Australian (ASX) Stock Market Forum

Commodities tipped to collapse

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Dr Doom said:
Sounds like Red Kite have been left holding the baby, so to speak. Looks like they have been holding a sizable inventory but now as prices have corrected they find themselves having toget rid of their long positions, putting further pressure on the price??.
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With the commodity prices coming off and the stellar bottom line of their fund weakening some of the investors in Red Kite have decided it's a good time to cash in their dwindling profits. Unfortunately Red Kite is fully invested, and need to sell into what is already a falling market to pay them out. They have tried to extend the time they have to repay investors so as to try not to spook the market, as they have no more money to pour into the market to prop it up. Their actions show up in the unusual vol and price action on the LME zinc forward contracts over the last week. Now word is out and it's a mad scramble for the exits.
Will it be business as usual after one panick attack day?
Will other investors in commodity hedge funds see which way the wind is blowing and want to cash out as well, domino type affecting the entire metals complex?
If you had money in a hedge fund leveraged heavily into metals would you be calling the fund manager at open of business Monday?
Which other metals, if any, will come under pressure if panicky herd mentality prevails? At least there is a minimum 1 month notice period for withdrawl from the funds, so if herd mentality rules we may get warning of it.
There again, it may all be a storm in a (china) teacup. ;) One thing is for certain, fund managers and large institutions heavily committed in the affected markets will be out in force in the media selling the line... Don't worry, it's only one small rogue fund that has recklessly over extended itself, the metals markets are still sound, in fact this presents a perfect time to buy... (falling knives have never been cheaper!!!)

The above is purely speculumation on my part, said with tongue firmly pressed in cheek. :D
 
I can barely hear the interview, sounds all muffled.

Is it the same for you guys also?

Cheers
 
This meeting points to a continuity of demand for rocks.Ian McFarlane seems to be encouraging on trade for such.Open the ports he says......

Mining heavyweights say inconsistencies on uranium transport are obstacles to growth.

The Federal Resources Minister, Ian Macfarlane, has called on state governments to remove restrictions on the shipment of uranium from their ports.

Mining heavyweights met government officials in Canberra today to discuss the transport and regulatory problems facing the industry.

They have named inconsistent regulation by the states and territories and uranium transport bans as obstacles to growth.

Darwin is currently the only Australian port shipping uranium and Mr Macfarlane says that needs to change before more uranium mines open.


And this......

Perth will host minerals industry leaders from 21 Asia-Pacific Economic Co-operation nations for the Ministers Responsible for Mining meeting from today until Friday.

The meeting, chaired by Industry Tourism and Resources Minister Ian MacFarlane, aims to provide Ministers with the opportunity to discuss the challenges caused by increasing demand for both producer and consumer economies, and the development of new technologies and applications which require new material.

Running alongside will be the inaugural Mining Industry Forum, co-ordinated by the Minerals Council of Australia, and providing a platform for comprehensive assessment of factors affecting the growth and prosperity of the minerals sector and its contribution to global economic growth as well as sustainable development.
 
On the other hand, Xinhua has reported on its website that China has discovered billions of tons of iron ore deposits on Qinghai-Tibet plateau.

Chinese geologists have discovered more than 600 new sites of copper, iron, lead and zinc ore deposits on the Qinghai-Tibet plateau since 1999, according to the results of the latest geological survey.

Preliminary estimates show the plateau has reserves of 30 million to 40 million tons of copper, 40 million tons of lead and zinc and billions of tons of iron, said Zhang Hongtao, vice director of the China Geological Survey Bureau.

Zhang said geologists have also compiled the country's first Qinghai-Tibet plateau geological map on the scale of 1:250,000 and the plateau's first map of metal and nonmetal deposits on the scale of 1:1.5 million.

Currently 90 percent of China's iron ore deposits are of low grade but geologists have discovered three large high-grade iron ore deposits on the plateau, including the one in Nyixung with reserves of 300 million to 500 million tons.

Large quantities of oil shale resources, which could be turned into oil, were also found on the plateau.

The plateau may have "large or super-large" deposits of hydrocarbon resources, said Zhang, adding that geologists had detected promising reserves of oil and gas in northern Tibet.

"These deposits will fundamentally ease China's shortages of mineral resources", said Zhang.

China will increase its copper concentrate output by 30 percent because the country has started to exploit three of the plateau's copper mines in Qulong, Pulang and Yangla regions, which are predicted to produce 250,000 tons of copper concentrates every year.
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The thread title remains interesting.
Are commodities still tipped to "collapse"?
We have had corrections, but not even copper has "collapsed" some 20 months after inventories bottomed.
Meanwhile nickel is likely (in my view) to reach $45k/tonne on a short term squeeze, tin prices are staying high, and lead prices are heading north quite firmly.
This remains a tight commodity market by any conventional standard, and will require a market economy of significance to "fall over" in order to precipitate a collapse.
 
rederob said:
The thread title remains interesting.
Are commodities still tipped to "collapse"?
We have had corrections, but not even copper has "collapsed" some 20 months after inventories bottomed.
Meanwhile nickel is likely (in my view) to reach $45k/tonne on a short term squeeze, tin prices are staying high, and lead prices are heading north quite firmly.
This remains a tight commodity market by any conventional standard, and will require a market economy of significance to "fall over" in order to precipitate a collapse.
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When the so called experts predict something they often get it wrong. That's why I got rid of my full service broker years ago.
DYOR
 
greggy said:
When the so called experts predict something they often get it wrong. That's why I got rid of my full service broker years ago.
DYOR
Click to expand...

Then why dont u open account with me?
I'm not famous, but my views have a higher possibility of being correct, in metal trading and Singapore stocks investing :) .

Some of my recent trades:
http://basemetal-trading.blogspot.com/2007/02/review-on-aluminum-trade.html

http://basemetal-trading.blogspot.com/2007/02/review-on-lead-trade_18.html

http://basemetal-trading.blogspot.com/2007/01/40-profit-on-lead-trade.html

http://basemetal-trading.blogspot.com/2007/01/83-profit-on-tin-trade.html

My Singapore stocks recommendations:
http://basemetal-trading.blogspot.com/2007/02/review-on-my-3-top-picks-listed-in.html
 
Credit Suisse said supper-cycle isn't over, upward bias

The commodities “super-cycle'' isn't over and prices may increase in the second half, led by gains in precious metals and agriculture, as the pace of global economic growth quickens, according to Credit Suisse Group.

Gold prices may match last year's 26-year high of $730 an ounce by the end of 2007, Philipp Vorndran, investment strategist at the Zurich-based bank's asset management unit, said by phone today. Corn, wheat and sugar may rise 50 percent in the next
three years after falling by as much as 15 percent in the next three months, he forecast.

“Investors have been very pessimistic about commodities recently, but the fundamentals are in place for higher prices starting later this year,'' Vorndran said. “The commodities super-cycle isn't over.”

Commodity prices, as measured by the Reuters/Jefferies CRB Index, have gained 6 percent in the past month after falling to its lowest in almost two years. The index declined 7.4 percent last year, ending a market rally that started in 2001, as a rise
in global inventories pushed prices for oil, copper and other raw materials down from records.

“Commodities will come under the spotlight again for positive reasons in the second half of 2007, if not sooner,” the bank said in a statement today.
Returns from commodities may average between 7.5 percent and 8 percent annually over the next three years, compared with forecasts from rival banks of returns of up to 6 percent.
 
BREND,

I'll be looking to open a futures account sometime this year.

Regarding opening an account with you:

Which bank do you work for?

How many years experience do you have in commodities trading?

What is your commission?

What is the minimum deposit required to open an account?

How to go about opening an account - you work in Singapore right?

PM me if you'd prefer.
 
Jadefox said:
BREND,

I'll be looking to open a futures account sometime this year.

Regarding opening an account with you:

Which bank do you work for?

How many years experience do you have in commodities trading?

What is your commission?

What is the minimum deposit required to open an account?

How to go about opening an account - you work in Singapore right?

PM me if you'd prefer.
Click to expand...

I'm working at United Overseas Bank, one of the largest bank in Singapore.
My experience in commodity trading as a broker is not long, but I was previously working in funds management for couple of years.

And rest of our team member has more than 3 years experience as base metal brokers.

You need to deposit USD30,000 to open an account with us.

Yes, I work in Singapore. We can refer you to the nearest United Overseas Bank in Australia to sign the forms.

We have close contract with our London couterparts, so we have all the juicy information. We update our clients on funds' trading activities, ie whether the hedge funds/ CTAs/ commodity funds are selling or buying a particular metals, whether funds are buying or selling options, whether funds are buying up huge amount of particular metal inventory. And what is happen to the demand level in China, I personally think this is very important.

Standard commission rate is contract value / 1600. But if your volume is higher, our management will reduce the rate.

*Futures is a leveraged product, it can work for you and also work against you. My suggestion is that make sure you know the risk that you will be undertake before you trade.

What is your email address? I can add you into our daily commentary first, you will be amazed how much information that we have, which the rest of the retails investors do not have.

Once you are comfortable, then you start trading. No obligations. :)
 
BREND said:
Credit Suisse said supper-cycle isn't over, upward bias

The commodities “super-cycle'' isn't over and prices may increase in the second half, led by gains in precious metals and agriculture, as the pace of global economic growth quickens, according to Credit Suisse Group.
Click to expand...
Agreed except for the bit about economic growth. I'd replace those words with "...as the pace of global monetary inflation quickens..." since I'm expecting more of the same from central banks later this year. They've been doing it for decades and I don't see them stopping now. Not with the massive debts, overvalued housing etc that all has to be returned to a reasonable balance somehow. The printing press being the "easy" way out.

That said, they'll need an excuse for more rapid inflation so I don't think it will happen until after some event gives that justification. Event as in significnat decline in a major market (housing, stocks), falling CPI data or some external shock such as terrorism. :2twocents
 
Steven Roach comments on China & commodities, and a warning for Australia

"Halfway around the world, a comparable issue is evident with respect to the Chinese investment slowdown. Like America’s housing shakeout, there can be little disputing the facts of a major slowing of Chinese investment activity -- a year-over-year growth rate that was running at close to 30% at the start of 2006 but that ended the year at 14%. Despite this dramatic slowing, most still believe nothing can stop China’s growth juggernaut. However, with investment easily the largest sector of the Chinese economy -- close to 45% of total GDP in 2006 -- it is almost mathematically impossible for sharply slower investment growth not to have impacts on the broader economy. The recent industrial output trajectory underscores this conclusion -- a slowing from peak rates of growth of 19.5% last June to less than 15% in the final months of 2006. While 15% growth in industrial output is still quite vigorous, it does represent a meaningful cooling off from earlier overheated gains.

At the same time, I take the recent softening of commodity markets as further validation of the spillover effects of China’s investment slowdown. With China accounting for about 50% of the cumulative increase in global consumption of base metals and oil since 2002 -- fully 10 times its 5% share of world GDP -- a China slowdown represents a very important development on the demand side of economically sensitive commodity markets. The same can be said for the transmission of spillover effects into China’s supply chain. As Chinese investment slows, cross-border impacts are likely in the other big economies of Asia -- especially Japan, Korea, and Taiwan. Similar ripple effects should be felt by China’s natural resource providers -- especially Australia, Brazil, Canada, and parts of Africa. In recent years, China has become such an important engine on the supply side of the global economy that it is difficult to see how a meaningful deceleration in its major source of economic growth won’t produce significant collateral damage elsewhere in the world."
 
2008 Olympics are China's opportunity to show the world what its all about... I have a feeling there wont be a substantial slowdown until then... The govt will keep trying to prop up things. With international media all over the place they will be trying desperately to show that communism can work and does work (ahem)..

Even if supercycle and China's economic boom continue there are bound to be hicups along the way, like the asian currency crisis, or property bust or something (an X factor?)..
 
trendsta said:
2008 Olympics are China's opportunity to show the world what its all about... I have a feeling there wont be a substantial slowdown until then... The govt will keep trying to prop up things. With international media all over the place they will be trying desperately to show that communism can work and does work (ahem)..

Even if supercycle and China's economic boom continue there are bound to be hicups along the way, like the asian currency crisis, or property bust or something (an X factor?)..
Click to expand...

Many economists like to use supercycle, and treat the whole commodity group as one. I think that is a wrong way to look at commodities. Different commodities, ie base metals, have different supply and demand situations.

Aluminum inventory is in abundance, China is producing huge amount of aluminum every year, there will not be any shortage of aluminum in the near term.

Whereas lead and tin supply are so little, any supply disruption (which is happening to tin and lead now) will push their prices to a much higher level.

As for copper, it has become a gambling pawn for hedge funds, rather than an investment class. There is hardly any explanation for their price movement except for hedge funds' and banks' trading activities.

Nickel price has overshot its fundamental value, now the price level is only at the mercy of the hedge funds who are controlling the remaining inventory level at LME warehouses. There is little demand for nickel now, a lot of stainless steel companies had closed down, because cost of nickel is way too high. All the news of high demand for nickel is just bull****.
 
BREND said:
There is little demand for nickel now, a lot of stainless steel companies had closed down, because cost of nickel is way too high. All the news of high demand for nickel is just bull****.
Click to expand...
Grateful to learn about the stainless companies that have closed down: Most have barely been able to keep up with orders until recent weeks.
 

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