The formal World Trade Organisation gathering in Bali in early December already has some strongly positive news – a global trade deal is on the cards – a rare and big achievement.
But some issues are still a bit thorny – take cotton. In the past, African governments lambasted the US and EU for their cotton subsidies. Now it’s India and China that they should worry about. Continue reading »
Another week, another barrage of criticism for Thailand’s massive rice subsidy scheme.
This time the attack on a programme that is costing the government billions of dollars a year and adding to worries about the country’s economy is delivered diplomatically, but none the less forcefully, by the International Monetary Fund. Continue reading »
They say timing is everything in business, and the Indian guar gum producers who invested in new capacity early last year – just as the US fracking business realised it needed thousands of tonnes of the stuff in a hurry – either got lucky or timed their market entry to perfection. But is the multi-billion dollar boom in this once obscure commodity now over? Continue reading »
Are commodities over-valued? There are two schools of thought on the subject, one that says constrained supply and surging demand from emerging markets is the key driver of price, and the other that suggests high prices are a consequence of market speculation (boosted by cheap money).
McKinsey’s annual commodity report, released on Thursday, gives succour to the latter group. The chart below shows average commodity prices since 1980, combining metal, food, energy and raw material prices. Average prices are about 12 per cent down on their 2008 peak – but they are still more than double what they were in 1980. The commodity super-cycle “isn’t dead”, it suggests. Continue reading »
By Paul Bloxham of HSBC
Commodity prices have been broadly steady over the past year. This is despite China’s slowdown, fears of Federal Reserve tapering and nervousness about the emerging economies. Indeed, commodity prices are still over 120 per cent above their 1990s levels, in inflation-adjusted terms. This may have surprised some observers, particularly those expecting the end of the so-called commodities super-cycle and forecasting large commodity price declines. So far, it has not happened. Continue reading »
Talk about being opportunistic.
Just as Wall Street’s biggest banks are facing increasing regulatory scrutiny over their involvement in metals warehousing and physical commodities trading, along comes Brazil’s BTG Pactual looking to make a foray into this very lucrative niche. Continue reading »
It has been quite a fortnight for Colombian mining.
First, small-scale, informal miners staged demonstrations demanding provisions be made for them in the country’s mining code. Then, miners at the Colombian operations of US coal miner Drummond went on indefinite strike.
To crown it, Canada’s Braeval Mining, a gold miner, said it was pulling the plug on an option to acquire a mining area citing “unfavorable market conditions”, after one of its geologists was kidnapped by the country’s second largest rebel group early this year. Continue reading »
South Korea has announced it plans to set up a gold exchange in 2014 to much fanfare – but analysts warned that it might be poorly timed, given weak demand for bullion amid the global economic slowdown.
The country’s financial watchdog said on Monday that spot gold will be traded on its main bourse from early next year as the government is keen to boost transparency of gold trades and root out shady deals used for tax evasion. Continue reading »
With crucial wage negotiations under way amid persistent strikes and declining commodity prices, South African mining has become symbolic of everything going wrong in the country. So would the latest mining production figures give any reason to hope?
Hardly. While a 0.7 per cent year-on-year contraction in May was better than the 4 per cent drop many economists had forecast, the outlook for the rest of the year is still on the depressing side. Continue reading »
In uncertain times – and no time has looked more uncertain recently for Brazil’s president Dilma Rousseff given her crumpling popularity – the long view of history can provide some guidance.
And what better day to do that than today, which is clearly an auspicious one in recent Brazilian history? Continue reading »
For commodity traders involved in emerging markets – say, buying cotton in Africa and selling it to China – one of the biggest headaches since the financial crisis has been the tightening of trade finance terms by banks.
It has been harder to finance shipments of commodities as btanks, eager to reduce risk, have been reluctant to offer financing over long distances, or where there is a significant lag between the placement of an order by a customer and receipt of the goods.
Enter Maersk Line with a way round the problem.
Continue reading »
When Ethiopia set up its commodity exchange in 2008, few observers foresaw the demand it would generate. But five years on, the ECX has shown that a bourse can help tackle food insecurity in poor nations, and countries are now falling over themselves to replicate its successes. Continue reading »
By all accounts, the data from the Chinese economy over the weekend was dour. As Simon Rabinovitch wrote in the FT, “Trade growth tumbled, imports fell, inflation slowed, investment weakened and bank lending also declined.”
But could a counterintuitive case for optimism be made from China’s May import numbers? A parsing of the commodities import figures – which are a key barometer of industrial activity and sentiment – paints a picture not quite as pessimistic as the headlines suggest. Continue reading »
By Tony Volpon of Nomura
Over the last few weeks, there has been a substantial correction in EM assets in general. Although much of this may have had a lot to do with positioning, we believe the current environment also bears various resemblances to the turbulent period for EM assets that began in 1994, when the Federal Reserve tightened monetary conditions after a prolonged “balance sheet recession” that had begun in 1991.
We believe the market’s violent reaction to the mere possibility of any tapering of the growth in the Fed’s balance sheet is a taste of things to come. Continue reading »