Archive | Commodity Super-Cycle and Decline

Changing of the guard as mining’s mini-boom loses steam – by Peter Ker (Australian Financial Review – August 30, 2019)

https://www.afr.com/

A three-year boom in prices for some of Australia’s most important commodities is fast losing steam, tempting investors to change horses mid-race.

Saul Eslake was tempting fate. As the keynote speaker for a sparsely attended mining conference during the deathly bottoms of the commodity cycle, the prominent economist’s message did not lift the mood.

”It could well be, in my view, that the commodities boom Australia has just experienced in the last 12 or so years is the last of its kind in human history unless unforeseen technological developments ordain otherwise,” he told Melbourne’s IMARC conference on November 10, 2015. Continue Reading →

Column: Why London Metal Exchange warehouses thrive in the shadows – by Andy Home (Reuters U.K. – July 26, 2019)

https://uk.reuters.com/

LONDON (Reuters) – Investment fund Cobalt 27 boasts on its website that it holds 2,904.7 tonnes of physical cobalt “fully insured and stored in LME-certified warehouses in Europe and the U.S.” Which is curious because the London Metal Exchange (LME) reports only 840 tonnes of cobalt sitting in its entire global warehouse network.

That, however, is metal that has been placed on warrant with the exchange. What Cobalt 27 owns is not on warrant. It could be warranted overnight. It is, after all, already sitting in one of the LME’s 559 registered warehouses.

But because it hasn’t been warranted, it doesn’t get counted as part of the LME’s daily inventory reports. And because it hasn’t been warranted, it’s also subject to a much lower storage charge. Which is, of course, one of the main reasons it hasn’t been warranted. Continue Reading →

OPINION: Mining industry needs investment or metal shortages are inevitable – by Julian Kettle (Woood Mackenzie – July 3, 2019)

https://www.woodmac.com/

Julian Kettle is Vice Chairman, Metals & Mining at Wood Mackenzie.

The time is right for the mining industry to invest in new projects. The fundamentals are clear: we forecast supply gaps across a number of key commodities by 2028.

Investors are understandably concerned that the mining industry will repeat the sins of the past. Meanwhile, macro-economic uncertainty is putting the brakes on project development, and the industry must contend with a widening range of above-ground risks.

But our view is that strong fundamentals mean that investors willing to step up will be rewarded.

Where are the most critical supply gaps? Continue Reading →

COLUMN-The Trump who tweeted wolf: commodities wary of U.S.-China trade news – by Clyde Russell (Reuters U.S. – July 1, 2019)

https://www.reuters.com/

LAUNCESTON, Australia, July 1 (Reuters) – Have commodity markets reached the point where they are ignoring the tweets and rhetoric on U.S.-China trade talks, and are instead waiting for some concrete developments?

Certainly the initial price action on Monday morning after U.S. President Donald Trump’s latest comments hailing a resumption of trade talks with Beijing was subdued.

The U.S. leader was upbeat after the G20 meeting at the weekend in Osaka, telling reporters that the talks were “right back on track,” before later tweeting that his meeting with Chinese President Xi Jinping was “far better than expected.” Continue Reading →

Trump blows up trade complacency, commodities to feel pain – by Clyde Russell (Reuters U.S. – May 5, 2019)

https://www.reuters.com/

LAUNCESTON, Australia (Reuters) – U.S. President Donald Trump has just given commodity markets a reminder that stormy waters can blow up quite quickly even if the voyage ahead was looking like smooth sailing.

Investors were becoming complacent with the idea that the U.S.-China trade dispute was heading toward an eminently sensible and mutually beneficial resolution before Trump’s latest Twitter outburst.

Trump tweeted on Sunday that he will raise U.S. tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent on Friday, and threatened to targets hundreds of billions of dollars more in trade. Continue Reading →

Citi Says U.S. and China Will Nail Deal, Aiding Commodities (Bloomberg News – April 23, 2019)

https://www.bloomberg.com/

The outlook for commodities is bullish, according to Citigroup Inc., which expects raw materials to be supported by a confluence of positive factors including the agreement of a trade deal between Washington and Beijing, improved demand from China, and a weaker dollar.

The bank’s base case is that the U.S. and China will agree to end their protracted trade fight by end-June, paving the way for tariffs to be lifted, analysts including Ed Morse said in a report. A deal between the two economies is now “on course” for the end of the second quarter, the bank said.

Raw materials have advanced in 2019 aided by gains in energy and metals, with the latest leg up this week driven by the U.S. decision not to extend sanctions waivers for buyers of Iranian crude. Continue Reading →

COLUMN-China’s commodity imports look tepid, may be slightly warmer – Clyde Russell (Reuters U.S. – April 15, 2019)

https://www.reuters.com/

LAUNCESTON, Australia, April 15 (Reuters) – If you were looking for evidence that China’s economy has lost momentum, you may be tempted to think that you’ve found it in the unimpressive growth, or lack thereof, in imports of major commodities in the first quarter.

Customs data for the first quarter show only crude oil has recorded significant growth in import volumes in the first quarter, with copper data mixed and iron ore and coal dropping.

This would seem to confirm the narrative of slowing growth in the world’s second-largest economy amid the ongoing trade and tariff dispute with the United States. Continue Reading →

Commodity prices, investment poised to extend upswing – by Eric Onstad (Reuters U.S. – March 29, 2019)

https://www.reuters.com/

LONDON (Reuters) – A rebound in commodities prices and investment is poised to extend in coming months as the sector gets its traditional boost during the final stages of the global economic cycle along with other drivers.

While some investors worry about a possible recession, commodities are due to benefit from an expected U.S.-China trade deal, tightening oil supply and potential short-covering in beaten-down U.S. grain futures.

The 19-commodity Thomson Reuters/Core Commodity CRB Index, which has rebounded 10 percent from an 18-month low touched at the end of last year, should also get further support from easier monetary policy that has lifted all financial markets, analysts and traders said. Continue Reading →

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 →