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Commodities Briefing - Category | Commodity Crisis more

If China killed the commodities boom, the Fed is about to bury it

Posted on 26 November 2015 by VRS  |  Email |Print

For commodities, it’s like the 21st century never happened. The last time commodity investor returns were this low, Apple’s best-selling product was a desktop computer, and you could pay for it with francs and deutsche marks.
Bloomberg’s Commodity Index tracking the performance of 22 natural resources has plunged two-thirds from its peak, to the lowest level since 1999. That shows it’s back to square one for the so-called commodity super cycle — a hunger for coal, oil and metals from Chinese manufacturers that powered a bull market for about a decade until 2011………………………………………..Full Article: Source

Fed to blame for commodities rout, not China

Posted on 26 November 2015 by VRS  |  Email |Print

Blame China. A global glut of commodities has emerged because China suddenly decided it no longer wants mineral ores. Prices are now collapsing, which threatens the worldwide supply chain. It’s all China’s fault. I have one problem with this story. Look at the first chart on the quantity of China’s iron ore imports and you see scant sign that iron ore is no longer in demand. That demand curve has flattened out but this is after a 16-fold growth over the past 15 years. A breather was due at some point.
And what you see in iron ore you can also see in other major minerals and in petroleum. In some cases there has been no slowdown at all. Imports of copper ore and concentrates, for instance, are still growing at double digit rates………………………………………..Full Article: Source

As commodities swoon, neighbors find a need for each other

Posted on 26 November 2015 by VRS  |  Email |Print

After two years of playing diplomatic tit for tat, the South Pacific’s two major powers are now pushing to restore close relations, especially on the economic front. Their newfound bond can be traced to the commodities markets, which have served both nations well but are now tanking.
Australian Prime Minister Malcolm Turnbull earlier this month demonstrated the importance his government places on Indonesia by visiting the country — before making trips to major trading partners like Japan and China. Turnbull took office in September………………………………………..Full Article: Source

Back to square one for commodity super cycle

Posted on 26 November 2015 by VRS  |  Email |Print

The last time the Bloomberg Commodity Index of investor returns was this low, Apple’s best-selling product was a desktop computer, and you could pay for it with francs and Deutschemarks.
The gauge tracking the performance of 22 natural resources has plunged two-thirds from its peak, to the lowest level since 1999. That shows it is back to square one for the so-called commodity super cycle - a hunger for coal, oil and metals from Chinese manufacturers that powered a bull market for about a decade until 2011………………………………………..Full Article: Source

Commodities strike 2002 bottom

Posted on 25 November 2015 by VRS  |  Email |Print

Commodities hit 13-year lows on Monday as metals markets crashed but a steady close in oil and higher grains markets helped a key sector benchmark settle off the day’s trough. Copper and nickel prices fell to multi-year lows, forcing the Thomson Reuters/Core Commodity CRB Index to its lowest levels since November 2002.
The 19-commodity index, however, managed to settle just slightly lower after tracking oil’s steady finish, which came on the back of a pledge by Saudi Arabia to work toward crude price stability. Grains from soybeans to wheat and corn also rose on better physical demand and technical buying, limiting the downside in commodities………………………………………..Full Article: Source

Harmless commodity crash accelerates as dollar soars

Posted on 24 November 2015 by VRS  |  Email |Print

‘Dr Copper should be struck off the list. He is telling us a lot about over-supply in China, but little about the world economy,’ says Capital Economics. Copper prices have crashed to their lowest level since the Lehman Brothers crisis and industrial metals have slumped across the board as a flood of supply overwhelms the market.
The violent sell-off came as the US dollar surged to a 12-year high on expectations of an interest rate rise by the US Federal Reserve next month. The closely-watched dollar index rose to within a whisker of 100, and has itself become a key force pushing down commodities on the derivatives markets………………………………………..Full Article: Source

Aussie dollar resists commodities rout - for now

Posted on 18 November 2015 by VRS  |  Email |Print

The Australian dollar has confounded traders by rising overnight despite a global commodities rout, but analysts say the gains are likely to be limited and predict the currency will face renewed pressure even when the prices of iron ore and other key commodities stabilise. The Aussie shrugged off a further 4.5 per cent drop in the price of iron ore, climbing overnight against the greenback to around US71.40¢ before easing to US71.15¢ in early local trade.
National Australia Bank global co-head of strategy Ray Attrill ascribed the unexpected resilience to a range of factors, including renewed faith the Reserve Bank of Australia will leave the cash rate at 2 per cent despite its concerns about the pace of China’s slowdown and sluggish household wage and spending growth at home………………………………………..Full Article: Source

Commodity rout deepens, like catching ‘falling knife’

Posted on 16 November 2015 by VRS  |  Email |Print

Commodity prices and energy stocks around the globe remained under heavy selling pressure entering the weekend, and analysts are warning the rout has not ended. “It’s going to take a while for this supply-demand imbalance to work out,” Wells Fargo senior global equity strategist Scott Wren said.
“To buy commodities here, it’s a catch the falling knife situation.” Commodity producers are facing a perfect storm: softening demand from a slowing China, a huge expansion in supply of commodities such as iron ore and oil, and a US dollar that is surging on expectations that the US Federal Reserve will begin lifting interest rates next month………………………………………..Full Article: Source

Commodities slump again - here’s why you should care

Posted on 16 November 2015 by VRS  |  Email |Print

It’s becoming a familiar story. Fed officials say - but not particularly clearly - something that spooks the markets, no one really knows when US interest rates will rise, but everyone thinks they will very soon, and then commodities tumble, which in turn drags down Asian stock markets.
It feels like we go through this every couple of weeks. But even if you’re not invested in the markets, here are three reasons why you should care about falling commodity prices and what it means for global growth. Demand is falling. Copper prices are down by more than a fifth this year. The metal is used in everything from homes to factories - so it’s a really good gauge of overall global demand………………………………………..Full Article: Source

Has ‘Commodities’ Slump Undercut Emerging Nations?

Posted on 06 November 2015 by VRS  |  Email |Print

While the 60% oil price crash from September 2014 to current levels has largely impacted the major producers (Russia, U.S., Saudi Arabia), a much wider range of commodity price depression is raising havoc with previously fast-growing emerging economies (Brazil, South Africa, Australia, Indonesia, etc.).
The latter, whose economic dynamics were heavily predicated on a large proportion of commodity reserves are now undergoing a serious deflation in economic growth, voiding any chance of expansion, while this deep commodity price depression persists. With the major segment of these nations’ gross domestic product based on commodity exports, forward growth has become impossible until commodities, in general, return to previous price levels………………………………………..Full Article: Source

The global commodities slump is hitting Africa hard

Posted on 30 October 2015 by VRS  |  Email |Print

If you live by commodities, you will die by commodities. In Africa, this aphorism is becoming true in a devastating fashion. The continent’s economies rode the global demand for commodities in the early part of this century to create some of the fastest economic growth in the world.
In fact, in the first 10 years of this century, six of the 10 fastest growing economies came from Africa. But those good times have come to an end. Demand for commodities has slowed down considerably, representing a “formidable shock for many of the sub-Saharan African countries that are still substantial commodity exporters,” a recent report by the IMF says………………………………………..Full Article: Source

Weary commodity investors see end of slump

Posted on 30 October 2015 by VRS  |  Email |Print

After commodity prices tipped over in 1997, it took 21 months to arrest the fall. In 2000-01 it was 13 months. After collapsing along with the global economy in 2008, commodities hit the floor in just eight months. This time, the Bloomberg Commodity Index has been in decline for four years and counting. From its most recent peak in May 2011, the benchmark is off by half and scraping the lowest levels of the 21st century.
Worn-out investors are asking: have commodity prices finally bottomed? “It’s top of mind for anyone looking at the market,” says Norbert Ruecker, head of commodities research at Julius Baer in Zurich………………………………………..Full Article: Source

Commodity prices wil continue to pressure Malaysia

Posted on 29 October 2015 by VRS  |  Email |Print

Weak commodity prices will continue to put pressure on Malaysia’s fiscal and broader economic outlook next year, said Fitch Ratings. According to the international rating agency, some of the detailed assumptions for the country’s Budget 2016 looked optimistic, hence, could potentially pose some downside risk to the Government’s projections.
It added that Malaysia’s fiscal and broader economic outlook would remain under pressure from weaker commodity prices into 2016. Fitch noted that there could be a risk of Malaysia missing its 2016 fiscal deficit target of 3.1% of gross domestic product (GDP), even though the Government’s debt level would likely remain stable………………………………………..Full Article: Source

A Global Chill in Commodity Demand Hits America’s Heartland

Posted on 26 October 2015 by VRS  |  Email |Print

A thousand miles south of this gritty steel town on the Mississippi River, West Texas oil rigs have shuddered to a halt. Seven hundred miles north, mines in the Iron Range of Minnesota have been stilled. The drilling rigs, with their deep underground pipes, once consumed much of the steel that Granite City’s blast furnaces could produce, while the mines supplied the raw material.
So now, more than 2,000 workers at the mammoth United States Steel plant not far from St. Louis are waiting to see if they will be next. This month, the company warned them it might be forced to idle the plant. Layoffs could begin around Christmas………………………………………..Full Article: Source

Commodities roiled by China rate cut

Posted on 26 October 2015 by VRS  |  Email |Print

Commodity markets were roiled on Friday after China cut interest rates for the sixth time in a year, with the focus on the strength of the Middle Kingdom’s resource-hungry economy. Oil and metals initially rallied on the news as traders scrambled to close out bets on lower prices, with lower interest rates potentially boosting China’s economy, where growth has slowed.
Both oil and copper later slipped, however, with traders split on whether the rate cut signalled good or bad news for China, the world’s largest consumer of commodities. “We shouldn’t take today’s announcement as evidence that policymakers have grown more concerned about the economy,” said Mark Williams, chief Asia economist at Capital Economics………………………………………..Full Article: Source

Commodities roiled by China rate cut

Posted on 26 October 2015 by VRS  |  Email |Print

Commodity markets were roiled on Friday after China cut interest rates for the sixth time in a year, with the focus on the strength of the Middle Kingdom’s resource-hungry economy. Oil and metals initially rallied on the news as traders scrambled to close out bets on lower prices, with lower interest rates potentially boosting China’s economy, where growth has slowed.
Both oil and copper later slipped, however, with traders split on whether the rate cut signalled good or bad news for China, the world’s largest consumer of commodities. “We shouldn’t take today’s announcement as evidence that policymakers have grown more concerned about the economy,” said Mark Williams, chief Asia economist at Capital Economics………………………………………..Full Article: Source

The Commodities Boom Is Dead. Long Live the Commodities Boom.

Posted on 26 October 2015 by VRS  |  Email |Print

What’s going on with BHP Billiton? The world’s biggest miner bid for a share in a Chilean copper mine this year and is exploring for offshore petroleum in Australia and the Gulf of Mexico. Isn’t the commodities super-cycle meant to be over?
One way of thinking about it is to take a trip to your local supermarket. Its owners probably purchased a lot of steel, concrete and bricks while it was being built. Now the doors are open, they’re buying stuff that shoppers use every day: Food to fill their bellies, gasoline to fuel their cars, aluminum foil to wrap their lunch, electronic goods wired with copper, and stainless steel cutlery alloyed with nickel………………………………………..Full Article: Source

Tough times may linger for commodities

Posted on 23 October 2015 by VRS  |  Email |Print

Bureau for Economic Research (BER) senior economist Hugo Pienaar said on Thursday that he expected commodities to face the pinch for some time to come. “We don’t think it is going to be a robust story for commodity prices any time soon. The global situation is not positive for South Africa,” he told a BER conference in Stellenbosch.
This was despite the fall in the rand to record low levels. Major producers were showing pessimistic numbers and price outlooks, although there was a window of hope come 2017. “Our five-year outlook is that we will start to see moderate increases in commodity prices from 2017 onwards as the global economy starts to recover,” advised Pienaar………………………………………..Full Article: Source

Two reasons commodities may have found a bottom

Posted on 20 October 2015 by VRS  |  Email |Print

While it’s unlikely that commodity prices will stage a material rebound, there is a good chance that a trough has been found. There are two reasons for this. Firstly, much of the shrinkage that regulators sought in the commodities market appears to have occurred. Secondly, it looks increasingly likely that the US dollar is at a peak.
Now this clearly carries significant ramifications for the Australian market. It’ll remove a key source of angst for investors and it should counter much of the pressure the Reserve Bank of Australia is under to cut rates again. That may sound counterintuitive as far as the US dollar goes, with most economists arguing that any renewed US dollar weakness strengthens the case for the RBA to cut. This isn’t necessarily the case though, as a weaker US dollar is normally associated with higher commodity prices………………………………………..Full Article: Source

Commodity contagion sparks second credit crisis as investors panic

Posted on 12 October 2015 by VRS  |  Email |Print

The collapse in commodity prices has sparked a second credit crisis as investors dump high-yield bonds, shattering the fragile confidence necessary to support global markets. Those calling it a Lehman moment forget their history. Current events have chilling similarities to the Bear Stearns collapse and mark the start of a new crisis, not the end.
The world of commodity trading has been thrown into chaos as the cost of borrowing to fund operations soars. Glencore has become the poster child for the sector’s woes as its shares have more than halved in value during the past six months. More worrying has been the impact on the group’s credit profile………………………………………..Full Article: Source

PIMCO calls an end to worst of commodity crunch

Posted on 12 October 2015 by VRS  |  Email |Print

The worst of the collapse in commodities prices is probably over, with oil poised to gain over the next 12 months, according to Pacific Investment Management Co. Just don’t expect a major rebound. Producers are shelving projects and scaling back output from Arctic oilfields to Indian aluminum mills amid the weakest returns from raw materials since 1999. While the response may help draw a line under the rout, prices are set to remain “lower for longer” because of excess inventories, according to the firm that manages $US15 billion in commodity assets.
“The declines in commodity prices are largely behind us,” executive vice presidents Greg Sharenow and Nic Johnson said in an e-mail. Newport Beach, California-based Pimco has about $US1.52 trillion under management. “Most prices are well into the marginal cost curve across metals and oil, and that will help to put a floor under prices here.”……………………………………….Full Article: Source

Commodity Collapse Has More to Go as Goldman to Citi See Losses

Posted on 06 October 2015 by VRS  |  Email |Print

Even with commodities mired in the worst slump in a generation, Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. are warning bulls that prices may stay lower for years.
Crude oil and copper are unlikely to rebound because of excess supplies, Goldman predicts, and Morgan Stanley forecasts that weaker currencies in producing countries will encourage robust output of raw materials sold for dollars, even during bear markets. Citigroup says the sluggish world economy makes it “hard to argue” that most prices have already bottomed………………………………………..Full Article: Source

Commodities crisis spurs calls for African reform

Posted on 06 October 2015 by VRS  |  Email |Print

African nations need to respond to the commodity price crash by overhauling the continent’s regulatory burden and bolstering its energy infrastructure, prominent executives and officials have told a Financial Times summit.
Participants at the London conference were virtually unanimous that reforms delayed when oil and metal prices were rising can be put off no further now that demand from China has slowed and the commodities supercycle is on a downturn………………………………………..Full Article: Source

Global commodity price slump sends ripples around the world

Posted on 05 October 2015 by VRS  |  Email |Print

Ghana as a whole, once Africa’s star economy, is suffering. Not only is gold it biggest source of foreign exchange but the price of oil, which it also produces, has sunk, it has double-digit inflation and the value of the cedi currency has declined.
There are similar tales of misfortune across the continent, with the impact felt on both the poor and the middle class.The United Nations Conference on Trade and Development (UNCTAD) says falling commodity prices threaten economic and political stability in developing economies across Latin America, Africa, the Middle East and Asia………………………………………..Full Article: Source

Global commodity price slump sends ripples around the world

Posted on 05 October 2015 by VRS  |  Email |Print

Ghana as a whole, once Africa’s star economy, is suffering. Not only is gold it biggest source of foreign exchange but the price of oil, which it also produces, has sunk, it has double-digit inflation and the value of the cedi currency has declined.
There are similar tales of misfortune across the continent, with the impact felt on both the poor and the middle class.The United Nations Conference on Trade and Development (UNCTAD) says falling commodity prices threaten economic and political stability in developing economies across Latin America, Africa, the Middle East and Asia………………………………………..Full Article: Source

Bear super-cycle? Gloomy outlook for commodities

Posted on 02 October 2015 by VRS  |  Email |Print

The outlook for commodity prices is generally pretty grim, according to the plethora of crystal-ball-gazing papers that have been published to mark the new quarter, although there are a few voices suggesting the only way from here is up.
As the sector recovers from its worst quarter since 2008, there are some deeply pessimistic views going around. Take the United States-based Ned Davis Research Group, which believes that commodities are in the fourth year of a 20-year “bear super-cycle”, going by a historical study of commodity busts going back to the 18th century………………………………………..Full Article: Source

Commodities Rout Takes Its Toll on ASEAN

Posted on 02 October 2015 by VRS  |  Email |Print

Following the Global Financial Crisis, sky-rocketing commodity prices, and a corresponding investment boom boosted ASEAN’s attractiveness – a narrative similar to other commodity-producing regions. After all, the region is endowed with a wide range of commodities – from natural gas reserves in Malaysia and Indonesia to abundant metal deposits, not to mention relatively high-value agricultural commodities in Thailand and Vietnam.
That said, the contours of ASEAN’s commodity exports are more diverse and convoluted than other commodity-producing regions (take the Middle East or Australia, for example), and the welfare benefits/consequences of price changes aren’t always clear. In this month’s ASEAN Perspectives, we attempt to break this down………………………………………..Full Article: Source

More Shocks Seen Roiling Commodities After Worst Drop Since 2008

Posted on 01 October 2015 by VRS  |  Email |Print

Commodities posted their worst quarter since the 2008 global financial crisis, and Morgan Stanley warns that more losses may be ahead. Returns from 22 raw materials tracked by Bloomberg shrunk about 14 percent, the most since the last quarter of 2008, amid forecasts for the slowest economic growth since 1990 in China, the biggest user of energy, metals and grains.
Oil led the collapse as OPEC producers pump near record levels while everything from copper to wheat were also down more than 10 percent on speculation that supplies are outpacing demand………………………………………..Full Article: Source

Trouble looms for developing countries as commodity revenues collapse: Kemp

Posted on 30 September 2015 by VRS  |  Email |Print

Slumping commodity prices pose a serious challenge to economic and political stability in developing economies across Latin America, Africa, the Middle East and Asia. According to the United Nations Conference on Trade and Development, 94 developing countries depended on commodities for more than 60 percent of their merchandise export revenues in 2012/13.
Sixty-three developing economies were considered “extremely commodity dependent” with commodities accounting for more than 80 percent of export earnings. Most commodity-dependent developing countries rely on raw material exports for more than 20 percent of their entire economic output, in some cases rising to more than 50 percent, according to UNCTAD……………………………………….Full Article: Source

Commodities Are Collapsing

Posted on 29 September 2015 by VRS  |  Email |Print

There are two commodity stories today worthy of an investor’s interest: the collapse of shares at Glencore and the abandonment of Arctic drilling by Shell. Both are interesting as they point to a continuing collapse in the commodity space, and an even more serious worry about what that collapse means for global economies going forward.
Shell has invested almost $7 billion to date to gain permission and develop the first leases for deepwater drilling in the Arctic. This story of Shell’s second big foray north (after its first ignominious defeat with the Kulluk in 2012) gained wide media attention last month as President Obama visited Alaska — making his case for a global initiative on climate change while approving Shell’s leases………………………………………..Full Article: Source

Commodities’ dive raises doubts over Africa’s ‘middle class’

Posted on 24 September 2015 by VRS  |  Email |Print

Whether it’s selling pensions, pasta or toothpicks, investors in Africa have been targeting the booming middle class. But a year of diving commodity prices has exposed how much the continent, and its consumers, still rely on exporting resources. A decade of growth above five percent in sub-Saharan African economies has drawn a wave of interest in selling consumer goods and providing services to a rapidly urbanizing population of 1 billion.
Millions of Africans have moved out of subsistence farming, but national economies have yet to make the transition from relying on commodity exports to mass manufacturing, the model which transformed living standards in much of Asia………………………………………..Full Article: Source

World Markets Drop as Commodities Tumble

Posted on 24 September 2015 by VRS  |  Email |Print

Tumbling commodities prices and worries about China’s economy pulled stocks sharply lower on Tuesday, while bond yields declined and the dollar rose to a two-week high on bets US officials will soon hike interest rates.
Wall Street losses hovered for much of the trading day around 2 per cent on selling driven by falls in oil and copper before easing. European shares were also stung by the commodities sell-off, with the pan-European FTSEurofirst 300 stocks index finishing down 3.3 per cent………………………………………..Full Article: Source

Citi says brace for more commodities losses

Posted on 23 September 2015 by VRS  |  Email |Print

The worst commodity meltdown since 2008 probably isn’t the end of the pain for bulls, according to Citigroup. Excess supplies and a sluggish world economy mean that it’s “hard to argue that most commodity prices have reached their trough for the year,” analysts led by Ed Morse, the global head of commodities research, said in a report Tuesday in the US. The bank is bearish on crude oil, aluminium, platinum, iron ore, cocoa and wheat in the next three to six months.
Prices for raw materials are languishing near a 16-year low as inventories climb just as demand growth slows in China, the world’s biggest consumer of everything from cotton to zinc. Money has been flowing out of funds linked to metals, crops and energy, while investors have punished shares of miners and oil drillers………………………………………..Full Article: Source

Peru Looks to Sustain Growth in Wake of the Commodities Bust

Posted on 18 September 2015 by VRS  |  Email |Print

Whenever elections loom in Peru, presidential hopefuls distance themselves from the mines and energy projects that form the backbone of the country’s economy. Ollanta Humala, the current president, won in 2011 by attacking the mining industry for failing to consult with local communities and turn over more benefits to them.
And that was at the height of a commodities boom that supercharged Peru’s growth rate. Pedro Pablo Kuczynski, an early favorite in the race to succeed Humala, doesn’t even mention mining in his campaign literature for the 2016 presidential election. “People don’t like mines, and there’s no getting around that,” says Kuczynski, a longtime politician and former Wall Street investment banker…………………………………Full Article: Source

How much would a slump in China affect global growth?

Posted on 15 September 2015 by VRS  |  Email |Print

In the unlikely event that China’s growth rate collapses in the coming years, global growth would decline sharply simply because China accounts for such a large share of the world economy. But the knock-on effects on activity elsewhere would be smaller, and the deflation risks should be limited.
Some have suggested that China is heading for a downturn comparable to that experienced by Japan, where average GDP growth slowed abruptly from 4.4 per cent in the 1980s to 1.5 per cent in the 1990s. We don’t think this will happen. However, here we consider what the implications would be if we turn out to be wrong………………………………………..Full Article: Source

Is the Slump in Commodities Here to Stay? (Video)

Posted on 11 September 2015 by VRS  |  Email |Print

Commonwealth Bank of Australia Senior Currency Strategist Peter Dragicevich discusses the slowdown in China and its impact on currencies and commodities. He speaks to Bloomberg’s Anna Edwards on “Countdown.”.………………………………………Full Article: Source

North American markets fall as commodities drop

Posted on 10 September 2015 by VRS  |  Email |Print

Commodity prices dragged the Toronto stock market lower Wednesday, while the loonie also dipped as the Bank of Canada held its benchmark interest rate steady. The S&P/TSX composite index ended the day down 98.82 points at 13,531.85, with the gold and energy sectors the leading decliners.
In New York, the Dow Jones industrial average closed 239.11 points lower at 16,253.57 after a 390-point gain on Tuesday, while the broader S&P 500 index fell 27.37 points to 1,942.04 and the Nasdaq retreated 55.40 points to 4,756.53………………………………………..Full Article: Source

Slumping Commodities Place A Premium On Risk Management

Posted on 09 September 2015 by VRS  |  Email |Print

It has been a challenging year for mining companies and commodity investors. Iron ore, copper, and nickel are all down by at least 15%. Combined with instances of precariously over-leveraged producer financials and weak demand, the near-term prospects for a commodity recovery are grim.
Yet falling prices should not disguise the fact that opportunities still exist, if political risk is weighed properly when conducting macroeconomic and sector analysis. Prior to the current downturn in commodity prices, investors pursued ambitious global projects and realized significant returns. Counting on steady Chinese growth, they often disregarded risk in placing their bets………………………………………..Full Article: Source

Financial Markets Rocked by World Commodities Collapse

Posted on 08 September 2015 by VRS  |  Email |Print

A collapse in commodity prices prompted by a slowdown in the world’s most voracious consumer, China, has rocked financial markets and sent Russia, Brazil and even Canada into recession. But for much of the world, the crisis may in fact be good news.
China accounts for 40-50 percent of the entire world’s demand for commodities, according to a review of the price slump by credit rating agency Standard & Poor’s. So as the world’s second-largest economy tries to shift from an investment-led model that hoovers up commodities towards one of slower, consumer-led growth, it has prompted a dizzying decline in prices………………………………………..Full Article: Source

Glencore grapples with fallout from commodities crash

Posted on 08 September 2015 by VRS  |  Email |Print

Glencore, albeit unwillingly, is adopting the brace position aboard the stalling aircraft of world commodities markets. The mining and trading group plans to slash debts by $10.2bn — about one-third — by the end of 2016. Investors sent chief executive Ivan Glasenberg and chief financial officer Steven Kalmin back to their spreadsheets to rework a proposal for a far more modest debt reduction revealed at the time of disappointing half-year results last month.
The surprise shift in strategy underlines the humbling extent to which Mr Glasenberg and his lieutenants have been wrongfooted by market sentiment………………………………………..Full Article: Source

Here’s why the collapsing commodity prices may be good news for some

Posted on 07 September 2015 by VRS  |  Email |Print

A collapse in commodity prices prompted by a slowdown in the world’s most voracious consumer, China, has rocked financial markets and sent Russia, Brazil and even Canada into recession. But for much of the world, the crisis may in fact be good news.
China accounts for 40-50 per cent of the entire world’s demand for commodities, according to a review of the price slump by credit rating agency Standard & Poor’s. So as the world’s second-largest economy tries to shift from an investment-led model that hoovers up commodities towards one of slower, consumer-led growth, it has prompted a dizzying decline in prices………………………………………..Full Article: Source

The End Of The Commodity Super Cycle

Posted on 04 September 2015 by VRS  |  Email |Print

The recent decline in commodity prices resembles a downhill mountain biking expedition. The price drop has been so severe that we’ve seen a nearly one-sided market, with buyers largely absent in futures, commodity indices, and exchange-traded funds (ETFs).
As a result, many commodity hedge funds have closed and are returning capital, despite their ability to trade short. Indeed, we knew it was getting serious when the phrase “market correction” was slowly replaced by the word “carnage.” Yet, if you believe in the commodity super cycle – defined as the decades-long price movements in a wide range of commodities – then this shouldn’t have been entirely surprising………………………………………..Full Article: Source

Why China’s slowdown is a nightmare for commodities in one chart

Posted on 03 September 2015 by VRS  |  Email |Print

China is slowing down. The country has been front-and-center over the last few weeks with its volatile stock market and its newly devalued currency. But, importantly, this decline isn’t an isolated event.
Since China is such a big player in the global economy, and a major trading partner of many countries, its slow-down will inevitably hit other countries. And, HSBC economists point out that commodities are a particularly vulnerable sector in this stagnating climate………………………………………..Full Article: Source

Waning demand for commodities sends cargo ships to scrapyard

Posted on 03 September 2015 by VRS  |  Email |Print

As China’s slump deepens, it’s off to the scrapyard for a growing number of global cargo ships. A drop in shipping rates amid the collapse in demand for coal, ore and other commodities has sparked a sharp rise in the number of ships yanked from the service and sold for scrap.
Almost 6 per cent of the world’s fleet of ships that carry bulk commodities will be beached and sliced up for scrap metal this year, up from 2 per cent last year and topping the recent high of 2012’s 4.3 per cent, according to Clarksons PLC, a London-based ship broker. “Business is good,” said Yogesh Rehani, director of operations at Global Marketing Systems Inc. (GMS), a buyer and recycler of ships. ……………………………………….Full Article: Source

China Seen Driving Commodities Lower as Uncertainty Spreads

Posted on 02 September 2015 by VRS  |  Email |Print

China will continue to hurt commodities in coming months as a volatile equity market and political uncertainty add to concern that economic growth is weakening, according to Citigroup Inc.
Demand for raw materials will weaken while a spillover from financial markets adds further pressure on prices, analysts including Ivan Szpakowski wrote in a report Tuesday subtitled “Riding the Chinese Rollercoaster.” Corruption investigations have also crippled investment by some state companies, particularly power grid operators that support copper demand, according to the bank………………………………………..Full Article: Source

Pain in global commodities to continue for the long term

Posted on 01 September 2015 by VRS  |  Email |Print

Stocks of leading companies producing iron ore, crude oil, steel, aluminium,and zinc have fallen 40-60% over the past 12 months to fresh lows. This fall has mirrored the 40-60% rout in underlying global commodity prices such as crude, iron ore, and steel. So, is this the time to do value buying or distressed asset buying? Not really.
Investors should avoid them as global demand-supply dynamics can potentially keep commodity prices under pressure for years to come. The top four global iron ore companies have been on a capacity expansion spree since 2012. By 2017, their production is likely to touch 1.2 billion tonnes, a massive 50% increase in supply. This supply will be at the lowest end of the cost curve ($25-40 per tonne, including freight)………………………………………..Full Article: Source

Even a modest slowdown in China sacks the global commodities market

Posted on 31 August 2015 by VRS  |  Email |Print

Until recently, China was a beast whose appetite knew almost no limit. It feasted on the world’s raw materials, buying them in a voracious, globe-spanning spree. Indonesian coal powered villages that morphed into mega-cities. Peruvian copper lined power cables for nearly 100 new mass-transit rail lines. Brazilian and Australian iron ore was turned into steel for skyscrapers rising in Shanghai at a rate of one per week.
So profound was that growth that even the hint of a slowdown is causing convulsions in the many countries that fed China’s rise. The deceleration in Chinese investment and construction, though gradual, has come with a dramatic side effect: a vast lowering in the value of the raw materials that are mined or drilled from the earth. By one major measure, commodity prices across the globe are at their lowest point in a century………………………………………..Full Article: Source

China isn’t the crisis some would have you believe

Posted on 31 August 2015 by VRS  |  Email |Print

Other global economies have plenty to look forward to, despite the blustery conditions in Asia. It is never possible to be sure that we aren’t about to face disaster. Some people seem to have made a living by foreseeing trouble ahead. The American stock market has “forecast” something like 10 of what turned out to be the past two recessions. And there is no reason why the Chinese stock market shouldn’t follow the same pattern.
Stock markets tend to get too much attention in the media. They are exciting, with quite large movements up and down occurring in very short order. By contrast, the processes of the real economy grind away slowly, and often in obscurity, their wonders to perform. But, in the end, it is the real economy that matters………………………………………..Full Article: Source

China’s Economic Slowdown Hurts Oil Market

Posted on 31 August 2015 by VRS  |  Email |Print

The 2015 budgets did take account of the near halving in the previous year of oil prices which had remained broadly stable at $110 a barrel between 2010 and 2015. When the oil price halved past year, from $110 to $55 a barrel, the cause was obvious: Saudi Arabia’s decision to increase its share of the global oil market by expanding production.
Reports earlier this week suggested that Venezuela was seeking an emergency OPEC meeting to discuss strategies about overturning the collapse in prices, which has hit the South American country quite hard. The country suffers from “operating difficulties at existing, mature oil fields”, according to the U.S. Energy Information Administration………………………………………..Full Article: Source

Behind the commodities bust

Posted on 27 August 2015 by VRS  |  Email |Print

First was the dot-com bubble, then the housing bubble. Now comes the commodities bubble. We don’t fully understand the stock market’s current turmoil, but we know it’s driven at least in part by a bubble of raw material prices. Their collapse weighs on world stock markets through fears of slower economic growth and large financial losses.
All bubbles share similar characteristics. There’s a strong, enthusiastic demand for some object (whether stocks, homes, oil or tulips). High demand pushes up prices, which inspires more demand. Prices ultimately reach unsustainable levels so that when spending slows, the bubble implodes. Commodities have now traced this familiar path………………………………………..Full Article: Source

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