Commodity Super-Cycle and Decline

http://www.mining-journal.com/

The inclusion of those at the top of this year’s hierarchy of mining’s most influential was not debated within the Mining Journal offices but their positioning was the subject of vigorous discussion. Meanwhile, it was the activity at the margin – where individuals are included or omitted – that generated the most heated arguments.

1. Xi Jinping, president of the People’s Republic of China: We use Xi (pictured right, second from left) as a proxy for Chinese economic policy. That being the case, it is difficult to imagine the Chinese state being usurped as the biggest influence on the mining sector for several years.

The numbers clearly back up this selection, with China consuming more than 40% of the world’s copper, about half the world’s nickel, aluminium, and coal, and more than 70% of seaborne iron ore.

As if China’s importance needed further practical evidence, 2016 has provided plenty of supporting data.

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https://www.bloomberg.com/

One of the fundamental dynamics of commodities markets has being turned upside down, thanks in part to Donald Trump.

Industrial metals prices and the dollar are rising in tandem on expectations that U.S. economic growth and inflation will accelerate during Trump’s presidency. Usually, they move in the opposite direction as the dollar’s strength makes commodities, which are mostly denominated in the currency, more expensive for buyers outside the U.S.

The trend is so rare that it’s only happened a handful of times in the past decade, and it’s one of the many reasons that mining companies such as Glencore Plc are rebounding. The commodities giant is benefiting from lower costs and higher metal prices at its zinc operations, and is on track to resume paying dividends next year as part of a broader turnaround plan.

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https://www.ft.com/

When Mark Cutifani, the boss of Anglo American, addressed analysts and investors on a recent trip to South Africa he had a simple message: the FTSE 100 miner was prepared to hold on to assets previously deemed noncore and run them for cash — unless it received the “right” price from buyers.

Those comments marked a sharp shift from January when Anglo, under attack from hedge funds, put a bundle of assets up for sale as part of a radical “shrink to survive” strategy.

Since then the mining sector has enjoyed a dramatic change in fortunes as a sharp and unexpected rebound in commodity prices, such as iron ore and coal, has boosted profits to the extent that large, diversified miners, such as Anglo and Glencore, will comfortably achieve their debt reduction targets.

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https://www.bloomberg.com/

Citigroup Inc. has given a clarion call for commodity bulls, predicting that most raw materials are expected to perform strongly next year as global economic growth picks up, the oversupply that’s dogged markets finally dissipates and investors plow in more funds.

The bank is bullish on oil, copper, zinc, and wheat on a six to 12-month horizon, with global growth seen at 2.7 percent from 2.5 percent in 2016, according to an e-mailed report. It’s bearish on coal and iron ore — describing this year’s out-performance in bulks as a fluke — and gold and soybeans.

Commodities have made a comeback this year after sinking to a quarter-century low in January as the oil market shows signs of rebalancing after a glut, and base metals rally on prospects for rising demand.

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http://www.reuters.com/

Nov 24 As the once-in-a-lifetime commodity boom winds down, a key concern has been what is going to replace the mega-projects built to feed China’s appetite for natural resources.

The huge minerals and energy projects that were both the solution and the demise of the China-inspired commodity super-cycle are unlikely to be repeated any time soon, but developments in Australia show it’s not all doom and gloom.

Australia was one of the biggest beneficiaries of the dramatic rise in China’s demand for commodities, with more than A$400 billion ($300 billion) being spent in the last decade.

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https://www.bloomberg.com/

Goldman Sachs Group Inc. said investors should bet on higher commodities prices in the next year as manufacturing picks up around the world, the first time the bank has recommended an overweight position for the asset class in more than four years.

Purchasing managers’ indexes strengthened in all major regions in October, helping to spur gains in iron ore, copper and other base metals. Goldman raised its iron ore price forecasts, citing an unexpected resilience in steel usage and a demand boost coming from broad restocking, as well as its oil price estimates into next year.

“The recent re-acceleration in global PMIs suggests commodity markets are entering a cyclically stronger environment,” Goldman analysts led by Jeff Currie wrote in a report e-mailed Monday. “Supply restrictions from policy actions should benefit oil, coking coal and nickel in the near term while economic reductions should boost natural gas and zinc.”

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http://investorintel.com/

The bitter competition among Asia’s largest economies, which
collectively are nearly twice as large as that of the USA,
for natural resources is now the principal driver of demand
for all natural resources. – Jack Lifton

The principal driver for change that I see in the overall supply picture for technology metals and materials as a result of the end of, and the slow reversal of, globalization is the realization by intelligent people of the need for capitalization of the security of their supply by individual nations.

This I believe will re-start many projects that were deemed uneconomical without the added value of security of supply, and it will make the conservation by recycling of critical materials not only nice but necessary.

The capital may well come from subsidies, both governmental and through apparent “premium” pricing used to enforce industrial policies such as already is in operation in China, Japan, and Korea; and even in the USA as governmental grants officially said to support innovation or the environment, since direct subsidies for critical materials would go against Washington’s neoliberal narrative (also in its death throes along with globalization-its baby).

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http://www.bloomberg.com/

It isn’t Donald Trump alone who’s making the mining industry great again. Though, he’s surely lent a hand. His victory in the U.S. presidential election after pledging an infrastructure splurge pushed copper prices up 11 percent last week, the best performance in more than five years. Mining shares reached the highest in almost two years.

The gains, continuing this week, are a huge turnaround from the start of 2016. Commodity prices sank to near a seven-year low in January, with the some of the largest miners fighting for survival under the weight of their debt.

“After a four- or five-year bear market, we’ve been clobbered over the head so many times we don’t believe in optimism,” said Jeremy Wrathall, Investec Plc global natural resources chief. “That is changing, it’s definitely changing.” Where some see fizz, others see froth.

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