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Commodities Briefing 09.Oct 2008

Commodity prices at mercy of world economy
Commodity exchanges seen beefing up clearing houses
Gold surges as investors rush for safety
World growth to slow to 3 percent
Gold slips after rally, ETF holdings hit record
Rescue may boost commodity trading
Commodities to rise into 2009 as liquidity returns
Focus shifts to commodities
NMCE gets new corporate identity
No objection to 100 percent FDI in brokerages: Indian Regulator
Commodity coal prices have started to slip
Opec members seek emergency meeting
EU climate body lets industry off the hook until 2013
Reliance Money may get additional 16 pct in NMCE
Petroleum industry reeling from commodity price rollercoaster
Copper hits new low as concern grows for metals demand
Ivanhoe Energy may invest $4.3 bln in Ecuador oil projects
Orange Juice advances as investors buy following price slump
China mills slowing iron ore demand
Slump worst in 50 years: Lundin
Oil touches year's lowest level
Fortis/VM Group predict solar energy will boost silver demand
Gold is telling us main currencies are weaker – not just the dollar stronger
Fiji targets $1billion from carbon trading
China: Commodities market takes another bashing
Potential growth for clean energy, carbon trading business in Asia-Pac
SEC head asks for reins on credit default swaps
Euro strengthens as rate cuts relieve pressure
Commodities markets react to outside pressure
Global IPO activity falls to lowest level in 5 years
Sharp declines in commodities hammer funds
Is it the end of the line for coal-to-oil in China?
CRB commodities index has largest decline in 50 years
Economic indicators signal a major collapse ahead
Commodities fall to lowest levels for 12 months

Posted on 09 October 2008 by VRS |  Email |Print

From Guardian: Further declines in oil and metals prices after coordinated global interest rate cuts suggest that commodities will not return to their giddy heights until the world economy is on more solid footing.

Wednesday’s performance also undermines the theory that commodities move independently of other markets. This argument made sense on days when oil and metals prices rose and equities fell but becomes less meaningful when they slump together in the current financial crisis. “The primary difference we have here is the change in worldwide investor psyche,” said Adam Sarhan, founder of New York’s GlobalMacroResearch.com.http://www.guardian.co.uk/business/feedarticle/7846918

Posted on 09 October 2008 by VRS |  Email |Print

From Cattlenetwork.com: Agricultural commodity exchanges are likely to be pushing their clearing houses to expand their capabilities as volumes of over-the-counter business look set to increase, chief investment officer of hedge fund advisory Aisling Analytics, Doug King, said.

A desire to minimize counterparty risk is likely to result in an increase in the amount of over-the-counter trades cleared through exchange clearing houses. While the majority of business in agricultural commodities takes place on exchanges, over-the-counter trading is popular for its flexibility….. Full Article: Source

Posted on 09 October 2008 by VRS |  Email |Print

From FT: Gold surged beyond $900 a troy ounce as investors rushed for a haven in spite of Wednesday’s co-ordinated cuts in interest rates as central banks stepped up their efforts to restore confidence across the global financial system.

In London, spot gold prices surged to a two-month high of $920 an ounce. In late afternoon trading, gold rose $27.60 to $913.50 an ounce….. Full Article: Source

Posted on 09 October 2008 by VRS |  Email |Print

From Money Web: In its October World Economic Outlook the International Monetary Fund warns that global growth will slow to 3% in 2009, down from 5% in 2007. Summing up the dismal events of recent weeks, the WEO report says, “Global activity is being buffeted by an extraordinary financial shock and by still-high energy and other commodity prices.

Many advanced economies are close to or moving into recession, while growth in emerging economies is also weakening.” Against this backdrop, warns the IMF, world economic growth must inevitably slow. Says the report, “On an average annual basis, global growth is expected to moderate from 5% in 2007 to 3,9% in 2008 and 3% in 2009, its slowest pace since 2002.”…. Full Article: Source

Posted on 09 October 2008 by VRS |  Email |Print

From Reuters: Gold eased on Thursday as investors booked profits from a rally the previous day, while holdings in the world’s largest gold-backed exchange-traded fund hit another record on safe-haven buying.

Gold traded at $905.30 an ounce, down $1.20 an ounce from New York’s notional close on Wednesday, when it rose as high as $920 an ounce, its highest since September 29, after coordinated interest rate cuts by major central banks failed to calm markets…… Full Article: Source

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From Economic TimesThe $700-bn bailout package for US financial institutions is likely to have positive implications on commodity trading. The package is currently the focus of commodity analysts world-wide, especially in view of the conclusion that the recent boom was not driven solely by speculative capital, but entrenched firmly in rapidly changing global demand and supply equations.

Next-to-nil demand saw markedly poor arrivals in the world’s best known commodity exchanges through September. Trade inaction kept prices at record lows for several commodities. The bailout package is expected to act as a catalyst for demand and fuel higher arrivals and trade in key commodity exchanges.http://economictimes.indiatimes.com/Market_News/US_bailout_to_boost_commodity_trading/articleshow/3575434.cms

Posted on 09 October 2008 by VRS |  Email |Print

From Cattlenetwork.com: Commodity prices will stabilize and creep higher into 2009 due to massive levels of liquidity being pumped into the world economy, according to an investment portfolio manager.

Commodities prices in the correcting bull market have fallen under the influence of deleveraging brought on by panic in the financial crisis, said Carlton Neel, senior vice president of Virtus/Zweig Advisors and lead portfolio manager of Virtus Alternatives Diversifier Fund in New York…… Full Article: Source

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From Telegraph India: Affluent investors have started funnelling their money into commodity futures as stock returns tumble by as much as 45 per cent this year.

High networth individuals (HNIs) have started to head to commodity exchanges which are now reporting a daily turnover of Rs 28,000 crore from a level of Rs 20,000 crore sometime ago. “I have come across many investors who are now eager to put their money in commodities,” says Harish Galipelli, head of research at Karvy Comtrade. He said most of the investor interest was centred on gold and silver, traditionally considered safe havens when the going is bad for the stock markets….. Full Article: Source

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From Business Standard: National Multi-Commodity Exchange of India (NMCE), the country’s first online demutualised commodity exchange today unveiled its new identity.

The new identity was unveiled by B C Khatua, chairman of the commodity market regulator Forward Markets Commission (FMC). The exchange plans to expand its membership network and commodity base…… Full Article: Source

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From Business Standard: The Forward Markets Commission (FMC) has no objection if the government plans to allow 100 per cent foreign direct investment (FDI) in commodity brokerages, as the regualator will take care to protect the functioning of the market, B C Khatua, chairman, FMC, said.

“We have no objection to the government’s decision as long as they conform to our regulatory rules,” Khatua said, referring to recent media reports that 100 per cent FDI in commodity brokerage houses is being considered by the government…… Full Article: Source

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From Purchasing: Eastern Appalachian metallurgical coal prices have slipped this month back to July’s average of $133/ton, down from $140 the previous two months. Part of the reason is the weak (1.2%) growth in electric-power-sector.

Also, some utilities have switched to cheaper $14/ton Powder River Basin coal from Wyoming. “Sales commitments for Powder River Basin coal to Eastern utilities are more than 50% higher than a year ago,” according to a report by Merrill Lynch & Co…… Full Article: Source

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From FT: Almost half the members of the Opec oil cartel are considering an emergency meeting in Vienna next month as oil prices dropped to their lowest level in nearly a year.

Almost half the members of cartel have in the past few days called on the group to act to halt the slide before their next official meeting scheduled to take place in Algeria in late December. ….. Full Article: Source

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From Dw-world.de: The EU parliament’s environment committee has let elements of EU industry off the hook for five years with the drafting of proposals that won’t see them begin paying for their carbon emissions until 2013.

The string of environment committee votes, labelled “Super Tuesday,” was a review of three major laws that make up the EU’s overall climate package targeting global warming…… Full Article: Source

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From Reuters: Reliance Money may get approval to buy an additional 16 percent stake in National Multi Commodity Exchange of India Ltd (NMCE) in three months, a top official said.

Reliance Money bought 10 percent in NMCE last week. “After buying 10 pct stake we are now working to get approval for another 16 pct stake in exchange..it should come through in three months,” Sudip Bandyopadhyay, director and chief executive of Reliance Money, said…… Full Article: Source

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From Rigzone.com: In an increasingly volatile market in which assets have been consistently tumbling, commodity prices have plunged to a new low of around $89 a barrel from record highs that topped out at more than $147 a barrel in July.

The plummeting price has sparked concern among members of OPEC, with some leaders citing that the oil cartel should meet in November, a month ahead of the scheduled date in December. Crude Prices took a steep fall Oct. 8, 2008, after the U.S. Energy Information Administration reported that U.S. crude oil inventories had increased by 8.1 million barrels for the week ending October 3. Inventories rose from 294.5 million barrels to 302.6 million barrels throughout the week, according to the EIA report…… Full Article: Source

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From The Australian: Industrial metals slumped overnight as global economic concerns continued to bite. In an attempt to stem the worst global financial crisis since the 1930s, the US Federal Reserve, European Central Bank, Bank of England, Switzerland, Canada and Sweden all lowered official rates by a half-percentage point.

The People’s Bank of China, in what appeared to be the first time it had coordinated with the Group of Seven advanced industrial nations, also lowered its key rate, but by a more modest amount…… Full Article: Source

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From Bloomberg: Ivanhoe Energy Inc., a Canadian oil and natural-gas producer, may spend $4.3 billion over 30 years to extract heavy crude from Ecuador’s Amazon region, state-owned PetroEcuador said.

Under an accord with PetroEcuador signed today, Vancouver- based Ivanhoe will extract oil from the Pungarayacu field on the western fringe of the Amazon. PetroEcuador will pay Ivanhoe $37 a barrel for the production, according to a statement from PetroEcuador.’…. Full Article: Source

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From Bloomberg: Orange juice rose for a second day as investors bought the commodity back to take advantage of the lowest price level since January 2005 before a government report on the size of Florida’s coming harvest.

Orange juice has tumbled 31 percent in the second half as groves in Florida, the world’s second-largest grower after Brazil, escaped storm damage and on speculation a sagging global economy will cut demand for the beverage. On Oct. 2, the price dropped to 78.3 cents a pound, the lowest for a most- active contract since January 2005…… Full Article: Source

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From Bloomberg: Steel mills in China, the world’s biggest makers, are reducing demand for iron ore and asking miners to postpone deliveries because of tightening credit facilities, said Mt. Gibson Iron Ltd., an Australian producer.

Chinese mills have slowed production, sending cash iron ore prices down 17 percent in the last week of September. The global financial crisis has locked corporates out of capital markets after financial companies booked more than $592 billion in writedowns and credit-market losses since last year….. Full Article: Source

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From The Globe and Mail: As the scion of the Lundin family resources empire, Lukas Lundin has both prospered and suffered through plenty of commodity sector booms and busts. Yet in all his years as a mining executive and financier he has never seen anything like this.

“I’m very surprised. This is the worst correction we have had in the last 50 years,” Mr. Lundin said in an interview this week. Just two weeks ago, the chairman of Lundin Mining Corp. and the head of the Lundin Group of Companies, still believed that the commodities boom cycle was intact. ….. Full Article: Source

Posted on 09 October 2008 by VRS |  Email |Print

From The Globe and Mail: Oil prices closed down Wednesday after touching their lowest level this year, pressured by a huge jump in U.S. crude inventories and more signs of dwindling demand.

Light, sweet crude for November delivery fell $1.11 (U.S.) to settle at $88.95 on the New York Mercantile Exchange. Oil at one point fell to $86.05 — the lowest price since Dec. 6, 2007. Crude has now fallen about 40 per cent since surging to an all-time record $147.27 a barrel on July 11…… Full Article: Source

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From Mine Web: The solar energy sector is expected to become a robust driver of the silver market in future as silver demand in solar energy is forecast to increase to about 1,270t by 2012.

The Fortis/VM Group’s latest Silver Book says silver demand from the solar panel sector was only 432t in 2007 based on the assumptions of maximum silver loadings per installed wattage of 0.12g/W, 4GW production (2007) and a 10% market share of non-silver containing thin film PV units…… Full Article: Source

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From Mine Web: Gold bullion is one of the few positive performers in the current meltdown, but the big question might be why is the gold price not doing even better? Liquidity is one side of the equation and investors’ needs to maintain this paramount.

The other is probably the dollar which has been showing strength - perhaps unjustified in some terms - where historically gold has moved in the opposite direction to the dollar index. What is significant particularly in the current market is that yesterday gold shot up, with the dollar rising sharply too - against the general historic precedent….. Full Article: Source

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From Pacific Magazine: The Fiji government is aiming to receive at least US$1billion in foreign exchange from carbon trading for the next 25 to 30 years, reports The Fiji Times.

Yesterday, its Cabinet reactivated carbon trading under the United Nations Framework Convention on Climate Change (UNFCCC) effective from tomorrow. Acting interim Minister for Labour and Industrial Relations, Filipe Bole said carbon is predicted to be the single biggest commodity market in the world by 2012….. Full Article: Source

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From People.com.cn: The grim outlook on the global economy arising from uncertainties over the full extent of the financial crisis in the United States has sent global commodities markets into a tailspin, with many futures contracts on the Shanghai exchange yesterday dropping to their daily limits.

Contract prices of copper, zinc and natural rubber on the Shanghai market dropped for the second consecutive day to their daily limits, with the most actively traded copper contract for delivery in December closing at 48,640 yuan (7,128 U.S.dollars) per ton, the zinc contract for the same month at 12,845 yuan and natural rubber for delivery in January 2009 at 17,045 yuan….. Full Article: Source

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From Channel News Asia: Renewable energy and carbon trading businesses in the Asia Pacific have great growth potential, according to policy makers at a Clean Energy Conference held in Singapore.

Experts feel there are also investment opportunities, with Australia set to put its carbon trading scheme in place on 1 July 2010. Experts said the cost of melting ice caps and other effects of climate change could rise to between 5 and 20 per cent of global gross domestic product (GDP)….. Full Article: Source

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From Business Week: The government’s top securities regulator on Wednesday pressed Congress anew to quickly rein in the market for credit default swaps, complex investments partly blamed for the widening financial crisis.

The roughly $60 trillion market for credit default swaps lacks transparency, is unregulated and creates an environment for market manipulation, Securities and Exchange Commission Chairman Christopher Cox said. The market’s size exceeds the gross domestic product of every country in the world combined, he noted….. Full Article: Source

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From IBTimes: The EUR USD rallied on Wednesday after a coordinated interest rate cut by the U.S., Switzerland, Sweden, Canada, the U.K. and the Euro Zone. This move dropped U.S. rates down to 1.5% and took off some of the pressure to buy Dollars as a safe haven investment.

Furthermore, the Fed’s announcement to sell more than $40 billion in debt to pay for the banking rescue package put further pressure on the Dollar. Despite the rate cuts, outside markets looked tentative on Wednesday as equity and treasury traders could not make up their minds as to the benefit of the cuts…… Full Article: Source

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From Brownfieldnetwork.com: Not just stock market losses this week - most commodities futures prices have taken a big drop as well, especially for grains and oilseeds.

USDA grains analyst Jerry Norton says it’s not because of any new problems with world grain production, “What’s really going on is these markets are responding to the financial pressure from the outside forces.I think it’s mostly about just responding to the financial situation – you know, money’s exiting the futures markets….. Full Article: Source

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From Investors Offshore: Global IPO activity has fallen to its lowest level since 2003, according to the quarterly Global IPO update from tax and advisory services firm Ernst and Young.

E&Y’s latest update shows that, in the third quarter of 2008, a total of 159 IPOs worldwide raised USD13.1 billion in capital. This is the lowest level of quarterly activity - by number of deals and capital raised - since the second quarter of 2003, which recorded 130 IPOs and USD6.8 billion in cumulative capital…… Full Article: Source

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From WSJ: Until earlier this year, commodity-focused mutual funds were red hot. Now, they’re burning through the value of investors’ portfolios. Over the past three months through Tuesday, these funds and other commodity-linked investments such as exchange-traded notes, are down on average 26% to 44%, according to Lipper Inc., thanks to a broad selloff in several commodities since mid-July.

This is a sharp reversal from the big gains in these funds in the past three years. In 2007, for instance, average gains for these funds ranged from 23% to 40%. The commodity slide is broad…… Full Article: Source

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From China Daily: With just two exceptions, China has officially halted all of its coal-to-liquids (CTL) projects due to environmental and economic concerns. In a notice posted on its website on September 4, the National Development and Reform Commission (NDRC) said that, apart from two projects operated by the Shenhua Group, none could go ahead before receiving official approval, because CTL is “a technology-, talent- and capital-intensive project at an experimental stage with high business risks”.

The two Shenhua projects are one it has already launched in the Inner Mongolia Autonomous Region and an indirect coal liquefaction project in Ningxia Hui Autonomous Region jointly invested by Shenhua Group and South Africa’s Sasol Limited….. Full Article: Source

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From Daily Reckoning: While the RBA rate cut is good news for the Aussie share market, the utter collapse in global commodity prices is not. This week the CRB commodities index fell the most in over 50 years—the most ever in such a short period. What is going on and where will commodity prices go from here?

Three factors have contributed to the huge reversal in resource prices. First is the global rush to cash. Investors have voluntarily liquidated positions they’ve held for years in order to be in cash and out of the markets…… Full Article: Source

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From Seeking Alpha: Last week’s 700 plus point drop in the Dow seems like a distant memory and a much bigger sequel looks to be in the works. The world has caught up to the US, and the domestic credit crisis has officially become a global one.

Who knew that struggling home owners in Flint, Michigan facing foreclosure due to ARM resets could impact the financial well being of people living in Seoul, South Korea, so heavily and so quickly? The doom and gloom news is pervasive in the media today and here are some that have really got me worried:…. Full Article: Source

Posted on 09 October 2008 by VRS |  Email |Print

From FT: Commodity prices hit their lowest levels in more than a year yesterday as the International Monetary Fund said the global economy faced economic downturn. Crude oil fell to $86.05 a barrel, its lowest since December 2007, and copper, the bellwether of the base metal sector, to $5,250 a tonne, its lowest since March 2006.

Other base metals, including zinc, nickel and aluminium, hit levels not seen in the past three and a half years. The drop in oil prices triggered discussion among members of Opec about production cuts. ….. Full Article: Source

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