Archive | Commodity Super-Cycle and Decline

NEWS RELEASE: Deloitte mining report explores key trends in 2019 (February 4, 2019)

Click here for full report: https://bit.ly/2UF8v49

As the industry shifts into a new stage of growth, miners must take an ever-expanding range of issues into account when setting corporate strategy.

Toronto, February 4, 2019—Released today, Deloitte’s 11th annual mining report, Tracking the trends (https://www2.deloitte.com/ca/en/pages/energy-and-resources/articles/tracking-the-trends.html), explores key trends facing mining companies as they navigate how to operate in a market characterized by constant disruption in the Fourth Industrial Revolution.

“The mining industry is changing faster than ever, resulting in both greater growth potential, as well as more disruption and volatility than in years past,” says Andrew Swart, Deloitte’s Canadian and Global Consulting Leader, Mining & Metals. “In today’s climate, miners must focus on differentiating their business models to generate long-term value, not only to attract investors, but also to remain successful in the communities in which they operate.”

Rethinking mining strategy

In the past, mining companies typically anchored their strategic planning around producing the highest volumes of ore at the lowest possible cost. This led to the drive to build ever-larger mines in pursuit of superior returns, underpinned by the expectation of constantly-rising commodity prices. Although that bubble has long since burst, many mining companies are still grappling with its strategic legacy. Continue Reading →

Column: A record-breaking year for China’s metals trade – by Andy Home (Reuters U.K. – January 28, 2019)

https://uk.reuters.com/

LONDON (Reuters) – Last year was one of the most interesting in a decade for China’s trade in base metals with multiple records broken both for imports and exports. The irony is that many key themes played out in the statistical darkness after China’s customs department suspended from March its traditional detailed monthly breakdown.

While some copper and aluminium insights could still be gleaned from customs’ continuing preliminary estimates, many other components of China’s metallic interaction with the rest of the world simply “disappeared”.

Partial light has since been restored thanks to the department’s new website and the forensic work of colleagues at Refinitiv. Here are some of the stand-outs in terms of what the markets largely missed at the time. Continue Reading →

Commentary: Commodity markets back Beijing’s stimulus, await trade talks – by Clyde Russell (Reuters U.K. – January 8, 2019)

https://uk.reuters.com/

LAUNCESTON, Australia (Reuters) – Commodity markets appear to have delivered their verdict on China’s plans to stimulate its economy, betting that Beijing’s boost to infrastructure spending will work.

China’s central bank cut the amount of cash that banks have to hold as reserves for a fifth time in a year on Jan. 4, a move that will free up as much as $116 billion in new credit.

The looser monetary policy announcement came two days after the national rail operator said it planned 6,800 km (4,225 miles) of new track this year, a 40 percent lift on what was laid last year. Continue Reading →

The Commodities to Watch in 2019 – by Jeremy Hill, Ranjeetha Pakiam and Jake Lloyd-Smith (Bloomberg News – January 4, 2019)

https://www.bloomberg.com/

Commodities took a kicking in 2018 — with deep losses in everything from oil and copper to coffee and sugar — so what’s in store for the 12 months to come? The inaugural What to Watch of the year offers a selective run through of prospects and pitfalls for some of the top raw materials, and it’s a reasonably positive picture that emerges.

That road map comes ahead of a busy period. The U.S.-China trade fight will be in the news next week, with a U.S. delegation in Beijing for talks from Monday. In addition, there’ll be more pointers on the macroeconomic outlook, with the World Bank updating its Global Economic Prospects report on Tuesday and a speech from Federal Reserve Chairman Jerome Powell on Thursday. Before that — and following a turbulent few days — Powell speaks in Atlanta later Friday.

Oil’s Well

The standout feature in commodity markets last quarter was crude’s swoon from four-year high into a bear market. The drivers of the reversal were record U.S. shale output, a clutch of sanctions waivers on Iranian flows, and a supply cut from OPEC+ deemed by some as too little. Continue Reading →

Deals: Acquiring or Selling: Mining Leaders Talk About Their 2019 Plans – by Danielle Bochove (Bloomberg News – December 20, 2018)

https://www.bloomberg.com/

U.S.-China trade tensions weighed on copper miners in 2018 as fears of a global economic slowdown overshadowed other fundamentals. Meanwhile gold producers struggled as bullion lost its safe-haven luster until late in the year.

What’s ahead in 2019? We asked four top executives from companies including Newmont Mining Corp. and Teck Resources Ltd. for their outlooks. From dealing with debt to dividends, to corporate-level acquisitions and asset sales, no one plans to stay still.

Gary Goldberg Newmont Mining

The Colorado-based miner intends to look at non-core assets that Barrick Gold Corp. may put up for sale after its merger: “If there’s something that’s attractive at the right value for us, we’d be interested.” Continue Reading →

Commentary: The year that politics broke the metals cycle – by Andy Home (Reuters U.K. – December 20, 2018)

https://uk.reuters.com/

LONDON (Reuters) – The two-year rally in industrial metal prices came to an abrupt end at the start of June. The London Metal Exchange Index, a basket of the LME’s major base metal contracts, hit a three-year high of 3499.6 in the first week of that month.

Prices then imploded over the ensuing weeks and the blood-bath has continued ever since. The Index stood at 2845.5 as of Wednesday’s close, back at mid-2017 levels when the rally was just gathering a head of steam. There’s no mystery as to what caused the crash.

The United States pulled the tariffs trigger on Chinese imports on June 15. China responded immediately in kind. Trade jaw-jaw had just become war-war. “The United States has initiated a trade war and violated market regulations, and is harming the interests of not just the people of China and the U.S., but of the world,” was the official Chinese Trade Ministry reaction. Continue Reading →

Miners bear brunt of risk aversion as investors take fright – by Clara Denina and Barbara Lewis (Reuters U.K. – December 5, 2018)

https://uk.reuters.com/

LONDON/KATOWICE, Poland (Reuters) – A two-year recovery in the mining industry has faltered, as trade tensions between China and the United States and concerns about economic growth weaken commodity prices and deter investment.

Institutional investors and fund managers say tighter regulations, namely MiFID, a major reform of European Union financial markets, have limited banks’ lending to mining companies and reduced research coverage, giving them fewer tools to carry out due diligence on businesses.

Sustainability and anxiety about the impact of mining on global warming has also risen to the top of the agenda, pushing miners to find new resources in riskier and politically unstable jurisdictions. “An increasing number of investors are becoming aware that ESG (environment, social, governance) risks can also be financially relevant,” Matthew Smith, head of sustainable investments at Storebrand Asset Management, said. Continue Reading →

Race to the bottom? India plans deep dive for seabed minerals – by Annie Banerji (Thomson Reuters Foundation – December 5, 2018)

http://news.trust.org/

As expanding technology and infrastructure fuel global demand for resources, manufacturing powerhouses India and China, are eyeing the ocean

CHENNAI, Dec 5 (Thomson Reuters Foundation) – In the 1870 Jules Verne classic “20,000 Leagues Under the Sea”, underwater explorer Captain Nemo predicted the mining of the ocean floor’s mineral bounty – zinc, iron, silver and gold.

India is catching up with that only now, as it prepares to unearth treasures down below, aiming to boost its economy. The floor of the world’s seas is scattered with vast beds of black potato-shaped polymetallic nodules comprising copper, nickel, cobalt, manganese, iron and rare earth elements.

These natural goodies are key to making modern gadgets, from smartphones and laptops to pacemakers, hybrid cars and solar panels. As expanding technology and infrastructure fuel global demand for these resources – whose supply is dwindling fast onshore – more and more countries, including manufacturing powerhouses India and China, are eyeing the ocean. Continue Reading →

‘An elephant starting to run’: With China’s economy slowing, all eyes turn to India in search of growth – by Joe Chidley (Financial Post – December 6, 2018)

https://business.financialpost.com/

The sixth-largest economy, India’s GDP growth was recently upwardly revised more than half a point to 7.3%

When Donald Trump, who is no stranger to Twitter hyperbole, describes a meeting with another world leader as “hopefully historic,” it’s hard not to consider it a case of damning with faint praise. But that’s the way he described his talks with Xi Jinping, China’s president, in Argentina at the G20 summit last week.

And no wonder. Days after the summit, what kind of trade truce the two superpowers actually struck seems to depend on which White House official you listen to, which Chinese state-controlled media outlet you read, or which way the wind is blowing. At best, it looks like the U.S. has agreed to withhold raising the tariff rate on US$250 billion worth of Chinese imports for 90 days while negotiators try to work out a longer-term deal. Hopefully.

In any event, investors who had been hoping for even a short-term respite from trade jitters — and the gathering storm of global economic gloom — didn’t get much of one from the G20. And until there’s clarity, worries over China’s economic growth won’t diminish. Continue Reading →

COLUMN-How cynical should you be about the Trump-Xi deal? Watch commodities – by Clyde Russell (Reuters U.S. – December 3, 2018)

https://www.reuters.com/

LAUNCESTON, Australia, Dec 3 (Reuters) – Perhaps the most interesting thing to try and calculate after the seeming trade ceasefire between the United States and China is the level of cynicism that will greet the new detente.

President Donald Trump and his Chinese counterpart Xi Jinping agreed to halt imposing additional tariffs on each other’s imports while they try to reach a deal to end their trade dispute within 90 days.

The agreement, reached at a meeting between the two leaders at the weekend G20 summit in Buenos Aires, certainly appears to be a de-escalation of trade tensions. And it does provide yet another opportunity for some sort of lasting deal. Continue Reading →

Commentary: Return of China trade figures reveals strong metal imports – by Andy Home (Reuters U.K. – November 29, 2018)

https://uk.reuters.com/

LONDON (Reuters) – China’s imports of refined base metals have been running at a robust pace this year, with flows of copper, zinc and nickel up on a year ago and the country on track to be a net importer of lead for a second year running.

Six months after the China’s customs department stopped publishing detailed monthly reports via companies such as Reuters, some light has returned to what is happening with the world’s largest metals buyer.

It has done so in the form of a new customs department website with a searchable database for this year’s trade flows. (43.248.49.97/) It’s in Chinese only and decidedly user-unfriendly, but it’s the real thing, cross-checking accurately with the first-quarter figures released under the old distribution system. Continue Reading →

China seen sustaining recovery in global mining M&A – by Tom Daly (Reuters U.S. – October 18, 2018)

https://www.reuters.com/

TIANJIN, China (Reuters) – A rebound in mining mergers and acquisitions is set to continue into 2019, led by companies from top metals consumer China, as a dearth of exploration spending leaves the industry in need of fresh investment, delegates told a conference on Thursday.

Sector M&A in mining powerhouse Canada had its best quarter in more than seven years in July-September, spurred by Barrick Gold Corp’s (ABX.TO) planned $6.5 billion acquisition of Randgold (RRS.L) and Chinese firm Zijin Mining’s (601899.SS) C$1.86 billion ($1.43 billion) deal to buy Nevsun Resources (NSU.TO).

“We think that this year and next year will be the years of consolidation,” Keith Spence, president of Canada-based Global Mining Capital Corp, told the China Mining conference in Tianjin. Continue Reading →

COLUMN-China’s resilient commodity imports show trade war yet to factor – by Clyde Russell (Reuters U.K. – October 15, 2018)

https://uk.reuters.com/

LAUNCESTON, Australia, Oct 15 (Reuters) – It’s tempting to look at the relative resilience of China’s imports of major commodities in September and conclude that the world’s second-biggest economy is weathering the trade dispute with the United States quite well.

The problem with this view is that while the trade conflict certainly looms as an issue in China’s commodity trade, it’s not yet the driving factor and any strength, or weakness, in various imports is largely a result of different dynamics.

Take copper for example, where imports of unwrought metal in September were 521,000 tonnes, up 24 percent from the 420,000 tonnes in August to the highest in 2-1/2 years. Continue Reading →

Commentary: LME Week metals puzzle is how to trade a trade war – by Andy Home (Reuters U.K. – October 12, 2018)

https://uk.reuters.com/

LONDON (Reuters) – Donald Trump didn’t make it to LME Week, the annual jamboree of the global metals trading community. But the U.S. president was the hot topic at the myriad seminars, cocktail parties and private meetings across London this week.

The industrial metals traded on the London Metal Exchange (LME) have found themselves at the heart of the escalating trade tensions between the United States and China. Physical supply chains have been stressed by tariffs and, in the case of aluminum, by U.S. sanctions against Russian producer Rusal.

Futures prices have been rocked by waves of speculative selling since the first round of trade tariffs was announced in June. The tension between macro doom and micro strength in markets such as copper has become extreme. Continue Reading →

COLUMN-China’s credit loosening may not do much for commodity demand – by Clyde Russell (Reuters U.K. – October 8, 2018)

https://uk.reuters.com/

LAUNCESTON, Australia, Oct 8 (Reuters) – China’s commodity imports may get a shot in the arm from Beijing’s decision to ease credit conditions in the world’s second-largest economy, but it may not be as big a boost as followed prior monetary loosening.

The People’s Bank of China on Sunday announced a steep 100 basis point cut in the level of cash that banks must hold as reserves, matching a similar move in April.

The easing of the reserve requirement ratios (RRRs) will inject a net 750 billion yuan ($109 billion) into the banking system, making it easier for banks to extend credit. Continue Reading →