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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, 07 December 17
SUPRAMAX: CHINA TO INDIA FIXING AT MID US$ 8000 - FEARNLEYS
Supramax
There has been quite some activity in the Atlantic basin this week, rates out of USG are still firm, trips to Emed gone through at low/m ...
Thursday, 07 December 17
THE ROLE OF COAL - AN INCONVENIENT TRUTH - BENJAMIN SPORTON, WCA
At the climate talks in Bonn, a global alliance to phase out coal was launched. This, along with other rhetoric about developments in the energy se ...
Wednesday, 06 December 17
SHIPPING MARKET INSIGHT - VASILIS VASILEIOU
Moving towards the end of 2017, we are facing a relatively slack period of business in the ship repair sector. The repair market has already mature ...
Tuesday, 05 December 17
DOES BITCOIN HAVE A FUTURE IN SHIPPING? - ALIBRA SHIPPING
Google now receives more search requests for Bitcoin than for Kim Kardashian, Beyoncé and Taylor Swift combined. This week, a shipping compa ...
Tuesday, 05 December 17
OIL PRICES HAVE GAINED SOME TRACTION THESE PAST FEW DAYS ON TALKS OF ANOTHER OPEC & RUSSIA PRODUCTION CUT EXTENSION - GERRY LATHROP
Oil prices have gained some traction these past few days on talks of another OPEC (including non-OPEC Russia) production cut extension.
The cu ...
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Showing 1856 to 1860 news of total 6871 |
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- Sojitz Corporation - Japan
- Posco Energy - South Korea
- Mercuria Energy - Indonesia
- Rio Tinto Coal - Australia
- Thiess Contractors Indonesia
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Toyota Tsusho Corporation, Japan
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Asmin Koalindo Tuhup - Indonesia
- Sical Logistics Limited - India
- Indika Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Global Coal Blending Company Limited - Australia
- Indian Oil Corporation Limited
- Parliament of New Zealand
- South Luzon Thermal Energy Corporation
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- ICICI Bank Limited - India
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Riau Bara Harum - Indonesia
- Straits Asia Resources Limited - Singapore
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- Bangladesh Power Developement Board
- The University of Queensland
- SMC Global Power, Philippines
- Interocean Group of Companies - India
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Deloitte Consulting - India
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- Commonwealth Bank - Australia
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Central Electricity Authority - India
- Mercator Lines Limited - India
- LBH Netherlands Bv - Netherlands
- Renaissance Capital - South Africa
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- Bhatia International Limited - India
- Agrawal Coal Company - India
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Attock Cement Pakistan Limited
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Sindya Power Generating Company Private Ltd
- Miang Besar Coal Terminal - Indonesia
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- PTC India Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Power Finance Corporation Ltd., India
- Chettinad Cement Corporation Ltd - India
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Sakthi Sugars Limited - India
- Makarim & Taira - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- Metalloyd Limited - United Kingdom
- MS Steel International - UAE
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- Cement Manufacturers Association - India
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- Parry Sugars Refinery, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kobexindo Tractors - Indoneisa
- Intertek Mineral Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- New Zealand Coal & Carbon
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- Carbofer General Trading SA - India
- Videocon Industries ltd - India
- Minerals Council of Australia
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Coalindo Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Goldman Sachs - Singapore
- Tata Chemicals Ltd - India
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Romanian Commodities Exchange
- Therma Luzon, Inc, Philippines
- White Energy Company Limited
- Heidelberg Cement - Germany
- GAC Shipping (India) Pvt Ltd
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Eastern Coal Council - USA
- Indo Tambangraya Megah - Indonesia
- Coal and Oil Company - UAE
- International Coal Ventures Pvt Ltd - India
- Orica Mining Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate Of Revenue Intelligence - India
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Baramulti Group, Indonesia
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- London Commodity Brokers - England
- Kumho Petrochemical, South Korea
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- San Jose City I Power Corp, Philippines
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Formosa Plastics Group - Taiwan
- Grasim Industreis Ltd - India
- Uttam Galva Steels Limited - India
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- Latin American Coal - Colombia
- Bayan Resources Tbk. - Indonesia
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Georgia Ports Authority, United States
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