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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, 08 November 17
COAL MARKETS WERE MIXED; COKING COAL EKING OUT SOME GAINS; THERMAL COAL STRUGGLING - DANIEL HYNES
Coal markets were mixed, with coking coal eking out some gains, while thermal coal struggled amid the falling oil prices, ANZ Strategist said in a ...
Wednesday, 08 November 17
WEEKLY SHIPPING MARKET INSIGHT
If you are a dry bulk owner today you are definitely feeling the pressure of the past couple of years off and given the admittedly unexpected growt ...
Wednesday, 08 November 17
NEW QUAY OPENED AT THE INDUSTRIAL PORT IN BREMEN,GERMAN
Press Release: After a building period lasting three-and-a-half years, the port logistics firm Weserport, the “bremenports” comp ...
Tuesday, 07 November 17
ING JOINS FORCES ON BLOCKCHAIN-BASED PLATFORM FOR ENERGY COMMODITIES SECTOR
Blockchain technology. It’s often been described as the most important invention in computing in a generation.
So it should come as no s ...
Tuesday, 07 November 17
MECHEL SIGNED LONG-TERM COAL SUPPLY CONTRACT WITH ITOCHU CORPORATION
Mechel PAO a leading Russian mining and metals company, reports signing a framework agreement with a major Japanese universal trading company Itoch ...
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Showing 1886 to 1890 news of total 6871 |
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- Interocean Group of Companies - India
- Electricity Authority, New Zealand
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
- Independent Power Producers Association of India
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Australian Coal Association
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Wilmar Investment Holdings
- Makarim & Taira - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Posco Energy - South Korea
- Electricity Generating Authority of Thailand
- Eastern Energy - Thailand
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Minerals Council of Australia
- Global Green Power PLC Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- London Commodity Brokers - England
- Jindal Steel & Power Ltd - India
- Sarangani Energy Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Bharathi Cement Corporation - India
- Kartika Selabumi Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Merrill Lynch Commodities Europe
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Ind-Barath Power Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Energy Link Ltd, New Zealand
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- Australian Commodity Traders Exchange
- PowerSource Philippines DevCo
- Riau Bara Harum - Indonesia
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhushan Steel Limited - India
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Kaltim Prima Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Ambuja Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Indian Energy Exchange, India
- Salva Resources Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Maharashtra Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- Renaissance Capital - South Africa
- The University of Queensland
- Semirara Mining and Power Corporation, Philippines
- New Zealand Coal & Carbon
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Latin American Coal - Colombia
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- South Luzon Thermal Energy Corporation
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- IEA Clean Coal Centre - UK
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Meenaskhi Energy Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indogreen Group - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhoruka Overseas - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Eastern Coal Council - USA
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Edison Trading Spa - Italy
- Star Paper Mills Limited - India
- White Energy Company Limited
- Ministry of Mines - Canada
- Standard Chartered Bank - UAE
- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- McConnell Dowell - Australia
- Krishnapatnam Port Company Ltd. - India
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- GMR Energy Limited - India
- Simpson Spence & Young - Indonesia
- Videocon Industries ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- MS Steel International - UAE
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Indonesian Coal Mining Association
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- India Bulls Power Limited - India
- Medco Energi Mining Internasional
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Bukit Makmur.PT - Indonesia
- Mercuria Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Power Finance Corporation Ltd., India
- Port Waratah Coal Services - Australia
- Antam Resourcindo - Indonesia
- Coal and Oil Company - UAE
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Kumho Petrochemical, South Korea
- Meralco Power Generation, Philippines
- IHS Mccloskey Coal Group - USA
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Parry Sugars Refinery, India
- Bukit Baiduri Energy - Indonesia
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