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Thursday, 22 February 18
WHY THE COMMODITY RALLY WILL GET BACK ON TRACK - SIMON FLOWERS
 Implications for the US dollar and producers
Are we in the early stages of a sustained rise in commodity prices? And what does it mean for the US dollar?
We posed these questions a year ago when robust global economic growth was driving commodity demand and the US dollar was starting to tip over from a 15-year high. The two are inextricably linked, though which is the horse and which the cart is not always clear. The recent disruption in financial markets suggests it’s worth a fresh look at the relationship.
Over the past couple of years, there has been a broad improvement in commodity prices, with indices up by around 50% on average since early 2016. It’s been far from uniform, and different commodities bottomed at different times.
Iron ore and oil have seen the most spectacular rebounds, both up more than 100% from their lows.
The fundamentals in each commodity market are very different, but Principal Economist Jon Butcher identifies common factors behind the recovery.
First and foremost is growth in the global economy. GDP growth strengthened from a low of 2.3% in Q1 2016 to a six-year high of 3.1% in Q4 2017. The upswing has been broadly based with growth accelerating across Asia, Europe and the Americas. In 2016, emerging market growth was just 3.7%; this year we expect 4.6%, with China and India driving much of the improvement. This is doubly important for commodity demand, given the resource-intensive nature of emerging market growth.
Then there is the US dollar. The currency dropped 10% on a trade-weighted basis by end-January 2018, from its high of a year ago. The relationship between the US dollar and commodity prices is not straightforward, or indeed constant. But the dollar tends to be inversely correlated with commodity prices; a weaker dollar usually means stronger commodity prices, and that’s what we’ve seen over the past six months.
The fall in the value of the dollar reflects strength in the emerging world rather than a weak US economy.
It’s also sentiment: with confidence boosted by the global economic upswing, investors have shifted capital out of traditional safe havens like US treasuries into riskier assets with potentially higher returns.
Better prospects for growth in major trade partners like Europe and Canada, and with the expectation of monetary tightening in those economies, they have pushed their currencies higher against the dollar. We’d expect continued dollar weakness through 2018 given the prospects for a strong year of global economic growth.
Financial market volatility in the last fortnight has upset the apple cart. Commodity prices have corrected and the US dollar bounced by 4%, taking it back to December levels. US jobs data released on 2 February highlighted tightness in the US labour market.
Associated wage gains prompted fears of higher inflation and raised the prospect of accelerated US interest rate hikes. Uncertainty spiked, and equities and commodities dropped. Increased risk aversion effectively pulled capital back into safe havens like the US.
So, turning point or just a blip? More likely the latter.
Our view is that the global economy is set fair for growth at a healthy pace, perhaps a tad slower than in 2017-18. Developing economies in particular will do well.
This provides a backdrop for a sustained recovery in commodities over the next five years, though each commodity market has its own fundamental story. Oil, for example, is stuck in oversupply for the next two years before the market tightens into the early 2020s.
As commodities gradually recover, the US dollar should revert to gentle decline – though markets adjusting to the end of 'easy money' means it will doubtless be a bumpy ride for the currency and commodities alike. If we’re right, then some commodity producers may be on a journey to a better place in the next few years – firmer prices and better margins.
On the other hand, it might not pan out this way. So producers have to learn from this tough down cycle and persevere with the relentless drive to keep costs down so they can still make money even at future cycle lows – and wherever the US dollar travels. That has to be the goal.
Simon Flowers
Chairman and Chief Analyst
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Monday, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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Showing 56 to 60 news of total 6871 |
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- Intertek Mineral Services - Indonesia
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Cigading International Bulk Terminal - Indonesia
- TeaM Sual Corporation - Philippines
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Leighton Contractors Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Baramulti Group, Indonesia
- Metalloyd Limited - United Kingdom
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Carbofer General Trading SA - India
- McConnell Dowell - Australia
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- Price Waterhouse Coopers - Russia
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Africa Commodities Group - South Africa
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- MS Steel International - UAE
- Rashtriya Ispat Nigam Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ASAPP Information Group - India
- Thiess Contractors Indonesia
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Orica Mining Services - Indonesia
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- Coalindo Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Romanian Commodities Exchange
- Goldman Sachs - Singapore
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
- Indian Energy Exchange, India
- GN Power Mariveles Coal Plant, Philippines
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Sindya Power Generating Company Private Ltd
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- Parry Sugars Refinery, India
- Global Green Power PLC Corporation, Philippines
- Ambuja Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Sical Logistics Limited - India
- Marubeni Corporation - India
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- VISA Power Limited - India
- Central Electricity Authority - India
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- Ministry of Mines - Canada
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PetroVietnam Power Coal Import and Supply Company
- Holcim Trading Pte Ltd - Singapore
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indika Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- Ind-Barath Power Infra Limited - India
- Commonwealth Bank - Australia
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Edison Trading Spa - Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Interocean Group of Companies - India
- Independent Power Producers Association of India
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- South Luzon Thermal Energy Corporation
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Parliament of New Zealand
- IHS Mccloskey Coal Group - USA
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Karaikal Port Pvt Ltd - India
- GMR Energy Limited - India
- Ministry of Transport, Egypt
- TNB Fuel Sdn Bhd - Malaysia
- Medco Energi Mining Internasional
- Mintek Dendrill Indonesia
- Electricity Authority, New Zealand
- Coal and Oil Company - UAE
- Bhoruka Overseas - Indonesia
- Australian Coal Association
- Power Finance Corporation Ltd., India
- Jaiprakash Power Ventures ltd
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Indian Oil Corporation Limited
- The University of Queensland
- Economic Council, Georgia
- Aditya Birla Group - India
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- Jorong Barutama Greston.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Wood Mackenzie - Singapore
- Bangladesh Power Developement Board
- Jindal Steel & Power Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Kartika Selabumi Mining - Indonesia
- Standard Chartered Bank - UAE
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