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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, 07 November 17
DRY BULK SHIPPING: TAKE GOOD CARE OF THE RECOVERY SAYS PETER SAND
Demand:
Even without much support from Brazilian iron ore exports during August, capesize rates went from $10,000 to $17,000 per day. In Septembe ...
Tuesday, 07 November 17
COAL MARKETS WERE RELATIVELY BUOYANT - DANIEL HYNES
Coal markets were relatively buoyant. Metallurgical coal prices were supported by the stronger steel and iron ore prices, says Daniel Hynes, Senior ...
Tuesday, 07 November 17
PROSPERITY AND WINTER WARMTH REMAIN PARAMOUNT IN CHINA - JEFFREY LANDSBERG
Chinese officials announced recently that 580 gigawatts of coal-derived electricity generation capacity has completed ultra-low emissions reform as ...
Monday, 06 November 17
COAL SHORTAGE HURTS INDIA'S HINDALCO AND VEDANTA SAYS BUSINESS STANDARD
Aluminium smelter operations of Vedanta and Hindalco are at risk of turning unviable due to a coal crunch.
According to Business Standard an I ...
Monday, 06 November 17
MARINE BUNKER EXCHANGE EXPECTS BUNKER PRICES WILL CONTINUE UPWARD TREND NEXT WEEK
World fuel indexes rose during the week, supported by main oil producers’ statements about possible extension of oil production cut agreement ...
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Showing 1891 to 1895 news of total 6871 |
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- GVK Power & Infra Limited - India
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Kartika Selabumi Mining - Indonesia
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- Thiess Contractors Indonesia
- Oldendorff Carriers - Singapore
- Kepco SPC Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Central Electricity Authority - India
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Africa Commodities Group - South Africa
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- San Jose City I Power Corp, Philippines
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Vizag Seaport Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Electricity Generating Authority of Thailand
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- Eastern Coal Council - USA
- Tata Chemicals Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Siam City Cement - Thailand
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- Meralco Power Generation, Philippines
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Jindal Steel & Power Ltd - India
- CNBM International Corporation - China
- Alfred C Toepfer International GmbH - Germany
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Pipit Mutiara Jaya. PT, Indonesia
- Xindia Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- Iligan Light & Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- Mercator Lines Limited - India
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Bhatia International Limited - India
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Agrawal Coal Company - India
- Bharathi Cement Corporation - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Mintek Dendrill Indonesia
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Australian Commodity Traders Exchange
- Orica Mining Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Trasteel International SA, Italy
- Rashtriya Ispat Nigam Limited - India
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Parry Sugars Refinery, India
- Star Paper Mills Limited - India
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- London Commodity Brokers - England
- Pendopo Energi Batubara - Indonesia
- Sical Logistics Limited - India
- India Bulls Power Limited - India
- Romanian Commodities Exchange
- IHS Mccloskey Coal Group - USA
- Singapore Mercantile Exchange
- Rio Tinto Coal - Australia
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Aboitiz Power Corporation - Philippines
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Parliament of New Zealand
- Cement Manufacturers Association - India
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- Karaikal Port Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- AsiaOL BioFuels Corp., Philippines
- Aditya Birla Group - India
- Riau Bara Harum - Indonesia
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Sojitz Corporation - Japan
- PTC India Limited - India
- MS Steel International - UAE
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- Meenaskhi Energy Private Limited - India
- Posco Energy - South Korea
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- Marubeni Corporation - India
- Planning Commission, India
- Malabar Cements Ltd - India
- Siam City Cement PLC, Thailand
- Power Finance Corporation Ltd., India
- Miang Besar Coal Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- Krishnapatnam Port Company Ltd. - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- GMR Energy Limited - India
- Commonwealth Bank - Australia
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Intertek Mineral Services - Indonesia
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- Uttam Galva Steels Limited - India
- Central Java Power - Indonesia
- Attock Cement Pakistan Limited
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Mjunction Services Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Formosa Plastics Group - Taiwan
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
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