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Commodities Briefing 17.Oct 2008

China calls time on commodities bonanza
Commodities fall as investors flee
Opec hawks want to cut oil production to keep up price
From a $500 billion tab to a $200 billion windfall
Goldmans bullish on commodity prices
Has gold bullion lost its compass?
Commodity bulls stranded as recession looms large
America's richest energy magnates
Commodities extend slide amid fund disinvestment
A woolly market for investors
Calling the next commodities boom
Finally, EU-Kyoto carbon trading link up and running
BMO commodity price index plunges
Commodities: A dash of realism
Commodity run to continue for next two decades – VM Group
Comex copper falls on long liquidation
Chinese futures traders told to limit speculation
Who will survive? Commodities collapse will take a mighty toll.
Baltic Dry index at lowest since 2002
Energy, metals lead commodity index to lowest since 2004
ASX to launch renewables, carbon productsspacer
Aussie dollar rally stalls on commodities sell off
Latin America: Assets fall in tandem with commodities
Eurex to launch commodity index futures and options
Banks predict lower oil and natural gas prices as demand fades
Commodities: China syndrome
Gold falls to 1-month low in commodities sell-off
Abu Dhabi exchange supports ETF strategy
Miners may be forced into writedowns
Relief for carbon market at EU-UN connection spacer
Emerging market currencies to recover medium term
Cotton price rebounds from 3-year low as equity indexes rally
Russia's halting of trading spurs new MSCI indexes
Fewer Wall Street banks tout commodities results

Posted on 17 October 2008 by VRS |  Email |Print

From Livemint.com: The Middle Kingdom accounts for more than 40% of the global growth in demand for major commodities, by Deutsche Bank AG estimates.

China has paused for breath — and knocked the wind out of the commodities boom. Rio Tinto Group, the Anglo-Australian mining firm, warned on Wednesday that the world’s biggest consumer of steel, coal, aluminium, copper and seaborne iron ore had started to show signs of a slowdown. ….. Full Article: Source

Posted on 17 October 2008 by VRS |  Email |Print

From USA Today: U.S. corn prices fell below $4 per bushel to a 10-month low Wednesday, while soybeans tumbled to a 131/2-month low as economic turmoil gripped all markets, causing investors to cash out their holdings amid fears of a worldwide recession.

Wheat and rice also were caught up in the selling frenzy, ending at 16- and eight-month lows, respectively, as stock markets and crude oil kept falling….. Full Article: Source

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From Times Online: Opec’s mettle will be tested next week when the cartel assembles in Vienna at a hastily convened meeting to discuss the economic crisis and whether the exporters’ club should take action to arrest the fall in the price of crude oil.

Mounting alarm over the dwindling rent from oil sales prompted Opec yesterday to bring forward an emergency meeting scheduled for mid-November to next Friday. Together the cartel members have lost about a billion dollars of revenue a day since crude price peaked in July….. Full Article: Source

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From Seekingalpha.com: The impact of commodity prices on consumers’ wallets continues to sink lower from its highs in early July. At the peak of the commodities bubble in July, the average daily impact of higher commodities was costing the average American an extra $4.77 per day in 2008 versus 2007 (or about $523 billion in total).

Now just over three months later, that ‘tax’ on the consumer has turned into a windfall of $2.00 per day or $220 billion in total. While the $4.77 a day ‘tax’ surely hurt the already strapped consumer this year, the reversal to a $2.00 per day windfall should provide some relief….. Full Article: Source

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From Ninemsn.com.au: No surprises - Goldman Sachs’ global economics team has downgraded its global growth forecast for 2009 from 3.7% to 3.0% and the commodities team has thus been swung into action for downgrades of its own.

The credit crisis is obviously the driver, and the analysts note ongoing uncertainty on the credit front means ongoing downside risk to commodity prices. But this story has a bullish end. From There are two reasons why commodity prices have fallen as far as they have to date…… Full Article: Source

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From Mineweb.com: During a season of unrelenting fear, risible if it were not so overwhelming, gold bullion has locked the bulls into the stadium, and left.

On Thursday, the dollar gold bullion price lost USD 40 an ounce, within minutes, shortly after trade started up in the Americas. The price plunged through the USD 800 an ounce level, before bouncing up a bit, and then fell again, for losses of more than USD 50 on the day. Looking at headlines over many months, gold bulls outnumber bears by at least 10 to one, but bullion has persistently declined Tsunamis of encouragement in the form of endless calls to move once again above USD 1,000 an ounce….. Full Article: Source

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From FT: As recently as three months ago, key raw materials such as crude oil and copper hit record highs on the belief that China and other emerging countries would ‘decouple’ from the industrialised nations’ economic problems.

Only the most optimistic commodities bull would still cling to that thesis….. Full Article: Source

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From IHT: McClendon is one of 38 men and women on this year’s Forbes 400 list who owe much of their fortunes to energy. The cumulative fortune of these power players is $161.9 billion.

Another one you can spot on television is T. Boone Pickens. The Texas oilman is spending $58 million of his own money to tout his plan for our nation’s energy future. He wants to replace more than a third of the U.S.’s oil usage with energy from wind, natural gas and other sources. Pickens says the shift will help the U.S. wean itself from a crippling addiction to foreign oil….. Full Article: Source

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From Cattlenetwork.com: Commodities sank Thursday in a broad sell-off fueled by continued liquidation from funds and other investors nervous about the global economy.

Metals, crude oil, grains and softs slumped as index and hedge funds pared positions and moved to cash. The flight of the funds from the markets was “like lemmings swimming in the same ocean,” said Dan Basse, president of AgResource Company…… Full Article: Source

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From Hardassetsinvestor.com: As far back as the mid-3rd century BCE, when Apollonius of Rhodes gave us the classic tale of Jason and the Argonauts, the story of the golden fleece had already been around for a number of centuries. It would have been known to Homer some five centuries previously and was known even before that.

If you think that’s ancient history, then think again: Wool and sheep had been around for many thousands of years before that. In fact, after dogs, sheep are probably the oldest domesticated animal…. Full Article: Source

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From FT: There’s evidently much irritation in the house of Goldman Sachs this week as the commodities research team have been forced to cut their raw price targets across the board.

The firm accepts now that Chinese urbanisation alone cannot out weight the effects of a global recession - something that the rest of the commodities market is now busily pricing in. And so to the new GS forecasts:…. Full Article: Source

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From Carbonnews.co.nz: Carbon emissions trading schemes in the European Union and under the Kyoto Protocol were connected yesterday after months of technical delays.

“It’s up and running,” a press officer for the EU’s Environment Commissioner said. “Transactions are taking place and everything seems to be fine.”…. Full Article: Source

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From Reportonbusiness.com: Bank of Montreal said its commodity price index plunged 7.8 per cent to 207.9 points last month, with global financial turmoil amplifying the downtrend that had already begun.

The bank also said weak and uncertain economic conditions around the world next year will restrain demand and pressure prices downward for all commodity groups….. Full Article: Source

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From Whatinvestment.co.uk: There is undoubtedly far less bullishness with regard to commodity prices compared with a few months ago. Index provider S&P’s report on the commodity markets during August revealed that every major S&P commodity sector posted a fall over the month, ‘as reallocation away from safe-haven assets seemed at play’.

Robert Parker, vice chairman of Credit Suisse’s asset management business, feels that ‘In commodities, with inflation peaking and a trend improvement in the US dollar, it is difficult to be positive on precious metals. …. Full Article: Source

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From Mineweb.com: The VM Group says while China can not escape economic slowdown in the world it is still a long-term, vast growth story. The Virtual Metals Group believes the commodity story will remain unchanged for the next two decades as current financial turmoil ultimately only spells a period of putting new commodity projects and expansion projects on ice.

The VM Group said in its latest Fortis metals monthly report that China could not escape some negative impact from the wider economic slowdown in the world, but China was still regarded as a long-term “vast” growth story, in metals, energy and soft commodities….. Full Article: Source

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From Fxstreet.com: The same long liquidation that has hit a number of other commodities sent copper to a lower close Thursday, particularly as worries about a slowing economy persist, analysts said.

Most active December copper fell 12.50 cents to settle at $2.0855 per pound on the Comex division of the New York Mercantile Exchange. Copper is being pressured by the same factors as in the past several weeks, including concerns about slowing global demand and rising inventories, said John Gross, publisher of The Copper Journal. All of this is having a psychological impact on the market as the economic worries also hit other commodities….. Full Article: Source

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From WSJ: Market regulators in China Thursday admonished domestic futures trading houses to curtail overseas speculation, amid signs that its domestic exchanges are facing their own problems during a tumultuous period for global commodity markets.

Chinese companies licensed to trade in futures markets overseas should limit their activity to legitimate hedging, and avoid speculation, said Jiang Yang, assistant to the chairman of the China Securities Regulatory Commission….. Full Article: Source

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From Mineweb.com: In times like these only the fittest mining companies will survive. The current shakeout will likely see many weaker companies go to the wall.

A figure being put about by serious market analysts is that as much as 50 percent of the large number of junior miners and explorers may not survive the next 12 months as cash runs out and there is little prospect of raising money by other means….. Full Article: Source

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From FT: The cost of shipping bulk commodities such as iron ore, coal or grains on Thursday tumbled to its lowest level in more than six years as recession fears intensified and the difficulty of obtaining trade finance left many ships without any cargo.

The Baltic Dry Index, a benchmark for shipping costs and seen as an indicator of global economic activity, fell 6.75 per cent to 1,506 points, its lowest level since November 2002. The index has plunged 53.2 per cent since the end of September. …. Full Article: Source

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From Bloomberg: Tumbling prices for energy and metals led commodities to the lowest since September 2004 on signs of plunging demand for raw materials as the U.S. economy slows.

Crude oil fell as much as 8 percent, dropping below $69 a barrel for the first time since June 2007. Gold slumped below $800 an ounce for the first time in four weeks, and industrial metals declined. The Reuters/Jefferies CRB Index of 19 raw materials slid as much as 3.2 percent to 273.95, the lowest since Sept. 20, 2004….. Full Article: Source

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From Environmental-finance.com: The Australian Securities Exchange (ASX) is planning to list futures and options contracts for renewable energy certificates and carbon pollution permits and also has ambitions to service New Zealand’s emissions trading scheme.

The exchange will be ready to offer futures and options contracts on carbon pollution permits as soon as “we see the ink dry” on the legislation establishing the Australian scheme, emerging markets general manager Anthony Collins said….. Full Article: Source

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From Forbes: The Australian dollar slipped from offshore highs on Friday, dented by another sharp drop in commodities prices on concerns a global economic downturn would hurt demand for natural resources.

Australia is a big exporter of commodities and a global recession will pose a significant downside risk to the economy….. Full Article: Source

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From Reuters: Stocks, bonds and currencies of emerging economies fell on Thursday as fears of recession hitting global markets deepened and drove commodities, Latin America’s main exports, to months lows.

A tumble in commodity prices was hurting Latin American markets and denting future economic growth in the region after experiencing exponential growth in the past few years as commodity prices touched all-time highs….. Full Article: Source

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From Energyrisk.com: Derivatives exchange Eurex will launch futures and options based on Dow Jones-AIG commodity sub-sector indexes in the first quarter of 2009.

The nine indexes are the Dow Jones-AIG energy, petroleum, livestock, ex-energy, grains, industrial metals, precious metals, softs, and agriculture. “Our planned derivatives on the Dow Jones-AIG Commodity Indexes will significantly increase our product offering in the commodities area,” says Peter Reitz, a member of the Eurex executive board. “ We will add transparency and central clearing to the existing OTC index swap market.”…. Full Article: Source

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From Resource Investor: Two major banks released bearish forecasts for oil and natural gas prices Thursday, saying global economic turmoil is expected to further dampen energy demand.

RBC Capital Markets, the investment banking arm of Canada’s biggest bank, is calling for an average 2009 oil price of $80 per barrel, down from its previous estimate of $90. But oil could dip below $60 per barrel if demand drops year-over-year — a phenomenon not seen since the early 1980s, the RBC report said…… Full Article: Source

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From Times Online: In the commodities fraternity, the buzzword earlier this year was “the supercycle”. The steady ise in metals prices since the beginning of the decade has confounded an industry used to long busts interspersed with brief three-year booms.

The supercycle theory was not unreasonable, given the extraordinary industrialisation of China. The question is whether this rout in commodity markets is a blip or whether the supercycle is turning into a less impressive midicycle….. Full Article: Source

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From IHT: Bullion prices slipped sharply on Thursday, with gold touching a one-month low and silver sliding to its weakest level in more than two years, as losses on the equity markets triggered a sell-off in commodities.

Platinum, palladium and rhodium prices also tumbled, extending sharp losses, as investors sold the metal on fears the U.S. economy could be facing recession and demand would plunge. A broad sell-off of commodities saw declines in crude oil, copper, aluminium, cocoa and grains….. Full Article: Source

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From Arabianbusiness.com: Abu Dhabi Securities Exchange (ADX) on Thursday reaffirmed its strategy to list Exchange Traded Funds (ETFs).

“ETFs have proved themselves to be popular with both retail and institutional investors and we would like to give investors the opportunity to trade ETFs on ADX,” Rashed Al Baloushi, deputy chief executive of ADX, said at the Financial Brokerage in the Gulf Forum in Abu Dhabi…. Full Article: Source

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From Times Online: Fears of a global recession have caused a slump in metal prices that could trigger a series of multibillion-dollar writedowns in the mining sector.

The price of copper fell nearly 8 per cent yesterday to $4,545 a tonne, its lowest since January 2006 and almost 50 per cent below its record of $8,940 in July. Aluminium was $2,178 a tonne on the London Metals Exchange yesterday, down a third from its peak of $3,380 a tonne, also in July….. Full Article: Source

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From Environmental-finance.com: The EU’s emissions log connected to the UN’s International Transaction Log (ITL) today, more than a year after it was originally planned, offering some much-needed relief for the European carbon market.

This connection will allow for the import of certified emission reductions (CERs), UN-issued carbon credits for emission-reducing projects in developing countries, into the EU Emissions Trading Scheme (ETS)…… Full Article: Source

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From Indiatimes.com: Fast-weakening emerging-market currencies are set to recover next year as investors eventually turn their attention to deteriorating U.S. economic conditions, especially its current account deficit, an emerging markets fund manager said on Thursday.

Jerome Booth, head of research at Ashmore Investment, said the current strengthening of the greenback is not based on good fundamentals of the U.S. economy but rather on the unwinding of foreign-currency positions forced by the global credit crunch….. Full Article: Source

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From Bloomberg: Cotton prices rose, rebounding from the lowest since February 2005, after U.S. equity indexes including the Dow Jones Industrial Average and the Standard & Poor’s 500 gained.

Cotton jumped 4.3 percent as the 30-stock Dow rose 4.7 percent today. The S&P 500 jumped as much as 4.4 percent. The Dow has declined 32 percent this year while cotton futures dropped 27 percent on concern an economic slowdown may reduce consumption….. Full Article: Source

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From Indexuniverse.com: MSCI Barra has created two new Russia indexes to mitigate the problems recently exposed with the frequent suspension of trading on the Russian stock markets during the global market unrest.

The new MSCI Barra indexes will capture the performance of Russian stocks that are traded outside Russia, during trading halts in Moscow. The MICEX Stock Exchange and Russia Trading System (RTS) have halted trading for more than a full day twice since September….. Full Article: Source

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From Guardian: Wall Street banks, which had touted stellar earnings from commodities operations as the sector’s six-year rally peaked this year, have downplayed commodities results in the latest quarter as prices for raw materials slumped in the global financial crisis.

Four leading U.S. banks this week reported third-quarter results and only one - JPMorgan Chase - broke down the amount of dollars at risk daily in commodities trading….. Full Article: Source

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