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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, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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Showing 26 to 30 news of total 6871 |
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- The University of Queensland
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Planning Commission, India
- Sojitz Corporation - Japan
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- European Bulk Services B.V. - Netherlands
- Anglo American - United Kingdom
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- Vedanta Resources Plc - India
- Indo Tambangraya Megah - Indonesia
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Coal and Oil Company - UAE
- Goldman Sachs - Singapore
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Indogreen Group - Indonesia
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- International Coal Ventures Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- CNBM International Corporation - China
- Indian Oil Corporation Limited
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Carbofer General Trading SA - India
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Globalindo Alam Lestari - Indonesia
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Kepco SPC Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Power Finance Corporation Ltd., India
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Indika Energy - Indonesia
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- PTC India Limited - India
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Malabar Cements Ltd - India
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhushan Steel Limited - India
- Bangladesh Power Developement Board
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Alfred C Toepfer International GmbH - Germany
- Siam City Cement - Thailand
- Kartika Selabumi Mining - Indonesia
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- MS Steel International - UAE
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Australian Coal Association
- Attock Cement Pakistan Limited
- Bahari Cakrawala Sebuku - Indonesia
- Straits Asia Resources Limited - Singapore
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- Thiess Contractors Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Ceylon Electricity Board - Sri Lanka
- GMR Energy Limited - India
- Ministry of Mines - Canada
- Pipit Mutiara Jaya. PT, Indonesia
- The State Trading Corporation of India Ltd
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- Trasteel International SA, Italy
- Cement Manufacturers Association - India
- GAC Shipping (India) Pvt Ltd
- Intertek Mineral Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- Commonwealth Bank - Australia
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Savvy Resources Ltd - HongKong
- Merrill Lynch Commodities Europe
- Economic Council, Georgia
- Global Business Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- IEA Clean Coal Centre - UK
- Bayan Resources Tbk. - Indonesia
- Ministry of Transport, Egypt
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- GVK Power & Infra Limited - India
- CIMB Investment Bank - Malaysia
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- London Commodity Brokers - England
- Meralco Power Generation, Philippines
- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Australian Commodity Traders Exchange
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- PetroVietnam Power Coal Import and Supply Company
- Therma Luzon, Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
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