Commodity Super-Cycle and Decline – Page 35

Widespread Mine Closures To Follow The Commodity Price Collapse – by Tim Treadgold (Forbes Magazine – July 21, 2015)

July 22, 2015

http://www.forbes.com/

Write down today. Close down tomorrow.

That’s the outlook for the minerals and metals complex as a glut of virtually everything, from gold to oil, and from iron ore to aluminum, forces big asset value write downs and sets the scene for wholesale mine closures over the next six-to-12 months.

BHP Billiton , the world’s biggest mining company, kicked off the current round of asset-value write downs by last week wiping $2.8 billion off the value of its U.S. onshore oil and gas business. Anglo American followed suit yesterday, booking a $4 billion write-down of a Brazilian iron ore mine and a number of Australian coal assets.

There’s a lot more to come because those decisions were made before the latest plunge in commodity prices, including oil dipping back below $50 a barrel and gold dropping to a five-year low of less than $1100 an ounce.

Not So Super Cycle

By some measures the price of industrial commodities are back to where they were in 2002, the year which unofficially marked the start of a so-called “super cycle” resources boom that investors were told would keep prices “stronger for longer”.

More resources write-downs expected as commodities slump – by Amanda Saunders (Australian Financial Review – July 21, 2015)

July 21, 2015

http://www.afr.com/

A steady flow of write-downs across most metals and oil and gas is tipped over the next year, as many of the mining majors tweak their medium-term price forecasts and try to offload non-core assets in a depressed market.

The big miners are facing profit falls of between 30 and 60 per cent in their next round of results, with their impressive cost cutting not enough to offset the commodity price rout.

Glencore is a candidate to take hits in nickel and possibly other base metals at its interim results, analysts say.

If thermal coal prices continue to languish at $US60 a tonne, Glencore could also write down its Australian coal holdings over the next year, and Anglo American could impair some of its South African coal assets, but probably at the full year.

Ahead of its interim results on Friday, Anglo flagged a writedown of up to $US4 billion ($5.42 billion) post-tax on its Brazilian iron ore mine and some Australian coal assets, two days after BHP Billiton took a $US2.8 billion (pre-tax) impairment on its US shale gas business.

Podcast: The cavalry is not coming – by Warren Dick (Mineweb.com – July 20, 2015)

July 20, 2015

http://www.mineweb.com/

There’s fear and panic in the market and the commodity super-cycle is over, according to Bloomberg Intelligence’s Global Head of Metal and Mining, Ken Hoffman.

WARREN DICK: Good day, everyone. My name is Warren Dick, the editor of Mineweb.com. And joining me on the podcast today is Ken Hoffman, the global head of metal and mining research from Bloomberg Intelligence, and he is joining us from New York. How are you, Ken?

KEN HOFFMAN: I’m doing very well. How are you?

WARREN DICK: Very good, thanks. I think it might be as cold today in Johannesburg as it is in New York. I don’t know what the weather is like there.

KEN HOFFMAN: Oh, it’s absolutely perfect today, actually. Finally we are getting a little bit of summer here.

WARREN DICK: Well, I think, Ken, what we really wanted to do is just pick your brains. You guys are looking at trends in the market, and you’ve obviously seen the massive sell-off in commodity prices. That’s been pretty much indiscriminate. I think everything from iron ore to some of the precious metals we’ve seen. We’ve just seen platinum going below $1000/oz.

Why commodities cycles inflict pain (as we are now feeling) – by Robin Bromby (Investorintel.com – July 8, 2015)

July 8, 2015

http://investorintel.com/

InvestorIntel publisher Tracy Weslosky asked some pertinent questions on my posting Tuesday about low prices not, in the long term, affecting the validity of technology metals stories. In the 24 hours since I wrote that piece, we have seen the Chinese markets tumble further with 51% of A-shares in Shanghai and Shenzhen suspending themselves to avoid the carnage (boy, if only American stocks had had that option in October 1929). Then the base metals took more hits. Get this: in one session (Tuesday) on the London Metal Exchange nickel lost $1,050 a tonne. In one session!

Things don’t look too good, in other words. Tracy asks when we will turn around: I don’t know, and I doubt whether anyone else does either. But last year I self-published a short e-book on Amazon that attempted, not to explain what various metals do, but rather to pick some underlying, long-term factors that investors should keep in mind. Here’s a short excerpt:

In 2013 David Jacks, an economics professor at Simon Fraser University in Vancouver and a research fellow at the Massachusetts-based National Bureau of Economic Research, put the metals world into some sort of perspective. As he pointed out, the global economy witnesses protracted and widespread commodity booms once in a generation.

China panic crushes mining stocks – by Frik Els (Mining.com – July 7, 2015)

July 8, 2015

http://www.mining.com/

Billions wiped from mining sector as gold, silver prices fall and copper, iron ore prices plummet to 2009 levels amid Chinese stock market collapse

The value of base and precious metal miners and the diversified giants all fell on Tuesday as commodity prices dropped to fresh multi-year lows hit by the triple whammy of a stronger dollar and turmoil in the eurozone and China.

In New York trade on Tuesday copper for delivery in September dropped as much as 6% to a low of $2.39 per pound or around $5,260 a tonne, the lowest since July 2009 and down 16% so far this year.

Despite a rebound in late trade, base metals prices ended the day at multi-year lows. Nickel lost as much 9% hitting $10,637 a tonne, tin ended 4.4% lower at $13,700 a tonne while zinc gave up 3.7% to $1,934 a tonne.

Lead prices dropped more than 2% to $1,722 a tonne entering a bear market with a 20% decline since its May high. The same fate befell aluminum which declined 1.7% to $1,666 a tonne, more than 20% below its September highs. Crude oil despite a slight gain late in the day is now back into bear territory.

SPEECH: Experience proves garlands are not distributed for pessimism – by Sam Walsh, chief executive (Melbourne Mining Club – 1 July 2015, London, U.K.)

July 2, 2015

Sam Walsh is the Chief Executive Officer of London-based Rio Tinto Group, the second largest mining company in the world.

**Check against delivery**

Ladies and gentlemen it’s great to be with you tonight. I think I am the first Melbourne-born boy to address the Melbourne Mining Club here at the historic Lord’s cricket ground.

It’s customary at Rio Tinto to acknowledge Traditional Owners and I would like to pay my respects to the first Australians to play cricket in the United Kingdom in 1868. They were from the Wimmera district of my home state of Victoria.

That match was ten years before a colonial eleven took on WG Grace here at Lord’s in a match completed in just under five hours – which you will be pleased to hear is nowhere near the length of my speech tonight.

It’s been quite a fascinating year so far. A lot of commentary, free expert advice, and even some sledging has come our industry’s way.

With a history stretching back to around the time of those early matches, Rio Tinto people know what it takes to play a long and quality innings. As do many of you in this room.

CHARTS: China’s steel, iron, coal industry growth collapsing – by Frik Els (Mining.com – June 12, 2015)

June 15, 2015

http://www.mining.com/

A new report shows China’s move away from industrialization and construction to consumption and services is happening much quicker than previously thought

China’s economic growth is expected to slow to 7% in 2015 and may even slip below that – the slowest pace since 1990.

While slower overall growth has long been expected, the transformation of China from an investment-led to a consumption driven economy appears to be happening much quicker that previously thought.

After the years of breakneck infrastructure investment, urbanization and industrialization that created the supercycle in commodity demand, Beijing is now shifting focus of policy to the services-orientated sectors of the economy.

A chart from oil giant BP’s Statistical Review of World Energy 2014 report shows how the energy intensive sectors of the Chinese economy “virtually collapsed”.

This strategy of curbing the once red-hot property sector and placing restrictions on heavy industry also ties in with the government’s fight against pollution after years of devastating environmental damage.

China Commodity Appetite Weakens as Growth Seen at Risk (Bloomberg News – June 8, 2015)

June 9, 2015

http://www.bloomberg.com/

China’s imports of oil, copper and iron ore slid last month amid a broader slowdown in trade that highlights the country’s weakening economy and threatens growth targets.

Inbound shipments of oil dropped to the lowest in 15 months, overseas copper purchases retreated from the highest in a year and iron ore cargoes slid for a second month, data from the country’s General Administration of Customs showed Monday.

Weakening imports of raw materials will add to speculation that domestic demand in the world’s biggest consumer of energy, metals and grains is faltering. The Bloomberg Commodity Index of 23 commodities is extending its biggest slide since the 2008 global financial crisis amid concern the nation will fail to contain a slowdown.

“The macro economy is still weak,” Li Li, an analyst with Shanghai-based commodities researcher ICIS-China, said by phone. “Demand from the downstream heavy industrial sector, including transportation and property, have shown no signs of recovery.”

The country’s total imports shrank by the most since February while exports fell for a third month. That coincides with a slump in investment growth that’s putting Premier Li Keqiang’s 2015 expansion target of about 7 percent at risk.

Commodity prices weigh heavily on top 40 mining giants June 4, 2015 – by Natasha Odendaal (MiningWeekly.com – June 4, 2015)

June 4, 2015

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

JOHANNESBURG (miningweekly.com) – The tough fight faced by the global mining industry in 2014 would escalate into a brawl this year as mining companies worldwide struggled to emerge from depressed markets, PwC’s Africa Mining Centre of Excellence head Michal Kotze said on Thursday.

Widespread government intervention, significant conflicts surrounding strategy debates and other internal industry conflicts, “huge” competition, weakening commodity prices with increasing short-term volatility and rising shareholder activism had left industry on the ropes.

A reduction in capital spend, somewhat higher production and “unexpected help” from currency devaluations and lower input costs had assisted the mining industry to “manage expectations” during 2014 despite continued headwinds from weak commodity prices, the latest PwC ‘Mine’ report showed.

By April 2015, iron-ore prices had dropped to below 50% of the value recorded in January 2014, while coal and copper prices dropped to below 75% and 80% of their respective price structures during the same period.

Keep Metal Prices Lower for Much Longer – by David Stringer (Bloomberg News – June 3, 2015)

June 3, 2015

http://www.bloomberg.com/

BHP Billiton Ltd. delivered a sombre warning to global commodity markets that oversupply is very much here to stay. Tumbling prices are creating a testing environment for commodity producers, while demand is slowing to more routine levels amid a transition in China’s economy away from investment-led growth, the world’s biggest mining company’s Chief Executive Officer Andrew Mackenzie said Wednesday.

“In many markets, recently installed low-cost supply can now be stretched to meet growing demand,” Mackenzie said in a speech in Canberra. “Incremental supply, induced during periods of higher prices, will take longer to absorb and this means over-supply may persist for some time.”

Expansion by the biggest iron ore producers, including BHP and Vale SA, will see a global surplus swell to 215 million tons in 2018 from 45 million this year, UBS Group AG estimates. Teck Resources Ltd. plans to idle six Canadian coal operations amid a slump in prices and demand.

“The speed at which prices have returned to long run levels for each commodity has varied as a function of the time taken for low cost supply to come to market,” Mackenzie said.

China Dotes on South American Infrastructure – by Tim Maverick (Wall Street Daily – May 28, 2015)

May 29, 2015

http://www.wallstreetdaily.com/

In April, I told readers about the billions of dollars China was pumping into the New Silk Road, connecting Pakistan to China. But China isn’t stopping there. It seems the economic powerhouse has also set its sights on South America.

Chinese Premier Li Keqiang just completed an extensive nine-day tour of Brazil, Peru, Chile, and Colombia. These four countries account for 57% of China’s quickly increasing trade with South America.

In January, Li promised $250 billion in investment into South America over the next decade. As of the end of 2014, China had already invested nearly $100 billion into its favorite countries.

On his current tour, Li is lavishing billions more on a number of deals, most of which center around infrastructure, such as rail.

You see, China is unflinching in its quest for power and security. Meaning the Chinese want to ensure speedy delivery of the precious commodities produced in South America.

Chinese President’s new Silk Road plan will fail unless ideas are free to travel – by Carl Mortished (Globe and Mail – May 29, 2015)

May 29, 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.

“One Belt, One Road” is China’s slogan for a 21st-century revival of the ancient trading routes that linked Han Dynasty silk merchants with Central Asia and the Mediterranean. President Xi Jinping’s big idea is investment in roads, railways, ports and pipelines that will link China to the world.

However, the ancient Silk Road was more than a caravan of camels loaded with stuff. It was also a convoy of ideas, and this may be where the Chinese Communist Party’s great ambition comes a cropper.

The first question you have to ask is why China needs such a vision of a new Silk Road.

The Chinese President sought to give a romantic gloss to his plan when he first mentioned it in 2013 on a visit to Kazakhstan, noting the thousands of years of trade between the two nations on the Silk Road. Last year, he announced a $40-billion (U.S.) infrastructure fund to build roads, railways, ports and airports across central and south Asia, and this year China reaffirmed its political ties to Pakistan with a promise of $45-billion of infrastructure investment.

Japan push into Africa resources sputters, helps China – by Yuka Obayashi (Reuters U.S. – May 29, 2015)

May 29, 2015

http://www.reuters.com/

TOKYO, May 29 (Reuters) – A Japanese government drive to secure access to resources in Africa has sputtered as some companies shy away from investing due to slumping commodity prices and worries over political stability, helping China as it races to import raw materials from the continent.

Around two years ago, Japan said it would provide about $2 billion mainly to back African commodity projects by its firms as part of a move to secure supplies of materials such as coking coal and copper it needs to churn out steel and electronic components.

But worries over the stability of the investment environment in some African nations, along with falling commodity prices, have sapped momentum from that push, Japanese firms said at a mining conference on Thursday and Friday.

A lack of infrastructure and concerns over resource nationalism were also cited as reasons.

“To invest in mine development, it is necessary to see an improvement in Africa’s investment environment so it is politically, sociologically and economically stable,” Shigeru Oi, president of JX Nippon Mining & Metals Corp, Japan’s top copper refiner, said in a speech.

COLUMN-“Cautious optimism” abounds in Asia commodities – by Clyde Russell (Reuters Africa – May 28, 2015)

May 28, 2015

http://af.reuters.com/

SINGAPORE, May 28 (Reuters) – There appears to be an outbreak of “cautious optimism” in the Asian commodities sector.

It was easy to lose track of the number of times the phrase popped up in presentations and conversations at four major commodities conferences in the region in the past two weeks.

However, defining what people meant by being cautiously optimistic was somewhat more challenging, although the common thread was a view that the worst is over for commodity prices, and the sector is once again worth looking at from an investment perspective.

Of course, it’s easy to dismiss participants at the SGX Iron Ore Forum and the Asia Mining Congress in Singapore, the Asia Oil & Gas Conference in Kuala Lumpur and the LME Week Asia in Hong Kong as talking their books, or at least to their hopes.

But what will be key is how the expectations of better times ahead translates into action. From a pricing perspective, there was widespread acknowledgement that the likelihood of strong rallies was very low, rather what producers, traders, buyers and investors are forecasting is a gradual grind higher as rising demand eats away the supply overhang created by over-investment in mines.

Westpac eyes China, India for commodities trade growth – executive – by Melanie Burton (Reuters U.S. – May 21, 2015)

May 21, 2015

http://www.reuters.com/

HONG KONG – A recent entrant in Asia’s commodities markets, Australia’s Westpac Banking Corp is ramping up to take advantage of a commodities “supercycle” that it says has at least another 30 years to run.

While some global banks have exited commodities due to more stringent regulations, Westpac is setting itself to support a deeper push into the region by its corporate customers, a senior executive told Reuters.

“The commodity cycle is still in the supercycle phase. The urbanization of Asia has not stopped – all we’re getting at the minute is a correction,” said Paul Gardner, the bank’s Singapore-based Global Head of Structured Commodity Finance.

“When you’re dealing with a 30-40 year window (of a bull cycle), are you really late, or are you just coming to the party at the right time? There were some major players who were in very early and who are already gone.”

Australia’s No. 2 lender by market value has been setting up a commodity trading desk in Singapore over the past 18 months, to focus mainly on lending in metals, as its customers tap Asia’s construction boom.