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Commodities Briefing - Archive | January, 2009

No bottom yet for falling commodities, Scotiabank finds

Posted on 30 January 2009 by VRS  |  Email |Print

From Global commodity prices have not yet hit bottom, but they are not falling as fast as they have been, Bank of Nova Scotia said Thursday. The pace of decline is slowing and the forced, indiscriminate asset selling by funds – triggered by investor redemptions and tight credit – appears to be subsiding.

Patricia Mohr, vice-president of economics and commodity market specialist at the bank, said in a monthly report: “Many prices are approaching average world cash costs, triggering substantial production cuts, new project deferral and tighter supplies.”…. Full Article: Sourcer

Australia: Not good news from commodity forecast

Posted on 30 January 2009 by VRS  |  Email |Print

From There’s some not so good news for Australia contained in the latest gloomy world economic forecast from the International Monetary Fund: The growth has gone out of prices for energy, metals and food exports over the next five years and anyone expecting a return to the halcyon days of 2008 had better think again.

That’s not to say the forecast is all gloomy: there is a silver lining in there for the well managed company, such as BHP Billiton which reports its 2008 December half year result next week. …. Full Article: Source

Commodities lead fund losses in Malaysia

Posted on 30 January 2009 by VRS  |  Email |Print

From Commodity funds posted an average decline of 33.3% in 2008, according to Thomson Reuters Lipper data. Mutual funds registered for sale in Malaysia posted an average loss of 22.28% in 2008, according to Thomson Reuters Lipper data.

In terms of average performance by asset type, commodities funds (-33.30%) and equity funds (-35.54%) were the worst performers, while bond funds (+0.07%) and money market funds (+2.90%) managed to end the year on a positive note. …. Full Article: Source

Global recession triggers slump in world trade volumes

Posted on 30 January 2009 by VRS  |  Email |Print

From Global output and trade plummeted in the final months of 2008, and the IMF said it expects world trade volumes to contract this year, falling by 2.8%.

The continuation of the financial crisis, with government policies failing to dispel uncertainly, has caused asset values to fall sharply across advanced and emerging economies, decreasing household wealth and thereby putting downward pressure on consumer demand, the IMF said in its updated World Economic Outlook, released on January 28….. Full Article: Source

Clean energy needs USD 515 bln a year

Posted on 30 January 2009 by VRS  |  Email |Print

From Guardian: Clean energy investment needs to more than triple to $515 billion a year to stop planet-warming emissions reaching levels deemed unsustainable by scientists, the World Economic Forum said in a report on Thursday.

The hefty investments required in renewable energy sectors such as solar and wind energy need to be made between now and 2030, the report, which was co-written by research group New Energy Finance, said. “Clean energy opportunities have the potential to generate significant economic returns,” the World Economic Forum said in a statement accompanying the report….. Full Article: Source

Recession threatens carbon trading

Posted on 30 January 2009 by VRS  |  Email |Print

From BBC: A crucial scheme to control greenhouse gases is under threat due to the recession. Under the Kyoto Protocol adopted in 1997, since ratified by 183 countries, industrialised nations agreed to reduce their emissions of gases such as carbon dioxide (C02) which cause global warming.

Among the measures introduced was the European Carbon Trading System, whereby governments put a price on the amount of greenhouse gases that can be emitted by any company. …. Full Article: Source

Carbon trading may be the new sub-prime, says energy boss

Posted on 30 January 2009 by VRS  |  Email |Print

From The row over the working of the European Union’s emissions trading scheme intensified last night when EDF Energy warned that speculators risked turning carbon into a new category of sub-prime investment.

Vincent de Rivaz, the chief executive of the UK arm of the French-owned gas and electricity group, said politicians and regulators needed to revisit the way the ETS was working and whether it was bringing the results they wanted. …. Full Article: Source

OPEC needs oil above 50 dollars, more cuts possible: sec gen

Posted on 30 January 2009 by VRS  |  Email |Print

From AFP: Organization of the Petroleum Exporting Countries (OPEC) members need an oil price above 50 dollars a barrel to make exports worthwhile, the head of the cartel said Thursday, adding that more production cuts were possible later this year.

“We are not happy with 40 even 50 dollars a barrel,” OPE Secretary General Abdalla Salem El-Badri told a panel discussing energy security at the World Economic Forum in Davos….. Full Article: Source

Energy chiefs say oil price must rise to ensure supply

Posted on 30 January 2009 by VRS  |  Email |Print

From Guardian: Consumers agreed with producers in Davos that the oil price must eventually rise to ensure investment in future supply, while energy chiefs said more should be done now to protect the climate.

At its peak near $150 in July, oil was clearly taking a toll on the global economy and eroding demand for fuel. But a $100-plus collapse since then has slowed investment and raised the potential of tight supply when consumption picks up….. Full Article: Source

Shell profits hits record USD31bln despite fall in oil price

Posted on 30 January 2009 by VRS  |  Email |Print

From Telegraph: Anglo-Dutch energy giant Royal Dutch Shell still managed to post a record $31bn profit last year, despite a 70pc slump in the price of crude in the second half of the year.

Fourth-quarter earnings came in at $4.8bn (£3.3bn) on a current cost of supplies (CCS) basis, which accounts for changes in the value of oil inventories currently held by the company. …. Full Article: Source

Rethinking uranium

Posted on 30 January 2009 by VRS  |  Email |Print

From Nuclear energy – say what you will about all of the problems associated with it – does have the advantage of being a carbon-emissions-free energy source, as good or better than solar and wind power. From a pure climate change and air quality perspective, nuclear is pretty green.

But is nuclear energy going to play a larger role in electricity generation in the future?…. Full Article: Source

S&P says metals prices may rebound late this year

Posted on 30 January 2009 by VRS  |  Email |Print

From Standard & Poor’s anticipates the 2009 operating performance of the global metals and mining sector to be much weaker with the potential for some improvement late in the year.

“We think there’s a good change that prices will rebound to a healthier level once demand starts to improve, although well below the peaks of 2007 and 2008,” S&P Credit Analysts Marie Shmark, Michael Scerbo, Alex Herbert and Donald Marleau said….. Full Article: Source

Xstrata launches GBP4bln cash call to pay down debts

Posted on 30 January 2009 by VRS  |  Email |Print

From Independent: Xstrata, the Swiss mining giant whose shares are listed on the London Exchange, wants to raise $5.9bn (£4.1bn) in order to pay off debt and buy a coal mine from its major shareholder.

Xstrata plans to issue almost 2 billion shares at a price of £2.10, some 66 per cent lower than Wednesday’s 623p closing price, the company revealed yesterday. …. Full Article: Source

Big metal cuts herald faster recovery for some

Posted on 30 January 2009 by VRS  |  Email |Print

From Guardian: Parts of the mining and metals industry such as ferro-chrome, iron ore and steel have slashed output on tumbling demand and prices which should stand them in good stead for an eventual upturn.

But industrial metals such as aluminium and nickel still need to do more to combat oversupply. Global ferro-chrome production has almost halved from year-ago levels and December steel output was down by a quarter because material could not find a home as demand slumped….. Full Article: Source

How base metals are caught in market bloodbath

Posted on 30 January 2009 by VRS  |  Email |Print

From Did we speak of good news for metals arising from China’s insatiable demand sometime ago? Surely, this has not happened and it looks like China too has succumbed to global recession as demand for Steel and other base metals drops rapidly making producers wonder who is going to be their saviour?

The bloodbath in the base metal prices has continued and there has been no respite in the fall in prices. Whatever the fundamentals of each metal the fall in prices has been across the board….. Full Article: Source

Gold rises as base metals retreat

Posted on 30 January 2009 by VRS  |  Email |Print

From FT: Gold battled to regain the $900-an-ounce level on Thursday while base metals staged a retreat amid demand concerns after the International Monetary Fund downgraded its forecasts for global growth.

Bullion came under pressure early in Thursday’s session, sinking to a low of $870.10 a troy ounce, as the dollar strengthened after the US Federal Reserve signalled it was prepared to buy long-term government debt if it would improve credit market conditions….. Full Article: Source

Gold likely to hit new highs on dollar fear-Barrick

Posted on 30 January 2009 by VRS  |  Email |Print

From Guardian: Gold is likely to hit new record highs, spurred by serious concern about the U.S. currency and doubt about the state of the world economy, the chairman of Barrick Gold Corp. said on Thursday.

There was even a possibility, although not a probability, central banks, including China’s, might start to switch from dollar holdings to gold, which could cause the metal’s price to treble or more….. Full Article: Source

Hedge fund launches gold pricing

Posted on 30 January 2009 by VRS  |  Email |Print

From Amid mounting worries that governments will devalue their currencies by printing more money, one hedge fund has started offering its clients the option of holding shares priced in troy ounces of gold, according to reports.

Osmium Capital Management is offering the gold pricing as an alternative to assets in US dollars, sterling or euros, the Financial Times reports. …. Full Article: Source

Gold finding huge traction with money managers

Posted on 30 January 2009 by VRS  |  Email |Print

From Gold, the traditional safe haven in times of economic turmoil, proved to be more a commodity that everyone loved to hate last year even amid the turbulence that engulfed world markets.

But as 2009 gets under way the yellow metal has found huge traction with money managers….. Full Article: Source

Zimbabwean currency is worthless

Posted on 30 January 2009 by VRS  |  Email |Print

From Guardian: Zimbabwe’s prolonged economic crisis has forced the government to allow businesses to trade officially in foreign currencies alongside the local dollar.

Acting finance minister Patrick Chinamasa said scrapping foreign exchange controls was necessary to tackle hyperinflation, last measured at 231 million per cent. Although the central bank has slashed 13 zeroes from the Zimbabwe dollar over the past three years, the currency is virtually worthless; the newest banknotes carry face values of up to $100 trillion….. Full Article: Source

Ruble sees fresh record falls

Posted on 30 January 2009 by VRS  |  Email |Print

From Yesterday was this month’s last day to pay taxes. Having completed this task, banks quickly lapsed back into their old ways, starting to purchase currencies.

It was only natural then for this to trigger the ruble’s new record decline against the basket of two currencies – the dollar and the euro – which appreciated from RUB 37.77 to RUB 38.75 in a single trading session on Wednesday, the RBC Daily newspaper reported….. Full Article: Source

Contango: How it affects crude oil ETFs and ETNs

Posted on 30 January 2009 by VRS  |  Email |Print

From The US Oil Fund holds long positions in West Texas Intermediate crude oil futures contracts, and rolls these contracts forward each month. Like most futures traders, USO buys futures with leverage, putting up a small portion of the money to buy the contracts.

The rest of the money is invested in Treasuries, which generates interest income for the fund….. Full Article: Source

Are agricultural ETFs immune to the current crisis?

Posted on 30 January 2009 by VRS  |  Email |Print

From ETF Securities is a London-based exchange-traded fund provider that primarily deals with commodities. They have gone from a “no-namer” to Europe’s largest ETF provider with roughly $10 billion+ in assets.

Not so surprisingly, then, when ETF Express reported that ETF Securities benefited from record inflows of $580 million, the news piqued my interest. Apparently, agricultural products joined physical gold and oil on the desirability list for exchange-traded commodity funds….. Full Article: Source

Electronic commodity exchange opens in Kyiv

Posted on 30 January 2009 by VRS  |  Email |Print

From Now it is possible to exchange commodities and services with the help of the Internet - an electronic commodity exchange started to work in Kyiv.

Its founders are convinced that taking into consideration a lack of circulation funds the exchange becomes especially topical….. Full Article: Source

India: Essential commodities could become cheaper

Posted on 30 January 2009 by VRS  |  Email |Print

From The decision to cut fuel prices could have a positive impact on inflationary trends and result in reduction in prices of essential commodities.

The government is positive about the outcome and feels that it will help bring down inflation to around 3 to 4 per cent by March this year. Experts say that as energy is the backbone of all economic activity, it is bound to have an all round impact. …. Full Article: Source

Who says agriculture cannot be funded?

Posted on 30 January 2009 by VRS  |  Email |Print

From In developing countries, the high real interest rates for agricultural loans are often linked to perceived risks. The banks refused to disburse loans owing to unsafe collaterals forcing the farmers to approach money lenders.

This creates a vicious circle or a loop of credit where the farmer is always under debt. …. Full Article: Source

Wheat tumbles as weekly U.S. sales plunge to eight-month low

Posted on 30 January 2009 by VRS  |  Email |Print

From Bloomberg: Wheat fell the most in a week after a government report showed U.S. export sales plunged to the lowest in eight months.

U.S. shippers reported net sales of 23,500 metric tons in the week ended Jan. 22, down 94 percent from the prior week and the lowest since May 22, the Department of Agriculture said in a report today. …. Full Article: Source

Steep drop in world wheat crop forecast

Posted on 30 January 2009 by VRS  |  Email |Print

From FT: The world’s wheat harvest is likely to “fall sharply” in 2009-10 as farmers cut the acreage devoted to the cereal, the International Grains Council said yesterday in its first forecast for the incoming crop.

The London intergovernmental body said the 2009-10 season wheat crop would fall to 650m tonnes – down about 5 per cent from a record 687m tonnes last season. …. Full Article:

Mexican food prices aren’t set for ‘abrupt’ increase

Posted on 30 January 2009 by VRS  |  Email |Print

From Bloomberg: Mexican food prices won’t undergo an “abrupt” rise like last year and may fall because of declining oil and grain costs, Agriculture Minister Alberto Cardenas said.

“It looks like prices will maintain themselves in the first six months of the year,” Cardenas said today at a breakfast with reporters in Mexico City. The drop in commodities prices “makes us believe” that the prices for some foods such as beef, eggs and milk won’t increase, he said. …. Full Article: Source

Demand fears hit oil, metals prices

Posted on 30 January 2009 by VRS  |  Email |Print

From Reuters: Oil and metals prices fell on Thursday as fears about falling demand, particularly from China, and rising physical stocks dampened optimism arising from recent winning streaks.

Grains also eased, as rains brightened the outlook for key exporter Argentina, which is suffering its worst drought in 48 years….. Full Article: Source

Gold prices rise as caution overcomes Wall Street

Posted on 30 January 2009 by VRS  |  Email |Print

From AP: Gold prices advanced Thursday as bad economic news once again had investors fleeing Wall Street. Other commodities, including oil and agriculture futures, tumbled.

Commodities seem to be taking a cue from the equities markets, more or less falling in tandem with stocks as concerns about a worsening economy take center stage. The theme is a familiar one to investors. …. Full Article: Source

Global economy: 2009 just like World War II

Posted on 29 January 2009 by VRS  |  Email |Print

From With overall global economic growth slowing to a near standstill this year, 2009 will be the most challenging year for economies across the globe since World War II, according to an International Monetary Fund report released Wednesday.

The IMF, a global economic organization of 185 countries, said economic growth across the world will fall to just 0.5% in 2009 from 3.4% in 2008. Financial markets are expected to remain under stress - despite a cornucopia of credit-easing actions - until investors and consumers gain confidence that policy actions can help improve market conditions….. Full Article: Source

Oil Prices to average $60 in 2009 - Markaz Study

Posted on 29 January 2009 by VRS  |  Email |Print

Kuwait Financial Centre “Markaz” in its recently released research note has analyzed the role of oil for GCC economies, estimated oil price scenarios for 2009, and explored the relationship between oil and GCC stock markets.

M.R.Raghu, Rajiv Bishnoi and Layla Al-Ammar, the authors of the report, note that every successive oil price spike actually goes to negate the feeble attempts by oil producing and exporting countries, especially the GCC, to diversify their economies and reduce the dependence and inherent volatility. …. Full Press Release: Source

UAE: SCA seeks information on foreign exposure

Posted on 29 January 2009 by VRS  |  Email |Print

From The Securities and Commodities Authority (SCA) has instructed the listed firms to submit detailed information on their exposure to real estate, derivatives and structured products to ascertain the extent of the financial losses the nation’s companies have suffered from these investments in to recession-hit western economies.

The SCA circular comes as a follow-up to the UAE Central Bank’s instructions to banks and financial institutions on the same topic, issued on January 27, asking them to submit detailed information on their investment activities. …. Full Article: Source

FMC allows hedging of refinery margins

Posted on 29 January 2009 by VRS  |  Email |Print

From Oil marketing companies will be able to hedge their refinery margins (difference in crude oil and finished product prices) and end-products from crude oil as Forward Markets Commission (FMC), the regulatory authority for forwards and futures markets in India, allowed it.

After getting the go-ahead from the FMC Multi-Commodity Exchange (MCX) has launched heating oil futures. This will open a window of opportunity for oil companies to hedge refinery margins and end products on MCX. So far, MCX had been providing a platform to oil exploration and marketing companies only to hedge volumes for crude oil….. Full Article: Source

Currencies: Playing a rebound in the Pound

Posted on 29 January 2009 by VRS  |  Email |Print

From Is it time to buy sterling? That depends on what you make of the dangers facing the struggling British economy. “The pound is sinking,” sang Paul McCartney in 1982. Unfortunately, the ex-Beatle’s ditty would sound perfectly current on a 2009 playlist.

The near-nationalization of the Royal Bank of Scotland on Jan. 19—in which the British government boosted its stake in the ailing banking giant to 70%—sparked fears for the health of the British banking system and forced the British pound down 6.6% for the week ended Jan. 23….. Full Article: Source

What will happen to the Chinese currency?

Posted on 29 January 2009 by VRS  |  Email |Print

From It becomes increasing clear that the Chinese yuan will depreciate as many economists expect. However, we have to recognize that this depreciation also has drawbacks.

First, many commodity prices in China are still total far less than similar products made overseas. So China’s shrinking export business is not because prices aren’t low enough….. Full Article: Source

Kazakhstan seen preparing to devalue currency

Posted on 29 January 2009 by VRS  |  Email |Print

From It’s become a familiar story. An oil-fueled boom now rapidly running out of steam as commodity prices plummet. Billions of dollars’ worth of government help for banks struggling in a liquidity crisis.

Foreign loans that were cheap to get in the good times, now increasingly hard to refinance….. Full Article: Source

Scientists invent GBP2 energy saving lightbulb that last for 60 years

Posted on 29 January 2009 by VRS  |  Email |Print

From Telegraph: A £2 energy-saving lightbulb that lasts for 60 years has been developed by scientists at Cambridge University. The researchers have designed a bulb that is three times more energy efficient than today’s best offer and can cut lighting bills by 75 per cent.

The bulbs are made using Gallium Nitride (GaN), a man-made substance used in LEDs (light emitting diodes). It is routinely used in bike lights, mobile phones and camera flashes….. Full Article: Source

Believe it or not - Natural gas producers can still show profits at $5 gas

Posted on 29 January 2009 by VRS  |  Email |Print

From Two new related technologies in the oil and gas industry are about to forever change the economics for its investors, producers, and consumers.

Horizontal Drilling (HD) and sister technology Multi-Stage Fracing (MSF) are lowering production costs, improving economics on current oil and gas fields and opening up massive new fields that were previously not profitable. …. Full Article: Source

Europe seeks global carbon trading market

Posted on 29 January 2009 by VRS  |  Email |Print

From Telegraph: The European Commission has called for a global emissions trading market, even as its own scheme comes under fire following a slump in the price of carbon. Analysts suggest companies are flooding the market by cashing in their emissions allowances to raise money, rather than for any environmental benefit.

The EU Emissions Trading Scheme (EU ETS) was set up as a market mechanism to help companies reduce carbon emissions. Polluters are granted a certain number of emissions allowances that can be traded. So a heavy polluter can buy carbon allowances from a company that has succeeded in reducing its emissions. …. Full Article: Source

EU calls on America to create transatlantic carbon trading scheme

Posted on 29 January 2009 by VRS  |  Email |Print

From Guardian: The Obama administration should join Europe in an ambitious new transatlantic pact to combat climate change, Brussels proposed.

Seeking to seize on the excitement generated by the election of the new US president and hoping to co-opt Barack Obama’s green agenda for a powerful alliance to tackle global warming, the European commission called on the Americans to establish a joint carbon trading scheme with Europe modelled on the system operating in the EU since 2005….. Full Article: Source

NSW pushes for carbon trading funds

Posted on 29 January 2009 by VRS  |  Email |Print

From The New South Wales Government says Sydney’s success in the new carbon trading market will depend on Commonwealth support.

The State Government’s new task force of financial experts and academics is meeting for the first time today to recommend ways of promoting Sydney as a centre for carbon trading.The team has two months to come up with a set of recommendations. …. Full Article: Source

Oil speculator debate resurfaces

Posted on 29 January 2009 by VRS  |  Email |Print

From FT Alphaville: It was the hot topic of last summer (when oil prices were racing to record highs), but the debate over whether speculators are really to blame for oil’s volatily has somewhat fallen off the agenda since the price of crude came crashing down.

Opec, of course, have always maintained it was indeed the speculators’ fault (not theirs). Unsurprisingly, perhaps, it is Opec secretary general, Abdalla el-Badri, who is planning to revive the debate at Davos this week. …. Full Article: Source

Crude oil prices decline

Posted on 29 January 2009 by VRS  |  Email |Print

From Crude oil prices fell sharply on the New York Mercantile Exchange Wednesday as slower demand continued to undermine price support. The American Petroleum Institute said this month that U.S. demand had fallen to the lowest levels since 2003, down to 19.4 million barrels a day.

On Wednesday, crude oil prices fell 58 cents to $41.82 per barrel. Heating oil prices gained 0.0255 cents to $1.40 per gallon. Reformulated blendstock gasoline rose 0.0091 cents to $1.1176 per gallon. Natural gas prices rose 0.087 cents to $4.59 per million British thermal units….. Full Article: Source

What companies are profiting from China’s commodities crusade?

Posted on 29 January 2009 by VRS  |  Email |Print

From While the rest of the world is grappling with the global slowdown, China is figuring out ways to exploit it. Over the past few months, China has capitalized on the financial turmoil that has paralyzed the world’s “developed” economies by stocking up on cheap commodities, weeding out competition to its largest state-run companies, and acquiring even more foreign assets.

Indeed, with China’s economic growth projected at an enviable 8% for this year, that country’s government has been able to spend less time promoting immediate growth and liquidity, and more time preparing for the economic renaissance that almost certainly seems to be the Asian giant’s destiny….. Full Article: Source

Rising oil price trend supports agri-food bull market during 2009

Posted on 29 January 2009 by VRS  |  Email |Print

From perhaps amazing characteristic of trends is that they do not continue indefinitely. One can not help also noticing the inability of journalists to correctly describe trends as they are developing.

While they, and we suspect their editors, spend considerable time on grammar, they still seem to have problems with the proper tense for verbs. The difference between falling and has fallen may seem trivial to journalists, but to the analysts they are considerably different….. Full Article: Source

Philippines: Govt control on prices of commodities urged

Posted on 29 January 2009 by VRS  |  Email |Print

From Militants want the government to set up price-control mechanism for basic commodities to protect workers and consumers amid mounting unemployment and underemployment.

The Bagong Alyansang Makabayan (Bayan) said the measure should be coupled with the removal of “unjust and burdensome” tax measures such as value-added tax (VAT) on oil and power….. Full Article: Source

NZ: Forecast slash costs farmers $3.3bln

Posted on 29 January 2009 by VRS  |  Email |Print

From Plummeting global dairy prices costing farmers billions are bottoming out, dairy giant Fonterra says, but don’t hold your breath for relief this year.

The world’s biggest dairy exporter yesterday dropped its forecast payout to farmers this season by 90c to $5.10 per kg of milksolids….. Full Article: Source

Hedge funds offers to price in gold

Posted on 29 January 2009 by VRS  |  Email |Print

From FT: A hedge fund has begun offering investors the chance to have their investment denominated in gold, as worries grow over governments debasing their currencies by printing money.

Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than US dollars, sterling or euros….. Full Article: Source

January 2009
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