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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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Thursday, 08 March 18
AVERAGE U.S. COAL MINING PRODUCTIVITY INCREASES AS PRODUCTION FALLS - EIA
Coal mining productivity in the United States increased 26% over the past five years, reaching 6.8 tons per miner hour in 2017, up from 5.4 tons pe ...
Wednesday, 07 March 18
WHEN AN IRRESISTIBLE FORCE MEETS AN IMMOVABLE OBJECT - GARD
KNOWLEDGE TO ELEVATE
Negotiable bills of lading are fundamental to trade. As documents of title, they are essential to the sale and carriage o ...
Wednesday, 07 March 18
SHIPPING MARKET INSIGHT - GIANNIS ANDRITSOPOULOS
The comparably small upside Handysize asset values have noted compared to other sizes since the historical lows of the dry bulk market in combinati ...
Tuesday, 06 March 18
FOREIGN INVESTORS ALLOWED TO BID FOR BIG MINING CONCESSIONS - THE JAKARTA POST
The government has allowed foreign investors to bid for mining concessions with a total area of more than 500 hectares, while smaller areas will be ...
Tuesday, 06 March 18
LNG VESSELS HAVE EMERGED AS THE FASTEST GROWING SEGMENT FOR THE WATERWAY - GERRY LATHROP
The day was July 25th 2016, a partly cloudy day on the Panama canal, and to most people a rather innocuous day without any real merit, however in s ...
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Showing 1786 to 1790 news of total 6871 |
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- Barasentosa Lestari - Indonesia
- Eastern Coal Council - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- Riau Bara Harum - Indonesia
- Straits Asia Resources Limited - Singapore
- Ministry of Transport, Egypt
- Alfred C Toepfer International GmbH - Germany
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Chettinad Cement Corporation Ltd - India
- Pendopo Energi Batubara - Indonesia
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Australian Coal Association
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Sree Jayajothi Cements Limited - India
- Price Waterhouse Coopers - Russia
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- SMC Global Power, Philippines
- Global Business Power Corporation, Philippines
- Videocon Industries ltd - India
- Madhucon Powers Ltd - India
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- Kumho Petrochemical, South Korea
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Electricity Authority - India
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Oldendorff Carriers - Singapore
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- McConnell Dowell - Australia
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- Siam City Cement - Thailand
- Sarangani Energy Corporation, Philippines
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Gujarat Mineral Development Corp Ltd - India
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- Parliament of New Zealand
- Billiton Holdings Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- Planning Commission, India
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Renaissance Capital - South Africa
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Wood Mackenzie - Singapore
- Holcim Trading Pte Ltd - Singapore
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- Bayan Resources Tbk. - Indonesia
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- IEA Clean Coal Centre - UK
- Meralco Power Generation, Philippines
- TeaM Sual Corporation - Philippines
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Wilmar Investment Holdings
- MS Steel International - UAE
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Metalloyd Limited - United Kingdom
- Heidelberg Cement - Germany
- Star Paper Mills Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- Economic Council, Georgia
- Merrill Lynch Commodities Europe
- Kepco SPC Power Corporation, Philippines
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Toyota Tsusho Corporation, Japan
- Edison Trading Spa - Italy
- OPG Power Generation Pvt Ltd - India
- Attock Cement Pakistan Limited
- Romanian Commodities Exchange
- Ind-Barath Power Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- Krishnapatnam Port Company Ltd. - India
- Thiess Contractors Indonesia
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
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