tinhat
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Ah yes, so they are. Thanks.
"The best place to be is in commodities"
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Ah yes, so they are. Thanks.
Global map of oil refining and trade to be redrawn over next 5 years, IEA report says
http://www.iea.org/newsroomandevents/pressreleases/2012/october/name,32158,en.html
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http://www.iea.org/newsroomandevents/pressreleases/2012/october/name,32158,en.html
***
October 15, 2012
It’s Not All Doom And Gloom For Commodities: The Global Economy Will Still Grow By 3.6 Per Cent This Year, And China By Nine Per Cent
By Rob Davies
Last week was a time for revising forecasts down. Alcoa did it for aluminium demand, and the IMF did it for world growth.
That degree of consensus between industry and academics is surprising, but does suggest that the overall trend is correct.
However, it’s not all gloom and doom and even if accurate, there’s nothing in these headlines that says we should all resign ourselves to penury.
Sure, Alcoa did reduce its forecast for growth in aluminium demand in 2012, but from seven per cent to six per cent.
Most companies would be delighted with such a robust market to feed.
More importantly Alcoa also still expects the global appetite for aluminium to double between 2010 and 2020. Given that consumption this year is estimated at 46.1million tonnes it suggests this pot has plenty of scope to feed lots of people over the next eight years.
Unfortunately the press and the market paid more attention to the reduction in the rate of demand growth and aluminium rattled back 4.6 per cent over the week to US$1,992 a tonne.
As the largest base metal by volume that decline had a knock-on effect on the asset class and the LME index closed down 2.2 per cent on the week at 3494.6.
Meanwhile, a major influence on all capital markets over the week was the IMF report. Although this report was trailed as being gloomy, in fact it is still forecasting global growth of 3.6 per cent in 2013.
While this is not dramatic it is at least a lot better than the 3.3 per cent now expected for 2012.
The main reason for the reduction was the ongoing strife in Europe where even Jens Weidmann, President of the Bundesbank, is now resigned to a stagnant German economy in the second half of this year.
As the continent’s leading metal basher that matters. Indeed, Alcoa cites Europe as the only region expected to record a drop in aluminium consumption this year.
Although many write Europe off, it’s important to remember that it is still the second largest market for aluminium, and most other metals, after China.
So a two per cent fall in a market of 6.5 million tonnes matters. The good news is that a nine per cent growth rate in the Chinese market of 20.7 million tonnes matters even more.
The argument is the same on a global economic scale. The IMF is forecasting a lacklustre growth rate of only 1.5 per cent for the economies of the developed world in 2013.
Mature economies are doing not much more than treading water at the moment.
Another indication that this is true is the depressed prices being achieved for No 2 copper scrap in the US. These are trading at a 25 per cent discount to the futures prices according to Bloomberg.
And that is with a global copper deficit this year of 102,000 tonnes.
But even in the US though there are rays of sunshine. Consumer sentiment has ticked up from 78.3 to 83.1.
That improvement may be related to a better housing market. According to Jamie Dimon, Chief Executive of J P Morgan, the US housing has “turned the corner”.
Now he just needs to tell the IMF. It might like some good news.
Source >>> www.minesite.com
*****
It’s Not All Doom And Gloom For Commodities: The Global Economy Will Still Grow By 3.6 Per Cent This Year, And China By Nine Per Cent
By Rob Davies
Last week was a time for revising forecasts down. Alcoa did it for aluminium demand, and the IMF did it for world growth.
That degree of consensus between industry and academics is surprising, but does suggest that the overall trend is correct.
However, it’s not all gloom and doom and even if accurate, there’s nothing in these headlines that says we should all resign ourselves to penury.
Sure, Alcoa did reduce its forecast for growth in aluminium demand in 2012, but from seven per cent to six per cent.
Most companies would be delighted with such a robust market to feed.
More importantly Alcoa also still expects the global appetite for aluminium to double between 2010 and 2020. Given that consumption this year is estimated at 46.1million tonnes it suggests this pot has plenty of scope to feed lots of people over the next eight years.
Unfortunately the press and the market paid more attention to the reduction in the rate of demand growth and aluminium rattled back 4.6 per cent over the week to US$1,992 a tonne.
As the largest base metal by volume that decline had a knock-on effect on the asset class and the LME index closed down 2.2 per cent on the week at 3494.6.
Meanwhile, a major influence on all capital markets over the week was the IMF report. Although this report was trailed as being gloomy, in fact it is still forecasting global growth of 3.6 per cent in 2013.
While this is not dramatic it is at least a lot better than the 3.3 per cent now expected for 2012.
The main reason for the reduction was the ongoing strife in Europe where even Jens Weidmann, President of the Bundesbank, is now resigned to a stagnant German economy in the second half of this year.
As the continent’s leading metal basher that matters. Indeed, Alcoa cites Europe as the only region expected to record a drop in aluminium consumption this year.
Although many write Europe off, it’s important to remember that it is still the second largest market for aluminium, and most other metals, after China.
So a two per cent fall in a market of 6.5 million tonnes matters. The good news is that a nine per cent growth rate in the Chinese market of 20.7 million tonnes matters even more.
The argument is the same on a global economic scale. The IMF is forecasting a lacklustre growth rate of only 1.5 per cent for the economies of the developed world in 2013.
Mature economies are doing not much more than treading water at the moment.
Another indication that this is true is the depressed prices being achieved for No 2 copper scrap in the US. These are trading at a 25 per cent discount to the futures prices according to Bloomberg.
And that is with a global copper deficit this year of 102,000 tonnes.
But even in the US though there are rays of sunshine. Consumer sentiment has ticked up from 78.3 to 83.1.
That improvement may be related to a better housing market. According to Jamie Dimon, Chief Executive of J P Morgan, the US housing has “turned the corner”.
Now he just needs to tell the IMF. It might like some good news.
Source >>> www.minesite.com
*****
October 20, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, what’s driving the outbreak of confidence in your market?
Oz. In a word, China. In two words, Chinese statistics. Last week there was a surprise upward revision of official economic growth data. The data seems to show that China suffered its hard landing in the first quarter of this year and has been in recovery mode for the past six months, with growth appearing to be accelerating.
That news was enough to wake market bulls who rushed back in to basic raw material stocks, especially iron ore and copper miners, a switch which hit the gold miners. The change in sentiment was enough to lift the metals and mining index on the ASX by a healthy 3.9 per cent. The gold index fell by 1.5 per cent, helped along by the lower gold price.
Minews. How much confidence can be put in the latest Chinese data?
Oz. That’s a good question because it’s always prudent to treat any government statistics with care. However, it’s worth noting that a few normally cautious observers, including the chief economist at Westpac Bank, Bill Evans, have turned bullish. Evans shocked the market by tipping that commodity prices will rise by 30 per cent over the next 12 months.
Easy as it might be to say that that’s just one-man’s view, Evans has been the most accurate forecaster of trends in the Australian market for the past few years, most famously predicting a big fall in interest rates at this time last year, just as his peers were tipping rate rises. Evans won, and now he’s stuck his neck out on commodities he has plenty of listeners.
Minews. And his tip is based on that Chinese data you mentioned.
Oz. It would seem so. The National Bureau of Statistics in Beijing revised down its first quarter number for gross domestic product growth from 6.8 per cent to 6.1 per cent, a shift which seems to show that the opening months of 2012 were the bottom of the cycle. The Bureau then revised up the second quarter from 7.4 per cent to 8.2 per cent, with third quarter growth back to 9.1 per cent. While that means overall growth for 2012 will probably still be less than eight per cent, a clear picture of improvement can be seen.
...
Source >> www.minesite.com
*****
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, what’s driving the outbreak of confidence in your market?
Oz. In a word, China. In two words, Chinese statistics. Last week there was a surprise upward revision of official economic growth data. The data seems to show that China suffered its hard landing in the first quarter of this year and has been in recovery mode for the past six months, with growth appearing to be accelerating.
That news was enough to wake market bulls who rushed back in to basic raw material stocks, especially iron ore and copper miners, a switch which hit the gold miners. The change in sentiment was enough to lift the metals and mining index on the ASX by a healthy 3.9 per cent. The gold index fell by 1.5 per cent, helped along by the lower gold price.
Minews. How much confidence can be put in the latest Chinese data?
Oz. That’s a good question because it’s always prudent to treat any government statistics with care. However, it’s worth noting that a few normally cautious observers, including the chief economist at Westpac Bank, Bill Evans, have turned bullish. Evans shocked the market by tipping that commodity prices will rise by 30 per cent over the next 12 months.
Easy as it might be to say that that’s just one-man’s view, Evans has been the most accurate forecaster of trends in the Australian market for the past few years, most famously predicting a big fall in interest rates at this time last year, just as his peers were tipping rate rises. Evans won, and now he’s stuck his neck out on commodities he has plenty of listeners.
Minews. And his tip is based on that Chinese data you mentioned.
Oz. It would seem so. The National Bureau of Statistics in Beijing revised down its first quarter number for gross domestic product growth from 6.8 per cent to 6.1 per cent, a shift which seems to show that the opening months of 2012 were the bottom of the cycle. The Bureau then revised up the second quarter from 7.4 per cent to 8.2 per cent, with third quarter growth back to 9.1 per cent. While that means overall growth for 2012 will probably still be less than eight per cent, a clear picture of improvement can be seen.
...
Source >> www.minesite.com
*****
October 22, 2012
Bond Investors: The Metals Markets Are Ready And Waiting For You
By Rob Davies
The world of commodities, especially metals, is pretty specialised and demands a lot of attention to detail to understand.
But sometimes, just sometimes, you can learn something so fundamentally important from another sector that it radically changes your perspectives.
The world of drug research is about as far removed from mining as it is possible to get.
Drug companies make their living by spending a lot of money on researching new drugs and then marketing the successful ones for extremely high prices until they lose patent protection.
Many investors think this a great, high quality business because it is underwritten by government health spending. And no one wants to vote against that.
Yet drug development is expensive and risky and not all new drugs work. Moreover, it is getting harder to protect margins as cheaper generic drugs become available.
It’s largely for these reasons that AstraZeneca, a large British drug company, is only trading on seven times earnings.
And yet despite this rather short term view on the earnings, the company has just sold one billion dollars of debt with a coupon of only four per cent as part of a US$2 billion financing.
Here is the staggering part though.
It is a thirty year note. In other words the market is prepared to believe that the company will be financially strong enough in 2042 to redeem these notes at par.
Any market needs to have a buyer and a seller. Clearly, the buyers thought this was a good deal.
Equally, the treasurer of AstraZeneca thought it was a brilliant trade. In fact, if someone offered this writer one billion dollars for thirty years at four per cent I think he would view it as an outstanding deal.
The biggest uncertainty in this deal is not actually the creditworthiness of the issuer. It is what inflation will be over that period.
AstraZeneca clearly thinks inflation will reduce the value of the capital, and the coupon, over that period. The investors presumably think that, despite the risk, it is a trade worth doing.
That seems a strange bet given that while UK inflation fell to 2.2 per cent in September, it was 5.2 per cent a year ago.
The data for the US is similar. In September of this year it was two per cent, but 3.9 per cent in 2011. Who knows what it will be thirty years from now?
Not everyone is so complacent. Over the course of the week the benchmark 10 year US Treasury bond fell 8.5 per cent to yield 1.8 per cent.
Some people are getting worried about inflation, and not just drug company treasurers.
Bizarrely though these developments seem to have bypassed the metals market. Base metals, as measured by the LME index, drifted back 0.6 per cent to 3,475 and gold fell 1.8 per cent to $1,734 an ounce.
The concern here focussed on lacklustre growth figures from China and hope that the Europeans will resolve their problems.
For anyone who doesn’t think China is about to come to grinding halt and is sceptical that Eurocrats will fix their sovereign debt problem, inflation hedges, like metals, look a one way bet.
And that includes borrowing money at four per cent for thirty years. When will bond investors wake up? The metal markets are ready and waiting for you.
Source >>> www.minesite.com
*****
Bond Investors: The Metals Markets Are Ready And Waiting For You
By Rob Davies
The world of commodities, especially metals, is pretty specialised and demands a lot of attention to detail to understand.
But sometimes, just sometimes, you can learn something so fundamentally important from another sector that it radically changes your perspectives.
The world of drug research is about as far removed from mining as it is possible to get.
Drug companies make their living by spending a lot of money on researching new drugs and then marketing the successful ones for extremely high prices until they lose patent protection.
Many investors think this a great, high quality business because it is underwritten by government health spending. And no one wants to vote against that.
Yet drug development is expensive and risky and not all new drugs work. Moreover, it is getting harder to protect margins as cheaper generic drugs become available.
It’s largely for these reasons that AstraZeneca, a large British drug company, is only trading on seven times earnings.
And yet despite this rather short term view on the earnings, the company has just sold one billion dollars of debt with a coupon of only four per cent as part of a US$2 billion financing.
Here is the staggering part though.
It is a thirty year note. In other words the market is prepared to believe that the company will be financially strong enough in 2042 to redeem these notes at par.
Any market needs to have a buyer and a seller. Clearly, the buyers thought this was a good deal.
Equally, the treasurer of AstraZeneca thought it was a brilliant trade. In fact, if someone offered this writer one billion dollars for thirty years at four per cent I think he would view it as an outstanding deal.
The biggest uncertainty in this deal is not actually the creditworthiness of the issuer. It is what inflation will be over that period.
AstraZeneca clearly thinks inflation will reduce the value of the capital, and the coupon, over that period. The investors presumably think that, despite the risk, it is a trade worth doing.
That seems a strange bet given that while UK inflation fell to 2.2 per cent in September, it was 5.2 per cent a year ago.
The data for the US is similar. In September of this year it was two per cent, but 3.9 per cent in 2011. Who knows what it will be thirty years from now?
Not everyone is so complacent. Over the course of the week the benchmark 10 year US Treasury bond fell 8.5 per cent to yield 1.8 per cent.
Some people are getting worried about inflation, and not just drug company treasurers.
Bizarrely though these developments seem to have bypassed the metals market. Base metals, as measured by the LME index, drifted back 0.6 per cent to 3,475 and gold fell 1.8 per cent to $1,734 an ounce.
The concern here focussed on lacklustre growth figures from China and hope that the Europeans will resolve their problems.
For anyone who doesn’t think China is about to come to grinding halt and is sceptical that Eurocrats will fix their sovereign debt problem, inflation hedges, like metals, look a one way bet.
And that includes borrowing money at four per cent for thirty years. When will bond investors wake up? The metal markets are ready and waiting for you.
Source >>> www.minesite.com
*****
October 27, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, your market seems to have had a rough week.
Oz. Forgettable, at any rate. Most companies lost ground, with a few managing to post modest rises after reporting positive discovery and development news. Lower prices for most commodities, especially gold, weighed on investor confidence and even iron ore, which managed to reclaim the US$120 a tonne mark, did little for the iron ore miners and explorers.
Overall, the market lost two per cent as measured by the all ordinaries index, but there were bigger falls in the indices we watch more closely. The metals and mining index shed 4.1 per cent.
Gold dropped by six per cent, copping the double-whammy of a lower US dollar price for the metal, and a fresh rise in the value of the Australian dollar which continues to defy attempts by the country’s central bank to drive it back below parity with its American cousin.
Minews. But there was good news from Queensland?
Oz. Uranium explorers had a modest win during the week when another state government - Queensland this time - said it was lifting an embargo on uranium mining. That news triggered a small ripple of positive sentiment in the uranium sector, including a rise from our old friend Manhattan Corporation.
Nickel was on the receiving end of bad news as there were further retrenchments from BHP Billiton and more talk about it selling its Nickel West operation - a move which might produce a surprisingly positive result as a new owner might inject a bit of life into one of BHP Billiton’s forgotten operations.
...
Source >> www.minesite.com
*****
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, your market seems to have had a rough week.
Oz. Forgettable, at any rate. Most companies lost ground, with a few managing to post modest rises after reporting positive discovery and development news. Lower prices for most commodities, especially gold, weighed on investor confidence and even iron ore, which managed to reclaim the US$120 a tonne mark, did little for the iron ore miners and explorers.
Overall, the market lost two per cent as measured by the all ordinaries index, but there were bigger falls in the indices we watch more closely. The metals and mining index shed 4.1 per cent.
Gold dropped by six per cent, copping the double-whammy of a lower US dollar price for the metal, and a fresh rise in the value of the Australian dollar which continues to defy attempts by the country’s central bank to drive it back below parity with its American cousin.
Minews. But there was good news from Queensland?
Oz. Uranium explorers had a modest win during the week when another state government - Queensland this time - said it was lifting an embargo on uranium mining. That news triggered a small ripple of positive sentiment in the uranium sector, including a rise from our old friend Manhattan Corporation.
Nickel was on the receiving end of bad news as there were further retrenchments from BHP Billiton and more talk about it selling its Nickel West operation - a move which might produce a surprisingly positive result as a new owner might inject a bit of life into one of BHP Billiton’s forgotten operations.
...
Source >> www.minesite.com
*****
October 28, 2012
That Was The Week That Was ... In London
By Alastair Ford
It was goodbye to Cynthia Carroll this week and goodbye to the prospect of West Africa emerging as a major iron ore province, at least if commentary from iron ore heavy weight BHP Billiton is to be believed. On the market the departure of Ms Carroll had a more marked effect than the potential extinguishing of a new mining province.
Shares in Anglo American rose by three per cent on the day she quit, and ended the overall week up 38p at 1,934p.
In a valedictory speech Ms Carroll stated that the platinum industry is not competitive and that it’s unlikely to thrive unless fundamental changes are made, although she didn’t spell out precisely what those changes might be.
Separately though, Anglo’s platinum subsidiary Anglo Platinum announced that it will re-hire 12,000 workers that it recently fired due to illegal strike activity. This move will come as no surprise to industry watchers, but does reinforce a well-established point that platinum mining companies have very little in the way of ultimate sanction against a restive workforce.
London-based broking house Liberum issued a brief assessment of Cynthia Carroll’s reign, criticising her acquisition of Minas Rio and the handling of certain elements of the De Beers deal. Liberum had also apparently hoped that the platinum interests would have been spun out under her watch, but was at least pleased that she’d fended off what it called a “bear-hug approach from Xstrata.
Overall though, the verdict was less than favourable: “The history books won’t be kind on Carroll’s tenure”, the broker said.
Meanwhile, on the sidelines of a shareholders’ meeting BHP Billiton chief Marius Kloppers stated that: "We believe the production in Brazil and in Australia will be sufficient to meet demand and there is increasing consensus, and a recognition by investors and the market, that this is indeed the case".
That statement followed on from a decision by iron ore heavyweight Vale to press the go-slow button at its giant Simandou project in Guinea.
"Progressively, you have seen other companies come to a conclusion that is closer to our position", said Kloppers. In July, BHP Billiton announced that it planned to pull out of its Mount Nimba project in Guinea, in order to focus on production from the Pilbara.
...
Source >>> www.minesite.com
*****
That Was The Week That Was ... In London
By Alastair Ford
It was goodbye to Cynthia Carroll this week and goodbye to the prospect of West Africa emerging as a major iron ore province, at least if commentary from iron ore heavy weight BHP Billiton is to be believed. On the market the departure of Ms Carroll had a more marked effect than the potential extinguishing of a new mining province.
Shares in Anglo American rose by three per cent on the day she quit, and ended the overall week up 38p at 1,934p.
In a valedictory speech Ms Carroll stated that the platinum industry is not competitive and that it’s unlikely to thrive unless fundamental changes are made, although she didn’t spell out precisely what those changes might be.
Separately though, Anglo’s platinum subsidiary Anglo Platinum announced that it will re-hire 12,000 workers that it recently fired due to illegal strike activity. This move will come as no surprise to industry watchers, but does reinforce a well-established point that platinum mining companies have very little in the way of ultimate sanction against a restive workforce.
London-based broking house Liberum issued a brief assessment of Cynthia Carroll’s reign, criticising her acquisition of Minas Rio and the handling of certain elements of the De Beers deal. Liberum had also apparently hoped that the platinum interests would have been spun out under her watch, but was at least pleased that she’d fended off what it called a “bear-hug approach from Xstrata.
Overall though, the verdict was less than favourable: “The history books won’t be kind on Carroll’s tenure”, the broker said.
Meanwhile, on the sidelines of a shareholders’ meeting BHP Billiton chief Marius Kloppers stated that: "We believe the production in Brazil and in Australia will be sufficient to meet demand and there is increasing consensus, and a recognition by investors and the market, that this is indeed the case".
That statement followed on from a decision by iron ore heavyweight Vale to press the go-slow button at its giant Simandou project in Guinea.
"Progressively, you have seen other companies come to a conclusion that is closer to our position", said Kloppers. In July, BHP Billiton announced that it planned to pull out of its Mount Nimba project in Guinea, in order to focus on production from the Pilbara.
...
Source >>> www.minesite.com
*****
October 29, 2012
Miners Are Still Under Stress, In Spite Of Marginally Better Economic News
By Rob Davies
Time and again history has shown that economic data taken to be current has actually turned out to be so unreliable as to be positively harmful to those trying to use them to run countries, businesses or investment portfolios.
Last week both the UK and the USA released growth data for the third quarter.
Even though the numbers were good the net effect seemed to depress capital markets.
A growth figure of one per cent for the UK economy was widely derided as being in la-la land yet, if history is any good, that figure is likely to be revised upwards by a substantial amount.
The problem for metal markets is that the UK hardly counts as a metal basher these days and the closure of two more car plants this week demonstrates that industrial production will continue to shrink as a component of the UK economy.
But even though the UK is not an important consumer of metal any longer it is still home to the London Metal Exchange and the negative tone here may partially account for the 5.1 per cent fall in the LME index over the week to 3,299.34.
The story in the US is more positive. Even though economic growth was only two per cent on an annualised basis, it was encouraging that residential construction increased by 14 per cent in the quarter.
That is a meaningful increase on the 8.5 per cent recorded in the previous quarter and is significant because construction is such big component of metal consumption.
Despite these encouraging signs the stress in the mining industry was demonstrated yet again when Brazilian miner Vale reported a 66 per cent fall in third quarter profits to US$1.67 billion.
Lower metal prices were the main problem and the company has taken action to address this by suspending operations at the Frood nickel copper mine in Canada and placing the Zogota iron ore project in Guinea under review.
These moves demonstrate that the mining industry is being pro-active in accepting the reality of modest world growth.
While China may be a beacon of light in a rather gloomy world there is little doubt that growth rates there are now closer to mid-single digits than high single digits.
The reality is that it looks as if the whole world now has to adapt to modest levels of growth, and that has implications for pricing across all asset classes.
Metals have enjoyed elevated prices for the last decade, as super-demand from China stretched the mining industry to absolute capacity.
Now a combination of additional production and subdued levels of growth are allowing the industry to get back into balance.
However, what is not in balance is the spending habits of governments everywhere. Governments had been relying on strong economic growth to drive tax receipts up and pay down debt.
Unfortunately, sluggish activity has led to ballooning sovereign debt which is acting as drag on recovery.
Nowhere is this more apparent than in Japan, once the powerhouse of metal consumption. Now it is struggling to get parliamentary approval to refinance ¥150 trillion of debt.
With a total outstanding sovereign debt of US11.6 trillion, equivalent to 212 per cent of GDP, it is a problem it has to solve before it can resume vibrant growth.
Until all governments deal with the issue of too much debt, all economic activity, including mining, will be under pressure.
One thing is for sure. States will not pay the debt back. They will either formally renege by renouncing the debt or informally renege through inflation.
Either way, hard assets offer protection.
Source >>> www.minesite.com
*****
Miners Are Still Under Stress, In Spite Of Marginally Better Economic News
By Rob Davies
Time and again history has shown that economic data taken to be current has actually turned out to be so unreliable as to be positively harmful to those trying to use them to run countries, businesses or investment portfolios.
Last week both the UK and the USA released growth data for the third quarter.
Even though the numbers were good the net effect seemed to depress capital markets.
A growth figure of one per cent for the UK economy was widely derided as being in la-la land yet, if history is any good, that figure is likely to be revised upwards by a substantial amount.
The problem for metal markets is that the UK hardly counts as a metal basher these days and the closure of two more car plants this week demonstrates that industrial production will continue to shrink as a component of the UK economy.
But even though the UK is not an important consumer of metal any longer it is still home to the London Metal Exchange and the negative tone here may partially account for the 5.1 per cent fall in the LME index over the week to 3,299.34.
The story in the US is more positive. Even though economic growth was only two per cent on an annualised basis, it was encouraging that residential construction increased by 14 per cent in the quarter.
That is a meaningful increase on the 8.5 per cent recorded in the previous quarter and is significant because construction is such big component of metal consumption.
Despite these encouraging signs the stress in the mining industry was demonstrated yet again when Brazilian miner Vale reported a 66 per cent fall in third quarter profits to US$1.67 billion.
Lower metal prices were the main problem and the company has taken action to address this by suspending operations at the Frood nickel copper mine in Canada and placing the Zogota iron ore project in Guinea under review.
These moves demonstrate that the mining industry is being pro-active in accepting the reality of modest world growth.
While China may be a beacon of light in a rather gloomy world there is little doubt that growth rates there are now closer to mid-single digits than high single digits.
The reality is that it looks as if the whole world now has to adapt to modest levels of growth, and that has implications for pricing across all asset classes.
Metals have enjoyed elevated prices for the last decade, as super-demand from China stretched the mining industry to absolute capacity.
Now a combination of additional production and subdued levels of growth are allowing the industry to get back into balance.
However, what is not in balance is the spending habits of governments everywhere. Governments had been relying on strong economic growth to drive tax receipts up and pay down debt.
Unfortunately, sluggish activity has led to ballooning sovereign debt which is acting as drag on recovery.
Nowhere is this more apparent than in Japan, once the powerhouse of metal consumption. Now it is struggling to get parliamentary approval to refinance ¥150 trillion of debt.
With a total outstanding sovereign debt of US11.6 trillion, equivalent to 212 per cent of GDP, it is a problem it has to solve before it can resume vibrant growth.
Until all governments deal with the issue of too much debt, all economic activity, including mining, will be under pressure.
One thing is for sure. States will not pay the debt back. They will either formally renege by renouncing the debt or informally renege through inflation.
Either way, hard assets offer protection.
Source >>> www.minesite.com
*****
ETF Performance: EWA(Australia) is +2.94%, month to date
http://www.bespokeinvest.com/thinkbig/2012/10/29/recent-asset-class-performance.html
***
http://www.bespokeinvest.com/thinkbig/2012/10/29/recent-asset-class-performance.html
***
Please visit >> http://www.resourcesroadhouse.com.au/
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November 03, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, your market seems to have been fairly flat last week.
Oz. That was the overall picture with the all ordinaries index down a fraction, metals and mining up a fraction, and gold doing best of all with a rise of 1.4 per cent. Next week will be a much sterner test for gold stocks because the price fall through US$1700 an ounce occurred after the ASX closed on Friday.
Minews. Did any sector stand out, either rising or falling?
Oz. Nickel, somewhat perversely, was the star performer with a number of explorers moving sharply higher even as the nickel price fell and producers were forced to make deep cuts in their operating costs.
Minews. That sounds like an interesting disconnection, or speculators playing games.
Oz. The latter, most likely, because the nickel price has fallen back into crisis territory of less than US$7.25 a pound, causing miners such as First Quantum to report that it is looking for further cost cuts at its Ravensthorpe project. The company said that total costs at the mine it acquired from BHP Billiton rose to US$7.84/lb a pound in the September quarter which obviously means that the future looks uncertain without a higher nickel price or lower costs.
As that news from First Quantum was being digested Sirius (SIR) and explorers close to its Nova nickel discovery charged higher. Sirius added A68 cents to A$3.05, but did trade as high as A$3.20 on Friday after management released a particularly upbeat report. Near neighbours Matsa (MAT), Sheffield (SFX) and Boadicea (BOA) joined in the game. Matsa rose by A18 cents to A44 cents. Sheffield gained A9.5 cents to A69.5 cents, and Boadicea put on A8 cents to A50 cents.
Minews. Let’s finish the nickel call, and then move through the other base metals.
Oz. Mincor (MCR), which is mainly seen as a producer, was in demand thanks to its latest exploration news, rising by A10 cents to A$1.23, a 12-month high which is quite an achievement as the price of the only metal it produces slides lower. Other nickel moves, either way, included: Western Areas (WSA), up A7 cent to A$4.36. Panoramic (PAN), down A2 cents to A59 cents. Independence (IGO), down A7 cents to A$4.02, and Mirabela (MBN), down A1 cent to A45.5 cents.
...
Source >>> www.minesite.com
*****
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, your market seems to have been fairly flat last week.
Oz. That was the overall picture with the all ordinaries index down a fraction, metals and mining up a fraction, and gold doing best of all with a rise of 1.4 per cent. Next week will be a much sterner test for gold stocks because the price fall through US$1700 an ounce occurred after the ASX closed on Friday.
Minews. Did any sector stand out, either rising or falling?
Oz. Nickel, somewhat perversely, was the star performer with a number of explorers moving sharply higher even as the nickel price fell and producers were forced to make deep cuts in their operating costs.
Minews. That sounds like an interesting disconnection, or speculators playing games.
Oz. The latter, most likely, because the nickel price has fallen back into crisis territory of less than US$7.25 a pound, causing miners such as First Quantum to report that it is looking for further cost cuts at its Ravensthorpe project. The company said that total costs at the mine it acquired from BHP Billiton rose to US$7.84/lb a pound in the September quarter which obviously means that the future looks uncertain without a higher nickel price or lower costs.
As that news from First Quantum was being digested Sirius (SIR) and explorers close to its Nova nickel discovery charged higher. Sirius added A68 cents to A$3.05, but did trade as high as A$3.20 on Friday after management released a particularly upbeat report. Near neighbours Matsa (MAT), Sheffield (SFX) and Boadicea (BOA) joined in the game. Matsa rose by A18 cents to A44 cents. Sheffield gained A9.5 cents to A69.5 cents, and Boadicea put on A8 cents to A50 cents.
Minews. Let’s finish the nickel call, and then move through the other base metals.
Oz. Mincor (MCR), which is mainly seen as a producer, was in demand thanks to its latest exploration news, rising by A10 cents to A$1.23, a 12-month high which is quite an achievement as the price of the only metal it produces slides lower. Other nickel moves, either way, included: Western Areas (WSA), up A7 cent to A$4.36. Panoramic (PAN), down A2 cents to A59 cents. Independence (IGO), down A7 cents to A$4.02, and Mirabela (MBN), down A1 cent to A45.5 cents.
...
Source >>> www.minesite.com
*****
November 05, 2012
Words Are Cheap, Cheques Are Expensive
By Rob Davies
This year the two largest countries by economic activity will change their leaders. The media is focussed on the one that is costing US$6 billion for understandable reasons. However, the other one that is costing a fraction of that will actually have much more impact on the global economy, and hence on metal markets.
As the US approaches the last few days of campaigning the fact that the two candidates are neck and neck is as good an indication as any of how little different their policies are. The only question of note is which candidate is more likely to let the Fiscal Cliff actually occur on 1st January 2013. This package of tax hikes and spending cuts is needed to address the US deficit but is political disaster because it would reduce GDP by 4 per cent. Maybe a second-term Obama administration with nothing to lose may let it happen unchecked. But it seems unlikely. So a compromise is on the cards whoever wins. One reason perhaps why capital markets are so unfazed by the election.
Slightly better than expected growth in US jobs in October, 171,000 were generated, provided some support. Against that the unemployment rate increased from 7.8 per cent to 7.9 per cent reminding everyone that the economy is still not growing fast enough to generate enough new jobs for the expanding workforce.
These data were enough to encourage risk markets and base metals rose 2.8 per cent as measured by the LME base metals index. It is the case though that what happens in China is far more important to the demand side of the metal market than four percentage points of US growth. Unfortunately, there is very little in the public domain to help us second guess what might happen.
The only thing that seems certain is that the winner will do even better financially than ex US Presidents do. But then they have to recover their election expenses which are not really a problem for successful Chinese Premiers.
In both countries the winner will do all he can to boost economic growth, which is why the Fiscal Cliff probably won’t happen in the US. But economic growth comes in different flavours and the type that is important to miners and metal bashers is industrial production. This is making real stuff that hurts when you drop them on your foot, not fancy software that destroys your laptop battery life. And this is the real difference between these two economies. While US industrial production grew by 4.1 per cent in 2011 it was 13.9 per cent in China. In developed economies, like the US, IP growth is typically less than GDP growth while in developing economies the opposite is the case as the state builds infrastructure.
The market knows that whatever grand promises the candidates make to the voters the money is simply not there to deliver them. Words are cheap, cheques are not. More plausible is that voters will actually be worse off in four years’ time if the US finally starts to address its deep-seated budget problems.
In China the relationship might be less transparent. Nevertheless, the winner knows he has to keep the population gainfully employed or face civil insurrection. Keeping the workers busy in China is good for metal demand. And, unlike the US, it is a country that can afford to write big cheques.
Source >> www.minesite.com
*****
Words Are Cheap, Cheques Are Expensive
By Rob Davies
This year the two largest countries by economic activity will change their leaders. The media is focussed on the one that is costing US$6 billion for understandable reasons. However, the other one that is costing a fraction of that will actually have much more impact on the global economy, and hence on metal markets.
As the US approaches the last few days of campaigning the fact that the two candidates are neck and neck is as good an indication as any of how little different their policies are. The only question of note is which candidate is more likely to let the Fiscal Cliff actually occur on 1st January 2013. This package of tax hikes and spending cuts is needed to address the US deficit but is political disaster because it would reduce GDP by 4 per cent. Maybe a second-term Obama administration with nothing to lose may let it happen unchecked. But it seems unlikely. So a compromise is on the cards whoever wins. One reason perhaps why capital markets are so unfazed by the election.
Slightly better than expected growth in US jobs in October, 171,000 were generated, provided some support. Against that the unemployment rate increased from 7.8 per cent to 7.9 per cent reminding everyone that the economy is still not growing fast enough to generate enough new jobs for the expanding workforce.
These data were enough to encourage risk markets and base metals rose 2.8 per cent as measured by the LME base metals index. It is the case though that what happens in China is far more important to the demand side of the metal market than four percentage points of US growth. Unfortunately, there is very little in the public domain to help us second guess what might happen.
The only thing that seems certain is that the winner will do even better financially than ex US Presidents do. But then they have to recover their election expenses which are not really a problem for successful Chinese Premiers.
In both countries the winner will do all he can to boost economic growth, which is why the Fiscal Cliff probably won’t happen in the US. But economic growth comes in different flavours and the type that is important to miners and metal bashers is industrial production. This is making real stuff that hurts when you drop them on your foot, not fancy software that destroys your laptop battery life. And this is the real difference between these two economies. While US industrial production grew by 4.1 per cent in 2011 it was 13.9 per cent in China. In developed economies, like the US, IP growth is typically less than GDP growth while in developing economies the opposite is the case as the state builds infrastructure.
The market knows that whatever grand promises the candidates make to the voters the money is simply not there to deliver them. Words are cheap, cheques are not. More plausible is that voters will actually be worse off in four years’ time if the US finally starts to address its deep-seated budget problems.
In China the relationship might be less transparent. Nevertheless, the winner knows he has to keep the population gainfully employed or face civil insurrection. Keeping the workers busy in China is good for metal demand. And, unlike the US, it is a country that can afford to write big cheques.
Source >> www.minesite.com
*****
November 10, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, it looks like your concern when we last spoke about a big fall in gold stocks was a bit askew.
Oz. It was. Gold did what gold often does, make a fool of anyone who thinks he can tip short-term price moves. Having chastised myself about gold, as looked at through the lens of a week-in-review, it might also be said that Monday was a bad day with the recovery coming later in the week as the price climbed back over the US$1700 an ounce mark.
The net effect of that wobbly start, and a tense week which saw multiple external factors at work such as the U.S. presidential election and Chinese presidential anointment, was that gold won the week when compared with other metals, but the overall result was a market which went absolutely nowhere with most indices ending where they started.
The all ordinaries index fell by 1 point which, at 4482 points, is a percentage move down to the second decimal point. Metals and mining added 5 points (up 0.14 per cent) and gold starred with a rise of 65 points (up 1.1 per cent).
Minews. Hardly worth writing home about, but presumably there was some interesting news flow even if the market was flat.
Oz. There certainly was, and it’s continuing into the weekend. Of most interest to mining investors is that the first flush of optimism that we saw a few weeks ago about commodity prices and Chinese demand for minerals and metals is gathering pace. A number of close observers of China in the banking community published optimistic demand comments, including one from ANZ Bank which started “Improving backdrop for higher prices”, followed by HSBC which started by saying “start your engines” while also noted the Chinese presidential change was a positive development for commodity exporters and finally, there was a very upbeat outlook from Rio Tinto about demand for metals.
Minews. Offsetting the good news that you’re picking up is the latest act in the Greek tragedy and the march towards the U.S. fiscal cliff.
Oz. Points that cannot be ignored, but the view from this side of the world is that Europe is becoming less important because even if it muddles through a second recession next year the rest of the world is getting on with business, especially Asia where there seems to be a view that there is sufficient demand from fast-growing countries in the region to offset sluggish Europe.
...
Source >> www.minesite.com (The registration is free)
*****
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, it looks like your concern when we last spoke about a big fall in gold stocks was a bit askew.
Oz. It was. Gold did what gold often does, make a fool of anyone who thinks he can tip short-term price moves. Having chastised myself about gold, as looked at through the lens of a week-in-review, it might also be said that Monday was a bad day with the recovery coming later in the week as the price climbed back over the US$1700 an ounce mark.
The net effect of that wobbly start, and a tense week which saw multiple external factors at work such as the U.S. presidential election and Chinese presidential anointment, was that gold won the week when compared with other metals, but the overall result was a market which went absolutely nowhere with most indices ending where they started.
The all ordinaries index fell by 1 point which, at 4482 points, is a percentage move down to the second decimal point. Metals and mining added 5 points (up 0.14 per cent) and gold starred with a rise of 65 points (up 1.1 per cent).
Minews. Hardly worth writing home about, but presumably there was some interesting news flow even if the market was flat.
Oz. There certainly was, and it’s continuing into the weekend. Of most interest to mining investors is that the first flush of optimism that we saw a few weeks ago about commodity prices and Chinese demand for minerals and metals is gathering pace. A number of close observers of China in the banking community published optimistic demand comments, including one from ANZ Bank which started “Improving backdrop for higher prices”, followed by HSBC which started by saying “start your engines” while also noted the Chinese presidential change was a positive development for commodity exporters and finally, there was a very upbeat outlook from Rio Tinto about demand for metals.
Minews. Offsetting the good news that you’re picking up is the latest act in the Greek tragedy and the march towards the U.S. fiscal cliff.
Oz. Points that cannot be ignored, but the view from this side of the world is that Europe is becoming less important because even if it muddles through a second recession next year the rest of the world is getting on with business, especially Asia where there seems to be a view that there is sufficient demand from fast-growing countries in the region to offset sluggish Europe.
...
Source >> www.minesite.com (The registration is free)
*****
- Joined
- 10 June 2007
- Posts
- 4,045
- Reactions
- 1,404
Australian miners dig for precious new commodity cash
James Regan and Umesh Desai
SYDNEY/HONG KONG | Sun Nov 11, 2012 2:02pm EST
http://www.reuters.com/article/2012/11/11/us-australia-mining-idUSBRE8AA0CZ20121111
excerpts
James Regan and Umesh Desai
SYDNEY/HONG KONG | Sun Nov 11, 2012 2:02pm EST
http://www.reuters.com/article/2012/11/11/us-australia-mining-idUSBRE8AA0CZ20121111
excerpts
- Joined
- 10 June 2007
- Posts
- 4,045
- Reactions
- 1,404
Nov. 12, 2012, 5:30 a.m. EST
U.S. set to overtake Saudi in oil output: IEA
excerpt
U.S. set to overtake Saudi in oil output: IEA
excerpt
Country Stock Market Performance
http://www.bespokeinvest.com/thinkb...erformance-qtd-ytd-us-struggling-in-q4-1.html
http://www.bespokeinvest.com/thinkb...erformance-qtd-ytd-us-struggling-in-q4-1.html
November 17, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia. It looks like your market suffered another tough week.
Oz. It was pretty awful. Finding stocks that rose was a needle-in-the-haystack exercise, whereas finding stocks that hit 12-month share price lows was relatively easy. Like London and New York, the Australia market is being buffeted by the ill winds blowing off Europe, the US, and China.
If it’s not the US “fiscal cliff” worrying investors, it’s trying to understand what’s happening in Beijing, or it’s guessing when the official diagnosis for Europe switches from recession to depression.
Minews. Or all three.
Oz. Well, that’s the point, isn’t it? We seem to have stumbled through the recovery phase after the big meltdown of 2008 to have reached a sort of triple-witching hour as the world’s three biggest economies experience simultaneous crises.
The net effect on the Australian market last week was that the all ordinaries index shed 2.7 per cent, its worst weekly performance in six months. The metals and mining index did even worse, losing five per cent, and the gold index topped them all with a fall of seven per cent.
Worst hit were the smaller mining stocks that we follow most closely, with 39 of them trading down to 12-month share price lows, including some relatively big names such as the phosphate explorer, South Boulder (STB), the iron ore miner, Mt Gibson (MGX) and the uranium producer, Paladin Energy (PDN).
...
Source >> www.minesite.com
*****
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia. It looks like your market suffered another tough week.
Oz. It was pretty awful. Finding stocks that rose was a needle-in-the-haystack exercise, whereas finding stocks that hit 12-month share price lows was relatively easy. Like London and New York, the Australia market is being buffeted by the ill winds blowing off Europe, the US, and China.
If it’s not the US “fiscal cliff” worrying investors, it’s trying to understand what’s happening in Beijing, or it’s guessing when the official diagnosis for Europe switches from recession to depression.
Minews. Or all three.
Oz. Well, that’s the point, isn’t it? We seem to have stumbled through the recovery phase after the big meltdown of 2008 to have reached a sort of triple-witching hour as the world’s three biggest economies experience simultaneous crises.
The net effect on the Australian market last week was that the all ordinaries index shed 2.7 per cent, its worst weekly performance in six months. The metals and mining index did even worse, losing five per cent, and the gold index topped them all with a fall of seven per cent.
Worst hit were the smaller mining stocks that we follow most closely, with 39 of them trading down to 12-month share price lows, including some relatively big names such as the phosphate explorer, South Boulder (STB), the iron ore miner, Mt Gibson (MGX) and the uranium producer, Paladin Energy (PDN).
...
Source >> www.minesite.com
*****
BlackRock’s Hambro Bullish on Mines
According to fund manager Evy Hambro Chief investment officer of BlackRock’s natural resources equity team, the mining sector is at the moment “rife with investment opportunities.” These opportunities, arising from expected supply shortfalls, should help spur a recovery in share prices after a sustained period of weakness, he said in a note to clients. (NOV 16, 2012)
*******************
According to fund manager Evy Hambro Chief investment officer of BlackRock’s natural resources equity team, the mining sector is at the moment “rife with investment opportunities.” These opportunities, arising from expected supply shortfalls, should help spur a recovery in share prices after a sustained period of weakness, he said in a note to clients. (NOV 16, 2012)
*******************
November 19, 2012
LME Inventories Give A Clearer Guide To The Global Economy Than The Background Noise Surrounding The Fiscal Cliff And The Sell-Off In Junk Bonds
By Rob Davies
Given the walloping equity markets took last week the modest, 0.5 per cent increase in base metal prices, as measured by the LME index, looks like a good result.
Well... at least in the short term.
Quite why capital markets have taken fright now is one of those perennial mysteries mere mortals will always fail to understand.
The prospect of the US Government dealing with the “fiscal cliff” in the New Year is no more or less likely now than before the election.
In any event many observers would view a real attempt to tackle bloated government spending as a massive positive factor for the private sector in the long term.
The foreign exchange markets took it as an excuse to bid the dollar up but, as always, it is hard to know if that is because the US looks good or that Japan and Europe look even worse.
In terms of the metal markets the change of leadership in China was by far the most important event of the week, even though no one knows how Xi Jinping will rule.
He certainly has every incentive to maintain economic growth to keep the population on-side and that will be good for metal markets.
Perversely, mining shares came under pressure last week despite a rising dollar and a falling oil price. Why perverse? Because both those dynamics will act to moderate costs.
That will help maintain margins as long as metal prices don’t decline in sympathy.
Even so, all these short term movements are simply noise that is impossible to interpret. The US$607 billion that the “fiscal cliff” will take out of the economy is a signal, and a massive one at that. Unfortunately no one knows if it will happen and what the effects will be if it does.
In the same vein the sell-off in the junk-bond market in recent weeks may just be noise. Alternatively, it could be a signal that days of easy money for large corporations are coming to an end.
So, to get a better idea of what is going on we need to look at fundamentals rather than prices. In the metal markets few items are more crucial than the inventories of metal in LME and other warehouses. These have been remarkably stable for some time, although they are changing.
The metal with highest profile is copper and its inventory on the LME remains staggeringly low at 253,465 tonnes - in a market that consumes 20 million tonnes a year.
Even allowing for the estimated one million tonnes of additional inventory in China it is still an amazingly low figure. What is even more noteworthy is that stocks are this low four years into the worst economic conditions for sixty years.
To cap it all the LME inventories are now are even lower than the 358,250 tonnes they were at the beginning of the year.
But copper is the exception. LME inventories of aluminium now exceed five million tonnes. Although this is only slightly up on the 4.9 million tonnes held in inventory at the start of the year, it does help to explain the decline in the price this year from US$2,157 to US$1,931 a tonne.
Zinc inventories have also risen this year. They now stand at 1.1 million tonnes, a significant gain over the 818,000 reported at the beginning of the year.
Given that increase the price has done well to stay at US$1,906 a tonne. Compared to the US$1,944 a tonne it was trading at at the start of 2012, that fall could have been much worse. Or maybe the big fall has yet to happen?
Source >>> www.minesite.com
*****
LME Inventories Give A Clearer Guide To The Global Economy Than The Background Noise Surrounding The Fiscal Cliff And The Sell-Off In Junk Bonds
By Rob Davies
Given the walloping equity markets took last week the modest, 0.5 per cent increase in base metal prices, as measured by the LME index, looks like a good result.
Well... at least in the short term.
Quite why capital markets have taken fright now is one of those perennial mysteries mere mortals will always fail to understand.
The prospect of the US Government dealing with the “fiscal cliff” in the New Year is no more or less likely now than before the election.
In any event many observers would view a real attempt to tackle bloated government spending as a massive positive factor for the private sector in the long term.
The foreign exchange markets took it as an excuse to bid the dollar up but, as always, it is hard to know if that is because the US looks good or that Japan and Europe look even worse.
In terms of the metal markets the change of leadership in China was by far the most important event of the week, even though no one knows how Xi Jinping will rule.
He certainly has every incentive to maintain economic growth to keep the population on-side and that will be good for metal markets.
Perversely, mining shares came under pressure last week despite a rising dollar and a falling oil price. Why perverse? Because both those dynamics will act to moderate costs.
That will help maintain margins as long as metal prices don’t decline in sympathy.
Even so, all these short term movements are simply noise that is impossible to interpret. The US$607 billion that the “fiscal cliff” will take out of the economy is a signal, and a massive one at that. Unfortunately no one knows if it will happen and what the effects will be if it does.
In the same vein the sell-off in the junk-bond market in recent weeks may just be noise. Alternatively, it could be a signal that days of easy money for large corporations are coming to an end.
So, to get a better idea of what is going on we need to look at fundamentals rather than prices. In the metal markets few items are more crucial than the inventories of metal in LME and other warehouses. These have been remarkably stable for some time, although they are changing.
The metal with highest profile is copper and its inventory on the LME remains staggeringly low at 253,465 tonnes - in a market that consumes 20 million tonnes a year.
Even allowing for the estimated one million tonnes of additional inventory in China it is still an amazingly low figure. What is even more noteworthy is that stocks are this low four years into the worst economic conditions for sixty years.
To cap it all the LME inventories are now are even lower than the 358,250 tonnes they were at the beginning of the year.
But copper is the exception. LME inventories of aluminium now exceed five million tonnes. Although this is only slightly up on the 4.9 million tonnes held in inventory at the start of the year, it does help to explain the decline in the price this year from US$2,157 to US$1,931 a tonne.
Zinc inventories have also risen this year. They now stand at 1.1 million tonnes, a significant gain over the 818,000 reported at the beginning of the year.
Given that increase the price has done well to stay at US$1,906 a tonne. Compared to the US$1,944 a tonne it was trading at at the start of 2012, that fall could have been much worse. Or maybe the big fall has yet to happen?
Source >>> www.minesite.com
*****
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