Commodity Super-Cycle and Decline – Page 27

Winners and losers as commodities ‘super-cycle’ turns into mirage – by Oliver Kamm (The Times/The Australian – December 11, 2015)

December 10, 2015

http://www.theaustralian.com.au/

These are tough times for commodity investors and resources companies. The price of Brent crude has dipped below $US40 a barrel for the first time since 2009 and is down by 60 per cent since the middle of last year. The share prices of mining companies fell sharply after news broke that Anglo American had cut its dividend.

Commodities are the biggest story of 2015, not only in markets and economics but also in politics and, of course, the environment. Cheaper fossil fuels pose a risk to strategies for mitigating climate change.

The collapse in prices is devastating for countries whose export earnings are dominated by commodities and that have squandered the proceeds of a commodities boom or siphoned them to private interests.

Commodity slump claims more dividend victims and there’s more to come – by Ian McGugan (Globe and Mail – December 10, 2015)

December 10, 2015

http://www.theglobeandmail.com/

The commodity rout has claimed a fresh round of victims among some of the world’s leading dividend payers and is stalking even larger prey.

Freeport-McMoRan Inc., the major U.S.-based copper and gold miner, suspended its payout to shareholders on Wednesday, following in the footsteps of Anglo American PLC, another giant metals producer, which halted its dividend on Tuesday.

Kinder Morgan Inc., the largest pipeline operator in North America, also took an axe to payouts on Tuesday. The company that once lured investors with the promise of ever-bigger payments slashed its dividend by 75 per cent.

The common theme in the recent cuts is collapsing commodity prices, which are erasing profits and leaving management with little financial room to manoeuvre.

Moody’s warns of ‘deep and long’ commodity price downswing – by Natalie Greve (MiningWeekly.com – December 9, 2015)

December 9, 2015

http://www.miningweekly.com/page/americas-home

JOHANNESBURG (miningweekly.com) – Based on its revised, weaker global growth expectations for 2016, softening demand, the strength of the dollar and continued uncertainty surrounding metal demand in China, Moody’s Investor Service expects base metals prices to remain under pressure to the downside, warning that an impending downturn is likely to be “deeper and longer”.

“We have lowered our price sensitivities for base metals to reflect the steep decline recently seen to lows commensurate with or below 2009 levels.

“Improvement from current trading levels is viewed as unlikely over the next several quarters, [unless we see] meaningful production cuts,” the group said this week.

Anglo Australian – by Warren Dick (Mineweb.com – December 8, 2015)

December 9, 2015

http://www.mineweb.com/

Mark Cutifani is stamping his own signature on Anglo – but is it enough?

He’s neither Anglo, nor American. But its taken an Australian, Mark Cutifani – presumably with the assistance of a good old fashioned Kookaburra cricket bat – to to try and beat what was once the world’s premier mining company back into shape.

At the very least, the announcements made at Anglo’s investor day on Tuesday revealed the company – and the executive team driving the change – had realised the cold, hard reality of the situation they found themselves in, and are prepared to do whatever it takes to see out the most brutal of winters in commodity markets.

Copper Meltdown Burning Miners Is Boon to Builders as Costs Sink – by Luzi-Ann Javier (Bloomberg News – December 8, 2015)

December 8, 2015

http://www.bloomberg.com/

Copper producers from Glencore Plc to Freeport-McMoRan Inc. spent most of this year getting slammed by the metal’s worst slump since the recession. But there are some folks who are cheering.

With prices heading for a third straight annual decline, the rout is a welcome reprieve for metal buyers like electricians and builders who put about 400 pounds (181 kilograms) of copper into the average U.S. home.

As recently as 2011, copper traded in New York was at all-time-highs, after more than five-fold gains in the previous decade. Now, with demand growth cooling in China, the biggest user, global surpluses have emerged.

Energy and Mining Producers Reeling as Price Collapse Deepens – by Ian Austen and Clifford Krauss (New York Times – December 8, 2015)

December 8, 2015

http://www.nytimes.com/

The pain among energy and mining producers is growing more acute as prices of global commodities continued their collapse on Tuesday.

The newest victim is the London-based mining firm Anglo American. On Tuesday, the company announced a drastic restructuring, which includes expanding job cuts, suspending its dividend, reducing its business unit and cutting its assets.

Anglo American is far from alone, as scores of oil, natural gas, and mining companies are feeling the pain from low prices. A number of commodity-related businesses have either declared bankruptcy or fallen behind in their debt payments.

King Dollar and the end of the commodity supercycle – by Scott Barlow (Globe and Mail – December 8, 2015)

December 8, 2015

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The chart showing the history of commodity prices and the U.S. dollar looks simple and I suppose that, on the surface, it is.

But for investors looking to understand the recent swoon in commodity prices, and when the carnage might end, it’s necessary to look deeper at the hundreds of millions of investing decisions, and trillions upon trillions of dollars, that lie behind the relationship.

The often used statement “commodities are priced in U.S. dollars so the value of the greenback moves in the opposite direction of resources” is true but a gross oversimplification.

Big miners accept reality of low commodity prices. Now what? – by Clyde Russell (Reuters U.S. – December 7, 2015)

December 7, 2015

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – It may seem like stating the obvious, but top miners BHP Billiton and Rio Tinto have said recently that they expect commodities prices to remain subdued.

While it is important that two of the world’s top three mining companies acknowledge what the rest of the market has believed for some time, what’s more important is how they respond to the realities they now face.

The first reality is that growth has slowed in China by more than the resource companies, and indeed most market analysts, expected when investment decisions on expanding capacity were made about five years ago.

Why Bankruptcy Might Be the Mining Industry’s Last Best Hope – by Thomas Biesheuvel, Jesse Riseborough and Agnieszka De Sousa (Bloomberg News – December 3, 2015)

December 3, 2015

http://www.bloomberg.com/

For the world’s ailing metals-mining industry to have any hope of a turnaround, more producers may have to go belly up.

Companies that dig up everything from gold to copper have failed to stem a prolonged collapse in mineral prices mostly because not enough mines are closing. Years of increased output have created global surpluses just as slower economic growth erodes demand.

Unprofitable operations were kept alive by across-the-board cuts in operating costs, lower energy prices, a strong dollar and the unfulfilled hopes by mining executives that markets will improve.

How Much Metal Does China Need? – by David Fickling (Bloomberg News – December 1, 2015)

December 2, 2015

http://www.bloomberg.com/

China’s metal producers are finally starting to cauterize the wounds inflicted by the commodity bust.

Copper producers will trim output by 350,000 metric tons next year, equivalent to about 4.4 percent of the country’s 2014 levels. Nickel smelters will slash production by 20 percent, and zinc furnaces will remove the equivalent of 4 percent of global output.

Will this be enough to reverse the slide in metal prices? It depends a lot on what sort of country China is becoming. For all the differences between major economies, their consumption of raw materials can be oddly uniform.

Miners: More Pain Before Gain – by Anthony Fensom (The Diplomat – December 2, 2015)

December 2, 2015

http://thediplomat.com/

Asia’s resource sector has felt the pain of falling prices in 2015, forcing job cuts from Indonesia to Australia and destroying billions of dollars of market value. Fortunately for miners, the longer-term outlook appears brighter, although more pain is expected in 2016.

A recent report by BIS Shrapnel predicts Australia’s miners will shed another 20,000 jobs over the next three years, on top of the 40,000 jobs lost since the peak in investment during the mining boom as miners adjust to the post-boom hangover.

Meanwhile in Indonesia, the coal slump has reportedly caused “the majority of coal mining companies in Indonesia to stop operating,” with up to 80 percent estimated to have ceased production as of August 2015.

Super-Cycle, Citigroup Picks Winners – by Pratish Narayanan (Bloomberg News – November 30, 2015)

December 1, 2015

http://www.bloomberg.com/

There’s still money to be made from investing in commodities, according to Citigroup Inc.

While a rising U.S. dollar, sustained oversupply and slowing growth in emerging markets including China are still hurdles to a recovery, many markets may strengthen in the second half of next year as the collapse in prices shrinks production, the bank said in a report.

Citigroup also forecasts “a more persistent price recovery by 2017 for oil and base metals, and possibly agriculture.”

The bank predicts the start of a recovery in some raw materials as returns from commodities head for a fifth annual drop amid the slowest growth since 1990 in China and the prospect of a stronger dollar if U.S. interest rates increase.

China metal producers have two ideas, one good, one bad – by Clyde Russell (Reuters U.S. – November 30, 2015)

November 30, 2015

http://www.reuters.com/

Nov 30 – Chinese metal producers have taken two steps to arrest the slide in prices, one that’s both sensible and has a reasonable chance of working, while the other is bad policy that would only provide a temporary boost.

The good idea is moving to lower output of refined copper, zinc and both refined nickel and nickel pig iron.

The not-so-good idea is to try to convince the government to start buying up various metals, including aluminium, in a bid to soak up surplus production and support prices.

Nine large Chinese copper producers have agreed an initial plan to cut output of refined metal by 200,000 tonnes next year, equivalent to about 5 percent of this year’s output, following a meeting of companies on Nov. 28.

An Interview with Sir Mick Davis – by by Adam Treger (Tregernomics.com – November 23, 2015)

November 30, 2015

http://www.tregernomics.com/

Mick Davis was the CEO of mining company Xstrata, which merged with Glencore in 2013. He is now CEO of a new company, X2 Resources. For services to Holocaust Commemoration and Education, he was knighted as part of 2015 Queen’s Birthday Honours.

Q: Which emerging markets are you most optimistic about?

A: Well, I think emerging markets are generally not in great shape, for a whole range of reasons. This is partly because they are experiencing a decline of their large export markets, as world growth has not been stellar.

Clearly the most dominant emerging market, China, is going through a very important structural adjustment that is impacting its growth rates and is compounded by the anti-corruption drive, which I think is stultifying economic activity in that country.

NEWS RELEASE: Deloitte Global Report Outlines Top 10 Issues Facing Mining Companies in 2016

November 30, 2015

http://www2.deloitte.com/ca/en.html

Weak Commodity Prices, Declining Grades and Slowdown in Demand From China to Continue

TORONTO, ON–(Marketwired – November 30, 2015) – Weak commodity prices, declining grades and a falloff in demand from China will continue the global mining sectors’ downward cycle well into 2016. However, regulatory mandates, tax burdens and stakeholder expectations remain as high as ever. This is according to the Deloitte Touche Tohmatsu Limited’s Mining Tracking the Trends 2016 report released today.

“It’s an interesting time in the mining industry, just as during the super cycle, people imagined prices would go up forever, people now imagine the market will never recover,” said Philip Hopwood, Deloitte’s Canadian and Global Mining Leader.
“Neither extreme is true, but cycle times are lengthening, which means it could take years to adjust to current market forces — but it’s still a cycle.”