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Commodities Briefing - Category | Trading more

US and European stocks ease as commodities slip

Posted on 21 October 2015 by VRS  |  Email |Print

Stocks were slightly softer as the euro and Bund yields rose after improving bank lending in the eurozone reduced expectations for more stimulus from the European Central Bank. The FTSE Eurofirst 300, a pan-European equity gauge, fell 0.5 per cent, also dragged lower by resources groups as the prices of base metals and oil relapse. The FTSE Asia Pacific index shed just 0.1 per cent.
Both regions have received little impetus from the US, where the S&P 500 was flat overnight and briefly flirted with two-month highs before slipping 2.89 points to 2,030.77 by the close. That leaves the Wall Street benchmark, which tends to determine the global mood, only about 5 per cent below its record hit in May, having bounced 8.7 per cent from its August lows………………………………………..Full Article: Source

Diamond industry dragged into commodities slump

Posted on 21 October 2015 by VRS  |  Email |Print

The China-fueled commodity slump that has torn through the world’s biggest raw-materials markets from iron ore to copper is now hitting the diamond industry. That’s bad news for Anglo American. Cooling demand for diamond jewellery in China, the biggest market after the US, is the latest sign that the country’s slowdown isn’t only a problem for industrial commodities.
At the same time, customers of Anglo American’s De Beers unit, who trade, cut and polish the stones, say the producer is demanding more for the gems than many in the industry say they can afford to pay. “It is a catastrophe,” said Guy Harari, co-founder of rough-diamond trading platform Bluedax. “De Beers is saying it’s business as usual; it’s not business as usual. The market is much weaker than what De Beers tries to show the world.”……………………………………….Full Article: Source

Moody’s downgrade 2016 oil prices estimates

Posted on 20 October 2015 by VRS  |  Email |Print

Ratings agency Moody’s has cut its price outlook for the both Brent crude and WTI, believing the rise in prices will take place at a much slower pace than originally forecast as oversupply and demand issues show no signs of waning. The agency downgrade it price assumption in 2016 for Brent crude to $53 per barrel, down from $57. WTI was cut to $48 from $52 per barrel.
Moody’s expects both prices to rise by $7 per barrel in 2017, which is down $5 per barrel from its prior forecast. “We believe that oil prices will remain lower for a longer period, as large built-up inventories and oversupply cause oil prices to increase at a slower rate,” said managing director of corporate finance at the group, Steve Wood………………………………………..Full Article: Source

LBMA Looks to Modernise Gold Trading

Posted on 20 October 2015 by VRS  |  Email |Print

Change is brewing in London as the the LBMA – the association that oversees the world’s largest gold market – is looking at how best to modernise and improve over-the-counter gold trading. As members of the world’s gold industry meet this week at the LBMA’s annual conference in Vienna, their proposals are being sought on how to bring the gold trading in London up to date.
According to Eddie Van Der Valt reporting today for Bloomberg, London’s bullion market is more than three centuries old and has cleared about $21 billion of gold on average each day through the city this year. Key considerations for reform include “boosting transparency and… considering a new electronic platform that may lower trading costs and improve efficiency”………………………………………..Full Article: Source

Commodities slump casts a pall over UK dividend growth

Posted on 19 October 2015 by VRS  |  Email |Print

Dividend growth from London-listed companies is set to slow sharply in 2016 as the commodities sell-off hits payouts. Total dividends paid by companies listed on the main market are set to grow by 3 per cent in 2016, down from a 6.8 per cent projected increase in 2015, says a report by Capita Asset Services.
The gloomier prospects follow a peak in the second quarter, when total dividends reached their highest levels since before the 2008 financial crisis. But that picture has since been marred by dividend cuts at Glencore, the heavily indebted FTSE 100 metals and mining group, and Standard Chartered, the emerging markets focused bank………………………………………..Full Article: Source

China could be what determines whether the bottom is in for commodities

Posted on 19 October 2015 by VRS  |  Email |Print

The painful sell-off in some commodities may be over for now, but a blast of major Chinese economic reports early next week could put any recent rallies to the test. While many Wall Street strategists see signs of a broader bottoming process, there is no consensus that the commodities crash is actually over, particularly for copper.
Nonetheless, a bundle of Chinese data Monday, including GDP, retail sales and industrial output, could set the course for these markets next week. Analysts believe China’s economy must show improvement, or at least stop declining, before some base metals and other commodities see a real rebound. The concern is that any unexpected weakness in the data could mean a hard landing is ahead………………………………………..Full Article: Source

China, LatAm need to expand cooperation far beyond trading commodities

Posted on 15 October 2015 by VRS  |  Email |Print

Cooperation between China and Latin America, which traditionally relied on trading commodities, has to explore new areas amid the fall in the price of commodities. In its latest World Economic Outlook report, the International Monetary Fund (IMF) identified the end of the commodities supercycle as one of the major economic threats currently facing the world.
Many emerging economies, which rely heavily on exports of raw materials, are clearly suffering. For example, raw and intermediate products make up 62 percent of Brazil’s total exports; countries such as Chile and Peru have similar trade breakdowns. It is no wonder that the fall in the price of oil, iron, copper and other minerals has left them uncertain about how to rebalance their foreign trade………………………………………..Full Article: Source

Wait for commodities opportunities

Posted on 14 October 2015 by VRS  |  Email |Print

China’s continued deceleration has significantly impacted countries such as Canada, Australia and Brazil, which all have resource-dependent economies. That slowdown has also weighed on global demand for many commodities, including iron ore, coal, coke and copper, says Scott Vali, vice-president, Equity, for CIBC Asset Management. He manages the Renaissance Global Resources Fund.
In particular, China’s transition from an industrialized to consumer economy has hurt steel demand, he adds. “We’re seeing auto sales [and] steel sales peaking. That has a direct correlation on the demand for coke and coal, and [for] iron ore.”……………………………………….Full Article: Source

China imports plummet on weak commodities prices

Posted on 14 October 2015 by VRS  |  Email |Print

Chinese imports plunged by more than a fifth last month, official figures showed Tuesday, as slowing growth in the world’s second-largest economy wreaks havoc on global commodities prices and the country’s own customers.
The Asian giant is the world’s leading trader in goods but flagging expansion has seen the resources it uses — such as iron ore and crude oil — fall sharply in value, hitting producer countries, for example Australia. September imports sank 20.4 percent to $145.2 billion in dollar terms, the customs department said — worse than forecast in a survey of economists by Bloomberg News………………………………………..Full Article: Source

How Much Gold Is China Importing

Posted on 14 October 2015 by VRS  |  Email |Print

We have some catching up to do in terms of discussing Chinese gold import in H1 2015 and how this relates to withdrawals from Shanghai Gold Exchange (SGE) vaults. For this post, it’s advised you’ve read The Mechanics Of The Chinese Domestic Gold Market to have a basic understanding of the physical gold supply and demand flows through the SGE within the Chinese domestic gold market.
SGE withdrawals in 2015 are stronger than ever. Although, SGE withdrawals are (seemingly) less correlated to Chinese gold imports this year, nonetheless Chinese gold imports in the first six months of 2015 were higher relative to the same periods in the years before………………………………………..Full Article: Source

Goldman Sachs: What to expect from commodities as China slows

Posted on 13 October 2015 by VRS  |  Email |Print

After a bounce in both oil and metal prices last week, some analysts predicted that the worst was over for the commodity rout sparked by fears of an economic slowdown in China. Nonetheless, Goldman Sachs is maintaining its bearish take on the sector generally, as it argues fundamentals have not changed following the recent rally, but analysts at the bank are also suggesting that China’s rebalancing also throws up some opportunities.
The biggest shift the group sees is a rising demand for “opex” commodities, or energy and consumption-based metals such as aluminium in China, while expecting a decline in demand for “capex” commodities such as steel, cement and iron ore………………………………………..Full Article: Source

The Falling Commodities Markets Are Not About To Cause A Second Crash

Posted on 13 October 2015 by VRS  |  Email |Print

Seriously, there is no chance of a systematic crash from the troubles that certain commodities companies are going through. Whatever does happen to Glencore (and it has to be said that what does happen might not be good for that firm) we’re simply not at a Bear Sterns or Lehman Brothers moment.
The firms that are having those interesting times simply aren’t large enough with respect to the global economy to have that effect. Nor are they harbingers of a more general financial markets crash. They’re, if anything at all, simply commodity traders who got a little over leveraged in the boom and now the commodities bust is upon them………………………………………..Full Article: Source

Copper gains following production cuts

Posted on 13 October 2015 by VRS  |  Email |Print

Copper prices are higher as production cuts by Glencore continued to boost base metals, but analysts warned the output shift may not be enough to offset weak demand growth in China.
Benchmark copper on the London Metal Exchange closed 0.5 per cent up at $US5,315 a tonne, after nearing Friday’s three-week high of $US5,356 in early trade. The metal rose more than three per cent in the previous session, swept higher in a broad metals rally triggered by news that Glencore will cut zinc output by 500,000 tonnes, or 4 per cent of global supply………………………………………..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 slump intensifies risks to emerging markets: Kemp

Posted on 09 October 2015 by VRS  |  Email |Print

Oil, gas and mining accounted for nearly nine percent of all new greenfield foreign direct investment (FDI) projects announced over the last decade. Oil, gas and mining FDI has played a large role fuelling growth over the last decade, especially in developing countries.
The current and prospective slowdown in investment is likely contributing to sluggish performance in 2015 and 2016. Between 2005 and 2014, the petroleum and mining industries announced new FDI projects totalling almost $745 billion, according to the United Nations Conference on Trade and Development (UNCTAD)………………………………………..Full Article: Source

Rethinking Commodities

Posted on 08 October 2015 by VRS  |  Email |Print

The holy grail of portfolio diversification: an asset class that provides long-term risk-adjusted returns similar to equities but is negatively correlated with the returns of stocks and bonds. That is what professors Gary Gorton and Geert Rouwenhorst (hereafter G&R) appeared to have identified in their seminal study, “Facts and Fantasies about Commodity Futures”.
The paper looked at the period from July 1959 through December 2004 and concluded that the risk premium earned from investing in a broadly diversified basket of fully collateralized commodity futures is very similar to the historical equity risk premium. Moreover, the authors found that the volatility of commodity futures (as measured by standard deviation) was less than that of stocks………………………………………..Full Article: Source

Gold still not drawing a crowd

Posted on 07 October 2015 by VRS  |  Email |Print

The shiny yellow stuff has all the usual things going for it: a US Federal Reserve that’s reluctant to hike interest rates and a run of drab economic data would often be enough to jack up the price. But many buyers are still staying away. UBS says in a new note that the reluctance to break higher suggests that, well, many investors just don’t care.
It highlights the overall subdued interest in the precious metals space. In a sense, it also confirms our recent observations that investors’ thresholds for warming up to gold is relatively high at the moment – stronger evidence seems to be needed in order to shift gold sentiment materially………………………………………..Full Article: Source

Commodity Traders Win Billions in Loans Amid Glencore Storm

Posted on 07 October 2015 by VRS  |  Email |Print

For all the fears that Glencore Plc could buckle under its weighty debt load, a wave of new bank loans this month shows the concerns aren’t spreading across the commodity-trading sector.
Banks are granting new credit lines to Glencore’s biggest trading rivals, including a record $8 billion of loan facilities on Tuesday to Vitol SA, the Swiss unit of the world’s biggest independent oil trader. Trafigura Pte Ltd. won improved terms on a $2.2 billion loan refinancing deal on Oct. 1 via a group of 28 banks. Swiss commodity traders Gunvor Group Ltd. and Mercuria Energy Group Ltd. are also marketing credit facilities totaling $2 billion………………………………………..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

Bottom Hunting In Commodities

Posted on 01 October 2015 by VRS  |  Email |Print

Not all commodities are created equal, oil is by far the most important. It’s a major input cost, often the largest, in the production of every commodity. When oil prices are cut in half over 12 months the cost to produce everything from corn to platinum declines, boosting supply and weighing on prices. Commodities have been in a bear market since 2011.
The oil collapse wasn’t the cause of this bear market, it was the nail in the coffin. Commodities have been in a rut because of the immense overcapacity built up following China’s infrastructure spending in 2009-2010. In retrospect, oil held up extremely well relative to other bulk commodities until it finally succumbed to USD strength in late 2014………………………………………..Full Article: Source

World stocks hit two-year lows as commodities stay pressured

Posted on 30 September 2015 by VRS  |  Email |Print

Global stocks slid to their lowest in more than two years on Tuesday as raw materials prices and emerging markets stayed under pressure. Commodity prices edged up but held near multi-year lows on concern over an economic slowdown in major consumer China.
Mining and trading giant Glencore, whose shares fell by almost a third on Monday on investor concern over its debt levels, eked out gains of 4 percent in London but only after its Hong Kong-listed shares fell 29 percent. Asian commodity merchant Noble lost 11 percent, having at one point in the session fallen by 15 percent to levels last seen in October 2008………………………………………..Full Article: Source

Oil prices set to move ’sideways’, but still vulnerable

Posted on 29 September 2015 by VRS  |  Email |Print

Oil traders have started the week in a pessimistic mood on the back of a report pointing again to a slowdown in manufacturing output in China. International benchmark Brent crude is down by around 0.8 per cent to little more than $48 a barrel after an Asian trading session dominated by a nine per cent fall in Chinese industrial profits.
The news, which has hit wider markets, adds to evidence of a fall in consumption in the world’s second largest economy. Oil is vulnerable to any signs of waning demand from such a key market, as the supply glut that has weighed on prices in the past year continues……………………………………….Full Article: Source

Commodity Traders Face Higher Costs Under New European Rules

Posted on 29 September 2015 by VRS  |  Email |Print

Commodity traders and consumers are set for higher costs as the industry will for the first time be subject to similar regulations as stock and bond markets under European Union proposals to prevent market abuse.
Companies where speculative activity makes up more than 10 percent of their total commodity derivatives trading will need to get a financial license, comply with new disclosure rules and set aside additional capital to back trades, the European Securities and Markets Authority proposed Monday. ESMA also relaxed some previously proposed limits on the total open positions a trading firm can hold in a market………………………………………..Full Article: Source

Oil Traders May Look to the Sea for Profit Amid Price Collapse

Posted on 28 September 2015 by VRS  |  Email |Print

The global oil glut may soon expand to the ocean. While traders are already cashing in on the surplus by housing oil in onshore tanks across the globe — including on the tiny Caribbean island of St. Lucia– expanding the storage to tankers at sea may near a point where it becomes profitable, according to Citigroup Inc., Goldman Sachs Group Inc. and IHS Maritime & Trade.
A structure called contango, when the price of a commodity to be delivered in the future is higher than if it was sold today, has been moving in the right direction. Vessels laden with oil, parked offshore from Singapore to the Gulf of Mexico, became a feature after the global financial crisis as the widening contango allowed traders with access to storage to lock in a profit………………………………………..Full Article: Source

Commodities Traders Brace for New European Rules

Posted on 25 September 2015 by VRS  |  Email |Print

Europe’s commodities traders are warning that new regulations set to be released within days could roil markets and push up costs for a range of essentials from crude oil to chocolate.
A final draft of expanded rules governing the European Union’s oversight of financial markets is expected to extend its authority over firms that focus on trading in oil, farm products, industrial metals like copper and a host of other commodities. It would add a new layer of scrutiny for an industry that has historically operated with limited oversight………………………………………..Full Article: Source

Gold price jumps as Fed rally returns

Posted on 25 September 2015 by VRS  |  Email |Print

On Thursday, gold capitalized on its safe haven status amid another down day on equity markets and after weak US economic news supported a decision by the US Federal Reserve last week not to raise interest rates.
In late afternoon dealings on the Comex market in New York, gold futures with December delivery dates jumped more than $25 or 2% to $1,156.70 in heavy trade with double the daily average number of contracts changing hands. The last time gold was above the $1,150 resistance level was August 24. Gold is up 5% from where it was trading before the Fed’s hold on rates which have been unchanged since June 2009………………………………………..Full Article: Source

Commodity traders given breathing room

Posted on 23 September 2015 by VRS  |  Email |Print

Hedge funds and Wall Street banks face an easier time keeping large oil, grain and metal trades after persuading the US derivatives regulator to amend a controversial clampdown on commodity speculation.
The Commodity Futures Trading Commission proposed on Tuesday to change one aspect of long-debated rules on commodity position limits, or caps on speculative holdings that were mandated by the Dodd-Frank financial reform. The regulation has been contentious, even after the collapse in commodity prices………………………………………..Full Article: Source

Despite Mideast worries over cheap global oil prices, more regional crude may enter the market

Posted on 21 September 2015 by VRS  |  Email |Print

Across a Mideast fueled by oil production, low global prices have some countries running on empty and scrambling to cover shortfalls, even as more regional crude is on tap to enter the market. While some Gulf nations rest on ample reserve funds, embattled Iraq is desperate to scrounge up more money for its fight against the extremist Islamic State group as protesters demand repairs to its failing power grid.
Contrast that to neighboring Iran, whose nuclear deal with world powers positions it to re-enter the global oil market and make long-needed repairs to its fields to increase its daily production. The possibility of more supply entering the market has analysts already lowering their forecast price for oil into the next year………………………………………..Full Article: Source

China takes aim at automated trading in commodities futures

Posted on 17 September 2015 by VRS  |  Email |Print

China is extending its control of onshore markets to commodities exchanges, spooked by signs that speculators have shifted from China’s volatile stock markets to commodities futures.
The country’s top commodities exchanges - the Dalian Commodity Exchange (DCE), Shanghai Futures Exchange (SHFE) and Zhengzhou Commodity Exchange (ZCE) - were asked recently by China’s exchange regulator to draft rules designed to “regulate the behaviour of program trading” in futures markets, according to people familiar with the matter………………………………………..Full Article: Source

OPEC cuts oil production forecast for US

Posted on 15 September 2015 by VRS  |  Email |Print

OPEC has cut its oil production forecasts for states like the US that are not members of the cartel. The group said Monday it had lowered its forecast for daily oil supply growth this year from non-member states by 72,000 barrels a day to 880,000 due to lower than expected output in the US For next year, it trimmed its forecast by 110,000 barrels to 160,000.
The cartel also increased its forecast for global demand growth this year by around 84,000 barrels a day to 1.46 million, and by 50,000 barrels to 1.29 million for next year. The price of oil has fallen this year amid strong supply and weaker demand from energy-hungry economies like China………………………………………..Full Article: Source

Day Traders Struggle Amid Commodities Rout

Posted on 15 September 2015 by VRS  |  Email |Print

There is no source that lists the losses and gains of day-traders, but anecdotal evidence from brokers and the traders themselves suggest losses for many day-traders were steeper. Their trade is adding to market volatility, analysts say.
These losses could combine with the increasingly complex, computer-generated way many markets now trade to push day-traders out of many markets, says analysts, and some of the traders themselves. While day trading is largely associated with equity markets, these investors also began moving into commodities after 2006 when some Chicago-based brokerages began offering commodities options to retail traders………………………………………..Full Article: Source

Commodities Producers’ Currency Prop

Posted on 14 September 2015 by VRS  |  Email |Print

Some emerging-markets exposure can be a valuable currency – for commodities producers. Currencies of commodity-producing countries have mostly fallen against the U.S. dollar this year, helping cushion earnings of miners who dig there. Platinum has fallen 20% this year in dollar terms, but only about 6% in South African rand. Copper is down 15% in dollars, just 4% in Chilean peso.
This can keep beleaguered producers in business. It also means big falls in investment spending don’t necessarily mean equally large cuts in activity. Tudor Pickering Holt notes emerging-market oil producers like Lukoil, Rosneft, CNOOC and Petrobras all expect capital spending to be down 30% this year, helped by currency moves, versus 15% for U.S. and European companies………………………………………..Full Article: Source

Oil remains on a slippery slope

Posted on 14 September 2015 by VRS  |  Email |Print

In June last year, it was difficult to guess that crude oil would fall off the precipice within months. The Islamic State (IS) was rampaging across Iraq and fears of supply disruption in the country had sent Brent oil up to $115 a barrel. But then, the pincer of global oversupply and slack demand put oil on the slippery slope. Declining steadily, Brent was down more than 50 per cent to about $45 a barrel by January this year.
A recovery to about $65 until mid-May was short-lived and the fuel again slipped to $40 last month. It currently trades at about $47 a barrel. While it’s a mug’s game trying to predict crude oil prices, it is likely to remain under pressure at least in the near term — the factors that caused the rout remain in place and seem to be getting worse………………………………………..Full Article: Source

CME challenges LME in its metals trading heartland: Andy Home

Posted on 09 September 2015 by VRS  |  Email |Print

When Hong Kong Exchanges and Clearing (HKEx) bought the venerable old London Metal Exchange (LME) back in 2012, it did so with eyes firmly fixed on China. The vision was to leverage the LME’s near monopoly on base metals pricing in the rest of the world to open up the world’s fastest-growing metals market.
That remains the vision, although HKEx’ ambitions in the commodities space have taken back seat to its Stock-Connect bridge between Hong Kong and mainland Chinese stock markets. What HKEx almost certainly wasn’t expecting back in 2012 was a challenge to the LME’s existing franchise outside of China………………………………………..Full Article: Source

Commodity Finance Slump Threatens Global Trading, Report Says

Posted on 08 September 2015 by VRS  |  Email |Print

Small and mid-sized commodity traders are being squeezed as banks retreat from global trade finance or offer the “wrong type” of loans, according to law firm Clyde & Co. Trade finance is harder to access today than it was a decade ago, according to 77 per cent of companies and executives surveyed in the report to be published Monday by the London- based legal firm.
Bank-led trade finance has slumped by half from a peak of US$14 trillion before the global financial crisis in 2008 to about US$7 trillion, Clyde & Co said. That’s forcing traders and commodity producers to rely on a “complex patchwork” of financing to meet their needs………………………………………..Full Article: Source

Spain Is Winner From Oil, Commodities Plunge, De Guindos Says

Posted on 04 September 2015 by VRS  |  Email |Print

Spain’s economy minister says his country is a winner from the plunge in oil prices and is well insulated from the Chinese slowdown that’s partly driving the decline. In a Bloomberg Television interview in Madrid, Luis de Guindos said lower energy costs for consumers and companies are helping to drive an acceleration in Spain’s expansion this year.
The economy grew 1 percent in the second quarter, more than three times the euro-area average. “We import the majority of the commodities, especially in the case of energy,” de Guindos said in the interview in Madrid on Wednesday. “So for Spain it’s a gain-gain situation.”……………………………………….Full Article: Source

Why is nickel trading like it’s 2008? Andy Home

Posted on 04 September 2015 by VRS  |  Email |Print

On the London Metal Exchange (LME) benchmark nickel for three-month delivery is currently trading around $10,000 per tonne. Which, as with all the other industrial metals traded on the LME, is the lowest it has been since the Global Financial Crisis in 2008-2009.
But whereas the likes of copper and aluminium are still comfortably above the troughs recorded during the worst of the manufacturing meltdown that followed the financial meltdown, nickel is actually there. Nickel hit a low of $9,100 during its “flash crash” of Aug. 12, within spitting distance of the low of $8,850 recorded in October 2009, the month after the fateful “Lehman Moment”………………………………………..Full Article: Source

OPEC oil output in Aug falls from record on Iraq disruption - survey

Posted on 03 September 2015 by VRS  |  Email |Print

OPEC oil output fell in August from the highest monthly level in recent history, a Reuters survey found on Wednesday, as disruptions to flows on Iraq’s northern pipeline halted supply growth from the group’s second-largest producer.
Largely stable output from Saudi Arabia and other Gulf members of the Organization of the Petroleum Exporting Countries indicated they are not wavering in their focus on defending market share instead of prices. OPEC supply fell in August to 31.71 million barrels per day (bpd) from a revised 31.88 million bpd in July, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants………………………………………..Full Article: Source

The End of the Commodity Super Cycle

Posted on 02 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

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

Why the commodities super cycle was a myth

Posted on 01 September 2015 by VRS  |  Email |Print

In 1980, the economist Julian Simon challenged doom-mongering biologist Paul Ehrlich to a bet that the prices of any five metals would be lower in 10 years’ time. He won, and made his point: over the long run, technological progress means commodity prices are likely to fall in real terms.
From the early 2000s, many investors forgot that lesson. The idea that there are decades-long “super-cycles” in commodity prices has some respectability: a 2012 paper by Bilge Erten of the UN and José Antonio Ocampo of Columbia University found evidence for four such cycles during the period 1865-2009. But in the bastardised form that became popular in the 2000s , the concept gained less honourable currency, as a story that commodities were a one-way bet upwards………………………………………..Full Article: Source

Commodities strike six-year lows, set to enter new cycle

Posted on 28 August 2015 by VRS  |  Email |Print

Falling demand, rising production and faltering growth in the world’s second-largest economy China have sent many major commodities plummeting to their lowest level since 2009, with some experts predicting the start of a new cycle.
Oil prices this week dived to 6.5-year lows as commodities tumbled over concerns that China’s slowing economy will curb demand for metals and other vital raw materials which have helped feed its astonishing growth over the past three decades………………………………………..Full Article: Source

Could commodities make a real comeback soon?

Posted on 28 August 2015 by VRS  |  Email |Print

With oil prices surging after the global market turmoil of “Black Monday,” could investors regain their faith in commodities? If China fired enough stimulus into its economy, a longer-term bounce back in commodities could be on the horizon.
“We certainly think that the authorities in China have the firepower in terms of monetary and fiscal policy to enact enough stimulus for the economy to at least meet the growth rate they’re targeting,” Caroline Bain, senior commodities economist at Capital Economics, said………………………………………..Full Article: Source

Difference in London Gold Price AM and spot gold rate costs ‘unhedged’ bullion dealers

Posted on 27 August 2015 by VRS  |  Email |Print

For over a century, gold rates have been set twice daily — at 10:30 am and 3 pm — in London on the basis of which the metal is valued and traded throughout the world. On Tuesday, after the customary morning rate was set eyebrows were raised among a few bullion dealers at home and reportedly by some abroad.
The so-called London Gold Price AM which traders in India get to know at 3 PM, was $4.48 higher than the spot gold rate. This, according to the bullion dealers, resulted in losses for those who without hedging themselves made a delivery commitment to clients based on the lower spot rate, but had to pick up the gold by paying almost $5 more, based on the London Bullion Market Association (LBMA) morning rate………………………………………..Full Article: Source

China Remains a Key Commodities Player, Despite Waning Appetites

Posted on 26 August 2015 by VRS  |  Email |Print

The fear that China’s appetite for commodities, from copper to coal, is falling after a decade of breakneck growth has sent prices tumbling, but the country’s sheer scale in these markets means that China will continue to shape them in the long term, even if at a slower speed.
China now buys about an eighth of the world’s oil, a quarter of its gold, almost a third of its cotton and up to half of all the major base metals. Its buying power has made the country integral to global commodities trading, influencing everything from prices to the hours traders work. While analysts predict a slowdown in the growth of Chinese commodity demand, they believe the country’s clout in the market isn’t likely to wane………………………………………..Full Article: Source

Buy low, sell high…but stay away from commodities

Posted on 26 August 2015 by VRS  |  Email |Print

The global stock rout may have claimed some victims this week, with heavy selling sending the S&P 500 into correction territory, but equity markets can still offer returns for investors. The definition of “correction territory” is when you see a downward move from a recent high of 10 percent or more.
The definition of “bear market territory” is when you have a 20 percent move down over the course of at least 2 months. Down 17 percent since its recent high in April, the broad-based European Stoxx 600 index is now officially in “correction territory”……………………………………….Full Article: Source

Commodity Traders Feel Unusual Pain of a Market Rout

Posted on 26 August 2015 by VRS  |  Email |Print

For years, the secretive club of the world’s largest commodities traders thrived on volatility and sometimes tiny price differences in the raw materials they trade—styling themselves as nimble middlemen able to profit whether markets were rising or falling.
These days, many outfits are very different animals and that’s causing unusual pain amid today’s commodities-market rout. During a decade of booming commodities prices, many of these trading firms put billions of dollars into mines, pipelines and storage terminals. Those bets were supposed to help their traders understand supply and demand, while providing their trading floors with a ready source of supply………………………………………..Full Article: Source

Copper, Aluminum Close at Lowest Levels Since 2009

Posted on 25 August 2015 by VRS  |  Email |Print

Copper and aluminum futures closed at more-than-six-year lows in London on Monday, as a sharp decline in Chinese equities triggered a broad-based commodities rout over fears that the world’s biggest consumer of base metals is heading into a steeper-than-expected economic slowdown.
The London Metal Exchange’s three-month copper contract was down 2% at $4,953 a metric ton at the PM kerb close, having tumbled to its lowest level since 2009 earlier in trading at $4,855 a ton. It fell below the key $5,000 level for the fifth-straight session. Aluminum, meanwhile, closed down 1.7% at $1,521.50 a ton, after hitting a six-year low during trading at $1,506 a ton………………………………………..Full Article: Source

Commodity trading norms cleared by Sebi

Posted on 25 August 2015 by VRS  |  Email |Print

Setting September 28 as the date for merger of Forward Markets Commission (FMC) with itself, Sebi on Monday announced new norms for commodities derivatives market under which exchanges and brokers in this segment will need to comply with rules applicable to their stock market peers.
The new regulations will also come into force on September 28, the date from which Sebi would begin regulating the commodity derivatives market as a unified regulator. These norms, approved by Sebi’s board here on Monday, will enable functioning of the commodities derivatives market and its brokers under Sebi norms and integration of commodities derivatives and securities trading in an orderly manner………………………………………..Full Article: Source

Commodities Are Cheapest Since 2002, But Maybe Not Cheap Enough

Posted on 24 August 2015 by VRS  |  Email |Print

Here’s one more way to measure just how bad the commodity meltdown has gotten: compare the asset class to stocks. The Standard & Poor’s GSCI Index of 24 raw materials is now trading near its cheapest since 2002 compared with the S&P 500 Index of U.S. shares. But if you trust history for providing guidance, that’s still not low enough.
During the last big shift from commodity bull markets to bear markets, the ratio dropped even lower. After peaking in October 1980 amid supply shortages, producers responded to higher prices by boosting output. As gluts emerged, the ratio tumbled 96 percent to a record low of 0.1 in February 1999………………………………………..Full Article: Source

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