Archive | Commodity Super-Cycle and Decline

Here’s how to tell when metals markets are about to turn south – by Scott Barlow (Globe and Mail – November 8, 2017)

There are times when market action isn’t tough to figure out and the recent rally in base metals is one of those times.

For all the talk of the lithium, nickel and magnesium that would be needed during a surge in electric vehicles, broader metals prices continue to be driven primarily by Chinese imports and also by rising global manufacturing activity.

The catch is that forecasts for the Chinese economy imply the rally could be short-lived. China’s dominance in global commodity markets is highlighted by the fact the country consumes half of the global supply of copper and coal produced each year. Continue Reading →

Why Biggest Metals Rally of the Year May Have Further to Run – by Mark Burton and Jack Farchy (Bloomberg News – November 1, 2017)

In a stellar year for base metals, aluminum has led the pack. Now, producers say surging raw material costs could drive prices even higher.

Alumina, the raw material used to make aluminum, has jumped 56 percent since August after China shut down some production, triggering a wave of buying by traders and aluminum smelters. The rally is putting a strain on metal producers in China, where alumina accounts for 40 percent of the cost of making aluminum.

Cost pressures could worsen in the months to come as Chinese environmental reforms weigh most heavily on bauxite and alumina producers. That may give extra fuel for aluminum’s 28 percent rally this year, the biggest since 2009. Continue Reading →

Everyone’s a Metals Bull as Global Economic Engine Fires Up – by Jack Farchy and Mark Burton (Bloomberg News – October 30, 2017)

Global growth is on a tear, and that can only be positive for metals prices. That’s the message coming from the industry ahead of LME Week.

For the first time in years, optimism is widespread among traders, smelters, miners and brokers gathering in London, buoyed by a combination of strong growth across the world’s key demand centers, supply curbs in China and a return of investor interest.

“The global economy looks much better than it has done probably since the crisis, maybe before that,” said Saad Rahim, chief economist at Trafigura Group Pte, the second-largest metals trader. “I’m pretty bullish.” Continue Reading →

Metals start to shine as miners find new optimism – by Jon Yeomans (The Telegraph – October 29, 2017)

As an annual jamboree for metal traders kicks off in London, investors are daring to believe a change is in the air. “This will be the first time in five years that people will be coming with a spring in their step,” says Guy Wolf, head of market analytics at commodities broker Marex Spectron.

London remains the heart of the global metals trade. Last year $10.3 trillion (£7.8 trillion) of notional trades in metals such as copper, aluminium and zinc passed through the London Metals Exchange (LME).

LME Week, at the end of October, is a chance for metal traders and miners to take stock. For the first time in five years, they are confronted with a bull market for base metals, Wolf says. Continue Reading →

Xi’s China a boon for mining – by Frik Els ( – October 23, 2017)

Most analysis of the 19th National Congress of the Communist Party of China has focused on how President Xi Jinping is consolidating his already considerable power acquired through a purge of opponents in a corruption crackdown that shows no sign of slowing down.

Despite its three-and-a-half hour running time Xi’s speech (referred to as the Report) in front of the 2,300-delegates assembled in the Great Hall of the People, paid relatively short shrift to the direction of the world’s second largest economy.

In a research note, Julian Evans-Pritchard of Capital Economics found that Xi used the word economy (经 济) 70 times during the speech giving it considerably less prominence than his predecessors. And that’s going back all the way to Hu Yaobang’s 1982 address which talked about the economy 104 times. Continue Reading →

Hedge funds bet on bright future for metals – by Maiya Keidan, Pratima Desai and Barbara Lewis (Reuters U.K. – September 19, 2017)

LONDON (Reuters) – Hedge fund investment in the metals industry is at its highest since 2011, according to investment data, a sign that investors are hoping to profit from a rise in prices that have spent years in the doldrums.

The investment by hedge funds follows a broader inflow of money into industrial metals, where prices are rising after production cutbacks helped to reduce a supply glut. That oversupply crisis led to the closure of some specialist metals hedge funds, including those run by Apollo Global Management and Hall Commodities.

The metals industry’s fortunes are turning, as an environmental crackdown in China, the world’s second-largest economy and biggest consumer and producer of industrial metals, in polluting industries cuts supplies. Continue Reading →

China’s commodity imports show why rally in prices may stall – by Clyde Russell (Reuters U.S. – September 10, 2017)

LAUNCESTON, Australia (Reuters) – China’s imports of major commodities in August illustrate both why prices have gained in recent months and why this rally may be running out of steam. Imports of crude oil, copper, coal and iron ore remained relatively robust in August, but the customs data released on Sept. 8 also showed a certain loss of momentum.

Crude oil imports were 33.98 million tonnes, equivalent to about 8 million barrels per day (bpd), which was the lowest in about eight months and down from 8.18 million bpd in July.

While an explanation can be found in maintenance closures by refineries and ramped up environmental inspections by the authorities, it does appear that China’s crude oil imports have been losing some momentum. The year-on-year increase for the first eight months of 2017 was 12.2 percent, which is still robust. Continue Reading →

Materials Stocks Set to Shine With Poloz Preparing Rate Hikes – by Kristine Owram (Bloomberg News – July 10, 2017)

If Governor Stephen Poloz does the expected and raises Canadian interest rates on Wednesday, it may be time to load up on potash, copper and gold stocks.

A review of equity performances following Bank of Canada tightening cycles over the past dozen years shows that materials stocks including Lundin Mining Corp. and Potash Corp. of Saskatchewan Inc. significantly outperform all other sectors of the Canadian market.

Over five periods of higher interest rates, including 2010, 2007 and an extended eight-month cycle in 2005 and 2006, the S&P/TSX materials index has returned an average of 9.7 percent in the three months following a rate hike, according to data compiled by Bloomberg. By contrast, financials have gained 1.8 percent, energy has returned 0.6 percent and the benchmark index has added 2.4 percent. Continue Reading →

Slow, bumpy market recovery on the cards for most commodities – by Henry Lazenby ( – June 22, 2017)

VANCOUVER ( – The global commodity market is probably in for a slow, drawn-out recovery following the five-year bear market, S&P Global Market Intelligence director for reports on the metals and mining sectors Dr Chris Hinde said during a webcast on Wednesday.

According to S&P’s ‘State of the Market’ report, there was a mixed performance for mined commodities during the first three months of this year, following the “encouraging” price increases last year. The March quarter overall saw a healthy increase in the price of aluminium and steady improvements in the prices of gold, zinc and copper, but flat performances for nickel and iron-ore, and a significant price fall for coal.

“Activity in the mining industry reflects the global economy generally and industrial production in particular. This reflects the uncertain political and economic environment but, fortunately, China has started the New Year with its strongest performance in six quarters,” he noted. Continue Reading →

COLUMN-China’s plan to boost commodity trading needs reality check – by Clyde Russell (Reuters U.S. – June 20, 2017)

The call by China’s securities regulator for the country’s wealth managers to invest in domestic commodity futures is both encouraging and somewhat bizarre.

The China Securities Regulatory Commission (CSRC) aims to promote the domestic derivatives industry by loosening regulations that restrict how commercial banks, insurance companies and pension funds invest in commodity futures, Fang Xinghai, the commission’s vice chairman, said on June 17.

Fang, who was speaking at a financial forum in Qingdao, didn’t give further details of the proposal, but it seems to fit into recent moves by the authorities in Beijing to promote commodity trading and become more of a player in global markets. Continue Reading →

Four BRICs don’t quite make a wall: Brazil, Russia, India and China have done even better than forecast—thanks mainly to China (The Econmist – June 8, 2017)

EMERGING markets have been through a lot over the past four years. The “taper tantrum” in 2013 (prompted by fears of a change in American monetary policy); the oil-price drop in 2014; China’s botched devaluation of its currency in 2015; and India’s botched “demonetisation” of much of its own currency in late 2016 (removing high-value banknotes from circulation).

But 2017 has started more brightly. Indeed, for the first time in two and a half years, the world’s four biggest emerging economies (Brazil, Russia, India and China, known as the BRICs) are all growing at the same time.

Russia’s GDP bottomed out at the end of 2015 (using seasonally adjusted figures) after the longest recession since the 1990s. It has expanded at a gathering pace for the past three quarters. Higher oil prices have helped, though Russia cannot profit fully from the improved market by ramping up sales without violating the production limits that caused the market’s recovery. Continue Reading →

Top 40 miners returned to profit in 2016: PwC – by Andrew Topf ( – June 9, 2017)

Is the bad and the ugly over and the good returning to the mining industry? PwC seems to think so, according to a new report from the consulting firm.

“The world’s Top 40 miners recovered from a race to the bottom, with bolstered balance sheets and a return to profitability in 2016, giving them much-needed space to pause and draw breath,” reads a press release on PwC’s annual review of global mining trends, this year titled “Mine 2017. Stop. Think. Act.”

The report was released on Wednesday by PwC Africa at the Junior Indaba conference in Johannesburg. It analyzed 40 of the largest listed mining companies by market capitalization, covering the financials between April 1 2015 and December 31 2016. Continue Reading →

Vedanta, Vale Lead Base-Metals Mining Drop as Iron Ore Plunges – by Mark Burton and Susanne Walker Barton (Bloomberg News – May 31, 2017)

(Bloomberg) — Vedanta Resources Plc and Vale SA led declines in industrial-mining companies as Chinese investors returning from a public holiday drove iron ore to a seven-month low. Nickel traded near its lowest in a year after Indonesia’s largest producer started shipping ore to China.

An index of 18 producers tracked by Bloomberg Intelligence headed for a third straight loss, with Vedanta dropping 5.7 percent and Rio de Janeiro-based Vale sliding 5 percent. Earlier, a 6.5 percent slump took iron ore to 424.5 yuan ($62.3) a metric ton on the Dalian Commodity Exchange amid signs of ample supply. The September contract finished May down 19 percent, in the longest run of monthly declines since November 2015.

“The fundamentals in iron ore are relatively weak but the selloff is more to do with speculative traders’ positions,” Xiao Fu, an analyst at Bank of China International Global Commodities, said by email. “The bears are winning at the moment.” Continue Reading →

The commodities lull will pass. It’s the swing of things – by David Fickling (Globe and Mail – May 30, 2017)

SYDNEY — Bloomberg News – Remember when commodities markets were fun? Just before Christmas 2008, WTI crude futures soared almost 18 per cent in a day. As recently as last November, the contract was able to climb 9.3 per cent on the back of OPEC announcing production cuts. Back in June 2014, soybeans fell 19 per cent in one session; three months later, sugar prices jumped 14 percent.

Those times, at least for the moment, are past. The 90-day volatility of the Bloomberg Commodity Index touched its lowest level since November 2014 this month, driven by declines in energy, crops and precious metals. Volatility in spot gold has been running at levels almost unseen so far this century.

Various reasons could account for this. The sheer volume of information that’s out there about supply and demand — and the range of instruments available for those who want to act on it — means there are fewer surprises these days. Continue Reading →

China plans to build new city nearly three times the size of New York – by Tom Phillips (The Guardian – April 4, 2017)

Announcement of the Xiongan New Area leads to a frenzy of property speculation with investors clogging roads to get to site

Beijing – A hitherto anonymous region near China’s smog-choked capital has been overrun by house buyers after Beijing unveiled “historic” plans to build a new city there in a bid to slash pollution and congestion.

Plans for the Xiongan New Area, a special economic zone that authorities say will eventually cover an area nearly three times that of New York, were announced by the Communist party’s top leaders on Saturday with a flurry of government propaganda.

In a joint statement two of China’s most powerful political bodies, the central committee and state council, described the new city, which will straddle three counties about 100km southwest of Beijing, as “a strategy crucial for a millennium to come”. Continue Reading →