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Commodities Briefing 09.Dec 2008

Posted on 09 December 2008 by VRS |  Email |Print

Benedicte Gravrand, Opalesque London: Sustainable, an adjective that in the 21st century denotes hopes and ways to continue using a maintained environment with minimal negative effect, was often quoted at the official announcement of the launch of a new investment management group in London.

Earth Capital Partners LLP (ECP) is a new business specialising in sustainable and renewable asset classes. It is currently seeking authorisation from the Financial Services Authority (FSA), and so will not launch any of its planned funds until early next year. The group targets AUM of $5bln in 5 years.

“Our objective will be to deliver attractive returns by investing in projects, companies and financial instruments, which address sustainable development challenges, such as climate change, water scarcity and energy security,” said Stanley Fink, Chairman of the new group.

Investments in sustainable and renewable asset classes have become more popular in recent years, as the risks of energy shortages and global warming have been substantiated by scientific reports and have been brought to the fore by governments and media. Barack Obama, for example, wants to increase investments in sustainable technologies and renewable energy sources as part of his economic plan.

The firm is being launched at a time when there is a substantial groundswell of environmental concern. “The next generation is very passionately engaged with environmental concerns,” said ECP’s CEO, Rufus Warner. “We need to plan now for a post hydro-carbon fuel economy, and work on the new challenges.”

“The last months were traumatic,” continued Warner, “as excess leverage and opacity were exposed. But we are seeing a new chapter. There will be a substantial interest in real assets (i.e. physical assets). We are convinced there is investor appetite for them.”

ECP does not want to be labelled as a socially responsible investment (SRI) company; its approach is different in that it relies on public information, and “it is not all about governance.”

ECP’s chairman Stanley Fink – former head of Man Group and now CEO at ISAM - is also one of the group’s financial backers. CEO Rufus Warner brings in 26 years of experience in asset management, and was most recently CEO at Close Investments. Neil Brown, also a veteran, most recently at Credit Suisse and HSBC, is the COO. Ben Cotton, previously at Man Group, and one of the main instigators of the birth of ECP, is responsible for external relations.

There are several other investment managers and experts in sustainable development in the team, including James Stacey, an environmental engineer with 17 years in environment and sustainability experience. ECP is still building up its investment team, and has plans for small offices in both Australia and Brazil, locations which are deemed as “strategic.” Everybody at ECP will have partnership shares, directly or indirectly.

Platform and investment process
ECP’s professional investment advisory platform will support a series of funds, each with a strategy to deliver good risk return characteristics and low correlation to both traditional and alternative investments. The future Guernsey domiciled funds will focus on environmental opportunities, environmental infrastructure or markets, agriculture, sectors and cleantech VC.

ECP has set investment guidelines (including no-go areas, standards and best practices) and has created a management system called the Earth Dividend, a score card which encompasses environment, social and governance issues and a measurable proxy for sustainable development against which all assets are evaluated. The Earth Dividend will be measured on an annual basis and assured by an independent company. All due diligence processes will be tested against the guidelines and the Earth Dividend.

Warner said that ECP aimed to be a more embedded sustainable investment structure than any other asset management companies.

The investment process will be close to that of private equity funds. “But it differs in that the veto goes to the head of risk and the head of sustainability,” said Warner. Initial proposals will be brought to an investment committee and external advisors, and, if approved, will go through a series of investment criteria and due diligence. Then a full report with detailed recommendations to invest will be put forward for final approval.

The geographical area of investment will be global. “The developing world is ahead in terms of renewable energy and sustainable development,” said Warner. “For example, some countries went straight to wireless telecommunication, bypassing landlines. 32% of China’s electricity comes from sustainable resources.”

The liquidity issues will be long term, and the performance is aimed at low to high teens (depending on the asset class) or matching the Earth Dividend. Targeted investors will be institutions, foundations, sovereign wealth funds, HNWIs and corporates.

Posted on 09 December 2008 by VRS |  Email |Print

From Forbes: A few months ago, commodities of all types were the darlings of these wealthy investment funds, which poured cash into crude oil, cattle, corn, copper, and others.

“They were like drunken sailors, they could not stand to have the money in their pockets,” Gary Lark, a 30-year veteran of the Chicago Mercantile Exchange livestock markets, said of the rush to buy. That heyday appears to be over….. Full Article: Source

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From FT: Liffe, the futures unit of NYSE Euronext, is to launch the first central clearing mechanism for over the counter soft commodities through its Bclear clearing business in another sign of how clearing is moving centre stage amid concerns over counterparty risk.

Ian Dudden, Liffe’s director of commodities, said Bclear would start by clearing OTC coffee, sugar and cocoa in the first quarter of next year. Wheat and rapeseed would follow….. Full Article: Source

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From Corn fell below $3 on Friday, closing at $2.935, the lowest price in two years. That’s a slide of 61% since hitting this year’s high of $7.625 this summer. Unsurprisingly, weak demand is the primary reason cited for the decline in corn prices, and analysts aren’t optimistic that demand is going to turn around any time soon.

What happens if corn prices continue to fall? Do farmers plant corn next year? At some point, the cost of seed, fertilizer, labor and fuel may well push right up against what farmers can expect to sell the crop for….. Full Article: Source

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From Don’t get complacent about lower oil prices. This market slide has overshot the mark, just as the upward swing did earlier this year. As we said last spring, supply/demand fundamentals didn’t support oil prices of $150 a barrel or more. Now they don’t warrant prices of $50 or less.

Eventually, the market will correct itself. But first, prices are likely to slip further. They’ll bob around $40 to $50 a barrel this winter, possibly even briefly dipping to nearer the $30 mark, making locking in purchases soon a smart move….. Full Article: Source

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From AP: The head of the International Energy Agency says the global demand for oil could shrink next year if the economies of China, India or the Middle East slow down fast.

Agency’s head Nobuo Tanaka says that if current economic conditions continue he expects only slight growth in oil demand in 2009….. Full Article: Source

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From The Shenzhen Stock Exchange is in discussions with Harvest Fund Management Co., one of China’s biggest asset managers, about the establishment of an exchange-traded fund based on the Shanghai-Shenzhen 300 Index.

The move, first reported on the Chinese investor Web site,, provides a glimpse of an interesting battle taking shape between the two big Chinese stock exchanges as ETFs become higher profile among Chinese investors. …. Full Article: Source

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Russia’s electric market needs to be repaired. But hard times are getting in the way. The current financial turmoil has left it in a state of disarray. And if the nation went ahead with plans to ease electricity subsidies and unleash market forces then prices would jump and create even more tumult.

The conundrum turns away investors, who won’t risk their money if prices are fixed and fair returns are elusive…… Full Article: Source

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From iFinix Corp, a provider of real-time financial information and services to active traders and to the securities industry,through its wholly owned subsidiary, ProActive Futures, the company has entered into a Joint Venture agreement with Island Forex Trading.

Island Forex Trading, a Commodities Trading Advisor, specializes in trading the fast-growing online foreign currency market. Island provides free in-depth training to all of its traders on a daily basis, and will offer the same service to proactive traders as well. …. Full Article: Source

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From AFP: French electricity giant EDF said on Monday it now holds nearly 89 percent of nuclear operator British Energy and it will extend its offer to secure the remaining shares until January 5.

EDF said that by the scheduled close of its 15.6 billion euro (13.4 billion pound) offer on December 5, it held 88.67 percent of British Energy’s shares, including its original stake of 26.48 percent….. Full Article: Source

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From Bloomberg: Oil prices, which have fallen 70 percent since July, are unlikely to fall below $40 a barrel, billionaire hedge-fund manager Boone Pickens said today.

“I don’t think you will stay at that level very long because you are going to start shutting down a lot of projects,” he said at a press conference in New York. “It will be obvious we can’t sustain anything like that.” …. Full Article: Source

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From A new venture capital fund is launching in early 2009, with the goal of raising $5 billion in the next five years to invest in energy security and climate change.

London-based Earth Capital Partners is spearheaded by former Marc Group chief Stanley Fink. The fund is expected to be run by Rufus Warner, formerly of Close Investments….. Full Article: Source

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From Global slump hits developing countries as credit squeeze impedes growth and trade; tensions in commodity markets ease.

The world financial crisis has dimmed short-term prospects for developing countries and the volume of world trade is likely to contract for the first time since 1982. The sharp slowdown has caused commodity prices to plummet, ending a historic five-year boom….. Full Article: Source

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From Last year, the European Union pledged to take aggressive measures to cut its greenhouse gas emissions 30 percent by the end of the next decade if other countries adopted similar measures.

Today, the bloc members have whittled that to 20 percent, and they are still struggling to set the rules to make it happen….. Full Article: Source

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From With the population of over 80 million, Ethiopia is the second largest country in Africa following Nigeria with the total population of 140 million.

However, with per capita income of less than US $200, Ethiopia is one of the least developed countries in the sub Saharan Africa. Agriculture is the main stay of the economy….. Full Article: Source

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From Utilities are facing major issues such as raising capital, increasing the use of renewable energy and energy efficiency, and dealing with a changing political environment.

The biggest of them all, though, are climate change and the expected carbon dioxide emission controls. Just as important is the renewed emphasis on restricting noxious fumes from coal-fired power plants. All these matters have leapt to the forefront of the legal and regulatory landscape in the utility field….. Full Article: Source

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From Buckling under the continuiling global economic meltdown pressure, will OPEC cut crude oil output further? It looks so, if OPEC President Chakib Khelil is to be believed. Khelil says oil markets should prepare for a “surprise” output cut after the organization’s Algeria meeting.

He said a consensus has formed for a significant reduction of production levels by the 14-member Organization of Petroleum Exporting Countries….. Full Article: Source

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From The UN’s top climate official has defended a global trading scheme to reduce greenhouse gas emissions after the US government released a report questioning its efficacy.

The General Accounting Office (GAO), the investigative arm of Congress, published a report analysing the UN’s Clean Development Mechanisms, arrangements under the Kyoto Protocol that allow rich countries to meet their commitments to cut greenhouse gases by investing in projects – such as a wind farm or a reforestation program – that reduce emissions in poorer countries….. Full Article: Source

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From NYSE Euronext has unveiled an online screener for exchange-traded products (ETPs) listed on its US and European markets. The screener helps users to search for exchange-traded funds, notes, warrants and certificates, by classification, key words, symbols and other search terms.

The web-based product screener on NYSE Arca, Euronext’s US electronic market, enables users to search for an ETF or ETN by keyword or symbol, or filter the products by issuer and classification….. Full Article: Source

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From CNN: Gold may have a special place in the hearts of many investors, but it has not been immune from the forces that have hammered commodities from aluminum to zinc this year - the rising dollar and drastic economic slowdown.

Since hitting a record near $1,030 an ounce in March, the price of gold has fallen about 25% to $775 as of Monday. Even so, the precious metal should still shine for investors in 2009….. Full Article: Source

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From Ugandan farmers’ tears may be dried by the imminent operationalisation of the Uganda Commodities Exchange (UCE) whose mandate is to commercialise farming in Uganda through market linkages.

The UCE is in advanced stages to facilitate the procurement and marketing of agricultural produce, mainly maize, un-milled rice and beans to begin with…. Full Article: Source

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From Environmental agencies have backed the Government’s plans to reform the Resource Management Act (RMA).

But they have also warned that trading off long-term environmental sustainability for short-term economic gain may ultimately damage the $29 billion a year farming and tourism industries….. Full Article: Source

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National Futures Association (NFA) announced today that it has distributed close to $3.4 million to 242 investors as part of a consent order issued on April 11, 2008, against E-Metal Merchants, Inc. and two of the firm’s officers, Benji Dayan and Andrew Stern.

The case was filed by the Commodity Futures Trading Commission (CFTC) in the United States District Court for the Southern District of Florida.The consent order arises from a CFTC lawsuit filed on June 13, 2005, which alleged that E-Metal Merchants purchased and sold illegal off-exchange metal options in violation of the Commodity Exchange Act (CEA) and CFTC regulations. The consent order provides that Dayan and Stern are liable for the firm’s violations of the CEA and CFTC regulations…… Full Press Release: Source

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From The Australian dollar is higher after stronger commodity prices and further rallies on Wall Street lifted the currency towards $US0.6700. Around midday, the dollar was trading at $US0.6615, up from Monday’s close of $US0.6534.

The dollar opened stronger at $US0.6675, boosted by higher commodity prices and a rallying stock market during New York trading, but the unit soon hit resistance just below $US0.6700 and fell back towards $US0.6600….. Full Article: Source

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From FT: Commodity markets staged a rebound on Monday after Barack Obama, US president-elect, repeated his promise of a substantial stimulus package to revive the ailing American economy.

The US government is expected to provide a rescue package for the country’s three largest carmakers and to spend billions on infrastructure in the largest programme of public works since the 1950s….. Full Article: Source

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From Bloomberg: Canada’s dollar rose the most in two weeks as President-elect Barack Obama’s pledge to spend the most on infrastructure since the 1950s reduced the U.S. currency’s haven appeal.

“It’s a risk-appetite move,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “We’re seeing the U.S. dollar weaker across the currency board.” …. Full Article: Source

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From A research report by Merrill Lynch released last week, said coal prices had not been able to escape the cyclical sell-off in commodity prices.

Since peaking at over $200 per tonne in early July due to supply bottlenecks in global port and rail systems, coal prices have fallen by 67%, with European, or API-2 coal, trading at $74.50/tonne on Friday, while South African API-4 coal was trading at $72.20/tonne….. Full Article: Source

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From Guardian: The U.S. dollar fell against the euro and most other major currencies on Monday as talk of an imminent bailout deal for the three U.S. automakers boosted stocks around the world and helped to ease risk aversion.

The rise in benchmark world stock indexes sent the low-yielding Japanese yen and U.S. dollar lower against the Australian dollar, sterling, and other currencies offering higher interest rates but also higher risk….. Full Article: Source

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From AP: Oil prices bounced off four-year lows to trade above $43 a barrel Monday as OPEC’s president suggested the group could surprise investors with a large production cut later this month.

Plans by the United States, China and India to broaden their respective economic stimulus measures also added to the bullish mood on the market….. Full Article: Source

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From AP: Gold prices advanced Monday as investors cheered President-elect Barack Obama’s plan to increase infrastructure spending to help boost the sagging economy. Other commodities, including energy and agriculture futures, also rose.

Over the weekend, Obama announced plans for the largest U.S. public works spending program since the creation of the interstate highway system a half-century ago. Meanwhile, government officials in China plan to meet this week to discuss possible ways to expand the $586 billion stimulus plan enacted last month….. Full Article: Source

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