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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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Monday, 09 October 17
INDIA'S COAL IMPORTS UP 10% IN SEPT AS POWER PLANTS FACE FUEL SHORTAGE - PTI
Coal imports rose by 9.5 per cent to 18.33 million tonnes (MT) in September, after having registered year-on-year decline for five months in a row, ...
Friday, 06 October 17
U.S. WEEKLY COAL OUTPUT HAS REBOUNDED AFTER DECLINING 5 WEEKS IN A ROW
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.3 million short tons ...
Wednesday, 04 October 17
SHIPPING MARKET INSIGHT - GEORGE ILIOPOULOS
During the past couple of months the dry bulk market has displayed particularly strong momentum and we have been witnessing steady appetite and act ...
Tuesday, 03 October 17
VIETNAM'S COAL-FIRED THERMAL POWER DEPENDENT ON CHINA - VIETNAMNET BRIDGE
A report from the Green Innovation and Development Centre (GreenID) showed that, as of the end of last year, of 27 coal-fired thermopower plants, 1 ...
Tuesday, 03 October 17
RIO TINTO COMPLETES FIRST FULLY AUTONOMOUS RAIL JOURNEY IN WESTERN AUSTRALIA
Rio Tinto has successfully completed the first fully autonomous rail journey at its iron ore operations in the Pilbara region of Western Australia ...
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Showing 1921 to 1925 news of total 6871 |
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- Madhucon Powers Ltd - India
- Energy Link Ltd, New Zealand
- The University of Queensland
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Holcim Trading Pte Ltd - Singapore
- MS Steel International - UAE
- PetroVietnam Power Coal Import and Supply Company
- Lanco Infratech Ltd - India
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- Coal and Oil Company - UAE
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- Sakthi Sugars Limited - India
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- White Energy Company Limited
- CNBM International Corporation - China
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- Kumho Petrochemical, South Korea
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Australian Coal Association
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- TeaM Sual Corporation - Philippines
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- Global Coal Blending Company Limited - Australia
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Mines - Canada
- Makarim & Taira - Indonesia
- Chettinad Cement Corporation Ltd - India
- New Zealand Coal & Carbon
- Sinarmas Energy and Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Gujarat Sidhee Cement - India
- Standard Chartered Bank - UAE
- Bulk Trading Sa - Switzerland
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- GVK Power & Infra Limited - India
- Eastern Coal Council - USA
- Maharashtra Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Romanian Commodities Exchange
- Petrochimia International Co. Ltd.- Taiwan
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- Riau Bara Harum - Indonesia
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Carbofer General Trading SA - India
- GMR Energy Limited - India
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Heidelberg Cement - Germany
- Gujarat Mineral Development Corp Ltd - India
- Pendopo Energi Batubara - Indonesia
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Mercator Lines Limited - India
- Petron Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- Anglo American - United Kingdom
- Indian Oil Corporation Limited
- Planning Commission, India
- Krishnapatnam Port Company Ltd. - India
- Ceylon Electricity Board - Sri Lanka
- Meenaskhi Energy Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- Coastal Gujarat Power Limited - India
- Edison Trading Spa - Italy
- Jaiprakash Power Ventures ltd
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Price Waterhouse Coopers - Russia
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Sical Logistics Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Barasentosa Lestari - Indonesia
- Rio Tinto Coal - Australia
- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kobexindo Tractors - Indoneisa
- Kaltim Prima Coal - Indonesia
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Marubeni Corporation - India
- Central Electricity Authority - India
- Parry Sugars Refinery, India
- Metalloyd Limited - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- Globalindo Alam Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Malabar Cements Ltd - India
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