Archive | Commodity Super-Cycle and Decline

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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 →

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 →

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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 →

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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 →

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 →

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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 →

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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 →

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 →

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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 →