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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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Tuesday, 05 December 17
THE COKING AND THERMAL COAL RECORDING SMALL GAINS - DANIEL HYNES
Coal markets were higher, with both coking and thermal coal recording small gains, said Daniel Hynes Senior Commodity Strategist at ANZ in his late ...
Tuesday, 05 December 17
WEEKLY US COAL PRODUCTION ESTIMATES DIP WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 14.1 million short ton ...
Thursday, 30 November 17
CONTEMPLATING COAL'S CONTROVERSY AT COP23 - BENJAMIN SPORTON
Representing the coal industry at climate talks is never going to be an easy proposition. For many people, coal and climate action are incompatible ...
Wednesday, 29 November 17
THE LAST DAYS OF COAL? - ALIBRA SHIPPING
At least 15 countries have joined an international alliance to phase out coal use for power generation before 2030.
Britain, Canada, Denmark, ...
Wednesday, 29 November 17
THERMAL COAL MARKETS WERE A LITTLE BIT MORE SUBDUED - DANIEL HYNES, ANZ
Coal prices were stronger, led by gains in coking coal. Premium hard coking coal jumped above USD200/t for the first time in two months, said Danie ...
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Showing 1861 to 1865 news of total 6871 |
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- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Globalindo Alam Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Grasim Industreis Ltd - India
- Barasentosa Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Vizag Seaport Private Limited - India
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Deloitte Consulting - India
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Semirara Mining Corp, Philippines
- Savvy Resources Ltd - HongKong
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Therma Luzon, Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- Bhatia International Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Wood Mackenzie - Singapore
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Agrawal Coal Company - India
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Antam Resourcindo - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining and Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Makarim & Taira - Indonesia
- Georgia Ports Authority, United States
- Chettinad Cement Corporation Ltd - India
- IHS Mccloskey Coal Group - USA
- TNB Fuel Sdn Bhd - Malaysia
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- Attock Cement Pakistan Limited
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Bharathi Cement Corporation - India
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- Meralco Power Generation, Philippines
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Metalloyd Limited - United Kingdom
- Minerals Council of Australia
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Karbindo Abesyapradhi - Indoneisa
- Goldman Sachs - Singapore
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- Interocean Group of Companies - India
- AsiaOL BioFuels Corp., Philippines
- ICICI Bank Limited - India
- Eastern Coal Council - USA
- Parliament of New Zealand
- Latin American Coal - Colombia
- Aboitiz Power Corporation - Philippines
- White Energy Company Limited
- Mercator Lines Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- San Jose City I Power Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- Petron Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Simpson Spence & Young - Indonesia
- Madhucon Powers Ltd - India
- New Zealand Coal & Carbon
- Gujarat Electricity Regulatory Commission - India
- Carbofer General Trading SA - India
- VISA Power Limited - India
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Bhushan Steel Limited - India
- Kartika Selabumi Mining - Indonesia
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- PNOC Exploration Corporation - Philippines
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Edison Trading Spa - Italy
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- Videocon Industries ltd - India
- Energy Link Ltd, New Zealand
- London Commodity Brokers - England
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- Baramulti Group, Indonesia
- Gujarat Sidhee Cement - India
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- Posco Energy - South Korea
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Billiton Holdings Pty Ltd - Australia
- Planning Commission, India
- Dalmia Cement Bharat India
- Renaissance Capital - South Africa
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Thai Mozambique Logistica
- India Bulls Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- CIMB Investment Bank - Malaysia
- Karaikal Port Pvt Ltd - India
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Trasteel International SA, Italy
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- Port Waratah Coal Services - Australia
- Bulk Trading Sa - Switzerland
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- Central Electricity Authority - India
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- ASAPP Information Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sree Jayajothi Cements Limited - India
- Bukit Baiduri Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
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