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Commodity Super-Cycle and Decline

The commodity supercycle is already crashing, blunting Canada’s growth and bruising the TSX – by Tim Kiladze and Niall McGee (Globe and Mail – July 22, 2022)

https://www.theglobeandmail.com/

A sharp reversal in commodity prices – hitting everything from copper, to crude oil, to wheat – is sapping investor enthusiasm for the resource sector and dismantling predictions of a supercycle that would immediately reshape the global economy.

As in many speculative booms, rising interest rates are largely to blame for the pullback. But investors are equally culpable, after they fell for age-old commodity price hype – no matter how many times they’ve already been burned.

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Explainer: Price surge prompts regulators to peer into commodity hinterland – by Huw Jones and Pratima Desai (Reuters – July 18, 2022)

https://www.reuters.com/

LONDON, July 18 (Reuters) – Spikes in energy and grain prices following Russia’s invasion of Ukraine in February, coupled with the suspension of nickel trading on the London Metal Exchange in March due to a disorderly market have prompted regulators to take a closer look at the commodities sector.

WHAT ARE THE CONCERNS?

There are many. A surge in food and energy prices has pushed inflation to the highest levels in decades, piling financial strain on households and political pressure on regulators.

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Column: China’s sluggish commodity imports set to improve, but risks abound – by Clyde Russell (Reuters – July 14, 2022)

https://www.reuters.com/

LAUNCESTON, Australia, July 14 (Reuters) – China’s imports of most major commodities were unabashedly weak in June, but the soft outcome is more of a history lesson than a pointer to future demand in the world’s biggest buyer of natural resources.

Crude oil imports slumped to a near four-year low in June, coming in at 8.72 million barrels per day (bpd), down 19% from May and 11% below the level in June last year, according to data released on Wednesday by the General Administration of Customs.

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White-hot metal market cools in warning for global economy – by Archie Hunter and Mark Burton (Bloomberg News – July 6, 2022)

https://www.bnnbloomberg.ca/

A white-hot corner of the aluminum market that for months defied a broader slide in metal prices is finally slumping, flashing a warning that major industrial economies are stumbling toward a recession.

While commodity-grade aluminum ingots have been tumbling since March on the London Metal Exchange, until recently the premiums paid for specialized products like billets remained sky-high.

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Russia targeting commodities in its war with Ukraine to create food shortages, break West’s resolve – by Mark MacKinnon (Globe and Mail – July 1, 2022)

https://www.theglobeandmail.com/

The day after a Russian missile struck a Canadian-owned vegetable oil terminal in this southern Ukrainian city, police sealed off the surrounding streets, fearing the Russians might strike it again.

Forty-eight hours after the June 22 attack, the police were gone, and local residents rushed to fill plastic jugs from the shallow stream of vegetable oil that was mixing with dirt and trash in a gutter behind the facility.

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Column: Metals melt down as recession fears overwhelm supply woes – by Andy Home (Reuters – July 4, 2022)

https://www.reuters.com/

LONDON, July 4 (Reuters) – Industrial metals have gone from boom to bust in the space of only three months. In March the London Metal Exchange (LME) suspended its nickel contract after the price spiked to more than $100,000 per tonne. Three-month nickel is now trading around $22,500, pretty much back where it was before the descent into chaos.

Copper, aluminium, zinc and tin all hit record price highs in March. Lead was the only LME base metal to miss out on the super-bull party. After the March melt-up, however, industrial metals are now in meltdown. The LME Index has just experienced its sharpest quarterly fall since the global financial crisis.

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Global recession fears wreak havoc on industrial metals, but industry better poised for long downturn, strategists say – by Nial McGee (Globe and Mail – June 27, 2022)

https://www.theglobeandmail.com/

Fears over a pending global recession are causing carnage in the industrial metals market, but the sector is better prepared than in the past to withstand a prolonged downturn, strategists at Morgan Stanley say.

Nickel, tin, zinc, and metallurgical coal and copper all tumbled last week and are trading far from their peaks. Copper is down 25 per cent from its all-time high of US$5.02 a pound reached in March. Tin has lost 44 per cent of its value in the same timeframe to trade at US$26,985 a ton.

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Mining Firms’ Cautious Spending Threatens Shift to Green Energy – by Amrith Ramkumar (Wall Street Journal – June 19, 2022)

https://www.wsj.com/

Metals prices are up, but mining companies aren’t spending. Their restraint could keep supplies tight and magnify shortages of raw materials such as copper and zinc that are critical for the transition away from fossil fuels.

Project spending by 10 large mining companies, including Rio Tinto PLC, RIO +1.29% BHP Group Ltd. and Glencore PLC, GLNCY 4.61% is expected to stay at roughly $40 billion this year and next year, according to figures compiled by Bank of America Corp. That would put capital expenditures well below a 2012 peak close to $80 billion, the bank’s figures show.

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World cannot allow Russia, China to dominate critical minerals market: Wilkinson – by Mia Rabson (Victoria Timines Colonist/Canadian Press – June 16, 2022)

https://www.timescolonist.com/

OTTAWA — The strategic mistake made in allowing Russia to have global dominance in oil and gas cannot be repeated as the world looks to massively ramp up production of critical minerals, Natural Resources Minister Jonathan Wilkinson asserted this week.

Demand for critical minerals and metals — such as lithium, graphite, nickel, cobalt and copper — is exploding as demand climbs for everything from smartphones and laptops to wind turbines, solar panels and electric cars.

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Plunging metals prices expected to rebound in H2 – report – by Henry Lazenby (Northern Miner – May 6, 2022)

Global mining news

Enduring Covid-19-linked lockdowns in the world’s largest metal consumer, China, are negatively impacting demand from end-use industries and sentiment towards the complex, resulting in lower metals prices, a new report by Fitch Solution Country Risk & Industry Research notes.

Nevertheless, market analysts at Fitch maintain their 2022 metal price forecasts as prices generally remain above levels seen before the Russia-Ukraine conflict. Fitch analysts also expect Chinese demand to eventually pick up in the second half, which will bring more stability to metals prices.

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Russia Struggles to Find New Buyers for Commodities as Europe Severs Links – by Georgi Kantchev (Wall Street Journal – May 5, 2022)

https://www.wsj.com/

With Europe weaning itself off Russian oil, natural gas and coal, President Vladimir Putin has ordered a full-scale reorientation of Russia’s commodity exports by shipping more cargoes to Asia, building new pipelines and expanding railroad links to the East.

But in redrawing its exports map, Moscow faces significant hurdles, putting its sanctions-stricken economy further at risk. European Union officials this week are preparing a sixth round of sanctions that aim to undercut Russia’s energy exports.

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Commodities at risk of reversing massive gains with ‘wild run’ similar to 2008, gold price to take on $2k – Bloomberg Intelligence – by Anna Golubova (Kitco News – May 04, 2022)

https://www.kitco.com/

(Kitco News) The commodity market is at risk of a reversal that will be a volatile ride similar to 2008, according to Bloomberg Intelligence. In this scenario, gold looks like one of the best options, with the ability to breach $2,000 once markets identify the end of the Federal Reserve rate-hike cycle.

“Commodities are at increasing risk this year of a wild ride akin to 2008, a development that may shine on gold,” Bloomberg Intelligence senior commodity strategist Mike McGlone said in his May outlook report.

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One by One, Mega Miners Show Why Metals Supply Is So Squeezed – by Thomas Biesheuvel and James Attwood (Bloomberg News – April 28, 2022)

https://www.bnnbloomberg.ca/

(Bloomberg) — Glencore Plc is the latest giant miner to pare back production forecasts, in what’s turning out to be a difficult start to the year for companies digging up some of the world’s most important raw materials.

The trend across the industry is clear — the biggest companies aren’t producing as much as they say they will. Rivals BHP Group, Rio Tinto Group and Anglo American Plc all reported underwhelming production numbers last week and costs are rising sharply across most operations.

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The view from England: Perception trumps reality – by Chris Hinde (Northern Miner – April 7, 2022)

Global mining news

The mining industry is playing by the wrong rules, and has been for decades. Many of us are scientists, and believe truth is discovered by establishing all of the facts.

However, as Oscar Wilde told us, the truth is rarely pure and never simple. Reality is easily distorted by incomplete data and misunderstood information, and what is real doesn’t matter as much as people’s perceptions, accurate or not. This dichotomy is exposed by publication of a report on the looming, catastrophic, underinvestment in mining.

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The $120 Billion Global Grain Trade Is Being Redrawn by Russia’s War in Ukraine – by Megan Durisin, Pratik Parija and Irina Anghel (Bloomberg News – April 5, 2022)

https://www.bnnbloomberg.ca/

(Bloomberg) — Across Ukraine’s farm belt, silos are bursting with 15 million tons of corn from the autumn harvest, most of which should have been hitting world markets. The stockpiles — about half the corn Ukraine had been expected to export for the season — have become increasingly difficult to get to buyers, providing a glimpse into the turmoil Russia’s war has wrought in the approximately $120 billion global grains trade.

Already gummed up by supply-chain bottlenecks, skyrocketing freight rates and weather events, markets are bracing for more upheavals as deliveries from Ukraine and Russia — which together account for about a quarter of the world’s grains trade — turn increasingly complicated and raise the specter of food shortages.

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