Commodity Super-Cycle and Decline – Page 11

[Opinion] Commodities Are Flashing a Once-in-a-Generation Buy Signal – by Frank Holmes (U.S. Global Investors – April 23, 2018)

April 26, 2018

Since the commodities supercycle began unwinding 10 years ago, many investors have been waiting for the right conditions to trigger mean reversion and lift prices. I believe those conditions are either firmly in place right now or, at the very least, in their early stages.

Among them are factors I’ve discussed at length elsewhere—a weaker U.S. dollar, a steadily flattening yield curve, heightened market volatility, overvalued U.S. stocks, expectations of higher inflation, trade war jitters, geopolitical risks and more.

In addition, nearly 60 percent of money managers surveyed by Bank of America Merrill Lynch believe 2018 could be the peak year for stocks. A recent J.P. Morgan survey found that three-quarters of ultra-high net worth individuals forecast a U.S. recession in the next two years.

COLUMN-China’s Q1 imports of major commodities lose some momentum – by Clyde Russell (Reuters U.S. – April 16, 2018)

April 16, 2018

https://www.reuters.com/

LAUNCESTON, Australia, April 16 (Reuters) – China’s imports of major commodities may be losing some of their strong growth momentum, with gains in the first quarter of this year failing to keep pace with those from the same period in 2017.

At first glance, China’s imports of crude oil, iron ore, coal and copper looked to have bounced back in March after a poor showing in February.

However, the first two months of the year generally result in some distortions in the data, depending on the timing of the Lunar New Year. This year’s holiday fell entirely within February, resulting in weaker import numbers.

Goldman Sachs Says You Must Own Commodities in These Tense Times – by Pratish Narayanan (Bloomberg News – April 13, 2018)

April 16, 2018

https://www.bloomberg.com/

The case for owning commodities has rarely been stronger, according to Goldman Sachs Group Inc. With raw materials rallying on escalating political tensions across the globe and economic growth remaining strong, the bank’s analysts including Jeffrey Currie doubled down on their “overweight” recommendation.

They reiterated a view that commodities will yield returns of 10 percent over the next 12 months, according to an April 12 note.

The Bloomberg Commodity Index is up more than 2.5 percent this week, the most in two months. Another raw materials gauge, the S&P GSCI Index, has rallied over 5 percent this week to levels last seen in 2014.

Trump threatens more China tariffs as Beijing vows ‘fierce counter strike’ (Reuters/Globe and Mail – April 6, 2018)

April 6, 2018

https://www.theglobeandmail.com/

China warned on Friday it was fully prepared to respond with a “fierce counter strike” of fresh trade measures if the United States follows through on President Donald Trump’s threat to slap tariffs on an additional $100 billion of Chinese goods.

Trump, in light of what he called China’s “unfair retaliation” against earlier U.S. trade actions, had upped the ante on Thursday by ordering U.S. officials to identify extra tariffs, escalating a tit-for-tat confrontation with potentially damaging consequences for the world’s two biggest economies.

China’s Commerce Ministry spokesman, Gao Feng, called the U.S. action “extremely mistaken” and unjustified, adding that the spat was a struggle between unilateralism and multilateralism. He also said no negotiations were likely in the current circumstances.

COLUMN-Damp squib or next commodity super-cycle? The Belt and Road dilemma – by Clyde Russell (Reuters U.S. – April 4, 2018)

April 4, 2018

https://www.reuters.com/

HONG KONG, April 4 (Reuters) – China’s Belt and Road Initiative (BRI) is one of those rare things that virtually everybody seems to have heard about, but equally, very few people can actually claim to have a detailed understanding of what it means.

This dichotomy was in evidence at the Belt and Road conference, hosted by Mines and Money, in Hong Kong on Tuesday, with views ranging from the BRI will be the driver of a new super-cycle for commodities to that it’s more of a marketing slogan aimed at boosting the image and influence of the government in Beijing.

On the side of thinking of the BRI as a sort of a Marshall plan for Asia, Africa and even Europe are a set of impressive sounding numbers, which dwarf the scale of the U.S. initiative that helped to rebuild Europe after World War II.

What the escalating U.S.-China trade battle means for Canada – by David Parkinson and Barrie McKenna (Globe and Mail – April 4, 2018)

April 4, 2018

https://www.theglobeandmail.com/

China’s latest escalation in its trade skirmish with the United States may present more a murky complication than a clear opportunity for Canadian pork and scrap aluminum exporters who look to be in the crossfire, industry watchers and trade experts said.

China announced this week that it would impose tariffs of up to 25 per cent on a list of 128 U.S. export goods, valued at US$3-billion, in retaliation for the tariffs announced by the United States last month on steel and aluminum from China and other countries.

Among the key products named in China’s action are pork and scrap aluminum – two areas where Canada is a significant competitor to the United States in the Chinese market. China will apply a 25-per-cent tariff on both U.S. pork and scrap aluminum.

COLUMN-Two risks threaten commodities, one bullish, one bearish – by Clyde Russell (Reuters U.S. – March 26, 2018)

March 26, 2018

https://www.reuters.com/

LAUNCESTON, Australia, March 26 (Reuters) – It’s not quite time to run up the red flags, but some recent developments in commodity markets suggest it may be time to start looking for them in the locker.

The are two main factors that appear to be emerging that may threaten an end to the current quite rosy picture surrounding demand for commodities such as iron ore, steel and the metals most exposed to the battery boom, cobalt, lithium and nickel.

On the supply side, there is a renewed rush of optimism that may set off another round of mining companies over-paying for assets or sinking way too much capital into projects approved on the back of too bullish forecasts.

Trade war looms as U.S. hits China with $60-billion in tariffs – by Adrian Morrow and Nathan Vanderklippe (Globe and Mail – March 23, 2018)

March 23, 2018

https://www.theglobeandmail.com/

U.S. President Donald Trump’s plan to hit US$60-billion worth of Chinese goods with tariffs threatens to spark a protracted trade war between the world’s two largest economies and send a shudder through international commerce.

The move – which may also include restricting Chinese investment in the United States and launching a World Trade Organization case against Beijing – is retaliation for China forcibly taking, and sometimes allegedly stealing, U.S. technology.

It is also meant to start erasing Washington’s US$385-billion trade deficit with Beijing, which Mr. Trump blames for the hollowing out of the U.S. manufacturing sector.

U.S. Trade Battle Fuels Metals’ Longest Weekly Slump Since 2015 – by Mark Burton (Bloomberg News – March 23, 2018)

March 23, 2018

https://www.bloomberg.com/

Base metals posted a fifth straight weekly loss in London as the trade conflict between the U.S. and China escalated, with nickel bearing heavy losses amid fears the rift will derail global growth and dent usage in China’s steel-making sector.

Most metals slumped on the London Metal Exchange after U.S. President Donald Trump ordered tariffs on $50 billion worth of imports from China on Thursday, and Beijing announced retaliatory duties shortly afterward.

Copper and aluminum hit fresh three-month lows and mining majors including Glencore Plc and Rio Tinto Group dropped in London. Gold rallied as investors flocked to haven assets.

Mining’s Main Event Shows Good Times Are Back—Just Not for All – by Danielle Bochove and Luzi-Ann Javier (Bloomberg News – March 7, 2018)

March 7, 2018

https://www.bloomberg.com/

If attendance at the world’s biggest mining conference is any indication, the industry has all but fully recovered from a painful downturn — although capital is still tight, especially for juniors.

More than 25,000 mining executives, investors, prospectors, government officials and analysts from 125 countries poured into this year’s PDAC conference in Toronto, the most in five years.

While attendance is still off the 2012 peak, which took place before producers were pummeled by a sharp price downturn, this year’s numbers indicate a clear recovery in confidence, albeit not evenly spread across the industry, said PDAC President Glenn Mullan.

Mining sector unloved as investors find it hard to trust – by Clara Denina and Barbara Lewis (Reuters U.S. – February 16, 2018)

February 20, 2018

https://www.reuters.com/

LONDON (Reuters) – Investors are shunning the mining sector, data from Thomson Reuters shows, as they struggle to forget the string of multi-billion dollar takeovers and expensive development projects that left them empty handed.

A decade-long commodity boom coincided with years of economic growth when China took off, but when the global economy slowed, so did the market for commodities from oil to copper.

Data shows that two years after the worst of the raw materials slump is over, investors are still not ready to pour in fresh funds despite a price rally. The mining sector .FTNMX1770 led the FTSE higher in 2016 as it rebounded from the previous year’s deep price crash, but it is still well below levels seen in 2011.

Copper, iron ore price jump sparks rally in mining stocks – by Frik Els (Mining.com – February 14, 2018)

February 15, 2018

http://www.mining.com/

Mining and metals investors were piling into the sector’s big names on Wednesday as gold jumped, base metals prices surged and iron ore continued to rally on optimism about global demand for raw materials ahead of a holiday week in top consumer China.

Gold enjoyed its best trading since the Brexit vote in June 2016 on Wednesday. Copper bounced to above the $7,000 a tonne ($3.24 per pound) level bringing the bellwether metal’s gains just this week to more than 6%. Nickel surged 4.8% to $14,100 a tonne, the highest since May 2015, while zinc ended nearly 3% higher to exchange hands for $3,567, a near decade high.

The iron ore price which has been defying expectations of a pullback for months gained on Wednesday with benchmark Northern China import prices rising to a five-week best of $78.25 a tonne.

Commodities Escape Worst of Market Rout on Robust Demand Outlook – by Jake Lloyd-Smith and Heesu Lee (Bloomberg News – February 6, 2018)

February 6, 2018

https://www.bloomberg.com/

Commodities are escaping the worst of the global market rout as losses in raw materials are capped by speculation that the bullish outlook for demand remains intact.

The Bloomberg Commodity Index pared its decline to only 0.1 percent by the end of the Asian day as gains in precious metals and U.S. natural gas helped offset lower oil and industrial metals.

While some raw materials were dragged lower as investors eschew risk, the reaction was muted compared with other assets. Stock markets from Hong Kong to Tokyo tumbled more than 4 percent following Monday’s collapse in U.S. equities and bond yields.

Pile-of-Cash Dilemma for Mining Industry Once Crippled by Slump – by Thomas Biesheuvel and Thomas Wilson (Bloomberg News – February 5, 2018)

February 5, 2018

https://www.bloomberg.com/

Three years after a commodity slump left their finances in shambles, mining companies are swimming in so much cash that investors aren’t sure where the industry will spend it all.

With metals from zinc to palladium trading at multi-year highs, four of the world’s top producers generated combined free cash flow last year of about $87 million a day. Some of the unprecedented windfall is earmarked for dividends, which companies including BHP Billiton Ltd. and Glencore Plc cut or eliminated during the slump.

Where the rest of the money goes — into new mine projects, acquisitions or a bank account — remains one of the big unanswered questions for executives, investors and bankers attending Africa’s biggest mining conference, which begins Monday in Cape Town. Companies may be reluctant to spend too much, given the disastrous results of rapid expansions a few years ago.

Goldman’s Most Bullish on Commodities Since Supercycle Ended – by Mark Burton (Bloomberg News – February 1, 2018)

February 2, 2018

https://www.bloomberg.com/

Goldman Sachs Group Inc. is more bullish on commodities than any time since the end of the supercycle in 2008. As economies around the world pick up, factories are humming, eating into stockpiles of raw materials and driving demand at miners and oil producers already facing limits on output.

Copper, iron ore and crude prices will extend gains this year, Goldman analysts Jeffrey Currie and Michael Hinds said. “The environment for investing in commodities is the best since 2004-2008,” they wrote in a research note.

Rising commodity prices will create a virtuous circle, improving the balance sheets of producers and lenders, and expanding credit in emerging markets that will, in turn, reinforce global economic growth, according to the bank.