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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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Friday, 19 January 18
U.S. WEEKLY COAL OUTPUT WAS 13.5 MMST FOR THE WEEK ENDING JANUARY 13, EIA SAYS
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 13.5 million short tons ...
Thursday, 18 January 18
WORLD TRADE IN HARD COAL RISES BY 1.5% IN 2017 - KOHLENIMPORTEURE
Press Release: World Trade in Hard Coal Rises by 1.5% in 2017. German Steam Coal Imports Plummet by 15% in 2017 – in Contrast to Other Sector ...
Wednesday, 17 January 18
SHIPPING MARKET INSIGHT - INTERMODAL
As we are now well into the first month of 2018, the mood across the entire offshore industry undeniably remains rather positive following the oil ...
Monday, 15 January 18
THE FREIGHT RATES ARE EXPECTED TO BE FLAT TO WEAK THIS WEEK - VISTAAR
COALspot.com: The daily average earnings for Supramax, for the route Indonesia to India passing through Singapore has stayed firm, week over week, ...
Monday, 15 January 18
QUEENSLAND SHIPPED 210.8 MT OF COAL IN 2017, DOWN 5% YOY QUEENSLAND RESOURCES COUNCIL
Queensland's coal exports over the 12 months reached 210.8 mt which is down 10 mt or 5 per cent from the previous year’s record of 220.8 ...
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Showing 1826 to 1830 news of total 6871 |
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- Kaltim Prima Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- Jorong Barutama Greston.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Parry Sugars Refinery, India
- Pendopo Energi Batubara - Indonesia
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Electricity Generating Authority of Thailand
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Romanian Commodities Exchange
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Siam City Cement - Thailand
- Deloitte Consulting - India
- SMC Global Power, Philippines
- San Jose City I Power Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Straits Asia Resources Limited - Singapore
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- The University of Queensland
- Miang Besar Coal Terminal - Indonesia
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Ministry of Mines - Canada
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Orica Mining Services - Indonesia
- South Luzon Thermal Energy Corporation
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Aditya Birla Group - India
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Siam City Cement PLC, Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Orica Australia Pty. Ltd.
- Gujarat Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Xindia Steels Limited - India
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
- IHS Mccloskey Coal Group - USA
- Bhatia International Limited - India
- Maheswari Brothers Coal Limited - India
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Global Business Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Trasteel International SA, Italy
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Transport, Egypt
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- Intertek Mineral Services - Indonesia
- Commonwealth Bank - Australia
- Price Waterhouse Coopers - Russia
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- Formosa Plastics Group - Taiwan
- Ambuja Cements Ltd - India
- Georgia Ports Authority, United States
- Bhushan Steel Limited - India
- Port Waratah Coal Services - Australia
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- White Energy Company Limited
- Binh Thuan Hamico - Vietnam
- Bayan Resources Tbk. - Indonesia
- Anglo American - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- OPG Power Generation Pvt Ltd - India
- Central Electricity Authority - India
- Planning Commission, India
- Thiess Contractors Indonesia
- Makarim & Taira - Indonesia
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Iligan Light & Power Inc, Philippines
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Indika Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- CNBM International Corporation - China
- Meenaskhi Energy Private Limited - India
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Coalindo Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- TeaM Sual Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- Grasim Industreis Ltd - India
- Vedanta Resources Plc - India
- Petron Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- Mintek Dendrill Indonesia
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Madhucon Powers Ltd - India
- Australian Coal Association
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Salva Resources Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Indogreen Group - Indonesia
- Sakthi Sugars Limited - India
- Wilmar Investment Holdings
- Oldendorff Carriers - Singapore
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Gujarat Sidhee Cement - India
- Toyota Tsusho Corporation, Japan
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Indian Oil Corporation Limited
- Antam Resourcindo - Indonesia
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Star Paper Mills Limited - India
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- India Bulls Power Limited - India
- Videocon Industries ltd - India
- PTC India Limited - India
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- Energy Link Ltd, New Zealand
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