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Commodities Briefing 28.Mar 2014

Posted on 28 March 2014 by VRS |  Email |Print

One morning last month Louis Dreyfus, a big commodity-trading house, formally opened a new $10m storage depot in the Peruvian port of Callao. Two of its six bunkers were piled high with 55,000 tonnes of fine brown dust covered by white tarpaulins—copper and zinc concentrate, awaiting blending and shipment.
The warehouse is “a bet that Peruvian mining will continue to be competitive,” says Gonzalo Ramírez, a Dreyfus manager. That looks like a sound wager. Blessed with high-grade ores and cheap energy, Peru’s output of copper—already the world’s third-largest—will more than double in the next three years, thanks to the opening of several low-cost mines……………………………..Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Commodity markets focus on bringing commodities from their place of origin to the centres of demand in the most efficient manner. Banks, trade houses, consumers and producers all aim to bring efficiency to this flow, but there is always room for improvement.
Structured finance, the activity of lending against inventory held as collateral, focuses on ameliorating and streamlining two aspects of the commodity business – cash flow and flow of goods. Structured finance has usually been the forte of large financial institutions, but recently commodities trading firms have entered this business. This has resulted in excess lending capacity, which has led to lower costs of capital for borrowers………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

During boom times when commodity prices were high compared to mining costs, producers had no qualms about giving up some margin for the use of third party traders to act as middle men in brokering the deals between producer and end-user.
Since the 2008 global financial crisis, companies having become more discerning over their cost base, questioned the necessity of the trader. This question has become more imperative as falling grades, increased labour, transport and utility costs and deeper mines threaten producers’ margins. The trend among producers is to go direct………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Early Thursday, the Dow Jones Industrials managed to claw back some of the ground it lost yesterday, with the average rising 17 points as of 10:45 a.m. EDT. Mixed economic data set the stage for a choppy morning for the market, with new claims for unemployment benefits falling to their lowest levels of the year, but a 0.8% drop in pending home sales contracts in February offseting some of the enthusiasm.
From a longer-term perspective, though, the Dow Jones Industrials haven’t yet demonstrated their ability to break out to new highs, and investors are looking to other markets for clues on where the Dow and the broader stock market could go next………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will curtail exports through mid-April in response to lower seasonal demand from refiners in Asia, according to tanker-tracker Oil Movements.
OPEC, responsible for 40 percent of global oil supplies, will reduce shipments by 620,000 barrels a day, or 2.5 percent, to 23.78 million a day in the four weeks to April 12, the researcher said in an e-mailed note. The figures exclude two of OPEC’s 12 members, Angola and Ecuador………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Could the U.S. unleash a flood of oil from the strategic petroleum reserve that would drive down prices in order to punish Russia? While the idea has been kicked around over the last few weeks – most recently by George Soros – it has also been dismissed as not a serious option.
Some say the impact of an oil sale, if it actually succeeded in lower prices, would be temporary. Saudi Arabia could cut back on production to keep oil prices at their current levels. Others decried the idea as contrary to the objective of the SPR, which has been setup to be used only in cases of emergency………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

The United States now produces 10.4% of the world’s crude oil, or 7.84 million barrels of crude oil a day. Of that total, 3.22 million barrels (43%) come from tight plays, including the shale oil fields of North Dakota and Texas. The rest comes from conventional production.
For those of you who are wondering why the U.S. Energy Information Administration (EIA) is claiming that 7.84 million is 10% of global production we’ll explain. According to the EIA and the International Energy Agency (IEA) and OPEC, total global production in 2014 will average right around 90 million barrels a day, meaning that 10% would equal 9 million barrels………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Earlier this month the price of gold hit a six-month high of $US1370 an ounce, buoyed by investors and civil unrest in Ukraine. So what does a foreign conflict have to do with the price of gold?
To those outside the gold industry it might seem strange that geopolitical uncertainty in Crimea might mean good things for your average gold miner in Kalgoorlie-Boulder. But, for one of the world’s oldest currencies, civil unrest is just one of many seemingly random factors to affect its price………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

As tensions ease on Russia/Ukraine, the gold price has suffered falling briefly below $1300 an ounce overnight and then again a little more heavily in European trade this morning. Russia now appears to have managed to annex Crimea without any sanctions of serious consequence being raised against it and President Putin has played the diplomat by cutting out some of the competitive sanction rhetoric.
There seems to be little doubt that the West – and Europe in particular – has no stomach for a serious economic fight given that tit for tat sanctions might be more of a problem for those European states dependent on Russian gas for 30% of their supplies than they would be for Russia itself………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Gold held steady just above $1,300 on Thursday as the metal’s safe-haven appeal was boosted by weaker equities, but gains were limited by a second day of outflows from gold funds.
Spot gold was flat at $1,302.96 an ounce by 0721 GMT. Asian markets were in skittish mood on Thursday following a soft finish on Wall Street and amid simmering tensions over Ukraine………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Gold prices sank to a six-week low on Thursday as signs of improving U.S. economic growth and easing concerns about Ukraine sapped investor interest in the haven asset. Gold for April delivery, the most active contract, fell $8.70, or 0.7%, to $1,294.70 a troy ounce on the Comex division of the New York Mercantile Exchange. This was gold’s lowest settlement price since Feb. 11, when futures closed at $1,295 an ounce.
Gold had rallied over the first two months of 2014 as investors sought to protect their wealth from risks such as a slowing U.S. economy, turbulence in emerging markets, and a political crisis in Ukraine. Gold is considered by some traders as a safer investment than currencies or Treasury bonds, because the precious metal’s value isn’t tied to a government or country………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Amid a brutal rout in base metals this year, one commodity is standing out from the crowd and has even further to run this year, analysts told CNBC. Prices of nickel, a metal used in the production of stainless steel, have been soaring in recent months, up roughly 17 percent year to date and trading at $16,300 per metric ton on Thursday.
Its peers however, including copper, iron ore, aluminum and zinc, have been tanking alongside. Copper, for example, has lost around 12 percent year to date, as worries over the use of copper in Chinese trade financing deals panicked investors………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

A startling rise in food prices this year has stoked inflation fears. While, by definition, inflation is a rise in prices, not all prices rise at the same rate. The price of physical goods such as agriculture and other commodities often rises fastest in inflationary periods.
The following ETFs may benefit from an inflation surprise, as they either hold physical commodities or invest in companies that deal in physical commodities: The PowerShares DB Agriculture ETF holds futures contracts on a range of agricultural commodities including wheat, corn, sugar, coffee, cattle, hogs and soybeans………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Investors are pouring money into energy companies, putting seven times as much into exchange-traded funds as they did last quarter.
They are betting oil and gas get more expensive and fatten profits of producers from Devon Energy Corp. in Oklahoma to Pakistan’s Oil & Gas Development Co. Those are two of the stocks held in the $39 billion U.S. market of energy-sector ETFs, which took in $2 billion in new money since Dec. 31………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

As Russia took full control over Crimea over the weekend, the situation turned even worse with the U.S. and European Union imposing various tough sanctions against the country. This has raised the possibility of Russia being trapped in recession this year, and likely sometime soon, compelling many rating agencies to downgrade their outlook on Russia.
This is particularly true as the two major rating agencies – Standard & Poor’s and Fitch Ratings – each reduced their credit rating outlook on Russia from stable to negative………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2013, a comprehensive survey of 207 European ETF investors. The survey was conducted as part of the Amundi ETF & Indexing research chair at EDHEC-Risk Institute on “Core-Satellite and ETF Investment.”
Among the key findings of the 2013 survey: Satisfaction has remained at high levels across most asset classes. There have been increases in satisfaction for corporate bond, commodity, real estate and sector ETFs, but satisfaction rates for ETFs based on the most liquid ETF asset classes are far more consistent compared to those based on illiquid asset classes………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

The New Zealand dollar, along with some other currencies of nations that rely heavily on the export of raw goods, strengthened Thursday, boosted by rising oil and natural-gas prices and some positive economic data.
The New Zealand dollar gained 1% against its U.S. counterpart, to $0.8674, and 1.1% against the yen, to 88.60. Intraday, the New Zealand currency reached $0.8688 against U.S. dollar, its highest level since Aug. 2, 2011. The Canadian dollar rose 0.6% against the U.S. currency and 0.8% versus the yen………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

Several high-beta emerging-market currencies are having a great day against the U.S. dollar — especially the Turkish lira, the Brazilian real, and the South African rand. It’s been about two months since the worst of the selling in an episode that sent the lira to record lows and saw the rand and the real fall to their lowest levels since 2008.
The biggest gainer of the three today is the real, up 1.1% against the dollar. The rand is up 0.9% and the lira is up 0.3%………………………………Full Article: Source

Posted on 28 March 2014 by VRS |  Email |Print

China plans to launch a nation-wide market to trade pollution permits within three years as part of efforts to tackle its environmental crisis, the Ministry of Finance (MOF) said on Monday. The ministries of finance and environmental protection have submitted draft guidelines for a market to the State Council, China’s Cabinet, which will make the final decision, MOF said.
“We will facilitate cross-regional trading, especially among regions covered by the same air and water pollution control regimes,” the statement said. The market would cap emissions of key pollutants from major facilities and force those that exceed their caps to buy permits in the market, hence providing economic incentives for polluters to invest in cleaner technologies………………………………Full Article: Source

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