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Noble overstated commodity values by at least US$3.8 bln: Iceberg Research

Posted on 27 February 2015 by VRS  |  Email |Print

Singapore-listed Noble Group overstated the value of commodities it holds by at least US$3.8 billion, Iceberg Research said in a report on the Asian commodity trading firm’s accounting practices. “Impairing these fair values dramatically impacts Noble’s performance indicators,” the little-known research firm said on its website on Wednesday, its second report this month raising questions about Noble’s books.
Iceberg released its first analysis on Feb 15, to which Noble issued a detailed rebuttal. The company’s shares fell a combined 13 percent in the two trading sessions following the initial report. It has recovered about 1 percent since then………………………………………..Full Article: Source

Commodities slump to deliver $110bn hit to export earnings: ANZ

Posted on 26 February 2015 by VRS  |  Email |Print

The aggressive slump in Australia’s key commodities will wipe $110 billion off export earnings over the next three years, new analysis has found. ANZ’s major project update for 2015, which includes developments requiring at least $100 million of investment, also anticipates that aggregate major projects spending on mining, energy and infrastructure projects would fall to about $32bn in 2017 from $88bn last year.
The slump in the resources sector is set to be significant, with the pipeline of potential mining sector projects declining. ANZ said the mining states were expected to be hit hardest as large projects wind down and sharply lower commodity prices reduced the likelihood of new capital spending or project expansions………………………………………..Full Article: Source

Yellen: Fed to Issue Bank Commodity Rules This Year

Posted on 26 February 2015 by VRS  |  Email |Print

Federal Reserve Chairwoman Janet Yellen said Wednesday that the Fed plans to propose new rules this year relating to banks’ activities in physical- commodity markets, such as aluminum and oil.
The Fed has been engaged in “a careful review” of the activities it has permitted, Ms. Yellen told the House Financial Services Committee during the second day of her semiannual monetary policy testimony. “With respect to the concerns they raise about safety and soundness, we are likely to propose new rules during this year,” Ms. Yellen said………………………………………..Full Article: Source

How to Use Commodity Futures to Hedge

Posted on 26 February 2015 by VRS  |  Email |Print

Futures are the most popular asset class used for hedging. Strictly speaking, investment risk can never be completely eliminated, but its impacts can be mitigated or passed on. (Related: A Beginner’s Guide to Hedging) Hedging through future agreements between two parties has been in existence for decades.
Farmers and consumers used to mutually agree on price of staples like rice and wheat for a future transaction date. Soft commodities like coffee are known to have standard exchange-traded contracts dating back to 1882. Let’s look at some basic examples of the futures market, as well as the return prospects and risks………………………………………..Full Article: Source

Commodities bright spot for investment banks

Posted on 20 February 2015 by VRS  |  Email |Print

Commodities revenues at the world’s largest investment banks rose 9 per cent last year as the fall in oil increased trading turnover, reversing a sharp slide in previous years that saw many of them withdraw from the sector.
Revenues in financial year 2014 came in at $4.9bn due to increased activity in energy markets, according to a report published on Thursday by industry consultant Coalition. That reversed a decline of 18 per cent in commodities revenues for Wall Street the previous year………………………………………..Full Article: Source

Major banks’ commodities revenue up 9 pct in 2014-report

Posted on 20 February 2015 by VRS  |  Email |Print

Commodities revenue at the top 10 investment banks climbed by 9 percent last year, reversing three years of declines, due to increased activity in energy markets as oil went into freefall, a consultancy said on Thursday. Revenue earned by leading banks from commodity trading, selling derivatives to investors and other activities in the sector rose to $4.9 billion from $4.5 billion in 2013, London-based financial industry analytics firm Coalition said.
“Despite significant business downsizing, revenues rose due to increased activity in the energy markets. Meanwhile, metals continued to be impacted by regulatory pressures and weak underlying demand,” Coalition said………………………………………..Full Article: Source

Deflation: The high cost of falling prices

Posted on 20 February 2015 by VRS  |  Email |Print

Low or negative inflation is spreading around the world. That is more of a worry than it sounds. For central banks in the rich world, two is a magic number. If prices rise at 2% a year, most shoppers can more or less ignore their slow ascent. And a touch of inflation is hugely helpful: it gives bosses a way to nudge unproductive workers—a pay freeze actually means a 2% cut—and an incentive to invest their earnings.
Most importantly it keeps economies away from deflation and the depressing choices—hoarding cash, delaying purchases—that falling prices can bring. Yet despite the professed adherence to the 2% mantra, a period of falling prices is on the cards………………………………………..Full Article: Source

Private equity and energy: Refilling the pipeline

Posted on 13 February 2015 by VRS  |  Email |Print

Oil’s plunge may have helped consumers, but it has hurt big private-equity firms. Earlier this month Apollo Global Management announced that profits were down by 79% year on year in the three months to December 31st. This week KKR and the Carlyle Group said they were smarting too, with KKR’s profits down by 94% and Carlyle’s by 68%. Energy-related assets, whose valuations have fallen with the oil price, are largely to blame.
Spurred on by the shale boom in America, private-equity funds have invested heavily in the energy sector. More money was raised for energy buy-outs in America in 2014, and more deals were made, than ever before, according to Preqin, a data provider………………………………………..Full Article: Source

India: Is Commodities Transaction Tax removal in the offing?

Posted on 12 February 2015 by VRS  |  Email |Print

The Commodity Transaction Tax (CTT) was introduced in the 2013 Union Budget on non-agricultural commodities traded on futures exchanges. This was based on the premise that commodity exchanges have matured; and there is no difference between stock and commodity derivatives trading.
Therefore, the very existence of Securities Transaction Tax (STT) in stock exchanges justified the CTT, as was stated during the time of the tax announcement. Since then, and even before that, several arguments have been put forward on the differences between the commodity and the stock exchanges; but that is immaterial now as the impact of CTT on the commodity futures markets is quite perceptible in the non-agricultural segment………………………………………..Full Article: Source

Swiss Bank Says Investors Favor Gold Amid Charges on Cash

Posted on 12 February 2015 by VRS  |  Email |Print

Investors are buying more gold as an alternative to hold Swiss franc cash deposits, according Vontobel Holding AG, a Swiss bank and wealth manager. “We keep noticing that gold is coming back into favor with investors,” Vontobel Chief Executive Officer Zeno Staub, 45, told reporters Wednesday after the Zurich-based company announced full-year earnings.
Concerns that Greece may abandon the euro and Ukraine may be headed for a wider conflict have spurred demand for haven assets. Gold has climbed 4.2 percent this year, even as the dollar strengthened on prospects of higher U.S. interest rates. Investors’ holdings in gold-backed funds are near the highest since October………………………………………..Full Article: Source

U.S. Farmers Watch $100 Billion-a-Year Profit Fade Away

Posted on 11 February 2015 by VRS  |  Email |Print

The squeeze on U.S. farmers is getting worse as low crop prices and rising costs erode incomes that not long ago were the highest ever. Illinois grower Jason Lay said he will buy 30 percent less fertilizer for his 2,500 acres of corn and soybeans, and 7 percent fewer seeds for spring planting. After his most profitable year ever in 2012, Lay said he upgraded his combine, tractor, sprayer and planter.
With crop futures now near five-year lows, he has no plans to buy any new equipment. “You spend when times are prosperous so you don’t need to when they’re not,” Lay, 41, said by telephone from outside Bloomington, Illinois. “That’s how you make it through.” He estimates his profit is down by a quarter from its peak………………………………………..Full Article: Source

Chinese banks bulk up in London’s commodity sector

Posted on 11 February 2015 by VRS  |  Email |Print

Under large chandeliers in London’s ornate Gibson Hall, China’s largest bank earlier this month celebrated its $690m purchase of a 60 per cent stake in Standard Bank’s global markets unit. The acquisition will help Industrial and Commercial Bank of China offer a full range of commodities services to its clients, some of China’s largest natural resources companies, as it moves to compete with western banks such as Citi and Goldman Sachs.
ICBC’s purchase is the latest foray by a Chinese entity into London’s commodities market, as such banks see an opportunity to service Chinese clients who produce and consume the bulk of the world’s resources as western banks withdraw from the sector………………………………………..Full Article: Source

Singapore DBS says total commodities exposure is S$30 bln

Posted on 11 February 2015 by VRS  |  Email |Print

Singapore’s DBS Group Holdings has total commodities exposure of S$30 billion ($22.18 billion), with the bulk of it in trade finance, Chief Executive Officer Piyush Gupta said on Tuesday.
DBS, Singapore’s biggest bank, took some charges on the commodities exposure in China in its fourth-quarter results. It reported a small rise in core fourth-quarter net profit which fell short of analysts’ estimates………………………………………..Full Article: Source

Global deflation risk deepens as China economy slows

Posted on 03 February 2015 by VRS  |  Email |Print

The risk of global deflation looms large for 2015 as surveys of China’s mammoth manufacturing sector showed excess supply and insufficient demand in January drove down prices and production. While the pulse of activity was livelier in Japan, India and South Korea, they shared a common condition of slowing inflation.
“The slide in global oil prices and inflation has turned out to be even bigger than anticipated,” said David Hensley, an economist at JP Morgan, and central banks from Europe to Canada to India have responded by easing policy. “What is now in the pipeline will help extend the near-term impulse from energy to economic growth into the second half of the year.”……………………………………….Full Article: Source

Gold becomes the ultimate hedge

Posted on 26 January 2015 by VRS  |  Email |Print

Lenin, the implacable Russian revolutionary, despised gold. He thought it should be used to build public lavatories. I was of much the same persuasion early in my career. The yellow metal’s economic utility seemed to me minimal in the light of its declining industrial uses. As an investment it was and remains entirely speculative because it yields no income.
And since the introduction of index-linked government bonds, any merits it might have as an inflation hedge have become less relevant. Certainly gold has been a very erratic store of value in recent decades. Anyone who bought gold at the peak of the gold bull market in the early 1980s saw their investment lose 80 percent of its value in real terms over the next 20 years………………………………………..Full Article: Source

Commodities: Deflation And The Future

Posted on 12 January 2015 by VRS  |  Email |Print

The year 2014 was the worst year for commodities in the past five and one-half years… since 2008 in the Great Recession. Prospects for a recovery in commodities prices are not good: market expectations for inflation over the next ten years has dropped from 2.30 percent last January to 1.55 percent now.
Can economic growth be rising in an environment where commodity prices are falling? Earlier in the current economic recovery, commodities seemed to be the darling of investors because the policy of quantitative easing on the part of the Federal Reserve seemed to spur on dreams, in the short run, of a bubble in commodity prices………………………………………..Full Article: Source

Australia trade deficit widens as commodities drop

Posted on 07 January 2015 by VRS  |  Email |Print

Australia’s trade deficit widened in November from October as falling prices for key resources such as iron ore overshadowed rising commodity export volumes as mining companies continued to ramp up production.
The seasonally adjusted trade deficit widened to A$0.93 billion from a revised A$0.88 billion in October, according to the Australian Bureau of Statistics. It is the eighth trade deficit in a row. Economists had been expecting a shortfall of A$1.6 billion in November………………………………………..Full Article: Source

BRICS countries lead global capital flight-report

Posted on 16 December 2014 by VRS  |  Email |Print

The BRICS grouping of emerging market nations is leading the flight of illicit capital from the developing world, according to data in a new report released this week. In its annual estimate of illegal capital flows, Washington-based think-tank Global Financial Integrity (GFI) said it a record $991 billion was siphoned in 2012 from the world’s developing economies, an increase of almost 5 percent from 2011.
Illicit capital incorporates such things as misinvoicing of trade whereby exports and imports are booked at different values to avoid taxes or to hide large transfers of money……………………………………..Full Article: Source

Sell bonds and buy commodities in 2015

Posted on 15 December 2014 by VRS  |  Email |Print

Commodities tend to zig when the equity markets zag,’ according to investment guru Jim Rogers. Sometimes a simple trade can make your year. If, a year ago, you had sold everything you owned that was in any way commodity-related and bought some sovereign fixed income bonds of a reasonable maturity, you would have done very well and probably beaten your benchmark quite handsomely.
Investment management, though, is not always about repeat performances. You have to regularly re-sift the evidence, look at valuations, factor in sentiment and make predictions about the future………………………………………..Full Article: Source

What Big Banks Are Saying About Commodities in 2015

Posted on 11 December 2014 by VRS  |  Email |Print

As 2014 winds to a close, several analysts have already published their predictions for the coming year, with the vast majority seeing the U.S. take the lead in the global economic recovery. On the commodities front, 2014 has been yet another difficult year, as a strong U.S. dollar put downward pressure on commodity prices.
This year, the energy sector came into the spotlight, as crude oil prices fell more than 30% on increased supply levels and slow global demand. Many believe the crude story will likely continue into the new year. Below, we highlight what big banks are saying about energy in 2015, as well as their outlook for the overall commodity market in the New Year………………………………………..Full Article: Source

India: RBI may allow FIIs to trade in commodities

Posted on 11 December 2014 by VRS  |  Email |Print

In a major boost to the sagging commodity market, the Reserve Bank of India is considering a proposal to allow foreign institutional investors (FIIs) to trade in commodities. The commodity market regulator, Forward Markets Commission, is expected to meet the RBI in this regard shortly, according to sources.
The proposal has surprised market participants, who were expecting the RBI to allow banks to trade first on the commodity exchanges before opening the doors to the FIIs. As banks actively lend to traders and farmers against warehouse receipts, it would have been logical to allow banks in first, said an analyst, who did not want to be identified………………………………………..Full Article: Source

US Banks Reprimanded for Influencing Commodities Prices

Posted on 09 December 2014 by VRS  |  Email |Print

A two-year probe conducted by Republican and Democrat lawmakers from the Senate Permanent Subcommittee on Investigations has found several US banks culpable of major violations in the commodities markets. The report determined that some of the biggest banks, including Morgan Stanley, Goldman Sachs and J.P. Morgan Chase & Company stockpiled massive volumes of inventory in commodities like copper and aluminum.
Beyond stockpiling inventories, these banks gained significant advantage over the financial system by participating in coal production, uranium and other volatile businesses. By participating in these activities, the banks jeopardized the entire financial system………………………………………..Full Article: Source

Report reveals breadth of banks’ commodities activities

Posted on 25 November 2014 by VRS  |  Email |Print

The 403-page report published by the US Senate last week on Wall Street’s involvement in physical commodities is a treasure trove of information. It shows just how deeply Goldman Sachs, Morgan Stanley and JPMorgan pushed into raw materials over the past decade.
According to a special review by the Federal Reserve’s commodities team cited in the report, Goldman Sachs had ownership interests in more than 30 power stations, 84 metal warehouses, a Colombian coal mine as well as a uranium trading business………………………………….Full Article: Source

Execs to testify on banks’ commodities holdings

Posted on 18 November 2014 by VRS  |  Email |Print

Executives of three major banks are scheduled to undergo questioning by a Senate panel this week on bank ownership of physical commodities such as oil, natural gas and aluminum and the effect those holdings have on consumers, industry and commodities markets.
Jacques Gabillion, head of Goldman Sachs’ (GS) global commodities principal investment group, Simon Greenshields, global co-head of commodities at Morgan Stanley (MS), and John Anderson, co-head of global commodities at JPMorgan Chase (JPM) are slated to testify at the two-day hearing of the Senate Permanent Subcommittee on Investigation…………………………………Full Article: Source

Private equity bets on energy ‘revolution’—in oil and gas

Posted on 18 November 2014 by VRS  |  Email |Print

Russ Steenberg likens how easy it is to find lucrative energy investments to what happens when a little boy throws a big rock into a pond. “There are incredible numbers of ripples that go out from the splash,” the head of BlackRock’s $18.8 billion Private Equity Partners said in a recent interview. “Well the energy revolution right now is the rock. The ripples are all of the things in the economy that support the energy revolution, … that provide all kinds of investment opportunity.”
That opportunity has the private equity industry salivating. PE funds have raised $157 billion since 2009 to invest in energy, according to data from intelligence firm Preqin. And they’re in the middle of raising even more, with nearly $32 billion collected by 33 funds this year…………………………………Full Article: Source

Banks brace for Senate’s commodities hearing

Posted on 07 November 2014 by VRS  |  Email |Print

Sen. Carl Levin of Michigan is preparing to take one last swing at Wall Street before leaving Congress. The Senate Permanent Subcommittee on Investigations, chaired by Mr. Levin (D., Mich), announced Thursday a two-day hearing into banks’ involvement in the ownership and trading of physical commodities in late November.
The hearing, which follows a two-year investigation by the subcommittee, is likely to delve into whether banks’ participation in the market for physical commodities influenced prices and harmed consumers. The subcommittee has held discussions with officials from J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley , among others. It wasn’t immediately clear who will appear before the subcommittee, but regulators and companies are expected to appear………………………………………..Full Article: Source

Commodities and the End of QE

Posted on 31 October 2014 by VRS  |  Email |Print

As boring as it sounds, I’m going to talk a bit about the end of QE today. Because it’s very important to how markets are going to behave over the next few months. As you probably know, overnight the US Federal Reserve voted to end its policy of quantitative easing. But it will still be reinvesting the interest payments from its $4 trillion plus portfolio and rolling over any maturing treasury securities, so it’s balance sheet will continue to grow, albeit much more slowly.
On the surface, US markets didn’t seem too fussed about the end of an era. Shares sold off around the time of the Fed’s statement and then rallied towards the close. Probably a case of ‘algo’s going wild’ as automated high frequency traders tried to make sense of the Fed’s statement………………………………………..Full Article: Source

Energy efficiency market hits $310b

Posted on 29 October 2014 by VRS  |  Email |Print

The global energy efficiency market is worth at least $310 billion a year and growing, according to a new report from the International Energy Agency (IEA). The report also finds that energy efficiency finance is becoming an established market segment, with innovative new products and standards helping to overcome risks and bringing stability and confidence to the market.
IEA Executive Director Maria van der Hoeven said that energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals………………………………………..Full Article: Source

Hedge funds pick wrong in oil bet

Posted on 28 October 2014 by VRS  |  Email |Print

Hedge funds rushed back into oil too quickly, boosting bullish bets amid a rebound last week, only to then watch surging US crude supplies push prices back to a two-year low. The net-long positions in West Texas Intermediate futures rose 5.7 per cent in the seven days to October 21, US Commodity Futures Trading Commission data showed. Short bets shrank 20 per cent, the most in three months, while longs dropped 2.8 per cent.
After rising as analysts speculated prices had reached a floor, WTI sank again after stockpiles climbed. It fell to US$80.52 on October 22, the lowest settlement since June 2012, and ended the week down 24 per cent from the year’s high. The US benchmark might dip to US$75 by the end of the year, Bank of America Corp said………………………………………..Full Article: Source

10 reasons gold and real interest rates tango

Posted on 28 October 2014 by VRS  |  Email |Print

Generally, the real interest rates are negatively correlated with the gold price, i.e. the rising interest rates adversely impact the yellow metal. Based on this adverse relationship between real interest rates and price of gold, the Elfenbein Gold Model shows that whenever the dollar’s real short-term interest rate is below 2%, gold rallies, and whenever the real short-term rate is above 2%, the price of gold falls.
Another rule of thumb is that gold moves eight times stronger than the difference between real interest rates and 2%. If the model is correct, the Fed’s future interest rates hike may be detrimental for the price of gold………………………………………..Full Article: Source

Don’t Expect Big Gains In Commodities

Posted on 23 October 2014 by VRS  |  Email |Print

Overall, pressure on commodity prices remains in place. The exception to the rule is the livestock market, which managed to rise 19% since last October. Disease and widespread drought conditions in California and other states drove livestock prices up to record highs.
On the other hand, energy was the worst sector, down 19% since October of last year. Americans driving less and more efficient cars caused US demand to decrease while US production is peaking as the nation is enjoying a renaissance in its domestic crude oil and gas exploration. In the same manner, soft commodities lost 18% this year, the second-worst performer. Precious metals remain at low levels, falling 9% this year………………………………………..Full Article: Source

How Much Gold Is On Loan Worldwide?

Posted on 22 October 2014 by VRS  |  Email |Print

We can’t speak about the manipulation of the gold price today without understanding the derivatives market. Right after the crash of 2000 in the stock market I became alarmed by the exponential increase of derivative products but especially by the complexity of those products.
I am sure that if I asked one of those financial engineers who has designed those products to explain their functioning and consequences in a bear market or, better yet, in a crash, he would be incapable. We are familiar with derivatives in real life through cars. When we speak of the speed of a car we talk of a first derivative, while acceleration, an increase of the speed, is a second derivative………………………………………..Full Article: Source

Commodity returns weaken, remains worst performing sector: Deutsche Bank

Posted on 20 October 2014 by VRS  |  Email |Print

Commodity returns continue to weaken and remains the worst performing sector on an excess returns basis, according to Deutsche Bank. In a weekly report it said that since the end of September, returns are down 6.2% and 1.0% for the SPGSCI and BCOM indices respectively. As a result, commodities remain the worst performing sector on an excess returns basis.
Losses have been most extreme in the energy sector with returns now down 17.1% since the end of last year. Energy is therefore the worst performing sector on an excess returns basis………………………………………..Full Article: Source

Banks and investors see appeal of commodity finance

Posted on 14 October 2014 by VRS  |  Email |Print

Despite the retreat of major global banks from commodities, commodity finance is nonetheless viewed as an attractive opportunity. But it is an area where banks face increased competition from trading houses.
Under assault from tighter regulation, falling revenues and higher capital requirements, banks across Europe and the US have been taking the axe to their commodity trading businesses during the past few years. But whereas commodity trading may have fallen out of favour, commodity finance remains very much in vogue………………………………………..Full Article: Source

5 ways to avoid losses in commodity market

Posted on 10 October 2014 by VRS  |  Email |Print

Commodity markets have a tremendous impact on the economy and the life of people. Though demand-supply is the prime factor behind the price volatility, currency moves, geopolitical issues, economic growth and government policies are other factors influencing commodity prices. Typically, the commodities market is subject to rallies and crashes, so it is more susceptible to speculation than the stock markets.
Before participating in commodity futures, an investor or trader should be prepared and ready to learn how the market works. Futures contracts unlike stocks have different expiry periods. As the futures platforms are primarily intended for hedging with a view to reduce the risk in portfolio, those who are participating in the commodities segment without fully understanding the fundamentals of the contract will stand to lose their initial capital or a part thereof………………………………………..Full Article: Source

Australia’s Hockey Says Falling Commodity Prices to Hurt Budget

Posted on 07 October 2014 by VRS  |  Email |Print

Falling commodity prices will hurt Australian government efforts to rein in its budget deficit, spurring possible new savings measures, Treasurer Joe Hockey said. “Lower commodity prices in iron ore and coal are going to have an impact on our budget bottom line,” he said in an interview in New York. “There are many variables at play but there will be a negative impact.”
Iron ore has fallen 41 percent in China this year, according to Metal Bulletin, while steelmaking coal is trading at the lowest level in six years. The government aims to bring the budget back to surplus over the medium term after recording a deficit of A$48.5 billion ($42.5 billion) for the 12 months that ended June 30, Hockey said last month………………………………………..Full Article: Source

Nothing new about bank commodity exits, history shows

Posted on 26 September 2014 by VRS  |  Email |Print

The recent exodus of banks from the commodities business is not a first. Alexander Osipovich looks back at the turbulent history of banks quitting the commodity markets, only to come piling back in a short time later. It’s tough being a bank in the commodity markets nowadays. Over the past 18 months, many US and European financial institutions have either shut down or significantly scaled back their commodity units, including some firms only recently regarded as titans of the business, such as JP Morgan, Barclays and Deutsche Bank.
The trend has raised questions as to whether banks have any future in commodities at all. But a quick review of recent history shows plenty of episodes where they retreated from commodities, often to jump back in a few years later once market conditions changed………………………………………..Full Article: Source

The Better Inflation Hedge: Gold or Treasuries?

Posted on 26 September 2014 by VRS  |  Email |Print

Rightly or not, gold is widely viewed as an inflation hedge — a reliable measure of protection against purchasing power risk. The precious metal may not be the best option for that purpose, though. Some gold investors fail to consider its volatility as well as its opportunity cost, while others fail to anticipate storage needs and other logistical complexities of gold ownership.
For these and other reasons, some view U.S. Treasury bills as a superior safe haven alternative to gold. Both asset classes have their own sets of pros and cons; here’s a look at them………………………………………..Full Article: Source

Commodities warn of correction repeat

Posted on 24 September 2014 by VRS  |  Email |Print

“History is a vast early warning system.” - Norman Cousins. Commodities were once one of the hottest areas to invest in, as China led the super cycle with infrastructure building, increasing demand and investment-driven GDP growth. Much has changed, however, since 2011.
By and large, commodities have been an awful investment with the benefit of hindsight, as a glut overwhelmed the marketplace, combined with slower growth in emerging economies and Europe. From an inter-market analysis standpoint, commodity movement is important to watch as it can provide a sense of whether cost-push inflationary pressures are either rising or falling………………………………………..Full Article: Source

Bank commodity trading and the US Fed: An unfolding relationship

Posted on 18 September 2014 by VRS  |  Email |Print

Last week something serendipitous happened. I went to what was ostensibly a briefing and news broke out. The news was that the big French bank BNP Paribas, after some high-level recruitment from a decamping JP Morgan Chase, intends to try and rebuild North American physical electricity trading to go along with its existing natural gas trading operations done primarily through its offices in New York.
BNP’s decision bucks the trend set by a number of other big banks—most notably JP Morgan Chase, Deutsche Bank and Barclays Plc– who have pulled out of several areas of physical energy commodity trading due to a combination of changing market conditions and flagging revenues, but perhaps most importantly, due to mounting regulations…………………………………….Full Article: Source

China commodity finance costs spike after Qingdao fraud

Posted on 15 September 2014 by VRS  |  Email |Print

Rising costs and delays in issuing letters of credit driving SMEs out of the market but global and local banks are still active in the business. The cost for financing commodity imports has increased steeply in China as banks begin to raise margin levels and step up due diligence investigation on clients after the Qingdao fraud that saw 25 international and local lenders lose up to $4.5 billion when traders reused copper collateral multiple times.
Commodity financing is a common way for small and medium-sized China firms to raise funds as state-owned enterprises are given preferential access to loans. But in June this year it was revealed that Decheng Mining, a Qingdao-based metals trading firm, was using the same batch of copper and aluminium stored at the local port as collateral against multiple bank loans………………………………………..Full Article: Source

ECB president Mario Draghi surprises Commodities market with boldness

Posted on 10 September 2014 by VRS  |  Email |Print

European Central Bank President Mario Draghi once again demonstrated a boldness that surprised commodities market last week when the ECB not only cut interest rates but announced the purchase of asset-backed securities.
Draghi recalls his track record and he reversed (former ECB President Jean-Claude) Trichet’s rate hikes almost immediately upon taking office. He nearly single-handedly ended the existential crisis facing (the) euro by aligning the ECB with the preservation of the monetary union, said Brown Brothers Harriman………………………………………..Full Article: Source

BHP, Rio reveal $US800 million ‘secret’ copper stash

Posted on 04 September 2014 by VRS  |  Email |Print

BHP Billiton and Rio Tinto could earn as much $US800 million between them for at least three years when they unlock a “secret” 200,000 tonnes of copper at their Escondida copper mine in Chile, Deutsche Bank says.
Deutsche mining analyst Paul Young says Rio and BHP are likely to tell the market in the next six months they have scrapped their plan to tear down one of the two operating plants at Escondida, called Los Colorados. The mining giants had planned to dismantle the plant when a third big plant, the $US3.8 billion concentrator OGP1, was brought online at the mine in the March quarter next year………………………………………..Full Article: Source

Commodity Trade Finance: uncovering the Opportunities in Africa

Posted on 04 September 2014 by VRS  |  Email |Print

In a recent Opalesque Radio interview with Sona Blessing, Nicolas Clavel, founder and chief investment officer of Scipion Capital, an investment manager specialising in self-liquidating short-term Commodity Trade Finance (CTF) with a focus on Africa, elaborates on the commodity trade finance opportunities, the hurdles and their ability to deliver consistent risk-adjusted returns.
From a sector perspective, the commodity trade finance fund focuses on minerals and agricultural commodities produced in Africa, which then tend to be shipped to destinations such as (mainly) China and Europe. The fund also finances the import of commodities into Africa, which is in sync with the continent’s growth and lack of available supplies for high in demand inputs such as cement and diesel………………………………………..Full Article: Source

Banks seen likely to stay in commodities

Posted on 03 September 2014 by VRS  |  Email |Print

Financial institutions could remain active in commodities markets following the dismissal of antitrust litigation that accused major banks and the London Metal Exchange of conspiring to artificially inflate aluminum prices, according to several U.S.-based aluminum traders.
A U.S. court recently dismissed the remaining claims against Hong Kong Exchanges & Clearing Ltd. (HKEx) and its subsidiaries, the LME and LME Holdings Ltd. (LMEH), in the class-action lawsuits. Other defendants included Baar, Switzerland-based Glencore Plc, New York-based Goldman Sachs Group Inc., New York-based JPMorgan Chase & Co. and their respective warehouse subsidiaries………………………………………..Full Article: Source

China Banks Boost Precious Metals Hoard Amid Lease Demand

Posted on 02 September 2014 by VRS  |  Email |Print

The value of precious metals held by China’s biggest lenders surged 66 percent from a year ago as banks lease more gold to customers because tighter borrowing rules make it harder to lend funds.
Precious metals held by Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd., the country’s four biggest lenders, were worth 378 billion yuan ($62 billion) at the end of the second quarter, according to financial reports. The growth since last year outpaced the gain in benchmark bullion prices, which rose 7.5 percent over the same period………………………………………..Full Article: Source

Major banks’ first-half commodity revenue climbs 21 percent

Posted on 29 August 2014 by VRS  |  Email |Print

Commodities revenue at the top 10 investment banks climbed by about a fifth in the first half of the year as a cold winter boosted business in U.S. power and gas and some investors returned to the sector, a consultancy said.
Revenue from commodities for the leading banks rose 21 percent to $3.3 billion in the first six months after falling by a similar percent last year, London-based financial industry analytics firm Coalition said in a report on Thursday………………………………………..Full Article: Source

CalPERS Removing Billions From Commodities?

Posted on 21 August 2014 by VRS  |  Email |Print

The California Public Employee Retirement System (CalPERS) is the largest U.S. public pension fund. It provides retirement, health, and financial benefits to more than 1.6 million public employees. With $295 billion in assets under management, CalPERS has long been viewed as a bellwether in the industry.
It tends to be an early adopter of alternative assets, too, setting the trend for the entire investment community. In October 2007, for example, the fund initiated its commodities program as a way of diversifying its portfolio – a move that helped establish commodities as a mainstream investment………………………………………..Full Article: Source

New funding opportunities in the oil and gas sector

Posted on 19 August 2014 by VRS  |  Email |Print

Project finance has been less widely used in the oil and gas sector than in other sectors such as power and utilities. Future revenue streams are typically less stable in oil and gas. The logistics, infrastructure and social issues caused by the increased size of projects have made achieving time, cost and quality targets more challenging than ever.
According to EY, the industry’s relatively poor track record of completing projects on time and on budget will test banking sector appetite for lending to the oil and gas sector. Project financing has typically been more prevalent in the downstream sector than in the more capital intensive upstream sector. In 2013, the Sadara Chemical Company JV successfully completed the project financing for the Sadara chemical complex in Saudi Arabia………………………………………..Full Article: Source

Oil and gas company debt soars

Posted on 11 August 2014 by VRS  |  Email |Print

Energy businesses are selling assets and took on $106bn in net debt in the year to March. The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.
The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets……………………………………..Full Article: Source

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