Commodity Super-Cycle and Decline – Page 34

Jim Rogers: Commodity bull market hasn’t gone away – by Frik Els (Mining.com – August 26, 2015)

August 27, 2015

http://www.mining.com/

While equity traders took a break from selling, Wednesday was another bloody day on commodity markets.

After a tepid attempt at a comeback on Tuesday the base metal complex fell again on Wednesday.

In New York trade copper for delivery in December dropped more than 3% to a low of $2.22 per pound or around $4,895 a tonne, the lowest since July 2009 and down 30% over the past year.

On the LME, three-month nickel continued to slide losing touch with the crucial $10,000 a tonne level and closing down 2% at $9,570 a tonne. Nickel has defied all expectations and is now trading down nearly 40% since the start of 2015.

Like nickel hopes have been high for stronger lead and zinc prices this year thanks to dwindling supply and stockpiles. Instead the metals moved deeper into bear territory with zinc touching a five-year low of $1,686 a tonne and lead prices dropping more than 2% to $1,648 a tonne on Wednesday.

U.S. Stocks Rise as Investors Look for Floor After 6-Day Selloff – by Joseph Ciolli and Roxana Zega (Bloomberg News – August 26, 2015)

August 26, 2015

http://www.bloomberg.com/

U.S. stocks advanced, amid their steepest losing streak in four years, as investors made another go at finding a floor after yesterday’s early rally evaporated.

New York Fed Bank President William Dudley said today that the case for raising interest rates in September is less compelling because of international financial and market developments.

The Standard & Poor’s 500 Index climbed 1.6 percent to 1,898.02 at 10:59 a.m. in New York, trimming an earlier 2.5 percent rise. The Dow Jones Industrial Average added 256.62 points, or 1.6 percent, to 15,923.06. The Nasdaq Composite Index gained 1.6 percent.

“This type of short-term rally shouldn’t be much surprise given recent weakness,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, which oversees about $170 billion. “But nonetheless, investors are resetting their global growth expectations, and that’s having a deleterious effect in the longer term. The acceleration of the situation has investors on edge.”

Can You Read China? Top Mining CEOs Disagree on Biggest Customer – by Thomas Biesheuvel (Bloomberg News – August 25, 2015)

August 25, 2015

http://www.bloomberg.com/

What on earth is going on in China?

Two of the biggest mining companies feeding the country’s appetite for raw materials can’t even agree on whether there’s an answer to the question.

Andrew Mackenzie, head of BHP Billiton Ltd., is bullish on his ability to comprehend a country that consumes more commodities than any other — and whose economic woes have shaken markets around the globe this week.

“We don’t find China impossible to read,” Mackenzie, chief executive officer of the world’s biggest mining company, said Tuesday.“We’ve been at this game for decades.”

His certainty conflicts with billionaire mining rival Ivan Glasenberg’s admission last week that he couldn’t read the world’s second-largest economy right now and neither could anyone else.

The 21 commodities that say China isn’t the problem – by Clyde Russell (Reuters U.S. – August 25, 2015)

August 25, 2015

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – Aug 25, 2015 – One of the reasons advanced for the plunge in commodity prices is concern over the outlook for Chinese demand for raw materials as growth slows in the world’s second-largest economy.

But these are fears not necessarily in evidence, as can be seen by trawling through the detailed customs data for July.

There were at least 21 commodities that showed increases in imports greater than 20 percent in July this year, compared to the same month in 2014.

While it’s true that many of these commodities are minor, there are some fairly major ones showing strong growth as well, led by crude oil, which saw imports jump 29.3 percent in July from the same month a year earlier.

Among the notable increases were a massive 236,594 percent jump in ethanol imports in July, with that single month accounting for more than half of total imports of the fuel so far this year.

Dollar Rallies as Global Stocks Advance While China Cuts Rates – by Eshe Nelson (Bloomberg News – August 25, 2015)

August 25, 2015

http://www.bloomberg.com/

The dollar climbed for the first time in five days against the yen as stock markets rallied following Monday’s $2.7 trillion global equity wipeout and China cut interest rates.

The U.S. currency’s biggest gains came against the Swiss franc and euro, as well as the yen — all currencies that investors consider to be havens in times of market turmoil. The yen weakened after a Japan Ministry of Finance official said its rally to a seven-month high as China’s economy slows had been “abrupt.”

“The better tone in markets, and a rebound from yesterday’s collapse, is helping lift dollar-yen,” said Keng Goh, a foreign-exchange strategist at Royal Bank of Canada in London. If equity markets stay calm, expectations for the Federal Reserve to raise interest rates will build again, further supporting the U.S. currency, he said.

The dollar jumped 1.5 percent to 120.13 yen as of 7:10 a.m. in New York, after slumping to 116.18 on Monday, the weakest since Jan. 16. It climbed 1 percent to $1.1498 per euro. Europe’s single currency gained 5.4 percent in the previous four days, the most since March 2009.

Metals feel China pain as rout spreads to other commodities – by Rachelle Younglai (Globe and Mail – August 25, 2015)

August 25, 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.

Copper, aluminum, nickel and other commodities plunged to new lows on fears that China’s faltering economy will exacerbate a market awash in metal.

The latest event to spook investors was the steep decline in Chinese stocks earlier on Monday. Copper and aluminum hit six-year lows. Nickel plunged 10 per cent. Zinc and lead dropped to five-year lows. Gold, usually a safe haven in times of turmoil, barely rose.

“All bad news is bad news and good news is no news. That’s the environment we are in,” said Jessica Fung, commodity strategist with BMO Nesbitt Burns. Once the engine behind the bull market in commodities, China’s slowdown is wreaking havoc across the mining complex.

There is less and less confidence that the world’s second-largest economy will reach its 7.5-per-cent growth rate target. Recent data showed a decline in China’s manufacturing sector, a top consumer of metals such as aluminum and steel.

China’s fever, everyone’s disease – by Doug Saunders (Globe and Mail – August 25, 2015)

August 25, 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.

What happened on Monday upended the conventional logic of the world economy. Suddenly, the way China finances its enterprises – previously considered a rather opaque mystery but one that was best left to China’s self-contained economy – became the whole world’s business.

A sudden loss in confidence in Beijing’s ability to rescue its collapsing stock market and restore confidence in its currency became, overnight, a worldwide event. It wasn’t just that Western stock markets plummeted as a result of a Chinese policy decision; worse, it triggered a truly global crash: throughout Monday, markets cratered in India, Saudi Arabia, Vietnam, Poland, the Philippines, Brazil, not to mention New York, London and Toronto. It may not have been the biggest or longest-lasting downturn, but it was a truly worldwide one, born in Beijing.

The stock markets are not an all-consuming force in China. Traded equities represent only a slice of finance in a Chinese economy still largely dependent on bank finance and wealth funds; the Shanghai and Shenzhen exchanges don’t have much relationship to the actual Chinese economy. Chinese stocks are largely closed to foreign traders. And, significantly, the pensions and retirement savings of Chinese are not invested in stocks – in fact, a move to allow pension funds to buy shares this weekend was one of the events that triggered the sell-off.

Commodity rout unlike 2008 recession, no China to the rescue – by Clyde Russell (Reuters U.S. – August 24, 2015)

August 24, 2015

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – With the prices of many major commodities currently plumbing depths last seen six years ago, what are the chances of a repeat of the China-led boom that lifted resources out of the 2008 recession funk?

To answer the question it’s worth looking at what is the same and what is different about the weakness in commodity prices between 2008-09 and now, and the answer is not much is the same.

The main similarity is simply that prices are weak and have fallen precipitously in a relatively short period of time. Brent crude fell by about 75 percent between the all-time high in July 2008 and the low in December that year.

So far it has dropped about 52 percent from the last year’s peak in June to the close of $45.46 a barrel on Aug. 21.

Benchmark London copper futures dropped about 67 percent between July and December in 2008, and they have slumped 22 percent since July this year to the close of $5,055 a tonne on Aug. 21.

Commodity Gauge Slumps to Lowest Since ’99 as China Roils Market – by Ranjeetha Pakiam (Bloomberg News – August 24, 2015)

August 24, 2015

http://www.bloomberg.com/

A measure of returns from commodities sank to its lowest since 1999 and shares in resource companies joined a global equity slump on concern that a slowing Chinese economy will exacerbate supply gluts.

The Bloomberg Commodity Index of 22 raw materials from oil to metals lost as much 2.2 percent to 85.8339 points, the lowest level since August 1999. Shares in miners and explorers from Glencore Plc to BHP Billiton Ltd. and Cnooc Ltd. tumbled while Brent crude fell below $45 a barrel for the first time since 2009.

“Sentiment is extremely negative across the commodity complex,” Mark Keenan, head of commodities research for Asia at Societe Generale SA in Singapore, said in an e-mail. “Markets are plagued by concerns of oversupply.”

Raw materials are in retreat as supplies outstrip demand amid forecasts for the slowest Chinese growth since 1990. The largest user of energy, grains and metals was much weaker than anyone expected in the first half of the year, according to Ivan Glasenberg, head of Glencore Plc, the world’s leading commodity trader.

Surviving the Chinese and euro storms – by John Redwood (Financial Times – August 21, 2015)

August 21, 2015

http://www.ft.com/

I’m staying well away from commodities

We have just seen a perfect storm. Markets gave a strong warning to the bulls and underlined why many people chose balanced or cautious funds to limit sudden swings into loss on their investments. In recent weeks some markets have issued a timely reminder of why investment specialists usually recommend a spread of assets to limit your risks.

This summer has brought big falls in some markets. The Greek stock market closed for a month and then reopened much lower. Greek uncertainties took some of the shine off the better performance from euro area shares. The Brazilian market, the largest exchange and economy in Latin America, is down by more than 40 per cent over the past year.

The authorities there are trapped between recession and inflation, with crisis levels of interest rates. The domestic Chinese share market suddenly fell nearly 30 per cent after a phenomenal upwards run. Commodity markets continued their downwards moves after the oil rally of the spring.

The inability to buy and sell shares in Greece at all made investors realise how important continuous liquidity in markets is, and how much we rely on the ability to get out if we change our minds.

Oil nears longest losing streak since 1986 as markets fall in worst bloodbath of the year – by Marc Jones (National Post/Reuters – August 21, 2015)

August 21, 2015

The National Post is Canada’s second largest national paper.

LONDON — World stock markets tumbled towards their worst week of the year on Friday and commodities got another kicking, as more alarming data from China sent investors scurrying to the safety of bonds and gold.

The data from China showed its giant manufacturing sector slowing at the fastest pace since the depths of the financial crisis in 2009, confirming the worries about its health that have preying on economist’s minds for months.

Emerging market assets took another hammering and oil prices were on track for their longest losing streak since 1986, as fears of a China-led deceleration in global growth gripped sentiment.

“The market is stuck in a relentless downtrend,” said Robin Bieber, a director at London brokerage PVM Oil Associates. “The trend is down — stick with it.”

China’s woes continued to roil commodities. Oil resumed its downward trend. U.S. crude was at a more than 6-year low, on track for its eight straight weekly decline as it slipped 0.5 per cent to $40.85. Brent nudged $46 a barrel.

Was the mining supercycle ever anything more than promotional hot air? – by Alastair Ford (Pro Active Investors – July 30, 2015)

July 30, 2015

http://www.proactiveinvestors.co.uk/

When does a normal cycle become a supercycle? Answer: when an over-excited mining promoter says it does.

During the mining boom London and the other major capitals of mining finance, Toronto, Vancouver, Perth, Sydney and New York were awash with mining promoters bearing equity.

The name of their game: sell equity into the mining boom for cash, then watch as valuations rocketed up and everyone walked away a winner. And for a while everyone was winner – and the reason they were winning was because of something called the supercycle.

This wheeze, dreamt up long ago to describe periods of major economic expansion, such as the European Industrial Revolution, was now being applied to the astonishing growth that the Chinese economy was beginning to deliver after Deng Xiaoping loosed the bonds connecting communist ideology to economic activity.

Chinese capitalism was born, and with it a commodities boom that ran for the better part of decade.

PRESS RELEASE: Commodity Prices Expected to Remain Weak in 2015 Despite Slight Rebound in Oil Price

July 24, 2015

Special feature assesses how China and India play significant roles in world commodity markets

Click here for the World Bank July 2015 Commodity Markets Outlook report: http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1304428586133/GEP2015c_commodity_Jul2015.pdf

WASHINGTON, July 22, 2015 –The World Bank is nudging up its 2015 forecast for crude oil prices from $53 in April to $57 per barrel after oil prices rose 17 percent in the Apr-Jun quarter, according to the Bank’s latest Commodity Markets Outlook, a quarterly update on the state of the international commodity markets.

The Bank reports that energy prices rose 12 percent in the quarter, with the surge in oil offset by declines in natural gas (down 13 percent) and coal prices (down 4 percent). However, the Bank expects energy prices to average 39 percent below 2014 levels. Natural gas prices are projected to decline across all three main markets—U.S., Europe, and Asia—and coal prices to fall 17 percent. Excluding energy, the World Bank reports a 2 percent decline in prices for the quarter, and forecasts that non-energy prices will average 12 percent below 2014 levels this year.

“Demand for crude oil was higher than expected in the second quarter. Despite the marginal increase in the price forecast for 2015, large inventories and rising output from OPEC members suggest prices will likely remain weak in the medium-term,” said John Baffes, Senior Economist and lead author of Commodity Markets Outlook.

COLUMN-China’s rising commodity exports changing nature of trade – by Clyde Russell (Reuters India – July 23, 2015)

July 23, 2015

http://in.reuters.com/

LAUNCESTON, Australia, July 23 (Reuters) – The world is used to seeing China as an importer of raw materials and an exporter of manufactured goods, but a change is occurring that has global implications for commodities.

While China is still the world’s biggest importer of commodities, the nature of its exports are changing.

The big growth in exports this year has been in semi-finished products, most of which fit into the broad definition of commodities. While not raw materials, these include steel, aluminium products and refined fuels.

What is happening in China is that as the country has overbuilt capacity in heavy industries, it is now being forced by economics to seek export markets for intermediate commodities that had previously been consumed at home.

The old dynamic, where Chinese demand for raw materials forced up commodity prices while Chinese exports led to lower prices for manufactured goods, is breaking down.

Commodity rout shows no signs of slowing as loonie hits decade-low – by Carrie Tait (Globe and Mail -July 23, 2015)

July 23, 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.

CALGARY — The rout in commodities ranging from gold to oil is showing no sign of letup, taking the Canadian dollar down to its lowest level in more than a decade.

The widespread slide is tied to factors that include speculation interest rates are about to rise in the United States, and concerns that strong oil and iron ore companies will continue to increase production in hopes of squeezing their less-efficient counterparts out of the market.

This comes as the prospect for global economic growth remains weak and as the World Bank on Wednesday released ugly predictions for commodity prices.

Gold fell for its 10th consecutive day – its longest slip since 1996. The commodity hit a five-year low on Monday. The loonie was down 0.50 of a cent (U.S.) at 76.71 cents. That’s the lowest level since September, 2004, and oil prices retreated below $50. The S&P/TSX composite index dropped 69 points on Wednesday, bringing the loss to 2.3 per cent so far this week.