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Commodities Briefing - Archive | December, 2008

Japanese Yen: An excessively strong currency spells recession

Posted on 29 December 2008 by VRS  |  Email |Print

From Japan saw its industrial output falling 8.1 percent from October. Another 8 percent decline is expected in December. The chief economist at Macquarie Securities in Tokyo says, “Exports and industrial production are falling so extraordinarily quickly that it almost defies analysis.”

The Yen is extraordinarily strong this year, having appreciated close to 25-30% against a basket of currencies….. Full Article: Source

Sterling hits record low vs euro, Swiss franc rises

Posted on 29 December 2008 by VRS  |  Email |Print

From Guardian: Sterling hit a record low against the euro on Monday, hurt by its yield disadvantage against the single European currency and inching closer to parity.

Hurt by fears about the bleak outlook for the UK economy and expectations that euro zone interest rates are likely to stay higher than British rates in coming months; sterling hit a low of 96.315 pence on the Reuters dealing system….. Full Article: Source

Gold may rise for fourth week as investors seek store of value

Posted on 29 December 2008 by VRS  |  Email |Print

From Bloomberg: Gold may rise for the fourth straight week on speculation the recession will deepen in 2009, boosting the appeal of the precious metal as a store of value.

Eighteen of 25 traders, investors and analysts surveyed from Mumbai to Chicago from Dec. 24 through Dec. 26 advised buying gold, which rose 4 percent last week to $871.20 an ounce in New York. Four said to sell, and three were neutral….. Full Article: Source

Soybeans, Corn touch 7-week highs as dry weather stresses crops

Posted on 29 December 2008 by VRS  |  Email |Print

From Bloomberg: Soybean and corn prices climbed to the highest in more than seven weeks on speculation that dry, hot weather will increase stress on young plants in Brazil and Argentina, the two biggest exporters of the crops after the U.S.

The lack of rain may last through the next week, DTN Meteorlogix LLC said in a report. A ridge of dry, warm air over western Argentina may develop after Jan. 1 and settle over the main growing regions, the private forecaster said….. Full Article: Source

Mixed gas outlook

Posted on 29 December 2008 by VRS  |  Email |Print

From Power generation is likely to be the only driver for increased natural gas demand this winter as warmer weather and a sluggish economy dampen retail and industry demand, the Natural Gas Supply Association forecast in its annual winter outlook for 2008-2009.

“Gas-fired generation is an area where gas demand is expected to increase as a result of gas generating capturing most of the new power generation capacity,” says Patrick Kuntz, vice president at Marathon Oil and current NGSA chairman, at a presentation of the forecast in Washington in October….. Full Article: Source

Crude Oil rises after Israeli attacks on Gaza roil Middle East

Posted on 29 December 2008 by VRS  |  Email |Print

From Bloomberg: Crude oil rose a second day in New York on supply concerns after Israeli air strikes in the Gaza strip killed more than 285 people, heightening geopolitical tensions in the Middle East, the world’s largest producing region.

Oil gained as much as 5.6 percent as Israel called up 7,000 reservists after two days of air attacks on the Hamas-controlled region….. Full Article: Source

Metals fatigue

Posted on 29 December 2008 by VRS  |  Email |Print

From Few Canadian resource industries fared well in what turned out to be a dismal year for commodities, but base metal miners were hit particularly hard as credit markets tightened, global demand slumped and prices for everything from zinc and copper to iron ore and aluminum plummeted.

And one analyst predicted some of Canada’s big mining companies will go bankrupt before conditions start to improve….. Full Article: Source

Gold glitters while silver drops during 2008

Posted on 29 December 2008 by VRS  |  Email |Print

From Gold as an investment option glittered like never before this year, which saw the global financial markets going topsy-turvy, with other investment options such as the dollar and the equities going into a tail-spin amid crude prices soaring to record high levels.

The prices of gold, the all-weather investment option, peaked to the all-time high of Rs 14,105 ($291) per 10 gram during intra-day on October 10 in Mumbai bullion with investors running for cover in the precious metal amid stocks spiralling downwards and dollar losing its sheen….. Full Article: Source

Carbon trading - smoke and mirrors?

Posted on 29 December 2008 by VRS  |  Email |Print

From Dr Peter Martin of the Centre for Excellence in Outdoor and Environmental Education at La Trobe University writes: The science and economics behind a carbon trading scheme are complex, but the basic ideas are not.

As the Government moves to convince Australians it has taken appropriate action on climate change, it’s tricky to unravel the facts from the political spin - where facts can get twisted….. Full Article: Source

Oil falls despite Saudi pledge to apply Opec cuts

Posted on 23 December 2008 by VRS  |  Email |Print

From FT: Commodities prices were mixed on thin pre-Christmas trading yesterday, with crude oil prices in London and New York dropping, tracking a fall in equities.

Nymex February West Texas Intermediate, from yesterday the US market benchmark, fell $1.35 to $41.03 a barrel…… Full Article: Source

Russia warns Europe it could face gas shortages

Posted on 23 December 2008 by VRS  |  Email |Print

From Guardian: Britain was given a sharp reminder of the dangers to its energy supplies today when Gazprom warned western Europe could be hit by gas shortages. The Russian gas provider said a long-running row with Ukraine could disrupt supplies to Europe this winter.

The fears were raised just 24 hours before Russia hosts a meeting of the world’s major gas suppliers to set up an Opec-style production cartel that could also push up the price of energy in the UK and elsewhere…… Full Article: Source

JPMorgan buys UBS Canadian commodities unit

Posted on 23 December 2008 by VRS  |  Email |Print

From UBS is selling its Canadian-based commodities and energy business to JPMorgan Chase & Co. as part of its plan to refocus on its core securities and advisory functions.

JPMorgan will acquire UBS Commodities Canada Ltd., the Canadian energy operations of UBS AG, Switzerland’s biggest bank, as well as the firm’s global agriculture business. The affected employees will transfer to JPMorgan…… Full Article: Source

Great depression 2009 follows $30 trillion deflation

Posted on 23 December 2008 by VRS  |  Email |Print

From From a fundamental perspective US consumers had come to rely on borrowing against growing asset prices to sustain their lifestyles. Most of today’s globally-interconnected economy was based upon growth in the US consumption. This game has ended badly.

Asset dependency will eventually be replaced by living off of income and savings, but not after we escape from this disastrous period…… Full Article: Source

Dark outlook for commodities

Posted on 23 December 2008 by VRS  |  Email |Print

From The dramatic fall in commodities prices in the second half of 2008, exacerbated by rapid economic contraction, has raised serious doubts about the ’supercycle’ theory in global commodities, producing little cheer in forecasts for 2009.

Oil, having fallen from $147 a barrel to less than $40 a barrel, is not expected to recover in the short term, at least until some impact from the Opec production cuts begins to be felt. Analysts at Goldman Sachs, which at one point this year predicted oil would hit $200 a barrel, have revised their forecasts for 2009 sharply downwards, predicting an average of $45 a barrel for the year ahead…… Full Article: Source

Commodities outlook for 2009

Posted on 23 December 2008 by VRS  |  Email |Print

From The commodities boom is dead - long live the commodities boom! Because if there is one thing that seems clear even now, as key industrial inputs such as metals and energy plumb depths that ’supercycle’ advocates thought would never be revisited.

It is that this carnage has occurred before the classic supply-side response to the elevated prices of recent years could properly emerge, thereby guaranteeing at least one more round of elevated prices in the offing as the world emerges from the current recession…… Full Article: Source

Forecasters share predictions for economy’s outlook in 2009

Posted on 23 December 2008 by VRS  |  Email |Print

From It may come as a surprise, given all the bad news of late, but the U.S. economy is expected to emerge from the recession sometime around mid-2009.

Until that happens, the economy will remain mired in one of the deepest and longest downturns the nation has seen in decades…… Full Article: Source

Why market-timing might work in commodities

Posted on 23 December 2008 by VRS  |  Email |Print

From There is no “commodities market” in the way there is a “stock market.” And there’s no literature that I’m aware of showing that commodity indexes offer the best approach for investors.

Consider that the two most popular commodity indexes in the world—the S&P GSCI and the DJ-AIG—differ wildly in their makeup and performance. The S&P GSCI is 70% Energy, while the DJ-AIG is just 31% Energy…… Full Article: Source

Gold prices post modest advance

Posted on 23 December 2008 by VRS  |  Email |Print

From AP: Gold prices advanced moderately Monday as investors went in search of safety after more signs of weakening global demand for all kinds of products. Energy prices faltered while agriculture futures rose.

As the economy worsens, investors have been fleeing stocks for the more traditionally safe investments of government bonds and gold. The belief is that gold has more potential to advance than other investments…… Full Article: Source

Meltdown in commodities spreads to gold

Posted on 23 December 2008 by VRS  |  Email |Print

From Gold prices started the week on a slightly firmer footing and rose for the first time in three days, as a small advance in oil and marginally softer dollar attracted buyers.

Although volatility could manifest itself amid thinning trading conditions, few expect significant new positions to be established or sharp trend changes in either direction to take place as the winding down of trading for the year will be well under way. Spot prices opened with a $7 gain quoted at $845 (that old, familiar number) after recording lows near $835 overnight…… Full Article: Source

Chicago 2016 joins climate exchange

Posted on 23 December 2008 by VRS  |  Email |Print

From Chicago 2016, the group behind the city’s bid to host the 2016 Summer Olympic and Paralympic Games, is going green. The non-profit organization has joined the Chicago Climate Exchange, which operates a greenhouse gas-emissions registry and a greenhouse gas-reduction and trading system.

The Chicago-based Climate Exchange claims to have been the first of its kind in the world and the only such organization in North America. The cost of Chicago 2016’s membership was not disclosed. ….. Full Article: Source

CFTC oks clearinghouse for interest rate derivatives

Posted on 23 December 2008 by VRS  |  Email |Print

From Reuters: The U.S. Commodity Futures Trading Commission said on Monday it approved International Derivatives Clearing Group LLC (IDCG) to clear and settle interest rate derivative contracts.

As a derivatives clearing organization, the agency said IDCG is authorized to clear futures contracts, options on futures contracts, commodity options and over-the-counter derivative contracts where interest rates or currencies constitute the underlying commodity…… Full Article: Source

Managed futures shine in 2008 massacre

Posted on 23 December 2008 by VRS  |  Email |Print

From Managed futures funds or Commodity Trading Advisors (CTAs) rank as the second best performing alternative index in 2008, according to Credit Suisse-Tremont.

This year, the CSFB/Tremont Hedge Fund Index has declined 19% through November compared to a 15.6% gain for the CSFB/Tremont Managed Futures Index. Only dedicated short-sellers have outpaced CTAs, up 16.8% in 2008…… Full Article: Source

How to go short with inverse exchange-traded funds

Posted on 23 December 2008 by VRS  |  Email |Print

From You don’t exactly need to be Jesse L. Livermore to make big profits in a down market these days, although it certainly wouldn’t hurt.

Livermore, of course, made massive fortunes betting against the markets, along with what became his ultimate claim to fame. Livermore went short the market in 1929 earning himself $100 million in short-selling profits…… Full Article: Source

Africa reels as global crisis hits mines

Posted on 23 December 2008 by VRS  |  Email |Print

From The global financial crisis and nosediving commodity prices have dealt a major blow to mining-based African economies, where a recent boom is set to wither, setting back the fight against poverty.

Analysts say the economic downturn and its impact on commodity prices pose a possible disaster for resource-rich countries that have failed to diversify beyond the mineral wealth that fills government coffers…… Full Article: Source

Could coal recover?

Posted on 23 December 2008 by VRS  |  Email |Print

From With only a few days left until Christmas, you have to believe that Santa has already purchased the coal he’s going to need for all those naughty children around the world. If he bought earlier this year, it probably cut into the big guy’s budget: Coal prices were sky-high until early fall.

But you’d better watch out - coal is predicted to be a lot cheaper for Santa next year - which could mean more coal in people’s stockings in 2009…… Full Article: Source

Copper trims gains as inventories rise

Posted on 23 December 2008 by VRS  |  Email |Print

From Demand concerns led copper to pare early gains, inspired by the weaker US dollar and rising Chinese imports.

China imported 141,728 tonnes of refined copper last month, 37.7 per cent more than in November 2007, official customs figures showed…… Full Article: Source

Scotiabank commodities expert provides a year-end review and outlook for commodity prices in 2009

Posted on 23 December 2008 by VRS  |  Email |Print

From For the fourth consecutive month, Scotiabank’s Commodity Price Index, which measures price trends in 32 of Canada’s major exports, lost ground in November, tumbling 9.4 per cent month-over-month (m/m).

2008 has been a tumultuous one for commodity prices, with the All Items Index first soaring to a new record high in July and then plunging by 35.4 per cent through November…… Full Article: Source

CF Partners launches carbon hedge fund

Posted on 23 December 2008 by VRS  |  Email |Print

From Environmental finance firm CF Partners is to start a hedge fund targeting the carbon market. Due to start by the end of January, the fund will exploit the volatility in the carbon markets to make profits, say executives.

The London-based company will run the hedge fund using arbitrage trading, which exploits mismatches in pricing. ….. Full Article: Source

Will COMEX default on gold and silver?

Posted on 23 December 2008 by VRS  |  Email |Print

From With investment advisors like the former NASDAQ Chairman Bernard Madoff being prosecuted for fraud, it is natural for people to begin to seek stores of wealth that are not subject to counterparty risk. The precious metals have been relatively safe stores of wealth for the past 10,000 years.

Many people are going back to basics, turning back to the precious metals, as places to put their money, in these uncertain times…… Full Article: Source

Kiplinger’s advice to investors: don’t despair

Posted on 23 December 2008 by VRS  |  Email |Print

From Investors who have endured a year of negative returns — and lost their faith in the markets, thanks to an alleged $50 billion Ponzi scheme — can be forgiven for wanting to stuff their mattresses with cash instead of investing it.

Still, Knight Kiplinger, editor in chief of Kiplinger’s Personal Finance, says there are better solutions…… Full Article: Source

ETF launches sputtered in tough 2008

Posted on 23 December 2008 by VRS  |  Email |Print

From This was a tough year to launch any new product, and exchange-traded funds were no exception. While ETFs were anticipated by many to overtake mutual funds due to their ability to trade like stocks, the crippling global economic crisis of 2008 put a halt to that growth for now, forcing dozens of new ETFs to close and hundreds more to delay launching until conditions improve.

Approximately 70% of the 730 U.S.-based ETFs opened in the last three years, but that pace has slowed significantly this past fall. ….. Full Article: Source

Dollar-commodities link dead after debate

Posted on 23 December 2008 by VRS  |  Email |Print

From “Go long commodities, short the dollar” rang the battle cry that pushed oil, copper and wheat to record highs earlier in 2008. That trade unwound with fury over the past five months, as the dollar rebounded from record lows and commodities lost 60% or more.

Now the greenback is once again in decline, but analysts say that they don’t expect that to rekindle interest in an inverse correlation trade that, for some, was dubious to begin with. ….. Full Article: Source

Analyst predicts mixed fortunes for Australian mining industry

Posted on 23 December 2008 by VRS  |  Email |Print

From A leading resource analyst at ANZ Bank says almost half of all mining companies in Australia are currently operating at a loss. ANZ’s head of commodities research Mark Pervan says contract prices for coal have dropped significantly since last year and further drops are forecast when contracts are renegotiated in early 2009.

Pervan says smaller miners will be hardest hit and coal is the most vulnerable resource…… Full Article: Source

Crude still weak; may go down to $30: PJ Commodities

Posted on 23 December 2008 by VRS  |  Email |Print

From Shreekant Jha of PJ Commodities feels crude still remains weak. “We feel it may go down to USD 30 per barrel, which is the next support. If it moves up at all, there is a resistance at USD 45 per barrel or USD 52 per barrel,” he said.

The agro commodities are doing a little better. Edible oil was down for a while but now even things like RM seed have started to move up and trade on the upside. So we are looking at it to be a little bullish now. Soya, too, has been moving up…… Full Article: Source

OPEC loses its muscle

Posted on 22 December 2008 by VRS  |  Email |Print

From Despite its bluster about cutting production, the cartel has been unable to marshal its members to halt oil’s sliding price.

Why is OPEC’s reputation taking such a hit? The market views it as having let things get out of control when prices were surging. Now the cartel can’t seem to contain a downward slide, either….. Full Article: Source

Crude price fall forces oil industry into rethink

Posted on 22 December 2008 by VRS  |  Email |Print

From A sudden collapse in the price of crude oil is forcing energy companies to slash budgets and reduce exploration and oilfield development programmes.

The cutbacks in spending are expected to hit the American oil industry hard, according to a survey by Barclays Capital, which is forecasting that upstream budgets in the US oil and gas industry will be reduced by a quarter in 2009….. Full Article: Source

The consequences of Opec’s failure

Posted on 22 December 2008 by VRS  |  Email |Print

From Organisation of Petroleum Exporting Countries’ (Opec) decision to cut oil production by 2.2 million barrels a day sounded drastic, but obviously failed to impress the market.

Oil prices, which at their peak of about $147 in July were seven-times higher than their 2002 levels, dropped to around $40 and are expected to fall further as the bet is that fewer barrels would be needed to fuel a shrinking global economy. …. Full Article: Source

Opec revenues to hit five-year low

Posted on 22 December 2008 by VRS  |  Email |Print

From Opec’s oil export revenue is set to tumble more than 50 per cent next year to a five-year low due to the combined effect of sharply lower crude prices and production cuts.

In a new forecast released late last week, the US government projected the group’s net revenue from oil exports would slump to US$444 billion (Dh1.63 trillion) next year, after narrowly failing to break through the trillion-dollar threshold this year….. Full Article: Source

UK green light for coal-fired power

Posted on 22 December 2008 by VRS  |  Email |Print

From FT: Britain will not ban the construction of coal-fired power stations while new technology is being developed to cut their carbon emissions, Ed Miliband, the UK energy secretary, has said.

Mr Miliband will decide next year on Eon’s application to build a coal-fired power station at Kingsnorth, Kent….. Full Article: Source

2009 to witness global agri-commodity shortage

Posted on 22 December 2008 by VRS  |  Email |Print

From Despite stronger production and falling prices for many food staples in the second half of 2008, the risk of food supply shortages remains acute in world markets.

These supply shortage risks stem from reduced producer incentives – and ability - to boost food production, according to a Commodity Online report….. Full Article: Source

The great stocks and commodities deleveraging crash of 2009

Posted on 22 December 2008 by VRS  |  Email |Print

From Should you not really have or bear the time with me to go thru technical explanations, which is most likely to happen under the given Christmas mood, here is an appropriate overall rundown on current issues:

The peak to be expected in about 8 weeks with the US $ should mark the end of the temporary relief from hyperinflation after it was nurtured worldwide over the last months by massive bailout plans with TRILLIONS of paper money printed out of thin air and passed on to future generations thru governmental indebtedness….. Full Article: Source

Buy-and-hold commodity play

Posted on 22 December 2008 by VRS  |  Email |Print

From Iron-ore demand has fallen due to the global slowdown, and prices have corrected sharply. Sesa Goa’s story is negative today, but long-term investors could bet on the stock’s cyclical nature.

Sesa Goa is into mining and export of iron ore. Almost 66 per cent of its ore is exported to a single country, China. …. Full Article: Source

Commodities firms suffer after grim year

Posted on 22 December 2008 by VRS  |  Email |Print

From Independent: Smaller companies across the commodities sectors are facing a difficult new year as capital remains hard to come by and prices show little sign of resurgence.

Ernst & Young’s index of top 20 mining companies on the Alternative Investment Market (Aim) plummeted by 77 per cent over the course of the year, as March’s record high was more than cancelled out by an all-time low in November…… Full Article: Source

Trade to be hot topic for commodities in ‘09

Posted on 22 December 2008 by VRS  |  Email |Print

From Trade-related issues are likely to be important for commodities in the coming year says Rabobank commodity analyst Michael Whitehead.

The ongoing Doha round of talks are an area to watch, and he expects action from the WTO on cotton, corn, sugar and ethanol, with many of those disputes driven in part by Brazil. ….. Full Article: Source

Carbon trading revenues to increase tenfold

Posted on 22 December 2008 by VRS  |  Email |Print

From Banks’ revenues from carbon emissions trading could see a tenfold jump to the €3bn ($4.3bn) to €5bn range by 2020, while the market may grow to $2 trillion over the same period, according to two reports on the sector.

However, the incoming Obama administration will have to pave the way for “cap-and-trade” in the US via regulatory reforms….. Full Article: Source

No carbon copy

Posted on 22 December 2008 by VRS  |  Email |Print

From Mexico has done something virtually none of the world’s rich, industrialized countries - including the United States - so far has been willing to do: begun a plan to cap greenhouse gas emissions.

Mexico’s move, announced 10 days ago in Poland at a gathering of 145 environmental ministers and other leaders, is seen as an attempt to prod others to action….. Full Article: Source

VM predicts further short term base metals price decline, but some recovery by end-2009

Posted on 22 December 2008 by VRS  |  Email |Print

From The latest metals monthly report from Fortis/VM Group suggests that the majority of the metals markets must expect further price declines in the first quarter of next year, before a recovery that will take prices higher by year-end; although gold will be more robust.

The Group’s price forecasts expect gold to be, at $850, at the same level in twelve months’ time as it is now (and, for that matter, as it was twelve months ago, more or less), while looking for $12 silver, $900 platinum and $180 palladium, an increase of 13% for silver, of 6% for platinum and no change for palladium. …. Full Article: Source

Australia: One third of miners to disappear

Posted on 22 December 2008 by VRS  |  Email |Print

From More than a third of Australia’s 800-odd publicly-listed mining and exploration companies may not survive the crash in commodities markets.

This is the dire warning from a big four accounting firm. The impact of the global financial crisis has hit hard in the nation’s vital resources sector, with a long list of mines shut indefinitely, expansions put on hold and approximately 5000 workers laid off in the past few months alone….. Full Article: Source

Half of Canada’s mining companies could go bankrupt after dismal year

Posted on 22 December 2008 by VRS  |  Email |Print

From Canadianpress: Few Canadian resource industries fared well in what turned out to be a dismal year for commodities, but base metal miners were hit particularly hard as credit markets tightened, global demand slumped and prices for everything from zinc and copper to iron ore and aluminum plummeted.

And one analyst predicted some of Canada’s big mining companies will go bankrupt before conditions start to improve….. Full Article: Source

Phenomenal demand for gold coins continues

Posted on 22 December 2008 by VRS  |  Email |Print

From International demand for gold coins has picked up as people strive to take charge of their own financial destinies in an uncertain investment world.

Sales manager at the South African Gold Coin Exchange Len Sham says the demand for Krugerrands and collector coins such as the Mandela Coin has been phenomenal over the past five years as the rand weakened and the gold price strengthened….. Full Article: Source

December 2008
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