# Is the commodities boom over?



## sam76

Could it really be?


THE commodities boom is over. 

Experts say that the super-high prices that commodities have attracted in the past five years are falling and are unlikely to return to peak levels for the forseeable future.


Slowing demand in China and a bleak outlook for the global economy has seen the price of many base metals fall - some to three-year lows. 

The CRB commodity index fell 10 per cent last month, the steepest one-month drop since 1980. 

Most raw materials have been slipping for months. Oil has dropped to a three-month low after peaking at $147 early last month. 

The chain of events has led to Deutsche Bank calling the top of the commodity cycle and advising clients to take profits before the economic downturn casts its spell on the sector. 

It warned that oil will slide back towards its "marginal production cost" of $60 to $80 a barrel, gold will slump to $650 an ounce as the US dollar recovers, copper, lead and tin will slowly halve in price and grains will calm down as harvests in Australia and the Eurasian Steppe return to normal. 

"Demand from China is softening, so the oil price is coming down as the government in China and other emerging economies lift their subsidies and the high prices lead to lower consumption," Fat Prophets commodities specialist Greg Canavan said. 

"Once commodities go through that kind of a bubble - and all of them have - then the market pulls back and it returns to fundamentals. Now we have zinc and nickel prices hitting levels where mines have to close." 

Nickel miner Minara revealed an 80 per cent fall in net profits yesterday. 

Its shares closed unchanged, but they are down from $7.26 at Christmas to just $1.49. 

"There has been huge amount of speculative money going into oil and that was the reason for the sharp spike," Commsec analyst Pieter Bruinstroop said. 

An increase in supply of various commodities is also having an effect. 

"Remember, when the China growth phenomenon first took off, the whole commodities industry was geared to handle world demand growth of 1-2 per cent a year, but then China came along and that increased to 3-4 per cent a year - virtually doubling demand. And we weren't ready for it, and couldn't handle it, so prices rose," he said. 

Now the supply side is responding, and many think there will be a surplus of iron ore at some point in 2009. 

"I've never known a commodity to be in surplus and still see its price rise," Mr Bruinstroop said. 

Mr Canavan is advising caution on commodity stocks, but said: "If you are in BHP or Rio, investors might have to deal with no share price growth for a year or so. It will probably trade within a certain range but let's face it they've had a good run for the past few years."

http://www.news.com.au/business/story/0,27753,24145898-462,00.html


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## doogie_goes_off

*Re: The commodities boom is over*

Nickel is up 6% overnight, should see MRE, MCR and others recover. About time nickel turned around, it was getting ridiculously cheap.


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## rossw

*Re: The commodities boom is over*

i reckon its just a correction...

long term china/india still growing massively
but us/european slow down will throw out a few curve balls along the way


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## Sean K

*Re: The commodities boom is over*



rossw said:


> i reckon its just a correction...
> 
> long term china/india still growing massively
> but us/european slow down will throw out a few curve balls along the way



Will be a major correction playing out for another year at least. Up to 5 maybe. EW'ers are calling a market sidways for 10+ years I think. 

If debt levels are reduced enough in the western world, RE comes back to long term trends, and some major policies change in regard to lending practices then perhaps natural world growth will continue without relying on really cheap debt. 

After another 5 years, Chindia may be feeding it's own middle class which may equal US demand in 15-20 years. Maybe more.

So, I think major correction in a very long term industrialisation of Chindia. 

Then, we look to the development of Latin America (less Brazil and Arg) and then Africa in another 100+ years...


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## wayneL

*Re: The commodities boom is over*



kennas said:


> Will be a major correction playing out for another year at least. Up to 5 maybe. EW'ers are calling a market sidways for 10+ years I think.
> 
> If debt levels are reduced enough in the western world, RE comes back to long term trends, and some major policies change in regard to lending practices then perhaps natural world growth will continue without relying on really cheap debt.
> 
> After another 5 years, Chindia may be feeding it's own middle class which may equal US demand in 15-20 years. Maybe more.
> 
> So, I think major correction in a very long term industrialisation of Chindia.
> 
> Then, we look to the development of Latin America (less Brazil and Arg) and then Africa in another 100+ years...



That's pretty much what my guess is as well. Get this up-coming recession out of the way, how ever long that takes, then a resumption of the bull.


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## Sean K

*Re: The commodities boom is over*



wayneL said:


> That's pretty much what my guess is as well. Get this up-coming recession out of the way, how ever long that takes, then a resumption of the bull.



Yeah, pretty broad brush, and I meant urbanisation, moreso than industrialisation. I think. Which ever one means moving to cities and buying plasmas. 

Of course, worse case is total meldown if changes are not made, and we're all on the streets fighting for scraps of meat along with the cats and dogs. 

I'm not sure when our brain will take over from natural instincts to save us though.


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## Nyden

*Re: The commodities boom is over*

The fact that so many have voted no; is enough to reinforce what I already believe; which is yes :


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## sam76

*Re: The commodities boom is over*

This from Money Morning


Why the Next Six Months Will Be Your Best Chance to Buy Resources Since 2003

The resource bears took a few swipes yesterday, reader. This morning we read that the commodity boom is over. 

It’s articles like this that are making companies like BHP cheap. It’s down 25% in a couple of months. And bears will make investing in commodity-based equities a good idea in the second half of the year. It’ll probably be the best opportunity you have to buy mining and energy stocks since 2003.

But buying resources is not as clear (or easy) as it once was, as you’ve probably found. And that article above isn’t just pessimistic. It’s utterly dismal. We felt like a pallbearer as we read.

“Demand from China is softening….the CRB Commodity Index fell 10% last month…gold will slump to $650 an ounce…”

Hey…we’re still locked up in our room with some sort of allergic reaction. But we’re not that feverish. Let’s unpack those comments.

China Shifts Gears to a Domestic Boom

“Demand from China is softening.”

Quite possibly true. China’s annual GDP is running at a rate of about 10% this month. That’s about 1.8% down on the high it hit last year. That means consumption has probably fallen off too.

But so has every country. It’s what happens in a credit crisis. You can put the drop in economic growth so far down to the shockwaves from America…not a fundamental demolition of Asian demand.

If you think that fall is a reason for dropping your Chinese-related investments, you automatically make an assumption. You assume that American spending is more important to China’s growth than Chinese spending.

That may have been true in the past. It won’t be in the future. China hasn’t yet accumulated the same income levels as Uncle Sam. But for every spender in the US, there are four in China. Add in India, and it’s more like eight.

And the tide is turning as we write. Chris Shaw from www.fnarena.com notes that
China has shifted focus from exports to the domestic economy. How? Encouraging retail sales and industrial production.

So we don’t see a slowing China as the end of the boom this month. It’s more of a correction. Who knows? Maybe China needed this. It’s possible to grow too fast.

And looking at the 10% drop in commodity prices…well, that depends on your view of China. If you think it’s going down the toilet, be our guest and sell everything. If you think it’ll keep growing, commodities aren’t dropping. They’re getting cheaper.


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## CanOz

*Re: The commodities boom is over*

The amount of money China is investing in infrastructure at this time is astounding. I don't have figures but i read in the China Daily a summary of the projects just in the big cities and surrounds. Under sea tunnels, bay bridges, tollways, subways, etc. All of this activity will continue to provide jobs, and consume resources. Export growth has stopped and started to slide the other way now and so have jobs in factories. 

It used to be that a container from China to the US was scarce as hens teeth, now we struggle to get one from the US to China.

The middle class are spending for sure, you can see it in the 300+ new cars per day purchased in this city alone. Apartments are bought up as soon as they are available, some family's are owning several, leaving them empty or renting them out. I do see the possibility for some loan defaults as credit is not quite as tight as the rest of the world right now. I still see an asset bubble in the property markets but some have started to slide off their highs already.

China will continue to grow, but maybe not at double digits. I'm still amazed that it can keep this pace up, but as others have said before when you urbanize 100s of millions of people, it takes a while.

Cheers,


CanOz


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## sam76

*Re: The commodities boom is over*

A snippet from "The Daily Reckoning"

Well, that's it. Apparently the commodities boom is over. The folks at Deutsche Bank told clients to get out of commodities. They say China is slowing. The whole world is slowing. Oil will return to its "marginal cost of production," somewhere between US$60 and $80 and gold will settle around $650. 

--Of course it's possible they're right. You have to take each one of these predictions from the investment banks for what they're worth, though. Sometimes they're late to the party (Goldman Sachs calling for an oil 'super spike' to $200 in March). Sometimes they miss the part altogether. And most of the time they're just morons who are making it up as they go along. 

--That said, it's pretty clear the institutional infatuation with commodities as an asset class is over. It's not at all clear the case for resources has been defeated. Remember, the up-trend in resource prices that started in 2003 came at the end of a period where resource prices declined in real terms...for nearly two hundred years. 

--Two-hundred year down-trend...three year up-trend...resumption of down-trend? Does that make sense to you? 

--Remember, the world's population has doubled since 1960, from three billion to well over six billion. The first two great periods of industrialisation in Europe and North America brought more resources on-stream, and thus, lower prices for tangible goods. 

--There was a lot of coal in Newcastle and West Virginia, and a lot of farmland in Kansas. But now, the latest period of industrialisation begins with more people than ever chasing scarce resources. China is not Kansas. 

--It could be that demand for resources will fall (as it appears to be doing simultaneously all over the planet). It could also be that in some sectors, supply will finally catch up (this appears to be what's happened with base metals). But what's really changed in the last month is that investors are simply demanding fewer resource shares. That's it. It's important to distinguish investment demand from real demand. 

--The trendy investors who want to own the latest "It" sector will be back. Let them go trawl for beaten down financials and retail stocks. If you missed out on the first phase of the boom, this will be your next best chance to get into long-term positions at much lower prices. Those prices may not go anywhere for a year, mind you. But at least it won't be so crowded in the aisles while you browse through firms, projects, and management. 

--What we have in the commodity and credit markets now is what the geopolitical crowd calls a kind of "durable disorder." Things can remain disorganised a lot longer than a neat freak would prefer. Replacing one global currency regime with another isn't easy, is it? Yet we still believe that's what you're witnessing and living through: a grand changing of the economic guard. More on that below and why it's bullish for resources.


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## treefrog

*Re: The commodities boom is over*

guess it depends on the timescale - not establishing this when talking stocks causes 90% of disagreements.
down for the next two years would not mean (necessarilly) that the boom was over; did we expect the recent run to continue for 17 years at the same rate of ascent without retrace??
if you think macro, population growth would need to reverse to stop demand as more peoples = more everything, except room to move and fresh air to breathe.


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## agro

*Re: The commodities boom is over*

The commodities boom is only just beginning..

just because it has had a sharp drop means f all..

china will always need materials

/end thread


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## Nyden

*Re: The commodities boom is over*



agro said:


> The commodities boom is only just beginning..
> 
> just because it has had a sharp drop means f all..
> 
> china will always need materials
> 
> /end thread





Well, I guess it's only a boom if you get in at the right price then, isn't it?

Might be like gold - if you bought back over many years ago at a certain date ... you'd still be in the red. Despite the rally of recent times.

I don't believe commodities are in for some major crash; but I believe they're not going anywhere for a while; and to me - this means the boom is over.

What if commodities do crash though? If someone buys into a copper company now, & copper majorly corrects back to $1.50-$2; what do you think will happen to the share price? Many Zinc mines are being closed at the moment, as they're no longer economically viable. 

I believe this is going to happen with other base-metals as well. High inflation, rising costs - energy, fuel, wages. 

Less demand from China, a potential global recession ... Where's the upside? How can you possibly claim that a potential 5-year correction still allows for it to be classed as one big boom? There may be a *new* commodities boom in 5 years, but IMO not right now, and not for a while.


Edit:
Yes, China will always need materials ... the world has always needed materials; that doesn't mean there's always been a boom. Pinning the hope / future of Australia on a foreign country is a very foolish mistake as well.


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## CanOz

*Re: The commodities boom is over*



agro said:


> The commodities boom is only just beginning..
> 
> just because it has had a sharp drop means f all..
> 
> china will always need materials
> 
> /end thread




Thanks for that great contribution.


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## Wysiwyg

*Re: The commodities boom is over*

Over the long term the market index has risen.What will be the driving force to keep the markets on their long term rise?

Information technology, health care, telecomms, inflatable dolls?Financials and commodities are it for Australia.


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## chops_a_must

*Re: The commodities boom is over*

China's growth historically is now comparable with strength and duration of other nation's industrialisation.

It will obviously mean that China will keep growing, but maybe not as strongly as in the past.

Likewise, for commodities, it will mean more stable and good prices for some time to come, just without the froth.

But... what's a commodity?


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## Uncle Festivus

*Re: The commodities boom is over*

You only have to look at the counter trade - the $USD - to see what's happening. I give it another week then back to the slippery snake.


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## Bushman

*Re: The commodities boom is over*



Nyden said:


> Many Zinc mines are being closed at the moment, as they're no longer economically viable. .




That is why zinc explorers that are fully funded should be high on everyone's watchlist as they profit from a supply crunch in 2010/2011.  Specific commodity cycles operating within a super cycle. 

This thread is way to generic.


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## GreatPig

*Re: The commodities boom is over*



kennas said:


> and then Africa in another 100+ years



I'm looking forward to being involved in that! 

GP


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## So_Cynical

*Re: The commodities boom is over*

We are suppose to be in a resource/commodities "super cycle".

8 >10 years to run yet.


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## MRC & Co

*Re: The commodities boom is over*



Nyden said:


> The fact that so many have voted no; is enough to reinforce what I already believe; which is yes :




Yes, a definate contrarian play.

But weren't you just talking about agri?

Agree with what Kennas and Wayne have said, a large correction seems to be on the cards, with long-term Chindia growth expected and a resumption of the bull.


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## So_Cynical

Anyone watching the Olympics opening ceremony?

The commentators just said china has over 100 city's of 1 million people 
and over 1000 billionaires.

Mr and Mrs average is severely underestimating the China phenomenon.


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## Wysiwyg

So_Cynical said:


> Anyone watching the Olympics opening ceremony?
> 
> The commentators just said china has over 100 city's of 1 million people
> and *over 1000 billionaires*.
> 
> Mr and Mrs average is severely underestimating the China phenomenon.




Over *100* my friend.


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## Spaghetti

I think it will be still very good for a number of years just not sure Australian miners will have it so good. Maybe those that explore offsore will do better as even though prices will remain high seems costs in Australia will increase at a faster pace.


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## Nyden

*Re: The commodities boom is over*



MRC & Co said:


> Yes, a definate contrarian play.
> 
> But weren't you just talking about agri?
> 
> Agree with what Kennas and Wayne have said, a large correction seems to be on the cards, with long-term Chindia growth expected and a resumption of the bull.




I think as others have stated here; there does seem to be a bit of confusion as to what 'commodities' refers to in this thread.

I'm only talking about base-metals here; people will stop buying cars, they'll stop buying houses; but they'll still need to eat.

Only wish I had already initiated my plan of going long into the USD ... would have already made 4 or so % 


I don't think it matters what the Dow does now; if commodities keep up their slide; the ASX is stuffed anyway  As I believe that only 2 things have kept commodities afloat recently; 1 is the Olympics. 2 is speculation / hedging against a falling USD, & now that the USD seems to be on its way up, this is obviously going to change.

Some folks are a bit emotive on this subject; which isn't a total shock, really. Most people have a high % of their retirement money on the mining industry, many have their careers / educations based around it as well. If/ when it does collapse ... Australia really is in the mess


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## CanOz

*Re: The commodities boom is over*



Nyden said:


> 2 is speculation / hedging against a falling USD, & now that the USD seems to be on its way up, this is obviously going to change.




The USD may rally, but there is not a snowflake's hope in hell its going up for any period of time. This is probably the rally that guys like Jim Rodger's will use to dump the rest of their dollars. The US is in so much debt and cannot raise interest rates, so as interest rate differentials drag on it, so the dollar must slide again. Its only a matter of WHEN not IF.

Cheers,



CanOz


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## Sean K

*Re: The commodities boom is over*



CanOz said:


> This is probably the rally that guys like Jim Rodger's will use to dump the rest of their dollars.



Yep, wouldn't be surprised in his next interview that he's been reducing his holdings, or even got rid of them completely.


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## Nyden

*Re: The commodities boom is over*



CanOz said:


> The USD may rally, but there is not a snowflake's hope in hell its going up for any period of time. This is probably the rally that guys like Jim Rodger's will use to dump the rest of their dollars. The US is in so much debt and cannot raise interest rates, so as interest rate differentials drag on it, so the dollar must slide again. Its only a matter of WHEN not IF.
> 
> Cheers,
> 
> 
> 
> CanOz






And, you of course believe that you can't be wrong? Jim Rodgers ... long on gold, are you?

The US has been in debt for many, many years - heck, the world has been in debt; for many, many years. If paper-money is as worthless as everyone says; the US can simply argue that, & not pay anything! 

What you're saying may very well play out; I personally don't believe it though.


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## MRC & Co

*Re: The commodities boom is over*



CanOz said:


> The USD may rally, but there is not a snowflake's hope in hell its going up for any period of time. This is probably the rally that guys like Jim Rodger's will use to dump the rest of their dollars. The US is in so much debt and cannot raise interest rates, so as interest rate differentials drag on it, so the dollar must slide again. Its only a matter of WHEN not IF.
> 
> Cheers,
> 
> CanOz




Yep agree.

Jim is a global macro MASTER!  One of the very very very few I take heed of.  Not sure if he is even a qualified economist, but he sure is one of the best in the business!!


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## sam76

0043 GMT [Dow Jones] Spot gold mostly holding early gains, last bid $859.20/oz, still up from $855 early Sydney but down $2.00 from morning's high. In technical analysis weekly, National Australia Bank declares "entire commodity boom looks like busting" with further advances for USD likely. "Markets are in for one of the most amazing turnarounds ever seen," NAB says. Gold giving major cyclical sell signals, with monthly close chart showing major break of RSI trend - a precursor to a break of the actual chart, also giving major positive signal for USD. "Gold could well be on its way back to the $630 area," bank says. (RCB) 



0043 GMT [Dow Jones] Base metals outlook weak with National Australia Bank declaring today "entire commodity boom looks like busting" with further advances for USD likely. Andrew Silver, deputy head of trading at Natexis Commodities, notes late Friday that unloading of commodities all about stronger USD and poor close last week for base metals "will bring in more selling". In technical analysis weekly, National Australia Bank says LME 3-month copper last $7,400/ton pulling back to support at $7,293, level close to a key weekly close moving average support at $6,936. "A weekly close below that will be very negative for copper with initial downside to $5,260 the first target."(RCB)


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## wayneL

Don't forget all western currencies are screwed though.

Think in relative terms.


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## explod

Funny thread this, talk of commodities and the main discussion seems to be gold.   Gold I see as a prescious metal (so commodity to some degree) but for 5 thousand years it has been a currency and store of wealth.  This will continue.  And the US dollar will get them out of what they owe by sheer devaluation, printing more.  The $US bear chart reflects intention in this respect and how some of you are unable to see this fundamental I find hard to understand.

As for metals, they may have a bit of a flop for awhile due to the US going to the wall.   But the world will go on, it will have to be greener so in will come nuclear reactors and electric motors to dirve us around.  China and India are just not going to stop, (slow down a bit maybe) but the sheer numbers of people who will demand what we have/had will see our metals prices, particularly copper and uranium continue on the merry way.

Cheers, hope I did not spoil your party in this thread, 

Explosions to all


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## jonojpsg

I think it was in ASF somewhere I read that China was planning on building 400 new cities (1million+) in the next thirty years 

Surely that points to an ongoing strength in commodities markets, I mean think about what that involves, building a whole city the size of Perth or Brisbane!

Add in the zillions of cars they are going to want over the next thirty years as well (that would have to be heading towards 9 figures?).

Then there's India with a comparable population as well who will no doubt be heading down a similar path.

Definitely haven't seen the end of this boom IMO


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## Gspot

jonojpsg said:


> I think it was in ASF somewhere I read that China was planning on building 400 new cities (1million+) in the next thirty years
> 
> Surely that points to an ongoing strength in commodities markets, I mean think about what that involves, building a whole city the size of Perth or Brisbane!
> 
> Add in the zillions of cars they are going to want over the next thirty years as well (that would have to be heading towards 9 figures?).
> 
> Then there's India with a comparable population as well who will no doubt be heading down a similar path.
> 
> Definitely haven't seen the end of this boom IMO



And don't forget Russia, Brazil, Vietnam and Arabians too, when it comes to building/ repairing infrastructure. 
It's amazing how quickly the worm turns?


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## derty

I was at Diggers and Dealers last week and from the talks that I saw, most companies were banking on the continued strength of China to maintain commodity demand. I was of the understanding that Chinese economy relied heavily on the US. 

However, I watched a talk from Howard Balloch of the Balloch Group and he was firmly of the opinion that the US only accounted for a small amount of the metals demand in China and that now, due to the development and urbanisation of China, most of that demand is actually internal. So while the sentiment of the US downturn is that China will follow the US into a major slowdown Howard believes that effect will be minor and that commodity demand will be maintained. 

(Howard Balloch was Canada's Chinese ambassador from 1996 to 2001 from there he set up the Balloch group http://www.ballochgroup.com/ )

I hope he is right 

Here is his presentation:
http://www.ballochgroup.com/uploads...ynote WS [Read-Only] [Compatibility Mode].pdf


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## CamKawa

I can't believe that only 17% believe that it's over.


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## CanOz

Marc Faber doesn't think its over:

http://www.bloomberg.com/news/av/

CanOz


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## CamKawa

Here's a chart of the Continuous Commodity Index, it looks like it's all over to me - bar some shouting in this thread.


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## explod

And just recieved email from Minesite.com headed by the following



> "When the going gets tough, the tough get going." It's an old saying, but true enough under current market conditions. Many analysts and company directors have never lived through a bear market and have no idea how to respond. The plain fact is that bear markets last a comparatively short time as investors are natural buyers and the fundamental factors behind the mining sector have not changed. China and India, the two most populous countries in the
> world, are undergoing industrial revolutions and it is worth remembering that the British industrial revolution lasted for 65 years.
> 
> Revolutions of this type require every type of natural resource and this is why the prices of metals, minerals, oil and gas and soft commodities are rising steadily. Value is therefore being generated throughout the sector as new resources are a priority. The market will wake up to this fact and the companies who have drawn down the blinds in the bear phase will be ignored when things start to recover.


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## sam76

0021 GMT [Dow Jones] Base metals mostly soften a little yesterday except for lead, which sold heavily again, with LME 3-month price last quoted at $1,925/ton, down 3.3%. Major market participant says stronger USD, other commodities movements drove base metals lower overnight; "the concern for demand from both China and the U.S. continue to dampen sentiment in base metals." Meanwhile, Leonard Kaplan, president of Prospector Asset Management, says investors "are getting out of commodities in general. All of the funds are getting out, and there's a lot left." Among other base metals, LME 3-month copper last down 1.1% at $7,333, aluminum at $2,833, down 0.8%, while tin also down 0.8% to settle at $18,750. But zinc edges $3 higher to settle at $1,690 while nickel edges up $100 to settle at $18,000.(RCB) 



So let's say this continues what commodities would remain steady?

My money is on coal - the world's main energy supply. Nothing around that could seriously  replace it in the next few years

IO - seems a few still beleive 20%+ increases are possible in 2009 with a filtering off in 2010.

Any others?


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## sam76

0154 GMT [Dow Jones] Normally bullish gold commentator Bill Murphy of lemetropolecafe website says technical damage to gold is "beyond considerable" after yesterday's 3.8% decline from $855 (Friday's close) to $823 at NY close. "While we ought to have some sharp rallies from here, it normally takes many months for gold to compose itself enough to make a run back up and eventually into new high ground." Spot gold now dropping sharply in Asian trade, $800 psychological level likely next support. Spot gold bid at $805.25/oz, down $17.75. Gold down 17% from recent peak of $976.60 (closing level on July 15).(JAC) 

Will gold fall through $800??


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## sam76

Sorry to keep posting snippets, but it seems as though the tide has/is turning against metals.

0218 GMT [Dow Jones] Gold unlikely to recover in short term, held hostage by resurgent USD, an oil market focused on worries over demand strength, says Mark Pervan, commodity analyst at ANZ Bank. "I think the lack of oil market reaction to the Georgia-Russia flare-up is a cause for concern for both oil and gold. It shows the oil market is now focused on demand, and is no longer responding much to fears of supply disruption." Adds this means inflation fears receding, which negative for gold price. Tips gold to retreat to $730/oz by March next year. Spot gold bid at $806.50, down $16.50 since NY close.(JAC


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## sam76

Gold, Platinum Lead Commodities Into Bear Market on Growth Risk 

By Glenys Sim and Dave McCombs

 Aug. 12 (Bloomberg) -- Gold, platinum and silver plunged to their lowest in more than seven months, leading commodities into a bear market, on concern a spreading global economic slowdown will reduce demand for raw materials. 

Precious metals also slumped as crude oil prices fell and the dollar gained, reducing their appeal as an inflation hedge and alternative investment. Gold has tumbled 22 percent from its record $1,032.70 on March 17. Platinum and silver are down 36 percent and 33 percent from their peaks. 

Commodities, as measured by the Standard & Poor's GSCI index, have lost 21 percent from a record July 3, descending into a bear market. Crude-oil prices are down 23 percent from a peak of $147.27 a barrel July 11, on signs a U.S. economic slump will extend into 2009. Corn, wheat and soybeans are in bear markets after sliding from highs set this year. 

``We're seeing a reconfiguration of the markets in the last 48 hours related to the realization that the slowdown in the U.S. has broadened across the globe,'' Darren Gibbs, chief economist at Deutsche Bank AG in Auckland, said by phone today. ``I'd imagine all sorts of trades are being unwound.'' 

Tumbling raw-material prices may erode profits at BHP Billiton Ltd., the world's largest mining company, and Exxon Mobil Corp., the biggest publicly listed oil company. Global energy and raw-materials stocks, last year's best-performing industries, fell into bear markets this month. 

'Losing Luster' 

The GSCI index surged 41 percent in the first half as equity markets and a declining dollar prompted a ``buying orgy'' by investors, Paul Touradji, founder of the $3.5 billion hedge fund Touradji Capital Management, said in March. 

Gold fell as much as 2.6 percent to $802.34 an ounce and traded at $810.01 an ounce at 3:50 p.m. Singapore time. Platinum lost as much as 3.7 percent and silver 4.5 percent. The dollar traded near a 5 1/2-month high against the euro today and close to a seven-month high against the yen. 

``The dollar had an enormous spike in the past couple of weeks, so the precious metals are losing their luster,'' Peter McGuire, managing director at Commodity Warrants Australia, said today by phone from Sydney. 

The U.S. economy, the world's largest, will grow at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to the median forecast of 50 economists surveyed by Bloomberg News from Aug. 1 to Aug. 8. 

Boom Slows 

Household spending, which has grown every quarter since 1992, is projected to stall in the last three months of the year as the impact of tax rebates fades, wages fail to keep up with inflation and property values fall, it showed. 

The commodity boom is fading, says Michael Aronstein, chief investment strategist at Oscar Gruss & Son Inc. in New York. 

``I think it's over in terms of the investment hypothesis, at least for the next several years,'' Aronstein said in an interview Aug. 5. ``I think the demand destruction, both in the developed world and the developing world is going to be quite a bit greater than people assume.'' 

Investor Jim Rogers, 65, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, differs. The fundamentals for commodities are ``astoundingly'' good and the bull market ``has a long way to go,'' he told a conference in Australia Aug. 6. 

Fund selling of gold, the Australian and New Zealand dollars may have spurred today's price drop in precious metals, said Toshihiko Sakai, head of trading in foreign-exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. 

Fund Sales 

``Hedge funds are probably unwinding long positions in commodities and high-yielding currencies, and short positions in low-yielding currencies,'' said Sakai in Tokyo. ``These position adjustments are likely to continue for now.'' 

Gold fell $20 an ounce in less than an hour today as the Australian dollar dropped 0.9 percent against the U.S. dollar, Bloomberg data shows. 

``We've been surprised by the strength of the U.S. dollar rally over the past month,'' Goldman Sachs JBWere Pty analysts wrote in a report. ``Nevertheless, we believe the threat of rising inflation and the climate of general economic uncertainty remains constructive for gold in the medium term.'' 

www.bloomberg.com

5:11 a.m.Light sweet crude oil futures down $1.30 at $113.15 a barrel
5:10 a.m.Gold futures down $10.50 at $811.00 an ounce

from marketwatch 2 mins ago

www.marketwatch.com


----------



## MRC & Co

explod said:


> As for metals, they may have a bit of a flop for awhile due to the US going to the wall.   But the world will go on, it will have to be greener so in will come nuclear reactors and electric motors to dirve us around.  China and India are just not going to stop, (slow down a bit maybe) but the sheer numbers of people who will demand what we have/had will see our metals prices, particularly copper and uranium continue on the merry way.
> 
> Cheers, hope I did not spoil your party in this thread,
> 
> Explosions to all




This is the exact thing we are stating.

Any near term 'flop' will dramatically impact on commodity prices.  Look at valueing a company, a small change in expected EPS can have huge consequences for the 'value' of company in most methods of fundamental valuation.  Same with commodities.  Not to mention the shift in sentiment already being seen.


----------



## sam76

From this morning's Age

*Fears rise that Australia's resources boom ending.*

*August 18, 2008 - 8:39AM *

Fears are growing that the commodities boom is ending as investors who have fled the oil market desert gold, copper and other metals.

Oil prices have slumped 23 per cent in four weeks, while gold and copper have fallen by similar amounts and last week lead plunged 15 per cent.

The falls follow a fundamental shift in financial flows as investors prepare for a global slowdown, News Ltd reports.

"The speed and weight of money behind this move has been quite breathtaking," ANZ foreign exchange strategist Tony Morriss said.

The Australian dollar - the world's strongest currency in the first half this year because of its commodities link - has become one of the weakest over the past two weeks, falling 10 per cent against the US dollar and retreating even against the New Zealand dollar.

The Australian economy will still gain from boom-time prices for some time as sharp iron ore and coal prices are locked in for another 12 months, but previous commodity busts have been steep, and the economy could face challenging management problems, especially on the external account, if the terms of trade reverses sharply.

"Commodity booms end ugly, they always do, and there has never been an exception," Access Economics director Chris Richardson told the newspaper.

Mr Richardson said it would not be until coal and iron ore prices fell that the boom would definitively be over for Australia, although the downturn was more serious than the correction in base metals prices in 2006.

"This downswing is more consistent with the global economic fundamentals," he said, warning that Australia would face serious economic problems if the downturn continued. "The commodity markets are more central to Australian national income than either credit markets or share markets."

The government does not believe world commodity markets have reached a turning point and is pinning hopes on continued growth from China, with Treasurer Wayne Swan telling News Ltd: "Prices for our commodity exports are still at generational highs and ongoing demand from emerging economies give us some cause for optimism, despite slowing global growth."

Treasury believes the continuing strength of iron ore and coal markets suggests the boom retains some strength.

However, the simultaneous shifts in currency and commodity markets indicate financial markets now expect a worldwide slowdown over the year ahead.

Citigroup's New York-based energy analyst, Tim Evans, told the newspaper evidence had been emerging this year that soaring prices had changed the balance of supply and demand for oil.

As oil fell, so too did other commodity prices. Gold hit an all-time peak of $US1,032 an ounce in March and was trading at $US965 in mid-July but dropped below $US775 on Friday. Copper has fallen almost 20 per cent from $US8,950 a tonne on July 2 to $US7,335. Nickel is down from $US32,000 a tonne to below $US18,000. Aluminium, lead and zinc have had similar falls.

http://business.theage.com.au/busin...lias-resources-boom-ending-20080818-3x61.html


----------



## CanOz

Allot of this weakness in commods is USD strength too, don't forget that.

Don't worry, it won't last forever.

CanOz


----------



## wayneL

sam76 said:


> From this morning's Age...
> 
> ...The government does not believe world commodity markets have reached a turning point and is pinning hopes on continued growth from China, with Treasurer Wayne Swan telling News Ltd: "Prices for our commodity exports are still at generational highs and ongoing demand from emerging economies give us some cause for optimism, despite slowing global growth."
> 
> Treasury believes the continuing strength of iron ore and coal markets suggests the boom retains some strength.
> 
> However, the simultaneous shifts in currency and commodity markets indicate financial markets now expect a worldwide slowdown over the year ahead.



What disturbs me most is the degree to which governments hang their hats on one or another bubble continuing _ad infinitum_.

Here in Britain it's been house prices and the belief of government that this will continue on in perpetuity, that have underpinned the whole economy.

A dangerous and ultimately deleterious folly.

Wayne Swine (and cross party imbeciles) pins their political and economic fortunes on the commodity superbubble continuing, and the  further development of Oz as an open cut mine.

That is unforgivably stupid. IF commodities are taken out by a world recession, Oz is going to take in the rear.

Now that the Olympic farce is all but over, things get very interesting.

Opportunities have been totally squandered.


----------



## wayneL

CanOz said:


> Allot of this weakness in commods is USD strength too, don't forget that.
> 
> Don't worry, it won't last forever.
> 
> CanOz




Or is it - A lot of the USD strength is commodity weakness?

I've heard a case made for that too. (Me? I wouldn't have a clue!)


----------



## explod

wayneL said:


> What disturbs me most is the degree to which governments hang their hats on one or another bubble continuing _ad infinitum_.
> 
> Here in Britain it's been house prices and the belief of government that this will continue on in perpetuity, that have underpinned the whole economy.
> 
> A dangerous and ultimately deleterious folly.
> 
> Wayne Swine (and cross party imbeciles) pins their political and economic fortunes on the commodity superbubble continuing, and the  further development of Oz as an open cut mine.
> 
> That is unforgivably stupid. IF commodities are taken out by a world recession, Oz is going to take in the rear.
> 
> Now that the Olympic farce is all but over, things get very interesting.
> 
> Opportunities have been totally squandered.




Cant' agree, not that I could agree with Swain and the Dud team either.

The big problems financially are with UK, US, Ireland, Spain and Aus due to sub-prime and now prime.    Expanding within themselves and without the need of those just mentioned is the Chindia industrial/techno revolution.  They are thinking forward and smart too.   Alternative energy will be on the agenda so that it can be achieved and the need for some commods. such as copper, zinc, uranium and ion ore will be very great.   

Inflation will go up in this bloch also which will bring about some parity in labour costs with Australia.  This in turn will see an about turn in our manufacturing industries and because we are Johhny on the spot with raw materials other secondary industries of refinement will arise.   

Many water problems will also be solved, expensive crops such as rice will be dropped and food will be on the agenda.

A long way away there in the UK where things are looking grim, but where I sit there is a great future picture for Australia.

Note today that Lehman Bothers now admitting to a 2 trillion problem as against 300 billion three weeks ago.

And also that the US have been buying up thier dollars over the last few weeks to bring up the value and suppress the inevitable for a bit longer, so unwittingly or not, it will be getting China off the hook perhaps.

We live in interesting times


----------



## sam76

I can't see the need for coal diminishing over the next 5 years in either South Africa or China as well


----------



## wayneL

explod said:


> Cant' agree, not that I could agree with Swain and the Dud team either.
> 
> The big problems financially are with UK, US, Ireland, Spain and Aus due to sub-prime and now prime.    Expanding within themselves and without the need of those just mentioned is the Chindia industrial/techno revolution.  They are thinking forward and smart too.   Alternative energy will be on the agenda so that it can be achieved and the need for some commods. such as copper, zinc, uranium and ion ore will be very great.
> 
> Inflation will go up in this bloch also which will bring about some parity in labour costs with Australia.  This in turn will see an about turn in our manufacturing industries and because we are Johhny on the spot with raw materials other secondary industries of refinement will arise.
> 
> Many water problems will also be solved, expensive crops such as rice will be dropped and food will be on the agenda.
> 
> A long way away there in the UK where things are looking grim, but where I sit there is a great future picture for Australia.
> 
> Note today that Lehman Bothers now admitting to a 2 trillion problem as against 300 billion three weeks ago.
> 
> And also that the US have been buying up thier dollars over the last few weeks to bring up the value and suppress the inevitable for a bit longer, so unwittingly or not, it will be getting China off the hook perhaps.
> 
> We live in interesting times



I think you're trying to run with hares and hunt with the hounds there explod.

Totally agree re reasons for probs in western economies, viz, sub-prime etc. But sub-prime was just a symptom not a cause. The cause was credit expansion. Credit expansion causes investment and more significantly at the moment, mal-investment. Much investment with seemingly may be prudent at the moment and servicing current demand, will prove to be mal-investment, as current demand is caused by credit expansion.

During expansionary times it seems like a virtuous circle, but as credit contracts, much of the virtuous circle becomes a viscous circle.

Ergo, much development in BRIC economies will turn out to be over-development. The BRIC economies have not learned from the follies of the west and are doomed to repeat the boom-bust cycle as per classic Austrian economic theory.

China et al will continue to develop over the long term, that seems to be set in stone. But in no way will they avoid the classic busts along the way. They aren't doing anything different to what we dis. They are us, they aren't smarter, they just talk funny.

But this is all talk. The job of the investor is to hedge themselves and have strategies for any eventuality, otherwise you're just punting. One thing we humans must realize about ourselves is that we are all cognitively biased.

The worst bias is the "bias blind spot" ( a refusal to accept that we are biased). So I will try to have a strategy for any eventuality, otherwise I'm just that punter looking to get lucky.


----------



## explod

wayneL said:


> I think you're trying to run with hares and hunt with the hounds there explod.
> 
> The worst bias is the "bias blind spot" ( a refusal to accept that we are biased). So I will try to have a strategy for any eventuality, otherwise I'm just that punter looking to get lucky.




It has been well said many times that "Necessity is the Mother of invention"

The pickles of the planet are no longer lost on anyone, we are a global villiage.   The mistakes of the West yielded a fantastic drunken spree of expansion and money.  Yes history repeats but in the meantime the Australian quarry will have a great time during the Chindia party which will at least run for the next decade.  IMHO


----------



## gfresh

It may be over for the next couple of years, however if we are to believe in the "supercycle" theory that is presented, driven by China & India, we may only be 20-30 years into something like the Industrial Revolution. Large call, but there are some similarities. Not sure whether such a comparison is valid or not. 

One of the things that drove the industrial revolution was great new innovation which drove further innovation, and further growth, and was self-perpetuating. I am not quite sure how much China is innovating as of yet, rather than simply imitating Western methods, but I think they are starting to make moves into this area. 

However maybe the world (environmentally) is unable to cope with such a large expansion again. 

Anyhow, for interest's sake..


----------



## Family_Guy

So if i'm lead to believe the boom is busting, then i got into the market (resource) at the wrong time. I started playing in late April mainly dtrading the banks, did ok and met my goals. But from late June i started throwing money at the resources and have suffered ever since. I used to make a sucessful profit every 3 to 4 days, now i havent sold for profit for a few weeks and my holdings look sad. Was hoping it was a blimp but i get the feeling it's not. I don't know a great deal about cycles but i feel i just jumped in on a waterfall. SBM , CFE, LGL (to name a few), and then some hard core speccies and all of a sudden i feel like a game of golf or 2 some i can whack the crap out of something. 

Never mind. At least i have ample supply of Atacand.


----------



## kingbrown

"*Commodity booms end ugly, they always do, and there has never been an exception," *Access Economics director Chris Richardson told the newspaper.

*The falls follow a fundamental shift in financial flows as investors prepare for a global slowdown, News Ltd reports. 

"The speed and weight of money behind this move has been quite breathtaking," ANZ foreign exchange strategist Tony Morriss said*. 

http://smallbusiness.theage.com.au/growing/finance/fear-over-resources-boom-907256442.html


----------



## sam76

BHP seems to think we should be long and strong commodities

*BHP profit up 15%*

BHP Billiton, the world's largest mining company, has reported a record annual profit and says it expects demand for commodities to remain strong.

Net profit for the year ended June 30 climbed 14.7% to $US15.39 billion ($A17.6 billion), from $US13.416 billion in the previous year.

The result was in line with analysts' forecasts and underpinned by higher production and prices for oil, copper, iron ore, coal and manganese.

Underlying profit, or earnings before interest and tax (EBIT), was $US24.28 billion ($A28.09 billion), up 21%.

BHP Billiton is reaping the rewards from the rapid urbanisation of China and other developing nations that has been driving up demand for commodities and their prices for the past seven years.

Revenue for the 2007/08 financial year is 25.3% higher at $US59.47 billion ($A68.79 billion).

BHP Billiton declared a final dividend of 41 US cents per share, taking the total for the year to 70 US cents, up 48.9% over the previous year.

BHP Billiton's petroleum division, the key differentiator between it and takeover target Rio Tinto, was the second-biggest earner for the group.

Its underlying EBIT increased 82.1% to $US5.489 billion ($A6.35 billion) on record oil prices and higher production.

The company's base metals division was the biggest earner and delivered EBIT growth of 16.2% to $US7.989 billion ($A9.24 billion), after record annual copper output and stronger prices.

Underlying earnings from iron ore climbed 69.8% to $US4.63 billion ($A5.36 billion), while BHP Billiton's manganese business posted a 549.8% increase to $US1.64 billion ($A1.9 billion).

BHP Billiton said demand for its commodities is expected to "remain strong'' over the longer term, even though it sees global economic growth slowing in the short term.

Supply side pressures "remain high'', so commodity prices should to remain "high relative to historical levels'' in the short term, it said.

"The continuing massive industrialisation in China is providing solid support to the global economy,'' it said.

The company's costs increased 4.3%, or by $US1.18 billion ($A1.36 billion) during the year.

BHP Billiton said about $US575 million ($A665.12 million) was due to higher fuel, energy and raw material costs, while exchange rate movements had a negative impact on underlying earnings of $US1.13 billion ($A1.31 billion).

The company said strong global demand for resources continues to provide cost challenges for the whole industry.

BHP Billiton said its increased dividend for the year was a "strong signal of our confidence'' in its outlook.

"We have achieved another year of record earnings, driven by excellent operating performance, cost control and the delivery of high margin growth projects into strong market conditions,'' it said.

BHP Billiton said it had 28 projects in execution or feasibility studies worth about $US24.8 billion focused on high margin commodities that would create significant future value.

BHP Billiton is in the middle of a hostile takeover bid for Rio Tinto.

Its results were released today after the stock market had closed. BHP Billition shares closed up 62 cents at $38.60.

http://business.theage.com.au/business/bhp-profit-up-15-20080818-3xid.html


----------



## explod

sam76 said:


> BHP seems to think we should be long and strong commodities
> 
> 
> Its results were released today after the stock market had closed. BHP Billition shares closed up 62 cents at $38.60.
> 
> http://business.theage.com.au/business/bhp-profit-up-15-20080818-3xid.html




Yep this is one of my long term favs.   Just the yellow cake alone for the longer term.

But, I think the stock market globally will smash everything down and in the next 8 to 12 months, pearls like BHP will be had for $20.  Thats when I will sell some of my bullion perhaps.


----------



## bvbfan

Gee, so many still bullish does not bode well from a contrarian point of view


----------



## Dowdy

CanOz said:


> Allot of this weakness in commods is USD strength too, don't forget that.
> 
> Don't worry, it won't last forever.
> 
> CanOz




What US strength?!

They still have all the same problems they had a month ago


----------



## wayneL

Dowdy said:


> What US strength?!
> 
> They still have all the same problems they had a month ago




Ahem!

I believe CanOz was referring to dollar strength

They certainly don't have the problem of the USDX being @ < 72c (atm anyway)


----------



## Sean K

Is USD strength just a blip, or does it have legs?

A lot of dirty linnen has been exposed in the US, with more to come probably.

But now a lot of attention has gone to the UK/Eurozone.

Flight to safety to a currency the world can not afford to have implode...??

Commods in USD.....


----------



## Kauri

The big question on traders minds is whether the closure of the Ospraie fund is a precursor to more unwinding of funds who have been caught wrong and long the commodities complex, or whether the fund"s closer marked a near-term blow-off after recent heavy liquidation of their positions.
  and lemmings are in there looking for a cliff...

Cheers
..........Kauri


----------



## sam76

So........................................


China asks for delays on iron ore delivery

By Tony Grant-Taylor
Herald Sun
October 10, 2008 12:00am

THE mining sector is starting to feel the effects of the global financial crisis with China asking iron ore producers to postpone deliveries. 
The once booming Chinese steel mills are cutting demand for iron ore as economies in other countries slow and want fewer Chinese goods.

Shares in Australia's fourth-largest producer Mt Gibson Iron plunged as much as 32.5 per cent yesterday after conceding some customers had asked for scheduled deliveries to be postponed.

Fortescue Metals also acknowledged weakening demand but said it had not had any scheduled shipments rejected.

The two giants, BHP Billiton (bhp.ASX:Quote,News) and Rio Tinto (rio.ASX:Quote,News), said shipments were proceeding as usual.

In a statement to the Australian Securities Exchange, Mt Gibson said a backlog at Chinese ports had reduced demand for iron ore.

The spot prices for iron ore, which earlier this year were well above contract prices, have slumped in recent months. Cash prices for iron ore imported by China fell 17 per cent to 1000 yuan ($214) a tonne in the last week of September - the biggest fall since June 2006.

UBS expects contract iron ore prices, which have underpinned revenues into Australia, to fall 15 per cent next year.

Until recently analysts were predicting price increases of 15 to 30 per cent.

China has an excess supply of ore with stocks of about 70 million tonnes at its 20 largest ports.

The China Iron and Steel Association said Vale, the world's biggest iron ore producer, is scheduled to meet Chinese steel mills next week to ask for a second price increase for this contract year.

Vale, Rio and BHP already have price rises of between 70 and 96 per cent for this year's exports.

Mount Gibson, a small supplier that shipped 1.43 million tonnes of ore in the September quarter, said it was not under any obligation to delay the deliveries until the second quarter as requested.

Mt Gibson shares fell 24 per cent to 87.5, Fortescue dropped nearly 9 per cent to $3.30, BHP was steady at $29.84 and Rio dropped almost 4 per cent to $78.01.

http://www.news.com.au/business/story/0,23636,24474382-14334,00.html


----------



## noirua

kennas said:


> Is USD strength just a blip, or does it have legs?
> 
> A lot of dirty linnen has been exposed in the US, with more to come probably.
> 
> But now a lot of attention has gone to the UK/Eurozone.
> 
> Flight to safety to a currency the world can not afford to have implode...??
> 
> Commods in USD.....



Only posted about 6 weeks ago and how the World has changed. Yes indeed, they've all flown for the safety of the US Dollar. The UK/Eurozone and what attention that is getting.
Still think the Aussie$ is being unfairly trashed, but once the trend, as strong as this one, is set, there's no stopping it until we get, perhaps to AU$1.70 to US$1 - should be very helpful too many.


----------



## Aussiejeff

noirua said:


> Only posted about 6 weeks ago and how the World has changed. Yes indeed, they've all flown for the safety of the US Dollar. The UK/Eurozone and what attention that is getting.
> Still think the Aussie$ is being unfairly trashed, but once the trend, as strong as this one, is set, there's no stopping it until we get, perhaps to AU$1.70 to US$1 - should be very helpful too many.




Maybe this thread needs a re-vote, what with high profile steel maker FerroChina today going under. It says it is unable to service huge debts and is immediately stopping production and shares will remain suspended until further notice.

Great!


----------



## sam76

Rio warning sends resource stocks plummeting
Barry FitzGerald 
October 17, 2008 

RIO TINTO'S confession that the five-year commodities boom was unravelling has triggered a global sell-off in resource equities and mineral commodities.

The big four of the industry - BHP Billiton, Rio Tinto, Xstrata and Anglo American - took their biggest one-day share-price hits since the 1987 crash while the slide in metal prices accelerated, in some cases to below marginal costs of production.

Rio let the cat out of the bag on Wednesday in its September quarter production report. It talked about slowing new production growth, potential cuts in aluminium, the lack of buyer appetite for assets sales and most disturbingly for the equities and commodities markets, a "deceleration in Chinese growth".

In overseas markets, Xstrata plunged 19% and Anglo American 20%. In the local market, Rio tumbled $12.49, or 15.9%, to $66.01 and BHP shed $3.90, or 13%, to $25.80.

Reports from China that steel makers were prepared to cut production by up to 20% to better match demand also spooked the already skittish market in the big miners.

Rio's share-price hit came amid reports that the Chinalco-Alcoa partnership's 9% stake in the group was locked up in a Hong Kong custodial account now managed by the liquidator of Lehman Brothers.

Lawyers for the state-owned Chinalco and Alcoa have descended in Hong Kong seeking the release of the parcel of shares, acquired in a $US14 billion market raid in February.

Alcoa is confident the partnership will regain access to shares while it was reported that Chinalco had asked the Chinese Government to help it resolve the issue.

Rio's takeover suitor, BHP, is a keen observer of the possible lock-up of the parcel. It was the February raid by Chinalco-Alcoa on the Rio register that forced BHP to replace its planned 90% minimum acceptance condition in its Rio scrip bid with a 50% condition.

Prospects that BHP might yet get its hands on the Chinalco-Alcoa stake have improved in line with the global economic meltdown. Both Chinalco and Alcoa are feeling the chill wind of the meltdown in their aluminium operations and are sporting a 63% or $US8.8 billion loss on their investment.

The unlikely situation where the liquidator of Lehman's Hong Kong business takes control of the 9% Rio stake is a new wild card in the BHP tilt for Rio.

In a briefing on its disappointing profit results last week, Alcoa managing director Klaus Kleinfield said the US group's long-term view on the Rio investment was "positive".

He noted that the Australian Government had given approval for Chinalco to increase its stake to 11%, but would not comment on the intentions of Alcoa or Chinalco.

In a surprise to some analysts, Alcoa did not make any write-downs on the cost of its original $US1.2 billion investment in the February raid on Rio.

The beating taken by BHP shares has reduced the value of its 3.4-for-1 scrip offer for Rio to $104 billion. That is down by close to $20 billion in the past five trading days.

The implied value of the offer of $87.72 a Rio share still represents a record 32% premium to Rio's market price of $66.01 a share (2.55 BHP shares).

The reporter owns BHP shares.

http://business.theage.com.au/busin...resource-stocks-plummeting-20081016-52ex.html


----------



## agro

nope

china may slow down but there is always other emerging economies such as India


----------



## nomore4s

lol, agro you're so one eyed.
To me it looks like the bubble has well and truly burst, but we will see what happens over the next 12 months or so.


----------



## Sean K

nomore4s said:


> lol, agro you're so one eyed.
> To me it looks like the bubble has well and truly burst, but we will see what happens over the next 12 months or so.



I'm with agro.

Major correction in a LONG term story.

Chindia has only just started to develop!

Give this rec/dep/ression a few years to run itself out and commods will be back in vogue.

The 'Mina de China' as called in South America, will be pumping again.

Maybe....


----------



## metric

*Re: The commodities boom is over*



So_Cynical said:


> We are suppose to be in a resource/commodities "super cycle".
> 
> 8 >10 years to run yet.




more like a 'super ramp' by the corporatocracy.....

the US is sunk.....chinas biggest customer. do you think that wont affect china..and in turn us?

ITS OVER....THINK; WAR COMMODITIES AND PRECIOUS METALS.


.


----------



## Garpal Gumnut

No way

this is the best opportunity in a generation to get set into commodities.

gg


----------



## Sean K

Garpal Gumnut said:


> No way
> 
> this is the best opportunity in a generation to get set into commodities.
> 
> gg



Once in a generation crash

=

Once in a generation opportunity


----------



## nomore4s

kennas said:


> I'm with agro.
> 
> Major correction in a LONG term story.
> 
> Chindia has only just started to develop!
> 
> Give this rec/dep/ression a few years to run itself out and commods will be back in vogue.
> 
> The 'Mina de China' as called in South America, will be pumping again.
> 
> Maybe....




lol, if it takes a few years for it to sort out, won't that then be classed as a new boom? Meaning this one is over?

How far do commodities and associated stocks have to fall before the boom is considered over?


----------



## nomore4s

kennas said:


> Once in a generation crash
> 
> =
> 
> Once in a generation opportunity




This I agree with, once we get through this mess there will be alot of very good opportunities in alot of different sectors - not just commodities.


----------



## Garpal Gumnut

nomore4s said:


> This I agree with, once we get through this mess there will be alot of very good opportunities in alot of different sectors - not just commodities.




Mate, you have to get set in before the opportunities appear.

Otherwise you are buying bhp at $40.

gg


----------



## Aussiejeff

kennas said:


> Once in a generation crash
> 
> =
> 
> Once in a generation opportunity




Unfortunately, for many poor souls (eg: less well off retirees and poor) that might well re-read as


*Once in a generation crash

=

Financial wipe-out for rest of life*.


----------



## Sean K

Garpal Gumnut said:


> Mate, you have to get set in before the opportunities appear.
> 
> Otherwise you are buying bhp at $40.
> 
> gg



Picking the future trend is critical in long term fundamental sector picks.

However, I seem to recall many MANY people, including me, calling Japan the boom of the late naughties. 



I still find it hard to see how Chindia will not be a significant growth platform for Australia over the next 5 - 30 years, pending world war. (on the cards...)

Lets get this recession/depression over and done with and get on with it I say!


----------



## Glen48

China house prices are down 40% Shanghai SP is down 70% Consumer confidence must be down as well.
Put the boom beside Buggy Whips, Crank Handles a thing of the past
Until confidence is boosted nothing will stop the rot, you may have to go to China to see the bottom of our SP index at this stage is some where around New Guinea.


----------



## Reealjrd

The commodity boom is not over. It is for some time on break as it had been trading with some nice movements. The main commodity are the gold and crudeoil as these major commodities are falling down.


----------



## Sean K

Aussiejeff said:


> Unfortunately, for many poor souls (eg: less well off retirees and poor) that might well re-read as
> 
> 
> *Once in a generation crash
> 
> =
> 
> Financial wipe-out for rest of life*.



So be it.

That's the pool you are swimming in.


----------



## CamKawa

The commodities boom is over for perhaps the next ten years or so. Lets take a quick walk down memory lane to remind ourselves what's happend in the past.

"The *Great Depression* of the 1930s was an economic catastrophe that severely affected most nations of the world, and Australia was not immune. In fact, Australia, with its extreme dependence on exports, particularly primary products such as wool and wheat, is thought to have been one of the hardest-hit countries in the Western world along with Canada and Germany. Unemployment reached a record high of almost 29% in 1932, one of the highest rates in the world."

...

"Falling export demand and commodity prices placed massive downward pressures on wages, particularly in industries such as coal mining. Due to falling prices, bosses were unable to pay the wages that workers wanted. The result was a series of crippling strikes in many sectors of the economy in the late 1910s. Coal miners' strikes in the winter of 1929 brought much of the economy to its knees."

Source: http://en.wikipedia.org/wiki/Great_Depression_in_Australia


----------



## Reealjrd

Hello All,

          Here i would like to say that the currenct commodity market is not for trading each day and keeping any long term position. Present market conditions say that just book profits if trading and take trades if seeing any market movements.


----------



## metric

its a worry..

got gold or silver in convertable size....?


.


----------



## sam76

Goldmans Bullish On Commodity Prices 
FN ARENA NEWS - 17/10/2008 


No surprises - Goldman Sachs' global economics team has downgraded its global growth forecast for 2009 from 3.7% to 3.0% and the commodities team has thus been swung into action for downgrades of its own. The credit crisis is obviously the driver, and the analysts note ongoing uncertainty on the credit front means ongoing downside risk to commodity prices.

But this story has a bullish end.

There are two reasons why commodity prices have fallen as far as they have to date. The first reason is they were too high. If oil is the benchmark, the ridiculous speculative bubble experienced earlier this year is just another example of leverage gone mad and a classic tale of "upside panic". The bubble burst when it was obvious a point of demand destruction had been reached in the US, and thus there was nothing surprising about the fall back from US$147/bbl to the US$100 level as speculative positions retreated.

Buy today we are at US$70. The second reason oil has fallen is due to the sudden panic about a global recession, brought about by the last gasp throes of a dying credit market. All in the last month, more or less. While the two are obviously related, it has been rather unfortunate for oil investors that fears of economic weakness have intensified right in the middle of a deleveraging process of the grandest scale ever experienced. Other commodity prices have experienced a similar rout. At the beginning of 2008 commodity investment funds were the preferred alternative to investment to a volatile stock market, and now that money is leaving in droves as well and escaping into cash.

The stock market went first, the commodity market has followed. Selling begets more selling. But just as surely as the sun rises in the east and sets in the west, commodity prices will overshoot to the upside and then overshoot to the downside. So while the Goldmans analysts are forced to bow to current market volatility and thus the risk of more short term weakness, they suggest:

"Nonetheless, we believe that the point of maximum demand weakness for many commodities and especially for oil is likely occurring right now while the credit markets are frozen. These credit conditions have generated severe dislocations in the commodity markets, in some cases substantially depressing demand far below where weak economic conditions would suggest."

And thus Goldmans suggests that once credit market tightness and general fear abates, so too will the intense selling pressure on commodities.

The analysts have been forced to significantly rein in their 12-month price forecasts, conceding that they had underestimated the potential severity of the economic slowdown that will be derived from the freezing of credit markets. However, they also note that even after making such downward revisions, prices remain historically high.

This could be put down simply for the "stronger for longer" theme, otherwise known as the China Story. Chinese demand is now expected to pull back, but there was always two sides to "stronger for longer". The other is global under-supply. There are supply constraints across the globe from China to South Africa, from South America to Russia. And in Australia. These constraints will remain in place even as demand weakens.

"As a result," says Goldmans, "it is likely that the supply constraints that have propelled commodity prices to record-high levels in recent years will likely be even more binding as the credit crisis resolves and as economic growth regains positive momentum. This suggests the potential for substantial upside from commodity investments in the medium-to-longer term."

A combination of fear, destocking and supply disruptions has sent oil demand crashing, the analysts note. Oil demand has likely fallen 10% in only the last week but underlying GDP weakness would imply only a 3-4% reduction in demand, they suggest. This provides the capacity for a market rebound "much stronger than it has been historically". There will not be the usual inventory overhang because tight credit is a disincentive to store oil.

Having said that, Goldmans has reduced its 2008 year-end price forecast from US$115 to US$70, and its year-end 2009 price from US$125 to US$107. This sends it 2009 average price forecast down from US$123 to US$86.

The analysts reiterate, however, an earlier warning that while credit markets remain in turmoil oil could trade as low as US$50 in the near term.

On the base metals front, Goldmans notes that nickel, zinc and lead prices had already come down a long way ahead of the latest financial cataclysm as demand from OECD nations, particularly the US, had subsided. This is what they expected, and they also expected copper and aluminium to hold up given supply constraints. But now copper and aluminium have been hit too.

Goldman's economists believe that the recent moderation in Chinese economic growth will now continue into 2009. They have downgraded expectations for domestic demand, construction, industry, exports and fixed asset investment. All of these have an impact on metals prices. Copper remains the most vulnerable, as it remains the only metal still trading substantially above its marginal cost of production, the analysts note.

It is Chinese demand that to date has held metals prices above historical levels. Demand for copper, for example, has been driven by a strong Chinese real estate market. But growth in real estate, and also manufacturing, has begun to abate.

The good news is that Goldmans nevertheless believes a bit of a fall in what were strong real estate prices is not a bad thing. With softer prices but generally rising incomes in China, the analysts expect demand for real estate to recover in 2009, which will in turn lead to increased demand for base metals towards late 2009. Assistance was also be provided by lower Chinese interest rates in response to the easing of the inflation threat.

Goldman's new 12-month base metals price forecasts are US$2600/t for aluminium, US$6625/t for copper, US$1525/t for lead, US$14375/t for nickel, and US$1640/t for zinc.

But the Goldman Sachs analysts remain long term base metal bulls.

They are looking for long run infrastructure growth in China, with the focus now moving to the underdeveloped central and western parts of the country. These areas will provide the next phase of real estate and general infrastructure growth, the analysts suggest.

On a more general note, ongoing urbanisation, demand from the vast population for manufactured goods that were not part of the "comsumption basket" as little as a few years ago, and subsequent industrial production of manufactured goods will underpin a robust pace of growth and support base metals demand.

While all the above is going on, China will continue to suffer from mature and overstretched production infrastructure, ongoing supply disruptions and marginally high costs of production. This is the supply-side factor that will also be supportive of commodities prices.

Despite dropping forecast prices, Goldmans is still expecting a net 10% return from metals investment in the next 12 months.

All is not lost. It's just a rocky road.
http://www.sharecafe.com.au/fnarena_news.asp?a=AV&ai=10611


----------



## seasprite

sam76 said:


> Goldmans Bullish On Commodity Prices
> 
> Having said that, Goldmans has reduced its 2008 year-end price forecast from US$115 to US$70, and its year-end 2009 price from US$125 to US$107. This sends it 2009 average price forecast down from US$123 to US$86.
> 
> The analysts reiterate, however, an earlier warning that while credit markets remain in turmoil oil could trade as low as US$50 in the near term.




I doubt if they could convince OPEC of these revised forecasts , I guess we will see on the 24th Oct.


----------



## rederob

Everyone said that the commodity boom would have a few rough edges.
Unfortunately it's copped a beauty with the financial market meltdown.
It's hard to see commodities being much above cost of production in near to medium term as buyers dry up and stock accumulates.
However, you need to bear in mind that despite the US being in slumber mode for over a year, only nickel and aluminium stockpiles have returned to historical high levels.
Copper, lead and zinc have low stockpiles by historical standards.
Zinc is trading below cost of production, so I can't see stockpiles rising greatly as producers are putting projects on care and maintenance.
Lead is a byproduct metal, so if its brethren decrease in output, its price could rise despite the doldrums we are in.
Copper demand from China remains robust, but it's hard to see it gobbling up what others have now passed over.
In a few years time the commodity bull will again roar into action. 
It will then have every nation on earth ready to reinvest and consume like never before. 
My strategy is to get into many "producers" late into 2009 and see if I can surf a building wave of pent up demand.
In the interim I am going to target a few oil producers as by 2010 we will see a return of plus $100 prices for good... and a launching platform to $200 as peak oil kicks in.


----------



## Glen48

Ch 10 News to night did a survey 85% of voters reckon things will get worse


----------



## noirua

OPEC have brought forward their meeting to discuss oil output.


----------



## Sean K

Glen48 said:


> Ch 10 News to night did a survey 85% of voters reckon things will get worse



Time to back up the truck...


----------



## sam76

But there's also been a rush of roving capital out of the market. According to the latest data from Hedge Fund Research, third-quarter hedge fund redemptions hit a record-high $210 billion, spearheading an exodus wealth that burst one of the biggest commodities bubbles of all time

http://www.marketwatch.com/news/sto...x?guid={D4E24BFF-BDC4-4B75-9C98-D06DD1C80A5F}

The voices are getting stronger.

I've got (had) a fair bit in commodities so i hope she rebounds...


----------



## noirua

At some point a recovery will come. Maybe not anywhere near the US$ peaks seen this year. Anyway, it's more what the price equates to in AU$'s. 
Time to do research and work out which companies are going to do better in local currency terms.


----------



## seasprite

Glen48 said:


> Ch 10 News to night did a survey 85% of voters reckon things will get worse




Of course that would be the answer, simply because the circumstance has been weighted to what the media expect.
If you kick someone in the groin then ask them if it hurts , you expect one answer only as the majority answer.

If Ch 10 asked the same question when the economy was performing well . 85% would probably say , "it can only get better". 

Media profit on gloomy stories and gossip simple as that.


----------



## lcl999

Yep. The boom's over.

It all seems like a replay of the 1969 nickel led boom and 1970 crash.
Back then everyone was playing the market, even taxidrivers.


----------



## seasprite

NEW YORK (CNNMoney.com) -- The price of oil rose Friday, after slumping to a 13-month low in the previous session, as investors viewed rising stock prices as a positive sign for energy demand.

Light, sweet crude for November delivery rose $2 to settle at $71.85 a barrel on the New York Mercantile Exchange. That's down 50% from crude's July peak settlement price of $145.29 a barrel.

On Thursday, the contract settled at $69.85, the lowest level since Aug. 23, 2007.

The oil market has been dominated by concerns that a prolonged economic slowdown would curb demand for energy. But some traders now say the price of oil has been driven down too far.

"The market is very oversold," said Peter Beutel, oil industry analyst at Cameron Hanover in Connecticut. "Now that we're out of the meltdown phase, the market is starting to look ahead."

Meanwhile, stock markets in Europe and Asia rose Friday. On Wall Street, the Dow Jones industrial average was up nearly 1% with about one hour left in the session.

Many oil traders see rising stock prices as a sign that economic conditions are improving and that energy demand may recover.

At the pump, gasoline prices fell another 4 cents overnight to a national average price of $3.04 a gallon. Gas is down more than 25% after soaring to an average of $4.11 in July.

As gas prices retreat, households should have more money to spend on discretionary items. That could help speed an economic recovery since consumer spending makes up two-thirds of the nation's gross domestic product.

OPEC: The market was also digesting a surprise move Thursday by the Organization of the Petroleum Exporting Countries to hold an emergency meeting earlier than it had originally planed.

OPEC member countries control two-thirds of the world's crude supplies, and analysts say its decision belies a desire to put a floor under the rapidly declining price of crude.

"OPEC is starting to panic," Beutel said. The cartel is expected to cut production by as much as 1 million barrels a day, he added.

But Beutel thinks a production cut by OPEC will not have a significant impact on the price of oil given the current outlook for supply and demand fundamentals.

"They're going to fail at keeping the price where they want it," he said. 
+++++++++++++++++++++++++++++++++++++++

An outlook/prediction is only an opinion.
Fact is , OPEC are very concerned about the oil price drop and fact is they want results now not next month.


----------



## alex arigo

no where near over listen to jim rogers the master of commodities this bull run has a long way to go we just started this is only another short term pull back and remember this is the chinese century


----------



## agro

alex arigo said:


> no where near over listen to jim rogers the master of commodities this bull run has a long way to go we just started this is only another short term pull back and remember this is the chinese century




not to mention pull backs are normal within a bull run


----------



## jonojpsg

You've got to take things into perspective here - current developed world population is what 1.5 or 2 billion.  That leaves hmmm, let's see, oh yes about 5 billion people, most of whom are probably pretty keen to get their hands on some of what we've got.  Even if they don't want the flat screen tvs and fancy cars, they most definitely want electricity, running water, houses, washing machines, etc etc.

Given the current capacity of the worlds mining companies to produce and the lead times in getting new production up and running, let alone the issues of finding new resources, there is no way that commodoties can return to historical levels, at least not for more than maybe a few months, year at most.

Interesting article from NY Times by Jared Diamond talks about the factor of 32 - which is about how many times our consumption is compared to developing countries!!!  That gives a real picture of what commodity prices are going to do over the next twenty - thirty years.

http://www.nytimes.com/2008/01/02/opinion/02diamond.html?_r=2&pagewanted=2&oref=slogin


----------



## rederob

From a price perspective the commodity boom is dead for this cycle.
From an inventory perspective base metal stockpiles are failing to build at the pace one would expect in such a recessionary phase.
The Shanhai exchange saw copper and aluminium stockpiles decline slightly, zinc steady, and fuel oil drop by a massive 15%.
LME inventories are on the rise, although several metal's stockpiles remain at long term low levels, viz. copper, zinc, and lead.

We are now at an interesting crossroad, as mine closures across the globe are on the rise.  Any expectation of metal stockpiles rising rapidly are likely to be dashed, because the cost of production is too often greater than the price sold.
This situation is markedly different to the phase leading into the bull run.  For many years we had a benign global economy that enabled marginal producers to eke out a living on stable but low metal prices.  
Now, almost overnight, we have prices fall through the floor: Miners need quickly to cut their losses or go broke.
Nickel is the odd man out in the present inventory build cycle: It appears to have strong warrantings from Norilsk, and few buyers.  How long Norilsk will deliver metal below cost prices is anyone's guess.   

Although early days, there appears a strong probability that the next bull run for commodities will commence from an exceptionally low inventory base.  In such an environment the price moves upward will be stellar compared to the recent cycle.


----------



## treefrog

rederob said:


> From a price perspective the commodity boom is dead for this cycle.
> From an inventory perspective base metal stockpiles are failing to build at the pace one would expect in such a recessionary phase.
> The Shanhai exchange saw copper and aluminium stockpiles decline slightly, zinc steady, and fuel oil drop by a massive 15%.
> LME inventories are on the rise, although several metal's stockpiles remain at long term low levels, viz. copper, zinc, and lead.
> 
> We are now at an interesting crossroad, as mine closures across the globe are on the rise.  Any expectation of metal stockpiles rising rapidly are likely to be dashed, because the cost of production is too often greater than the price sold.
> This situation is markedly different to the phase leading into the bull run.  For many years we had a benign global economy that enabled marginal producers to eke out a living on stable but low metal prices.
> Now, almost overnight, we have prices fall through the floor: Miners need quickly to cut their losses or go broke.
> Nickel is the odd man out in the present inventory build cycle: It appears to have strong warrantings from Norilsk, and few buyers.  How long Norilsk will deliver metal below cost prices is anyone's guess.
> 
> Although early days, there appears a strong probability that the next bull run for commodities will commence from an exceptionally low inventory base.  In such an environment the price moves upward will be stellar compared to the recent cycle.




good logic rederob - while there are many high cost mines closing there are quite a few cheaper producers still to come on line/ramp up next stages etc because they are past the point of no return with development.
But hell yes, keep a keen eye on prices and stockpiles for timing of your model playing out.


----------



## dj_420

rederob said:


> How long Norilsk will deliver metal below cost prices is anyone's guess.
> recent cycle.




Looks like they have already stopped rederob, several of Norilsk mines shutting down and been sold off:

http://www.bloomberg.com/apps/news?pid=20601081&sid=aRTcug1VJ7tA&refer=australia


----------



## rederob

dj_420 said:


> Looks like they have already stopped rederob, several of Norilsk mines shutting down and been sold off:
> 
> http://www.bloomberg.com/apps/news?pid=20601081&sid=aRTcug1VJ7tA&refer=australia




Cawse is small fry.  Norilsk is delivering huge quantities to LME Rotterdam via Dudinka.  Until the Norilsk mine itself eases output, nickel inventories will keep climbing.


----------



## dovetree

The real reason commodities boomed and why it was over sometime ago.

Read the testimony by hedge fund manager Michael Masters to the US senate commitee on finance.


hsgac.senate.gov/public/_files/052008Masters.pdf

This is why oil and other comm. prices have risen. and it is doubtful they will have such a rise again


----------



## IFocus

Got told last week RIO have halted all projects in development around a 1000 project jobs to go

Telfer dumping 400 jobs

Rumors

BHP Ravensthorpe to go into mothball 

Niffty copper to close


----------



## Whiskers

dovetree said:


> The real reason commodities boomed and why it was over sometime ago.
> 
> Read the testimony by hedge fund manager Michael Masters to the US senate commitee on finance.
> 
> 
> hsgac.senate.gov/public/_files/052008Masters.pdf
> 
> This is why oil and other comm. prices have risen. and it is doubtful they will have such a rise again




Nice point dovetree.

Had some extraudinary arguements with some insisting that futures can't/don't manipulate prices. 

So simple to reregulate the whole futures industry but while economically powerful people with vested interests in the US control the legislature it's going to be hard work.

Not sure that I agree that (some) commodity prices won't boom again though. For example, high oil flows on th higher costs for almost everything else atm, efectively eroding growth and quashing a lot of demand. 

But if oil goes sub 40 again as I expect, that will contribute to lessening the risk of both inflation and recession in the short term by effectively reducing the cost base of almost everything else so basic/staple products at least are much more affordable.

I also think the futures racket in association with other derivitives contributed significantly to the credit crisis and share market crashes. 

However, with many commodities nearing longer term lows it looks like the futures racket cycle has about gone full circle. 

NOW is the time for the US to take decisive action in making changes as some other countries have so the rackets would be snuffed out and we could return to something like true supply and demand conditions in which the world will still grow and consume raw materials.

In the medium term I expect to see good rebounds in some commodities.



> Summary of Prior Testimony
> One of the fundamental purposes of futures contracts is to provide price discovery in the ―cash‖ or ―spot‖ markets. *Those selling or buying commodities in the ―spot‖ markets rely on futures prices to judge amounts to charge or pay for the delivery of a commodity*.1 Since their creation in the agricultural context decades ago, it has been widely understood that, unless properly regulated, futures markets are easily subject to distorting the economic fundamentals of price discovery (i.e., cause the paying of unnecessarily higher or lower prices) through excessive speculation, fraud, or manipulation.
> 
> The Commodity Exchange Act (―CEA‖) has long been judged to prevent those abuses. Accordingly, *prior to the hasty and last minute passage of the Commodity Futures Modernization Act of 2000 (―CFMA‖), ―all futures activity [was] confined by law (and eventually to criminal activity) to [CFTC regulated] exchanges alone.‖2* *At the behest of Enron*, the CFMA authorized the ―stunning‖ change to the CEA to allow the option of trading energy commodities on deregulated ―exempt commercial markets,‖ i.e., exchanges exempt from CFTC, or any other federal or state, oversight, thereby rejecting the contrary 1999 advice of the President‘s Working Group on Financial Markets. Id. This is called ―the Enron Loophole.‖
> 
> *Two prominent and detailed bipartisan studies of the Permanent Subcommittee on Investigations (―SPI‖) staff represent what is now conventional wisdom: hedge funds, large banks and energy companies, and wealthy individuals have used ―exempt commercial energy futures markets‖ to drive up needlessly the price of energy commodities over what economic fundamentals dictate,* adding, for example, what the SPI estimated to be @ $20-$30 per barrel to the price of a barrel of crude oil at a time when that commodity had reached a then record high of $77. The conclusion that speculation has added a large premium to energy products has been corroborated by many experts, including most recently and most prominently, George Soros.3
> 
> The SPI staff and others have identified the Intercontinental Exchange (―ICE‖) of Atlanta, Georgia as an unregulated facility upon which considerable exempt energy futures trading is done. For purposes of facilitating exempt natural gas futures, ICE is deemed a U.S. ―exempt commercial market‖ under the Enron Loophole. For purposes of its facilitating U.S. WTI crude oil futures, the CFTC, by informal staff action, deems ICE to be a U.K. entity not subject to direct CFTC regulation even though ICE maintains U.S. headquarters and trading infrastructure, facilitating, inter alia, @ 30% of trades in U.S. WTI futures. That staff informal action may be terminated instantly by the CFTC under existing law.4
> 
> Virtually all parties now agree the Enron Loophole must be repealed. *The simplest way to repeal would be to add two words to the Act‘s definition of ―exempt commodity*‖ so it reads: an exempt commodity does ―not include an agriculture _*or energy *_commodity;‖ and two words to 7 U.S.C.  § 7 (e) to make clear that ―agricultural _*and energy *_commodities‖ must trade on regulated markets. An ―energy commodity‖ definition must be then be added to include crude oil, natural gas, heating oil, gasoline, heating oil, metals, etc.5 In the absence of quick CFTC action permitted by law, the statute should also be amended to forbid an exchange from being deemed an unregulated foreign entity if its trading affiliate _or_ trading infrastructure is in the U.S.; _or_ if it trades a U.S. delivered contract within the U.S. that significantly affects price discovery.
> 
> http://commerce.senate.gov/public/_files/IMGJune3Testimony0.pdf


----------



## rederob

Whiskers said:


> But if oil goes sub 40 again as I expect, that will contribute to lessening the risk of both inflation and recession in the short term by effectively reducing the cost base of almost everything else so basic/staple products at least are much more affordable.



If oil gets to $40 then we are in a depression, so basic staples won't be affordable because most people won't have the money to pay.
If oil goes below $50 very few producers will stay in business.
At $60 oil will not provide enough revenue to carry out exploration, let alone the essential maintenance that is way overdue on old infrastructure.  
OPEC members want oil closer to $100 and will keep curbing output to get it back there.
Don't forget that despite the recession we are experiencing, global demand forecasts anticipate an increase this year and next.  While I anticipate further downward revisions as the recession bites, the fact remains that consumption remains high and demand will quickly spike up once the recession is over.

What is most important to understand at this juncture is that circumstances are *NOT *normal.  Many commodity prices have fallen below cost of production leading to a range of severe circumstances:
Exploration is cut back or stopped
Cut off grades are increased
Project economics are no longer favourable
Project financing is difficult
Expansion projects are delayed 
Marginal producers are closing or going into care and maintenance.

The above circumstances may lead to inventory declines rather than rebuilds in the near to medium term.  In the longer term it will mean that economic recovery will be met with severe shortages - and we know what happens thereafter.


----------



## amory

the way the Hangseng is going bellyup, there could be some doubt about resurgence of our mining boom.  Oil is at the mercy of the elements, but wouldn't it be good if Gold at least, could find recognition it deserves.  instead of having to flounder about aimlessly amidst all these battered commodities.


----------



## Reealjrd

Hello friends,

The commodity boom is not over you will soon see agin some nice movements in commodity market. Here is some news for the day for commodities.

 LME metals edge lower after enormous overnight gain
 Shanghai copper and zinc edge up after LME rally
 Tin bounces approximately 50 percent in less than a week
 Markets may have bottomed, risk opening to favour longs
Oct 30 - Shanghai copper and zinc open at their 4 pct upside limits on Thursday, chasing a huge rally in London that axiom copper jump almost 13 pct after sheer losses in the precedent two weeks.
However, London futures edge lower, snapping their best ever string of gains seeing as mid-September on profit taking, in spite of an increase in the EUR.
The greenback posted its major one-day fall in 23 years on Wednesday, as the Fed delivered an predictable 50 point rate cut and China's central bank also cut rates, raising hope that order would not sluggish as much as feared.
"Today's cascades are not enormously significant. The marketplace was vault to rise as it was extremely oversold, it was presently the timing that was in uncertainty," a metals merchant said in Singapore.
"Direction will be single-minded by equities, the dollar and all the customary economic marketplace factors that have been lashing this. However, the risk at present seems to favour being long rather than short. However we are not putting on at all big directional position."
LME copper for release in three months chop down 1.2 pct, or $55, to $4,600 a tone by 0355 GMT, bountiful up a few of Wednesday's $525 increase.
Prices have risen around 20 percent so far this week and if the market can maintain those gains, copper is set for its biggest weekly rise since September 1979. Despite that, for the month prices are down 28 percent, which would be their biggest fall in at least three decades.
"The down shift has to foot out at some point. We have seen a few real lows veteran our foot for copper is in the region of $3,500 to $4, 000," Said by Edward Meir MF Global analyst.
On Monday, price dished to $3,590, their weakest additional than three years.
"The turn down may have broken and we are set for a phase of sideways trade in 2009, much as we axiom at the beginning of the century," Edward Meir said.
Copper futures in Shanghai rose by their 4 pct threshold to 33,100 yuan ($4,838) and zinc top out at its edge, at 9,515 yuan in early on trade after London zinc jump approximately 10 pct.
LME tin cut down $25, or 0.2 pct, to $15,200. Tin price are up approximately 50 pct since plummeting to a 21-month low of $10,300 on Oct. 24.
"Tin is doing very well. Stocks are dropping, and the market is very dependent on a single producer, Indonesia, which has said it will cut production when prices fall below $15,000," Meir said.
In contrast to most other metals, tin stocks have fallen steadily during 2008. LME inventories of the metal, which is seeing rising demand as a replacement for lead in electrical solder, have dropped 75 percent to 3,815 tonnes since August last year.
By contract, copper stocks have risen 78 percent in the same period. Metals prices are 0355 GMT.
 Metal Last Change Pct Move End 2007 Pct chg 08
 LME Cu 4600.00 -55.00 -1.15 6670.00 -31.00 
SHFE Cu* 33100.00 1280.00 +4.02 56880.00 -41.81 
LME Alum 2125.00 -26.00 -1.21 2403.00 -11.57 
COMEX Cu** 207.15 0.00 +0.00 304.10 -31.88 LME Zinc 1210.00 -50.00 -3.97 2370.00 -48.95 
SHFE Zinc 9490.00 265.00 +2.87 18950.00 -49.92 
LME Nickel 13250.00 -390.00 -2.86 26350.00 -49.72 
LME Lead 1530.00 -50.00 -3.16 2550.00 -40.00 
LME Tin 15200.00 -25.00 -0.16 16400.00 -7.32
 LME/Shanghai arb^ 3454 Dollar/yuan 6.8365 \ 6.8368 **
1st contract month for COMEX copper 
3rd contact month for SHFE aluminium, copper and zinc
LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month 

If any mistake please bear. It is commodity market any thing can happen.

Happy trading.


----------



## Sean K

Mining industry to freeze, if not fozen already, but this may be a once in a life time buying opportunity.....

I've edited this article to briefen it. For the full story hit the heading..


*Mining industry freezes capital expenditure *
Sarah-Jane Tasker | November 01, 2008 

Analysts say $US50 billion ($75 billion) in planned expenditure is at risk of being delayed next year, as miners bunker down to survive the global financial turmoil.

The Credit Suisse UK mining team has estimated that about $US50 billion of the $US75 billion of mining capital expenditure planned for next year could be delayed, and that a further $US150 billion scheduled for 2010-12 could be delayed. 

This represents about 66 per cent of next year's spending plans and may materially delay production of some 300 million tonnes of iron ore (35 per cent of current seaborne market), 5 million tonnes of copper (29 per cent), 10 million tonnes of aluminium (25 per cent) and more than 1 million ounces of platinum (14 per cent). 

Mr Gray said this could plant the seeds for the next bull market, especially given that the recent five-year bull market did not see large-scale capacity additions, with the exception of iron ore. 

The most affected miners are likely to be those with excessive debt, such as Xstrata, and the juniors, which have limited access to financing. 

Industry experts have argued that many of the emerging iron ore projects in Western Australia, which have been bidding to grow at a frenzied rate to cash in on China's increasing need, may not eventuate. 

Africa, which was once a new frontier, has effectively been wiped out. 

With the juniors now desperate for cash, there are potentially some great buys in the market. 

"This is why the sell-off in the junior miners is likely to be a one in 100-year buying opportunity for the brave at heart," he added. "I have many of the best copper juniors in DR Congo trading at just 5c in the dollar ....


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## noirua

kennas said:


> Mining industry to freeze, if not fozen already, but this may be a once in a life time buying opportunity.....
> 
> I've edited this article to briefen it. For the full story hit the heading..
> 
> 
> *Mining industry freezes capital expenditure *
> Sarah-Jane Tasker | November 01, 2008
> 
> Analysts say $US50 billion ($75 billion) in planned expenditure is at risk of being delayed next year, as miners bunker down to survive the global financial turmoil.
> 
> The Credit Suisse UK mining team has estimated that about $US50 billion of the $US75 billion of mining capital expenditure planned for next year could be delayed, and that a further $US150 billion scheduled for 2010-12 could be delayed.
> 
> This represents about 66 per cent of next year's spending plans and may materially delay production of some 300 million tonnes of iron ore (35 per cent of current seaborne market), 5 million tonnes of copper (29 per cent), 10 million tonnes of aluminium (25 per cent) and more than 1 million ounces of platinum (14 per cent).
> 
> Mr Gray said this could plant the seeds for the next bull market, especially given that the recent five-year bull market did not see large-scale capacity additions, with the exception of iron ore.
> 
> The most affected miners are likely to be those with excessive debt, such as Xstrata, and the juniors, which have limited access to financing.
> 
> Industry experts have argued that many of the emerging iron ore projects in Western Australia, which have been bidding to grow at a frenzied rate to cash in on China's increasing need, may not eventuate.
> 
> Africa, which was once a new frontier, has effectively been wiped out.
> 
> With the juniors now desperate for cash, there are potentially some great buys in the market.
> 
> "This is why the sell-off in the junior miners is likely to be a one in 100-year buying opportunity for the brave at heart," he added. "I have many of the best copper juniors in DR Congo trading at just 5c in the dollar ....



Sums most of it up really. Now it's the time for miners with lots of cash, and check out those who have JV's that include taking coal, iron ore etc., for up to 30 years at market prices.
Some stocks are virtually down and out, and the big boys will take the best for not much.


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## Sean K

Crikey, and BHP now delaying OD expansion.

*BHP delays opening of world's biggest pit *
Matt Chambers | November 01, 2008 

BHP Billiton has pushed back the start date for its giant Olympic Dam copper and uranium expansion until at least 2015.

This was to include digging the world's biggest open-pit mine.

In a long-awaited presentation, the mining giant was tight-lipped on development costs, which have been tipped by analysts to be $15 billion, and indicated it would not reveal them until the project was approved, in 2010 at the earliest. 

BHP's ambitious plans for the deposit will see it ramp up in three major stages over 10 or 11 years, with the planned, huge pit eventually eating into the existing underground mine and mill around 2025.


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## Whiskers

kennas said:


> The Credit Suisse UK mining team has estimated that about $US50 billion of the $US75 billion of mining capital expenditure planned for next year could be delayed, and that a further $US150 billion scheduled for 2010-12 could be delayed.




Yes, there has certainly been a lot of belt tightening and project mothballing lately which will slow down new production somewhat... but I'm seeing a few with little or no debt and or good cash balances that are planning to carry on as usual.

That's going to be the key from an investment/trading perspective... find the well heeled ones that are ready or can get ready to go pretty quickly. 

But having achnowledged some capital raising problems, I'm not sure that demand has fallen so much as maybe an over correction of prices with the hedge funds cashing out. 

Some metals such as copper, even zinc and lead are not at historically high stockpile levels, so I am expecting them to rise to and maintain reasonable prices in the near term.


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## rederob

Whiskers said:


> Some metals such as copper, even zinc and lead are not at historically high stockpile levels, so I am expecting them to rise to and maintain reasonable prices in the near term.



You forgot lead.  It has 17% of its LME stockpile cancelled and has been rising firmly in price during the week.  http://www.kitcometals.com/charts/lead_historical.html
Lead was already suffering inventory-wise through Magellan's failure to get back on line, and the present number of mine closures appears to have now materially impacted the supply response.
Zinc is likely to be the next candidate, probably followed by nickel.
At this stage I am not sure where copper sits as its price has not fallen hard enough for larger producers to shut down.  There are polymetallic mines that relied on copper and byproduct credits for profitability that will instead move to care and maintenance, or closure.


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## GREENS

rederob said:


> However, you need to bear in mind that despite the US being in slumber mode for over a year, only nickel and aluminium stockpiles have returned to historical high levels.
> Copper, lead and zinc have low stockpiles by historical standards.






rederob said:


> What is most important to understand at this juncture is that circumstances are *NOT *normal.  Many commodity prices have fallen below cost of production leading to a range of severe circumstances:
> Exploration is cut back or stopped
> Cut off grades are increased
> Project economics are no longer favourable
> Project financing is difficult
> Expansion projects are delayed
> Marginal producers are closing or going into care and maintenance.
> 
> The above circumstances may lead to inventory declines rather than rebuilds in the near to medium term.  In the longer term it will mean that economic recovery will be met with severe shortages - and we know what happens thereafter.






rederob said:


> Lead was already suffering inventory-wise through Magellan's failure to get back on line, and the present number of mine closures appears to have now materially impacted the supply response.
> Zinc is likely to be the next candidate, probably followed by nickel.




Some very good and interesting points Red. I agree lead seems to be the most likely candidate to be the first cab of the rank, but I think zinc and nickel could be going head to head for the next movement. But untill we start to see a recovery in demand I dont suspect that prices will be spiking any time soon.


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## sam76

The Daily Reckoning Australia

--If you treat it as a thought experiment and ask yourself what would have to happen for the ASX to fall that much, you get some alarming possibilities. The liquidation of Oz Minerals? The dismemberment of Rio Tinto? The fall of a major investment bank or leveraged institution?

--Or perhaps it's something simpler: more falling prices for commodities. That's what the World Bank seems to think anyway. As reported in the FT, the World Bank's Global Economic Prospects report says the commodities boom has, "come to an end." It adds that, "Over the longer run, the price of extracted commodities should fall." It reckons slower population and income growth will contribute to slower resource demand growth.

--Naturally, this is diametrically opposed to the logic of the boom that began in 1999. Then, you had 200 years of falling real prices for tangible goods seemingly reverse itself, mostly because of growth in global population and per capita income. So which thesis is right?

--Well you know what we think. We think the Money Migration is the long-term transfer of the world's wealth from the debt-based consumption economies of the West to the world's savers and producers, roughly in the "East." This certainly favours Aussie resources for at least a generation.

--But the migration has been massively disrupted by the credit crisis, which is really just an epic attempt by the U.S. and other English-speaking economies to avoid their Day of Reckoning. But don't you worry. That day is coming. It's just taking longer than we originally thought. Ben Bernanke is a creative man. And he's desperate too.

--But why don't we ask China what it thinks? After all, it's a pretty important party to this discussion. China? What do you think? Hello China. Are you there?

--Hmm. China is not taking our calls. Maybe that's because some Chinese firms are too busy looking for ways to take advantage of the current situation by securing long-term supplies to resources at lower market prices. And maybe actions speak a lot louder than words about Chinese desire for Aussie resources.

--"Shenzhen Zhongjin Lingnan Nonfemet Co., China's fourth-biggest zinc producer by output, said it agreed to acquire a 50.1 percent stake in Australian miner Perilya Ltd. through a private placement," reports Bloomberg. And Forbes reports that Chinese steel-makers are set to push for a major reduction in iron ore prices to reflect the fall in global steel prices.

--The average price in October for a metric ton of iron ore fines, according to Forbes, was $US90.60. But Chinese steel makers reckon that with steel prices back at 1994 levels, iron ore prices should roll back to. In 1994, a metric ton of fines was US$20.40.

--A lot has changed since 1994. Supply of ore is up. Demand is up too. But costs for resource producers are way up too. It's unlikely the steel-makers are going to get a price cut that large. And if they do, it will put some smaller ore producers under enormous pressure (even harder to with stand if you don't have access to credit).

--Where are we then? A year ago BHP held the whip hand and chased Rio in a dream of grand ambition. Now BHP is reconsidering its strategy. Rio is reeling. And pricing power has switched back to resource consumers in China, who are eager to use the whip as well, it appears. There's been a lot of whipping going on, hasn't there? More on what it means tomorrow.

--Finally, yes. We too saw the reports circulating that the International Monetary Fund is getting ready to dump a bunch of gold on the market. So far, we haven't found anything to substantiate them. We're looking around, and will report back on what Diggers and Drillers editor Al Robinson digs up as well. Until then...


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## Sean K

Still major correction in long term bull to some.


*Commodities "horribly" hit, not killed: Rogers*
Thu Dec 11, 2008 5:09pm EST

NEW YORK (Reuters) - Jim Rogers, the famous investor and author on commodities, said on Thursday the credit crisis has not killed the bull market in commodities as many imagined, but just dealt it a "horrible setback".


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## wayneL

kennas said:


> Still major correction in long term bull to some.
> 
> 
> *Commodities "horribly" hit, not killed: Rogers*
> Thu Dec 11, 2008 5:09pm EST
> 
> NEW YORK (Reuters) - Jim Rogers, the famous investor and author on commodities, said on Thursday the credit crisis has not killed the bull market in commodities as many imagined, but just dealt it a "horrible setback".



Jayzuz Jim,

Apart from Gold & Siver, I can't see any commodity at all that remains in any sort of long term bullish pattern.

Unless we include Treasuries which are in a rampant runaway bull market... but that suggests anything but a continuation of the commodity bull.

Endowment effect there methinks. I wonder how big a hit he's taken?


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## Sean K

His fund is off 40% from July I think.

Perhaps he has a vested interest in pumping commods. lol

And I wonder when his 'bull run' started? I thought we'd wiped all gains out since the bull kicked in. Perhaps just a false bull run start? Everyone back to the starting line please!


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## sam76

Chinese iron ore market 'recovering'

John Garnaut, Beijing
December 17, 2008 
SINOSTEEL, China's biggest iron ore importer and trader, says the Chinese ore market is recovering and it wants to "accelerate" shipments from Australia.

The comments come as Rio Tinto and BHP Billiton prepare to start a new round of annual contract price negotiations with Baosteel.

"Obviously a lot of (iron ore) trading companies have suffered a lot in the past two months and many trading companies have already disappeared," said Sinosteel's Frank Feng, deputy general manager of iron ore imports and domestic sales.

"I think the market has now stabilised and will gradually become warmer. We have already returned to profitability."

more at...
http://business.theage.com.au/business/chinese-iron-ore-market-recovering-20081216-6zwi.html


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