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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, 13 December 17
DEMAND FOR THERMAL COAL LOOKED RELATIVELY ROBUST - DANIEL HYNES
Coal prices were a touch higher. Demand for thermal coal looked relatively robust, after reports continued to surface that Chinese authorities have ...
Wednesday, 13 December 17
SHIPPING MARKET INSIGHT - GEORGE PANAGOPOULOS
As another year is coming to an end and much has been already written about the positive reversal in the dry bulk market, we think it is interestin ...
Monday, 11 December 17
INDIA CONSUMERS ARE SAID TO BE DESPERATELY SEEKING CARGOES - DANIEL HYNES
Coal markets were stronger, as strong demand outside China continues to spur buying said Daniel Hynes, Senior Commodity Strategist at ANZ.
Acc ...
Monday, 11 December 17
CAPESIZE FFA MARKET LOOKING PROMISING MOVING FORWARD - FIS
Capesize
Another very promising day for the big ships as rates continued to firm in both oceans and the paper market ate into the backwardation s ...
Friday, 08 December 17
U.S. WEEKLY COAL PRODUCTION UP 11.6 PER CENT WEEK OVER WEEK, EIA DATA SHOWS
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 15.7 million short ton ...
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Showing 1851 to 1855 news of total 6871 |
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- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Star Paper Mills Limited - India
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Anglo American - United Kingdom
- Vizag Seaport Private Limited - India
- IHS Mccloskey Coal Group - USA
- PTC India Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Binh Thuan Hamico - Vietnam
- Essar Steel Hazira Ltd - India
- GAC Shipping (India) Pvt Ltd
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Mintek Dendrill Indonesia
- Orica Australia Pty. Ltd.
- Jaiprakash Power Ventures ltd
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- New Zealand Coal & Carbon
- Formosa Plastics Group - Taiwan
- London Commodity Brokers - England
- Jorong Barutama Greston.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Asmin Koalindo Tuhup - Indonesia
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- McConnell Dowell - Australia
- MS Steel International - UAE
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- International Coal Ventures Pvt Ltd - India
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- Kobexindo Tractors - Indoneisa
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PowerSource Philippines DevCo
- Aditya Birla Group - India
- Power Finance Corporation Ltd., India
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- IEA Clean Coal Centre - UK
- Jindal Steel & Power Ltd - India
- Bayan Resources Tbk. - Indonesia
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Bhatia International Limited - India
- Latin American Coal - Colombia
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Economic Council, Georgia
- Romanian Commodities Exchange
- Siam City Cement - Thailand
- Indika Energy - Indonesia
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- Iligan Light & Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Ceylon Electricity Board - Sri Lanka
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Australian Coal Association
- Renaissance Capital - South Africa
- Thai Mozambique Logistica
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Kapuas Tunggal Persada - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Oil Corporation Limited
- Xindia Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- GVK Power & Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Madhucon Powers Ltd - India
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Metalloyd Limited - United Kingdom
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Cement Manufacturers Association - India
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- Larsen & Toubro Limited - India
- Chettinad Cement Corporation Ltd - India
- The University of Queensland
- Posco Energy - South Korea
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- Global Business Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Semirara Mining Corp, Philippines
- The Treasury - Australian Government
- Directorate Of Revenue Intelligence - India
- Merrill Lynch Commodities Europe
- Goldman Sachs - Singapore
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Lanco Infratech Ltd - India
- Pendopo Energi Batubara - Indonesia
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- South Luzon Thermal Energy Corporation
- TNB Fuel Sdn Bhd - Malaysia
- Therma Luzon, Inc, Philippines
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Java Power - Indonesia
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Eastern Coal Council - USA
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Central Electricity Authority - India
- Petron Corporation, Philippines
- VISA Power Limited - India
- White Energy Company Limited
- Baramulti Group, Indonesia
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
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