An undated company photograph shows coal stockpiling at Felix Resources Ltd. facilities in Ashton, Australia.

China will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.

China National Petroleum Corp.’s plan to buy Repsol YPF SA’s Argentine unit may push Chinese purchases of overseas commodity assets to $43 billion this year, a 48 percent increase on 2008, according to data compiled by Bloomberg.

“The Chinese don’t have enough nickel, don’t have enough oil, and they don’t have enough copper,” Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist”, said in a telephone interview Thursday. “There’s a crisis coming. They are going around the world buying up what they can. They’re preparing for a rainy day.”

Bids for resources by China, whose $2.1 trillion in currency reserves are the world’s largest, have been met with opposition in the US and Australia. Neither concern over its growing influence nor the arrest of four Rio executives in Shanghai have stopped Chinese companies from buying assets abroad as the nation’s 4 trillion yuan ($585 billion) economic stimulus spurs demand.

‘Bolder deals’

“China will see larger and bolder deals,” said Brian Gu, the Hong Kong-based head of mergers and acquisitions for greater China at JPMorgan Chase & Co., the third-ranked adviser by transaction value this year. “The growing outbound mergers and acquisitions activity is going to be a long-term trend and the volume and activity are here to stay.”

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, dropped 36 percent last year, the biggest annual decline since at least 1957. The measure has gained 15 percent this year on signs that the recession may be ending.

Chinese energy companies have spent at least $13 billion on overseas assets since December as they take advantage of lower valuations caused by the slowdown.

Yanzhou, China’s fourth-biggest coal miner, is offering A$18 a share for Felix, including a dividend and stock in a spin off of a unit of the Australian company.

‘Inferior’ offer

The offer, recommended by Felix’s board, is “inferior” and shareholders should reject it, Sophie Spartalis, an analyst with Macquarie Group Ltd., said in a report Friday. A bid of between A$23 to A$25 a share would be “more reasonable,” she wrote.

Felix rose 4.1 percent to A$17.60 in Sydney trading. Yanzhou climbed 2.3 percent in Hong Kong to HK$12.40 while its Shanghai shares rose 3.7 percent to 20.72 yuan.

The state-owned parents of PetroChina Co., China Petroleum & Chemical Corp. and CNOOC Ltd. are studying investments in companies in Africa, Latin America, the Middle East and Central Asia, according to JPMorgan’s Gu and Mike Arruda, a lawyer at Jones Day in Hong Kong who advises on mergers and acquisitions in the oil and gas industry. Both declined to disclose details of deals they are advising on.

Controlling stake

China National Petroleum, the parent of PetroChina and the nation’s biggest oil company, is considering offering $13 billion to $14.5 billion for a controlling stake in Repsol’s unit, three people familiar with the matter said last month.

China Petrochemical Corp., the country’s second-biggest oil company, in June agreed to buy Geneva-based Addax Petroleum Corp. for C$8.3 billion ($7.6 billion) in China’s biggest overseas takeover to date.

Purchasing Addax, which has oil reserves in Iraq’s Kurdish territory, shows Chinese oil companies are “going for bigger transactions,” said Arruda, who is advising on what he described as “significant” acquisitions. “These deals seem to reflect an appetite we have not seen before.”

China bought record volumes of oil and iron ore in July, according to customs figures released August 11.

The world’s fastest-growing major economy consumes more than a third of the world’s aluminum output, a quarter of its copper production, almost a tenth of its oil and accounts for more than half of trading in iron ore. Last year, China bought $211 billion worth of iron ore, refined copper, crude oil and alumina, according to government data.

Demand, imports

China’s oil consumption doubled in the last decade, rising to eight million barrels a day last year from 4.2 million barrels in 1998, according to BP Plc’s Statistical Review. The world’s third-largest economy imported 3.6 million barrels of oil a day last year, meeting about 45 percent of its needs.

China’s increasing reliance on imported crude means the scale of acquisition deals has to increase, said Paul Ting, president of New Jersey-based Paul Ting Energy Vision LLC, a consulting company specializing in Chinese oil and gas markets.

The country’s crude needs may rise to more than 11 million barrels a day in five years with China’s ageing oilfields unable to produce the extra capacity needed, Ting said.

China National Petroleum said on May 13 it wants overseas crude production to match domestic output by 2020. Chairman Jiang Jiemin said CNPC produces less than 8 percent of its oil overseas and foreign acquisitions and ventures must be increased. “We want overseas production to contribute half,” he said at the time.

Source: Bloomberg