China’s Nuclear Expansion to Exceed Forecast, Japan Steel Says

By Masumi Suga and Shunichi Ozasa

Sept. 7 (Bloomberg) -- Japan Steel Works Ltd., which makes reactor parts for Areva SA, Toshiba Corp. and rivals, more than doubled its forecast for China’s nuclear plant construction because of stimulus spending and environmental pressures.

The country may build about 22 reactors in the five years ending 2010 and 132 units thereafter, compared with a company estimate last year for a total 60 reactors, President Ikuo Sato said in an interview. Japan Steel Works has the only plant that makes the central part of a large-size nuclear reactor’s containment vessel in a single piece, reducing radiation risk.

China, the world’s largest energy consumer after the U.S., is increasing spending on atomic energy as part of a 4 trillion yuan ($586 billion) economic stimulus and as it curbs greenhouse gas emissions. Japan Steel Works is counting on the rising reactor demand as the global recession curbs sales to customers such as carmakers and electronics companies.

“The potential for investment in nuclear power is huge,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “Only a small number of companies in China have the right to develop nuclear power projects, but the country is open to foreign companies to help build reactors and to provide equipment.”

Japan Steel Works, which has lost 12 percent of its value this year, fell 1.1 percent to 1,085 yen on Sept. 4 on the Tokyo Stock Exchange.

China became the world’s largest emitter of greenhouse gasses from burning oil and coal in 2006, followed by the U.S., Russia, India and Japan, according to U.S. Department of Energy data compiled by Bloomberg News.

Business Talks

“China, which had increased construction of coal-fired power plants, is now trying to focus on nuclear power because of the environmental issue,” Sato, 60, who took office in June, said in the Aug. 31 interview in Tokyo. “China is accelerating nuclear spending, and additional business talks are coming up.”

The country has 9,100 megawatts of nuclear capacity and has approved the construction of additional reactors able to generate 25,400 megawatts, Sun Qin, then-deputy head of the National Energy Administration, said last month. China will issue a plan by the end of the year to push development of clean energy sources such as nuclear, wind, solar and hydro power.

Gross domestic product in China expanded 7.9 percent in the second quarter as the economy rebounded from the weakest growth in almost a decade, boosted by stimulus spending.

“Similar to road and railway construction, nuclear energy is also part of China’s plans for a recovery after the economy slowed,” Sato said.

Global Increase

Globally, a total of 52 nuclear reactors were under construction as of Jan. 1, according to the Japan Atomic Industrial Forum Inc.

Japan Steel Works is spending 80 billion yen ($864 million) at its Muroran plant in the country’s northern island of Hokkaido by March 2012 to increase capacity to make parts for 12 nuclear reactors a year, compared with 5.5 units now, the president said.

The investment will increase annual sales from Japan Steel Works’ cast and forged steel for electric and nuclear power to 70 billion yen from the year starting April 2012, up from 45.5 billion yen expected for the current year, Sato said.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net.

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Baoshan May Cut Hot-Rolled Steel Prices, Mysteel Says

By Bloomberg News

Sept. 7 (Bloomberg) -- Baoshan Iron & Steel Co., China’s biggest steelmaker, may cut benchmark hot-rolled coil prices for the first time in four months, following reductions by rivals, Mysteel Research Institute said.

The Shanghai-based mill will probably cut October prices for hot-rolled coil, used to make other steel products, by 4.3 percent to 4,442 yuan ($650) a metric ton, Mysteel said. Prices of cold-rolled steel, used to make cars, may be unchanged at 5,476 yuan a ton, the industry publication said.

Chinese steel prices have fallen 15 percent in the past four weeks after an earlier gain spurred record output in July. Prices will rebound from the recent declines because of increasing demand from the makers of automobiles, appliances and machinery, Baoshan President Ma Guoqiang said Aug. 31.

“Baoshan’s October policy indicates orders from automobile and appliance makers are stronger than machinery, shipbuilding and container producers,” said Hu Yanping, Beijing-based analyst with researcher Umetal Research Institute. “Baoshan remains optimistic over the market outlook because the price cut is smaller than the spot reductions.”

Baoshan Steel gained as much as 3.1 percent to 7.25 yuan in Shanghai, and traded at 7.17 yuan at 11:30 a.m. The benchmark Shanghai Composite Index gained 1.6 percent.

Vice President Chen Ying declined today to comment on the price report. The steelmaker may officially announce the October prices to traders and consumers late today or tomorrow, Mysteel analyst Bai Rui said.

Baoshan Steel may cut some steel products, such as pickling hot-rolled coil, by as much as 500 yuan a ton, Mysteel said. The mill may also keep prices of zinc-galvanized steel sheets unchanged.

Inventories in China, the world’s biggest steel producer, are at “high levels” and are weighing on prices, Citigroup Inc. said Sept. 4. Producers are anticipating “strong demand” in the fourth quarter, it said.

--Helen Yuan. Editors: Tan Hwee Ann, Matthew Oakley.

To contact the reporters on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

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Grain Areas in Australia Get Rainfall, Easing Stress

By Madelene Pearson

Sept. 7 (Bloomberg) -- Australia, the world’s fourth- largest wheat exporter, received rainfall over the weekend in New South Wales and Queensland states, easing concern that production may suffer after adverse weather.

“The rain will significantly help ease moisture stress that had become increasingly evident across parts of the Queensland and New South Wales wheat belt,” Luke Mathews, agri- commodity strategist at Commonwealth Bank of Australia, said in an e-mailed report today.

Growers in Australia rely on rain in September to help boost yields in winter crops including wheat, barley and canola before the harvest from November. Commonwealth Bank said on Aug. 24 that growing regions in the two states needed urgent rain after hot, dry weather cut yield prospects.

A front and trough are starting to spread some rain over New South Wales, Queensland and Victoria, the bank said today, citing forecaster weatherzone.com.au. A high-pressure system is directing some showers over coastal South Australia and keeping Western Australia dry for now, it said.

Milling wheat futures for January delivery fell 3.2 percent to A$214 ($181) a metric ton on the Australian stock exchange at 12:38 p.m. in Sydney. The contract is domestic-focused for grain delivered in New South Wales, the nation’s No. 2 wheat producer.

Export Contract

Export wheat futures contracts will begin trading Sept. 14 in a move designed to set a benchmark for shipments, ASX Ltd., operator of the nation’s biggest exchange, said today.

The unit for Western Australia Wheat futures is 20 tons, priced at Kwinana, West Australia, according to an e-mailed statement from ASX. Options will be available from Sept. 15.

Australia ended its monopoly selling system for wheat shipments last year, giving 23 traders permission to export. Western Australia is the nation’s biggest wheat-growing region, with most of its crop sold overseas.

West Australian production may be greater than forecast a month ago after most areas had good rainfall in August, according to the state government.

The state may produce 11 million to 13 million tons of all grains this harvest, the local Department of Agriculture and Food said in its latest seasonal report. Wheat output may be 7.5 million to 9 million tons, it said. It had previously tipped a total grains crop of 10 million to 12 million tons.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

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Gold Drops, Ending Four-Day Gain as Investors Sell Near $1,000

By Kim Kyoungwha

Sept. 7 (Bloomberg) -- Gold fell, snapping a four-day advance, as some investors sold holdings after bullion surged close to the highest this year.

Bullion jumped 4.1 percent last week, the steepest weekly gain since April, as the Dollar Index declined, reversing a 0.4 percent advance the previous week.

“There is growing interest in profit-taking after gold neared the $1,000 level,” said Jang Joong Shik, head of precious metals trading with Hyundai Futures Co. in Seoul. “The dollar will keep a weak tone which, combined with inflationary concerns, will power a further rise in the metal.”

Gold for immediate delivery fell 0.2 percent to $992.55 an ounce at 9:19 a.m. in Singapore. The metal has advanced 13 percent this year.

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended Sep. 1, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 184,501 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report.

“The price increase is of speculative nature, but gold will be able to temporarily break through the $1,000 mark,” Eugen Weinberg, a senior analyst with Commerzbank AG, wrote in a Sept. 4 note. “Currently, there is insufficient fundamental support to allow for a sustained rise beyond this level.”

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 0.38 metric tons to 1,077.63 tons on Sept. 4, according to data on the company’s Web site.

Among other precious metals for immediate delivery, silver was little changed at $16.22 an ounce, platinum rose 0.4 percent to $1,259.50 an ounce and palladium was unchanged at $292.50 an ounce.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Japan Stocks Rise on Property-Price Speculation; Toshiba Climbs

By Masaki Kondo

Sept. 7 (Bloomberg) -- Japanese stocks rose for the first time in four days as Toshiba Corp. gained on a plan to outsource some electronics production and real-estate developers climbed on speculation property prices will increase.

Toshiba, the nation’s biggest chipmaker, jumped 3.9 percent. Property developers as a group rose the most in the Topix index, with NTT Urban Development Corp. leading gains. Canon Inc., a camera maker that gets more than a quarter of its sales from the Americas, climbed 2.6 percent as the dollar strengthened against the yen. Promise Co., a consumer lender, lost 7.6 percent after Nikko Citigroup Ltd. cut its share-price estimate.

“The market is dominated by speculators and nobody has a clue how the market will look even in a week,” said Mitsushige Akino, who oversees the equivalent of $645 million at Ichiyoshi Investment Management Co. “Funds seem to be flowing into Japan’s real-estate market because properties are relatively cheap and there are signs the economy has bottomed out.”

The Nikkei 225 Stock Average rose 1 percent to 10,289.04 as of 12:43 p.m. in Tokyo. The broader Topix index added 0.8 percent to 942.75, with three stocks gaining for every two that declined. Both gauges fell for a third day on Sept. 4, the longest stretch of declines in seven weeks.

The number of shares traded on the Tokyo Stock Exchange as of the 11 a.m. break was the lowest since at least July. U.S. markets are closed today for the Labor Day holiday.

Toshiba, Real-Estate

The estimated price-earnings ratio on the Nikkei dropped to 39.5 on Sept. 4, a level not seen since July 17, as investors sold equities on concern gains had outpaced the prospects for profit growth. The gauge has rallied 44 percent in the past six months after plunging to the lowest level since October 1982.

Toshiba rose 3.9 percent to 484 yen and was the most actively traded stock by value in Japan. The company said it may contract out some production of large-scale integrated circuits. The Nikkei newspaper earlier reported Toshiba may give orders to Chartered Semiconductor Manufacturing Ltd. of Singapore or Globalfoundries Inc. of the U.S.

NTT Urban surged 6.1 percent to 93,800 yen, and market leader Mitsui Fudosan Co. leapt 3.1 percent to 1,784 yen. A gauge of property developers posted the steepest increase among the Topix’s 33 industry groups.

“Businesses are putting up good properties for sale” because of restructuring and cost cuts, said Ichiyoshi’s Akino. That’s attracting investors and may lead to higher property prices, he said.

Dollar-Yen Rate

Canon, the world’s biggest maker of digital cameras, climbed 2.6 percent to 3,560 yen and was the single biggest contributor to the Topix’s advance. Sony Corp., the maker of the PlayStation 3 game machine, advanced 1.9 percent to 2,470 yen.

Electronics makers were buoyed by the stronger dollar, which boosts the value of overseas sales at Japanese companies when converted into their home currency. The dollar appreciated to as much as 93.20 yen today from 92.61 at the close of Tokyo stock trading on Sept. 4.

Promise, the consumer lender, lost 7.6 percent to 754 yen, set for the lowest close since its listing in December 1994. Nikko Citigroup slashed its price estimate by almost a fifth to 690 yen and kept its “sell” rating.

Nikkei futures expiring in September added 1 percent to 10,290 in both Osaka and Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Asian Stocks Gain as G-20 Agreement Fuels Recovery Optimism

By Shani Raja

Sept. 7 (Bloomberg) -- Asian stocks rose for a third day, led by finance and technology companies, as the Group of 20 nations agreed on steps to shore up the global financial system.

HSBC Holdings Plc, Europe’s largest lender, gained 2 percent in Hong Kong. Toshiba Corp. climbed 3.7 percent in Tokyo after saying it may contract out some production to cut costs. Technology companies also advanced as a $1.8 billion bid for Chartered Semiconductor Manufacturing Ltd. fueled merger speculation. China Unicom (Hong Kong) Ltd. gained 2.2 percent after announcing a $1 billion share swap with Telefonica SA.

The MSCI Asia Pacific Index rose 0.9 percent to 113.81 as of 12:39 p.m. in Tokyo, taking a three-day advance to 1.2 percent. The gauge climbed 61 percent from a more than five-year low on March 9 on speculation stimulus measures around the world will revive the global economy.

“It’s clear there’s an ongoing commitment by the authorities to make sure this recovery works,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “Together with the evidence of a recovery we’re already seeing, it points to a continuing improvement in the economic outlook.”

Japan’s Nikkei 225 Stock Average climbed 0.9 percent. Canon Inc., which gets 28 percent of its sales from the Americas, gained 2.6 percent after the U.S. government said companies cut fewer jobs than estimated in August.

U.S. Jobs Report

Futures on the S&P 500 were little changed. The stock gauge climbed 1.3 percent on Sept. 4 after a Labor Department report showed U.S. companies cut fewer jobs last month than economists had estimated. The unemployment rate rose to 9.7 percent, the highest level in 26 years.

HSBC, which is based in London, gained 2 percent to HK$83.65. Commonwealth Bank of Australia rose 1.2 percent to A$46.23. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, added 0.7 percent to 557 yen.

Finance chiefs from the G-20 nations concluded weekend talks in London with an agreement on a regulatory blueprint aimed at avoiding a repeat of the global financial crisis that has caused at least $1.6 trillion of losses since 2007.

The G-20 measures include forcing banks to curb leverage and raise the amount and quality of assets they keep in reserve once growth takes hold.

“The G-20 has shown once again that governments from around the world can come together to agree on the global governance the new global economy needs,” U.K. Prime Minister Gordon Brown said.

Relatively Cheap

Stocks in the MSCI Asia Pacific Index are priced at an average 1.5 times book value, lower than 2.1 times for the Standard & Poor’s 500 Index in the U.S. and 1.6 times for Europe’s Dow Jones Stoxx 600 Index.

“Investors are focusing on the relative cheapness of equities,” said Hiroichi Nishi, an equities manager at Tokyo- based Nikko Cordial Securities Inc.

Toshiba, Japan’s largest chipmaker, climbed 3.7 percent to 483 yen. The company will contract out production of large-scale integrated circuits to overseas chipmakers as part of efforts to cut production costs, the Nikkei newspaper reported. Keisuke Ohmori, a spokesman for Toshiba, said no decision had been made.

Technology companies accounted for 17 percent of the MSCI Asia Pacific Index’s gain today as Advanced Technology Investment Co., owned by the government of Abu Dhabi, said it plans to acquire Chartered Semiconductor for S$2.5 billion ($1.8 billion) in cash. Chartered was halted from trading in Singapore.

Unicom, Telefonica

“Companies are starting to realize there are attractive valuations out there, and taking advantage of it,” AMP’s Naeimi said.

Unicom, China’s second-biggest wireless carrier, gained 2.2 percent to HK$10.98. Telefonica, Europe’s second-biggest phone company, will pay $1 billion to boost its stake in Unicom to 8.1 percent from 5.4 percent, the two companies said in a joint statement yesterday.

Telefonica also agreed to sell an equal value of shares to Unicom, which may gain a stake of as much as 0.89 percent in the Spanish company, according to the statement.

BHP Billiton Ltd. and Rio Tinto Group, the world’s biggest and third-biggest mining companies, are considering a A$1 billion ($853 million) merger of their Canadian diamond operations, the Australian reported, without saying where it got the information.

Rio Tinto gained 1.3 percent to A$55.94 in Sydney, while BHP was little changed at A$36.59.

Canon rose 2.6 percent to 3,560 yen on optimism demand for its digital cameras will increase as global demand picks up. Toyota Motor Corp., which gets 31 percent of its revenue in North America added 1 percent to 3,890 yen.

Greater-than-estimated earnings and economic reports have fueled the MSCI Asia Pacific Index’s rally since March. A survey released today showed Australia’s building industry contracted at a slower pace last month amid higher demand for residential dwellings. New Zealand’s house prices rose for a fourth month in August, the government’s valuation agency reported.

To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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South Korea, Australia Warn Against Early Stimulus Withdrawal

By Shamim Adam

Sept. 4 (Bloomberg) -- South Korea and Australia said an early winding back of fiscal and monetary stimulus that has been pumped into economies risks derailing a recovery even as debates intensify that such policies may spur asset bubbles.

South Korea’s government will formulate an exit strategy from its stimulus program once there are signs the nation’s economic recovery is led by business and consumers, Vice Finance Minister Hur Kyung Wook said in an interview today. Australian Treasurer Wayne Swan yesterday said a premature withdrawal of stimulus would stall a global recovery.

Government pledges of more than $2 trillion in stimulus worldwide and interest rate cuts are helping the world economy pull out of the worst recession since World War II. The global equity rally has added about $15 trillion to the value of stocks since this year’s low on March 9 as the credit crunch eased and investors became more confident of a recovery.

“The global recession is still with us,” Swan said in London, where finance ministers and central bankers from the Group of 20 are meeting this week. “Getting the timing right is essential, but we have to be acutely aware of just how fragile the international economy is. I don’t sense that anybody thinks that the time is near” for stimulus to be withdrawn.

U.S. Treasury Secretary Timothy Geithner on Sept. 2 also cautioned that it’s too early to remove policies aimed at boosting growth. European Central Bank President Jean-Claude Trichet yesterday said the euro region’s recovery from recession will be “bumpy” and signaled officials are in no rush to withdraw emergency measures as it left rates at a record low.

‘First Signs’

“You’re seeing the first signs of positive growth now in this country and countries around the world,” Geithner said. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”

The U.S. economy faces a “significant chance” of contracting again after emerging from its worst recession since the 1930s, Nobel Prize-winning economist Joseph Stiglitz said yesterday.

Asia’s reliance on stimulus spending has caused public debt to swell and policy makers need to consider unwinding the measures, former Japanese Economic and Fiscal Policy Minister Heizo Takenaka said today.

“Asia is developing a dangerous amount of debt; we must look for an exit strategy,” Takenaka said in Tokyo. “If this continues, Asian economies will become too dependent on their governments.”

Southeast Asia

Policy makers in Southeast Asia’s biggest economies may begin to remove monetary stimulus in their financial systems as early as the second quarter of 2010 as growth resumes, according to UBG AG.

Singapore may shift its currency stance to one that allows for a modest and gradual appreciation of its exchange rate, while Thailand, Indonesia and the Philippines may start raising interest rates in the quarter ending June, UBS economist Edward Teather wrote in a report published yesterday. Malaysia will raise rates by 50 basis points next year, Credit Suisse predicts.

Central banks across Asia have started to signal they may soon need to raise borrowing costs as growth resumes and threatens to stoke consumer prices.

Indonesia’s central bank yesterday refrained from cutting its benchmark rate for the first time in 10 months, judging faster inflation is now a bigger risk than slowing growth.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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U.S. Payroll Losses Slow, Unemployment Rises to 9.7%

By Timothy R. Homan

Sept. 4 (Bloomberg) -- The pace of U.S. job losses slowed in August as signs emerged that the recession is ending, while the unemployment rate reached a 26-year high, underscoring threats to consumer spending gains in the recovery.

Employers cut 216,000 from payrolls, fewer than forecast, after a 276,000 drop in July that was larger than previously reported, Labor Department data showed today in Washington. The jobless rate jumped to 9.7 percent from 9.4 percent.

“What we’re learning is that the pace of job declines is subsiding,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Radio. “The economy is no longer detonating, but we are still losing jobs, and the unemployment rate is going up. It’s going to be a very tough environment for the consumer.”

Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy. AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s.

Stock-index futures fluctuated after the report, and contracts on the Standard & Poor’s 500 Index were little changed at 1,002.30 as of 9:06 a.m. in New York. Treasuries were also little changed, with benchmark 10-year notes yielding 3.35 percent.

Revised Losses

Revisions subtracted 49,000 from payroll figures previously reported for July and June.

The report comes hours before Geithner meets in London with finance ministers and central bankers from the Group of 20 emerging and developed nations.

While the G-20 gathering will discuss how policy makers plan to exit from their fiscal and monetary stimulus efforts, now isn’t the time to start pulling back, Geithner told reporters in Washington this week. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”

Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions.

6.9 Million

The latest numbers brought total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump.

Payrolls were forecast to drop 230,000 after a 247,000 decline initially reported for July, according to the median of 79 economists surveyed by Bloomberg News. Estimates ranged from decreases of 365,000 to 100,000. Job losses peaked at 741,000 in January, the most since 1949.

The jobless rate was projected to rise to 9.5 percent. Forecasts ranged from 9.3 percent to 9.8 percent. Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent for all of next year.

Adjusted for part-time employees that would rather have a full-time job and for discouraged workers that are no longer looking for a job but would take one if it were available, the jobless rate jumped to 16.8 percent in August from 16.3 percent.

A rising jobless rate, stagnant wages and falling home values signal a lack of consumer spending may curb an economic recovery.

Factory Jobs

Today’s report showed factory payrolls fell by 63,000 after decreasing 43,000 in the prior month. Economists forecast a drop of 60,000. The decrease included a loss of 15,000 jobs in auto manufacturing and parts industries.

Announcements of staff reductions continued last month. Whirlpool, the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.

Payrolls at builders declined by 65,000 after decreasing 73,000. Financial firms decreased payrolls by 28,000, after a 17,000 loss the prior month.

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 80,000 workers after falling 154,000. Retail payrolls decreased by 9,600 after a 43,200 drop.

American Airlines

Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put 244 more on involuntary leave as part of the 1,600 job cuts it announced in June.

Government payrolls decreased by 18,000 after falling 28,000 the prior month.

Today’s report also showed the average work week held at 33.1 hours in August. Average weekly hours worked by production workers remained unchanged from the month before, at 39.8 hours, while overtime also held at 2.9 hours. That brought the average weekly earnings up to $617.32 from $615.33.

“We’re still going to see some months of job cuts,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “There is a whole range of options, like adding shifts or hours, that companies can put in place until it becomes necessary to hire people back.”

Workers’ average hourly wages rose 6 cents, or 0.3 percent, to $18.65 from the prior month. Hourly earnings were 2.6 percent higher than August 2008. Economists surveyed by Bloomberg had forecast a 0.1 percent increase from the prior month and a 2.2 percent gain for the 12-month period.

The U.S. recession “is bottoming out” and the economy is poised for “a slow return,” Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings “positively” this year.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Ireland Taps Honohan to Run Central Bank Amid Financial Crisis

By Fergal O’Brien and Ian Guider

Sept. 4 (Bloomberg) -- Ireland named finance professor Patrick Honohan to run the country’s central bank, giving him supervisory power over a banking industry that almost collapsed last year and a voice in monetary policy across the euro region.

Honohan, 59, will succeed John Hurley, who retires later this month, Finance Minister Brian Lenihan said in Dublin late yesterday. He is currently a Professor of International Financial Economics and Development at Trinity College Dublin.

Honohan takes over as Ireland revamps its banking system amid the worst recession in the country’s history. An expert on banking, Honohan brings both economic and political skills to the job, having worked at the World Bank and as an adviser to former Irish Prime Minister Garret Fitzgerald.

“He’s not just an Irish expert on banking, he’s an expert of international renown,” said Karl Whelan, a professor at University College Dublin and a former economist at the Federal Reserve in Washington. “There’s some incredibly impressive people on the ECB council, and if you want to have your voice heard, it helps to have a resume like Patrick’s.”

While Honohan won’t have power over the so-called bad bank set up by the government to clear banks’ balance sheets, he will have responsibility for the stability of the financial system and the supervision of individual firms. Currently, the latter is managed by an autonomous regulator within the central bank.

“Throughout this financial crisis, I have sought the views of Professor Honohan and he has consistently provided valuable advice,” said Lenihan.

‘Honored’

The appointment of the academic marks a break from Ireland’s traditional policy of appointing a top ranking government official to the central bank role. Honohan said in a phone interview that he was “honored and delighted” to have the opportunity “to help stabilize” the financial sector and the economy. He declined to comment further.

Honohan will also join the European Central Bank’s 22- member Governing Council and has described President Jean-Claude Trichet’s style of communication as “oblique.”

“I think the big issue will be negotiating Ireland’s position within the ECB, making sure Ireland has the support of the ECB in sorting out its difficulties,” said Frances Ruane, Director of Ireland’s Economic & Social Research Institute.

The ECB said Aug. 31 that the bad bank, know as the National Asset Management Agency, must not make “undue premium payments” to banks when it takes over their loans.

Retuned

Honohan has criticized Irish economic policy in the past, saying that the lower interest rates inherited when the country adopted the euro in 1999 weren’t solely to blame for the credit- fueled boom over the following decade.

Joining the euro was “neither necessary nor sufficient for a crisis,” Honohan said in a paper delivered in Dubrovnik in June. “The Irish authorities did retain sufficient policy instruments to have combated the emergence of imbalanced; they simply did not use them effectively.”

Irish policies were “not retuned to take account of the fact that, following euro membership, financial markets were no longer offering an early warning system,” he said. “Corrective action that could and should have been taken were neglected as a result.”

Honohan supports the idea of a euro-region bank regulator, writing on the Irish Economy Web site in January that he has “long been an advocate” of such a move.

“Isn’t it now obvious that we in Ireland should be cheerleaders for an early move in this direction?” he said. “We urgently need all the help we can get in financial regulation -- even for nationalized banks.”

Risk Sharing

Born in Dublin in 1949, Honohan studied economics and mathematics at University College Dublin, where he graduated with first-class honors in 1971. After a masters degree at UCD, he completed a doctorate at the London School of Economics, where his dissertation was “Uncertainty, Portfolio Choice and Economic Fluctuations.”

Last month, he proposed a plan to share the risks associated with the National Asset Management Agency between the government and banks.

This would involve a two-part payment for the loans, with the second part made in the form of a stake in the agency. Lenihan, who is examining the proposal, said today that there “has never been a divergence” between him and Honohan on NAMA.

Married with one son, Honohan worked as an economist at Ireland’s central bank from 1976 to 1984 and was at the World Bank from 1987 to 1990 and again from 1998 to 2007. He has been at Trinity since 2007.

His academic papers have covered topics from divergent inflation rates in monetary unions to banks’ risk-management models and financial supervision in developing economies.

“The appointment is a loss for academia,” said Brian Lucey, an associate professor of finance at Trinity. “But it’s good for Ireland. He’s well respected across Europe.”

To contact the reporter on this story: Fergal O’Brien in Dublin at fobrien@bloomberg.net; Ian Guider in Dublin at iguider@bloomberg.net.

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Rand Weakens, Paring Weekly Gain, on U.S. Unemployment Concern

By Garth Theunissen

Sept. 4 (Bloomberg) -- The rand weakened from a six-week high as economists speculated a report will show U.S. unemployment rose, dulling risk appetite on concern the world’s largest economy is struggling to recover from recession.

The rand depreciated as much as 0.6 percent to 7.6925 per dollar and traded 0.3 percent weaker at 7.6697 by 10:18 a.m. in Johannesburg. Earlier the rand gained 0.1 percent to 7.6341, the strongest level since July 23.

Unemployment in the U.S. probably rose to 9.5 percent in August from 9.4 percent in July, according to the median of 77 estimates in a Bloomberg News survey. Rising joblessness underscores Treasury Secretary Timothy Geithner’s view that it’s “too early” to begin exiting from stimulus measures aimed at reviving the U.S. economy.

“The rand is retracing a bit because there’s some caution ahead of the U.S. non-farm payrolls data,” said John Cairns, head of foreign-exchange research at Rand Merchant Bank in Johannesburg. “Investors don’t like taking big positions before an important data release that could impact negatively on risk appetite.”

Today’s decline pared the rand’s third weekly climb to 1.1 percent. The currency gained 2 percent yesterday after a report showed South Africa’s current-account deficit more than halved in the second quarter, reducing the country’s reliance on foreign capital.

“The significant improvement in the current-account deficit was far better than the market expected and is a big positive for the rand,” said Cairns. “It alleviates the need for foreign portfolio inflows.”

Current Account

The deficit on the current account, a measure of trade in goods and services, shrank to 3.2 percent of gross domestic product in the three months to end-June, the lowest since March 2004, down from 7 percent in the first quarter and narrower than the 4.4 percent median analyst estimate.

Foreign investors have been net buyers of almost 76 billion rand ($9.9 billion) of South African assets this year, according to data from the JSE Ltd., which runs the nation’s stock and bond exchanges. The capital inflows have helped the rand rally almost 23 percent against the dollar this year, making it the second-best performing major currency monitored by Bloomberg.

A gain of 3.5 percent in gold and 0.7 percent advance in platinum this week also boosted the currency of South Africa, an exporter of both metals.

Government bonds increased, with the yield on South Africa’s benchmark 13.5 percent security due September 2015 dropping 10 basis points from yesterday’s close to 8.04 percent. The bond’s price, which moves inversely to the yield, gained 51 cents from yesterday to 125.65 rand. In the week its price rose 57 cents.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

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Darling Rejects FSA Call for Action to Curb ‘Useless’ Banks

By Gonzalo Vina

Sept. 4 (Bloomberg) -- U.K. Chancellor of the Exchequer Alistair Darling dismissed calls from Financial Services Authority Chairman Adair Turner to take action against parts of the banking industry that are “socially useless.”

It is not the job of governments to decide which elements of commercial activity are of wider social value, Darling said in a British Broadcasting Corp. radio interview today.

“You get into huge difficulties if you draw up a list of what’s useful and what’s useless in banking or indeed anything else because you are applying subjective judgments,” Darling said. “Where do you draw the line? ”

Turner last month said that the financial sector is “swollen” and proposed a global “Tobin Tax” on financial transactions to redistribute bank profits to the poor and to “public goods” like fighting climate change.

His suggestion was quickly dismissed by U.S. economist Henry Kaufman, Harvard University history professor Niall Ferguson and former Bank of England policy makers Willem Buiter and Richard Lambert. The Treasury said “taxation is a matter for the chancellor.”

The Conservative opposition has pledged to dismantle the FSA and return banking supervision to the central bank if it wins the next general election, due by June at the latest.

In a Prospect magazine article, Turner said complex financial products were of “very dubious social value” and proposed governments look at ways of discouraging their use.

Not the Same

“Clearly, not all innovation should be treated in the same category as the innovation of either a new pharmaceutical drug or a new retail format,” Turner wrote. “I think that some of it is socially useless activity.”

Turner had expressed views on taxes before. He said last month that the FSA is considering whether it could penalize banks that have tax-avoidance programs, even if primary enforcement of tax matters comes from the Treasury’s Revenue and Customs arm.

The government has endorsed other proposals made by Turner in March to overhaul regulation, including getting banks to put aside more capital.

Darling said he wants agreement among Group of 20 finance ministers, who meet in London today, for tougher rules to police banks and rein in bonuses.

He conceded bankers may leave the U.K. and that this would be a price worth paying as long as the right rules were in place to prevent a repeat of the excessive risk-taking that led to the worst financial crisis since the Great Depression.

“We have do decide what’s right and what’s appropriate, and if people don’t like it they could potentially go,” Darling said. “My point is, it is not actually in our interest for people to go offshore which is why we need international agreement.”

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net

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RBS, Barclays Cut Lending as Treasury Pushes for More

By Andrew MacAskill and Jon Menon

Sept. 4 (Bloomberg) -- Royal Bank of Scotland Group Plc and Barclays Plc, two of Britain’s biggest banks, cut lending even after promising the government to give more credit to borrowers and help revive the economy.

RBS and Lloyds Banking Group Plc, the two biggest banks bailed out by the government, and Barclays Plc reduced lending globally by 165 billion pounds ($270 billion) in the first half, according to company filings. RBS and Barclays reduced loans by about 11 percent, the most among Europe’s largest banks.

RBS and Barclays are at risk of missing the government’s target to boost their U.K. net lending by 36 billion pounds this year. The two banks cut lending to U.K. homeowners and businesses by 9.5 billion pounds in the first half, the filings show. London-based Lloyds, which is 43 percent owned by the taxpayer, declined to disclose its net U.K. lending.

“This is a bearish sign for the economy,” said Jonathan Loynes, chief European economist at Capital Economics Ltd. in London. “For there to be economic growth, bank lending needs to rise. It is pretty clear that there are supply constraints.”

The Treasury has committed 1.4 trillion pounds to rescue the nation’s banking system through direct investments, asset insurance and loan underwriting amid the worst recession in 60 years. Banks may not be lending the extra cash as they seek to bolster capital, Bank of England Deputy Governor Charles Bean said last week. Consumers repaid debt at a record pace in July, according to the Bank of England.

Lending Shrinks

Global lending fell by an average of 5.4 percent at the five largest U.K. banks in the first half, five times more than at the 10 biggest banks in continental Europe, company reports show. RBS, which is 70 percent government-owned, shrunk its global loan book by 91 billion pounds, Barclays by 50 billion pounds, and Lloyds by about 24 billion pounds, the filings show.

Fiona MacRae, a spokeswoman for Edinburgh-based RBS, said the bank had planned to shrink its loan book after receiving a government bailout. London-based Barclays said the reduction in lending was due to a decline in cash held against derivative trades and a stronger pound. Lloyds spokeswoman Eve Speight said the bank was committed to lending to “creditworthy” borrowers.

In all, Europe’s 15 largest banks by market value cut lending to customers by 2.9 percent from a year earlier, the company filings show. Banks provide about 70 percent of corporate financing in Europe compared with about 20 percent in the U.S., where borrowers sell commercial paper and corporate bonds to fund the majority of investments, according to the European Central Bank.

Some Banks Expanding

ECB President Jean-Claude Trichet and politicians around the continent are warning that banks’ reluctance to boost lending risks prolonging the recession.

Stockholm-based Nordea Bank AB bolstered lending by 5 percent in the period, more than any of the European banks. London-based Standard Chartered Plc and Zurich-based Credit Suisse Group AG increased loans by 3.6 percent.

All banks that received government aid cut lending in the first half, company filings show. Lloyds, Britain’s biggest mortgage lender, reduced its loan book by 3.6 percent. Zurich- based UBS AG, which received a cash injection from the Swiss government last year, pared lending by 7.2 percent.

“The priority of the weak banks right now is rebuilding their balance sheets,” said Arturo de Frias, a banking analyst at Evolution Securities Ltd. in London. “They are increasing some new lending, but at the same time running down their books by cutting old loans.”

Easing Demand

Banks say the lending slowdown is largely the result of a drop in demand from borrowers, a consequence of the recession. U.K. consumers, the most indebted in Europe, are paying back mortgages and credit card debt as interest rates drop.

RBS said U.K. net lending, which takes customer repayments into account, fell by 3.2 billion pounds in the first six months. The bank agreed to increase annual net lending by 25 billion pounds in February as a condition for state support. David Gaffney, an RBS spokesman, said businesses are looking to reduce their debt levels rather than increase them.

RBS said today it won’t call $1.6 billion of subordinated bonds after regulators objected to using state aid to pay holders of the lender’s lowest-rated securities. The Financial Services Authority told RBS not to redeem four series of bonds early after the European Commission said banks shouldn’t use government cash to repay equity and subordinated debt.

Brown Under Pressure

Barclays reduced its outstanding loans in the U.K. by 6.3 billion pounds in the first half even as it made 17 billion of new loans to households and businesses, indicating the bank may struggle to meet its target to increase lending by 11 billion pounds this year. Barclays spokeswoman Gemma Abbott declined to comment on the figures.

A Treasury spokesman said RBS’s lending targets are legally binding and apply over the 12 months from March. Barclays, which didn’t receive a government bailout, isn’t legally bound to increase lending, he added.

The failure to get credit flowing increases the pressure on Prime Minister Gordon Brown, who nationalized banks, insured assets and is underwriting loans to spur lending. Politicians have repeatedly criticized banks for failing to boost credit after receiving government bailouts and guarantees.

“The banks are still not playing fair,” said John Wright, chairman of the London-based Federation of Small Businesses, which represents 215,000 entrepreneurs. “Small businesses are still having difficulty getting finance from banks, and those that are fortunate enough to get finance face higher interest payments.”

To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; Jon Menon at jmenon1@bloomberg.net

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U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says

By Sonia Sirletti and Jeffrey Donovan

Sept. 4 (Bloomberg) -- The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.

“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy. “The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.”

Roubini said he didn’t see a risk of a dollar crash in the “‘short term.” The value of the U.S. currency relative to currencies such as the yen or the euro “cannot change too much compared to current levels because if the dollar were to weaken a lot and the euro strengthen a lot, that’s going to warp any chance for the European economy to recover, same argument as to the yen,” he said.

“Most of the adjustment of the dollar in the future has to occur relative to China, relative to emerging Asia and relative to some of the other commodity exporters in the world, whether these are advanced economies or emerging markets,” he said.

Foreign creditors need assurances that the U.S. will address its deficit, Roubini said.

“Unless in the medium term these issues of fiscal sustainability are addressed, and unless we mop up that excess liquidity from the financial system, eventually the financial markets and the foreign creditors of the United States might get more concerned about the sustainability of the U.S. fiscal deficit and about the U.S. being tempted to use the inflation tax as a way of resolving its private and public debt problems,” he said.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Jeffrey Donovan in Rome at jdonovan26@bloomberg.net

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Canadian Dollar Gains as Job Reports Boost Appetite for Risk

By Chris Fournier and Matt Townsend

Sept. 4 (Bloomberg) -- Canada’s dollar advanced the most in more than a week as investors’ appetite for riskier assets grew after government reports showed the nation unexpectedly added jobs in August and the U.S. shed fewer positions than forecast.

“People are putting risk back on,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer. “The Canadian dollar should head back down toward the bottom of the well-established range.” A “rather large” option expiry next week at C$1.10 should limit Canadian dollar gains, he said.

The Canadian currency appreciated as much as 1.2 percent to C$1.0887 per U.S. dollar, the biggest intraday advance since Aug. 27, before trading at C$1.0969 at 9:09 a.m. in Toronto, from C$1.1019 yesterday. One Canadian dollar purchases 91.17 U.S. cents.

Employment in Canada increased by a net 27,100 jobs last month after a decline of 44,500 in July, the nation’s statistics agency reported today in Ottawa. The median forecast of 21 economists in a Bloomberg News survey was for a decrease of 15,000 jobs.

“The number was well above consensus,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “It certainly suggests an improvement. It’s not necessarily a defining moment in Canadian job creation, but it certainly suggests a more bullish direction for the Canadian economy and, by extension, the Canadian dollar.”

U.S. Job Report

U.S. employers eliminated 216,000 jobs in August after a revised decrease of 276,000 jobs in the previous month, the Labor Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg was for a reduction of 230,000. The unemployment rate increased to 9.7 percent from 9.4 percent in July.

The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 11 percent this year. It weakened 1.5 percent against the greenback last month, performing worse than 13 of the 16 most-traded currencies tracked by Bloomberg. The loonie was the No. 1 performer in July, gaining 7.9 percent.

Canada’s dollar will strengthen by the end of next year against its U.S. counterpart to C$1.07, according to the median forecast of 37 economists and analysts in a Bloomberg survey.

To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net

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Euro Erases Gain Against Yen as Stocks, Bond Yields Fluctuate

By Oliver Biggadike and Ye Xie

Sept. 4 (Bloomberg) -- The euro erased its gain versus the yen as U.S. stocks and government bond yields fluctuated after the Labor Department said employers eliminated fewer jobs in August than economists forecast.

“It’s a slightly better-than-expected number,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “There’s too much uncertainty about how this will play out. From a recession point of view, we still have a long way to go.”

Canada’s currency rose against all of the 16 most-traded counterparts tracked by Bloomberg as Statistics Canada reported the first gain in jobs since April. New Zealand’s dollar increased against the greenback and yen as Chinese stocks extended yesterday’s biggest gain in six months.

The euro was little changed at 132.10 yen at 9:42 a.m. New York, compared with 132.03 yesterday, after earlier increasing 0.8 percent. The dollar appreciated 0.3 percent to $1.4210 per euro, from $1.4252, and rose 0.3 percent to 92.92 yen, from 92.64.

Employers eliminated 216,000 jobs in August after a revised decrease of 276,000 jobs in the previous month, the Labor Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News was for a reduction of 230,000. The unemployment rate increased to 9.7 percent.

The Dollar Index rose 1.2 percent to 78.975 on Aug. 7 as 10-year Treasury yields climbed after a report showed July payrolls dropped less than economists forecast. The gauge, which the ICE uses to track the currencies of six major U.S. trading partners, advanced 0.2 percent to 78.609 today.

Trichet on Recovery

The euro erased its gain versus the dollar yesterday as European Central Bank President Jean-Claude Trichet said the economic recovery will be “rather uneven” after holding the target lending rate at a record low of 1 percent.

“Trichet sounded extremely dovish,” a team of Commerzbank AG analysts including Ulrich Leuchtmann in Frankfurt said in a report today. “It is hardly surprising that the dollar was able to benefit from it.”

The Federal Reserve signaled in minutes of its August meeting published on Sept. 2 that it’s trying to prepare investors for an end to some of its asset purchases as the U.S. economy shows signs it’s beginning to recover from its worst recession since the Great Depression.

Treasury Secretary Timothy Geithner told reporters on the same day in Washington that it’s still “too early” for the Group of 20 nations to implement exit strategies. G-20 finance ministers and central bankers meet today and tomorrow in London.

The kiwi, as the New Zealand currency is known, advanced 0.9 percent to 63.30 yen and appreciated 0.5 percent to 68.17 U.S. cents.

Canada’s dollar strengthened 0.7 percent to C$1.0944 per U.S. dollar as Statistics Canada reported employment rose by 27,100, compared with economists’ median forecast of a drop of 15,000. The unemployment rate increased to 8.7 percent as the labor force grew faster than employment.

To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

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Corn, Soybeans Head for Weekly Decline on High U.S. Harvests

By Jae Hur

Sept. 4 (Bloomberg) -- Corn and soybeans are poised for weekly declines on forecasts that rain last month will allow farmers in the U.S. Midwest to produce more of the crops than the government forecast.

Before today, corn fell 4 percent this week and the oilseed slumped 6.9 percent. U.S. corn output will total 13.01 billion bushels, Informa Economics Inc. said yesterday. The Department of Agriculture forecast 12.761 billion last month, up from an estimated harvest of 12.101 billion last year.

“Informa’s bearish supply forecasts were a weight on the Chicago grains and oilseeds, but at this stage the market should be well aware of the bountiful new crop supply,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney.

Corn for December delivery fell as much as 0.6 percent to $3.1375 a bushel in electronic trading on the Chicago Board of Trade by 4:37 p.m. in Singapore. The price touched $3.115 yesterday, the lowest since Aug. 17.

Soybeans for November delivery were little changed at $9.41 a bushel. Prices reached $9.295 yesterday, the lowest level since July 30.

The soybean crop will total 3.305 billion bushels and could reach 3.372 billion with favorable September weather, Informa said. The USDA is estimating a crop of 3.199 billion bushels and is scheduled to release its second survey-based production forecast on Sept. 11.

Inventories, Demand

“Very tight inventories and voracious Chinese import demand will makes soybeans very sensitive to any adverse late- season weather events,” CWA’s Hassall said.

U.S. exporters sold 110,000 metric tons of soybeans to China and 174,000 tons of corn to unknown buyers for delivery in the marketing year that ends Aug. 31, the USDA said yesterday.

China’s soybean output in 2009-2010 may fall by 14.8 percent to 14.05 million metric tons on adverse weather conditions, Li Qiang, chairman of Shanghai JC Intelligence Co., said today at a Beijing conference.

Wheat for December delivery in Chicago fell 0.1 percent to $4.7825 a bushel at 4:38 p.m. Singapore time. The price touched $4.7525 yesterday, the lowest level since Dec. 5. Before today, the grain had lost 3.3 percent this week.

Grain crops in Australia’s New South Wales, usually the nation’s second-largest wheat producer, may fail after rain forecast this week missed many areas. The state was forecast to produce 6.8 million tons of wheat, 1.6 million tons of barley and 321,000 tons of canola this season.

‘Pretty Disappointing’

Rainfall in the past two days was “pretty disappointing,” Frank McRae, grains specialist at the state’s Department of Industry and Investment, said today. As much as 30 percent of the winter crop, including wheat, barley and canola, may be in “dire straits,” he said.

Hot, dry weather in eastern parts of Australia and the forecast return of an El Nino has raised concerns that the nation’s grain output may miss forecasts. The country, the world’s fourth-largest wheat exporter, relies on rain in September to boost yields ahead of the harvest from November.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Cocoa Exports From Indonesia Advance 60% in August

By Yoga Rusmana

Sept. 4 (Bloomberg) -- Cocoa bean exports from Indonesia’s Sulawesi island, the nation’s main growing region, surged 60 percent in August as farmers sold stockpiles to benefit from a gain in prices and raise funds ahead of a Muslim festival.

Shipments from South and Central Sulawesi provinces, which account for about four-fifths of Indonesia’s output, advanced to 47,527 metric tons last month compared with 29,725 tons in July, according to data today from the Indonesian Cocoa Association. Sales were 25,261 tons in August last year.

Increased shipments from the world’s third-biggest grower may help to arrest this year’s 9 percent gain in the price of the chocolate ingredient, which has risen on concern that global demand will exceed supply. Indonesia, with the world’s largest Muslim population, will mark Eid al-Fitr on Sept. 21.

“Now is the right time to sell beans as the price is high,” Herman Agan, the head of the association’s Central Sulawesi branch, said by phone from Palu. “Farmers need money to buy food and new clothes for the festival.”

Cocoa for December delivery slipped 0.5 percent to $2,923 a ton on ICE Futures U.S. in New York yesterday. Ivory Coast is the world’s top producer, with Ghana the second-biggest.

Indonesian exports in the first eight months of the year slid to 176,312 tons from 180,891 tons a year ago, the trade group said today. The country harvests most of its crop from April to July, with smaller volumes gathered until September.

Production in Indonesia may rise next year for the first time in four years as improved yields offset any setback from a lack of rain from an El Nino, Halim Razak, chairman of the association, said on July 9. Output in 2010 may gain to 500,000 tons from an estimated 480,000 tons this year.

El Ninos shift weather patterns around the world and can cause drought in the Asia-Pacific.

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

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