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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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Wednesday, 31 January 18
SHIPPING MARKET INSIGHT - TIMOS PAPADIMITRIOU
Days before the celebrations of the Lunar New Year, the dry bulk market seems to be holding well, against negative predictions. Period numbers repo ...
Monday, 29 January 18
BALTIC INDEX GAINS ON STRONGER BIG VESSEL ACTIVITY
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose this past week and ending on a positive note week ov ...
Monday, 29 January 18
U.S.WEEKLY COAL OUTPUT UP 8.7% W/W - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 14.6 million short tons ...
Wednesday, 24 January 18
SHIPPING MARKET INSIGHT - GEORGE ILIOPOULOS
Since the beginning of the New Year we have been witnessing the BDI correcting downwards, which nonetheless seems to have no effect at ...
Tuesday, 23 January 18
OIL MARKET ANALYSIS - ALLIED
Brent oil futures hit a three year high on January 16th touching around USD 70.30 before falling back down to around USD 68.60 at the Time of this ...
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Showing 1821 to 1825 news of total 6871 |
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- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Mjunction Services Limited - India
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- Independent Power Producers Association of India
- Kartika Selabumi Mining - Indonesia
- Energy Link Ltd, New Zealand
- SMC Global Power, Philippines
- Simpson Spence & Young - Indonesia
- Romanian Commodities Exchange
- GVK Power & Infra Limited - India
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- Bhatia International Limited - India
- Goldman Sachs - Singapore
- PTC India Limited - India
- Barasentosa Lestari - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- The State Trading Corporation of India Ltd
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Neyveli Lignite Corporation Ltd, - India
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Straits Asia Resources Limited - Singapore
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ASAPP Information Group - India
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Latin American Coal - Colombia
- Chamber of Mines of South Africa
- Georgia Ports Authority, United States
- Central Electricity Authority - India
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Sical Logistics Limited - India
- Heidelberg Cement - Germany
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- ICICI Bank Limited - India
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- GAC Shipping (India) Pvt Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- SN Aboitiz Power Inc, Philippines
- Deloitte Consulting - India
- International Coal Ventures Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bhushan Steel Limited - India
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- Bank of Tokyo Mitsubishi UFJ Ltd
- San Jose City I Power Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- Commonwealth Bank - Australia
- Indian Energy Exchange, India
- LBH Netherlands Bv - Netherlands
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- Petron Corporation, Philippines
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Timah Investasi Mineral - Indoneisa
- Africa Commodities Group - South Africa
- Ind-Barath Power Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- The University of Queensland
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Renaissance Capital - South Africa
- Interocean Group of Companies - India
- Coastal Gujarat Power Limited - India
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Central Java Power - Indonesia
- Larsen & Toubro Limited - India
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Anglo American - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kideco Jaya Agung - Indonesia
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Indogreen Group - Indonesia
- MS Steel International - UAE
- Meenaskhi Energy Private Limited - India
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Malabar Cements Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- IHS Mccloskey Coal Group - USA
- Mintek Dendrill Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- Bulk Trading Sa - Switzerland
- Australian Commodity Traders Exchange
- Marubeni Corporation - India
- Iligan Light & Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Singapore Mercantile Exchange
- OPG Power Generation Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Uttam Galva Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Aditya Birla Group - India
- Thiess Contractors Indonesia
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