'Business

Today' - global sell-off,

Shanghai leads the market

slide. Securing supply. China's

cut-price iron ore deal. And -

reef tourism threat. The need

to tackle climate change. Those

stories shortly, but first,

let's take a quick look at

markets.

In China, Shanghai's

composite index was the worst

hit regional market, dropping

5.79% in trade yesterday.

China's benchmark index

extended last week's 6.6%

slide, closing at 2,870 points.

In the past two weeks, it's

lost 17.5%, well down from its

recent 14-month high of 3,478

points. Economic uncertainty

and investor nervousness are

seen to be the causes for the

volatility in light of recent

disappointing economic data

released in China, which

suggested the recovery is

taking a breather. For more on

market action I'm joined by

David Taylor from CMC Markets.

Wall Street has slipped off the Wall Street has slipped off the

back of recovery concerns? It

certainly has. Also the fact

that you have to remember, the

reason why people are focusing

so much on the Chinese

composite index is simply

because it fell around 5%

before the market went into a tail spin leading into March.

It also led the recovery and

now we've seen a couple of

sessions in last few weeks

where it's been down around 5%.

Investors are very nervous

about that. As far as Wall

Street's concerned the banks

did most of the damage last

night. We also had materials

companies down on the back of

lower commodities prices. Oil

companies were down and

consumer companies were down as

well. So clearly a bout of

profit taking last night.

People believe the share prices have gone up too hard, too

fast. A mixed reaction to the

news that Japan has recorded some growth. Shares some growth. Shares in Europe

gave up recent gains? Yes and I

think it's to do with the fact

that people are of the

impression this is as good as

it's going to get for Japan.

They have falling business

investment . They have rising

unemployment and the .9%

quarter-on-quarter GDP figure

we got yesterday is pretty much

considered to be as good as

it's going to get. As far as

Japan is concerned that's not

a healthy picture. Some market

watchers are even speculating

that the economy might stall

once the economic stimulus is

eventually worked out of the

system. So still plenty of

nervousness about the Japanese

economy there, and European

markets the FTSE certainly

responded to that. On top of

that, you had some negative

housing data out of the UK,

which also put downwards

pressure on the FTSE. Given

all this negativity on markets

around the globe, what will we

see in regional trade

today? I'm not expecting a very

good day, although the Nikkei

futures the SPY futures are

pointing to a loss of around 1%

at the opening. We will be led

down by banking stocks

following the losses on Wall

Street offnight. Miners will

also be down. BHP was down 3%

in London trade overnight. I

expect oil producers to be down

on the back of lower oil prices. It will depend on whether there is a rush into the defensives or whether it

will just be a broad-based

sell-off. Xwhod tease. Oil has

fallen even --

commodities. Oil has fallen

even further. The storm coming

into the Gulf Coast in Florida

and the US doesn't appear to be

pushing towards the refineries,

or the oil producers. So that's or the oil producers. So that's

not going to put any upwards

pressure on the price. At the

moment it's coming off the back

of lower Japan GDP, lower

consumer sentiment in the US. That's putting downwards

pressure on prices. Rising

stock piles in the US isn't

doing any favours for the price

either. We're looking at a

price of crowd around 67.75 US

a barrel. Market watchers think

it could go as low as the early 60s. Thanks for the

update. Thank you. Now let's

take a look at what's happening

with currencies and

commodities.

China has increased its

effort to take control of iron

ore prices from the world's

biggest suppliers by signing a surprise deal with Australia's

third biggest miner. Fortescue

Metals has sealed a deal to

supply iron ore at a cheaper

price than that sought by

rivals BHP Billiton and Rio

Tinto. That's a return for $6

billion in funding and priority

when it comes to next year's when it comes to next year's

negotiations. In six years,

Andrew Forrest has transformed

his company from a price taker

into a price maker. Fortescue

Metals Group has broken away

from its bigger rivals and struck a pricing deal with

China. The miner says it's just

rewards for its robust

relationship with China. That

is reflected in this agreement.

That is reflected very much in

the ongoing support for FMG.

For the next six months FMG

will sell iron ore to China at

a slightly reduced price to the deal struck between Rio Tinto

and Japanese steel mills

earlier this year. Rio and BHP

are yet to sign a benchmark

price with Chinese steel mills. Relations between the parties

have soured after Rio Tinto and

BHP Billiton signed a

production joint venture and

Rio Tinto executive Stern Hu

was detained and charged in

China. FMG argues the pricing

deal is in Australia's best

interests. This is a fantastic

deal for Australia. This makes

Australia competitive . What

we've got to understand is it

isn't just Fortescue Metals, it

isn't just Rio or BHP, but

Australia is more competitive.

But analysts aren't so sure.

They say it gives China too

much power over price

negotiations. That can't be

good as far as the iron ore

industry is concerned, given

China's determination to push

prices down. The deal is

conditional on FMG raising more

than $6 billion to fund the

expansion of its mine. Cash

which will also come from

China. Both Rio Tinto and BHP

have shrugged off the FMG deal,

saying they're continuing

negotiations with the Chinese

who've taken about 150 million

tonnes from their mines over

the past year. The deal raises

questions about whether such

moves are meant to further

China's political goals instead

of its commercial interests. To

offer some more analysis on the

McGuire of Commodity Warrants deal I'm joined by Peter

Australia. Welcome to 'Business

Today'. Good morning. Firstly,

Fortescue Metals has pretty

much undercut the big miners.

Are they now at a

disadvantage? Don't believe so.

When you think about where it's going as far as going as far as a strategy

move, they need dollars to

expand their operation. They've

taken $6 billion into their war

chest and they need to ramp up

production. So you need to do

it with dollars. It's simple as

that. So as far as cutting the

cost I don't think it's going

to put too much pressure as far

as Rio and Vale and BHP are

concerned. I don't see it being

a negative as far as the market is concerned. Let's look at

the other side of this. How big

a win for China is it really?

The other major miners like BHP

and Rio, they control about 70%

of iron ore sales. Yes, they

do. They certainly do control a

major market as far as a share

of it. And when you think of what Fortescue Metals holds

it's only minimal. It's a 20

million as far as the tonnes

are concerned and you know, China's importing around about

50 million tonnes a month. So it's only a very small drop it's only a very small drop in

the ocean. And where China's

concerned, it needs to

guarantee supply over the

coming years. And I think it's

a wise strategy. It's a two-way

street. When you think of how

much Japan imports and of

course Korea and other nations,

China is certainly a behemoth

in that industry. Its demand is

not going away and we're

satisfying that through the

likes of Fortescue Metals, Rio likes of Fortescue Metals, Rio

and BHP. Would you say that

it's kind of the thin edge of

the wedge and that the big

miners like BHP Billiton and

Rio Tinto really need to take

note, because China has given

Fortescue Metals priority in the negotiations next

year? Well, you know, yesterday

may have given them some

priority, but remembering that

they needed $6 million to expand their operation, and

that's going to have an effect

as far as their gearing is

concerned in years to come as

far as ongoing earnings. So

they need to guarantee and to

grow their business. Where Rio

sits and BHP, there might be a

little bit of toing and froing

as far as pricing, but that's

the way to negotiate, and unfortunately, it's probably

been a little bit all one way

over the last couple of years

and now it's getting a little

bit more China's way. So more

players enter a market and

sometimes, that's the essence

of price discovery. So you get

I suppose a fairer price. You'd say it's really more

China flexing its muscle or

beating its chest than anything else? I think so. It's probably

saving a bit of face. We know

what happened with the Rio

deal. Also, it goes to - Andrew

Forrest's intention, and his

strategic intent, has primarily

been China focused. He realise

hez wants to build that

relationship and grow his business into that region, and

from a strategy point, I suppose you gotta congratulate

the guy for that. He's got

someone on the other side that

needs his product and he's

doing whatever he can to move

heaven and earth literally to

satisfy the needs of China. And

he needs to be congratulated. A

great entrepreneur. So do you

think that this has some sort of link of link to China's investment

in Fortescue Metals? Oh I think

overall, it probably will. I

mean, remember this: China is

magnificently placed.

Geographically and of course,

it's doing deals across the

whole world. So yeah you do a

deal with Fortescue Metals but

let's roll it across to grain.

It does deals with Africa as

far as growing crops in Africa.

It does deals with Brazil. We

recently did a $150 billion

deal as far as crude oil in

Brazil. So it lent money to

Brazil. So this isn't unusual.

It has a huge war chest and it

needs to buy resource

relatively cheaply. At the

present time they're very, very

cheap on the global scene.

Nickel, lead and zinc. Nickel, lead and zinc. You're

saying it needs to secure these

resources. Another attempt to

do that is Felix Resources.

What are your thoughts on that

one? This is the great

challenge. You need to rebuild

nations. We'll see so much of

it over the coming years and

decades. As far as deals being

put to other parts of the

world, I think it will just be

a growing consumption. We've got population base exploding

across the planet. We've got more resources needed, more

krurd oil and Energy Resources

and precious metals. So as the

populations explode and more

food's required and I think

there will be just deals left,

right and centre. It's a very

exciting space over the coming decades the commodities

sector. There's no doubt that

China has a voracious appetite

for resources, but do you think that they might be just

stockpiling them as well? When

you think about the price of

nickel, nickel was $9,000 a

metric tonne in March and it

just went through $20,000.

We've seen similar rises as far

as copper, read, aluminium,

when you think - and you look at what happened as far as

silver and gold prices. So all

of those markets have had very,

very strong rallies. They've very strong rallies. They've

probably far more upside

considering that they're fairly depressed even compared to last

year's prices. So yeah, you can stockpile them. They don't

date. They don't age. They

don't rust. So that's the

beauty of the commodities

sector. So I think it's a wise

strategy. Thank you for your

time there. We'll have to leave

it there, bu thank you. Thank

you, Whitney.

Air China the mainland's

biggest airline has raised its

stake in Cathay Pacific Airways

as China continues to

strategically upgrade its fast

growing aif jais industry. The

deal was part of a divestment

by one of the Hong Kong

carrier's oldest investors. Air

China paid $813 million

China paid $813 million for a

12.5 stake from Cathay from a

Chinese state control conglomerate based in Hong

Kong. Investors have punished

Australia's BlueScope Steel for

producing a full year loss and

forecasting another small loss in the current half. The company is warning conditions

could get a lot tougher for

local steel producers local steel producers if the

Australian Government's carbon

trading scheme is eventually

passed. A strong start to the

year was eroded by a dramatic

second-half slump in demand for

steel. BlueScope suffered a $66

million loss for the full year,

which is a $662 million

turnaround from last year's

profit. Other EBIT is down 1.1

billion dollars. And billion dollars. And

predominantly, there's a lot of

things that have moved but the

main issue we faced was a

significant drop in demand for

steel products. The second

half result reported

significant losseses pretty

much across-the-board. Earnings

deteriorated very rapidly. As

did the steel price which

dropped from $1,000 US a tonne

at the start of the year, to

around $400 US per tonne. But

the company says there are

early signs of a recovery. The

global liquidation steel sale

is now over. We are seeing

restocking under way. And we're

seeing an improvement, an

increase in underlying demand.

That's certainly a positive for

the company. The improved

outlook means BlueScope will

restart production at furnaces

that were shut down at the

beginning of the year. Last

furnace five is about half furnace five is about half of BlueScope's total capacity in

Australia. Firing that up is a

very positive signal that not

only domestic demand is

improving but global growth

continues. BlueScope has

described last year as its most

challenging in its history, and

still expects a negative result

in the first half of 2010. Paul

O'Malley however is optimistic

that the worst of the global

slowdown has passed but it critical of critical of the government's

existing carbon pollution

reduction scheme. In its

current form, Chief Executive

Paul O'Malley says by 2020, the

CPRS could cost his company

$1.4 billion. We do need to

take a reality check and

consider the specific industry

characteristics that face the

Australian steel industry. Australia is not

Australia is not a laggard in

reducing CO2 globally in the

steel sector. We're actually

environmentally competitive and

the first to face a material

CO2 cost globally. BlueScope

says that would put at risk 50%

of its production.

ICBC's first half net profit

rose 1.5% to $120 million. Hong

Kong's sixth largest lender and

a unit of China's biggest bank

says a revaluation gain on some

of its financial assets

derivatives and liabilities

lifted the result. That helped

offset losses on loans and

declines in interest and fee

income. While an increase in

the bank's net trading income

also helped boost earnings, the

bank, which is 72% owned by

industrial and commercial Bank

of China, says its first half

dividend remains unchanged from a

a year earlier. There have been

mixed reactions to the news out

of Japan that its export oriented economy showed

tentative signs of life. With a

0.9% rise in GDP. In fact,

Japan was officially in

depression after GDP shrank for

four quarters in a row and few

countries have suffered as much

as Japan during the global recession. The drin driver of

growth in exports spending by

governments around the world

has boosted sales of Japan's

cars and electronics, the

country's mainstays, the

country's economy's mainstays.

In particular, recovery in

China which grew by 7.9% over

the last year has helped

Japan's economy. A massive government stimulus program

here has also boosted domestic

spending in Japan. Now the news

isn't all isn't all positive.

Unemployment is at its highest

level in six years, and

analysts continue to be

concerned about dropping

prices. Nevertheless, for the

first time in more than a year,

people here in Japan can find

some reason for optimism in

looking at their country's

economy. Japan's economic

improvement may encourage some analysts' view that the global economy is on the mend but Australia's Treasury Secretary

has warned business leaders not

to get carried away by the

recent run of good numbers.

While the Governor of the

Reserve Bank has been talking

up the economy of late,

Treasury Secretary Dr Ken Henry

has a more sober view. I think

we want to be a little careful

not to prematurely declare that

the war is over. The reason

according to Dr Henry is that

large parts of the rest of the

world continue to face serious

economic problems, which may

yet hit Australian shores. It's

possible that there will be a

second shockwave. I have no

reason to believe it will be

anything like the first

shockwave in size and

intensity. It won't. But there

could be a second shock wave to

hit us. Dr Henry shared the

platform with the Chief

Executives of some of

Australia's biggest companies

who expressed a slightly more

confident view. Wesfarmers'

Richard Goyder revealed in the

last 12 months his company has

boosted its work force by

10,000. It's prudent for the

government at this stage to

keep a lid on things at the

moment. I don't think the world has magically turned around but

there are some positive signs

at the moment. The conference

also discussed one of the most

contentious current issues for

business which is the repeal of

John Howard's WorkChoices

legislation. Wesfarmers'

Richard Goyder believes the new

workplace laws could strip more

than $70 million a year from

his bottom line through added

costs, while Leighton Holdings'

Wal King also has

reservations. We would've

preferred the old regime but

we'll live with the new one.

The ingredients are there for

hopefully a cooperative environment going forward with the unions. We believe that the

unions in the pain do ability

responsibly. Probably the

biggest challenge for the

business community for many

years to come will be climate

change. And it's no surprise

therefore that business leaders

have been closely watching the

wrangling around the

government's attempts to get

its global warming legislation

through Parliament. Which is

why corporate Australia will be

keenly monitoring any further

political compromises. We may

be seeing the mainland markets

react to mixed global economic

news today but over the long

term China has survived the

global crisis surprisingly well

when compared to other nations

in the reason. It's done this

by concentrating on creating

goods for the domg stk markets

and giving a boost to inland manufacturing powerhouses like

Chong Ching, the Chong Ching, the biggest city

in China. At this car factory,

assembly lines are on the move

pumping out more vehicles every

month. This is China's fourth

large est car maker and growing. China's market is

huge. It has a bright future so

we have a number of prospective

customers. Vans like this are perfect for rural perfect for rural farmers. But

it's just one vehicle in the

car maker's diverse group of

models. Part of China's

strategy is to target emerging customers like first time

buyers in the villages and a

growing middle class in the

city that may want to buy low

emission cars like these. It's

part of an ambitious long-term

plan to sell more than 4

million vehicles a year within million vehicles a year within

a decade. It's the economic

story of Chong Ching and so

many other cities in central

and western China. They are booming despite the global

financial crisis because they

rely on domestic consumption

rather than falling foreign

demand. Chong Ching's biggest

industries are autos, motorcycles, steel and agriculture, primarily for

domestic consumers. I will use

the word decouples. I'm not

talking about China decoupling

from the rest of the world but

I am talking about the internal

economy in central and western China decoupleing from the

coastal region. Growth is

saging in coastal areas, where

exports account for 80 to 90%

in of GDP. In Shanghai GDP

grew by just 3.1%, but in Chong

Ching where exports account for

only 10% of the economy, GDP

grew an impressive 9%, about 3%

above the national average.

It's also thanks to stimulus

efforts focused on the west.

Government spending has grown

46.5% in Western Provinces

compared to about 33% in the

east. So even the Chinese

Government is counting on

inland cities like Chong Ching

to keep China's economy moving

in the economic downturn. And

to help the nation make a

difficult transition from an

export driven to a domestic

market economy. Farmers in India's north eastern state of

Assam are finding it pays to go

organic. Assam farmers have

traditionally been sparing in

their use of chemical fertiliser

fertiliser bus --

fertilisers but are now phasing

them out altogether. Assam grow

grows many fruits and

vegetables. The local agriculture department is

spreading t organic message at

seminars like this one but

there is one drawback - Assam

has only four food processing

centres meaning the farmers

have difficulty getting their

produce into cold storage. produce into cold storage.

Australian tour operators on the Great Barrier Reef say

they're prepared to tackle

climate change whatever the fate of the Federal

Government's emissions trading

scheme. They've launched a

strategy aimed at saving the

reef and protecting its $5

billion tourism industry.

President Great Barrier Reef is

still Australia's biggest

drawcard for international

tourists. Almost 2 million

people from Australia and elsewhere go elsewhere go each year. While

they see one of the world's

great natural wonders they also

get a living lesson on the pressures of climate

change. Since 1998 we've had

mass coral breaching on the

Great Barrier Reef. So it's been experiencing those

pressures now for at least 10

years. It's set to - the

pressures are set to increase.

Sea surface temperatures have

already gone up almost half a

degree and water levels have risen 5 centimetres in less than 20 than 20 years. There's

measurable declines now in

density of coral skeletons due

to the increasing acidity of

the water. That's just one

example of why action is needed

right now. Protecting the reef

is vital theet of a $5 billion

industry, but operators say

that doesn't have to mean

higher costs. I think we have

well established a long time

ago that being green is also keeping you out of the

red. Lady Elliott Island on the southern end of the reef has southern end of the reef has

already done away with its

diesel generators, putting in a

hybrid solar plant. It

represents a saving to us of

about $200,000 per year but

more importantly it represents

a saving to the environment,

because we reduce our output.

The tourism industry says the

climate change action strategy

will be used as a handbook for

tourism operators, otherwise

tourists will be reduced to

looking at coral under glass.

Now a look at what's making

headlines around the region.

The 'Standard' says the China

arm of HSBC is issuing up to $2

billion worth of bonds in Hong

Kong but there are no

guarantees that all investors

will get what they want if the

response is overwhelming. The

financial times reports on

world stock prices tumbling

yesterday despite the rebound

in the Japanese economy.

Amounted the 'Wall Street

Journal' leads with the fall on the Shanghai Stock the Shanghai Stock Exchange,

while reporting analysts

believe there are strong

foundations for growth in

China. That's all for this

edition of 'Business Today'. If

you want to look pack over any

of our interviews, please visit

our web site. We look forward

to your feedback. I'm Whitney

Fitzsimmons. Thanks for joining

me. Enjoy your day. Closed Captions by CSI