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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

Hedge Funds Are Digging Gold Miners

Posted on 11 August 2014 by VRS  |  Email |Print

All that glitters isn’t gold—at least for the investors who are eschewing the precious metal in favor of the companies that mine it. After years spent in the shadow of gold, miners are back in favor, driven by stronger earnings and cuts to mining costs. The NYSE Arca Gold Miners Index, which tracks 39 gold-mining companies, has soared 26% so far this year, compared with a 8.9% rise in gold and a 4.5% increase in the S&P 500.
The gold-miner rally is a boon for high-profile hedge-fund managers such as George Soros and John Paulson—as well as traditionally gold-focused traders like Peter Palmedo and Eric Sprott. Their gold bets were pummeled last year, when a rise in bond yields and muted inflation dulled gold’s allure, sparking a stampede that drove the precious metal’s price down 28% and the gold-mining index down 54%……………………………………..Full Article: Source

Banks: A love-hate relationship with commodities

Posted on 11 August 2014 by VRS  |  Email |Print

Banks have had a chequered involvement in commodities over the years, and have much to mull over as the race to expand in the market begins once again. When grain merchants in sixth-century Lombardy began issuing loans to farmers in return for a share of future crop production, they were laying the foundations of the modern banking system.
By also accepting readily marketable commodities such as gold as collateral for those loans, and later issuing money backed by that collateral, the Lombardy merchants were building a framework for the world’s first private and central banks, as Randall Guynn, a lawyer at Davis Polk who represents many of the world’s leading merchant banks and broker-dealers, told the US Senate Banking Committee last year……………………………………..Full Article: Source

The corporatisation of US green energy: a double-edged sword worth billions

Posted on 08 August 2014 by VRS  |  Email |Print

As tax breaks and incentives for renewable energy increase, corporations are entering the green energy landscape. There’s a popular meme that surfaces on green energy blogs, forums, and Facebook pages. The gist is that large corporations love oil and gas because they can own and control it. They’re against renewable energy because no-one can own the sun or wind.
The problem for anti-corporate green-energy campaigners is, increasingly: the meme isn’t true………………………………………..Full Article: Source

Energy firms fight for right to hedge at portfolio level

Posted on 08 August 2014 by VRS  |  Email |Print

CFTC position limits rule could limit the ability of energy firms to hedge, unless they aggregate commodity derivatives positions held across disparate business units.
A revived position limits rule from the US Commodity Futures Trading Commission (CFTC) could force energy firms to abandon the widely used practice of allowing individual business units to handle hedging for their own asset portfolios independently of the rest of the enterprise, industry groups have warned………………………………………..Full Article: Source

Banks down, but not necessarily out, in commodities

Posted on 07 August 2014 by VRS  |  Email |Print

Investment banks are making deep cuts in commodities, but they are not departing from the market entirely. Hammered by slender revenues, cumbersome regulation and higher capital requirements, banks are continuing their retreat from the commodity market. The latest example is Credit Suisse, which on July 22 announced it would exit its commodities business, citing the need to reduce risk-weighted assets under Basel III capital rules.
While this has been going on, commodity trading houses and oil majors have expanded their trading businesses, providing a keen sense of contrast. The trend was capped by the $3.5 billion sale of JP Morgan’s physical commodities business to Switzerland-based trading house Mercuria – a deal agreed in March………………………………………..Full Article: Source

Commodity ETFs: The makings of a perfect partnership?

Posted on 01 August 2014 by VRS  |  Email |Print

Commodity price moves are making headlines again after a relatively quiet period earlier this year. The intensifying crisis in Iraq is fuelling the rise in crude oil prices, the six-month long miners’ strike in South African has pushed platinum and palladium prices higher and gold is also attractive again as a safe-haven buy.
For many investors exchange-traded products (ETPs) are becoming the financial instrument of choice when it comes to commodities as they are easy to trade, they bypass some of the regulatory restrictions linked to futures and they come with relatively low fees………………………………………..Full Article: Source

Brazil’s Vale Hurt by Write-downs From Commodities Boom

Posted on 01 August 2014 by VRS  |  Email |Print

Brazilian mining company Vale SA reported lower-than-expected net profit in the second quarter as prices for iron ore fell to a four-year low and the company continued to write off assets it acquired during the last decade’s commodity boom.
Vale, the world’s biggest iron-ore producer, said Thursday its second-quarter net profit was $1.43 billion. That was up from a year earlier, when a currency depreciation distorted Vale’s financial results, but less than the $2.08 billion median estimate of 11 analysts surveyed by FactSet………………………………………..Full Article: Source

Russia Risk Seen Prompting BNP Paribas Commodity Bond Prepayment

Posted on 01 August 2014 by VRS  |  Email |Print

Bonds backed by loans made by BNP Paribas SA (BNP) to commodity traders will be repaid early because there’s a shortage of borrowers seeking to finance new shipments amid conflict in the Ukraine, according to Fitch Ratings.
The $131.6 million Lighthouse Trade Finance Issuer I Ltd. notes will be redeemed because of “the shortage of commodity transactions” originated by BNP Paribas’s Geneva office, which focuses on energy commodities sourced from eastern Europe, including Russia, Fitch said in a statement………………………………………..Full Article: Source

Reuters: Commodities assets under management rise $8 bln in June - Barclays

Posted on 31 July 2014 by VRS  |  Email |Print

Total global commodity assets under management (AUM) rose to $325 billion in June 2014 from $317 billion in May 2014, Barclays Capital said on Wednesday. “We estimate that there was a small net inflow of around $300 million into commodity investments during June,” the bank said.
The investment bank said in a research note on the sector that investors have continued to withdraw assets from commodity investments on a quarterly basis despite a marked improvement in the health of commodities as an asset class………………………………………..Full Article: Source

Commodity finance being done by Trading Houses

Posted on 30 July 2014 by VRS  |  Email |Print

A story recently in Reuters talked about how the biggest trading houses are filling the traditional banks (and mostly European banks role) of funding traders. This got particular attention, especially in light of the Obama administrations sanctions on Rosneft and other big Russian commodity producers.
If you look at the big trading houses, do they really want to take over the role of banks (who have access to historically cheap deposits?). Or is it really a question of providing these large trading houses with huge credit lines to further provide upstream finance to their smaller counterparties?……………………………………….Full Article: Source

Commodities Trading At Banks: Going, Going, Gone?

Posted on 29 July 2014 by VRS  |  Email |Print

While on a visit to the commodities unit of a major investment bank in New York roughly seven years ago, one was enveloped by a sense of exuberance on the trading floor. No less than three executives claimed their institution was among the “few banks” with separate units dealing in paper crude oil barrels, as well as loading and dispatching the physical stuff on to tankers somewhere off a foreign shipping terminal.
Given that the global financial crisis hadn’t taken hold and the year was 2007, such a claim could well be classified as the market overstatement of the decade then. In actual fact, most major banks were trading derivatives, futures, options and physical commodities at the time. Fast forward to the second half of 2014, and it is a different scenario altogether………………………………………..Full Article: Source

Inflation - Are Commodities Talking to Us?

Posted on 29 July 2014 by VRS  |  Email |Print

Markets often do talk to us, if only we would listen. Our ears serve as only part of listening. An open mind is also required. Regrettably, minds receptive to new thoughts and questions have been somewhat outmoded in the investment world for many years. Why else do so many seem to ignore what commodities are saying?
Commodities may be saying that complacency on prices might be inappropriate. In the chart below is plotted the year-to-year percentage change for the U.S. consumer price index, black line, and a like measure for the median U.S. CPI as prepared by the Cleveland Federal Reserve Bank………………………………………..Full Article: Source

OPEC income plummets as oil demand wanes

Posted on 28 July 2014 by VRS  |  Email |Print

The Organization of Petroleum Exporting Countries (OPEC) are expected to see their revenues decline this year and the next as demand for their crude diminishes, according to the Energy Information Administration, the US Department of Energy’s research arm.
The 12-member OPEC net oil export revenues hit an all-time high of USD 900 billion in 2012, before falling to USD 826 billion in 2013. EIA did not include Iran due to lack of available data. This was a 7% decrease from 2012 earnings, but still the second-largest earnings totals during the 1975-2013 period for which EIA has tracked OPEC oil revenues………………………………………..Full Article: Source

Bulls Fleeing Natural Gas as Goldman Sees Further Decline

Posted on 28 July 2014 by VRS  |  Email |Print

Speculators are fleeing natural gas after prices dropped below $4 for the first time since December and power plant production fell to a 13-year seasonal low.
Hedge funds reduced net-long positions, or bets on rising prices, by 11 percent in the week ended July 22, the U.S. Commodity Futures Trading Commission said. Bullish wagers have fallen 51 percent since February………………………………………..Full Article: Source

Credit Suisse heads for exit on commodities trading

Posted on 23 July 2014 by VRS  |  Email |Print

When is an investment bank committed to a business? Until it’s not! That oft-quoted adage could be heard in the City of London on Tuesday morning after Credit Suisse joined the ranks of investment banks exiting commodities trading. The bank announced that it was winding down its derivative-focused commodities unit to focus on more profitable businesses such as structured products and credit.
Like its peers, Credit Suisse blamed tighter regulation and lower profitability due to stable prices for oil and other commodities for the decision, revealed after the bank announced its biggest quarterly loss since the collapse of Lehman Brothers………………………………………..Full Article: Source

Bank Exodus From Commodities Could Hurt Liquidity Short Term

Posted on 23 July 2014 by VRS  |  Email |Print

The trend of major banks leaving the commodities business could hurt liquidity in the short term, but eventually other trading firms will fill the void, say veterans of the commodities business. Most do not look for a major impact on the price trend of commodities in general; after all, speculators can establish either long or short positions. Nevertheless, some pointed out that past moves by banks to exit happened to coincide with a bottoming in commodities prices.
Credit Suisse said Tuesday it plans to wind down its commodities trading to focus on other areas of its business. Previously, Deutsche Bank, JPMorgan and Barclays also said they are either scaling back or exiting the commodities arena………………………………………..Full Article: Source

Speculators Cutting Bullish Oil Bets Miss Ukraine Rally

Posted on 21 July 2014 by VRS  |  Email |Print

The downed jetliner in Ukraine and Israel’s Gaza offensive blindsided speculators who had cut bullish crude bets on the assumption that risks to supply were diminishing.
Crude futures rose after money managers slashed net-long positions in West Texas Intermediate, the U.S. benchmark grade, by 15 percent in the seven days ended July 15, the Commodity Futures Trading Commission said. It was the biggest drop in bullish wagers since March 2013………………………………………..Full Article: Source

The Return of Gold Hedging

Posted on 18 July 2014 by VRS  |  Email |Print

It’s baaack… That’s right, I’m talking about gold hedging, the gold stock investor’s bane. You see, gold miners “hedge” by agreeing to sell a portion of their future gold production at a fixed price. That way, if prices fall, they’re guaranteed a better profit.
Hedging was all the rage during the late 1990s and early 2000s, a period in which gold lost more than half its value. At the time, even mining company executives didn’t think gold prices would move up. But with most of their production hedged at relatively low prices, many miners missed out on the gold price boom of the last decade………………………………………..Full Article: Source

Commodity traders and asset ownership

Posted on 17 July 2014 by VRS  |  Email |Print

As trading has become more competitive and markets more transparent, big commodity traders have responded by sinking billion of dollars into refineries, power plants, ports and other assets.
It is a narrative that has taken up many column inches over the past couple of years and there is more than a kernel of truth to it. Some energy and metals traders have indeed become more asset heavy through targeted acquisitions. Vitol, for example, recently acquired Royal Dutch Shell’s Australian refinery and petrol station assets for $2.6bn, while Mercuria is set to buy the physical commodities business of JPMorgan Chase………………………………………..Full Article: Source

To Hedge or Not to Hedge; The Dilemma for Gold Mining Companies

Posted on 14 July 2014 by VRS  |  Email |Print

A major Russian gold producer earlier this month entered into the gold mining industry’s biggest hedging transaction in six years. According to analysts at Thomson Reuters GFMS, gold producers will return to net hedging this year for the first time after 2011. Hedging future production certainly has its benefits.
It guarantees future cash flows, especially during a volatile period like the one seen in 2013 when gold prices fell nearly 30%. However, it also limits the upside potential for mining companies………………………………………..Full Article: Source

Is “Inflation” On Its Way Out? Keep An Eye On Commodities

Posted on 14 July 2014 by VRS  |  Email |Print

Yes we are all too aware that Food, insurance and many other assets are more expensive these days. Speaking purely from a Commodities perspective, the Commodity Index TR has made a series of lower highs over the past few years. Early this year the index rallied up to falling resistance and now its breaking down below a couple of support lines.
Should we listen to the broader global inflation message or lack of with this index break down of late? I believe its important what the basket of commodities does going forward. I doubt that long bond players dislike this price action!!!……………………………………….Full Article: Source

Commodities Prices Point To Bottoming Euro-Zone Inflation

Posted on 18 June 2014 by VRS  |  Email |Print

Fears that the euro zone could be sliding into deflation might be short lived, if commodity prices continue to rise as they have done so far this year.
That’s because, by European Central Bank President Mario Draghi‘s reckoning, some 80% of the decline in euro zone inflation since 2011 can be accounted for by falling commodity prices. But with commodity prices picking up, that deflationary pressure should start to fade………………………………………..Full Article: Source

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Commodity finance in China: An assay-light strategy

Posted on 13 June 2014 by VRS  |  Email |Print

At the best of times, seizing collateral on defaulted loans in China is a fraught task, plagued by patchy enforcement. These are not the best of times in the port of Qingdao, a trading hub in the north-east. Police are investigating whether companies have committed fraud by pledging the same holdings of copper and aluminium to multiple banks, multiple times. The banks are scrambling to see how much of the metal sitting in Qingdao’s warehouses actually belongs to them.
More than just a fraud, the tale exposes China’s financial idiosyncrasies and the lengths to which firms sometimes go to borrow money. Regulators have tried to choke off credit to metal traders in recent years as part of efforts to slow pell-mell construction. Traders have devised a simple workaround………………………………………..Full Article: Source

Have large banks in China fallen victim to a commodities fraud?

Posted on 13 June 2014 by VRS  |  Email |Print

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other big Western banks are concerned that their loans may lack the appropriate collateral of big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there………………………………………..Full Article: Source

China Commodity Loans Add to Surge in Offshore Borrowing

Posted on 13 June 2014 by VRS  |  Email |Print

The commodity-backed loans at the center of a probe into an alleged financial scam at a Chinese port are part of a ramp-up in offshore borrowing by Chinese companies that Beijing is looking to tamp down.
As Chinese authorities tightened credit at home in the past year, local firms instead looked abroad for financing. Asian-Pacific banks alone had $1.2 trillion in loan exposure to China at the end of 2013, up two-and-a-half times from 2010, according to Fitch Ratings………………………………………..Full Article: Source

Lenders Fear Spread of Chinese Commodities Fraud Case

Posted on 12 June 2014 by VRS  |  Email |Print

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other large Western banks are concerned that their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there………………………………………..Full Article: Source

Shift metals in China to secure warehouses, banks tell clients

Posted on 12 June 2014 by VRS  |  Email |Print

At least two global banks involved in commodity financing in China have asked some clients to shift copper and aluminium, used as collateral for loans, to better regulated warehouses, three sources with direct knowledge of the matter said.
Banks and trading houses have been making urgent checks on the security of metal holdings in China, sparked by a suspected fraud at Qingdao Port, the world’s seventh biggest. Police are investigating the duplication of warehouse receipts by a third-party firm on metal cargos used to obtain financing………………………………………..Full Article: Source

Why Metals Buyers Should Worry About China’s Commodity Trade Financing Game

Posted on 12 June 2014 by VRS  |  Email |Print

Chinese companies are getting caught up in commodity trade finance trouble, as borrowers are securing loans using warehoused aluminum and copper as collateral – and allegedly using the same collateralized stock multiple times for multiple loans. Should Industrial Metals Buyers Worry About This?
Surely, it is an internal Chinese matter; if a few Western banks have got themselves caught up in it and get burned as the clients default, the underlying commodity proves to not be there or pledged elsewhere, well, some may say, that’s their fault for lending in such an unregulated market………………………………………..Full Article: Source

OPEC’s Withholding Taxes Oil Majors

Posted on 12 June 2014 by VRS  |  Email |Print

Business lore holds that you can’t cut your way to prosperity. Apparently, no one told OPEC. In December, at its last general meeting, the Organization of the Petroleum Exporting Countries faced a rush of rising oil supply from Libya, Iraq, Iran, and North America. The big question was how far oil prices would fall before the sometimes fractious cartel agreed how to share the pain of output cuts to make way.
Now, with Libya and Iraq in crisis again and U.S. talks with Iran looking dicey, OPEC’s job is a lot easier as it its latest get-together wraps up; the group Wednesday agreed to maintain current production quotas………………………………………..Full Article: Source

Bankers Focus on Trading Firm in Search for Metals Used as Collateral

Posted on 11 June 2014 by VRS  |  Email |Print

Bankers in China are focusing on the actions of a commodities-trading firm as they scramble to find metals they believed were backing loans but which appear to have been used as collateral multiple times.
The operator of Qingdao port, on China’s eastern coast, said this week Chinese authorities were investigating an alleged fraud involving metals stored at the port and used as collateral to obtain multiple bank loans………………………………………..Full Article: Source

China Commodity Financing Seen Declining by Goldman Sachs

Posted on 11 June 2014 by VRS  |  Email |Print

Foreign banks are projected by Goldman Sachs Group Inc. to lend less money against commodity inventories in China amid a probe into metals stockpiles in the biggest consumer of raw materials.
Claims that single batches of copper and aluminum at Qingdao Port were pledged as collateral for multiple loans risks undermining a broader practice in which traders use everything from iron ore to rubber to get funding. The investigation is already weighing down copper prices and may curb foreign exchange inflows to China, according to a report by Goldman………………………………………..Full Article: Source

StanChart says not pulling out of China commodities financing

Posted on 11 June 2014 by VRS  |  Email |Print

Standard Chartered said on Tuesday it acknowledges there are issues in China around commodity financing and while it is monitoring the situation, it is not pulling out of its commodity financing business in the country.
Arun Murthy, global head of comomodities at Standard Chartered, also said in an email response to Reuters that commodity financing remained a key focus for the bank………………………………………..Full Article: Source

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