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Commodity Super-Cycle and Decline

China trumps Trump over outlook for industrial commodities – by Clyde Russell (Reuters U.S. – November 14, 2016)

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – The election of Donald Trump as U.S. president has added froth to prices for metals and bulk commodities, but the real driver is, and will remain, the outlook for China. While price volatility associated with the somewhat surprising election of the brash real estate mogul was always likely, hopes for a Trump-led revival of industrial commodities and coal look way too optimistic.

Even if Trump can deliver a massive stimulus package as promised when he takes occupancy of the Oval Office in January next year, this alone would unlikely be enough to justify some of the extreme optimism now being priced into commodities.

The market also seems to be ignoring the threat to commodities posed by Trump’s stated trade protectionism, with the possibility of higher tariffs on Chinese goods probably a greater downside risk than the upside potential of a Trump stimulus program.

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Miners set to cash in on Trump’s White House – by Zandi Shabalala (Reuters U.S. – November 9, 2016)

http://www.reuters.com/

LONDON – Mining companies led gains on London’s FTSE bluechip index on Wednesday as Republican Donald Trump’s victory in the U.S. presidential election spurred hopes for higher metal demand and drove investors to buy gold as a shelter against economic uncertainty.

The FTSE mining index rose around 5 percent to its highest level since May 2015 led by gold and silver miner Fresnillo. In his victory speech Trump reiterated that he had a great economic plan and would embark on a project to rebuild U.S. infrastructure and double U.S. economic growth.

Analysts said they were reassessing their commodities outlooks following the Trump victory and a strong rally this year, which has reversed the trend of 2015 when raw materials and mining companies crashed, has yet to lose momentum.

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Commodities’ outlook depends on if Trump reality matches rhetoric – by Clyde Russell (Reuters U.S. – November 10, 2016)

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – Beyond the short-term volatility as investors become used to the idea of President Donald Trump, the main risk for global commodities is how much of the campaign rhetoric translates into policy reality when the Republican victor moves into the White House.

The problem global commodity markets are currently grappling with is that the new U.S. president hasn’t articulated well-defined policies, rather his campaign was a series of slogans, threats and somewhat vague promises.

Nonetheless, there is enough to suggest that Trump’s presidency holds both positives and negatives for commodity demand and prices. Much of the focus so far has been on what his domestic energy policies will bring, but whatever changes will be much more of an issue within the United States and will likely only have a limited impact on the rest of the world.

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Copper hits 15-month high after Trump wins White House – by Clara Denina (Reuters U.S. – November 9, 2016)

http://www.reuters.com/

LONDON – Copper surged to a 15-month high on Wednesday, pulling most other metals up too on technical buying and as some investors speculated that a Donald Trump presidency could herald a period of significant fiscal stimulus and boost demand for metals.

In his victory speech, Trump said he would embark on a project to rebuild American infrastructure and would double U.S. economic growth. “The Republicans have control of both houses of Congress and that means there is a possibility that those kind of programs could become reality,” ICBC Standard Bank analyst Tom Kendall said.

Three-month copper on the London Metal Exchange rose as much as 3.4 percent to its highest since July 22, 2015 at $5,443 a tonne and traded 2.2 percent higher at $5,352 in official rings.

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Major mining assets change hands after commodity rout (Reuters U.s. – November 8, 2016)

http://www.reuters.com/

Major miners are selling assets after a global commodities rout last year left them with high levels of debt. A recovery in raw materials prices has taken away some of the pressure to sell, however, and deals have slowed.

China, whose stimulus package spurred this year’s commodities rally, is the biggest potential buyer. Following is a list of the main mining companies, some of the biggest sales so far and what assets are on offer:

BHP BILLITON LIMITED

Market capitalization: 72.7 billion pounds ($90.3 billion)(Reuters data)

Net debt: $26.1 billion (company reported in August)

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After Descent to Hell, Miners Emerge Blinking Into Daylight – by Thomas Biesheuvel and Jesse Riseborough (Bloomberg News – October 31, 2016)

http://www.bloomberg.com/

When the biggest names in mining arrive in London this week, the surroundings will be familiar, the mood unrecognizable. A year ago as prices slumped, talk at the annual London Metal Exchange gathering was of bloodletting and journeys through hell.

On Tuesday, the 1,900 dinner guests under the huge tulip-shaped chandeliers of the Great Room in Park Lane’s Grosvenor House Hotel, will be relieved to have survived the industry’s biggest crisis in decades.

“This time last year, I was talking about a commodity-specific financial crisis,” said Colin Hamilton, head of commodities research at Macquarie Group Ltd. “The rally in commodity prices has taken that off the table. The foot is really off the throat.”

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Metals Jump on Economic Optimism as Rand Strengthens With Miners – by Lukanyo Mnyanda and James Regan (Bloomberg News – October 25, 2016)

http://www.bloomberg.com/

Metals are regaining their luster, a sign the global economy is becoming more resilient, helping to boost stocks and currencies of commodity-producing nations.

Iron ore surged by the daily limit of 6 percent on the Dalian Commodity Exchange and rising steel prices in China spurred a rally from aluminum to zinc. Currencies of resource-exporting nations, South Africa and Australia, led gains versus the dollar. The Stoxx Europe 600 Index headed for its strongest close in three weeks as earnings reports fueled optimism about the profitability of the region’s companies. Austrian and U.K. government bonds were weighed down by new supply.

ndustrial metals have gained steadily this year with an index of London Metal Exchange contracts poised for the first annual increase since 2012 as a pickup in manufacturing in the U.S. and euro area point to an economy that’s getting more robust.

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BHP says sees early signs of commodity recovery – by James Regan (Reuters U.S. – October 19, 2016)

http://www.reuters.com/

SYDNEY – BHP Billiton, the world’s biggest diversified miner, said on Wednesday it was finally detecting indications of a commodity market turnaround, giving its most upbeat assessment in about five years.

A recovery would be a particular boon for the global miner which has kept production humming through a multi-year collapse in commodities markets, although it cautioned that raw material supply was still outpacing demand despite stronger steel consumption in China.

“We have seen early signs of markets rebalancing,” Chief Executive Andrew Mackenzie said in releasing BHP’s September quarter production report and guidance update. “Fundamentals suggest both oil and gas markets will improve over the next 12 to 18 months. Iron ore and metallurgical coal prices have been stronger than expected, although we continue to expect supply to grow more quickly than demand in the near term,” he said.

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New mining money to be made as investment tide turns – by Henry Lazenby (MiningWeekly.com – October 11, 2016)

http://www.miningweekly.com/

VANCOUVER (miningweekly.com) – There is a noted general perception among the investment community, including private equity firms and high-net-worth individuals, that there is some money to make again in the rebounding mining industry, PearTree Securities president Trent Mell tells Mining Weekly Online.

“Following three years of net outflows from the precious metals sector, things have certainly reversed, to an extent, and that capital is being deployed. The several years of tough decisions not to . . . increase output at all costs and instead focus on cash flow metrics have reinstalled some of the faith in the investment community,” states Mell.

According to him, the industry as a whole has worked hard at gaining that trust back and, while he does not believe the industry to be there yet, there are certain signs it is improving.

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China demand drives good outlook for commodities – by Allan Seccombe (Business Day – October 3, 2016)

http://www.bdlive.co.za/

THE outlook for a broad range of commodity prices has turned positive, with January this year marking the low point, and Chinese demand once again the dominant factor this year and in 2017.

In Macquarie’s Commodities Compendium, which showed upward revisions in a host of commodity price expectations for the next 12 months, the importance of China for global commodity demand and pricing was again underlined as the key driver for the sector after a difficult year in 2015 and at the start of this year.

“Perhaps the biggest single contributor to the stronger-than-expected commodity pricing environment this year has been the resurgence of Chinese demand as the Chinese government continues to prolong its more commodity-intensive phase of growth,” Macquarie said.

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Copper, platinum key to future of auto industry, mining financier says – by Ian McGugan (Globe and Mail – September 27, 2016)

http://www.theglobeandmail.com/

The current lithium frenzy will end badly while gold bugs should look at the riper opportunities available in copper and platinum, according to mining financier Robert Friedland.

In a sprawling, exuberant and at times politically incorrect speech at the Mines and Money Americas conference in Toronto, the veteran promoter demonstrated he hasn’t lost his sales mojo as he ticked off all the reasons why the properties owned by his Ivanhoe Mines Ltd. just happen to be ideally positioned for the next wave of automotive technology.

“I’m not here to depress the gold bugs in the room, but to get you excited about copper and other metals that we need in our new society,” he said as he accepted a lifetime achievement award.

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Rio CEO Turns China Optimist as Construction View Improves – by Jesse Riseborough and Jonathan Ferro (Bloomberg News – September 19, 2016)

http://www.bloomberg.com/

Rio Tinto Group, the world’s second-largest mining company, is becoming more optimistic on the outlook for commodities demand in China after recent data pointed to a pickup in the construction market.

“The drop that we had experienced for the last two or three years in China seems to have plateaued,” Chief Executive Officer Jean-Sebastien Jacques said in an interview with Bloomberg Television in New York on Monday. “We are becoming much more what I would describe as cautiously optimistic in relation to China.”

The $57 billion company is looking to rebound from its worst profit since 2004 as a slowdown in China hurt commodity prices, eroding earnings and forcing Rio to trim its dividend payment. The country makes up about half of the world’s raw-materials demand and also accounts for half of Rio’s revenues. Ivan Glasenberg, who heads rival Glencore Plc, last month said the Chinese market looks “pretty good” in the long term.

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Big Miners Need a Better Plan for Growth Riddle in China – by David Stringer (Bloomberg News – September 13, 2016)

http://www.bloomberg.com/

Rio Tinto Group, the world’s second-biggest miner, is no longer certain of picking the path ahead for growth in China, its biggest customer. It isn’t alone.

China’s short-term demand remains difficult to read, Glencore Plc’s Chief Executive Officer Ivan Glasenberg said last month after the largest miners were wrong-footed this year by Chinese stimulus that’s boosted raw materials demand, lifting prices following five straight annual declines. Rio now sees long-term targets as unhelpful, and has drafted a range of potential growth scenarios, with titles including “China Malaise” and “Fits and Starts,” according to CEO Jean-Sebastien Jacques.

“It’s not about predicting the future, it’s about preparing for any future — this is where mining and metals companies have gone wrong in the past,” EY’s Global Mining and Metals Sector Leader Miguel Zweig said in an e-mailed response to questions. “Growth in China, which is critical to pricing, is difficult to anticipate.”

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Biggest commodity surprise of 2016 is a windfall for miners – by Jesse Riseborough and Thomas Biesheuvel (Globe and Mail/Bloomberg – September 9, 2016)

http://www.theglobeandmail.com/

The surprise surge in coal prices should provide an unexpected profit boost for the world’s biggest mining companies as they navigate a commodity downturn that sapped earnings.

Gains for coking coal, used with iron ore to make steel, accelerated in recent weeks and benchmark prices from top producer Australia jumped 9.5 per cent on Thursday, the most since at least 2013. At current prices, that would add almost $5-billion (U.S.) to BHP Billiton Ltd.’s underlying earnings before interest, tax, depreciation and amortization in the year ending June 30, according to Liberum Capital Ltd.

Coal has more than doubled this year as China’s production curbs increased its reliance on supplies from other nations. The rally — which Morgan Stanley called a “complete surprise” — is a bright spot for miners still suffering from a plunge in commodities over the past five years. It will also help compensate for a worsening outlook for iron ore, BHP’s main earner, with the firm and a raft of banks expecting prices to retreat by year-end.

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Chinese Takeovers Trigger Global Backlash Ahead of G-20 Summit – by Rich Miller (Washington Post/Bloomberg – August 26, 2016)

https://www.washingtonpost.com/

(Bloomberg) — Forget about Yankee go home. Now it’s Chinese go home.

From Australia blocking a bid for a power network to the U.K.’s review of a proposed Chinese-funded nuclear plant, opposition to China’s outward push is opening a thornier and potentially more treacherous front in the country’s economic tug-of-war with the rest of the world. And it’s coming as China prepares to host a Sept. 4-5 summit of Group of 20 leaders.

Unlike festering frictions over trade, the new front is in an area — investment — where the global rules of engagement are more amorphous and where national security interests are more prominent. That raises the risk of a rapid escalation of tensions that can’t be so easily contained.

“The implicit accusation when rejecting overseas direct investment is much stronger than trade,” said James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology in Sydney.

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