Commodity Super-Cycle and Decline – Page 26

Metal price meltdown opens door for private equity to walk in – by Peter Koven (National Post – December 30, 2015)

January 4, 2016

http://business.financialpost.com/

No matter how you look at it, 2015 was an awful year for metal prices. But if the majority of experts are correct, 2016 is going to be worse. Maybe a lot worse.

Put simply, market sentiment for commodities has not been this bad in at least 15 years. Nearly every metal is in oversupply, and almost no one thinks China can bail the market out, as it did the last time prices crashed in 2008.

“I think the whole commodity complex has been over-hyped, overbuilt and it’s going to take years to dismantle it,” said portfolio manager John Stephenson, head of Stephenson & Co. Capital Management.

That pretty much sums up the consensus outlook.

COLUMN-Seven (possibly) magnificent commodity bets for 2016 – by Clyde Russell (Reuters U.K. – December 24, 2015)

December 24, 2015

http://uk.reuters.com/

Dec 24 It’s always tempting for commodity analysts to issue forecasts for the coming year, even though we intrinsically know that the future is inherently uncertain and even the most reasoned expectations can be easily confounded by events.

With that in mind, and with a nod to my fellow Australians’ love of a punt, I’ve decided rather to do a list of bets I may be tempted take in commodity markets in 2016, assuming I was allowed to wager.

1. Crude oil will trade both below $30 a barrel and above $60 in 2016.

Logic and momentum suggest the first part of this bet is a no-brainer, with both Brent and WTI crude already having tested below $35 a barrel.

Editorial: Top stories of 2015 – by John Cumming (Northern Miner – December 23, 2015)

December 24, 2015

http://www.northernminer.com/

Phew, was 2015 a tough year for miners! As we look back and tie a bow around the fourth year of the downturn in commodity prices and the mining sector, we see an industry in defensive mode, spending more time and energy reacting to harsh, global economic forces than charting their own paths forward.

In July, we saw the end of the Commodity Supercyle, as commodity prices represented by the Bloomberg Commodity Index returned to levels last seen in 2002 — or right back to where they were at the start of the much-beloved Supercycle that peaked in 2011.

(To be fair, most other industries have limped along in recession or low-growth mode since the onset of the global recession in 2008, while the mining industry gained some respite with that freaky boom in 2010–11, fuelled by a still-voracious Chinese demand for raw commodities.)

Monster rally for mining stocks – by Frik Els (Mining.com – December 23, 2015)

December 23, 2015

http://www.mining.com/

Investors returned to the metals and mining sector in a big way on Wednesday after good news from the world’s two largest economies and metals consumers.

Yesterday, Chinese leaders paved the way for a raft of measures to stimulate the country’s slowing economy while growth figures in the US, although modest came in ahead of expectations.

On the Comex market in New York copper for delivery in March climbed 1% to $2.13 a pound or just under $4,700 a tonne. The red metal is up more than 6% from a six-year low hit a month ago. The benchmark price of iron ore consolidated its rebound from near decade lows to exchange hands for $40.20 a tonne, an 8.6% advance over two weeks.

OPINION: No doubt that Africa needs what China offers – by Xhanti Payi (Business Day Live – December 9, 2015)

December 23, 2015

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

DESPITE his many political and philosophical detractors, Henry Kissinger is one of the few authoritative voices on China. Having served as a key US diplomat during a time when China was reinventing herself to what she is today, Kissinger has had a perspective few other analysts have today.

His views on China are not inconsistent with the China we see, in the ways in which it responds to global debates and tensions. One need only look at the way China votes at the United Nations Security Council to understand its posture on affairs of other nations.

In his book, On China, Kissinger is seemingly at pains to show that, unlike the US, China is not interested in exporting its values or owning culture and territories outside itself — that even though it may seek to be a leading civilisation, it does so not through an effort to export its values, but to sustain them even in what Kissinger himself calls the “new world order”.

You’re too bearish on China growth – by Frik Els (Mining.com – December 22, 2015)

December 22, 2015

http://www.mining.com/

China’s leaders in October outlined the direction of the world’s second largest economy over the next five years.

The country’s 13th five-year plan running from 2016 – 2020 is the first one approved by Xi Jinping who led a group on “comprehensively deepening reforms” to overhaul China’s investment-led economy into one driven by services and consumption.

The communique issued in October provides only the basic frameworks of programs and policies with a more detailed plan to be made public in March. But it gave some indication that Xi and company, unnerved by slowing economic growth, decided to put their money again on investment to re-energize the sagging economy.

COLUMN-Hoping your rivals will die – The 2016 commodity story – by Clyde Russell (Reuters U.S. – December 21, 2015)

December 21, 2015

http://www.reuters.com/

Dec 21 – If 2015 was the year in which the growing oversupply of key commodities led to a rout in prices, will 2016 bring the point of capitulation, leading to consolidation and the start of recovery?

That would certainly be the hope of many beleaguered commodity producers, be they members of OPEC, shale gas drillers in North America or the big companies that bet their futures on what they thought would be China’s endless appetite for coal, iron ore, copper and liquefied natural gas (LNG).

But the problem with hoping for a rationalisation of supply is that everybody wants someone else to shut down or cut production. Everywhere in commodity markets, producers are still following the tactics that have largely failed for the past few years.

[Molybdenum] This Year’s Worst Commodity Is One You Probably Can’t Pronounce – by Sonja Elmquist and Joe Deaux (Bloomberg News – December 18, 2015)

December 18, 2015

http://www.bloomberg.com/

An obscure metal used to make steel has become this year’s worst-performing commodity, after China’s stumbling economy and a collapse in the energy industry drove outsized losses.

Molybdenum — that’s mo.lyb.de.num for the uninitiated — is used in many steel building materials and to help harden the drills used to extract oil and natural gas from deep underground.

Prices plunged 49 percent, the most among 79 raw materials tracked by Bloomberg, as the white metal was undermined by the flagging demand and oversupply that plagued global commodity markets throughout 2015.

A glimmer of hope for copper bulls in 2016? – by Andy Home (Reuters U.S. – December 17, 2015)

December 18, 2015

http://www.reuters.com/

LONDON – It’s been a tough year for copper bulls.

One of the industrial metals most associated with the boom years in China has been hit hard by the country’s lurch away from its previous fixed-asset investment growth model.

Talk of the “new normal” and of a Chinese “slowdown” doesn’t capture the severity of the demand shock experienced by all the metals, copper included.

On the London Metal Exchange the price of three-month copper peaked at $6,481 per tonne in early May, since when it’s ground steadily lower to a current $4,550.

COLUMN-China’s steady-as-she-goes economy won’t rock commodity boat -by Clyde Russell (Reuters U.K. – December 17, 2015)

December 17, 2015

http://uk.reuters.com/

Dec 17 – China is no longer a driver of commodity demand, rather it has become a constant factor that can be relied upon to import relatively steady volumes of major natural resources.

Both China’s central bank and a respected think-tank expect further moderation in the economic growth rate next year, which underscores that the world’s second-largest economy is still undergoing a structural transformation, but is unlikely to fall victim to a hard landing.

The People’s Bank of China said in a paper published on Wednesday that annual growth will slow to 6.8 percent in 2016, from an estimated 6.9 percent this year.

UBS Analyst Who Called Mining Stock Slump Says Rout Not Over – by Adam Haigh (Bloomberg News – December 15, 2015)

December 16, 2015

http://www.bloomberg.com/

David Cassidy, who correctly told investors to shun Australian mining stocks in 2015, says the worst is yet to come for the industry as China’s economy decelerates.

Investors should hold fewer commodity producers than are represented in the S&P/ASX 200 Index because shares are yet to bottom, says Cassidy, UBS Group AG’s head of equity strategy for Australia.

Instead of speculating on some of the stock market’s worst performers, he’s telling investors to buy firms with profits that are closely tied to an upswing in the economy, such as developer LendLease Group and retailer Harvey Norman Holdings Ltd.

“We’re closer to the bottom but not yet willing to call the bottom here,” Cassidy said in a phone interview from Sydney on Dec. 14.

The Chinese scramble to mine Africa – by Vladimir Basov (Mining.com – December 15, 2015)

December 16, 2015

http://www.mining.com/

A more than twenty-five fold jump in investment in fewer than 10 years. That’s how fast China is gaining control over Africa’s mining industry. And Beijing’s push is not ending any time soon.

China’s growing economy is thirsty for sustainable supplies of mineral resources. Despite being the number one mining nation in the world, China is facing a rapid depletion of its local mineral resources.

Reserves-to-production (R/P) ratio that represents the “burn rate” of proven reserves of mineral commodities when applying current levels of domestic mine production shows that China is in the “red zone” for future supplies of nearly all crucial minerals.

After stock sell-off, what lies ahead for battered mining sector? – by Ian McGugan (Globe and Mail – December 15, 2015)

December 15, 2015

http://www.theglobeandmail.com/

An across-the-board sell-off in mining stocks is picking up speed, leading to new questions about what lies ahead for the battered sector.

On Monday, the metals and mining group in the S&P/TSX composite index plunged 6.5 per cent, a remarkable fall for an industry that has already seen its share values devastated by falling commodity prices.

The losses hit both gold miners and base metal producers and far outpaced the rest of the market, which slid less than a percentage point. The damage to miners also exceeded the declines in metals prices themselves.

Hedge Funds Burned by Commodities Lose $40 Billion Since ’08 – by Agnieszka De Sousa (Bloomberg News – December 14, 2015)

December 14, 2015

http://www.bloomberg.com/

The biggest commodities meltdown in a generation has cost hedge funds more than $40 billion in seven years.

Losses due to poor performance and investor withdrawals have left assets at the top 10 commodities hedge funds at less than $10 billion, compared with more than $50 billion in 2008, according to estimates from Trafigura Pte Ltd.’s annual report.

The trader and asset manager said the perception of commodities as an investable asset has been replaced by a “generalized aversion.”

“Commodities as an asset class are not as attractive as before and we are seeing the consequences on our asset management division,” Trafigura Chief Financial Officer Christophe Salmon said in a phone interview.

Commodities slump has Glencore exploring its options – by Ian McGugan (Globe and Mail – December 11, 2015)

December 11, 2015

http://www.theglobeandmail.com/

For sale: One multibillion-dollar agricultural trader. Slightly used. All reasonable offers considered.

Okay, that’s not exactly how Ivan Glasenberg, chief executive officer of embattled Glencore PLC, put things during his conference call with investors on Thursday. But it does capture the flavour of some of his remarks.

Like every other miner, Glencore is taking it on the chin as the great global commodity collapse continues to send prices spiralling lower. Shares in the Anglo-Swiss company are down 68 per cent this year.