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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, 14 November 17
COAL STOCKS RUN SHORT, CENTRE TO GET DAILY UPDATE ON STOCKS - DECCAN CHRONICLE
Facing a shortage of coal for thermal power generation in the country, the Central Electricity Authority (CEA) has issued guidelines for maintainin ...
Tuesday, 14 November 17
IN 2018, WORLD OIL DEMAND IS FORESEEN REACHING 1.51 MB/D - OPEC
Oil Market Highlights - OPEC
The OPEC Reference Basket averaged $55.50/b in October, gaining $2.06 over the previous month and reaching the hi ...
Monday, 13 November 17
THERMAL COAL PRICES WERE RELATIVELY UNCHANGED - DANIEL HYNES
Coal prices were broadly higher, driven by strong gains in the metallurgical coal market said Daniel Hynes, Senior Commodity Strategist at ANZ in h ...
Monday, 13 November 17
THIESS AWARDED $300M SANGATTA EXPANSION CONTRACT
Thiess has been awarded a $300 million contract by Kaltim Prima Coal (KPC) to expand operations at Sangatta coal mine in East Kalimantan, Indonesia ...
Friday, 10 November 17
U.S. COAL OUTPUT FOR THE FIRST 10 MONTHS OF 2017 IS ESTIMATED AT AROUND 656 MMST; UP10% YOY - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 15 million short tons ...
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Showing 1881 to 1885 news of total 6871 |
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- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- McConnell Dowell - Australia
- Ceylon Electricity Board - Sri Lanka
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Eastern Coal Council - USA
- Chamber of Mines of South Africa
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- The Treasury - Australian Government
- Bhushan Steel Limited - India
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- Sakthi Sugars Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sree Jayajothi Cements Limited - India
- Chettinad Cement Corporation Ltd - India
- Kobexindo Tractors - Indoneisa
- Orica Mining Services - Indonesia
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Rashtriya Ispat Nigam Limited - India
- Vedanta Resources Plc - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- Kalimantan Lumbung Energi - Indonesia
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Siam City Cement - Thailand
- Xindia Steels Limited - India
- Wilmar Investment Holdings
- Timah Investasi Mineral - Indoneisa
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- OPG Power Generation Pvt Ltd - India
- Indogreen Group - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Globalindo Alam Lestari - Indonesia
- Romanian Commodities Exchange
- Bulk Trading Sa - Switzerland
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Bharathi Cement Corporation - India
- Central Electricity Authority - India
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Planning Commission, India
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Cement Manufacturers Association - India
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- CNBM International Corporation - China
- Kepco SPC Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- SMC Global Power, Philippines
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Sindya Power Generating Company Private Ltd
- Standard Chartered Bank - UAE
- Medco Energi Mining Internasional
- Essar Steel Hazira Ltd - India
- Posco Energy - South Korea
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Star Paper Mills Limited - India
- MS Steel International - UAE
- PetroVietnam Power Coal Import and Supply Company
- Indo Tambangraya Megah - Indonesia
- The State Trading Corporation of India Ltd
- Karbindo Abesyapradhi - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Australian Coal Association
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Baramulti Group, Indonesia
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Price Waterhouse Coopers - Russia
- SN Aboitiz Power Inc, Philippines
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Uttam Galva Steels Limited - India
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
- Electricity Generating Authority of Thailand
- Mjunction Services Limited - India
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- Thai Mozambique Logistica
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Parliament of New Zealand
- Indian Oil Corporation Limited
- Bangladesh Power Developement Board
- Interocean Group of Companies - India
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- The University of Queensland
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Altura Mining Limited, Indonesia
- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Dalmia Cement Bharat India
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- Coastal Gujarat Power Limited - India
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Wood Mackenzie - Singapore
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Energy Development Corp, Philippines
- Aditya Birla Group - India
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- Australian Commodity Traders Exchange
- Marubeni Corporation - India
- Goldman Sachs - Singapore
- Latin American Coal - Colombia
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Sojitz Corporation - Japan
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