Archive | Commodity Super-Cycle and Decline

Top Miner Sees U.S.-China Trade Spat Limiting Global Growth – by David Stringer (Bloomberg News – september 18, 2018)

Rising U.S.-China trade tensions threaten to curb consumer purchasing power, crimp productivity growth and limit global economic expansion, according to the world’s biggest mining company.

The confrontation between the world’s top two economies, “along with an increasingly unpredictable policy formation process” in some nations, serves to reduce consumer confidence and business certainty, BHP Billiton Ltd. said Tuesday in its annual report. Protectionist policies and political uncertainty lower the achievable ceiling for global economic growth, it said.

Melbourne-based BHP released the report before the Trump administration’s decision to impose a 10 percent tariff on about $200 billion of Chinese goods next week and to more than double the rate in 2019. Continue Reading →

Base Metals Drop as Trade War Angst Spurs Concern About Demand (Bloomberg News – September 17, 2018)

Industrial metals fell for a second day on concern that the escalating U.S.-China trade war will hurt prospects for demand in the biggest users.

The Bloomberg Industrial Metals Subindex, which tracks aluminum, copper, nickel and zinc, slipped 0.8 percent as the market braced for a new round of U.S. tariffs on about $200 billion more in Chinese products that’s seen spurring retaliation from Beijing.

Aluminum’s losses also came as the U.S. Treasury softened the impact of sanctions on Russian supplier United Co. Rusal. Metals have been under pressure for months as the U.S.-led trade war fans concern that the showdown will derail otherwise-strong economic growth in the world’s two largest economies. Continue Reading →

Crunch time coming for minerals supply as economic powerhouses drive demand (Mining Review Africa – August 30, 2018)

Mining Review Africa

China will remain a key driver of global commodity demand but India – the world’s fastest growing economy – and Indonesia’s emergence as Asia’s new rising tiger – will put added pressure on minerals supply.

Speaking at the Paydirt 2018 Africa Down Under mining conference in Perth, EMR Capital Executive Chairman, Owen Hegarty, warned that future resources supply would be constrained. “Investment in the sector remains at trough levels,” Hegarty said.

“Future supply constraints will parallel the more than halving in minerals exploration spend, particularly for the global non-ferrous exploration budget. “And this at a time the global economy itself remains healthy.”

Hegarty pointed to genuine fears about impacts on resources commodities of a trade war between majors and the United States – with copper pundits pricing in a greater than 0.5% drag on global growth due to the uncertainy about economic policy within the resources powerhouses. Continue Reading →

Seven new powerhouses to drive mineral demand: EMR exec – by Valentina Ruiz Leotaud ( – August 30, 2018)

China, India, Brazil, Mexico, Russia, Indonesia, and Turkey will be leading the world’s mineral demand in the coming decades, Owen Hegarty, Executive Chairman of Australian private equity manager EMR Capital, predicts.

Speaking at the Paydirt 2018 Africa Down Under mining conference taking place in Perth, Hegarty said that the new top seven economies will lead the expected doubling of the global economy by 2050.

“You have to look at China – a country rebalancing, reforming and transforming – and that will make it the key driver of minerals commodity demand,” the investment expert said. Continue Reading →

Which mining supercycle? – by David Robinson (Sudbury Mining Solutions Journal – August 20, 2018)

Growing talk of a new supercycle for mining is encouraging, but a totally different kind of supercycle may be more important for mining supply firms.

The supercycle of the first years of our new millennium was a sustained period of rising commodity prices, supported by population growth and infrastructure expansion in emerging markets. The broader economic boom collapsed with the global financial crisis of 2007–2008.

The mining sector saw an orgy of investment and acquisitions that left major players over-extended and created excess capacity that held prices down for years. The past decade was nothing like a slump. Global output of metals continued to rise, only prices dropped. It is an oddity of GNP accounting that increased production can appear as lower GNP when prices drop. Continue Reading →

Weaker dollar boosts metals – by David Hodari and Benjamin Parkin (Wall Street Journal/Toronto Star – August 22, 2018)

Copper prices rose on Tuesday, with a drop in the U.S. dollar allowing the industrial metal to recover from heavy selling last week. Contracts for September rose 0.9% to $2.6915 a pound at the Comex division of the New York Mercantile Exchange, on track for the highest close in more than a week.

Analysts pointed to the weakness in the dollar, which fell after President Trump criticized the Federal Reserve for raising interest rates. The WSJ Dollar Index, which measures the greenback against a basket of 16 others, fell 0.1%.

Prices for gold, aluminum and various other metals were also mostly higher. Gold prices for August climbed 0.3% to $1,190.50 a troy ounce, with the more-active October contract rising 0.1%. Continue Reading →

Miners navigate uncertainty of currency crises, trade war – by Gabriel Friedman (Financial Post – August 21, 2018)

The U.S. dollar surge is only part of the problem

Vancouver-based First Quantum Minerals Ltd. entered the summer with copper prices on the rise, and investors enthusiastic about its stock.

But the summer has not been kind to Canadian miners, and the company is now contending with plummeting copper prices — which have fallen 19 per cent since June to about US$5,820 per metric ton.

As the U.S. dollar rises in value, and fears of a U.S.-China trade war take root, many Canadian mining executives are seeing ripple effects, as the commodities they produce, from copper to gold, and currencies in some of the markets where they operate, get pummelled. It’s all creating a difficult environment for mining companies. Continue Reading →

RPT-COLUMN-Best commodity bets? Exposed to China and less open to trade – by Clyde Russell (Reuters U.S. – August 16, 2018)

LAUNCESTON, Australia, Aug 16 (Reuters) – The recent gyrations in the world economy around Turkey’s currency and the escalating U.S.-China trade dispute have taken a toll on commodity prices, especially industrial metals.

However, while news-driven sentiment can clearly pummel markets, over a longer period of time not all commodities will be equally affected by the changing global economic dynamics. The key to which commodities are likely to perform better is China, which is the world’s largest commodity importer.

Even if the Chinese economy does struggle under the weight of the trade barriers erected by U.S. President Donald Trump, there are still likely to be commodities that can hold their own. The key is to look for commodities that are likely to remain in relatively high demand, and are subject to supply constraints. Continue Reading →

Metals Poisoned by Turkey Contagion as Copper Nears Bear Market – by Mark Burton (Bloomberg News – August 15, 2018)

From Turkey’s financial crisis to China’s trade war, the emerging-market contagion is infecting metal markets.

Base metal markets tumbled on Wednesday, with most contracts falling more than 2 percent in London. Copper sank below $6,000 a metric ton and is now approaching a bear market. Not even gold, the usual safe haven, was spared from the selloff. Bullion prices sank 0.7 percent to $1,186 an ounce. Natural resource shares were also in the red.

“It’s going to be difficult to shake this bearish sentiment,” Nicholas Snowdon, a metals analyst at Deutsche Bank AG, said by phone from London. “When you look at the broad selloff across metals, the key drivers are clearly macro factors.” Continue Reading →

Threat of Contagion in Emerging Markets Deepens Commodity Risk – by Javier Blas (Bloomberg News – August 14, 2018)

When Thailand devalued its currency two decades ago, few in global commodity markets took note. Within a year, the crisis morphed into an emerging-market rout that eviscerated the price of everything from crude oil to copper.

Fast forward to today and Turkey is presenting a similar challenge. The lira plunged to a record low against the dollar this month, taking local stocks and bonds with it.

Commodity markets have failed to react, with even gold unmoved by the chaos. Traders are focused more on Iranian sanctions, South American mine strikes and drought damage to crops, all of which point to higher, not lower, raw-material prices. Continue Reading →

China’s commodity imports stay resilient, but U.S. trade dispute looms – by Clyde Russell (Reuters U.S. – August 9, 2018)

LAUNCESTON, Australia (Reuters) – It’s tempting to look at China’s imports of major commodities in July and conclude that the strength is a sign that the escalating trade dispute with the United States isn’t having much of an impact.

While the first of the tit-for-tat tariffs came into effect in July, it will likely take several months before any real impact is discernable, and even then, separating out the effect of trade measures from other factors will be tricky.

In the meantime, the commodity trade data can still provide insight to China’s economy, and it’s largely painting a picture of resilience. Imports of crude oil rose slightly in July to about 8.48 million barrels per day (bpd), up from June’s 8.36 million, according to customs data released on Wednesday. Continue Reading →

Glencore looks to buybacks, not dealmaking – by Barbara Lewis (Reuters U.S. – August 8, 2018)

LONDON (Reuters) – Glencore (GLEN.L) said it would favour share buybacks over deal-making after it reported a 23 percent rise in first-half core earnings on Wednesday, just below analyst forecasts.

The miner and commodities trader said its earnings for January-June were a record – building on 2017 full-year results it said were the best yet – but it also said higher costs and lower prices for cobalt and other byproducts ate into profits.

CEO Ivan Glasenberg said market conditions were likely to remain volatile. Many mining stocks have pared gains this year as metals markets weakened in response to trade tensions and uncertainty about Chinese demand. Continue Reading →

RPT=COLUMN-Commodities may be first to show real impact of Trump-China trade war – by Clyde Russell (Reuters U.K. – August 2, 2018)

LAUNCESTON, Australia, Aug 2 (Reuters) – The Phoney War stage of U.S. President Donald Trump’s trade dispute with China may be ending, with economic indicators and commodity flows and prices starting to show real world effects.

The latest signal that China’s economy may be feeling some pain associated with Trump’s tariffs on about $34 billion in Chinese goods was the softening of the Purchasing Managers’ Index (PMI) in July.

While the overall drop to 50.8 in July from June’s 51.0 was small, of bigger concern was the slump in the subindex for new export orders, which dropped to 48.4, a fourth consecutive monthly decline. Continue Reading →

Why Shareholders Aren’t Loving Rio Tinto’s Cash Machine – by David Fickling (Bloomberg News – August 1, 2018)

The big mining companies are thriving again, but they’re right to be cautious.

Poor little rich kids. After a brush with death when commodity prices slumped barely three years ago, the world’s miners are back in rude health. Net debt at the big five is now headed to its lowest levels since the peak of the previous mining boom in 2011, based on reported results and analyst estimates.

Free cash flow hasn’t quite scraped those heady heights yet, but it’s looking barely less robust than it was back then — and much more sustainable, too. While the measure dropped by 38 percent in Rio Tinto Group’s first-half results Wednesday, the change was attributable almost entirely to the timing of a $1.2 billion tax payment on the previous year’s earnings:

One obvious reason for the strength of cash flows is that, contrary to predictions including our own, the companies have so far resisted the temptation to fall off the capital-discipline wagon and splurge on building new mines and infrastructure. Continue Reading →

All under heaven: China’s belt-and-road plans are to be welcomed—and worried about (The Economist – July 26, 2018)

The “project of the century” may help some economies, but at a political cost

SHUNNING all false modesty, China’s leader, Xi Jinping, calls his idea the “project of the century”. The country’s fawning media hail it as a gift of “Chinese wisdom” to the world’s development. As for the real meaning of the clumsy metaphor to describe it—the Belt and Road Initiative (BRI)—debate rages.

The term itself is confusing. The “road” refers mostly to a sea route; the “belt” is on land. Countries eager for China’s financing welcome it as a source of investment in infrastructure between China and Europe via the Middle East and Africa. Those who fear China see it instead as a sinister project to create a new world order in which China is the pre-eminent power.

One cause of confusion is that the BRI is not a single plan at all. A visitor to its website would click in vain to find a detailed explanation of its aims. There is no blueprint of the kind that China’s leaders love: so many billions of dollars to be spent, so many kilometres of track to be laid or so much new port capacity to be built by such-and-such a date. Continue Reading →