Archive | Commodity Super-Cycle and Decline

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 →

Is it just the London Metal Exchange that’s short of tin? – by Andy Home (Reuters U.S. – May 12, 2017)

LONDON – The London Metal Exchange (LME) is running short of tin. Headline stocks of the soldering metal in the LME’s warehouse system fell to 2,290 tonnes this week.

It’s the lowest level in at least 20 years but in truth any historical comparison is lost in the mists of time because the world of metals trading and the LME’s place in that world were so different back then. Unsurprisingly, low inventory is once again generating tightness across short-dated time-spreads, extending a pattern that has been running for a couple of years now.

But the outright price is underperforming. Tin, currently trading just shy of $20,000 per tonne, is down more than 5 percent on the start of the year and vying with nickel for worst performer among the major LME metals. Which begs the question of whether the LME is reflecting the wider state of the market or its own dwindling liquidity. Continue Reading →

The Daily Prophet: If You’re Long Commodities, Our Condolences – by Robert Burgess (Bloomberg News – May 4, 2017)

Connecting the dots in global markets.

It would be an understatement to say it was an ugly day for anything related to commodities. The Bloomberg Commodities Index tumbled 1.82 percent, its biggest drop since November. Energy markets, agriculture-related raw goods such as wheat and cattle, and metals such as copper, nickel and the iron ore used to make steel were all hit hard.

Even gold dived. Economists like to say commodities are not the referendum on the global economy they once were, but it’s hard not to notice how closely the recent weakness tracks the drop in the Citi Economic Surprise Index, which measures the data that exceed forecasts relative to those that miss, to its lowest level since the start of the year.

The oil rally following OPEC’s deal to curb supply has disappeared. Futures on both sides of the Atlantic dropped to their lowest since late November on growing signs that the group’s production cuts are failing to clear a surplus of crude, according to Bloomberg News’ Mark Shenk. Oil stocks felt the pinch, with the S&P Oil & Gas Exploration and Production Index slumping as much as 4.9 percent Thursday to the lowest since August. Continue Reading →

Despite slower growth, China still key market for miners and Africa – by Keith Campbell ( – April 21, 2017)

JOHANNESBURG ( – There can be no doubt that, for the past two decades-and-a-half or so, the biggest single influence on the global mining industry has been China. Between 2002 and 2012, that country experienced an annual average real gross domestic product (GDP) growth rate of 10.4%, compared with India’s 7.6%, the UK’s 1.3%, Germany’s 1.2%, France’s 1.0% and Japan’s 0.8%.

During the period 1992 to 2002, China’s average annual real GDP growth rate had been 9.8% (India’s had been 5.8%). (These figures are from The Economist: Pocket World in Figures 2015.)

The result was the “commodity supercycle” and a global mining boom. But Chinese economic growth has, of course, decelerated significantly since 2012. In 2015, it grew at 6.9% and last year at 6.7%, according to official data released in Beijing. (The International Monetary Fund, or IMF, has estimated India’s 2016 growth rate at 6.6%, which makes China again the world’s fastest- growing economy. Continue Reading →

Billionaire Facebook Backer Buying Commodities That Made Him – by Yuliya Fedorinova (Bloomberg News – April 10, 2017)

The Russian tycoon who made $1.4 billion with an early bet on Facebook Inc. and still owns a stake in Uber Technologies Inc. is returning to the sooty old commodities industry that first made his fortune.

Alisher Usmanov, 63, said he’s been investing in natural-resource producers as they rallied last year following three years of declining prices. The Bloomberg World Mining Index of shares jumped 38 percent in 2016 as concerns eased over China’s economy and prices for metals rose, with companies such as Fortescue Metals Group Ltd., BHP Billiton Ltd. and Anglo American Plc surging.

“Last year showed that commodities companies such as BHP Billiton, Fortescue and traditional companies of the oil and gas sector are also able to offer high returns on investment,” Usmanov said in an interview in his Moscow office, without disclosing which companies he’s bought stakes in. Continue Reading →

Top 50 biggest mining companies – by Frik Els ( – April 3, 2017) and sister company IntelligenceMine’s ranking of the world’s 50 largest mining companies based on market value continues to show an industry in recovery.

At the end of the first quarter this year the top 50 companies had a combined worth of $842 billion. In total these companies’ added $258 billion in market capitalization over the past 12 months and a good fifth of those gains occurred in 2017.

As with any ranking, criteria for inclusion is a contentious issue. We decided to exclude unlisted and state-owned enterprises at the outset due to a lack of information. That of course excludes giants like Chile’s Codelco, Uzbekistan’s Navoi Mining which owns the world’s largest gold mine, Eurochem, a major potash firm, trader Trafigura, top uranium producer Kazatomprom and numerous entities in China and developing countries around the world. Continue Reading →