Archive | Commodity Super-Cycle and Decline

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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 →

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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 →

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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 →

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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 →

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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 →

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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 →

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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 →

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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 →

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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 →

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With annual revenues often in the tens or even hundreds of billions, mining companies are big business. When mergers or acquisitions occur, they create some of the largest mining powerhouses in the world and can have an everlasting impact on the industry. Here are six of the biggest mining mergers in history.

With annual revenues often in the tens or even hundreds of billions, mining companies are big business. When mergers or acquisitions occur, they create some of the largest mining powerhouses in the world and can have an everlasting impact on the industry. Here are six of the biggest mining mergers in history.

Shenhua Group and China Guodian Corporation: $272.96bn

Two of China’s largest state-owned enterprises (SOEs), Shenhua Group and the China Guodian Corporation, completed a merger on 20 November 2017, valued at almost $273bn. The resulting entity, the China Energy Investment Corporation, became the world’s largest organisation in the coal mining, thermal power, renewable energy, and coal-to-liquid conversion industries. Continue Reading →