Commodities

17

Ore’s not well with iron ore

On the heel’s of the release of the RBA’s paper on the mining boom, and the excellent analysis by The Unconventional Economist, comes a Dow Jones Newswire piece, reposted at The Oz: Global demand growth for iron ore is set to slow in 2012, bringing down average iron ore prices from last year’s record high.

3

Commodities press Oz equities

Usually when I think of the CRB (Commodity Research Bureau) Index I’m looking at it as part of my toolkit for the Australian Dollar outlook. But I was talking to a few mates over in Perth yesterday and thoughts turned to the relationship between the CRB and the S&P ASX 200. We all have our

3

La Nina strikes back in 2012

Some fascinating an in-depth research from Forecast: “Keep an Eye on the Baby”. The summary: La Nina returns, and is seen persisting through northern hemisphere spring and maybe summer The impacts are well-known after the disastrous effects of the – albeit more severe – 2011 episode Foodstuff prices could again spike further – agriculture index

3

Commodity prices fall again in December

The Reserve Bank of Australia (RBA) yesterday afternoon released its Index of Commodity Prices for the month of December. According to the release: Preliminary estimates for December indicate that the index fell by 1.0 per cent (on a monthly average basis) in SDR terms, after falling by 0.2 per cent in November (revised). The price of gold

45

Bulk trouble

According to the AFR this morning: Falling industrial output in Australia’s key mineral export markets of China and Japan is putting pressure on energy coal prices. China is reportedly pushing back on shipments of thermal coal from Australia and Indonesia as inventories in Qinhuangdao and Guangzhou, as well as at coastal power stations, continue to

2

Iron ore volumes holding up

Find above the updated chart for Port Hedland iron ore shipments. November numbers were down 2% with China down 1%, Japan up 10%, and the ROK down 12% and Taiwan down 39%. To put it bluntly, only China matters.

18

Brazil’s huge hopes sinking?

Reuters reports this facinating tale this morning from Brazil: The world’s largest iron ore carrier is disabled and could sink at a key Brazilian port from where Vale, the world’s No.2 mining company, loads about 10 per cent of the global iron-ore trade, shipping agents and media said on Monday. The crippled Vale Beijing is

1

Commodities rise in November

The Reserve Bank (RBA) released the Index of Commodity Prices today, with preliminary results suggesting a rise of 0.2% for November, for a total rise of 16% for the year (in AUD) and remain at record high levels. Preliminary estimates for November indicate that the index rose by 0.2 per cent (on a monthly average

40

Mining projects go ballistic

From NAB today comes this little note on a big subject, the developing pipeline of major mining projects: AUS: Resource project listing sky-rockets to $232bn from $173bn in April Prior to the release of the Government’s mid year review of the Budget this morning, an updated listing of major resource development projects has also been

20

Iron ore weakens again

The SMH report this morning that Rio is striding towards ever greater expansions of its iron ore output: Rio Tinto has revealed plans to expand its flagship iron ore operations in Western Australia beyond previous expectations, but the news has been dampened by confirmation that capital costs for the project will also rise higher than

4

Is Dr Copper worth a look?

Copper is a sort of middle of the pack commodities play, and Australian copper companies are in the middle of the pack in global terms, according to UBS. The price has been weak in recent months because of the general nervousness, risk aversion, and concerns about Chinese growth. There are predictions of limited mine growth

7

Precious palladium

In a recent discussion with a gold and precious metals analyst I have known for a long time, he described a gold conference he recently attended in Europe. Many of the European investors who attended, mostly German and Swiss, were, he said, not really there to learn about the market. They were there to buy

12

Chart of the Day: Oil is oil

Today’s chart plots the widely quoted West Texas Intermediate Crude (WTI) price against the ICE Brent Crude price since the early 2009 low following the GFC (non-Australian readers call this the Great Recession) The chart shows the recent divergence, whereby the former corrected alongside other “undollar” assets, whilst ICE Brent remained resilient has now closed,

19

The race for ‘first gas’

While debate continues around land access and groundwater contamination, the coal seam gas industry in Queensland is powering ahead in a race for ‘first gas’.  Which begs the question, why the rush? It is no secret that government is a few steps behind the resource companies in terms of providing a solid regulatory framework for

9

Chart of the Day: Crude divergence

Today’s chart plots the CRB Index, a weighted basket of 19 commodities, against the two major crude oil products, West Texas Intermediate (WTI) and ICE Brent Crude. The horizontal orange line was the support area for the CRB during the minor correction throughout the 2006-07 lows, before the large bubble in commodity prices through 2008,

28

How big the ore bounce?

So, with a temporary floor under the ore price, it’s time to ask how big is the bounce likely to be? We have had a solid rebound so far with spot up another 1.7% last night to $125, 12 month swaps are at $129.50 unchanged and Shanghai rebar is also flat. According to Reuters, traders

3

Chart of the Day: S&P500 vs CCI

Following on from Friday’s Chart of the Day, today’s chart from the McClellan Market Report (via Pragmatic Capitalism), shows how closely correlated commodities have become with the stock market: Note that the commodity index used is the old CRB index now called the CCI (which MacroBusiness reports on each morning through the Daily links post).

3

The iron ore crash in context

Yesterday saw the little bounce in the ore price continue with spot up 0.76% to $119.30, 12 month swaps reversed course and were down 2.1% to $125.55, whilst Shanghai rebar was again little moved. This looks like a weak bounce. I’m not confident that the correction is over. But today I want to discuss what

2

Chart of the Day: Commodity price index

The Reserve Bank of Australia (RBA) just released the preliminary estimates for October’s commodity price index: …the index fell by 3.9 per cent (on a monthly average basis) in SDR terms, after falling by 1.4 per cent in September (revised). The largest contributors to the fall in October were declines in the estimated export prices

7

Iron ore bounces (from a fall it never had)

It had to happen. Iron ore has found a bottom for now. The ore spot price closed yesterday up 1.3% to $118.40. Twelve month swaps are up big for two days and 5.5% yesterday to $127.94. Shanghai rebar is steady at 3640. So, is it over and can we expect a v-shaped recovery? First things

41

China spoils the party

Let’s party! Yes, it’s a world party and we’re all invited. At least, everyone else is. I’m sober, and, like some stale chaperone, worried. Still, let’s face plant into the punch before we call the police. Preliminary US Q3 GDP came in at 2.5%, right on expectations. Here’s the chart from Calculated Risk: This is an

22

Iron ore crash

Iron ore is crashing. Overnight the price fell 7% plus to $131.70: Thankfully, 12 month swaps only fell 1% to a new low of $117. Shanghai rebar was also flat on the day. But, as China iron ore port stocks show, there’s plenty in reserve if the draw down continues: So, there’s some inconsistency here. Obviously

1

Woodside parts the brokers

Woodside Petroleum is getting the attention of brokers, with raw enthusiasm the general tenor of the analysis. The stock is on a prospective price earnings ratio of 16 times and gross profit margins in excess of 50%, which gives it some buffer against any weakness in energy prices. Gas looks like a pretty strong long

20

Iron ore still falling

Yesterday brought no respite for iron ore. The 12 months swaps market fell another 3.08% to a new low at $117 and Shanghai rebar was down 2.44%. Ore itself fell 1.3% to $145.80. If you combine this with the dizzying crash of copper, 6% last night to a new correction low, you have to ask

5

Chart of the Day: Commodities rule

Today’s chart comes from the MarketSci blog, and illustrates the increasing correlation between commodities and equities: This chart shows the 3 year monthly correlation of the S&P500 (the broadest US equity index) and the Goldman Sachs commodity index, from 1970. Although the GS Index is not as diversified as the CRB Index, the comparison is

19

Boom and bust in iron ore

You know the ore market is in trouble when contracts start to disintegrate. There’s a raft of reports indicating just that this morning. The pick is from the AFR (and is free) but owing to its archaic attitude to the internet, copy and paste is disabled, so I can’t provide any of it. Here’s an

39

What’s freaked Swan out?

As I posted last night, the Treasurer, Wayne Swan, released a rather dour communique to Parliament indicating that Australia was ready to take on GFC 2.0. The timing of the missive seemed fairly random, though it did obviously seek to bring pressure to bear upon Europe prior to the G20, such as it is. I

25

Who really owns Antarctica?

I have often argued with extreme libertarians (and anarchists) that the existence of property rights first requires the existence of a government with a monopoly on coercive force (ie. government requires the largest armed force).  If such an entity didn’t exist, then the largest armed force would simply take control and become the government.  Many

6

Chart of the Day: Pay dirt in AUD

The Prince is on hiatus for a week, so I’ll be filling his Chart of the Day shoes. Today’s chart shows iron ore and thermal coal prices in Australian dollars.  They are typically quoted in USD however our big miners pay their Oz operations in Oz dollars, so these graphs are important. Iron ore’s recovery from the GFC