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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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- Lanco Infratech Ltd - India
- Power Finance Corporation Ltd., India
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Kartika Selabumi Mining - Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- Parliament of New Zealand
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Siam City Cement - Thailand
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Planning Commission, India
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- Australian Coal Association
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Straits Asia Resources Limited - Singapore
- ICICI Bank Limited - India
- Baramulti Group, Indonesia
- Leighton Contractors Pty Ltd - Australia
- The Treasury - Australian Government
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- New Zealand Coal & Carbon
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bhushan Steel Limited - India
- Sree Jayajothi Cements Limited - India
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- TNB Fuel Sdn Bhd - Malaysia
- Therma Luzon, Inc, Philippines
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Larsen & Toubro Limited - India
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Electricity Generating Authority of Thailand
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Central Electricity Authority - India
- Sarangani Energy Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Star Paper Mills Limited - India
- PNOC Exploration Corporation - Philippines
- Mjunction Services Limited - India
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- London Commodity Brokers - England
- Global Coal Blending Company Limited - Australia
- Interocean Group of Companies - India
- PTC India Limited - India
- Thai Mozambique Logistica
- Kepco SPC Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Timah Investasi Mineral - Indoneisa
- South Luzon Thermal Energy Corporation
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Barasentosa Lestari - Indonesia
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Marubeni Corporation - India
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- Riau Bara Harum - Indonesia
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Merrill Lynch Commodities Europe
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Indika Energy - Indonesia
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Malabar Cements Ltd - India
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Pendopo Energi Batubara - Indonesia
- The University of Queensland
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Indonesian Coal Mining Association
- Globalindo Alam Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Wood Mackenzie - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Transport, Egypt
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Global Business Power Corporation, Philippines
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Bukit Baiduri Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- Trasteel International SA, Italy
- Economic Council, Georgia
- Deloitte Consulting - India
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Vedanta Resources Plc - India
- LBH Netherlands Bv - Netherlands
- Tamil Nadu electricity Board
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- Jindal Steel & Power Ltd - India
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Global Green Power PLC Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- Jorong Barutama Greston.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Alfred C Toepfer International GmbH - Germany
- Singapore Mercantile Exchange
- Bukit Makmur.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- Africa Commodities Group - South Africa
- Independent Power Producers Association of India
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
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