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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, 12 June 24
CHINA ACCOUNTS FOR 16.3% OF AUSTRALIA'S COAL EXPORTS, FOLLOWED BY INDIA 14.4% - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels says Banchero Costa in its latest report.
...
Wednesday, 12 June 24
LNG NEWBUILDING VALUES AT RECORD HIGH: 78 NEWBUILD ORDERS PLACED IN 2024, DOUBLING 2023 - VESON NAUTICAL
The number of LNG newbuilding orders have more than doubled from the same period last year where 34 orders were placed, compared to 78 in the first ...
Monday, 10 June 24
CHINA'S MAY COAL IMPORTS RISE 11% ON LOWER DOMESTIC OUTPUT - REUTERS
China’s imports of coal rose 11% in May from a year earlier, customs data and Reuters records showed on Friday, as lower domestic output this ...
Tuesday, 04 June 24
HOW DO WESTERN SANCTIONS ON RUSSIA IMPACT THE GLOBAL METALS, MINING AND COAL MARKETS - WOOD MACKENZIE
The geopolitical landscape for Russia, as a major supplier of various commodities, has undergone a dramatic transformation since the invasion of Uk ...
Friday, 22 March 24
CASE STUDY: DANGERS OF COAL CARGO - SKULD
Recently, a bulk cargo vessel carrying coal from South Africa to Singapore suffered a fatal accident, resulting in the deaths of three crew members ...
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Showing 21 to 25 news of total 6871 |
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- Malabar Cements Ltd - India
- Global Business Power Corporation, Philippines
- Coal and Oil Company - UAE
- GAC Shipping (India) Pvt Ltd
- OPG Power Generation Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- Attock Cement Pakistan Limited
- Formosa Plastics Group - Taiwan
- Coalindo Energy - Indonesia
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Indian Energy Exchange, India
- TNB Fuel Sdn Bhd - Malaysia
- Sindya Power Generating Company Private Ltd
- Africa Commodities Group - South Africa
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Ind-Barath Power Infra Limited - India
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- Barasentosa Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Siam City Cement PLC, Thailand
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- Indogreen Group - Indonesia
- The University of Queensland
- Star Paper Mills Limited - India
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- Wilmar Investment Holdings
- San Jose City I Power Corp, Philippines
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Marubeni Corporation - India
- MS Steel International - UAE
- Interocean Group of Companies - India
- Thai Mozambique Logistica
- IHS Mccloskey Coal Group - USA
- Energy Development Corp, Philippines
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Power Finance Corporation Ltd., India
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- Karbindo Abesyapradhi - Indoneisa
- Aditya Birla Group - India
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Bayan Resources Tbk. - Indonesia
- Anglo American - United Kingdom
- Bhoruka Overseas - Indonesia
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Posco Energy - South Korea
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Iligan Light & Power Inc, Philippines
- Ministry of Mines - Canada
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- International Coal Ventures Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Karaikal Port Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Eastern Energy - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Kartika Selabumi Mining - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Banpu Public Company Limited - Thailand
- Vizag Seaport Private Limited - India
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- Indonesian Coal Mining Association
- Cement Manufacturers Association - India
- Xindia Steels Limited - India
- ASAPP Information Group - India
- Petrochimia International Co. Ltd.- Taiwan
- European Bulk Services B.V. - Netherlands
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Timah Investasi Mineral - Indoneisa
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Electricity Authority, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Billiton Holdings Pty Ltd - Australia
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Krishnapatnam Port Company Ltd. - India
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Semirara Mining and Power Corporation, Philippines
- Chamber of Mines of South Africa
- Straits Asia Resources Limited - Singapore
- Riau Bara Harum - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Australia Pty. Ltd.
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Sojitz Corporation - Japan
- Bukit Asam (Persero) Tbk - Indonesia
- GMR Energy Limited - India
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Minerals Council of Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Altura Mining Limited, Indonesia
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- Holcim Trading Pte Ltd - Singapore
- Pendopo Energi Batubara - Indonesia
- Oldendorff Carriers - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Orica Mining Services - Indonesia
- GVK Power & Infra Limited - India
- Tata Chemicals Ltd - India
- Coastal Gujarat Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bangladesh Power Developement Board
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Meralco Power Generation, Philippines
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Mintek Dendrill Indonesia
- Grasim Industreis Ltd - India
- Trasteel International SA, Italy
- PTC India Limited - India
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Ministry of Transport, Egypt
- Heidelberg Cement - Germany
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