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Commodities Briefing 12.Jun 2014

Posted on 12 June 2014 by VRS |  Email |Print

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other large Western banks are concerned that their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

At least two global banks involved in commodity financing in China have asked some clients to shift copper and aluminium, used as collateral for loans, to better regulated warehouses, three sources with direct knowledge of the matter said.
Banks and trading houses have been making urgent checks on the security of metal holdings in China, sparked by a suspected fraud at Qingdao Port, the world’s seventh biggest. Police are investigating the duplication of warehouse receipts by a third-party firm on metal cargos used to obtain financing………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Chinese companies are getting caught up in commodity trade finance trouble, as borrowers are securing loans using warehoused aluminum and copper as collateral – and allegedly using the same collateralized stock multiple times for multiple loans. Should Industrial Metals Buyers Worry About This?
Surely, it is an internal Chinese matter; if a few Western banks have got themselves caught up in it and get burned as the clients default, the underlying commodity proves to not be there or pledged elsewhere, well, some may say, that’s their fault for lending in such an unregulated market………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Agricultural shares will provide a better hedge against food price inflation than food commodities, BlackRock’s Desmond Cheung has said. The sector specialist, who runs the BGF World Agriculture + fund, said the farming sector was currently home to interesting opportunities for long-term investors.
‘While food prices spike and subside around episodes of supply disruption, companies in the sector have outperformed food commodities over the long term,’ Cheung said in an investor update………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Delegates of the Organization of the Petroleum Exporting Countries agreed to roll over the group’s production quota, maintaining the group’s current official production output. The decision comes despite concerns over adequate global supply. Libya has struggled to lift its output amid political turmoil in the country. Meanwhile, global growth—and by extension, oil demand—has been picking up.
OPEC, which is holding its semiannual meeting in the Austrian capital, agreed to keep its official output quota at 30 million barrels a day, delegates said. OPEC produces about one in three barrels of the world’s crude………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

OPEC sailed through a brief, calm meeting on Wednesday - even as oil prices rose to $110 on barrel on concern renewed strife could hit Iraq’s output and deepen a supply shortfall from chaotic Libya and sanctions-bound Iran.
Oil ministers painted a soothing image of good supply, and prices beneficial to all, although some among them struggled to eke out exports………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

OPEC, which supplies about 40 percent of the world’s crude, kept its production target unchanged in a widely anticipated move that left the group’s output below forecast demand for the rest of the year.
The Organization of Petroleum Exporting Countries reaffirmed yesterday its production ceiling of 30 million barrels a day for a fifth consecutive meeting. The group forecasts demand for its crude of 30.4 million barrels a day in the coming six months, while its 12 members produced 29.6 million barrels a day in April, the organization’s data show………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Business lore holds that you can’t cut your way to prosperity. Apparently, no one told OPEC. In December, at its last general meeting, the Organization of the Petroleum Exporting Countries faced a rush of rising oil supply from Libya, Iraq, Iran, and North America. The big question was how far oil prices would fall before the sometimes fractious cartel agreed how to share the pain of output cuts to make way.
Now, with Libya and Iraq in crisis again and U.S. talks with Iran looking dicey, OPEC’s job is a lot easier as it its latest get-together wraps up; the group Wednesday agreed to maintain current production quotas………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

In the days before an Opec meeting the financial press pack descends on Vienna. The media fan out across the city hoping to catch a comment from an oil minister as they arrive in the Austrian capital and then shuttle between briefings.
This week’s meeting – the 165th in Opec’s 54-year history – is no different. As usual, the reporters are camped out in the foyers of the luxurious hotels favoured by the cartel’s 12 member countries, ready to jump on officials and their entourage………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

The United States and Canada will account for about 8 percent of the global liquefied natural gas market by 2019, the International Energy Agency said.
“While demand growth is driven by the Asia-Pacific region, and especially China, supply growth for the international gas trade is dominated by private investments in LNG in Australia and North America,” IEA Executive Director Maria van der Hoeven said Tuesday………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

The low price of gold has failed to entice managers to back the precious metal, in spite of its value nearing a four-year low. The gold spot price fell to $1,244 per troy ounce last week, meaning it was not far above the $1,200 mark, a price it has not been at since it rose past that level in 2010.
Investors usually flock to gold in times of stress as a hedge against inflation or when currencies are being debased. The fact gold is falling suggests, in part, investors are comfortable with inflation levels and are bullish on equities………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Even though gold has gradually lost appeal among global investors since 2013 — amid a compounding consensus view that a decade-long bull run in the yellow metal may be over — a weaker rupee and restrictive import policies have ensured that, in India, the impact hasn’t been so extreme.
Even as the average global spot price corrected by a third to $1202 an ounce in 2013, domestic spot prices moderated by just about 1% to Rs 29,158 per 10 gm, thanks to a declining average value of the rupee from Rs 53.5 in 2012 to R58.6 against the dollar………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

While China has now been the world’s largest producer of gold for the past seven years, there have always been questions asked as to whether the current level of gold output (430 tonnes in 2013) is sustainable. Now figures out of The Bureau of Raw Material from the Ministry of Industry and Information Technology suggest that there certainly are sufficient gold resources available to retain this position for the foreseeable future.
According to a report on Asia First Chan Yanhua, Director of the Bureau has said that reserves found through geological prospecting had been increasing faster than the country’s mining rate – and had seen a substantial rise over the past three years. The Bureau put China’s gold resources as being 8,200 tonnes (263.6 million ounces), which it says is only exceeded by known South African resources of 31,000 tonnes (close to 1 billion ounces)………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Palladium held near its highest level in more than three years in a volatile session on Wednesday, underpinned by physical demand for the precious metal, as well as a five-month strike in South Africa.
Palladium often tracks sister metal platinum, which has risen nearly 8 percent this year on supply concerns after the strike over wages took out 40 percent of global platinum output and hit South Africa’s economy………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Palladium prices closed at the highest level in 13 years, propelled by investors’ worries that supplies of the precious metal are dwindling amid a nearly five-month-old miners’ strike in South Africa.
Palladium for September delivery, the most actively traded contract, rose $5.60, or 0.7%, to $860.15 a troy ounce on the Comex division of the New York Mercantile Exchange. It was the highest close since February 2001. Palladium for June delivery also rose 0.7%, ending $5.80 higher at $860.70 an ounce………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Chinese copper imports tumbled 16% in May. Year to date China is still importing refined copper at a record setting pace – up a whopping 34% over 2013 to 2.1 million tonnes. This at a time when the Chinese economy is expanding at is slowest pace in more than two decades.
The mismatch is ascribed to the popularity in credit-starved China of the red metal as collateral in trade financing agreements. But May’s sharp drop indicates these deals may be unwinding at a more rapid rate than previously thought………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Nickel fell in London to the lowest level in almost four weeks amid closing out of some bets on rising prices. A speculative long position contracted for a second week to 58 percent of nickel futures outstanding on the London Metal Exchange, according to Marex Spectron Group.
Prices are still up 33 percent this year after surging as much as 56 percent following January’s ban on raw-ore exports by Indonesia, the world’s biggest nickel-mining nation………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Aluminium prices which had hit a four-and-a half year low in February at London Metal Exchange (LME) but recovered 14% from those lows. According to United Company Rusal Plc, world’s leading aluminium producer, prices may peak to $2000 per ton in the coming months due to bullish physical and technical factors.
Angel Commodities noted in a monthly report that Chinese aluminum smelters are restarting some idled capacity after prices of the metal rebounded from five year lows hit in March, also taking advantage of lower power costs………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Deutsche Bank looks for industrial metals to outperform precious metals and energy. “We view the macro environment as remaining hostile to the (precious) sector and specifically gold given our belief that the S&P 500 will hit fresh highs, U.S. long-term real yields are set to move higher and the possibility that divergent monetary policies between the Fed and the ECB (European Central Bank) trigger a more meaningful turn in the U.S. dollar during the second half of the year,” Deutsche Bank says.
“Industrial metals have been the best-performing sector on a total returns basis during the second quarter. A snapback in U.S. GDP growth as well as the Fed preparing the groundwork for a turn in U.S. monetary policy should be supportive for industrial metal prices over the coming year. ……………………………………….Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Agricultural commodities have seen smooth trading this year, enjoying a huge rally in the first four months of the year on adverse weather conditions and growing demand. This trend now seems to be reversing on accelerated crop plantation, especially in the U.S., and eased dry-weather concerns following rains.
This is especially true as wheat saw the worst slump in its prices in 15 years early this month on speculations of increased global supply. Wheat harvest in the European Union (EU) is expected to be the most since 2008. As per FAO, global wheat production would be 702.7 million metric tons in the 2014-15 season, up from 701.7 million metric tons projected in May………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Large exchange-traded fund providers have seen significant inflows during May, as investors came back to the market, according to figures from ETFGI. In its monthly newsletter, the exchange-traded product analyst revealed that BlackRock’s iShares division gathered the largest net exchange-traded fund inflows in April at $9.7bn (£5.77bn), followed by Vanguard with $6.5bn (£3.86bn), and Lyxor ETFs with $1.4bn (£0.83bn).
The newsletter said: “In May, investors invested net new money in almost equal amounts into equity and fixed income exposures with net new flows going into a broad spectrum of exposures from riskier emerging market equities to safer government bond products………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

The rise in global population, growth in the Chinese economy, urbanization of the Asian countries and increasing requirements of the developed countries have created an unprecedented demand for minerals and metals. The metals & mining industry caters to this ever-rising demand through extraction (mining) and primary and secondary processing of metals.
However, of late, the tepid global economic growth and a slowdown in the Chinese economy have emerged as major headwinds for the metal industry worldwide. Let’s have a sneak peak at what is in store for the major industrial metals ― Iron, aluminium and copper………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

With the summer driving season rapidly approaching and growing demand reducing energy stockpiles, the price of crude oil has continued to surge higher. As of Tuesday, the price of West Texas Intermediate Crude Oil was nearing the significant $105 mark, ahead of the Department of Energys weekly inventory report.
Speculation over an additional reduction in stockpiles has energy traders making increasing bullish bets on crude oil ahead of the report. This speculation, in turn, has lifted the United States Oil Fund (USO) more than eight percent so far this year and added to gains in energy stocks as well………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Rigging the foreign exchange, bond and commodity markets could become a criminal offence, the government will warn the City on Thursday as part of its latest effort to clean up the financial markets after a wave of scandals and allegations relating to key benchmarks.
Criminal offences for manipulating these global markets, which are based in London, will be among measures considered in a year-long review being launched by the chancellor, which was immediately criticised by Labour for being too late. It follows steps in 2012 to allow prison sentences of up to seven years for anyone involved in rigging the key interest rate benchmark Libor………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

Of course, the US Dollar isn’t the only currency that nations maintain reserves of. The Euro is also a major reserve currency and the Yuan is fast becoming a major reserve currency. But since the USA produces 22% of all world output it happens to play a particularly special role in the global economy.
By virtue of being the largest economy in the world the accumulation of US dollar denominated financial assets happens to dominate the global financial system. It’s sort of like being the top market share producer of a particular product in a particular industry. Other entities accumulate your products because you’re the top producer. And that changes over time. Market shares change and regimes shift with the evolving economy………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

On June 2nd, Barack Obama announced that he wanted total emissions from American power stations to fall by 30% from 2005 levels in the next 15 years. This has (correctly) been interpreted as a potshot at the coal industry. States will have to come up with plans to meet specific emission-reduction targets; scrapping coal plants (and replacing them with gas-fired ones, say) is an obvious avenue to get there.
The goal is laudable, but even if the act makes it through inevitable legal challenges its global impact may be limited. Part of the trouble is that scrapping an American coal plant serves little purpose if the black stuff is then put on a ship to China and burned there instead………………………………………..Full Article: Source

Posted on 12 June 2014 by VRS |  Email |Print

China’s Shenzhen will impose sanctions on companies that fail to comply with targets under the city’s carbon trading scheme, an official said according to a local media outlet, despite criticism about the rules.
The Shenzhen government, hosting the oldest of China’s six pilot carbon trading markets, last week arranged a special CO2 permit auction to help local emitters meet their targets for 2013 by the June 30 deadline………………………………………..Full Article: Source

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