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Showing posts with label commodities. Show all posts
Showing posts with label commodities. Show all posts
Wednesday, January 28, 2009
Special Report: Is the Grim Commodities Outlook Prices in? -- Bloomberg
Coverage from Sao Paulo, Brazil: Emerging Markets Dropped in Second Half, Morgan Stanley's Index Plunging 55% for the Year
Does Brazil have a cash flow problem?
Brazil seems to be having some money troubles by the looks of the press. It's not good news for Latin America when its largest economy slows, especially when until just recently it seemed Brazil (the depreciation of the Real aside) was well relatively well poised to weather the storm.
Like its fellow BRIC country's, Brazil is far from immune to the global crisis. The country is still heavily dependent on commodity exports, which was the main engine of growth for both the Brazilian economy and stock market the past few years.
Despite reports that consumer spending is still holding up and that Brazil's big state conglomerates like Petrobras are increasing spending (see MercoPress article here), it simply won't be enough to keep the economy afloat forever—and it definitely will not be enough to maintain growth levels of 4-5%.
Poor Ronaldo seen here losing at the French World
Now... for the grim news. While just days earlier Petrobras reported it will be increasing spending, yesterday things did not go its way when it went shopping in international markets to raise money. The company was forced to put off plans to sell bonds because the cost of borrowing to finance the bonds in dollar denominated debt was simply too high (see Bloomberg article here)
Moving on. Brazil's government also had some bad news to bring to the table, announcing plans to freeze roughly 6% of its planned spending budget for 2009 because slow economic growth is eroding tax collection ( see bloomberg article here)
To round up the negative news is one last story concerning loan defaults in Brazil. Credit card spending may be surging, people may be packing the stores but they aren't paying their bills. Loan defaults surged last month to their highest since September 2002 (see Bloomberg article here).
Not good news people...
Like its fellow BRIC country's, Brazil is far from immune to the global crisis. The country is still heavily dependent on commodity exports, which was the main engine of growth for both the Brazilian economy and stock market the past few years.
Despite reports that consumer spending is still holding up and that Brazil's big state conglomerates like Petrobras are increasing spending (see MercoPress article here), it simply won't be enough to keep the economy afloat forever—and it definitely will not be enough to maintain growth levels of 4-5%.
Poor Ronaldo seen here losing at the French World Now... for the grim news. While just days earlier Petrobras reported it will be increasing spending, yesterday things did not go its way when it went shopping in international markets to raise money. The company was forced to put off plans to sell bonds because the cost of borrowing to finance the bonds in dollar denominated debt was simply too high (see Bloomberg article here)
Moving on. Brazil's government also had some bad news to bring to the table, announcing plans to freeze roughly 6% of its planned spending budget for 2009 because slow economic growth is eroding tax collection ( see bloomberg article here)
To round up the negative news is one last story concerning loan defaults in Brazil. Credit card spending may be surging, people may be packing the stores but they aren't paying their bills. Loan defaults surged last month to their highest since September 2002 (see Bloomberg article here).
Not good news people...
Monday, January 26, 2009
Commodities in focus – Gold prices rise above $900/oz
The spot price of Gold rose above $900/oz on Monday for the first time since October 10, 2008.
Gold ETF's also benefited. New York's SPDR Gold Trust GLD, the world's largest gold EFT allows investors to invest in physical gold like they do normal stocks. This is accomplished through issuing securities backed by physical gold stocks. SPDR said its security backed gold holdings rose 1.6% percent to an all-time high of 823.57 tonnes during Friday trading.
The ETF isn't doing all that bad either. Year-to-date it is up 4.92%. Take a look at the ETF's performance over the year year. The chart truly does justice to the age old concept of investing in gold as a safe heaven. With interest rates so low, investing in Gold, even at yields of 4.92% will become even more enticing as banking woes persist in developed world.
The Royal Bank of Scotland's head of commodity strategy, Nick Moore told Reuters factors including falling interest rates, the re-inflation of Western economies and the prospect of lower supply both from mines and via central bank sales were supporting gold.
“In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment,” Commerzbank analyst Eugene Weignberg said.
Below I have included two links. The first link directs you to a informative analysis and perspective on the gold market by Lawrence Williams who, along with his “expert panel” are forecasting gold prices to reach a high of $1074/ oz.
The second is a article about how gold miner Red Back has managed to successfully raise capital on the Toronto Stock Exchange, further indication of the support for gold.
Forecasting the gold price – expert panel predicts $1074 high, Mineweb readers $1305 – Mineweb
Gold miners still able to raise capital from the markets – Mineweb
Gold ETF's also benefited. New York's SPDR Gold Trust GLD, the world's largest gold EFT allows investors to invest in physical gold like they do normal stocks. This is accomplished through issuing securities backed by physical gold stocks. SPDR said its security backed gold holdings rose 1.6% percent to an all-time high of 823.57 tonnes during Friday trading.
The ETF isn't doing all that bad either. Year-to-date it is up 4.92%. Take a look at the ETF's performance over the year year. The chart truly does justice to the age old concept of investing in gold as a safe heaven. With interest rates so low, investing in Gold, even at yields of 4.92% will become even more enticing as banking woes persist in developed world.
The Royal Bank of Scotland's head of commodity strategy, Nick Moore told Reuters factors including falling interest rates, the re-inflation of Western economies and the prospect of lower supply both from mines and via central bank sales were supporting gold.
“In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment,” Commerzbank analyst Eugene Weignberg said.
Below I have included two links. The first link directs you to a informative analysis and perspective on the gold market by Lawrence Williams who, along with his “expert panel” are forecasting gold prices to reach a high of $1074/ oz.
The second is a article about how gold miner Red Back has managed to successfully raise capital on the Toronto Stock Exchange, further indication of the support for gold.
Forecasting the gold price – expert panel predicts $1074 high, Mineweb readers $1305 – Mineweb
Gold miners still able to raise capital from the markets – Mineweb
Thursday, January 22, 2009
Good readings
Opinion: India, China, and Obama's Oil Policy
by William Nobrega
Business Week Online 1/22/2009
If China's Growth Goes South What Happens to Oil?
by G. Allen Brooks
Parks Paton Hoepel & Brown 1/22/2009
The China factor and what it means for the price of copper
by Simon Hunt
Weybridge, UK (SHSS) 1/14/2009
by William Nobrega
Business Week Online 1/22/2009
If China's Growth Goes South What Happens to Oil?
by G. Allen Brooks
Parks Paton Hoepel & Brown 1/22/2009
The China factor and what it means for the price of copper
by Simon Hunt
Weybridge, UK (SHSS) 1/14/2009
Thursday, January 15, 2009
Gloomy day in the news -- 3 part update
When I woke up this morning and did my morning news reading there weren't too many stories that particularly stood out... If you wanted to describe the news this morning in one word, it would have to be gloomy.
I've assembled separate posts according to region and subject of the the “Gloom and Doom,” as Marc Faber says.
I've assembled separate posts according to region and subject of the the “Gloom and Doom,” as Marc Faber says.
News reel: Economic Meltdown p3 – Commodities
Click on article titles to access the full copy from parents websites
Gold Little Changed in Asia as Dollar Steady Before ECB Meeting – Bloomberg LP - Jan 15, 2009
Jan. 15 (Bloomberg) -- Gold traded little changed in Asia as the dollar steadied before a European Central Bank meeting where interest rates are widely expected to be cut by at least half a percentage point. Platinum declined.
Resources downturn trips up contractors – The Australian – Jan 16, 2009
MINING companies slashing costs and cutting production as they struggle to cope with the global financial crisis is driving down revenue in Australia's engineering, contracting and services sectors.
Although analysts believe that the diminished income and the prospect of further contract cancellations are already being incorporated into share prices, they said the full impact had not yet been incorporated.
Metal meltdown rocks global miner Rio Tinto – The Australian – Jan 16, 2009
RIO Tinto continues to be battered by the global slowdown, with fourth-quarter iron ore sales falling 31 per cent.
Slumping metal prices are set to wipe more than $US500 million ($758 million) from the miner's bottom line and more aluminium production cuts have been flagged.
Under new management, miner ready to tackle debt – The Australian – Jan 16, 2009
RIO Tinto's board has shown it is serious about its turnaround by dumping chairman Paul Skinner 11 months ahead of plan. And yesterday's 18 per cent fall in iron ore production underlined the magnitude of the cutbacks ahead.
Rio's fourth-quarter production report is, of course, just a warm-up to the real event on February 12, when its half-year profits are released.
Oil Falls Below $34 After OPEC Reduces 2009 Demand Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Crude oil fell below $34 a barrel after OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.
Natural Gas Falls After U.S. Supplies Drop Less Than Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Natural gas fell to the lowest in more than two years in New York as government reports today on gas stockpiles, producer prices and manufacturing pointed to slower demand as the U.S. recession deepens.
Stockpiles declined 94 billion cubic feet last week, less than the 102 billion analysts expected, an Energy Department report showed. Prices paid to producers in the U.S. dropped for the fifth straight month and manufacturing in the New York and Philadelphia areas shrank. Slowing demand from factories and power plants has helped send gas down 15 percent this month.
Copper Prices Drop for Second Day in N.Y. as Stockpiles Rise – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Copper futures fell for a second straight day as climbing inventories signaled global output of the metal is exceeding demand.
Stockpiles monitored by the London Metal Exchange climbed 1.4 percent to 387,325 metric tons today and have jumped 14 percent this month after surging 72 percent last year. Before today, copper prices plunged 65 percent from a record in May as slumping global growth slashed demand for the metal used in pipes and wires.
Soybeans Prices Jump on Adverse Weather in Argentina, Brazil – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Soybeans prices jumped on signs that demand for U.S. supplies will increase as adverse weather damages crops in Argentina, the world’s biggest exporter of vegetable oil and animal feed made from the oilseed.
Australia Expects ‘Significant’ Drop in Coal, Iron Ore Prices – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw materials, may drop significantly this year as slowing industrial growth curbs demand, the nation’s central bank said.
Gold Little Changed in Asia as Dollar Steady Before ECB Meeting – Bloomberg LP - Jan 15, 2009
Jan. 15 (Bloomberg) -- Gold traded little changed in Asia as the dollar steadied before a European Central Bank meeting where interest rates are widely expected to be cut by at least half a percentage point. Platinum declined.
Resources downturn trips up contractors – The Australian – Jan 16, 2009
MINING companies slashing costs and cutting production as they struggle to cope with the global financial crisis is driving down revenue in Australia's engineering, contracting and services sectors.
Although analysts believe that the diminished income and the prospect of further contract cancellations are already being incorporated into share prices, they said the full impact had not yet been incorporated.
Metal meltdown rocks global miner Rio Tinto – The Australian – Jan 16, 2009
RIO Tinto continues to be battered by the global slowdown, with fourth-quarter iron ore sales falling 31 per cent.
Slumping metal prices are set to wipe more than $US500 million ($758 million) from the miner's bottom line and more aluminium production cuts have been flagged.
Under new management, miner ready to tackle debt – The Australian – Jan 16, 2009
RIO Tinto's board has shown it is serious about its turnaround by dumping chairman Paul Skinner 11 months ahead of plan. And yesterday's 18 per cent fall in iron ore production underlined the magnitude of the cutbacks ahead.
Rio's fourth-quarter production report is, of course, just a warm-up to the real event on February 12, when its half-year profits are released.
Oil Falls Below $34 After OPEC Reduces 2009 Demand Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Crude oil fell below $34 a barrel after OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.
Natural Gas Falls After U.S. Supplies Drop Less Than Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Natural gas fell to the lowest in more than two years in New York as government reports today on gas stockpiles, producer prices and manufacturing pointed to slower demand as the U.S. recession deepens.
Stockpiles declined 94 billion cubic feet last week, less than the 102 billion analysts expected, an Energy Department report showed. Prices paid to producers in the U.S. dropped for the fifth straight month and manufacturing in the New York and Philadelphia areas shrank. Slowing demand from factories and power plants has helped send gas down 15 percent this month.
Copper Prices Drop for Second Day in N.Y. as Stockpiles Rise – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Copper futures fell for a second straight day as climbing inventories signaled global output of the metal is exceeding demand.
Stockpiles monitored by the London Metal Exchange climbed 1.4 percent to 387,325 metric tons today and have jumped 14 percent this month after surging 72 percent last year. Before today, copper prices plunged 65 percent from a record in May as slumping global growth slashed demand for the metal used in pipes and wires.
Soybeans Prices Jump on Adverse Weather in Argentina, Brazil – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Soybeans prices jumped on signs that demand for U.S. supplies will increase as adverse weather damages crops in Argentina, the world’s biggest exporter of vegetable oil and animal feed made from the oilseed.
Australia Expects ‘Significant’ Drop in Coal, Iron Ore Prices – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw materials, may drop significantly this year as slowing industrial growth curbs demand, the nation’s central bank said.
Sunday, January 11, 2009
Commodities in focus – mixed messages from China
Until this past October / November when markets came crashing down all over the world as the US credit crisis exploded into a full blown global economic crisis it seemed as if nothing could stem China's insatiable demand for commodities.
However, once economic crisis spread to wealthy nations a chain reaction started.
First, consumers who had been eating up cheap Chinese exports for years decreased their spending as credit dried up. Less demand for goods produced by China's manufacturing sector would mean less Chinese demand for commodities.
Second, a slowing global economy produced a situation where aggregate commodity demand shrank around the world. It mattered little if a country is rich or poor, a slowing global economy would mean less demand for energy and metals.
Third, as economic problems continued to spread it became less and less likely the economic dragon of China would be able to ride the storm out. If a global recession occurred, China would find it very difficult to rely solely on their domestic economy and international currency reserves to keep things growing as fast as they had been from 2001-2008.
Finally (and this is a over-simplification), combine all facts and you get a situation where the future of the global economy is unpredictable. Meaning, no one really knows when Chinese demand will pick up again, no one really knows when the global economy will recover and therefore investing in metals and energy seemed foolish if recession would hamper demand in the near future.
That being said, a few interesting stories passed through the presses this weekend. The first two indicate demand is returning to the commodity markets in China, the second two tell a different story.
Baoshan Steel, Angang Steel, Wuhan Iron & Steel and Maanshan Iron & Steel. Four major Chinese steelmaker stock ratings where raised by Credit Suisse, which said improving demand will help raise steel prices (click here for Bloomberg LP article).
China National Petroleum Corp., the country's biggest oil and gas producer, said it plans to increase oil and gas production by 5% annually to meet domestic demand (click here for Bloomberg LP article).
China's State Electricity Regulatory Commission said demand and output in China will continue to shrink this year because of slower economic growth. China is the world's second largest consumer of energy.
If people are using less electricity it means one of three things. First, it could be a bad sign for the economy. It could indicate the Chinese are becoming more efficient / environmentally friendly. Or third, it may mean the Chinese are trying to save a few Yuan from the higher price they have to pay for the energy.
The correct answer in this situation I feel is the first. A slowing economy simply means less demand for energy. I don't doubt the Chinese are indeed adapting their growth strategies to be more environmentally friendly, but I don't think it is the reason their demand for energy is shrinking (80% of China's energy comes from coal). Last, I don't think it's because of higher prices, commodities after all have once again become very cheap (click here for the Bloomberg LP article).
Moving onto aluminum. China's Shanxi Guanlu said on Friday it was shutting 40,000t of aluminum capacity owing to low prices and weak demand (click here for the full article from the Mining Journal).
I think the main idea to take away with you from all of this is that the market has no idea how to make up its mind and neither do the participants in the market. If and when the global economy does see a recovery, be sure you have some of your money invested in energy and metals, because demand will return and with a vengeance.
For a bit of perspective check out what Jimmy Rogers and Marc Faber, the guru's of commodity investing have to say.
Jim Rogers - Recession and Commodities in 2008
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P1
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P2
However, once economic crisis spread to wealthy nations a chain reaction started.
First, consumers who had been eating up cheap Chinese exports for years decreased their spending as credit dried up. Less demand for goods produced by China's manufacturing sector would mean less Chinese demand for commodities.
Second, a slowing global economy produced a situation where aggregate commodity demand shrank around the world. It mattered little if a country is rich or poor, a slowing global economy would mean less demand for energy and metals.
Third, as economic problems continued to spread it became less and less likely the economic dragon of China would be able to ride the storm out. If a global recession occurred, China would find it very difficult to rely solely on their domestic economy and international currency reserves to keep things growing as fast as they had been from 2001-2008.
Finally (and this is a over-simplification), combine all facts and you get a situation where the future of the global economy is unpredictable. Meaning, no one really knows when Chinese demand will pick up again, no one really knows when the global economy will recover and therefore investing in metals and energy seemed foolish if recession would hamper demand in the near future.
That being said, a few interesting stories passed through the presses this weekend. The first two indicate demand is returning to the commodity markets in China, the second two tell a different story.
Baoshan Steel, Angang Steel, Wuhan Iron & Steel and Maanshan Iron & Steel. Four major Chinese steelmaker stock ratings where raised by Credit Suisse, which said improving demand will help raise steel prices (click here for Bloomberg LP article).
China National Petroleum Corp., the country's biggest oil and gas producer, said it plans to increase oil and gas production by 5% annually to meet domestic demand (click here for Bloomberg LP article).
China's State Electricity Regulatory Commission said demand and output in China will continue to shrink this year because of slower economic growth. China is the world's second largest consumer of energy.
If people are using less electricity it means one of three things. First, it could be a bad sign for the economy. It could indicate the Chinese are becoming more efficient / environmentally friendly. Or third, it may mean the Chinese are trying to save a few Yuan from the higher price they have to pay for the energy.
The correct answer in this situation I feel is the first. A slowing economy simply means less demand for energy. I don't doubt the Chinese are indeed adapting their growth strategies to be more environmentally friendly, but I don't think it is the reason their demand for energy is shrinking (80% of China's energy comes from coal). Last, I don't think it's because of higher prices, commodities after all have once again become very cheap (click here for the Bloomberg LP article).
Moving onto aluminum. China's Shanxi Guanlu said on Friday it was shutting 40,000t of aluminum capacity owing to low prices and weak demand (click here for the full article from the Mining Journal).
I think the main idea to take away with you from all of this is that the market has no idea how to make up its mind and neither do the participants in the market. If and when the global economy does see a recovery, be sure you have some of your money invested in energy and metals, because demand will return and with a vengeance.
For a bit of perspective check out what Jimmy Rogers and Marc Faber, the guru's of commodity investing have to say.
Jim Rogers - Recession and Commodities in 2008
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P1
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P2
Friday, January 9, 2009
Commodities in focus -- Copper rises in London trading as China begins to stockpile raw materials
The commodity sector has been hit hard by the global economic crisis, especially in terms of the speed of its decline. For much of 2008 as other equities faltered, shares of commodity and energy stocks seemed immune, many times leading the major US indices into the green despite poor performance in other sectors.
When markets began to tank between September – November this all changed. Year to date (2008), oil is down around 60%, copper 50%, natural gas 20%, etc. As commodities plummeted miners profits shrank, exploration slowed, new mining projects became unfeasible in light of depressed prices and speculators who had been relying on energy and raw materials as a safe investment or inflation hedge withdrew their money.
If the stimulus packages being enacted by governments around the world successfully help to re-invigorate the global financial system and we see a recovery in confidence and economic activity the recession may end sooner than expected. If this happens commodity demand will once again explode, especially considering how so many producers and explorers have scaled back their operations.
China is not oblivious to this. Much like China's logic behind securing resources in Africa to avoid supply disruptions, China is now concerned about supply disruptions that may occur if demand picks up.
Bloomberg and Reuters reported this morning that China's Reserve Bureau, the country's stockpiling agency, is buying aluminum. Analysts seem to think (and I agree in this situation) that if they are buying up aluminum at cheap prices, they will do the same for other metals.
“Aluminum inventory in warehouses monitored by the Shanghai Futures Exchange declined 18% in the past week, the largest decline since April 2007, figures from the exchange today showed. China’s Ministry of Land and Resources said two days ago the country would build emergency stockpiles of copper and other items to guard against potential supply disruptions.”
(click here to access the full article from Bloomberg, republished by the Mining Journal)
China is smart to do this, with the country's massive foreign reserves and depressed commodity prices it makes sense for them to stockpile the resources they need to ensure their development. China is worried about its slowing economy because of the potential for political unrest in bad economic times.
Considering the fact China continued to purchase commodities when they where selling at their recent historical highs, it must feel like shopping at a giant fire sale for the Chinese who can now scoop up a huge stockpile of raw materials and energy for depressed prices.
When markets began to tank between September – November this all changed. Year to date (2008), oil is down around 60%, copper 50%, natural gas 20%, etc. As commodities plummeted miners profits shrank, exploration slowed, new mining projects became unfeasible in light of depressed prices and speculators who had been relying on energy and raw materials as a safe investment or inflation hedge withdrew their money.
If the stimulus packages being enacted by governments around the world successfully help to re-invigorate the global financial system and we see a recovery in confidence and economic activity the recession may end sooner than expected. If this happens commodity demand will once again explode, especially considering how so many producers and explorers have scaled back their operations.
China is not oblivious to this. Much like China's logic behind securing resources in Africa to avoid supply disruptions, China is now concerned about supply disruptions that may occur if demand picks up.
Bloomberg and Reuters reported this morning that China's Reserve Bureau, the country's stockpiling agency, is buying aluminum. Analysts seem to think (and I agree in this situation) that if they are buying up aluminum at cheap prices, they will do the same for other metals.
“Aluminum inventory in warehouses monitored by the Shanghai Futures Exchange declined 18% in the past week, the largest decline since April 2007, figures from the exchange today showed. China’s Ministry of Land and Resources said two days ago the country would build emergency stockpiles of copper and other items to guard against potential supply disruptions.”
(click here to access the full article from Bloomberg, republished by the Mining Journal)
China is smart to do this, with the country's massive foreign reserves and depressed commodity prices it makes sense for them to stockpile the resources they need to ensure their development. China is worried about its slowing economy because of the potential for political unrest in bad economic times.
Considering the fact China continued to purchase commodities when they where selling at their recent historical highs, it must feel like shopping at a giant fire sale for the Chinese who can now scoop up a huge stockpile of raw materials and energy for depressed prices.
Wednesday, January 7, 2009
China goes shopping for commodities
If you have kept up to date as I try to do with China's oversea investments in the commodity and energy sectors you're probably aware of the fact China has been shopping for commodities in emerging markets.
Africa and to a lesser extent South America where the main benefactors of China's spending spree from 2000-2008. The two continents are home to abundant supplies of natural resources China needs to sustain economic growth. The two continents are also home to various countries that are hungry for foreign direct investment in their commodity sectors which until recent had been the main fuel behind their respective economics booms.
China also had a edge up on their western counterparts in many of these countries. Some countries in Africa and South America intimidate traditional western investors due to political instability. Others have such a horrendous human rights record that many western firms are morally inclined not work in them.
With the global slow down in full swing, cash rich Chinese companies and investment groups now find themselves in a different position. Frozen credit markets, plummeting commodity prices, depressed stock market prices and a cloudy horizon in the future have led many mining companies from developed countries to search for long-term investors with the capital to keep their operations running until the global economy improves.
China has shifted its attention away from Africa, instead focusing on possible investment opportunities in Canada, Australia and South America. Keith Spence, president of Global Mining Corp, a China-focused resource investment company was quoted in a great piece published in the Financial Times yesterday.
"The Chinese realize there are massive opportunities in the market. A year ago, they were going to Africa to acquire early-stage development assets. But now they are looking for larger tonnage, longer life, later-stage assets. There is less of an emphasis on emerging markets, because now there is choice."
Last month China's largest zinc producer, Zhongjin purchased 50.1% of Australian zinc miner Perilya for $32 million usd. Chinalco, a Chinese aluminum company has suggested it may increase its stake in Rio Tinto to nearly 15%.
(click here to access the full article on this topic from the Financial Times)
I must say it is interesting to see that although China finds itself in a more lucrative buying position that it has not shunned South America. Evidence to suggest the Chinese may perceive South America as more than simply another commodity rich area in which to extract untapped resources.
Rather it may be that South America has come to represent a region that has well developed assets, worthy of purchasing for the long-term. China is forging much closer ties with fellow APEC members Chile and Peru. China is quickly working with Peru to finalize a Free Trade Agreement and already has one with Chile. China is increasing its investment in agricultural commodities in Brazil and Argentina and hopes to continue easing visa restrictions for many of its citizens on travel to the region.
Below I've included a chart of Chinese investments / cooperation with Latin American countries. I assembled this chart about 6 months ago for my independent study / thesis. If you know of any other instances of Sino-Latin America interaction please by all means let me know and I'll update this chart.
Africa and to a lesser extent South America where the main benefactors of China's spending spree from 2000-2008. The two continents are home to abundant supplies of natural resources China needs to sustain economic growth. The two continents are also home to various countries that are hungry for foreign direct investment in their commodity sectors which until recent had been the main fuel behind their respective economics booms.
China also had a edge up on their western counterparts in many of these countries. Some countries in Africa and South America intimidate traditional western investors due to political instability. Others have such a horrendous human rights record that many western firms are morally inclined not work in them.
With the global slow down in full swing, cash rich Chinese companies and investment groups now find themselves in a different position. Frozen credit markets, plummeting commodity prices, depressed stock market prices and a cloudy horizon in the future have led many mining companies from developed countries to search for long-term investors with the capital to keep their operations running until the global economy improves.
China has shifted its attention away from Africa, instead focusing on possible investment opportunities in Canada, Australia and South America. Keith Spence, president of Global Mining Corp, a China-focused resource investment company was quoted in a great piece published in the Financial Times yesterday.
"The Chinese realize there are massive opportunities in the market. A year ago, they were going to Africa to acquire early-stage development assets. But now they are looking for larger tonnage, longer life, later-stage assets. There is less of an emphasis on emerging markets, because now there is choice."
Last month China's largest zinc producer, Zhongjin purchased 50.1% of Australian zinc miner Perilya for $32 million usd. Chinalco, a Chinese aluminum company has suggested it may increase its stake in Rio Tinto to nearly 15%.
(click here to access the full article on this topic from the Financial Times)
I must say it is interesting to see that although China finds itself in a more lucrative buying position that it has not shunned South America. Evidence to suggest the Chinese may perceive South America as more than simply another commodity rich area in which to extract untapped resources.
Rather it may be that South America has come to represent a region that has well developed assets, worthy of purchasing for the long-term. China is forging much closer ties with fellow APEC members Chile and Peru. China is quickly working with Peru to finalize a Free Trade Agreement and already has one with Chile. China is increasing its investment in agricultural commodities in Brazil and Argentina and hopes to continue easing visa restrictions for many of its citizens on travel to the region.
Below I've included a chart of Chinese investments / cooperation with Latin American countries. I assembled this chart about 6 months ago for my independent study / thesis. If you know of any other instances of Sino-Latin America interaction please by all means let me know and I'll update this chart.
Thursday, August 21, 2008
Jim Rogers says commodities will rebound after drop (update 1 from Bloomberg)
Bloomberg's journalists have been speaking with good old commodity guru's Jimmy Rogers and Marc Faber about commodities.
``I don't see that it's the end of the bull market,'' the chairman of Rogers Holdings, said in an interview in Bangkok before speaking at an investor conference later today. ``Until either a lot of supply comes on stream or the economy collapses, the bull market will continue,'' he said.
Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow. Sixteen of the 19 commodities in the Reuters/Jefferies CRB Index fell this month, after the index plunged 10 percent in July, the biggest such drop in 28 years.
``I am contemplating whether it's time to get involved in base metals again,'' Rogers, 65, said today. ``I haven't bought any for awhile.''
Gold fell to the lowest since October on Aug. 15, while platinum had the biggest intraday loss since 2001. Aluminum has dropped 18 percent from a record on July 11 and Nickel is down 26 percent in the past year.
......................
Click here to access the full article from Bloomberg
``I don't see that it's the end of the bull market,'' the chairman of Rogers Holdings, said in an interview in Bangkok before speaking at an investor conference later today. ``Until either a lot of supply comes on stream or the economy collapses, the bull market will continue,'' he said.
Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow. Sixteen of the 19 commodities in the Reuters/Jefferies CRB Index fell this month, after the index plunged 10 percent in July, the biggest such drop in 28 years.
``I am contemplating whether it's time to get involved in base metals again,'' Rogers, 65, said today. ``I haven't bought any for awhile.''
Gold fell to the lowest since October on Aug. 15, while platinum had the biggest intraday loss since 2001. Aluminum has dropped 18 percent from a record on July 11 and Nickel is down 26 percent in the past year.
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Click here to access the full article from Bloomberg
"Oversold" Markets -- Brazilian Companies "among the cheapest" reports UBS.
UBS, as reported by Bloomberg in this article (linked here) feels Brazilian companies are "among the cheapest," trading in emerging markets. Check the article out for yourself, and also take a look at how pretty much every emerging market is being haled as being "over-sold," "or having "bottomed out."
People are in a frenzy and investors should tread carefully in these emerging markets, choosing companies that have strong fundamentals on their balance sheet, not on a geo-political scale or when a short rally in global equities occurs.
The bottom line... the health of financial markets and the macro-global economy is just not looking all that nice.
Monday, July 21, 2008
India, China continue to push for more nuclear facilities to ease energy shortages -- prices set to rise says analyst Yuriy Humber
Moscow: The uranium industry’s worst year is about to collide with a nuclear construction programe in India and China that rivals the ones undertaken during the oil crisis of the 1970s.
The result is likely to be a 58% rebound in uranium to $90 (Rs3,870) a pound from $57 now, according to Goldman Sachs JBWere Pty. Ltd and the Rio Tinto group, the third biggest mining company. Uranium plunged 57% in the past year as an earthquake damaged a Japanese plant that is the world’s largest and faults shut down reactors in the UK and Germany.
Plans for India and China to end electricity shortages will ripple from Canada to the Australian outback and the flatlands of Kazakhstan, the primary sources of uranium. India will start three reactors this year, with another six due next year in India, China, Russia, Canada and Japan. Uranium demand worldwide will rise as fast as oil this year, or 0.8%, Deutsche Bank AG forecasts.
“The first wave of growth is going to come from the emerging economies,” said John Wong, fund manager with CQS UK Llp. in London, which has $10 billion under management including $150 million of uranium investments. “People are starting to look at coal, gas, oil and seeing the energy prices go up, they wonder about uranium.”
Click here to access the full article from Livemint News.
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Plans for India and China to end electricity shortages will ripple from Canada to the Australian outback and the flatlands of Kazakhstan, the primary sources of uranium. India will start three reactors this year, with another six due next year in India, China, Russia, Canada and Japan. Uranium demand worldwide will rise as fast as oil this year, or 0.8%, Deutsche Bank AG forecasts.
Scarce commodity: The Hamaoka nuclear power station in Japan. Uranium plunged 57% in the past year
as an earthquake damaged another plant in Japan and faults shut down reactors in the UK and Germany.
(Photo: Robert Gilhooly/Bloomberg)
as an earthquake damaged another plant in Japan and faults shut down reactors in the UK and Germany.
(Photo: Robert Gilhooly/Bloomberg)
Click here to access the full article from Livemint News.
CTAPDA Website Directory
Thursday, July 17, 2008
Jim Rogers comments on commodities (Bloomberg LP)... Amazing how this guy alone can cause the market to move
Jim Rogers on Bloomberg 2008.07.14
Saturday, July 12, 2008
CPM Group says global molybdenum supply deficits will grow in 2009 and 2010
In its latest molybdenum market study, CPM says tight credit market s and other developments have caused molybdenum’s forward supply curve to shift over the past year. Author: Dorothy Kosich
Posted: Thursday , 10 Jul 2008
"These higher production costs-combined with robust demand in the energy industry, narrow inventory levels, and expectations that molybdenum supplies will not exceed demand on a sustained basis are expected to boost the floor prices of molybdenum," according to a news release issued by CPM Wednesday.
"Demand is not only growing in the principal end uses of molybdenum, but in newer industries that are seeking to utilize molybdenum's significant alloying properties," according to CPM.
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Click here to access the fully article from Mineweb.com
Posted: Thursday , 10 Jul 2008
Commodities research firm CPM Group says financing for molybdenum mining projects "has become an uphill battle for some of the new primary and by-product producers."
Meanwhile, the delays in bring new primary moly or copper/moly mining projects on line have exacerbated the moly supply deficits forecast for 2009 and 2010, according to CPM's study, The Sustainability of Recent Molybdenum Prices, 2008
"These higher production costs-combined with robust demand in the energy industry, narrow inventory levels, and expectations that molybdenum supplies will not exceed demand on a sustained basis are expected to boost the floor prices of molybdenum," according to a news release issued by CPM Wednesday.
"Demand is not only growing in the principal end uses of molybdenum, but in newer industries that are seeking to utilize molybdenum's significant alloying properties," according to CPM.
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Click here to access the fully article from Mineweb.com
Tuesday, July 8, 2008
Jim Roger's offers his comments on the rising prices of commodities and where the market is heading
Commodity Guru Jim Rogers stated in a interview earlier this weekend, "the severe oil supply shortage could take futures prices even higher."
Thursday, June 19, 2008
Road Blocks end in Peru - Southern Copper resumes operations -- see post on Inka Kola News
Was planning up posting my own update on the strikes that had been afflicting Southern Copper (PCU) operations, but Inka Kola News already got the job done. The strikes have ended... check out Inca Kola News for details and analysis.
I highly recommend people check out this great site which reports and keeps the average reader up to date on many news developments relating to Latin American stocks, politics and economics.
Inca Kola News can be accessed here: http://incakolanews.blogspot.com/
And the report / analysis covering the end of the the road blocks in Peru can be accessed directly through clicking on this link.
Also see update, accessible through this link.
I highly recommend people check out this great site which reports and keeps the average reader up to date on many news developments relating to Latin American stocks, politics and economics.
Inca Kola News can be accessed here: http://incakolanews.blogspot.com/
And the report / analysis covering the end of the the road blocks in Peru can be accessed directly through clicking on this link.
Also see update, accessible through this link.
Tuesday, June 17, 2008
Natural Gas found in Chile! Discoveries in Magallanes Region! Reports Merco Press
For full article... please click here. Accessed from Mercopress on July 17, 2008
GeoPark Holdings Limited announced the discovery of two new gas fields in the extreme south of Chile, the Magallanes Region. The gas fields are on the Fell Block following the successful drilling and testing of the two new gas wells.
GeoPark drilled and completed the Nika Oeste 3 well to a total depth of 3,023 meters on a geological structure that had been re-defined following the interpretation of GeoPark’s 3D seismic program.
Approximately at 2,960 meters in an 11.5 meter perforated interval, gas flowed, without stimulation, at a rate of approximately 4.7 million cubic feet per day, 70 barrels per day (bpd) of condensate and 14 bpd of water with a well head pressure of 1,470 pounds per square inch (psi).
These are preliminary results and further production history will be required to determine stabilized flow rates from this well and the extent of the reservoir. Construction has been initiated on a gas pipeline to connect the Nika Oeste 3 well to GeoPark’s Kimiri Aike gas process and compression facility which connects with the regional gas infrastructure and the Methanex Corporation's methanol plant located 120 kilometers from the Fell Block.
The Bump Hill 1 well was drilled to a total depth of 2,979 meters with a production test at approximately 2,820 meters in a 4 meter perforated interval, flowed, without stimulation, at a rate of approximately 0.9 million cubic feet per day (mmcfpd) of gas, 5 bpd of condensate and 4 bpd of water with a well head pressure of 420 psi. Bump Hill 1 will also be linked to the Kimiri Aike gas processing facility.
Targeted completion of the two new gas pipelines is July 2008 with an expected increase in total sales production of 900 barrels of oil equivalent per day (boepd). GeoPark in its release states that it has drilled and successfully put on production seven new wells in Chile since its long term drilling program began in June 2007. Five other new wells have been drilled and are currently waiting for testing, sidetracking or remedial operations.
--- As always, with this site I like to convey development that grab my attention. Last minute inclusion of the above article is a result of a last minute click on "home" in my web browser-- prompting many news sites to load. One being Mercopress.com.
GeoPark Holdings Limited announced the discovery of two new gas fields in the extreme south of Chile, the Magallanes Region. The gas fields are on the Fell Block following the successful drilling and testing of the two new gas wells.
GeoPark drilled and completed the Nika Oeste 3 well to a total depth of 3,023 meters on a geological structure that had been re-defined following the interpretation of GeoPark’s 3D seismic program.
Approximately at 2,960 meters in an 11.5 meter perforated interval, gas flowed, without stimulation, at a rate of approximately 4.7 million cubic feet per day, 70 barrels per day (bpd) of condensate and 14 bpd of water with a well head pressure of 1,470 pounds per square inch (psi).
These are preliminary results and further production history will be required to determine stabilized flow rates from this well and the extent of the reservoir. Construction has been initiated on a gas pipeline to connect the Nika Oeste 3 well to GeoPark’s Kimiri Aike gas process and compression facility which connects with the regional gas infrastructure and the Methanex Corporation's methanol plant located 120 kilometers from the Fell Block.
The Bump Hill 1 well was drilled to a total depth of 2,979 meters with a production test at approximately 2,820 meters in a 4 meter perforated interval, flowed, without stimulation, at a rate of approximately 0.9 million cubic feet per day (mmcfpd) of gas, 5 bpd of condensate and 4 bpd of water with a well head pressure of 420 psi. Bump Hill 1 will also be linked to the Kimiri Aike gas processing facility.
Targeted completion of the two new gas pipelines is July 2008 with an expected increase in total sales production of 900 barrels of oil equivalent per day (boepd). GeoPark in its release states that it has drilled and successfully put on production seven new wells in Chile since its long term drilling program began in June 2007. Five other new wells have been drilled and are currently waiting for testing, sidetracking or remedial operations.
--- As always, with this site I like to convey development that grab my attention. Last minute inclusion of the above article is a result of a last minute click on "home" in my web browser-- prompting many news sites to load. One being Mercopress.com.
Friday, June 13, 2008
Wealthy donors + Rice + Interactive Vocab Game -- beginning the day with a new tool to help the global poor cope with rising fuel costs
I decided to mix a bit of humanitarianism spirit and food aid along with the afternoon analysis today which today, concentrates on rising food prices.
Basic staples of nourishment (food), ranging from wheat, rice, corn, soy to chicken and beef are on the rise around the world. Commodity prices are in a bull market, few can argue that. Combining the factors of rising demand for everything from food, energy and base metals in emerging markets AND sky rocketing energy prices resulting from a variety of factors such as overall economic uncertainty, instability in the Middle East, and supply disruptions in the North Sea or Nigeria, have simply established an environment in which natural resources have proportionately speaking, become scarcer than ever before while demand and necessity for them remains strong.
Many will feel the affects of rising prices and inflation, in particular, the poor of the world. The global poor in large rely on basic staples like rice for a large portion of their diets. In terms of energy, most developing countries, unless they have substantial price controls in place, already pay higher prices per barrel of petrol than Americans in the US. A rise in the cost of gas for a taxi driver in Lima, Peru or in Cape Town, South Africa of 10-15% will be much far more painful for a Peruvian or South African than it is for American's filling their tanks this summer.
In an effort to help the poor of the developing world Poverty.com, has launched a sister website www.freerice.com where people can play a very addicting vocabulary game, where you simply choose the definition of a word displayed on the screen, if you choose correctly, the financial backers and advertisers of the site will donate rice to poor countries in exchange for your time. Defined on freerice.com as follows
FreeRice has two goals:
1. Provide English vocabulary to everyone for free.
2. Help end world hunger by providing rice to hungry people for free.
This is made possible by the sponsors who advertise on this site.
Whether you are CEO of a large corporation or a street child in a poor country, improving your vocabulary can improve your life. It is a great investment in yourself.
Perhaps even greater is the investment your donated rice makes in hungry human beings, enabling them to function and be productive. Somewhere in the world, a person is eating rice that you helped provide. Thank you.
The site in my opinion exploits the short attention span of the millions of people who spend way too many hours in front of a computer screen and are constantly searching for ways to distract themselves (myself included hehe).
Food prices have been on the rise in practically every corner of the world. Whether you’re a mother/father shopping for a family of 6 in the United States, and more importantly if you’re a mother/father providing for a family of 6 in the “global south,” which includes most the developing countries of the world.
Jimmy Rogers Commodity Index (RICI), was created in the 90’s to track the growth of commodity prices by Jim Rogers and has since become one of most well respected benchmarks / index for observing and tracking commodity price movements. It’s also a great index for investors who have used it as a means to identify investments in the commodity market. Growing (YTD) in 2008 by 25.86% while the S&P 500 Composite index is down -8.75% this year, the Nasdaq down -9.35%, the Dow Jones Comp down -8.47% (data gathered and accessed on June 13, 2008 from http://www.rogersrawmaterials.com/).
The Rogers Raw Materials Page describes the composition of the index in greater detail. Below is copy a excerpt of how the index is compiled, provided to give readers a general idea
“Rogers International Commodity Index® (RICI)® is based on monthly closing prices of a fixed-weight portfolio of the nearby futures and forwards contract month of international commodity markets. The selection and weighting of the portfolio is reviewed annually and weights assigned in the December preceding the start of a new year.”
This index is a great measure of rising costs. By rising costs, I mean the rising price of practically all goods in the global economy. The global economy is now beginning to show signs; or rather finally express signs that inflation is a potential threat to global growth and needs to be handled with care to ensure continued growth. Sadly, central bankers and countries around the world do not work together all too well yet, multi-lateral organizations lack the influence to organize a global effort—so countries around the world are raising interest rates in order to re-enforce their currencies strength, institutional investors are buying energy and gold to hedge their investments against the possibility of inflation, and even the US, EU, and UK have expressed signs there will be little possibility of further rate cuts, leaning instead towards increasing interest rates.
Although in economic theory this should do the trick, the problem is more complicated than many are capable of realizing. Yes… easy money for years has contributed to inflation, but more than anything it’s the fact capacity for production is no longer what it was when you consider the growth of countries such as China and India.
Food related commodities included on the Rogers index and their respective weights: Wheat (7%), corn (4.75%), Live Cattle (2%), Coffee (2%), Rice (0.5%), soybean oil (2%), lean hogs (1%), Sugar (2%), azuki beans (0.25%), Canola (0.67%) Orange Juice (0.66%), soybean meal (0.75%), and barley (0.27%). Personally I feel the only under-represented staple would be rice which deserves far more weight within the index considering how many billions of people in the world eat it on a daily basis. Together food related commodities comprise 21.72% of the index. Energy, metals and wood related commodities comprise the rest.
The world is in a correction phase in which consumers, producers and governments are going to have to adjust and adapt to a new global environment—where wasteful consumption is no longer an option. People must adjust to higher prices as other people in emerging markets demand the same things people in wealthier societies have enjoyed for quite some time.
Reflecting in brief upon my own dissertation on China’s growing interest in South America, observe China’s rising demand for soy and meat, only 2 of the commodities mentioned above and only 1 of the major developing markets in the world. Yes many argue China proportionately holds the most influence as the fastest growing and biggest emerging market, China is by no means the only large growing market.
Basic staples of nourishment (food), ranging from wheat, rice, corn, soy to chicken and beef are on the rise around the world. Commodity prices are in a bull market, few can argue that. Combining the factors of rising demand for everything from food, energy and base metals in emerging markets AND sky rocketing energy prices resulting from a variety of factors such as overall economic uncertainty, instability in the Middle East, and supply disruptions in the North Sea or Nigeria, have simply established an environment in which natural resources have proportionately speaking, become scarcer than ever before while demand and necessity for them remains strong.
Many will feel the affects of rising prices and inflation, in particular, the poor of the world. The global poor in large rely on basic staples like rice for a large portion of their diets. In terms of energy, most developing countries, unless they have substantial price controls in place, already pay higher prices per barrel of petrol than Americans in the US. A rise in the cost of gas for a taxi driver in Lima, Peru or in Cape Town, South Africa of 10-15% will be much far more painful for a Peruvian or South African than it is for American's filling their tanks this summer.
In an effort to help the poor of the developing world Poverty.com, has launched a sister website www.freerice.com where people can play a very addicting vocabulary game, where you simply choose the definition of a word displayed on the screen, if you choose correctly, the financial backers and advertisers of the site will donate rice to poor countries in exchange for your time. Defined on freerice.com as follows
FreeRice has two goals:
1. Provide English vocabulary to everyone for free.
2. Help end world hunger by providing rice to hungry people for free.
This is made possible by the sponsors who advertise on this site.
Whether you are CEO of a large corporation or a street child in a poor country, improving your vocabulary can improve your life. It is a great investment in yourself.
Perhaps even greater is the investment your donated rice makes in hungry human beings, enabling them to function and be productive. Somewhere in the world, a person is eating rice that you helped provide. Thank you.
The site in my opinion exploits the short attention span of the millions of people who spend way too many hours in front of a computer screen and are constantly searching for ways to distract themselves (myself included hehe).
Food prices have been on the rise in practically every corner of the world. Whether you’re a mother/father shopping for a family of 6 in the United States, and more importantly if you’re a mother/father providing for a family of 6 in the “global south,” which includes most the developing countries of the world.
Jimmy Rogers Commodity Index (RICI), was created in the 90’s to track the growth of commodity prices by Jim Rogers and has since become one of most well respected benchmarks / index for observing and tracking commodity price movements. It’s also a great index for investors who have used it as a means to identify investments in the commodity market. Growing (YTD) in 2008 by 25.86% while the S&P 500 Composite index is down -8.75% this year, the Nasdaq down -9.35%, the Dow Jones Comp down -8.47% (data gathered and accessed on June 13, 2008 from http://www.rogersrawmaterials.com/).
The Rogers Raw Materials Page describes the composition of the index in greater detail. Below is copy a excerpt of how the index is compiled, provided to give readers a general idea
“Rogers International Commodity Index® (RICI)® is based on monthly closing prices of a fixed-weight portfolio of the nearby futures and forwards contract month of international commodity markets. The selection and weighting of the portfolio is reviewed annually and weights assigned in the December preceding the start of a new year.”
This index is a great measure of rising costs. By rising costs, I mean the rising price of practically all goods in the global economy. The global economy is now beginning to show signs; or rather finally express signs that inflation is a potential threat to global growth and needs to be handled with care to ensure continued growth. Sadly, central bankers and countries around the world do not work together all too well yet, multi-lateral organizations lack the influence to organize a global effort—so countries around the world are raising interest rates in order to re-enforce their currencies strength, institutional investors are buying energy and gold to hedge their investments against the possibility of inflation, and even the US, EU, and UK have expressed signs there will be little possibility of further rate cuts, leaning instead towards increasing interest rates.
Although in economic theory this should do the trick, the problem is more complicated than many are capable of realizing. Yes… easy money for years has contributed to inflation, but more than anything it’s the fact capacity for production is no longer what it was when you consider the growth of countries such as China and India.
Food related commodities included on the Rogers index and their respective weights: Wheat (7%), corn (4.75%), Live Cattle (2%), Coffee (2%), Rice (0.5%), soybean oil (2%), lean hogs (1%), Sugar (2%), azuki beans (0.25%), Canola (0.67%) Orange Juice (0.66%), soybean meal (0.75%), and barley (0.27%). Personally I feel the only under-represented staple would be rice which deserves far more weight within the index considering how many billions of people in the world eat it on a daily basis. Together food related commodities comprise 21.72% of the index. Energy, metals and wood related commodities comprise the rest.
The world is in a correction phase in which consumers, producers and governments are going to have to adjust and adapt to a new global environment—where wasteful consumption is no longer an option. People must adjust to higher prices as other people in emerging markets demand the same things people in wealthier societies have enjoyed for quite some time.
Reflecting in brief upon my own dissertation on China’s growing interest in South America, observe China’s rising demand for soy and meat, only 2 of the commodities mentioned above and only 1 of the major developing markets in the world. Yes many argue China proportionately holds the most influence as the fastest growing and biggest emerging market, China is by no means the only large growing market.
Wednesday, June 11, 2008
Commodities in Focus -- Energy, food and metals grab world attention as prices continue to sour and supply problems emerge
Fitch analyst calls for new investment as oil prices soar - Regional
by Nathan CrooksBusiness News Americas
http://www.bnamericas.com/news/privatization/Fitch_analyst_calls_for_new_investment_as_oil_prices_soar
Tuesday, June 10, 2008
High international oil prices should encourage oil companies that operate in Latin America to invest in new projects, Gianna Bern, senior director and oil and gas analyst for Fitch Ratings Latin America Corporate Finance, told BNamericas.
"In Latin America, governments have been the one of the biggest beneficiaries of high crude oil prices in terms of taxes and royalties," Bern said.
For example, Venezuela, Ecuador and Bolivia have increased their take of oil profits in recent years. Brazil and Colombia are mulling plans to increase the state's gains from oil production as well.
"Having said that, at US$135/b WTI, now is the time for the oil companies to invest and pursue those projects that they wouldn't ordinarily," she said in reference to West Texas Intermediate prices. "The economics become compelling."
The analyst, meanwhile, does not see an end to high oil prices in the short term.
"High crude oil prices are driven by a fundamental imbalance in the global market between crude oil supply and demand. Supplies are not able to keep up with rising demand, primarily from non-OECD countries," she said.
The Organization for Economic Cooperation and Development (OECD) includes 30 member countries, including Mexico.
"There could be upward pressure on crude prices until there is more of a market balance which could take months, if not longer, for additional supplies to hit the market," Bern continued._____________________________________________________________
Grow more food or starve: FAO
Commodity Online
http://www.commodityonline.com/news/topstory/Grow-more-food-or-starve-FAO-9365-3.html
NEW DELHI: Want to beat the food crisis? Go for more investments in the agriculture sector and grow more food.
That is what United Nations Food and Agriculture Organization (FAO) has to advise the countries across the world.
If you don’t listen to FAO, your population will starve. That is the clear message came from Rome after a summit on food crisis there.
“There is an urgent need to help developing countries and countries in transition to expand agriculture and food production, and to increase investment in agriculture, agribusiness and rural development from both public and private sources,” the FAO summit declaration said.
Donors and International Financial Institutions are urged to provide balance of payments support and budget support to food-importing, low-income countries. Other measures should be considered as necessary to improve the financial situation of the countries in need, including reviewing debt servicing as necessary.
The final declaration also called on governments to assure United Nations agencies the resources to expand and enhance their food assistance and support safety net programmes to address hunger and malnutrition, when appropriate, through the use of local or regional purchases.
Speaking about the growing social threat from rising food prices at the opening of the summit, FAO director general Jacques Diouf said: “What is important today is to realise that the time for talking is long past. Now is the time for action.”
The declaration also called for development partners to participate in and contribute to international and regional initiatives on soaring food prices and assist countries to put in place the revised policies and measures to help farmers, particularly small-scale producers, to increase production and integrate with local, regional and international markets.
Also recommended by the declaration are initiatives that moderate unusual fluctuations in food grain prices. “We call on relevant institutions to assist countries in developing their food stock capacities and consider other measures to strengthen food security risk management for affected countries,” FAO said.
_________________________________________________
| | Is Nymex admitting to speculation in crude oil? By Sreekumar Raghavan MUMBAI: The debate is still raging on what is causing the crude to rise. It is going from one extreme to the other. Some blame it on high speculation, others on demand-supply imbalances and forecasters predicting it would rise to $200. The actions of world’s largest commodity derivatives exchange, The New York Mercantile Exchange, Inc. during the past two days indicates the possibility that speculation is indeed beyond allowable limits. In the case of oman crude oil, the margins were raised from $8300 to $9500 on June 9. For members it was raised from 9,130 to 10,450 and for customers from 11,205 to 12,825. On June 10 it was further revised to 11,500, 12,650 and 15,525 for clearing members, members and customers respectively. It has announced margin changes for its crude oil and related futures contract even though no explanation has been provided for such actions by Nymex or market regulator Commodity Futures Trading Commission. Among the contracts attracting higher margins from now include: July to December 2008 crude oil, crude oil calendar swap, MiNYTM crude oil futures, Nymed MACI index futures, natural gas, oman crude among others. July-December Contracts Margins for the July to December 2008 crude oil, crude oil calendar swap, and crude oil financial futures contracts will increase to $8,750 from $7,750 for clearing members, to $9,625 from $8,525 for members, and to $11,813 from$10,463 for customers. Margins for all other months will increase to $8,500from $7,750 for clearing members, to $9,350 from $8,525 for members, and to$11,475 from $10,463 for customers. The margins for the July through December NYMEX miNYTM crude oil futures contracts will increase to $4,375 from $3,875 for clearing members, to $4,813 from $4,263 for members, and to $5,906 from $5,231 for customers. Margins for all other months will increase to $4,250 from $3,875 for clearing members, to $4,675 from $4,263 for members, and to $5,738 from $5,231 for customers.The margins for the NYMEX MACI index futures contract will increase to $1,742 from $1,550 for clearing members, to $1,916 from $1,705 for members, and to$2,351 from $2,093 for customers. Natural Gas Margins for the first and second months of the natural gas, natural gas penultimate financial, and natural gas last day financial futures contracts will increase to $8,250 from $7,500 for clearing members, to $9,075 from $8,250 for members, and to $11,138 from $10,125 for customers. The margins for the third and fourth months will increase to 9,000 from $8,000 for clearing members, to $9,900 from $8,800 for members, and to $12,150 from $10,800 for customers. Margins for the fifth to ninth months will increase to $9,250 from $8,500 for clearing members, to $10,175 from $9,350 formembers, and to $12,488 from $11,475 for customers. The margins for the 10th to 21st months will increase to $6,000 from $5,500 for clearing members, to $6,600 from $6,050 for members, and to $8,100 from $7,425 for customers. Margins for the 22nd to 33rd months will increase to $4,750 from $4,500 for clearing members, to $5,225 from $4,950 for members, and to $6,413 from $6,075 for customers. The margins for the 34th to 45th months will increase to $4,500 from $4,250 for clearing members, to $4,950 from $4,675 for members, and to $6,075 from $5,738 for customers. Margins for all other months will increase to $4,000 from $3,750 for clearing members, to $4,400 from $4,125 for members, and to $5,400 from $5,063 for customers. The margins for the first and second months of the NYMEX miNY natural gas and Henry Hub swap and penultimate swap futures contracts will increase to $2,063 from $1,875 for clearing members, to $2,269 from $2,063 for members, and to$2,784 from $2,531 for customers. The margins for the third and fourth monthswill increase to $2,250 from $2,000 for clearing members, to $2,475 from$2,200 for members, and to $3,038 from $2,700 for customers. Margins for the fifth to ninth months will increase to $2,313 from $2,125 for clearing members, to $2,544 from $2,338 for members, and to $3,122 from $2,869 for customers. The margins for the 10th to 21st months will increase to $1,500 from $1,375 for clearing members, to $1,650 from $1,513 for members, and to $2,025 from $1,856 for customers. Margins for the 22nd to 33rd months will increase to $1,188 from $1,125 for clearing members, to $1,306 from $1,238 for members, and to $1,603 from $1,519 for customers. The margins for the 34th to 45th months will increase to $1,125 from $1,063 for clearing members, to $1,238 from $1,169 for members, and to $1,519 from $1,434 for customers. Margins for all other months will increase to $1,000 from $938 for clearing members, to $1,100 from $1,031 for members, and to $1,350 from $1,266 for customers. The margins for the Henry Hub swing swap futures contracts will increase to $2,063 from $1,875 for clearing members, to $2,269 from $2,063 for members,and to $2,784 from $2,531 for customers. |
Heating Oil
Margins for the first month of the heating oil, New York Harbor heating oil calendar swap, and heating oil financial futures contracts will increase to $10,000 from $9,000 for clearing members, to $11,000 from $9,900 for members, and to $13,500 from $12,150 for customers.
Margins for the second month will increase to $9,500 from $8,500 for clearing members, to $10,450 from $9,350 for members, and to $12,825 from $11,475 for customers. Margins for the third through ninth months will increase to $8,750 from $8,000 for clearing members, to $9,625 from $8,800 for members, and to $11,813 from $10,800 for customers. The margins for all other months will increase to $8,000 from $7,500 for clearing members, to $8,800 from $8,250 for members, and to $10,800 from $10,125 for customers.
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Margins for the first month of NYMEX miNY heating oil futures contract will increase to $5,000 from $4,500 for clearing members, to $5,500 from $4,950 for members, and to $6,750 from $6,075 for customers.
The margins for the second month will increase to $4,750 from $4,250 for clearing members, to $5,225 from $4,675 for members, and to $6,413 from $5,738 for customers. Margins for the third through ninth months will increase to$4,375 from $4,000 for clearing members, to $4,813 from $4,400 for members,and to $5,906 from $5,400 for customers. Margins for all other months will increase $4,000 from $3,750 for clearing members, to $4,400 from $4,125 for members, and to $5,400 from $5,063 for customers.
Margins for the first month of the RBOB gasoline, RBOB financial, and RBOB calendar swap futures contracts will increase to $8,750 from $7,750 for clearing members, to $9,625 from $8,525 for members, and to $11,813 from $10,463 for customers. The margins for the second to fourth months will increase to $8,250 from $7,250 clearing members, to $9,075 from $7,975 for members, and to $11,138 from $9,788 for customers. Margins for the fifth to11th months will increase to $7,500 from $6,500 for clearing members, to $8,250 from $7,150 for members, and to $10,125 from $8,775 customers.Margins for all other months will increase to $7,250 from $6,250 for clearing members, to $7,975 from $6,875 for members, and to $9,788 from $8,438 for customers.
Margins for the first month of the NYMEX miNY RBOB gasoline futures contract will increase to $4,375 from $3,875 for clearing members, to $4,813 from $4,263 for members, and to $5,906 from 5,231 for customers. The margins for the second to fourth months will increase to $4,125 from $3,625 for clearing members, to $4,538 from $3,988 for members, and to $5,569 from $4,894 for customers. Margins for the fifth to 11th months will increase to $3,750 from $3,250 for clearing members, to $4,125 from $3,575 for members, and to $5,063 from $4,388 for customers. Margins for all other months will increase to$3,625 from $3,125 for clearing members, to $3,988 from $3,438 for members, and to $4,894 from $4,219 for customers.
If indeed, $25 of the present crude prices are on account of speculation, as suggested by some experts, will Nymex actions result in a fall in prices in near future? That itself can be cause for a speculation.
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