News reel: Economic Meltdown p3 – Commodities

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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.

Commodities in focus: Sector outlook

Gold -- To hold gold or not to hold gold...? That is the question.

Gold is a funny metal in the commodity family. Despite its functional use in areas such as filling cavities, gold is also a very fickle metal in the sense that a variety of other macro-conditions ultimately play a big role in determining the price of gold.

The price of gold has held up reasonably well, remaining in the $800/t oz. Range despite a short dip into the $700's/t oz in October and November. Reasons to favor gold right now come predominantly in the form of using it as a hedge against future depreciation of the US dollar vs. the Euro and other major currencies. With all the money the US Government is printing and spending, plus historically low interest rates, most analysts estimate that the currency will weaken in the coming quarters.

Kitco - 6 month gold spot

On the other side of the equation, demand is falling from major consumers like India. Second, if stock markets do witness a sharp rebound, investors may have reason to turn away from gold and return to stocks which are at historical valuations. Chandrashekhar of the Hindu Business Line, a Indian news site says “In the short-term it could come under pressure amid a deflationary environment or during bouts of dollar strength.”


Base Metals – Copper futures jump 5% limit in Shanghai trading, but outlook still remains dim

Li Rong, chief analyst at Great Wall Futures in Shanghai told Bloomberg (in this article), “Chinese consumers took advantage of lower overseas prices to stock up ahead of the Chinese New Year.”

Chandrashekhar had the following to say about base metals.

In case of copper, market fundamentals, especially the demand side continues to deteriorate. This metal may have the furthest downside potential from current levels. According to experts, copper prices are still above production costs and miners still make money. Therefore, there would likely be cost-related cutbacks in production. On the other hand, aluminum, zinc and nickel prices have all fallen very close to weighted average production costs. There is growing risk that copper could dip near to this level at $2,100/t (click here to access the full article from the Hindu Business Line).


Crude Oil / Energy -- Bounce back?

At the moment the financial crisis and the recent political tensions in the Middle-East and Eurasia (Russia) have created a sense that oil prices may have come too low. Additionally OPEC has just announced large production cuts will be hitting the markets in the coming months to bolster oil prices.

When the global crisis appears to have been brought under control and demand returns to markets, the price of a barrel of crude may well spike back above $50 a barrel. Further dollar deterioration and escalation of political tensions may also contribute to higher prices.

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.

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Copper, Oil Lead Decline as Global Growth Slows reports Bloomberg LP

Aug. 8 (Bloomberg) -- Copper and crude oil led a decline in commodities on concern that slower global economic growth will curb demand for raw materials.

Copper headed for its biggest weekly drop since March, crude oil fell to the lowest compared with closing prices since May and silver reached its cheapest since January. Italy's second-quarter gross domestic product unexpectedly shrank, the statistics office in Rome said today. Japan's economy probably contracted in the three months ended June, according to the median estimate of 25 economists surveyed by Bloomberg News.

``People understand that we might face a difficult two or three quarters ahead of us,'' said Christoph Eibl, who helps manage more than $1 billion of commodities at Tiberius Asset Management AG in Zug, Switzerland. ``Industrial-related commodities will not outperform.''

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Click here to access the full story from Bloomberg LP

Chavez to expand Venezuela's oil pact

Venezuelan President Hugo Chavez is flexing the country's petroleum muscle once again, stating he seeks to expand Venezuela's oil pact to poor nations in the Caribbean.

Chavez stated "Nations taking part in Petrocaribe initiative will now be required to pay just 40% of the bill within 90 days - down from the current 50%. The rest can be paid over the next 25 years at a fixed rate of 1% percent as long as oil prices are above US$100 a barrel.

"That could compensate for the horrible curve of the jump in oil prices," Chavez said. He added that 70 percent of payments may be deferred if oil reaches US$150 a barrel.

AP Photo

In this photo released by Miraflores Press Office, Venezuela's President Hugo Chavez speaks during the opening ceremony of the Petrocaribe Summit in Maracaibo, Venezuela, Sunday, July 13, 2008. President Hugo Chavez sought to expand an oil-supply pact that is delivering fuel to 17 nations, calling it a tool against poverty and dismissing opponents' accusations that he is giving away Venezuela's oil wealth.

Sounds really generous to me... Venezuela is unarguably of the wealthier Caribbean nations in the Caribbean, however it does remain a country with many economic problems. Calculating if such a long-term donation is even feasible is difficult to do. So many variables could arise in the next 25 years which could cause the cash flow from its oil accounts receivable ledger simply stop...

New government could come into power who don't honor the repayment. Alternative energy could leap frog and bring the price of oil down substantially. A new government could come into power in Venezuela and re-arrange the terms, leaving small Caribbean contries with little bargaining power against Venezuela: their provider of energy and also regional political and economic power.

No less the gesture as it stands is a nice one, and in reality there is just so much domestic investment that is possible given Venezuela's limited FDI and internal domestic capacities. Oil drills may be in shortage, but so is the industry as a whole since the PDVSA strikes. Given the set backs, PDVSA remains a relatively vibrant operation, turns a profit and even manages to give Chavez some diplomatic barganing chips by making Venezuela into a gracious, oil rich country which cares about its region and the poor of world... unlike the United States, which is a underlying point Chavez hopes to make through such efforts.

China's crude oil import volume up 11%

China's Crude Oil Import Volume Up 11%

Crude imports stood at 90.53 million tons, the General Administration of Customs said on Thursday. The growth rate was down 0.2 percentage points from last year. The imports were valued at 64.98 billion U.S. dollars, up 85.8 percent, as world prices surged. Import prices hit a record high of 849.10 U.S. dollars per ton in June. Angola, Saudi Arabia, and Iran were the top three oil suppliers. China also imported 21.01 million tons of refined oil products in the first half, up 16.4 percent year-on-year. Xinhua News Agency - China, the world's second-largest energy consumer, imported 11 percent more crude oil in the first half of 2008 than in the year-earlier period.

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Click here to view full article from Xinhua news courtesey of Oilworks.com

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."