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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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Friday, 27 October 17
U.S WEEKLY COAL PRODUCTION FLAT WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 14.9 million short tons ...
Thursday, 26 October 17
CYBER COVER FOR E-BILLS - PHILIP STEPHENSON
KNOWLEDGE TO ELEVATE
Increasingly popular electronic bills of lading are, by their nature, susceptible to the risk of cyber attack. Here, Stan ...
Thursday, 26 October 17
INDO TO CHINA ROUNDS SUPRAS ACHIEVING AROUND HIGH $14000 - FEARNLEYS
Supramax
By mid-week the market has been relatively quiet in the Pacific basin as well, but still some healthy rates being achieved on the differ ...
Thursday, 26 October 17
STRONG SIGNAL FOR AUSTRALIAN COAL DEMAND - GREG EVANS
The International Energy Agency’s Southeast Asia Energy Outlook report, released today, presents a positive outlook for Australian coal produ ...
Wednesday, 25 October 17
COAL MARKETS REMAINED SUBDUED - DANIEL HYNES
Coal markets remained subdued.
Daniel Hynes, Senior Commodity Strategist at ANZ, Coking coal prices were unchanged amid an absence of fresh of ...
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Showing 1901 to 1905 news of total 6871 |
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- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- Price Waterhouse Coopers - Russia
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Medco Energi Mining Internasional
- Maharashtra Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Holcim Trading Pte Ltd - Singapore
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- Gujarat Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- SN Aboitiz Power Inc, Philippines
- PowerSource Philippines DevCo
- Bahari Cakrawala Sebuku - Indonesia
- GMR Energy Limited - India
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- Madhucon Powers Ltd - India
- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Salva Resources Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Coal Association
- Independent Power Producers Association of India
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- Bukit Makmur.PT - Indonesia
- CNBM International Corporation - China
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Mercuria Energy - Indonesia
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Mercator Lines Limited - India
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- Star Paper Mills Limited - India
- Krishnapatnam Port Company Ltd. - India
- PetroVietnam Power Coal Import and Supply Company
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Commonwealth Bank - Australia
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- Vijayanagar Sugar Pvt Ltd - India
- Vedanta Resources Plc - India
- Cigading International Bulk Terminal - Indonesia
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- Bhushan Steel Limited - India
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Makarim & Taira - Indonesia
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Videocon Industries ltd - India
- Simpson Spence & Young - Indonesia
- Deloitte Consulting - India
- Kumho Petrochemical, South Korea
- VISA Power Limited - India
- Thiess Contractors Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Oldendorff Carriers - Singapore
- Aboitiz Power Corporation - Philippines
- Riau Bara Harum - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- The State Trading Corporation of India Ltd
- Siam City Cement PLC, Thailand
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- PTC India Limited - India
- Romanian Commodities Exchange
- Rio Tinto Coal - Australia
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Rashtriya Ispat Nigam Limited - India
- SMC Global Power, Philippines
- White Energy Company Limited
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Aditya Birla Group - India
- Bayan Resources Tbk. - Indonesia
- Indonesian Coal Mining Association
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- MS Steel International - UAE
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- Central Electricity Authority - India
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Directorate Of Revenue Intelligence - India
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
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