Archive | Commodity Super-Cycle and Decline

Mining’s Next Big Boom – by David Fickling (Bloomberg News – January 11, 2017)

Here’s something to give a fresh shot in the arm to copper, the second-best-performing base metal over the past three months: the prospect of strike action at its biggest pit.

Management at BHP Billiton Ltd.-run Escondida in Chile have rejected union demands for a 7 percent pay rise and 25 million peso ($37,300) bonus, and talks are ongoing ahead of a vote by workers on a final proposal Jan. 24, Bloomberg News reported Wednesday.

As Gadfly argued in September, the risk of industrial action is one of the major supply-side factors supporting copper at the moment. Escondida accounted for about 1.2 million metric tons of mined copper in 2015, so any stoppage could sharply tighten a market that Bloomberg Intelligence estimates will see a 453,000-ton surplus this year. Continue Reading →

COLUMN-Funds keep the faith with the base metals turnaround story – by Andy Home (Reuters U.S. – January 11, 2017)

LONDON, Jan 11, 2017 – This time last year the base metals complex was all doom and gloom. The London Metal Exchange (LME) index of prices touched 2,049 in January 2016, its lowest reading since the dark days of January 2009, when the world seemed to be spiralling into full-blown depression.

China came to the rescue then and it came to the rescue again last year, Beijing policymakers once again pumping money down the twin metals-intensive channels of infrastructure and construction to reinvigorate economic growth. The LME index has since recovered to 2,768. True, performance has been mixed, largely reflecting each individual metal’s supply dynamics.

But the worst seems to be over for base metals prices, with more upside to come. That, at least, is what fund managers are betting on. There was some marginal reduction in fund positions over the course of December but the money men appear to be largely keeping the faith with the broader turnaround story. Continue Reading →

Don’t count mining shares out yet – by Ian McGugan (Globe and Mail – January 11, 2017)

Mining shares aren’t the dirt-cheap bargains they were a year ago, but still have room to rise in 2017. A pick up in global growth coupled with less in the way of new production should support metal prices this year, observers say.

While nobody sees stock-price gains to match last year – when Barrick Gold Corp. doubled, Glencore PLC tripled and Teck Resources Ltd. quintupled – the sector still seems reasonably priced and could benefit from factors ranging from Trumponomics to momentum trading.

“We think 2017 should be a positive year for miners,” Jatinder Goel and other Citigroup analysts wrote in a report this week. “We believe most commodities are moving up the recovery curve,” concurred David Gagliano and his team at Bank of Montreal. Continue Reading →

2017 to be a positive year for mining sector following strong 2016: Citi analysts – by Sunny Freeman (Financial Post – January 10, 2017)

The mining sector will enjoy a positive year of growth in 2017 following a strong performance in 2016, an industry analysis by Citi suggested Monday.

Mining stocks will have a strong 2017, thanks to industry-wide trends toward increased free cash flow, upward earnings momentum and the potential to return excess capital to shareholders, Citi said.

However, it added, they are unlikely to see the same percentage increases in share prices as they did in 2016. The odds of mining overperforming the rest of the market are weak. Last year’s strong mining and commodities performance follows five straight years of underperformance. Continue Reading →

World Bank on a Trump economy and commodities – by Frik Els ( – January 10, 2017)

A pillar of president-elect Trump’s economic plan is fiscal stimulus in the form of tax cuts and $500 billion-plus of infrastructure spending.

Trump’s victory sparked a rally in the copper price which is seen as a bellwether for metals and industry as a whole thanks to its widespread use in construction, the power sector, manufacturing and transportation.

The World Bank’s outlook for the world economy in 2017 released on Tuesday includes a look at the effect accelerating growth in the US could have in the rest of the world and on the commodities sector. Continue Reading →

Can World’s Miners Dig Up Another Year of Stratospheric Gains for Investors? – by Rhiannon Hoyle (Wall Street Journal – January 5, 2017)

The world’s miners are starting the new year as must-have darlings in stock portfolios. But some money managers are beginning to question whether the industry’s surprise rebound is built on rock.

Soaring prices for commodities from coal to zinc and manganese caught many investors off guard in 2016, sending mining stocks from Sydney to Toronto on a tear that outdid banks, retailers and utilities.

The S&P/ASX 300 Metals and Mining Index on Australia’s resources-heavy stock exchange surged in December to its highest intraday value since 2014, while the MSCI World Metals and Mining Index recently touched an 18-month high. Continue Reading →

Scarce Minerals Are Running Out: Mining Quotas Are Needed in Resource Crisis — by Theo Henckens (Counter – January 5, 2017)

Molybdenum is essential for the manufacture of high-grade stainless steels, but at present molybdenum is hardly recycled. Yet unless reuse of molybdenum is dramatically increased, the extractable reserves of molybdenum on Earth will run out in about eighty years from now.

The extractable reserves of antimony, a mineral used to make plastics more heat-resistant, will run out within thirty years.During more than a century the use of mineral resources increased exponentially with an average between 3 and 4% annually. Can this go on, given the limited amounts of mineral resources in the earth’s crust?

Which raw materials or minerals are scarce?A mineral’s scarcity is expressed as the number of years that its extractable amount in the Earth’s crust is sufficient to meet anticipated demand. This exhaustion period is estimated from the annual use of such mineral. Continue Reading →

The mining industry two years on – by David Humphreys (Mining Journal – December 12, 2016)

Two years ago, I completed the manuscript for my book The Remaking of the Mining Industry. I judged that by 2014 the great commodities boom which started in 2004 was well and truly over and that it was an appropriate moment to take stock of what had happened during the boom years and why.

A lot has happened in the intervening two years. So, with the release of a paperback edition of the book,** I thought it might be interesting to check back on whether some of the assertions made in the book still hold up.

Not entirely unsurprisingly, the industry took a beating through 2015 as the global economy slowed and commodity prices tanked. Companies sought to shore up their balance sheets by squeezing out costs and curtailing exploration and capital spend. In February 2016, BHP Billiton made the landmark announcement it was ending the progressive dividend policy which had been in place for 15 years. Continue Reading →

The top 20 most influential people (Mining Journal – December 19, 2016)

The inclusion of those at the top of this year’s hierarchy of mining’s most influential was not debated within the Mining Journal offices but their positioning was the subject of vigorous discussion. Meanwhile, it was the activity at the margin – where individuals are included or omitted – that generated the most heated arguments.

1. Xi Jinping, president of the People’s Republic of China: We use Xi (pictured right, second from left) as a proxy for Chinese economic policy. That being the case, it is difficult to imagine the Chinese state being usurped as the biggest influence on the mining sector for several years.

The numbers clearly back up this selection, with China consuming more than 40% of the world’s copper, about half the world’s nickel, aluminium, and coal, and more than 70% of seaborne iron ore.

As if China’s importance needed further practical evidence, 2016 has provided plenty of supporting data. Continue Reading →

Trump Is Causing a Rare Trend in Commodities – by Mark Burton (Bloomberg News -December 16, 2016)

One of the fundamental dynamics of commodities markets has being turned upside down, thanks in part to Donald Trump.

Industrial metals prices and the dollar are rising in tandem on expectations that U.S. economic growth and inflation will accelerate during Trump’s presidency. Usually, they move in the opposite direction as the dollar’s strength makes commodities, which are mostly denominated in the currency, more expensive for buyers outside the U.S.

The trend is so rare that it’s only happened a handful of times in the past decade, and it’s one of the many reasons that mining companies such as Glencore Plc are rebounding. The commodities giant is benefiting from lower costs and higher metal prices at its zinc operations, and is on track to resume paying dividends next year as part of a broader turnaround plan. Continue Reading →

Blistering European mining rally hinges on China, Trump and dollar – by Atul Prakash and Peter Hobson (Reuters U.S. – December 9, 2016)

LONDON, Dec 9 European miners are in a race for the title of the best sector performer this year, a sharp turnaround from a slump in 2015, although the rally extending into 2017 rests on U.S. president-elect Donald Trump and China.

A recovery in commodity prices, better balance sheets and brighter global economic growth prospects have underpinned the rally in so-called ‘cyclical’ stocks – which tend to follow the fortunes of the wider economy – that were beaten down to low valuations at the end of 2015.

Glencore’s move to join a consortium taking a stake in Russian oil giant Rosneft suggests some companies are getting more confident about their balance sheets, analysts said. But with several blue-chip mining shares surging, a lot of optimism may already be in the price, they said. Continue Reading →

Miners emerge from downturn bruised but determined to be better – by Neil Hume (Financial Times – December 8, 2016)

When Mark Cutifani, the boss of Anglo American, addressed analysts and investors on a recent trip to South Africa he had a simple message: the FTSE 100 miner was prepared to hold on to assets previously deemed noncore and run them for cash — unless it received the “right” price from buyers.

Those comments marked a sharp shift from January when Anglo, under attack from hedge funds, put a bundle of assets up for sale as part of a radical “shrink to survive” strategy.

Since then the mining sector has enjoyed a dramatic change in fortunes as a sharp and unexpected rebound in commodity prices, such as iron ore and coal, has boosted profits to the extent that large, diversified miners, such as Anglo and Glencore, will comfortably achieve their debt reduction targets. Continue Reading →

RPT-COLUMN-China’s commodity trading crackdown has long-term consequences – by Clyde Russell (Reuters U.S. – December 7, 2016)

Dec 7 Is there a longer-term cost to be paid by China for its ongoing efforts to curb what the authorities in Beijing see as unjustified price spikes in commodity prices on the country’s futures exchanges?

Certainly it is becoming clear that the authorities are continuing to ramp up their campaign against the so-called hot money pumping up commodity prices, with new measures designed to cool price action in iron ore, steel and coal among others.

In recent weeks the Dalian and Zhengzhou commodity exchanges and the Shanghai Futures Exchange have all toughened trading requirements several times. The measures imposed include raising trading margins, hiking transaction fees and imposing trading limits. Continue Reading →

Citi Makes a Clarion Call for Commodity Bulls With 2017 View – by Ranjeetha Pakiam (Bloomberg News – December 5, 2016)

Citigroup Inc. has given a clarion call for commodity bulls, predicting that most raw materials are expected to perform strongly next year as global economic growth picks up, the oversupply that’s dogged markets finally dissipates and investors plow in more funds.

The bank is bullish on oil, copper, zinc, and wheat on a six to 12-month horizon, with global growth seen at 2.7 percent from 2.5 percent in 2016, according to an e-mailed report. It’s bearish on coal and iron ore — describing this year’s out-performance in bulks as a fluke — and gold and soybeans.

Commodities have made a comeback this year after sinking to a quarter-century low in January as the oil market shows signs of rebalancing after a glut, and base metals rally on prospects for rising demand. Continue Reading →

Rio marks the re-emergence of the miners – by Robert Gottliebsen (The Australian – November 28, 2016)

In the next two years we are going to have a mining profits boom of considerable magnitude. Don’t be surprised to see the profits of some mining companies rise 50 to 100 per cent above their lows. Sometimes the rise will be even more.

I reached that conclusion as I was listening to the address by the chief executive of Rio Tinto Jean-Sébastien Jacques to some 700 mining, accounting, investment, legal and other executives at the Melbourne Mining Club last week.

Jean-Sébastien Jacques did not actually mention profit trends, so, to get the message, you had to listen very closely to what he was saying and combine that with the mood of the people at the function. Continue Reading →