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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, 29 November 17
SHIPPING MARKET INSIGHT - VASILIS MOIRIS
In line with most expectations for the end of this month, during the past days the Dry Bulk market realized a significant rebound that sent the BDI ...
Tuesday, 28 November 17
THE DRY BULK MARKET HAS SHOWN A REMARKABLE RECOVERY THIS YEAR - GEORGE LAZARIDIS
The Dry Bulk market has shown a remarkable recovery this year with the average earnings having increased by around 63% this year so far compared to ...
Friday, 24 November 17
U.S. PRODUCED 14.9 MMST FOR THE WEEK ENDING NOV 18; UP 0.9% W/W - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 14.9 million short ton ...
Thursday, 23 November 17
PANAMAX: ANOTHER SLOW AND UNEVENTFUL WEEK; DECREASING FREIGHT RATES IN BOTH HEMISPHERES - FEARNLEYS
Supramax
A quiet start to the week. USG closed last week a bit tighter, and continued into the new week on a positive tone with little concluded, ...
Wednesday, 22 November 17
THERMAL COAL WAS FLAT AMID CONCERNS OF FURTHER GOVERNMENT INTERVENTION IN CHINA, SAYS DANIEL HYNES
Coal prices were mixed. Thermal coal was flat amid concerns of further government intervention in China, said Daniel Hynes Senior Commodity Strateg ...
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Showing 1866 to 1870 news of total 6871 |
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- Ministry of Mines - Canada
- GMR Energy Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Bukit Baiduri Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Romanian Commodities Exchange
- Tamil Nadu electricity Board
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Savvy Resources Ltd - HongKong
- Manunggal Multi Energi - Indonesia
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- MS Steel International - UAE
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- Parliament of New Zealand
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- IEA Clean Coal Centre - UK
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- The University of Queensland
- SN Aboitiz Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- Tata Chemicals Ltd - India
- Coalindo Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Baramulti Group, Indonesia
- Indonesian Coal Mining Association
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- SMG Consultants - Indonesia
- Bharathi Cement Corporation - India
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- Oldendorff Carriers - Singapore
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petron Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Grasim Industreis Ltd - India
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- Malabar Cements Ltd - India
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- SMC Global Power, Philippines
- White Energy Company Limited
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- Antam Resourcindo - Indonesia
- Mercator Lines Limited - India
- Central Electricity Authority - India
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Samtan Co., Ltd - South Korea
- Mercuria Energy - Indonesia
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Bhatia International Limited - India
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhoruka Overseas - Indonesia
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- Minerals Council of Australia
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- New Zealand Coal & Carbon
- London Commodity Brokers - England
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Meralco Power Generation, Philippines
- Borneo Indobara - Indonesia
- Lanco Infratech Ltd - India
- Globalindo Alam Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Sojitz Corporation - Japan
- Australian Commodity Traders Exchange
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- McConnell Dowell - Australia
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thai Mozambique Logistica
- Economic Council, Georgia
- Trasteel International SA, Italy
- Sinarmas Energy and Mining - Indonesia
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Sindya Power Generating Company Private Ltd
- Agrawal Coal Company - India
- CNBM International Corporation - China
- Planning Commission, India
- Marubeni Corporation - India
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Coal and Oil Company - UAE
- Xindia Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- Medco Energi Mining Internasional
- Sical Logistics Limited - India
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- San Jose City I Power Corp, Philippines
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- Edison Trading Spa - Italy
- Siam City Cement - Thailand
- Mjunction Services Limited - India
- Gujarat Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Larsen & Toubro Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- CIMB Investment Bank - Malaysia
- Commonwealth Bank - Australia
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Sarangani Energy Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Bahari Cakrawala Sebuku - Indonesia
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Bukit Asam (Persero) Tbk - Indonesia
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