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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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Tuesday, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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Showing 101 to 105 news of total 6871 |
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- Sojitz Corporation - Japan
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Carbofer General Trading SA - India
- Edison Trading Spa - Italy
- Electricity Generating Authority of Thailand
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- The University of Queensland
- New Zealand Coal & Carbon
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- Coastal Gujarat Power Limited - India
- Sree Jayajothi Cements Limited - India
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- Vedanta Resources Plc - India
- Petron Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
- Barasentosa Lestari - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Central Electricity Authority - India
- GMR Energy Limited - India
- Thiess Contractors Indonesia
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Heidelberg Cement - Germany
- Mercuria Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- Bukit Makmur.PT - Indonesia
- Marubeni Corporation - India
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- The Treasury - Australian Government
- Aditya Birla Group - India
- Kobexindo Tractors - Indoneisa
- Coalindo Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Star Paper Mills Limited - India
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- PNOC Exploration Corporation - Philippines
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- PowerSource Philippines DevCo
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Sidhee Cement - India
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- Medco Energi Mining Internasional
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- AsiaOL BioFuels Corp., Philippines
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Meenaskhi Energy Private Limited - India
- Bayan Resources Tbk. - Indonesia
- Merrill Lynch Commodities Europe
- Indian Oil Corporation Limited
- Thai Mozambique Logistica
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
- Maheswari Brothers Coal Limited - India
- PTC India Limited - India
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement PLC, Thailand
- India Bulls Power Limited - India
- Grasim Industreis Ltd - India
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- Kapuas Tunggal Persada - Indonesia
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Electricity Authority, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Indogreen Group - Indonesia
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Bhatia International Limited - India
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Mintek Dendrill Indonesia
- Port Waratah Coal Services - Australia
- ASAPP Information Group - India
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Goldman Sachs - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- Iligan Light & Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Makarim & Taira - Indonesia
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- Siam City Cement - Thailand
- Wilmar Investment Holdings
- Riau Bara Harum - Indonesia
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- GVK Power & Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Renaissance Capital - South Africa
- Mercator Lines Limited - India
- Planning Commission, India
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- Africa Commodities Group - South Africa
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Global Business Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
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