Commodity Super-Cycle and Decline – Page 22

Commodities rebound seen faltering as demand stalls – by Ian McGugan (Globe and Mail – March 30, 2016)

March 30, 2016

http://www.theglobeandmail.com/

Prices for copper and oil are poised to fall, according to a new report that adds to the growing skepticism around the great commodity revival.

Kevin Norrish, a widely followed analyst with Barclays PLC, warns that raw materials prices could get trampled if the buyers who have piled into the commodity sector during recent weeks decide to simultaneously rush for the exits.

“Investors have been attracted to commodities as one of the best performing assets so far in 2016,” he said. “However, in the absence of any concerted fundamental improvements, these returns are unlikely to be repeated in the second quarter, making commodities vulnerable to a wave of investor liquidation.”

Analysts insist the rally in mining stocks is a blip that won’t last – by Ian McGugan (Globe and Mail – March 24, 2016)

March 29, 2016

http://www.theglobeandmail.com/

What is happening in the mining sector is not quite man bites dog, but it’s close. As metal prices and mining shares climb steadily higher, many of the industry analysts who can normally be counted upon to take a sunny view of the sector are raining pessimism on the upward moves.

The result is an odd combination of rising commodity prices, surging share values – and dour, skeptical observers. “Is it time to get excited?” Heath Jansen, the widely followed mining analyst at Citigroup, asked in a research note Tuesday. His answer: “Despite the positive short-term momentum, we remain cautious.”

He’s not alone. “This year will be another difficult year for commodities,” Paul Robinson, director of consultancy CRU Group, said earlier this month.

Why you should take this commodities rally with a grain of salt – by Joe Chidley (Financial Post – March 29, 2016)

March 29, 2016

http://business.financialpost.com/

Signs are beginning to surface that the global commodities implosion has reached bottom. The questions for investors, though, are how long the relative good times will last, and just how good they will be.

On the surface, at least, the news has been positive. Last week, the Baltic Dry Index — which reflects the price of moving dry goods by sea, is often considered an indicator of global commodities demand and trade, and has nothing to do with drought in Estonia — finished above 400, which represents a 38 per cent increase in a little more than six weeks.

Meanwhile, spot prices for iron ore have risen by nearly 30 per cent this year, and are now well out of the trough they dug last December. Base metals like zinc and copper are also up by double-digit percentages on the year. Futures for benchmark West Texas Intermediate crude (not dry, but anyway) have soared 50 per cent since testing US$26 on Feb. 11.

Bonfire of the Writedowns Just Starting – by David Fickling (Bloomberg News – March 28, 2016)

March 29, 2016

http://www.bloomberg.com/

What does $13 billion of burning money smell like? Commodity investors are getting a nose for it. Japanese trading houses Mitsui, Mitsubishi, and Sumitomo have announced 767 billion yen ($6.8 billion) of writedowns on assets this year, including copper, nickel, iron-ore and natural-gas projects.

PetroChina wrote 25 billion yuan ($3.8 billion) off the value of oil and gas fields that have “no hope” of making a profit at current prices, President Wang Dongjin said last week, while Citic posted a HK$12.5 billion ($1.6 billion) impairment on an Australian iron-ore mine.

Cnooc’s annual results last Thursday count as a good news story against that backdrop, with impairments of 2.75 billion yuan that were lower than the previous year’s.

COLUMN-Robust commodity imports don’t tell the whole China story – by Clyde Russell (Reuters U.K. – March 23, 2016)

March 23, 2016

http://uk.reuters.com/

The improved sentiment surrounding the outlook for China’s demand for natural resources is being reflected by rising imports for some major commodities, but as usual it pays to be wary when interpreting the numbers.

Customs data released this week shows strong import growth in the first two months of the year in copper and crude oil, a more modest expansion in iron ore and a surge in imports of alumina and bauxite, the main raw materials used to make aluminium.

Taken at face value this lends support to the view that China is heading for a better spring season after a gloomy autumn and winter cast a pall over the outlook for demand in the world’s largest consumer of commodities.

Five-year mining bear market shows signs of ending – by Nelson Bennett (Business Vancouver – March 22, 2016)

March 22, 2016

https://www.biv.com/

A 2016 rally in commodity prices and mining stocks has analysts guardedly optimistic

Recent stock charts are making it tempting to declare a five-year-long bear market for mining finally over.

Since mid-January, mining stocks have rallied, key commodity prices appear to be making their way up from a bottom, a number of financing and acquisition deals have been struck and, for the first time in years, the mood at the recent Prospectors & Developers Association of Canada (PDAC) convention in Toronto was buoyant.

“We’re certainly in a rally,” said Ivan Lo, founder of Equedia.com. “Whether the rally will sustain itself is another question. There does seem to be some excitement in the market. It’s a different type of excitement than we’ve seen in previous years.”

Private capital is ready to invest $7 billion in mining – by Frik Els (Mining.com – March 20, 2016)

March 21, 2016

http://www.mining.com/

Half of private capital funds say it’s easier to find attractive investments in the sector new study finds

According to a study of private capital in the resources sector from industry tracker Preqin, finds half of investors in the mining and metals sector will deploy more capital this year despite two-thirds of institutional investors displaying less appetite for the sector compared to a year ago.

The pullback comes after fundraising for natural resources investment reached record levels in 2015, with 74 funds raising a total of $67.8bn.

In total natural resources investment firms have $400 billion assets under management. Of this $243 billion represent unrealized value with the remaining $157.3 billion so-called dry-powder capital ready to invest. The vast majority is destined for North America.

From Oscars to Tuna Cans, Tin Gets More Expensive as Mines Quit – by Joe Deaux (Bloomberg News – March 17, 2016)

March 21, 2016

http://www.bloomberg.com/

Smartphones, cars and a prolonged mining slump are creating tighter supplies of tin, a metal used mostly as solder for electrical circuits.

Demand for tin remains strong from all sorts of manufacturers, from makers of food cans and building materials to iPads and Oscar statuettes. At the same time, big exporters like Indonesia and Myanmar are shipping less, following a three-year slump that discouraged investment in mines and smelters.

Supplies in 2016 will be the smallest relative to demand in almost two decades, industry forecasts show. Tin on the London Metal Exchange has surged into a bull market, after prices in January were at their lowest since 2009.

March mining madness as copper, iron ore prices rebound – by Frik Els (Mining.com – March 17, 2016)

March 18, 2016

http://www.mining.com/

Volatile metal and mining stocks enjoy another huge rally

March madness reached the commodities markets on Thursday as investors piled into the mining sector on the back of a jump in the copper price and a renewed iron ore rally

On the Comex market in New York copper for delivery in May climbed as much 2.8% to $2.2925 a pound or some $5,050 a tonne. It’s the highest closing value since November 4 and the red metal is now up more than 18% from a six-year low hit mid-January.

Other industrial metals also gained led by zinc which rose 2% to $1,812 a tonne nearly matching a five-month high hit earlier in March. Nickel rose to $8,765 a tonne on the LME. Nickel was last year’s worst performing metal with a 40% drop and hit a 13-year low mid-February of $7,725.

Biggest mining equity rally in years built on shaky foundations – by Clara Denina (Reuters U.S. – March 18, 2016)

March 18, 2016

http://www.reuters.com/

LONDON – The biggest rally for mining company shares since 2009 risks fizzling out as gains have largely been driven by funds reversing bets on lower prices rather than long-term investors looking for value.

The benchmark FTSE 350 mining index, which tracks the performance of the UK’s 11 biggest listed miners, is up 26 percent this year, the biggest quarterly gain since September 2009, and marking a revival after three years of losses.

Sentiment in the sector has been helped by a weaker U.S. currency, which makes dollar-denominated commodities cheaper for non-U.S. consumers and expectations that top consumer China will use further stimulus to boost its flagging economic growth.

How did the world’s miners not see it coming? – by Andy Home (Reuters U.S. – March 17, 2016)

March 18, 2016

http://www.reuters.com/

It is an extraordinary fact that in just three years, 2011,
2012 and 2013, China used more cement than the United States
did in the 20th century, 6.6 billion tonnes compared with 4.4
billion, according to figures from the U.S. Geological Survey.

LONDON – “Why did nobody see it coming?” With this simple question, posed to Professor Luis Garicano of the London School of Economics in November 2008, Britain’s Queen Elizabeth famously summed up the layman’s astonishment that an obscure part of the derivatives universe could trigger a global financial crisis.

A similar question might be posed of the world’s miners right now. Having collectively bet the house on a commodities “supercycle” only to see the “super” part of that cycle dissolve in front of their eyes, they are now fighting the numerous fires engulfing their overstretched balance sheets.

Distressed asset buyers see silver lining as miners languish – by Melanie Burton and Swati Pandey (Reuters India – March 15, 2016)

March 15, 2016

http://in.reuters.com/

After years on the sidelines, funds specializing in troubled assets are set to take center stage in the mining industry, driving deals in a sector where the top players alone plan to raise more than $30 billion through sales to cut debt.

Overall deal volume in mining and metals last year sank to its lowest level globally since 2003, according to Thomson Reuters data, as the industry’s sellers, crippled by more than $1 trillion in debt, crowded a market with very few buyers.

Bankers, funds and investors, however, say that could change in 2016, as specialist buyers rethink a market where prices are languishing, mines are losing money and the traditional competition is weak.

Deals to rise amid mine fire sale – by Rachelle Younglai (Globe and Mail – March 11, 2016)

March 11, 2016

http://www.theglobeandmail.com/

As the world’s biggest base metal miners embark on a fire sale of their mines, Canadian banks are poised for a piece of the action. The groundwork has been laid for a busy year for mining deals after one of the slowest periods in more than a decade.

Desperation is high among indebted industrial metal producers, whose businesses have been felled by low commodity prices and weak demand from the world’s largest metal consumer, China.

Vale SA, Freeport-McMoRan Inc., Glencore PLC and Anglo American PLC are all planning to divest dozens of mines in a mad dash to raise cash, providing a smorgasbord of assets for potential buyers.

Expected shortages boost crowd-pulling power of copper mines – by Pratima Desai (Reuters U.S. – March 10, 2016)

March 10, 2016

http://www.reuters.com/

LONDON – An expected global shortage of copper in years to come has thrown a spotlight on the value of mines that produce the metal, with scouts from private equity firms, trading houses and miners sniffing out potential targets.

Strong interest in good quality copper assets was recently highlighted by Sumitomo Metal Mining buying another 13 percent stake in Freeport-McMoRan’s Morenci mine for $1 billion.

Earlier on Thursday, Swedish mining and smelting group Boliden struck a deal to buy the Kevitsa mine in northern Finland for a cash consideration of $712 million.

“Copper is the most sought after commodity, it’s a good time to buy copper assets now, there are some very visible deficits coming up at the end of this decade,” said Simon Lovat, a commodity analyst at fund firm Carmignac.

Capital Markets Starting to Thaw for Miners, Toronto Bankers Say – by Scott Deveau (Bloomberg News – March 8, 2016)

March 9, 2016

http://www.bloomberg.com/

The biggest rally in mining stocks since the aftermath of the financial crisis is opening the door for producers to return to the equity market in their ongoing battle to reduce debt, according to bankers in Toronto.

While the Bloomberg World Mining Index retreated on Tuesday, it surged 16 percent in the past month, the steepest four-week rally since August 2009. Metal prices have also rebounded, with gold up 19 percent this year. That shift in sentiment may mean that a pickup in equity deals this year will accelerate.

“We’ve all seen, thankfully, a much better start to 2016 than we saw at the end of 2015,” David Shaver, managing director of mining and metals at RBC Capital Markets, told the annual PDAC convention Tuesday. “Capital is beginning to flow back into the mining sector.”