Commodities / Raw Materials

[whiteheron]

Mick 100

I have made exactly the same observations as you
Makes you wonder doesnt it ?

Also , I was going through old papers the other day as part of a clear out and happened to look at a few of the so called experts comments from about six months to a year ago --- believe me ,they seem to be so tied up in technicalities and what has happened in the past that they completely forget what the BIG PICTURE now is
Most of their predictions have been so far off the mark it is a joke

[winner69]

put this on another thread but just as pertinent here

read this compelling article from an Aus commentator the other day saying much the same sentiments .... except he says BHP at $65

Briefly argument was ..... small end of resource sector is performing so strongly it is making BHP and RIO (the market leaders) look ridiculously cheap ... not just this making BHP smnd RIO cheap but compared to 15 times earnings for a Aussie bank, 20 times for a contractor, 30 times for a healthcare .... even Telstra is 15 times .... BUT BHP IS LESS THAN 10 TIMES EARNINGS ///none of thlse have the attributes like earnings growth, net assets, free cashflow growth, barriers to entry etc etc etc .... sees one day soon the brkers and analysts will give up their woeful attempts to forecast commodity prices and start basing their valuations on long term future curves .... resulting in brokers upgrades of 40% plus ... we are on the brink of a'seminal change' in how analysts value resource stocks .... and that one day investors will have decided to commit to major resource stocks ... they will be become acceptable for growth and value investors and fundies will need to be at leat at index if not greater .... based on true fundamentals and not rated as a resource company

Just like the rerating of News in 1999/2000 ..... a large mkt cap company and big component of the index that traded around $20 (pre split) for years and low multiplies compared to junior tech/media stocks and then in 2000 'investors capitulated on their bearish views and News rallied from $20 to $56 in SIX months ..... it was a monumental event and many funds were under exposed and many mangers lost their jobs

Get the gist

[Mick100]

Jim Rodgers is bullish on agricultural commodities

Interview

http://www.financialsense.com/fsu/editorials/schiff/2006/0414.html
,

[Mick100]

Downside to mining boom times
Email Print Normal font Large font By Ian Porter
April 15, 2006

INADEQUATE planning and a lack of skilled workers will result in many hundreds of millions of dollars being lost during this resources boom as major capital projects run late and get into difficulties during the start-up phase.

The losses will result in some projects becoming financial liabilities, which will either be mothballed or will destroy more shareholder value than they create, according to a leading consulting engineer.

And that is only if the project can actually be built, because the number of projects lined up for design and construction would need far more in skilled human resources than is available in Australia.

"Think back to the last investment cycle and you can think of several (projects) that failed because of poor start-up," said Skipp Williamson, the chief executive of Partners in Performance.

PIP specialises in getting large plants to run smoothly and has been called in on a number of high-profile projects such as the Bulong and Minara nickel plants and BHP's now-defunct HBI operation.

Ms Williamson said that many projects ran into trouble after completion as they ramped up production and, depending on how long it took to get right, that was where heavy financial losses could accumulate.

"If a project takes 18 months to ramp up to planned production instead of, say, nine months, they might have blown 40 or 50 per cent of the net present value of the whole project.

"Much of the value of the project lies in getting it right as fast as possible yet, while companies spend tens, sometimes hundreds, of millions of dollars on the design and engineering side, they spend insufficient amounts on planning and training for the ramp-up and operation phases."

While the engineering and construction side has become scientific, many companies tend to gloss over or even ignore the operational necessities.

"The money is made in the attention to detail," Ms Williamson said. She said companies needed to delve deep into the detail of how the plant was going to be run, what was expected of it and the personnel operating it before ramp-up began.

A common mistake is to look at the organisation chart for an operating plant and hire those people for the start-up, Ms Williamson said. "Start-ups are usually chaotic, and if one or two things start to go wrong then there is usually no one there to pick up the pieces."

However, an increasing number of projects were taking longer getting to the ramp-up stage because contractors could not find the skilled people needed to do the work, said Tony Barry, national president of the Association of Consulting Engineers of Australia.

While there are 270,000 engineers in Australia, half are working in other industries not related to project delivery. Of the rest, 100,000 were in management positions, leaving about 30,000 in the technical field doing the work, Mr Barry said.

When escalating materials costs were added in, the result was that projects might not be worth pursuing, he said. "As the costs rise, some projects simply will not proceed. The clients will take the view that the risk is too great at this point in the cycle and will decide to wait."

Mr Barry said delays in completion caused extra costs to mount quickly. "If you have spent $400 million of a $600 million budget and there is a six-month delay, that's half a year at 7 per cent on $400 million. And there's the double negative that income is not being generated.

"If it's a coal loader designed to carry 10,000 tonnes an hour, the revenue forgone in a six-month delay works out to a very big number."

[Mick100]

Chart on crude oil (looking bullish)

Paul Skarp

http://www.financialsense.com/fsu/editorials/skarp/2006/0416.html
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[winner69]

quote:Originally posted by winner69

...... small end of resource sector is performing so strongly it is making BHP and RIO (the market leaders) look ridiculously cheap ... not just this making BHP smnd RIO cheap but compared to 15 times earnings for a Aussie bank, 20 times for a contractor, 30 times for a healthcare .... even Telstra is 15 times .... BUT BHP IS LESS THAN 10 TIMES EARNINGS ......none of these have the attributes like earnings growth, net assets, free cashflow growth, barriers to entry etc etc etc .... sees one day soon the brkers and analysts will give up their woeful attempts to forecast commodity prices and start basing their valuations on long term future curves .... resulting in brokers upgrades of 40% plus ... we are on the brink of a'seminal change' in how analysts value resource stocks .... and that one day investors will have decided to commit to major resource stocks ... they will be become acceptable for growth and value investors and fundies will need to be at leat at index if not greater .... based on true fundamentals and not rated as a resource company



This is the SMH .... and they still don't get the big picture
http://www.smh.com.au/news/business/analysts-see-bhp-stock-at-35/2006/04/19/1145344154036.html

Analysts see BHP stock at $35

excerpts

......The world's largest mining company touched a new high of $31.59 before ending at a record closing price of $31.25.

....The resources industry is just not set up to grow at that sort of pace so you are getting this shortage of commodities, and commodity prices are just moving up."


..... As the commodity price climb has steepened, brokers have exploited a discrepancy between analysts' target prices for resource companies and the "spot" prices at which those companies sold the ores they dig out of the ground.

.....The gap exists because analysts tend to base forecasts on prices over time rather than on more volatile spot prices. As a result, their valuations typically lag a price boom. Brokers call this tendency to undervalue resource stocks "the biggest opportunity in world equity markets".


.... "In almost every company in our universe there is in excess of 10 per cent further upside in the 12-month forward period, and in some cases 20, 30 or 40-plus per cent in future years," Mr O'Connor wrote. He said historically low price-to-earnings ratios - in some cases into the single digits if calculated using spot prices - indicated the sector was still affordable.

[Skol]

Marc Faber reckons this commodity boom could go for 20 years and that commodities in the years 1998-2001 were the cheapest in the history of capitalism, but watch for short term volatility.
www.ameinfo.com/83176.html

[Mick100]

NEW YORK, N.Y., April 20, 2006 — The New York Mercantile Exchange, Inc., today announced margin changes for its natural gas, NYMEX miNYTM natural gas, Henry Hub swing swap, Henry Hub swap, and Henry Hub penultimate swap futures contracts, as of the close of business on April 21.

Margins for the first month of the natural gas futures contract will increase to $9,000 from $6,500 for clearing members, to $9,900 from $7,150 for members, and to $12,150 from $8,775 for customers. The margins on the second to sixth months will increase to $7,500 from $6,000 for clearing members, to $8,250 from $6,600 for members, and to $10,125 from $8,100 for customers. Margins on the seventh through 11th months will increase to $9,000 from $7,500 for clearing members, to $9,900 from $8,250 for members, and to $12,150 from $10,125 for customers. The margins on all other months remain unchanged.

Margins for the first month of the Henry Hub swap futures and Henry Hub penultimate swap futures contract will increase to $2,250 from $1,625 for clearing members, to $2,475 from $1,788 for members, and to $3,038 from $2,194 for customers. The margins on the second to sixth months will increase to $1,875 from $1,500 for clearing members, to $2,063 from $1,650 for members, and to $2,531 from $2,025 for customers. Margins on the seventh through 11th months will increase to $2,250 from $1,875 for clearing members, to $2,475 from $2,063 for members, and to $3,038 from $2,531 for customers. Margins on all other months remain unchanged.

Margins for the first month of the NYMEX miNYTM natural gas futures contract will increase to $2,250 from $1,625 for clearing members, to $2,475 from $1,788 for members, and to $3,038 from $2,194 for customers. Margins on the second month will increase to $1,875 from $1,500 for clearing members, to $2,063 from $1,650 for members, and to $2,531 from $2,025 for customers.

The margins for the first month of the Henry Hub swing swap futures contract will increase to $2,250 from $1,625 for clearing members, to $2,475 from $1,788 for members, and to $3,038 from $2,194 for customers.

http://www.nymex.com/press_releas.aspx?id=pr20060420b

================================================== =====

I see this as a desperate move by the authorities in an attempt to knock this commodities bull on the head. How can they claim that inflation is under control if commodty prices are going through the roof. There solution is to take down the commodities. These measures will have a short term affect but in the long run it comes back to supply vs demand.
The authorities are anticipating a crunch in nat gas supply with still about 20% of gulf gas offline from last yrs hurricanes.
One can be sure that these desperate measures are not going to increase the supply of nat gas.

.

[bermuda]

For those interested in the Chinese expansion dial up www.energybulletin.net and log on to Matthew Simmons 19 page slide preview on Politics and Economics April 20.Well worth a read.Simmons has the staff and resources to give a pretty accurate synopsis.

[Mick100]

CLEAN GOLD TO COST MORE
by Shailendra Kakani
Managing Editor, CommodityResearch.In
April 25, 2006


When gold glitters, it blinds lots of eyes. When its price jumps, other stories are quickly forgotten. During February when entire media was going ga-ga over gold price, a prominent news - which can have long term bearing on the price of the noble metal - was silently brushed aside.

The news of Newmont Mining having agreed to pay $30 million to Indonesian government to end the lawsuit regarding its malpractices in Sulawesi mines - 1,300 miles northeast of Jakarta, Indonesia - according to me, deserved much better attention.

To provide a backdrop, Newmont had been accused of dumping millions of tons of mercury and ****nic-based pollutants in open sea, and causing villagers to develop skin diseases and other illnesses.

Prosecutors had accused Newmont and its local boss, Richard Ness, of polluting Buyat Bay in Indonesia, from 1997 until 2004, the year the mine closed. According to the prosecution, this careless dumping had led to economic and health hardships for the people living around the bay. The consumption of poisoned water and fish had caused skin complaints among people living in nearby villages. Simultaneously, the fish stocks had plummeted, and babies were born with strange rashes and skin disorders. A doctor who examined the locals living there claimed that about 80 percent showed symptoms of poisoning by mercury and ****nic.

As could be expected, Newmont had refused the charges. The company had sung the song that is usually crooned in such cases: that "the residents' health problems are caused by poor hygiene and diet", that "it sticks to best practices", and that "more than 2,000 tonnes of waste it dumped daily into the bay at a depth of 82 metres remained at the bottom of the sea and did not enter the ecosystem."

By paying $30 million, Newmont has tried to place a lid on what promises to be a seriously simmering cauldron. Of course the $30 million payoff has no impact on another ongoing criminal trial of the U.S. gold mining giant's top local executive, Richard Ness, who is accused of knowingly dumping dangerous amounts of ****nic and other heavy metals in the same Buyat Bay.

If the trial runs its course, and if the company management is found guilty, Ness faces a ten year prison term and the company having to pay a hefty fine.

However the whole affair has brought the topic of environmental havoc caused by the mining companies into the limelight yet again. It is a well-known fact that the Western multinationals don't stick to the same safety norms that they do in their home countries. Bhopal in India is the most glaring example: Union Carbide did not apply the most basic safety measures which it would have in its US-based manufacturing units.

In Indonesia, the issue was Newmont's use of a waste disposal method, something known as submarine tailing disposal. It involves piping treated mine waste into the ocean, and is effectively banned in the United States under the Clean Water Act.

Various environmental groups in the US have in the past vehemently opposed this method. According to an article in the New York Times, " Washington's political risk insurance agency, the Overseas Private Investment Corporation, does not like the submarine tailing disposal system, either. In the late 1990's, the agency refused to give insurance to a mine operated by Rio Tinto in Papua New Guinea on the grounds that the mine's submarine tailing system would violate United States domestic regulations."

The tightening of noose by environmentalists at home is one reason why mining companies rush to third world, where they know they can bribe the officials, and arm-twist the local community leaders. This is precisely the case with Newmont. The same article in NYT suggests "...the company, concerned by the more stringent rules for mining permits in the United States, seeks greater growth from operations overseas, where environmental groups and, increasingly, government officials charge that it employs pra

[Mick100]

China, construction help copper shine By John Waggoner, USA TODAY
Wed Apr 26, 7:06 AM ET



Your copper plumbing has probably beaten your stock portfolio this year.

ADVERTISEMENT

Copper hit a record $3.408 a pound on the New York Mercantile Exchange Tuesday, fueled by huge demand from China, labor unrest in Mexico and fears of production slowdowns in Chile.


For the day, April copper futures gained nearly 21 cents a pound, a 6.7% gain. This year, copper has soared 62%, according to the New York Mercantile Exchange, vs. a 4.3% gain for the Standard & Poor's 500-stock index.


The world economy has been growing strongly, and economic growth typically boosts demand for copper, which is used in plumbing, electronics and automobiles.


China is one of the most potent economic engines. "They're snapping up all the copper supply they can get," says Richard Asplund, chief economist for the Commodities Research Bureau. China's gross domestic product grew at a sizzling 10.1% annual pace in the first quarter.


But it's not just China, says S&P analyst Leo Larson. "Japan's economy is coming back, and the U.S. economy is growing stronger," he says.


The U.S. housing boom has lifted copper demand, too. Building accounts for 46% of all U.S. copper use - the average single-family home uses 440 pounds.


Many homes now use plastic pipes, but autos may be using more copper soon. "Open the hood of a hybrid car, and you'll see the copper wire in its electric motor," says Ken Heebner, manager of CGM Capital Development fund.


Yet supply remains tight. A strike at a mine owned by Grupo Mexico, the world's seventh-largest copper producer, could further restrict supply. Miners in Chile, the largest copper-producing country, are threatening to strike, too.


Water shortages in Chilean mines could slow production more. Copper processing requires huge amounts of water, and many Chilean mines are near the Altacama desert. Chile's government recently limited how much water the Dona Ines de Collahuasi copper mine can use.


The bull market in copper has pushed up the prices of other metals, too. Silver closed at $12.56 an ounce Tuesday, a 23-year high. Zinc closed at an all-time high of $3,411 a metric ton.


Big price rises mean that it likely costs more than a penny to make a penny now. The U.S. mint says it cost 0.97 cents to make a penny last year including labor; sharp increases in zinc and copper may have pushed that above 1 cent. A penny is 97.5% zinc, 2.5% copper.

[Mick100]

GOLD: MUCH MORE TO GO

Mary Anne & Pamela Aden

Gold is soaring. Today it rose over $18 and reached yet another new 25 year high.

Silver has been in a league of its own. It's been soaring too and it's been even stronger than gold. The other metals and oil are surging as well, and so are gold shares, energy and natural resource shares.

So what's driving these markets? Essentially, it's a combination of financial and geopolitical factors. But many are now warning that these markets are overdone and they'll soon be headed lower. And while downward corrections are certainly normal in any bull market, we wouldn't bet against these bull markets.

Why? Because something much larger is currently happening for the first time in about 25 years. It's the mega upmove in commodities and tangible assets, which is poised to last for many more years (see chart). Aside from geopolitical and financial factors, this mega uptrend alone is going to be very bullish for the metals in the years ahead and we feel it's important to understand this very big picture.

THE MEGA COMMODITY CYCLE

Marc Faber writes a great, always informative newsletter and he discusses these cycles in depth, which were studied by the Russian economist, Nikolai Kondratieff and are, therefore, referred to as the Kondratieff waves. These waves last between 45 to 60 years from peak to peak and the rising waves are characterized by rising commodity prices, new innovations, social upheaval, global economic power shifts and wars.

Briefly, new innovations, which tend to occur during the preceding cost cutting down wave, result in new countries competing on the world stage. This increases global tension because the new competitors (like China today) erode the old economic powerhouse's share of world markets. It also creates wealth imbalances at home, leading to possible social unrest, and wars abroad. This recurring pattern has happened throughout history. It's been documented going back to 1780 and it's now happening again.

Previous Kondratieff upmoves, for example, coincided with the following innovations: in the first one there was road, c*****and bridge construction; in the second it was railroads; third was electricity, radio, telephone and autos; in the fourth it was electronics and aerospace and now in the fifth upswing it's telecommunications and internet.

These rising waves also coincided with the following wars and revolutions, to name but a few: the U.S. war of Independence, French Revolution, Napoleonic wars, Austro-Hungary Revolution, U.S. Civil war, Spanish-American war, Chinese Revolution, World War I, Russian Revolution, World War II and the Vietnam war.

WHERE ARE WE NOW?

These mega Kondratieff upmoves normally last around 22 years or more and since we're only six years into this mega upmove, it still has many years to go. This means commodity prices will likely be rising for the next 15 years or so. This tells us that you'll want to keep a large portion of your assets in tangible assets like gold, other metals and commodities, and not in paper assets like stocks and bonds.

Gold's mega uptrend since 2001 is reinforcing this. The booming rise in oil and the ongoing demand in the face of diminishing supplies in the years ahead is yet another reinforcement of this emerging mega uptrend.

Those who recognize this will profit handsomely. But those who follow the mainstream and keep a large portion of their savings in common stocks, especially those approaching retirement age, will be disappointed. And while we certainly don't have a crystal ball, the markets and history are also telling us we're going to be in for a period of wars and social unrest in the upcoming years.

In other words, what we've seen in recent years is going to continue and it'll probably intensify. This too will provide an underlying boost for gold because it tends to rise along with global tension. And considering that gold hit over $2000 an ounce in 1980 at the last Kondratieff peak, adjusted for inflation, it still has a long way to go in the years ahead

[Mick100]

Clive Maund on gold and commodities

http://www.gold-eagle.com/editorials_05/maund043006.html
.

[Mick100]

Jim Rodgers interview

http://www.resourceinvestor.com/pebble.asp?relid=19298
,

[Mick100]

Gold versus oil

Steve Saville

http://www.gold-eagle.com/editorials_05/milhouse050206.html
,

[croesus]

Thanks for the links Mick. espicially the Jim Rodgers interview, although I regrettably followed him into Pasminco, I think the guy talks good common sense.
cheers Croesus

[Mick100]

SOFTS VS. HARDS
by Shailendra Kakani
Managing Editor, CommodityResearch.In
May 4, 2006


The commodity world aficionados have often been divided in two camps: softs and hards. Those who favor soft commodities like agro products, meat, and other renewable products, feel they are being run over by hard commodities like base metals, precious metals, and energy. Surely, so far it has been so. Softs have risen during last couple of years, but not as much as the hard ones.

As of now, most of the hard commodities are trading at their highs since the beginning of 2001. Right now Aluminum is up 94%, Gold is up 164%, silver is up 182%, platinum is up 159%, zinc is up 220%, lead is up 252%, copper is up 410+%, crude oil is up 300%, nickel is up 358%, butane is up 330%, and natural has is up a whopping 600+%.

On the other hand grains remain the most inexpensive commodities. Presently, they are at a 200-year low against oil, and multi decade low against a host of hards. Wheat, rice, coffee, cuminseed, there are so many softs which have hardly seen the price growth.

One of the reasons is that the governments have been artificially keeping their prices low, in order to keep their vote banks happy, and inflationary pressures under control. This is often done by doling out vast subsidies to the agriculturists and those trading in agricultural goods. Farmers are supplied extremely cheap fertilisers and insecticides to synthetically suppress the price of the output.

The second reason is that the coming of Green Revolution has somehow instilled an unprecedented confidence in the mind of the people that the grains will always be grown easily, and in increasing abundance. Not having extensive agricultural background, many investors feel growing more softs is simply about dousing the crops with a little more urea and ammonium di sulphate. So why pay a premium?

Among the rising softs sugar is the truly interesting story. It has performed very well in this bull market, but for reasons that would exhibit the characteristics of a hard commodity. It recently hit a 25-year high not because more people are putting sugar in their coffee, but rather due to the huge increase in ethanol demand.

Sugar happens to be a common compound in ethanol production with well over 50% of the global ethanol supply coming from it. Ethanol consumption has significantly increased over the years and its demand is expected to continue to rise sharply in the years to come. As more and more countries are adopting ethanol as an alternate energy source the world is likely to face a supply-deficit in sugar.

So much is the attention on ethanol that both the New York Board of Trade (NYBOT) and the Chicago Board of Trade (CBOT) recently introduced futures contracts for sugar-derived ethanol. Because of this it is quite possible we may see gains in sugar that exceed the 282% we’ve seen since 2000.

So in which camp do I belong?

Although I am certainly a lover of hards, simply because they are much more finite, and closer to extinction, I am not less bullish on softs either. The first reason is that softs as of now are unnaturally priced low. The mass-scale infusion of subsidies, suppressed cost farm inputs, and a dictatorial control over the price of the final produce somehow manages to keep a tight lid over the prices of softs. However, once things begin boiling and pressure mounts inside in the shape of governments having lesser and lesser control, the lid is likely to be blown away.

More, the rising cost of hards in turn is likely to drive the price of softs. Very few people are aware that every soft commodity requires lots of hard commodities to grow. A farmer may grow wheat or rice or may have pepper vines around coconut trees on his farm land, but in the end he needs to use chemical fertilisers, pesticides, acaricides, rodenticides, and nematocides. The manufacture of all these requires hard commodities. Similarly tractors, combines, ploughs, are all made of base metals. And lastly, all farm machinery requires fossil fuels and other forms of

[Mick100]

OIL, SILVER, AND FEAR
by Jennifer Barry
www.discountsilverclub.com
May 5, 2006


Many people have heard of the relationship between oil and gold, but there is also a correlation between oil and silver. Back in the bull market of the 1970s, silver and oil prices generally moved together.

Adam Hamilton of Zeal Intelligence notes that oil and silver had a .78 correlation from the 1973 oil crisis through the blow off precious metals top in 1980 (see http://www.zealllc.com/2005/sor.htm for some great charts). This makes sense when you realize that mining is very energy-intensive, so higher oil prices should eventually force metal prices upward.

Like other commodities, both oil and silver experienced overinvestment during the bubble of the late 1970s. When the demand dropped below available supply in the 1980s, prices dropped precipitously. OPEC countries like Saudi Arabia pumped so much petroleum that supply periodically flooded the market. In contrast, consumption of silver has outpaced mining for over 60 years according to Ted Butler. Unlike oil, the silver price had to battle both excessive short positions and dishoarding of silver stockpiles by the U.S. government.

There was much more silver available 26 years ago, yet in relative terms, silver is over 9 times cheaper today! The Federal Reserve's own inflation calculator states that silver would have to pass $132 per ounce in order to surpass the 1980 spike high in today's depreciated dollars.

So why did silver surge dramatically in 1980? I believe that much of the demand for silver in the late 1970s was monetary. People inside and outside America lost much of their faith in the U.S. dollar.

Richard Nixon severed the last tie between the dollar and gold in 1971. At that time, the U.S. was running a trade deficit, the Vietnam War was increasingly unpopular, and consumer price inflation was accelerating. The stock market was performing poorly, and more and more investors switched to hard assets to try to protect their wealth.

Eventually, they placed their trust in silver and gold which have been real money for thousands of years.

The price move in precious metals turned parabolic and unsustainable.

Like any mania, the bubble had to burst. People were willing to switch back to the dollar and paper assets because they had become cheap compared to tangibles. Paul Volcker, the Federal Reserve Chairman from 1979 through 1987, had the will to tighten the money supply which pushed the prime rate over 20%. Paper assets became attractive once again, and the stock market began to appreciate.

During the stock market boom of the late 1980s and most of the 1990s, the silver/oil relationship became quite weak. Oil experienced some spikes, especially during the first Gulf War, while silver was generally flat or declining. When you factor in inflation, the price of silver dropped to 600 year lows.

Recently, it seems that silver is trying to catch up to oil to assert its traditional relationship. The silver/oil ratio slipped to a record low of .09 last year, requiring over 11 ounces of silver to buy one barrel of oil. Today it takes about 5 ounces. According to Hamilton's research, since 1981 the silver/oil ratio has averaged .26, or about 4 ounces to every barrel of oil. If the petroleum price remained stagnant, silver would have to jump to $18 an ounce just to revert to the mean. However, when prices correct upward they usually blast past the average. One standard deviation above the mean would equal $23.46 silver, and that's at an oil price of $69. Increase the oil price or have volatile silver jump up another standard deviation or two as it has in the past, and we could see some real fireworks.

Oil has plenty of reasons to continue its upward march. Mainstream networks like CNN have reported that there is less oil available than previously thought. Many major oil fields like Cantarell in Mexico, and Burgan in Kuwait have peaked. No matter what technology is used, they will produce fewer barrels per day in the future.

Remarkably, 22% of oil produ

[Mick100]

C change: red-letter day as Treasury heeds China's role
Email Print Normal font Large font By Tim Colebatch, Canberra
May 11, 2006


THE economic growth of China and India could deliver Australia not only a short-term commodity price boom but a lasting rise in export earnings that will mean growing living standards and significant and at times painful shifts in resources, federal Treasury has forecast.

Treasury has been wary of the "supercycle" theory — that we have entered a lengthy resources boom — but in the budget papers it concedes for the first time that this theory could be right, and the implications for Australia will be profound.

Treasury now calls the rise of China and India a "major tectonic shift" in the world economy that will cause "seismic disturbances" around the world, and will also lift Australia, thanks to its wealth in resources.

In the past four years, Bureau of Statistics figures show, most of the growth in Australia's exports of goods has been to China and India, and two-thirds of all export growth has been in sales to developing countries.

Exports to China and Hong Kong have jumped from $12 billion to $20 billion while exports to India have almost trebled, from $2.5 billion to $7.3 billion. Japan remains by far Australia's biggest customer, buying almost $30 billion from us in the 12 months to March, up from $24 billion four years earlier.

Treasury predicts that in 2006-07, the opening of new mines and expansion of existing ones will see Australia's export volumes finally take off after years of stagnation, rising 7 per cent, while prices flatten.

While cautioning that it is not certain that China and India will be able to sustain their rapid growth, it says China alone could provide more than half the growth in the world's demand for commodity imports for some time.

"If we are at an early stage of a long-lived change in Australia's comparative advantage, this change is likely to generate significant reallocation of activity among major sectors of the economy," Treasury says.

Workers and capital would have to move out of manufacturing, and even trade-exposed services sectors, into mining and the sectors supplying it. At the same time, increased global competition for skilled migrants would make it harder for Australia to attract them.

"There is a compelling case for helping to enhance individuals' capacity to adjust to economic changes that have adversely affected them, and hence an important role for education and training policies geared to this outcome," it said.

[Mick100]

Commodities - New highs or the same old lows

http://www.financialsense.com/fsu/editorials/2006/0509.html
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[Mick100]

Commodity boom built on solid ground
Email Print Normal font Large font By Alex Wilson
May 12, 2006


THE booming Chinese economy is driving a "step change" in the commodities market that will leave prices at high levels for years and continue to generate bumper profits for miners, a new report says.

In a report released yesterday investment bank Goldman Sachs JBWere upgraded its long-term commodity price forecasts by between 20 and 30 per cent.

Its resource analysts have firmly backed the so-called BRICs story, which holds that rapid growth and industrialisation in Brazil, Russia, India and China has ratcheted prices to a new level.

"We believe we are witnessing a structural shift in commodity prices and demand growth and this provides a super normal profit environment for incumbent producers and valuable growth options," the report said.

Taking into account future production and predicted demand, Goldman Sachs has raised its long-term forecast for the price of copper by 29 per cent, iron ore by 21 per cent, zinc by 37 per cent and oil by 33 per cent.

The analysts also boosted the group's short-term forecasts for commodities across the board.

Gold is now forecast to trade between $US630 and $US850 an ounce, with a bias to the upside, after a previous forecast range of $US550 to $US700 was overtaken by the actual price.

Goldman also believes Australia's major iron ore producers will win 15 per cent increases in this year's negotiations with Asian steel makers, up from an earlier forecast of a 10 per cent rise.

It then expects contract iron ore prices to be flat next year and drop 10 per cent the following year.

Following on from its bullish forecasts, Goldman also boosted profit forecast for Australia's heavyweight miners.

It has lifted its earnings per share (EPS) forecasts for BHP Billiton by 4 per cent for 2005-06, by 19 per cent for 2006-07 and by 7 per cent for 2007-08.

It now expects BHP to register an Australian record net profit in 2005-06 of $US10.7 billion ($13.84 billion), followed by $US11.4 billion in 2006-07 and $US10.2 billion in 2007-08.

Rio Tinto's EPS forecasts are up 13 per cent in 2006, 19 per cent in 2007 and 13 per cent in 2008.

Goldman is expecting the miner to post a net profit of $US7.1 billion ($9.19 billion) in 2006, $US6.3 billion in 2007 and $US6 billion in 2008.

The report said suppliers of commodities had been struggling to keep pace with soaring demand.

"In many commodities, operations are running at 100 per cent of capacity, and the incidence of companies failing to meet their production targets is rising," it said.

At the same time the quality of projects being developed had weakened, especially in base metals.

"Today's potential projects are typically smaller and lower in grade than those of 10 years ago," the report said.

Costs for producers were continuing to rise and, with much of the increase structural, looked set to stay high, the report said.

[Mick100]

China vows to stockpile mineral reserves
By Xiao Yu Bloomberg News

WEDNESDAY, MAY 10, 2006


BEIJING China aims to build up strategic reserves of minerals such as uranium, copper and aluminum to help meet rising demand and provide a buffer against supply disruptions, the Ministry of Land and Resources said.

The nation aims to have "sufficient reserves" of uranium, and will start to amass stockpiles of copper, aluminum, manganese, tungsten and other minerals in the next few years, the ministry said in a statement on its Web site Tuesday.

The term "sufficient reserves" was not defined, and there were no specific targets for the eventual size of the mineral holdings.

"China is at a new stage of industrialization," Zhou Ming, a Shanghai-based metals analyst with Guotai Junan Securities, said Wednesday. If China wants "to have a voice in international trade and ensure its interests are unhurt, while sustaining growth, it must control enough of the world's key resources."

China, the world's biggest consumer of steel, copper, and aluminum, is building up the reserves to ensure stable supplies for its economy, which grew 10.2 percent in the first quarter. The growth, the fastest among the world's major economies, has contributed to a surge in many metal prices to records this year.

China has already announced plans to begin building a strategic oil reserve as early as this year. The government has also urged companies such as Aluminum Corp. of China, the world's second-largest alumina maker, to secure raw materials overseas to make sure the nation's metals needs are met.

The government and companies will jointly invest to build up the mineral reserves, the statement said, citing a five- year government plan. It didn't say how the reserves will be managed.

China's State Reserve Bureau currently oversees the nation's commodities reserves, including those in copper and steel. The bureau has lost hundreds of millions of dollars since late last year covering wrong-way bets on copper as the metal climbed to a record, Chinese traders have estimated.

The ministry said it will step up domestic exploration and increase the country's proven reserves of iron ore by 5 billion metric tons, of copper by 20 million tons and of bauxite by 200 million tons by 2010. Bauxite is used to make aluminum.

The ministry wants to increase proven reserves of oil by 4.5 billion to 5 billion tons; natural gas by 2 trillion to 2.25 trillion cubic meters; and coal by 100 billion tons, the statement said.

Copper futures in London have gained 78 percent this year and touched an all-time high of $7,831 a ton Tuesday. Nickel futures have gained 48 percent, and zinc has jumped 82 percent in the same period.

The rise in commodity prices has also been underpinned by an increase in speculative investment in metals and energy by hedge and pension funds seeking better returns than from stocks and bonds. Money in commodity index investments may rise 38 percent to $110 billion this year, Barclays has estimated.

China and Australia, the world's second-biggest uranium exporter, signed agreements April 3 allowing Asia's biggest energy consumer to tap nuclear fuel worth 100 billion Australian dollars, or $71.4 billion, for power generation. Exports to China of the fuel may start within four years.

BEIJING China aims to build up strategic reserves of minerals such as uranium, copper and aluminum to help meet rising demand and provide a buffer against supply disruptions, the Ministry of Land and Resources said.

The nation aims to have "sufficient reserves" of uranium, and will start to amass stockpiles of copper, aluminum, manganese, tungsten and other minerals in the next few years, the ministry said in a statement on its Web site Tuesday.

The term "sufficient reserves" was not defined, and there were no specific targets for the eventual size of the mineral holdings.

"China is at a new stage of industrialization," Zhou Ming, a Shanghai-based metals analyst with Guotai Junan Securities, said Wednesday.

[Mick100]

A BOTTOM FOR GAS?
by Roger Conrad
Editor, Utility & Income
May 12, 2006


Ethanol-powered cars, oil from shale, tar sands: The financial media is rife with hype about alternative fuels that will supposedly kick America's ever-more precarious and costly dependence on Middle East oil.
All of these would-be solutions, unfortunately, have a major problem: They're not economic unless energy prices are at very high levels.

Take Canada's tar sands. Using today's technology, there's theoretically as much potential oil there as under all of Saudi Arabia. The problem is using the technology is extremely expensive.

In fact, based on what we've seen so far, increasing the scale of operations doesn't help with costs.

The leading developer of Canada's oil sands is the Syncrude venture, which is essentially a partnership between giant energy companies including CONOCOPHILLIPS (NYSE: COP). Realizing that developing oil sands would be expensive and risky, ConocoPhillips and others decided to pool their interests into one giant project, limiting overall financial risk to each member.

Thus far, the partners' ambitious development program has been basically successful. Plans to ramp up output in stages are still more or less on target, despite some unforeseen delays, and Syncrude looks set to continue the expansion.

Syncrude's progress is best reflected in the performance of its tracking stock, CANADIAN OIL SANDS INCOME FUND (TSX: COS.UN, OTC:COSWF). Organized as a Canadian trust, the Fund's only asset is an ownership of a little over one-third of Syncrude. First quarter distributable cash flow per share rose 50 percent, enabling management to boost the actual dividend by 50 percent. Coupled with a 5-for-1 stock split, those results have spurred Canadian Oil Sands' shares to new heights.

Syncrude/Canadian Oil Sands' costs, however, surged to more than $35 per barrel of oil produced. That's more than twice levels of two years ago, and continues a trend in place virtually since Syncrude was formed.

With oil prices more than twice even those levels, the rising cost of Syncrude's output obviously hasn't raised too many concerns. And as long as oil prices continue to rise--or at least avoid a major breakdown--investors will largely ignore the issue. The fact that costs and output are increasing exponentially at the same time does, however, present remarkably different economics from conventional energy projects.

When an ordinary oil or gas well or coal seam is developed, much of the cost is incurred up front. Roads must be built, equipment must be set up, workers must be hired, facilities and supply chains must be put in place and the most profitable methods of exploitation must be sorted out. While this is being set up, the ratio of ordinary operating costs to the amount of oil equivalent produced will be very high. As output is ramped up, however, the ratio tends to fall dramatically, boosting profit.

The fact that oil sands production appears to work in precisely the opposite way--Syncrude's cost per barrel of oil equivalent produced has risen along with its output--indicates remarkably different economics. Producers must rely on ever-higher oil prices in order to increase or even hold market share.

There are many reasons for the rising costs. One is that electricity is so essential for processing what's mined into useable fuels.

Greater demand for power has pushed up its price in the region, as well as demand for natural gas to run the plants, which in turn has increased prices of both gas and power. Another is the enormous amount of waste generated by producing oil from tar sands that must be disposed of (which, by the way, is far greater than waste generated from producing conventional oil and gas).

Regardless of cause, however, it's clear that this is not a fuel source that would survive a return of $30 or even $40 per barrel oil. The more we rely on it, the less likely we'll see a return to those levels, since such a drop would automatically curtail production and hence drive prices back up. Bu

[airedale]

Hi Mick, gas producers!:) NEO continues to look promising[8D]

[Mick100]

Gold Mining Stocks and the Current Sell Off in the Metals

Kenneth J. Gerbino

This is not the final blow off for gold but could be a major consolidation and pullback that could last from two months to two years (like 1974-76)


Gold mining dehedging will be a stabilizing factor for gold as many companies try and close out horrible hedge book positions and cover. This will be a strong influence to halt any major price declines.


Since all the metals are getting hit hard at the same time, this appears to be big fund action and now momentum players will follow and exit.


If there is any central bank that wanted to add some gold to the kitty without upsetting their colleagues they will show up in the next few weeks or months.


The gold correction should be looked at from two basic global technical aspects. 1) Using a base of approx $400 gold for all of 2004, one could expect a 33% retrenchment of the move to $700. 33% of this $300 move , would be $100. So a target here would be $600 gold. 2) Using the shorter term base of 2006 ( Jan- March of approx $570) then the move to $700 would be $130 and using a short term 50% retrenchment (due to the short term nature ) would be $65 or a target of $635. These numbers work for traders as well as jewelry buyers in Asia and India. So a $600-635 price target may be reasonable.


The major move in gold will occur years from now when inflation is everywhere and at very high levels (8-12%) and people from China, France, the U.S. and other countries are stampeding into gold. The last few years are only the first leg of gold catching up with toothpaste, donuts and coffee. The big move is coming later.


Major mining companies are in acquisition mode and this is a long term bullish sign as these players are extremely conservative and rarely speculate (as opposed to small exploration companies) ABX taking over PDG. Teck-Cominco merger and now Teck-Cominco going after Inco. There are others. They know the supply-demand equation for the metals is long term very favorable.


The dollar needed a rest from its 8% sell off in the last 10 weeks and is rallying. Gold is responding to this. The other base metal sell offs are more likely to respond to other factors and that is why this coordinated selling is most likely fund driven and many funds are new to this arena…so expect plenty of volatility.


50 day moving averages will probably bring in some support. I would suggest that long term investors in this sector protect profits, raise some cash and remain at least 60% invested as we are still in a bull market in the precious metals. But caution is advised. All metals are very pricey. The easy stuff is over.


A hard look at 1974-76 would be a smart thing to do. This was a tough time for gold and the mining shares but it was only a rest from the 1968-73 run up and a prelude to the blast off from 1976 to 1980. This may be a re-run..


Remember gold mining stocks that can mine gold at $250 gold or lower make fortunes at even $500 gold …so don't throw out the baby with the bath water just because a much needed correction is now showing up.


Please visit our website for other articles on gold and the mining sector. www.kengerbino.com



Kenneth J. Gerbino
15 March 2006

Kenneth J. Gerbino & Company
Investment Management
9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
Telephone (310) 550-6304
Fax (310) 550-0814
E-Mail: kjgco@att.net
Website: www.kengerbino.com

[Mick100]

I'll be riding out this correction the same way I have in 04 and 05. That is to sit tight until things have bottomed out, which may take a couple of months, and then watch to see if any of the shares in my portfolio are at bargain prices and add to those positions.

Some of the "ask" prices on the miners were at extreme lows this morning meaning that some investors were freaking out - probably those people who have jumped in in the past 6 months.
It's times like at present that one has to remind oneself of the big picture - we are in the early stages of a long term bull market in commodities and a healthy bull market does not go up all the time until it reaches the blowoff stage at the end. It's two steps forward followed by one step back and so on.
,

[Mick100]

There's alot of talk about rising interest rates and a reccession in the US at the moment
Even if the US goes into reccession, which is highly likely over the next 12 months, that doesn't mean that the commodities bull will end. Demand for oil, steel etc is growing strongly enough in asia to take up any slackening in demand from the US. The chinese are not going to sell their cars and start riding bikes again. The chinese can also revalue their currency again, if the USD tanks, which would make their imported resources cheaper for them. The day will come when the chinese will stop using their trade surplus with the US to support the US consumer through the purchase of US debt. The domestic consumer in china will, one day, take the place of the US consumer who are currently buying chinese manufactured goods.

Commodities bull markets come about through an inbalance in supply and demand for resources. Demand does drop off during reccessions but if this drop off in demand is matched by a drop off in supply then prices still rise.
This is what could happen with oil over the next couple of yrs. High oil prices will lead to some mining operations, particuarly low grade, to become uneconomic which in turn reduces the supply of these mined resources as well.

The large increase in the prices of some commodities has not,so far, lead to a huge increase in supply - the amount of gold mined this yr will be less than last yr.
.

[Packersoldkidney]

Gold going great guns tonight....good indicator of what is tradable tomorrow on the ASX.

[Sharpie]

Gold hit about $717 with the asian markets open but then dropped back to the high $680's with the US. Copper down 18 cents to $3.60, zinc down to $1.50ish.

DOW and FTSE down almost 2% and 3% respectively.

Could well be a repeat of Tuesday with a bit of panicked selling.

A drop followed by a bounce back followed by another drop highlights that it is correction time.

Obviously portfolios will take a hit but a good time to go shopping in the next few days/weeks if you got a bit of CA$H lying around.

Any picks on how low gold/silver/copper/zinc etc will go before the next big up leg.

I will have a guess at $640/$11.50/$3.00/$1.25.

Happy shopping.

[Mick100]

quote:Originally posted by Sharpie


A drop followed by a bounce back followed by another drop highlights that it is correction time.


Happy shopping.


I tend to agree sharpie

I think we may see 2-3 months of consolidation rather than a big pull back. I have no idea how low prices will go. This will shake out the momentum players who have been playing this market and there's probably quite a few of them. But there is also a widely held view now, that commodities are in a long term bull market so many investors and fund managers may take this opportunity to get into position on the long side. This should prevent prices from falling too far.

I am in no hurry to add to positions at the moment.
.

[GB]

Mick you r %100

[Mick100]

China faces twice the price hike for ore
Andrew Trounson
May 19, 2006
CHINA has been left fighting virtually alone after Japan's steel mills yesterday accepted another big hike in iron ore prices this year, double the increase Beijing is contemplating.
Rio Tinto joined Brazil's CVRD in announcing the Japanese had accepted a 19 per cent increase in the price of iron ore fines, or powder, in line with CVRD's deal earlier in the week with German steel mill Thyssen Krupp. But the Japanese are believed to be holding out for a slightly smaller rise for premium lump iron ore.

By late last night BHP Billiton had not announced a settlement but was expected to win a similar increase.

BHP last year incurred the wrath of both China and Japan by unsuccessfully demanding an extra premium on its prices to reflect the cheaper cost of freight from Australia relative to Brazil.

The price of Rio's Hamersley iron ore fines to Japan has increased by $US7.50 to $US47 a tonne. A similar 19 per cent increase would raise the price of lump iron ore by $US9.58 to $US59.99 a tonne. But the Japanese could be demanding that the increase be limited to $US7.50 as for fines, which would imply a 14.8 per cent rise in lump to $US57.91.

"This year's pricing reflects the current international market, which is characterised by extremely tight supply and a continuing high level of demand," Rio iron ore head Sam Walsh said.

Lead Chinese negotiator Baosteel said a 19 per cent rise was too much.

"We will continue separate talks with suppliers on our own," Liu Yongshun, Baosteel's lead iron ore negotiator in Shanghai, told Bloomberg.

Earlier, the China Iron & Steel Association had warned that any settlement had to take its needs into account.

"A decision made without considering the needs of the Chinese market would not be accepted by the Chinese steel industry," it said. "The negotiations must consider the long-term interests of both supply and demand sides, in order to achieve a win-win result."

The Chinese had been seeking to lock miners into a two-year deal under which any increase would be recouped by a corresponding price decline in 2007-08. But with some analysts tipping prices to remain strong for the next year, or even two, as mine supply struggles to expand in time with demand, there was little incentive for miners to accept such a deal.

Having fought so hard to take control of these negotiations away from the traditional price setters in Japan and Europe, Beijing will be bitter at the outcome, but China is expected to grudgingly accept the increase.

If not, it risks having to pay higher prices on the spot market. Spot prices are driven by Indian export prices that are supported by an export tax imposed by Delhi to sustain iron ore reserves for its own steel industry.

"I think the ground they are standing on is getting weaker by the hour as these settlements come in," ABN AMRO resources analyst Robert Clifford said.

ABN AMRO had forecast a 10 per cent price rise, and Mr Clifford now expects to raise his earnings forecasts for BHP and Rio Tinto by 2 per cent and 3 per cent respectively.

[airedale]

Hi Mick, a few weeks ago, as gold worked its way up to its recent climax, Mike Swanson forecast a pullback in the SP for the middle of May.He was right on, and I will be watching for opportunities to add to my positions.

[ASXIOU]

Gold getting absoutely slammed in New York as I type: down to $661.80......

[Packersoldkidney]

Into the 650's for gold.....massive smackdown in one night: all the speculative money is pouring out of gold in the space of a few nights.

Base metals are getting thumped around as well.

Dow flat.

[Packersoldkidney]

Looks like another Red Letter Day on the ASX come Monday!!

[Mick100]

US rate jitters an excuse to take money and run
Email Print Normal font Large font By Stephen Bartholomeusz
May 19, 2006



AdvertisementTHE wobble in global markets, triggered by fears of further interest rate rises in the US after higher than expected inflation numbers, may test the thesis there is a hedge fund-led speculative bubble in commodity prices.

The simultaneous sell-offs in commodities and equities and the general volatility may not presage anything more than a modest glitch in the three-year bull market that, not by coincidence, has coincided with the explosive impact of China on global economic activity and demand for resources.

Given that our market has risen about 34 per cent in a year and almost 60 per cent in the past two years — the latter figure almost identical to the increase in the average price increase achieved by Australian non-rural commodity exporters over the period — an eventual correction in this market was to have been expected.

But this week's sell-off was more broadly based and centred on the US. Nervousness about the outlook for US rates was confirmed by higher than anticipated inflation numbers, raising the prospect that US rates would continue to rise.

It hasn't helped that new Federal Reserve chairman Ben Bernanke is an unknown quantity, relative to his predecessor Alan Greenspan. If the Fed is forced to keep raising rates, the US economy will slow, its housing market will be affected and US households, with record levels of leverage, will reduce consumption. If that happens, the world economy, which has recorded strong growth despite high oil prices, will also falter.

That would then flow into demand for Chinese goods and then into demand for, and the prices of, commodities. That's one scenario.

Economies aren't in that bad shape and, given the rate at which the Chinese economy has grown, even a slowdown in its demand for resources should have only a marginal effect on the supply-demand balance for commodities — it will be slowing from a base that is so much larger than it was before China took its great leap forward.

Even our equity market, which could, given the extent and rate of its rise in the past few years be regarded as risky, isn't wildly overvalued.

The overall price/earnings multiple for the market hasn't changed materially in three years — underlying earnings have grown at similar rates to the market — and even resource company share prices have, until recently according to the Reserve Bank, tracked their earnings growth.

The US market hasn't performed anything like ours, which again suggests it isn't wildly out of whack with its fundamentals at a time when the US economy has been travelling quite well.

There are, however, as the market is reminding us, always external threats to the stability of markets and economies.

In the US, the obvious threat is that the Fed can't finesse the shift up in rates to avoid overdoing it and forcing the economy back into recession.

There is a well-held view in the US that Greenspan, however revered he may be in that market, took too long to start lifting rates, even when it was clear the risk of deflation, if it really had existed, had disappeared. The Fed's expansionary stance created a series of asset bubbles — in the dollar, in bond markets, in equity markets and in housing.

Recently, with dollars pouring into the hedge fund sector and obvious signs of hedge fund activity in commodity markets, there has been speculation that the extent to which commodity prices have been inflated, while explicable in terms of the sheer increase in Chinese demand, might owe quite a lot to the hedge funds.

Given the leverage some hedge funds employ — both conventional and through the use of derivatives — that has created concern that any uncertainty about either China's growth rate and/or the US economic outlook could trigger a rout as the funds rushed to extricate themselves from their commodity exposures.

It isn't clear the commodity boom contains another asset bubble, given that the prices of commod

[SCHUMACHER]

LONDON (Reuters) - Oil fell below $69 a barrel on Friday, close to a five-week low, as renewed concern about rising inflation and slower economic growth prompted selling across commodity markets.

The drop in crude oil came alongside a slide in prices of industrial and precious metals, which had hit record or near-record highs in the past month. Copper tumbled more than 6 percent and aluminum, zinc and gold also fell.

"Oil is moving in sympathy with other commodities," said Alexander Kervinio, analyst at SG CIB Commodities in Paris. "People are still worried about inflation, and we don't have anything new to push oil higher."


U.S. crude <CLc1> settled 92 cents lower at $68.53 a barrel -- down 4.9 percent from a week ago -- after hitting $67.85 on Thursday, the lowest level since April 10. London Brent crude <LCON6> settled 99 cents lower at $68.68 a barrel.

Oil's drop this week coincided with a sell-off in commodities, stocks and bond markets. But analysts say worries about supply cuts in Nigeria and possible disruption of oil flows from Iran limit selling.

"The medium-term picture still looks pretty bullish to us. The mid-60s is about as low as it will go," Kevin Norrish, an analyst at Barclays Capital, said of the price of oil.

Mohammed Barkindo, acting secretary-general of the Organization of Petroleum Exporting Countries, said on Friday oil prices would not fall until global political tensions eased.

"Prices will not fall until this anxiety abates," he said in Oslo, where officials of OPEC and the International Energy Agency, an advisor to 26 industrial nations, were meeting on Friday.

[SCHUMACHER]

Going to be an interesting week for commodities
Gold is expected to hold around mid 6,s ..time will tell

LONDON/NEW YORK, May 19 (Reuters) - Gold and silver prices tumbled on Friday as a sharp rise in the dollar against major currencies sparked a sell-off in the metals market, dealers said.

Palladium fell about 6 percent, silver shed about 1.3 percent, and spot platinum also trekked south on liquidation in the metals complex and commodities generally.


"The market is in a liquidation mood and it's going to struggle to get out of this mood for the time being," said Yingxi Yu, precious metals analyst at Barclays Capital.

"The significant fund length certainly points to scope for further selling," she said.

Spot gold <XAU=> fell 4.3 percent early to a three-week low of $651.00 an ounce, versus New York's Thursday close of $680.30/681.10. The metal traded in a broad range of $37, climbing as high as $688.50 at one stage.

It last fetched $659.20/660.00. It has fallen 11 percent from its 26-year high of $730 hit last Friday when speculators poured money into the metal on a weak dollar outlook and inflationary concerns.

At down 8 percent for this week, bullion was on track for its steepest weekly decline, in percentage terms, since February 1983, according to price charts.

[Bel]

Do you think that it is possible for forwarned investors to tell the difference between a shoeshine boy/taxi driver speculating on investment X and modern day equivalents doing the same? Such as military personnal on a chat forum?

[Mick100]

China baulks as iron ore price soars
Email Print Normal font Large font By Barry Fitzgerald
May 22, 2006


CHINA is crying poor that its steel industry cannot afford the bumper 19 per cent price increase secured by Australian and Brazilian iron ore producers for shipments of the key steel-making raw material in 2006-07.

The Government-owned China Daily said the US dollar price rise — it follows on from last year's 71.5 per cent increase — could bust the current boom.

China has fast become the biggest market for Australian iron ore with an annual value of about $4 billion, making the health of the steel-making industry there a key consideration for the leading exporters, the Pilbara operators BHP Billiton and Rio Tinto.

"When over-capacity is looming in China's steel industry, rising ore cost that further bites in to domestic steel makers' profits could turn the current boom in to a bust and no one will benefit," according to an editorial in the China Daily.

China's Iron & Steel Association said that its steel makers and the iron ore producers that supply them, including BHP and Rio, "still differ" on price and that their price talks would continue.

An emergency meeting of 16 Chinese steel makers in Beijing on Friday was held in an effort to ensure a united front in China's opposition to the price increase — one now accepted by the rest of the global steel-making industry as the new benchmark. This was underlined by the announcement from Rio Tinto's Hamersley Iron subsidiary on the weekend that it had reached agreement with South Korea's POSCO for a 19 per cent price increase for shipments of its Pilbara lump ore.

The chief executive of Rio's iron ore operations, Sam Walsh, said the agreement with POSCO — the world's fourth biggest steel maker — confirmed the "tightness of the iron ore market and the very strong demand for Australian iron ore".

China's hopes of securing a price increase of no more than 10 per cent were dashed last week when the world's biggest producer, CVRD, effectively set the new benchmark in a 19 per cent price-increase settlement with Germany's ThyssenKrupp.

The Chinese have argued ever since that the CVRD settlement was not a global benchmark.

The Federal Government's chief commodity forecaster, the Australian Bureau of Agricultural and Resource Economics, predicts that world seaborne trade in ore ore could rise by 7.6 per cent to 706 million tonnes this year, with China's booming economy to account for about 44 per cent of the total — up from 28 per cent in 2003.

Expansions by BHP and Rio are expected to underpin a 17 per cent surge in Australian exports this year to 282 million tonnes worth about $14 billion.

Meanwhile, the Australian producers' case for China to pay up for iron ore has been strengthened by moves in India to curb its iron ore exports.

India's Steel Ministry has called on the Ministry of Commerce to curb exports to protect the interests of the domestic steel industry.

Exports from the country are not big but their removal from the global market, to feed the booming domestic industry, would add to the global tightness in iron ore supplies.

[Mick100]

Bloomberg News

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Commodities Rise, Led by Copper; Rally Seen Strengthening
May 23 (Bloomberg) -- Commodities rose for a second day, led by copper and silver, on speculation that demand for raw materials may be strong enough to resume the longest rally in more than five decades.

Copper climbed more than 10 percent, its largest-ever gain, silver rose the most in two weeks and gold gained for the first session in five. Crude oil soared $2.32, or 3.4 percent, to $71.55 a barrel, partly on forecasts for Atlantic hurricanes this year. Commodities posted their biggest declines in 25 years last week as some investors bet prices were exaggerated.

``The underlying fundamentals of supply and demand around the world remain the same,'' Charles ``Chip'' Goodyear, chief executive officer of BHP Billiton, the world's largest mining company, said in a teleconference today. ``We are seeing very good economic conditions around the world, the supply side is still struggling to keep up.''

Copper for delivery in three months jumped as much as $720 to $8,300 a metric ton on the London Metal Exchange. Earlier, it fell as much as 2.3 percent to $7,405. Silver for immediate delivery gained as much as 64 cents, or 5.1 percent, to $13.16 an ounce, recording the biggest daily gain since April 28.

Commodities slumped last week as speculative investors cut their holdings on concern global interest rates will increase. Still, metal producers such as Anglo American Plc, the world's second-biggest mining company, and Kazakhmys Plc, a Kazakh copper producer, say prices will keep rising because of demand from China, the world's fastest-growing economy.

`Very Healthy'

``We expect commodity markets to remain very healthy through out 2006,'' Vladimir Kim, chairman of Kazakhmys, said today in London.

The Reuters/Jefferies CRB Futures Price Index of 19 commodities, including base and precious metals, rose 5.88, or 1.7 percent, to 350.09 today. The index declined to a one-month low of 337.54 on May 19.

Speculation the dollar may extend declines against the euro and yen boosted precious metals as an alternative investment today.

``People are looking for opportunities to exit the dollar into something safer,'' said James Turk, founder of GoldMoney.com. ``Commodities are benefiting as a general rule, and I think gold and silver moved up in part because people are exiting the dollar.''

Shares of mining companies rallied. BHP Billiton surged as much as 8.7 percent, the largest daily increase since March 2001. Anglo American Plc, the world's No. 2 miner, soared 10 percent, the biggest since March 2003.

Price Swings

Price swings in commodities including copper will continue because of buying and selling from speculators, said Peter Hollands, managing director of U.K. consulting company Bloomsbury Minerals Economics Ltd.

``Conditions like this will probably prevail for another year,'' Hollands said.

Nickel rose as much as 5.3 percent to a record $21,900 a ton as of 4:42 p.m. in London, the largest gain since May 12. Prices dropped as much as 6.5 percent May 15.

The metal, used to coat stainless steel, may climb as high as $28,000 a ton in one or two months as production lags behind demand, Li Long, president of the China Stainless Steel Council, said in an interview yesterday in Shanghai. Steelmakers account for about two-thirds of global nickel consumption.

Coffee also advanced on speculation a cold weather front may reduce the harvest in Brazil, the world's biggest producer and exporter. On the New York Board of Trade, Arabica beans for delivery in July gained 1.3 percent to $1.0090 a pound as of 10:45 a.m. local time. The contract slid 2.9 percent last week.

White sugar, which fell 3.2 percent last week, climbed 0.5 percent to $482.40 a ton. Raw sugar advanced 1.2 percent, after falling 6.7 percent last week.

[Sharpie]

Was Wednesday the 'Deadcat Bounce'? Gold/Silver/Zinc/Copper all starting down for the day. Could well have been the time to sell for those traders who bought on Monday.

Tried to flick my OXR that were purchased on Mon for $2.58, for $2.96 but to no avail (too greedy).

No worries though.

Happy shopping.

[Sharpie]

Gold now under $650. Bit of a bugger but it is probably good in the long term if the correction is stretched out a little.

Buy Buy!

[airedale]

Some experts are just getting the Matthew Simmons message[|)]

story Normal_Item Oil Could Top US$100: Expert Haitham Haddadin O









Oil Could Top US$100: Expert
View larger image© Getty Images / Phil Walter
29/05/2006
Haitham HaddadinA Goldman Sachs projection that oil prices could top US$100 a barrel in the event of a major supply disruption could be conservative in the current tight market, said a senior executive with the US investment bank.

Other energy experts told an energy forum late on Saturday in Kuwait that global oil market fundamentals point to generally higher energy prices as demand growth outstrips new supply.

"We thought that maybe somewhere within US$50 to US$70 (oil price) we might get the economic damage and that it would take a major, not a minor, disruption to get to the US$105 number," said Arjun Murti, Managing Director at Goldman Sachs.

"If we truly did have a major outage in a major exporting country then US$105 will prove conservative," Murti added at the National Bank of Kuwait energy forum.

Murti said when Goldman Sachs issued a projected range of US$50 to US$105 a barrel in March 2005, actual prices hovered around US$55 a barrel. Oil prices in New York and London traded above $70 Friday.

Katherine Spector, head of energy research for JP Morgan Securities, said market fundamentals point to petroleum prices reverting to a higher mean in coming years. "The world is running out of easy barrels of crude production," she said, adding that marginal costs of production are rising.

Both Spector and Murti said one factor that the oil markets will remain focused on for the rest of this year would be the US hurricane season after Katrina caused big disruptions last year to refining capacity on the US Gulf Coast.

Hurricanes Katrina and Rita had shown "energy markets are highly susceptible to a supply shock", Murti noted.

Spector said another severe hurricane season predicted for this year was bullish for oil and products prices as are changes to US diesel and gasoline specifications this year. But she said among factors that are bearish for the market are relatively comfortable global oil inventories.

Asian Demand

Other delegates told the forum that global oil market fundamentals pointed to the possibility of higher prices given that global oil demand is robust and tends to grow every year, especially due to firm demand from China and India.

Edward Morse, executive adviser with Hess Energy Trading Co., said that between 1965 and 2004, total Asian oil demand has risen 620 percent while world oil demand was up by 158 percent.

"Asian energy demand growth, especially oil demand, has been truly extraordinary," Morse said, adding that most analysts believe incremental Asian demand growth drives the market.

On the supply side, spare capacity is gone, traditional areas of oil production are mature and areas with growth are geopolitically or demographically challenged, Murti noted.

"We believe that oil markets are in the early stages of what we are calling a multi-year 'super-spike' period," Murti added.

Murti said total non-OPEC crude supply has grown in recent years mostly due to Russia, but excluding Russia the supply from producers that are outside the Organisation of Petroleum Exporting Countries has been essentially flat in recent years.

"Effective production capacity - that what actually can come out of the ground today - is pretty close to zero," he said. "Our point is not that the OPEC countries are running out of oil. But the question is, are we to believe that real-time production capacity is going to grow, year in and year out, to match economic growth?".

[Mick100]

WITHERING CHINESE DEMAND?
by Shailendra Kakani
Managing Editor, CommodityResearch.In
June 1, 2006


There are lots of articles floating the web and in the print media right now claiming the demise of commodities, especially in the aftermath of the recent tumbledown. One of the reasons cited is that the Chinese demand is going to cool off. And the main reason cited for that is that the American demand may get subdued due to the impending appreciation of the Yuan.

But is it really going to play out that simply? It is true that the US government is persuading its Chinese counterpart to let Yuan appreciate against the US dollar. The Chinese are dilly-dallying, trying to work out what's best for them; to keep their currency down and maintain the high export level, or to let it rise and then lose out on the export front.

However as far as I can see the things, though they seem to be confused, they are preparing for both the scenarios, just as people keep saying "nice doggy" till they find the stick. They are of course prepared for the first probability: the status quo. They have no problem in keeping the Yuan at artificial low, letting the US trade deficit balloon, and watching the American congressmen split their hairs in disgust. Everything remains same and the things go on till they can't go on.

The second choice is difficult, but the doughty Chinese seem to be doing hard work on that front as well. The choice is to let the Yuan appreciate, considerably. After all, at one point of time the US pressure might just be too much, specially with the election year drawing in fast, and the Chinese might just have to save Mr Bernanke from taking his famous helicopter flight.

They know it that in case the Yuan is let to float absolutely freely, without any state intervention, it might appreciate by at least 30-40% against the dollar. They also know that such an appreciation will surely lead to a downfall in the US imports from China; the Americans can't go on importing brooms and flags and hair clips as recklessly as they are doing right now.

That is why China is doing what any intelligent nation would have done in its place: development of other markets. The bamboo curtain country is already busy making friends among its neighbors and in the rest of the third world. It is exporting its goods to every country where it can, and thus cultivating new markets for itself. Its business delegations are traveling to every nation, forming ties with every conceivable trade association and business group.

Circa 2006, its businessmen don't cold-shoulder any business delegation simply because it is non-American. In fact my own experience is that they are rather more pleasant with them. Till a couple of years back Indian businessmen were hardly received with a smile in Shanghai or Beijing, today there are many who are emotional about their good relations with their Chinese counterparts. There was a time India received from China only what could not be exported to say the USA, today India also gets the prime variety.

This is the premise of this write-up: namely, if China is able to maintain its exports in the wake of reduced American imports, there is going to be no reduction in its appetite for the commodities. After all a DVD player consumes the same amount of raw materials, whether it is sold to America or to Sierra Leone.

Simultaneously China needs these new friendly ties not just to sell its products but also to buy. With population hovering at 1.3 billion, and with a savings rate approaching almost 50%, it is guaranteed that domestic consumption levels are going to remain pretty high. The growing appetite of the world's most populous nation has made it dependent on continuous imports. And the growing commodity prices has enlightened it to the fact that the coming era may well belong to those who have easy access to commodities, be they hard or soft.

So the red country is signing deals for multi-decade development and operation of mines and gas pipeline. In the developing world, the country is becoming the trad

[Mick100]

Commodity ETF's

Scott Wright

http://www.gold-eagle.com/gold_digest_05/wright060206.html
.

[Mick100]

End of cheap oil

Saxena

http://www.gold-eagle.com/editorials_05/saxena060606.html
.

[Mick100]

The china India story is as strong as ever. There's a chronic shortage of zinc at this moment and the japanese have agreed to a 20% increase in iron ore prices recently. The bull market in commodities is alive and well.
What surprises me is the number of people who are fixated on inflation and interest rate concerns coming from the FED in the US.
What these people seem to be missing is that this bull market is being driven by developing countries - not the developed countries
China ,India , veitnam, brazil etc are not going to put their industrialisation/developement on hold because a new Fed chairman has stated that he's concerned about inflation.

The momentum players are bailing out - lets face it, they were'nt in commodities because they believed that they were participating in a 15-20 yr bull market in commodities - they were there because the share prices of these commodity companies were rising. They'll be back when the share prices start rising again later in the year, in the meantime it gives us, the long term bulls, a chance to pick up some more cheap shares just like last yr and the yr before and the yr before that. I'll probably start buying next month at this rate.

[Mick100]

Withering Chinese Demand?

Shailendra Kakani

www.commodityresearch.in

2nd June 2006

There are lots of articles floating the web and in the print media right now claiming the demise of commodities, specially in the aftermath of the recent tumbledown. One of the reasons cited is that the Chinese demand is going to cool off. And the main reason cited for that is that the American demand may get subdued due to the impending appreciation of the Yuan (also known as Renminbi).

But is it really going to play out that simply? It is true that the US government is persuading its Chinese counterpart to let Yuan appreciate against the US dollar. The Chinese are dilly-dallying, trying to work out what's best for them; to keep their currency down and maintain the high export level, or to let it rise and then lose out on the export front.

However as far as I can see the things, though they seem to be confused, they are preparing for both the scenarios, just as people keep saying "nice doggy" till they find the stick. They are of course prepared for the first probability: the status quo. They have no problem in keeping the Yuan at artificial low, letting the US trade deficit balloon, and watching the American congressmen split their hairs in disgust. Everything remains same and the things go on till they can't go on.

The second choice is difficult, but the doughty Chinese seem to be doing hard work on that front as well. The choice is to let the Yuan appreciate, considerably. After all, at one point of time the US pressure might just be too much, specially with the election year drawing in fast, and the Chinese might just have to save Mr Bernanke from taking his famous helicopter flight.

They know it that in case the Yuan is let to float absolutely freely, without any state intervention, it might appreciate by at least 30-40% against the dollar. They also know that such an appreciation will surely lead to a downfall in the US imports from China; the Americans can't go on importing brooms and flags and hair clips as recklessly as they are doing right now.

That is why China is doing what any intelligent nation would have done in its place: development of other markets. The bamboo curtain country is already busy making friends among its neighbors and in the rest of the third world. It is exporting its goods to every country where it can, and thus cultivating new markets for itself. Its business delegations are traveling to every nation, forming ties with every conceivable trade association and business group.

Circa 2006, its businessmen don't cold-shoulder any business delegation simply because it is non-American. In fact my own experience is that they are rather more pleasant with them. Till a couple of years back Indian businessmen were hardly received with a smile in Shanghai or Beijing, today there are many who are emotional about their good relations with their Chinese counterparts. There was a time India received from China only what could not be exported to say the USA, today India also gets the prime variety.

This is the premise of this write-up: namely, if China is able to maintain its exports in the wake of reduced American imports, there is going to be no reduction in its appetite for the commodities. After all a DVD player consumes the same amount of raw materials, whether it is sold to America or to Sierra Leone.

Simultaneously China needs these new friendly ties not just to sell its products but also to buy. With population hovering at 1.3 billion, and with a savings rate approaching almost 50%, it is guaranteed that domestic consumption levels are going to remain pretty high. The growing appetite of the world's most populous nation has made it dependent on continuous imports. And the growing commodity prices has enlightened it to the fact that the coming era may well belong to those who have easy access to commodities, be they hard or soft.

So the red country is signing deals for multi-decade development and operation of mines and gas pipeline. In the developing world, the country is beco

[Kookaburra]

quote:Originally posted by Mick100

Withering Chinese Demand?
So long as these markets are open for China, it will continue to consume the resources as wolfishly as it is doing right now.


Yes what is likely to stop the growth in demand from China and other developing nations? Protectionism may slow things down but will not kill the demand. The Chinese home market must be large enough to keep things going. A rampant disease such as bird flu would certainly change things dramatically. Global warming will eventually hit home with catastrophe as the third worl learns to burn fuel at a western rate but that is still longer term. A crash of the American exchanges would drive prices down for a while until people realised that it no longer dictates demand and therefore the profitability of Australian commodity stocks. So while a loss of confidence may set things back briefly the longer term for growth in demand in Aussie commodity stocks seems pretty rosey to me.

[Mick100]

ENERGY AGAIN
by Roger Conrad
Editor, Utility & Income
June 10, 2006


Rising commodity prices are to blame for pushing inflation pressures above the Federal Reserve’s expectations in recent months, according to statements this week by none other than new Fed Chairman Ben Bernanke.

Bernanke’s comments were in stark contrast to the usually opaque pronouncements of his predecessor, and the general reaction was one of derision. But even Alan Greenspan weighed in this week on the energy price question, charging that they presented a threat to low inflation and economic growth.

With so much brimming concern about commodity prices and inflation from the country’s leading monetary authorities, it’s intensely ironic that the market has chosen now to become deathly worried about the exact opposite--a decline of epic proportions, particularly in the price of oil. For example, companies like CHEVRON (NYSE: CVX) and CONOCOPHILLIPS (NYSE: COP) are financially stronger than most countries. But they trade at single-digit multiples even to the most pessimistic forecasts for their future earnings.

Energy stocks across the board were hit hard this week on concerns that the political premium in oil prices was about to fall sharply.

Especially wrecked have been oil service stocks, the companies that provide on-site services, logistics and rigs to oil and gas producers. These stocks are considered especially leveraged to energy prices, since profits are determined by the drilling plans of producers. That makes their performance an excellent indicator of investors’ view of where energy prices are headed.

The broad-based Philadelphia Oil Service Index, or OSX, is now down nearly 20 percent from its highs this year. Moreover, open interest on the index’ put options (bets these stocks will fall) is more than twice that of call options (bets they’ll rise). The pessimism is thick enough to cut with a knife, both for oil service stocks and for energy prices as well.

At the heart of the bears’ case is the buildup in inventories over the past several months. Storage facilities have now stock piled especially large quantities of oil, gasoline, natural gas and other derivative products. That’s in large part a consequence of very weak demand this winter, which was caused by a combination of record mild weather and high prices in the wake of hurricanes Katrina and Rita that encouraged conservation.

The stockpiles have continued to mount throughout the spring season, traditionally a period of very slack demand. That’s made the market for all these products very dependent on strong summer demand to soak up the supply in time for the slack fall season. If not, the supply/demand equation will remain strongly in favor of another dip in prices.

Natural gas prices have already come down by nearly two-thirds from the post-hurricane highs, with most of the decline coming in the first quarter. As a result, the fuel has become very cheap in terms of energy produced, relative to oil. It also remains the primary fuel for the peaking plants that are needed to meet demand for electricity. Gas-fired capacity is likely to be particularly important for the Southwest in coming months, where units of the giant Palo Verde nuclear plant have been idled for long stretches.

As long as oil prices remain high, therefore, natural gas isn’t likely to fall much further from where it is now. In fact, any burst of hot weather that pushes up demand for power, and therefore natural gas, is likely to trigger a mighty rebound. And that’s not including the potential for supply disruptions as hurricane season gets under way.

Should oil prices fall, however, it could be a far different story, and we could well see natural gas break to $5 or lower per million British thermal units (MMBtu). In fact, oil prices the key to the equation for all energy investments. If they hold near current levels, the selloff we’re seeing now in energy stocks is sooner or later going to reverse with a vengeance. If they fall, there could well be more damage ahead, despite the v

[Mick100]

Gold's Down! Time to Sell?

Dr. Steve Sjuggerud

Gold's down to about $630, this is after hitting highs of $700 just last month.

Should you panic? Absolutely not.

In the January 2006 issue of my newsletter True Wealth, I wrote about gold after it experienced a similar crash. What I said then absolutely applies right now…

"Most people think gold went straight up from $35 an ounce in 1971 to $800 in 1980. That wasn't the case at all.

Gold absolutely soared until mid-1973. And then it quickly lost a quarter of its value, shaking out nearly everyone. Gold had gone up hundreds of percent by then, so everyone thought the move was done.

But it wasn't...

Gold soon hit new highs in 1974. Then it got obliterated again... falling from about $200 an ounce at the beginning of 1975 to about $100 an ounce by mid-1976. Those that weren't shaken out of gold before were shaken out this time.

Gold started coming back, and the third time was the charm... Everyone had seen gold jump twice now. They finally believed in it by the third time. The general public started clamoring to get in. That's when gold rose above $800 by January 1980, and the coin index rose 1,195%.

The point is, it won't be a straight shot up… It'll be a rough ride, but we'll try not to get bucked off, and give it time to develop.

Then in ten years, when everybody loves commodities and collectibles, we'll sell… and it will be time to buy conventional stocks again.

Summing up, since the last generation loved stocks, this next generation has to learn to hate them. It'll probably take 10 years.

Of course, it may not be exactly ten years. But that's a reasonable ballpark guess. Based on the size of the boom that we just went through in stocks, and how it captivated everyone, it'll probably take the full 10 years to shake everyone out of believing in stocks, and into believing in commodities and collectibles."

So gold's corrected $70 bucks. Big deal. What do we do now? We stick with the big trend…

To me, we've likely reached the end of the first leg of the new bull market in gold. There are plenty of signs we're there…

Gold is finally being talked about. It's finally quoted on CNBC. And individual investors are just starting to take notice.

It's about time. I've been writing about gold for four years now, and it's done nothing but go up. Meanwhile, nobody has wanted to hear about it… until now.

So we've finally reached the point where new investors will get shaken out (hey, it's the way things go in markets, I'm sorry). However, I believe much higher prices will come.

In the last bull market in gold, the first "big move" ended in 1973. But much higher highs were ahead. Remember, the bull market in gold didn't peak until 1980 back then.

Could we have another seven years to go in this gold bull market like we did in the 1970s? Easily…

Don't get rattled by the action over the last few days. It's a bull market in gold and commodities. Plan on sticking around for the long run.

Good investing,



13 June 2006

DailyWealth is a free e-letter focused on the world's best contrarian investment opportunities. To begin receiving a free subscription, click here. (www.dailywealth.com/signups/SDW-affiliate.asp?scode=XFFDW001)

[Mick100]

>Chinese bow to iron ore hike
Andrew Trounson and Andrew White, Commodities
June 21, 2006

CHINESE steel mills last night bowed to the inevitable and accepted a 19 per cent hike in annual iron ore prices in the face of unflinching pressure from the world's three biggest producers - Brazil's CVRD, and Anglo-Australian mining giants Rio Tinto and BHP Billiton.
The cave-in by China's steel mills brings to a close the longest price negotiation in history as Beijing struggled in vain to leverage its position as the world's largest iron ore market to wrest control of the negotiations away from the Japanese and European steel industries that have been the traditional price-setters.

China had been shocked and angered the previous year when the Japanese industry accepted a massive 71 per cent price rise as soaring steel production caught the world short of iron ore.

The Chinese mills insisted that prices should rise no further after a fall in the steel market squeezed the mills.

China is the largest iron ore market in the world, estimated by Australia's Bureau of Agricultural and Resource Economics to account for as much as 44 per cent of seaborne iron ore trade.

But pressure mounted in recent weeks as other major markets including Europe, Korea and Japan agreed to the 19 per cent price hikes.

China's official Xinhua newsagency reported the hike had been agreed with lead negotiator BaoSteel last night, and BHP Billiton confirmed it in a statement to the London Stock Exchange. Rio and CVRD were expected to conclude deals within days.

The 2005 contracts ran out in April and the new contracts will be back-dated to then.

Australia exports about $18billion worth of iron ore every year so the hike in prices is expected to add more than $3 billion a year to revenues for Australia's big miners, led by BHP and Rio.

It will come as a welcome fillip to the big miners, which have been among the worst hit stocks following massive sell-offs in the commodity and share markets since their May peaks.

As talks this year dragged on beyond the official April 1 contract start date and the iron ore market remained tight in the face of continued strong Chinese steel production, the Europeans and Japanese finally began accepting CVRD's demand for a 19 per cent rise, with German steel mill Thyssen Krupp the first to settle.

Rio and BHP later confirmed they had struck the same deal with major Japanese steel makers. The protracted negotiations strained relations between China and the three major producers that between them control over 70 per cent of the world seaborne trade in iron ore.

At one stage there was talk that the traditional annual contract system could be undermined, with speculation that a defiant China would turn to the spot market that is mostly supplied by Indian iron ore.

But with spot prices also high and Indian supplies curtailed by government export taxes aimed at saving iron ore for India's own steel industry, the spot market in the end was not an option.

Prices for imported Indian iron ore have risen to $US73-$US74 a tonne, compared with less than $70 a tonne in mid-May, before the first steel mill agreed to the 2006 term prices, Reuters reported.

Domestic Chinese iron ore prices have risen to between 640 ($109) yuan and 650 yuan a tonne in the last two weeks, up 40-50 yuan. In the northeast, where port stocks of iron ore are still ample, prices are lower at 530 yuan a tonne, up 20 yuan.

And with the steel mills needing price certainty, the miners knew it was only a matter of time before the Chinese settled.

However, amid some forecasts for iron ore prices next year to pull back by 20 per cent, the Chinese are unlikely to show any mercy to the miners when the market turns in their favour.

[Mick100]

Soviet legacy propels Russian advance in steel
By Andrew E. Kramer The New York Times

Published: June 20, 2006


MOSCOW The dictator Joseph Stalin, whose name was derived from the Russian word for steel, seemed fascinated with the metal and threw resources at its production during the rapid industrialization of the Soviet Union.

These days, Russia has more steel than it knows what to do with. And with cheap labor, energy and iron ore, the metallurgical factories once regarded as wasteful dinosaurs of the Soviet era are starting to look fearsome again.

On Monday, the richest man in Russia, Roman Abramovich, bought a 42 percent stake in the country's largest steel group, Evraz, for an estimated $3 billion - the second major steel deal involving a Russian company in three weeks.

Earlier, one of Russia's top steel producers, Severstal, had announced a merger with Arcelor of Luxembourg, in part to thwart a hostile takeover bid for Arcelor by Lakshmi Mittal, an Indian businessman who is consolidating steel factories into a worldwide empire.

Because Abramovich, a close ally of President Vladimir Putin, has worked closely with the Kremlin in past business deals, analysts and industry executives interpreted the purchase of Evraz as a step toward consolidating Russian steel into a large, state-controlled holding.

Russia is seeking, if not a Gazprom of steel, a company with the heft and pricing power to compete with Mittal, and to expand beyond Russia.

The industrial strategy, some analysts said, was to consolidate Russia's industry around one or two national companies - a clear trend in major Russian industries like energy, automobiles and aircraft manufacturing - while linking up with foreign steel makers to ensure an export market.

"There's a great deal of reason and logic behind this," said Sergei Donskoy, a metals analyst at Troika Dialog, a brokerage firm in Moscow. "You get stronger bargaining power with raw materials suppliers. You have a better position negotiating sales."

So far, Abramovich has offered no hints at a larger strategy - but that has not quieted the rumors that something is stirring in Russian steel.

Abramovich's holding company, Millhouse Capital, released a sp**** statement praising the management of Evraz, a Luxembourg-registered steel group with its primary mines and factories in the southern Ural Mountains.

"Has he got political backing to go in and consolidate the whole industry? That remains to be seen," said Michael Kavanagh, a metals analyst at MDM bank in Moscow.

"From his side and Evraz, we've heard nothing of the kind," Kavanagh said. "Everybody's taking with a pinch of salt that he simply likes the company and the management."

Russia's steel makers are flush with cash and cheap production. Now, they might just be ready for the next stage: going global. With Severstal reaching out for a large stake in Arcelor, the world's second-biggest steel company after Mittal, the country's other steel companies were bound to be thinking about broader opportunities, analysts and company executives said.

Arcelor has said the deal with Severstal must be approved by shareholders, a group of whom, led by the investment bank Goldman Sachs, has resisted the merger. They have criticized the deal as a poison-pill defense against the hostile takeover bid by Mittal Steel.

Still, the ambition at Russian steel makers to expand internationally is larger than the Arcelor deal, analysts and industry executives say.

Along the way, the industry might finally benefit from decades of Soviet investment in steel production and secure more favorable export terms for the steel that no longer would be used to make weapons and other military equipment.

The Soviet era's emphasis on steel has left Russia producing roughly twice its domestic consumption.

Separately, Russian media have reported that Evraz is in merger or acquisition talks with Corus, which is based in London. One of the world's largest steel producers, Corus itself resulted from a merger of Bri

[Mick100]

Commercial traders decreasing short and increasing long positions in crude

http://buythebottom.com/oil.html
.

[Mick100]

Clive Maund update

http://www.gold-eagle.com/editorials_05/maund061806.html
,

[Mick100]

Growth in China to accelerate
Email Print Normal font Large font Janet Ong, Shanghai
June 26, 2006

CHINA'S economy will expand faster this year than in 2005 as investment and exports continue to grow, the central bank's research bureau says.

Gross domestic product will probably rise 10.3 per cent in the first six months before slowing in the second half for full-year growth of 10 per cent, the People's Bank of China says in a report published today. China's economy grew 9.9 per cent last year, overtaking Britain as the world's fourth largest.

Premier Wen Jiabao said in April he wanted to curb an expansion by factories, which has caused an oversupply of goods in China and pushed global commodity prices to record highs. The Government is seeking to avoid a sudden economic slowdown by shifting its focus to raising incomes and consumer spending.

"The forecast of slower GDP growth in the second half of the year reflects the central bank's expectations that macro-economic measures taken in late April will take effect and help slow economic growth," said Wang Qing, senior currency strategist at the Bank of America in Hong Kong and a former International Monetary Fund official.

The central bank raised its key lending rate on April 28 by 0.27 to 5.85 per cent and told banks to rein in loans.

China is stepping up efforts to cool the economy after reports showed investment, money supply and production accelerated last month.

Increased lending coupled with low exchange rates will "exert inflationary pressure" on raw materials and property prices, the report says. A build-up of funds in the financial system has encouraged banks to lend to investment projects, leading to overcapacity and falling profits in some industries.

Money supply at the end of May was 19.1 per cent higher than a year earlier, the biggest gain in four months, while new yuan lending almost doubled from a year earlier. New yuan loans in the first five months accounted for nearly three-quarters of the central bank's target for the entire year.

But China has maintained it still needs growth. "China is still a developing country," central bank governor Zhou Xiaochuan said. "We need growth. We need it to solve a lot of economic problems. We need it to have a poverty reduction."

An increase in money supply, plus inter-bank money market rates at near record lows, are encouraging banks to offer credit to companies for new investment projects.

Investment in fixed assets in urban areas jumped 30.3 per cent in the first five months of 2006 from a year earlier, a June 15 report shows.

China's consumer prices are expected to rise 1.3 per cent in the first half, and full-year inflation will be about 1.7 per cent, the report says.

Inflation in the second quarter is expected to reach 1.4 per cent, accelerating to 2 per cent in the second quarter and 2.1 per cent in the fourth quarter.

Personal housing loans rose 12.3 per cent from a year ago to 1.9 trillion yuan as at end April.

Investment in real estate development rose 21.8 per cent in the first five months from a year earlier. The Government has recently adjusted loan, tax and land policies to curb property prices, including raising the minimum down payment for larger apartments.

[Mick100]

Alook at some commodity charts along with open interest

george Kleinman

http://www.financialsense.com/editorials/kleinman/2006/0626.html
,

[Mick100]

Oil Rises Above $73 on Unexpected U.S. Gasoline Supply Drop

June 29 (Bloomberg) -- Crude oil rose above $73 a barrel in New York after an Energy Department report showed an unexpected decline in U.S. gasoline inventories.

``We are back in the bullish mode,'' said Tom Bentz, an oil broker with BNP Paribas Commodity Futures Inc. in New York. ``Gasoline demand is very good, which is pulling everything higher. There was talk that demand was being hurt by high prices, but the last few inventory reports have put an end to that.''

Gasoline stockpiles fell 1.1 million barrels last week, the first decline in nine weeks, yesterday's report showed. Demand for the fuel rose 1.2 percent to 9.54 million barrels a day, the highest since August. U.S. gasoline use peaks during the summer as vacationers take to the highways. The Independence Day holiday on July 4 is the busiest driving period during the summer.

Crude oil for August delivery rose $1.13, or 1.6 percent, to $73.32 a barrel at 12:33 p.m. on the New York Mercantile Exchange. The contract touched $73.50, the highest since June 5. Prices are up 28 percent from a year ago. Oil reached $75.35 on April 21, the highest since New York trading began in 1983.

Oil has risen seven straight sessions, the first time since the period from May 23 to June 1, 2005.

``If we can break through and close above $73 it would be a signal that we are going to make new highs,'' Bentz said.

Gasoline for July delivery rose 6.41 cents, or 2.9 percent, to $2.27 a gallon in New York. Prices reached $2.29, the highest since Sept. 29. Futures are up 43 percent from a year ago.

Refinery Closures

Prices for the fuel also rose on speculation that units at two Sunoco Inc. refineries along the Delaware River were shut. Sunoco spokesman Jerry Davis didn't immediately respond to a message left at his office.

Gasoline also rose as a weeklong shutdown of the Calcasieu Ship Channel in Louisiana has disrupted oil supplies to refineries in the Lake Charles area. The channel may open later today to limited barge traffic, the U.S. Coast Guard said.

Because of the closure, ConocoPhillips, the second-largest U.S. refiner, and Citgo Petroleum Corp. will be loaned a combined 750,000 barrels from the U.S. Strategic Petroleum Reserve for their nearby refineries, the Energy Department said yesterday.

Pump prices have followed futures higher. Regular gasoline, averaged nationwide, is 30 percent higher than a year earlier, according to AAA, the nation's largest motorist organization. Prices rose 1.4 cent yesterday to an average $2.873 a gallon.

Economic Growth

Prices have also risen because economic growth has led to increased fuel consumption. The U.S. economy expanded at an annual rate of 5.6 percent in the first quarter, propelled by a surge in consumer spending. The U.S. consumes 25 percent of the world's oil.

The gain in gross domestic product, the value of all goods and services produced, was the biggest in more than two years and followed a 1.7 percent pace in the previous quarter, the Commerce Department said in Washington. Growth was revised from the government's 5.3 percent estimate last month as the trade deficit widened less than previously estimated.

Growth in the dozen nations that use the euro may be accelerating faster than the European Commission had previously forecast. The European Union's economic watchdog predicted May 8 that the economy will expand 2.1 percent this year. Members of the EU consume 18 percent of the world's oil.

Iranian Decision

Oil has risen 20 percent this year in part on concern that Iran, the fourth-biggest oil producer, may cut exports because of a dispute over its nuclear program. Iran's top nuclear negotiator, Ali Larijani, dismissed U.S. and European calls to accelerate its decision over whether to accept trade and technology incentives in return for ending uranium enrichment.

``We had told the negotiating parties that they will gain nothing if they show tough approaches,'' Larijani told reporters today, accordin

[Mick100]

Outlook for junior miners

http://www.smh.com.au/news/business/another-strong-year-tipped-for-mining-juniors/2006/07/10/1152383676455.html
,

[Mick100]

Major Alaskan Oil Field Shutting Down
Monday August 7, 1:09 am ET
By Mary Pemberton, Associated Press Writer
Corrosion, Spill Prompt Shutdown of Alaska Oil Field in a Sudden Blow to Nation's Supply


ANCHORAGE, Alaska (AP) -- In a sudden blow to the nation's oil supply, half the production on Alaska's North Slope was being shut down Sunday after BP Exploration Alaska, Inc. discovered severe corrosion in a Prudhoe Bay oil transit line.


BP officials said they didn't know how long the Prudhoe Bay field would be off line. "I don't even know how long it's going to take to shut it down," said Tom Williams, BP's senior tax and royalty counsel.

Once the field is shut down, in a process expected to take days, BP said oil production will be reduced by 400,000 barrels a day. That's close to 8 percent of U.S. oil production as of May 2006 or about 2.6 percent of U.S. supply including imports, according to data from the U.S. Energy Information Administration.

The shutdown comes at an already worrisome time for the oil industry, with supply concerns stemming both from the hurricane season and instability in the Middle East.

"We regret that it is necessary to take this action and we apologize to the nation and the State of Alaska for the adverse impacts it will cause," BP America Chairman and President Bob Malone said in a statement.

A 400,000-barrel per day reduction in output would have a major impact on oil prices, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

"Oil prices could increase by as much as $10 per barrel given the current environment," Emori said. "But we can't really say for sure how big an effect this is going to have until we have more exact figures about how much production is going to be reduced."

Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said he expected the impact to be minimal.

"The U.S. market is actually well-supplied; crude inventories are very high," he said. "So while this won't have any immediate impact on U.S. supplies, the market is in very high anxiety. So any significant disruption, traders will take that into account, even though there is no threat of a supply shortage."

Light, sweet crude for September delivery was up 36 cents to $74.95 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange.

Malone said the field will not resume operating until the company and government regulators are satisfied it can run safely without threatening the environment.

Officials at BP, a unit of the London-based company BP PLC, learned Friday that data from an internal sensing device found 16 anomalies in 12 locations in an oil transit line on the eastern side of the field. Follow-up inspections found "corrosion-related wall thinning appeared to exceed BP criteria for continued operation," the company said in a release.

Steve Marshall, president of BP Exploration Alaska, Inc., said at an Anchorage news conference that testing in the 16 areas found losses in wall thickness of between 70 and 81 percent. Repair or replacement is required if there is over an 80 percent loss.

"The results were absolutely unexpected," he said.

Marshall said Sunday night that the eastern side of Prudhoe Bay would be shut down first, an operation anticipated to take 24 to 36 hours. The company will then move to shut down the west side, a move that could close more than 1,000 Prudhoe Bay wells.

Marshall said BP is looking at repairing, bypassing or totally replacing the line.

Only one of BP's three transit lines is operating. The third was shut down in March after up to 267,000 barrels of oil spilled. BP installed a bypass on that line in April with plans to replace the pipe.

While they suspect corrosion in both damaged lines, they can't say for sure until further tests are complete. Corrosion is primarily caused by carbon dioxide that comes up with water, oil and gas during drilling.

BP puts millions of gallons of corrosion inhibitor into the Prudhoe Bay lines each year. It also examines pipes

[Mick100]

BASE METALS

Doug Casey

http://www.financialsense.com/editorials/casey/2006/0811.html
,

[yogi-in-oz]

:)

Hi folks,

Soybeans ..... a long-standing Gann trade on beans is about
to come into play .....

..... from the 12 May 2006 highs, we are now 90 days (square)
down the road and looking for the lows this year, around
18-21082006 ..... and 535 (August contract)???

This has been a reliable trade in the past and will be the
forerunner of another trade in beans around 01 December 2006,
where we will be alert for confirmation to go long again,
until 12-16 January 2007.

happy days

yogi

:)

=====

[Mick100]

Ethanol could leave the world hungry
One tankful of the latest craze in alternative energy could feed one person for a year, Lester Brown tells Fortune.
By Lester Brown
August 16 2006: 5:39 AM EDT


(Fortune Magazine) -- The growing myth that corn is a cure-all for our energy woes is leading us toward a potentially dangerous global fight for food. While crop-based ethanol -the latest craze in alternative energy - promises a guilt-free way to keep our gas tanks full, the reality is that overuse of our agricultural resources could have consequences even more drastic than, say, being deprived of our SUVs. It could leave much of the world hungry.

We are facing an epic competition between the 800 million motorists who want to protect their mobility and the two billion poorest people in the world who simply want to survive. In effect, supermarkets and service stations are now competing for the same resources.




This year cars, not people, will claim most of the increase in world grain consumption. The problem is simple: It takes a whole lot of agricultural produce to create a modest amount of automotive fuel.

The grain required to fill a 25-gallon SUV gas tank with ethanol, for instance, could feed one person for a year. If today's entire U.S. grain harvest were converted into fuel for cars, it would still satisfy less than one-sixth of U.S. demand.

Worldwide increase in grain consumption
The U.S. Department of Agriculture reports that world grain consumption will increase by 20 million tons this year, roughly 1%. Of that, 14 million tons will be used to fuel cars in the U.S., leaving only six million tons to cover the world's growing food needs.

Already commodity prices are rising. Sugar prices have doubled over the past 18 months (driven in part by Brazil's use of sugar cane for fuel), and world corn and wheat prices are up one-fourth so far this year.

For the world's poorest people, many of whom spend half or more of their income on food, rising grain prices can quickly become life threatening.

Once stimulated solely by government subsidies, biofuel production is now being driven largely by the runaway price of oil. Many food commodities, including corn, wheat, rice, soybeans, and sugar cane, can be converted into fuel; thus the food and energy economies are beginning to merge.

The market is setting the price for farm commodities at their oil-equivalent value. As the price of oil climbs, so will the price of food.

In some U.S. Cornbelt states, ethanol distilleries are taking over the corn supply. In Iowa, 25 ethanol plants are operating, four are under construction, and another 26 are planned.

Iowa State University economist Bob Wisner observes that if all those plants are built, distilleries would use the entire Iowa corn harvest. In South Dakota, ethanol distilleries are already claiming over half that state's crop.

The key to lessening demand for grain is to commercialize ethanol production from cellulosic materials such as switchgrass or poplar trees, a prospect that is at least five years away.

Malaysia, the leading exporter of palm oil, is emerging as the biofuel leader in Asia. But after approving 32 biodiesel refineries within the past 15 months, it recently suspended further licensing while it assesses the adequacy of its palm oil supplies. Fast-rising global demand for palm oil for both food and biodiesel purposes, coupled with rising domestic needs, has the government concerned that there will not be enough to go around.

Less costly alternatives
There are truly guilt-free alternatives to using food-based fuels. The equivalent of the 3% of U.S. automotive fuel supplies coming from ethanol could be achieved several times over - and at a fraction of the cost - by raising auto fuel-efficiency standards by 20%. (Unfortunately Detroit has resisted this, preferring to produce flex-fuel vehicles that will burn either gasoline or ethanol.)

Or what if we shifted to gas-electric hybrid plug-in cars over the next decade, powering short-distance driving, s

[Mick100]

Energy sector Update

Joseph Dancy

http://www.financialsense.com/fsu/editorials/dancy/2006/0822.html
.

[Mick100]

Alarm bells sound as China goes dry
Rants + Raves Print Email
Wednesday, August 23rd, 2006


Beijing, Aug 23 (DPA) China’s worst drought in half a century is putting the spotlight on a far larger problem: its water is running out. The 1.3 billion people of the world’s most populous country have at their disposal only a quarter of the water per person that is available on average around the world.

Through its surging economic growth, industrial pollution and widespread waste, China long ago saw itself sink into a serious and sustained water crisis.

Professor He Shaoling, a researcher with the China Institute of Water Resources and Hydropower Research, said the water shortage had developed into ‘a threat to national security’.

Of China’s more than 600 cities, 400 are short of water, the water resources ministry said. In Beijing and about 100 other cities, there are ‘extreme shortages,’ and in the Olympic year 2008, the Chinese capital and host city is to find itself short of up to 1.1 billion cubic metres of water, the ministry predicted.

Despite the danger, automatic sprinkler systems are installed there to water lawns and flowers every day at its quickly rising industrial and residential complexes.

But the water problem could threaten the very economic miracle that made those complexes possible. Today China requires 10 times more water as Japan and six times more than South Korea for its economy to produce one unit of gross domestic product, said Zhai Haohui, vice minister for water resources.

He warned that the problem threatens China’s food security as well. A persistent drought has left 18 million Chinese in 15 provinces thirsty and is causing crops to whither in the fields.

The fall harvest was certain to be poor and was expected to lead to food shortages in some areas.

‘While a decade of near double-digit economic growth has increased people’s income and living standards, it simultaneously has put a serious strain on natural resources and, in some cases, pushed them to breaking point,’ He said. ‘The most notable of these is fresh water.’

In addition to the shortages, water is also unevenly distributed in China. The northern plains, with more than 45 percent of the country’s population and 58 percent of its agricultural land, have a mere 19 percent of the country’s fresh water reserves.

The Yellow river, a prime water gauge for northern China, regularly dries up. Hundreds of thousands of wells have gone dry, and the groundwater table under the North China Plain, where half of China’s wheat is grown, is 90 metres below the surface and falling by three to six metres per year as farmers pump water out of it to irrigate their wilting crops, He said.

According to the government, more than 300 million Chinese in rural areas lack clean drinking water. The water resources ministry estimated that pollution has left about 40 percent of the water in the nation’s 1,300 rivers fit only for agricultural or industrial production.

Although the wealthy southern coastal cities have better water resources, they have also found that they cannot escape the crisis, He said.

‘Chemical spills, rampant pollution and poor stewardship of the land have tainted much of the area’s water supply.’

Ma Jun, the author of a book on China’s water crisis, said government officials must

change their thinking.

‘Local officials should be judged not just by how fast their local economies grow but also by how well they protect the environment,’ he said in an appeal published across China.

Ma said a $62.5 billion project by the central government to divert water from the Three Gorges Dam on the Yangtze River to the north would not solve the water crisis. He said priority needs to be given to conservation and more efficient use of water.

The alternative, water watchdogs said, is not only the sacrifice of China’s galloping economy but also its ability to feed itself.

‘Water is the lifeline of a country’s economy and a regional economy,’ Ma said. ‘Economic growth cannot be allowed to come at a ste

[Mick100]

Drought, water worries cloud skies for US farmers By Christine Stebbins
Tue Aug 22, 2:21 PM ET



CHICAGO (Reuters) - As the United States bakes in one of the hottest summers since the Dust Bowl years of the 1930s, drought from the Dakotas to Arizona through Alabama has sharpened the focus of farmers on their lifeline: water.



Eighty percent of all fresh water consumed in the United States is used to produce food. But years of drought, diversion of water to growing urban areas and, most lately, concerns about global warming are feeding worries.

Specifically, farmers fear the U.S. Plains is facing its limits as a world producer of wheat, beef, vegetable oils and other crops due to long-term water shortages.

"Farmers aren't going to be able to produce enough food to feed the world because there's a finite amount of water left in the world. There are many folks that will tell you the next war will not be over gold, silver or land, it will be over water," said Ed Burchfield, director of facilities for Valmont Industries, which makes irrigation equipment.

The U.S. National Weather Service's outlook through October saw persistent drought from eastern Montana to Minnesota and on down through Nebraska, Kansas, Oklahoma and Texas -- the main spring-wheat and winter-wheat growing areas of the United States as well as its main cattle and beef production region.

"Relief for water supplies will likely need to wait until next winter's snow season, at the earliest, since snow melt is the major source for water in the West," the National Weather Service's Drought Outlook said last month.

IRRIGATION

The region under the greatest stress is the Great Plains, an area from North Dakota to Texas dubbed the Great American Desert by early explorers but turned into a garden spot in the last century thanks to a single innovation: irrigation.

But farmers from Nebraska through northern Texas are now growing more water-thirsty crops, like corn, that offer them better cash returns due to changing trends such as the boom in ethanol and biodiesel fuels.

That is only accelerating the depletion of ground water faster than it can be replenished by rain. In some cases, farm land is already being idled to conserve water.

"My sense in looking at these issues for 20 years, we're going to need at least a doubling of water productivity in agriculture if we're going to have an opportunity to meet food demand in a way that is somewhat environmentally sustainable," said Sandra Postel with the Global Water Policy Project, a group in Amherst, Massachusetts that analyzes water policies.

NOT JUST A PROBLEM FOR U.S. FOOD PRODUCTION

Experts say water scarcity will be a growing dilemma for world farmers. Most projections put world population at about 8 billion people by 2025, or another 2 billion mouths to feed.

But those people and their industries will also need more water. A 2002 study by the International Food Policy Research Institute estimated that farmers' use of irrigation water worldwide will rise only 4 percent from 1995 to 2025, partially because the water won't be available.

Meanwhile, non-irrigation water use could rise 62 percent.

"In the face of water scarcity, farmers will find themselves unable to raise crop yields as quickly as in the past, and by 2025 their irrigated cereal production will be 300 million metric tons less than it would have been with adequate water -- a difference nearly as large as the U.S. cereal crop in 2000," the study said.

But U.S. water problems have the greatest implications for world food supplies. The United States for decades has been the planet's "food reserve," the top exporter of wheat, corn and soybeans and the largest single provider of food aid to other nations.

The squeeze on water for U.S. farms is pushing innovation, such as a trend away from flood irrigation to center pivot sprinklers or state-of-the art, localized drip irrigation.

"Just the changing of irrigation techniques can save a lot of water. That's the first place to start," said Thoma

[Mick100]

Growing Fuel

Elliot Gue

http://www.financialsense.com/editorials/gue/2006/0831.html
.

[Mick100]

Wheat Rises, Capping Biggest Monthly Gain in at Least 7 Years

By Claudia Carpenter

Aug. 31 (Bloomberg) -- Wheat rose in Paris, capping the biggest monthly gain in at least seven years, amid forecasts that India, the world's second-largest consumer, will increase imports and a heat wave will curb European production.

India may import as much as 8 million metric tons of the grain this year, resuming purchases after a six-year gap, the U.S. lobbying group U.S. Wheat Associates said. The global wheat harvest will be the smallest in three years because of damage to European crops, the International Grains Council said last week.

``Eight million tons is quite a lot,'' said Sorin Vasloban, a commodities trader at brokerage Plantureux SA in Paris. ``The problem in Europe is we will have less milling wheat and more feed wheat for the animals because quality was affected by rains.''

Milling wheat futures for November delivery rose 3.50 euros, or 2.5 percent, to close at 143.50 euros ($184) a ton on Euronext.liffe in Paris. They have soared 14 percent this month, the biggest monthly gain since at least January 1999.

India's projected imports of 4.5 million tons for this year will ``likely be raised in the months ahead,'' said Amy Reynolds, an economist at the London-based Grains Council. The country ``potentially could be the largest importer in the world this year.''

Egypt is the world's biggest importer, at 7.2 million tons, she said. China is the biggest consumer.

Dry weather in France and Germany spurred the Grains Council on Aug. 24 to reduce its estimate of global wheat output to 593 million metric tons from 596 million tons a month earlier. Dry conditions also damaged crops in the U.S., Australia and Argentina.

To contact the reporter on this story: Claudia Carpenter in London at at Ccarpenter2@bloomberg.net

Last Updated: August 31, 2006 12:52 EDT

[trader10]

Optimistic Commodities Investor Bides His Time
BY LIZ PEEK
September 5, 2006

Is the commodity party over? Is last week's bounce a sign of renewed vigor or a last hurrah? With a falloff in the housing sector, and consequent expectations that the American consumer will take a well-earned breather, most commodities, including zinc, copper and gold, are off more than 10% from their May highs. At the same time, the stock market has rallied, hoping for that Goldilocks economy of non-inflationary but job-producing growth.

Darko Kuzmanovic thinks the celebration may be a bit premature. He is a long-time commodities analyst and investor, and currently manages the Prudent Global Natural Resource Fund along with David Tice, better known for his Bear portfolio. Mr. Kuzmanovic regards the summer slide in most commodity prices as a blip in a strong long-term trend. Not mincing words, he said: "I've never felt so positive about the sector." Still, he is cautious near-term.

He is an Aussie, and started out as a metallurgist working for a zinc producer in New South Wales, which eventually was taken over by Rio Tinto. After many years working in the resources industry, Mr. Kuzmanovic acquired an MBA, with which he hoped to break into mining's management ranks. As luck would have it, he emerged at a terrible time — a time, which in retrospect, built the platform for his current successes.

Faced with slumping metals prices and no end in sight, Mr. Kuzmanovic joined Zurich Investment Management in Australia as a resources analyst, and from there became a fund manager. Among other things, and after several mergers, he ran Scudder's Gold & Precious Metals Fund, which for a period of time Morningstar ranked no. one in the sector. In 2004 he joined David Tice & Associates.

In other words, Mr. Kuzmanovic knows a great deal about commodities — how to find them, produce them, and also invest in them. From his current location in Vancouver, he watches the global interplay of supply and demand, all the while looking for companies with growing, high-quality assets and above-average prospects.

That's not to say that he doesn't spend a fair amount of time anguishing over the big picture. And especially, over China. There is no question, according to Mr. Kuzmanovic, that China has been central to the skyrocketing prices we have seen for copper, lead and other commodities. A decade ago, he recalls that the guiding principle for mining companies was to avoid any commodity that China was exporting. They were ruthless traders, and prone to driving prices lower to gain share.

Those days are long gone, as China has become an importer of one product after another. There seems, according to Mr. Kuzmanovic, no end in sight. China's most recent five-year plan focuses on its interior provinces, where widespread poverty has already caused demonstrations against the government. As the country tries to even out its economic progress, it will be forced to spend heavily on infrastructure in those regions.That means even greater demand for concrete, steel and other imported goods.

Overall, Mr. Kuzmanovic said, "the structural dynamics evident over the past five years are still okay." The overexpansion of the 1980s and unwinding of Russia's sizable inventories in the early 1990s caused a decline in real commodities prices that discouraged reinvestment in the sector. Though cyclical forces will eventually build up capacity and start the whole ball rolling again, that time is not near, according to Mr. Kuzmanovic.

Still, he is concerned that in the short term, a slowing in economic growth will put further pressure on prices, especially copper, where there is some new supply coming on stream, and nickel. Nickel shortages have led prices higher, to a point where some buyers will start to substitute chrome. He is more positive on the dynamics of the uranium, gold, and zinc markets.

Mr. Kuzmanovic says that today's valuations of mining and energy stocks assume below-market commodities prices. Nonetheless, he expects stocks in the sector t

[Mick100]

http://in.today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2006-09-14T142226Z_01_NOOTR_RTRJONC_0_India-267501-2.xml


World economy stays strong but risks grow - IMF

Thu Sep 14, 2006 2:29 PM IST

By Lesley Wroughton

SINGAPORE (Reuters) - The global economy is set for another year of strong growth, the International Monetary Fund said on Thursday, but it warned that rising inflationary pressures and a U.S. economic downturn posed growing dangers.

In its twice-yearly World Economic Outlook, the IMF raised its 2006 forecast for global growth to 5.1 percent from an April forecast of 4.9 percent. It also predicted 4.9 percent growth in 2007 versus a previous projection of 4.7 percent.

Stronger growth in Europe and emerging economies should help offset a slowdown in the U.S., the global economic watchdog said.

There is a one in six chance that global growth could fall to 3.25 percent or less in 2007, the IMF estimated.

If the forecast for 2006 materialises, it will mark the strongest four-year period of growth for the global economy in three decades.

"The United States has been so central to world growth, it is hard to know how much of world growth outside is autonomous of the United States," IMF chief economist Raghuram Rajan told Reuters in an interview.

"We know the United States is slowing but we don't know how much, partly because a lot of it is dependent on the housing market and those links with the rest of the economy," he added.

Rajan said the slowdown in the U.S. housing market had started but the real threat was if it slows more abruptly.

"Importantly, the slowdown in housing has yet to translate into significantly lower consumption," he said, adding that it was unclear how much U.S. jobs and wage growth would offset the cooling housing market.

The fund estimated the U.S. economy would grow 3.4 percent in 2006 but it lowered its previous forecast for 2007 growth by 0.4 percentage point to 2.9 percent.

FACING A DILEMMA?

Earlier, Rajan told a news conference it was appropriate that the U.S. Federal Reserve had halted a two-year string of interest rate hikes in August while there were uncertainties about where the U.S. economy is headed.

But pausing too long while inflationary pressures and unit labour costs rose was risky, he cautioned.

"The Fed may soon be on the horns of a dilemma and monetary policy will need to be skilfully managed if the economy is not to be gored," Rajan said.

Rajan told Reuters he was not too concerned that a U.S. slowdown would affect Chinese growth, saying the impact would only be marginal. Of greater concern was the threat that the U.S. downturn may fan protectionism.

"The effects you have to worry more about is if U.S. slowing prompts more talks about protectionism, about the yuan being relatively fixed and that channel becomes more active," he added.

In the euro area, growth is likely to pick up in 2006 and then moderate next year, while in Japan the economy should continue to expand, the IMF said.

"At this point, Germany is on a roll," Rajan said.

In emerging Asia, the IMF said the outlook was for continued strong growth of 8.3 percent in 2006-07 -- half a percentage point higher than projected in April.

BOOMING CHINA

The IMF said near-term risks to the outlook for Asia were broadly balanced but it said there was a possibility of even faster growth than projected in China and India.

The IMF voiced mild concern about the possibility of a disorderly unwinding of global economic imbalances that are caused by large deficits in the United States and massive surpluses in emerging Asia and oil producing nations.

"A smooth, market-led unwinding of these imbalances is the most likely outcome, although investors would need to continue increasing the share of U.S. assets in their portfolios for many years to allow this to happen," it said.

Later Rajan said the IMF's language on global economic imbalance concerns had changed slightly but it did not mean the fund was less concerned.

"The risk of an abr

[Wossname]

Assumption: US consumption determines the short to mid term future of the commodities boom.

1. If Consumers Feel Happy:

> They re-elect President George W. Bush.
> They buy from Asia and the Middle East, and attract support for US debt and the USD.
> They maintain US service industries, which maintains US employment and spending.
> They support domestic consumption and prosperity in Asia and the Middle East.
> They maintain the commodities boom by these direct and indirect means.
> Inflation accelerates, diluting US debt.

2. If Consumers Feel Unhappy:

> They oust President George W. Bush.
> They cut back personal spending.
> US service industry employment levels stagnate or fall. Spending contracts further.
> US consumers, by saving, create deflationary pressure.
> The real cost to the US of existing debt grows.
> Export income in Asia and the Middle east suffers as US consumption contracts.
> Tight margins and overcapacity in Asian manufacturing multiply Asian political woes.
> Immaturity in Asian capitalism exacerbates instability.
> Middle Eastern tensions exacerbate instability.
> The balance of the political pros and cons of holding US debt shift toward foreclosure.
> Sino-Japanese tensions et al exacerbate risk of a pre-emptive key liquidator emerging.
> US economy contracts beyond the reach of US Fed Reserve Bank stimuli.
> Professor B. Bernanke risks infamy.
> Commodity prices stagnate, await recovery and growth of Asian economic world order.

US consumer confidence is arguably tottery. Hopefully, concerns that central banks have historically tended to ease liquidity too slowly in the face of incipient consumption crashes will be unfounded this time.

[Mick100]

Well it looks like the commodities bull is taking a breather. Both the CRB and oil have broken down. Interesting to note that the CRB went into a four yr consolidation pattern in the 70s bull market - it ranged between 185 and 225 between 1974 and 1978
http://www.financialsense.com/fsu/editorials/2006/0919.html
I expect the PMs to consolidate for the next 12 months between 550 and 750. I can imagine base metals coming back a bit - $2.00 copper. Oil could spike down into the low 50s but should average around 60 over the next few months. I think OPEC will make sure oil doesn't go down too much - they have indicated that they will defend 60 dollar oil. With the current geopolitical situation anything could happen with oil. I'm holding all my oil investments for now.
Not all the commodities will stop going up in price but because the CRB is so heavily weighted in oil then as long as oil is going sideways then the CRB will also go sideways.
It's too early to say where the best place to be is over the next 12 months - maybe ag commodities.
,

[Mick100]

Australia Cuts Wheat Forecast 28% on Dry Weather (Update2)

By Gemma Daley and Madelene Pearson

Sept. 19 (Bloomberg) -- Australia, the world's second- largest wheat exporter, cut its forecast for the coming harvest by 28 percent after dry weather damaged crops and curbed yield.

The October-to-January harvest may produce 16.4 million metric tons of wheat, the Australian Bureau of Agricultural and Resource Economics said in a statement today. That compares with the 22.8 million tons it forecast in June and the 25.1 million tons gathered last year.

Wheat prices have gained 17 percent this year amid concern dry weather may cut Australian, European and U.S. output and as Indian purchases rose. Developing El Nino weather conditions in the Pacific Ocean may cause drought in Australia, which supplied about 14 percent of the wheat traded globally last harvest.

``Most analysts think the balance of risk is tilted well to the smaller crop side,'' Tobin Gorey, a commodities analyst at Commonwealth Bank of Australia, said in an e-mail. ``That has only grown as more conclude an El Nino event has begun.''

Wheat for delivery in December rose as much as 2.25 cents, or 0.6 percent, to $3.9775 a bushel in after-hours electronic trading on the Chicago Board of Trade. The contract traded at $3.975 at 10:15 a.m. in Sydney.

``Most cropping regions of Australia recorded below to very much below average winter rainfall, with some regions recording their lowest winter rainfall on record,'' the bureau's acting executive director Karen Schneider said in the statement released in Canberra.

The cut beat the expectations of five analysts and traders surveyed by Bloomberg News before today who estimated the bureau may reduce its estimate to 17 million tons.

Barley production will fall to 5.8 million tons and canola output will drop to 775,000 tons, the lowest in 10 years, the bureau said.

To contact the reporters on this story: Gemma Daley in Canberra on gdaley@bloomberg.net Madelene Pearson in Melbourne on mpearson1@bloomberg.net ;

Last Updated: September 18, 2006 20:30 EDT

[Mick100]

Stay focused on the Major Trends

Mary-anne and Pamela Aden

http://www.gold-eagle.com/editorials_05/aden092206.html
,

[Mick100]

By Kevin Morrison and Javier Blas in London

Published: September 25 2006 20:10 | Last updated: September 25 2006 20:10

"Oil exporting countries may consider a cut in output after crude prices fell below $60 a barrel on Monday for the first time in six months.

The decline came as global demand fell back from its mid-year peak and tensions over Iran eased.



Ministers from the Organisation of the Petroleum Exporting Countries are understood to be concerned about the drop in oil prices, which are down almost a quarter from their recent peaks.

They have discussed the prospect of trimming production ahead of the oil cartel’s next ministerial meeting in Nigeria in December, according to Opec officials.

The oil price fall over the past month has been accompanied by investor selling in oil and other commodity markets, mainly on concerns that economic growth in the US is slowing.

“There is a concern by hedge funds that oil and commodities are no longer the one-way bet they once were,” said an Opec official.

Brent, the European benchmark oil price, dropped 50 cents to $59.91 a barrel, down 24 per cent from its record peak of $78.40 reached last month.

The US benchmark oil price, West Texas Intermediate, yesterday hit $59.62, its lowest level since early March, before recovering to $60.54. It was flat on the day.

The WTI is now lower than the level it ended at last year. The magnitude of the decline in percentage terms is the largest in more than three years.

Investors have been selling out of oil futures over the past month, after taking bets earlier in the year on expectations of hurricanes disrupting oil supplies in the Gulf of Mexico.

But with the Atlantic hurricane season finishing at the end of September, there is little prospect of a repeat of last year’s devastating storms.

Opec is not only worried about investor activity in oil markets, but also about preserving high export prices, which underpin government budgets in member countries.

Many Opec producers have embarked on big spending programmes in recent years on the back of the higher oil price.

Opec maintained its quota of 28m barrels a day at its recent meeting in Vienna, and this is close to the cartel’s actual production last month.

Saudi Arabia, Opec’s linchpin member and the world’s largest oil exporter, has been cutting its output since the end of last year.

If Opec does trim its official production ceiling, it would be the first cut since December 2004, when oil prices were close to $42 a barrel"
.

[Mick100]

Rio Tinto undercut cools coal outlook
Email Print Normal font Large font Barry FitzGerald
October 17, 2006

Other related coverage
The future is looking coal-fired
FEARS that Australia's coking coal export values will take a hit in looming annual price negotiations have increased after Rio Tinto surprised the market by bidding well below competitors to win a tender from the Steel Authority of India (SAIL).

Market sources said that Rio won the tender to supply 1 million tonnes of hard coking coal from its Hail Creek mine in Queensland at $US83 a tonne.

That was $US15 a tonne below the offer from US group Peabody's and $US22 a tonne lower than this year's contract prices (about $US105 a tonne) into Japan and China, which run through to April 2007.

While the tender was outside the annual contract process, negotiators for other coal producers fear the SAIL tender will be used as ammunition in negotiations in the key Japanese market for the steel making raw material. Rio's Melbourne office had no comment.

Japanese steel makers buy about 34 per cent of Australia's coking coal exports. They are followed by Europe (18 per cent) and India (13 per cent).

Traders said that the Indian deal was the first real sign of a break in hard coking coal prices. If carried through to contracts, it would cost Rio, BHP Billiton, Xstrata and other exporters more than $3.5 billion in revenue based on annual exports of more than 125 million tonnes-a-year.

Weakness in coking coal prices comes as no surprise to the equity markets as supply is rising steadily to meet the surge in China-led demand.

Most analysts now expect that from a position of tight supply in recent years, the market for coking coal could move in to surplus in 2008-09.

The pressure on coking coal comes as analysts continue to debate what will happen to iron ore prices in annual negotiations.

While some are tipping a 5 to 10 per cent fall from the current bumper levels, others argue that a 5 to 10 per cent increase is on the cards as China and India take up the slack in other markets.

There were no concerns about coking coal price weakness reflected in Rio shares yesterday. Along with the rest of the resources sector, Rio was swept higher, closing $1.86 or 2.5 per cent higher at $75.29.

http://www.theage.com.au/news/business/rio-tinto-undercut-cools-coal-outlook/2006/10/16/1160850871492.html

[Mick100]

Long-term prospects for uranium bullish: report

Updated: 2006-10-20 09:00:00





(Special) - Uranium may be radioactive, but it is a friend to investors.

Despite the recent downtrend in other commodity prices, the price of uranium has continued to rise. It recently pushed through a new high of $54 US per pound, up 25 per cent in the past six months.

Even though the price has quintupled since 2000, it will continue to rise to an average $59 per pound in 2007 and $63 per pound in 2008, says a report issued last month by German-based Deutsche Bank.

The report, by analysts Peter Richardson and Joel Crane, says the current concerns over the availability of supplies, which are driving the price, are "expected to persist through to the end of 2009 before a significant increase in planned mine production results in a temporarily oversupplied market.

"Renewed supply concerns are expected to emerge from 2013 onwards as the U.S.-Russian highly enriched uranium (HEU) agreement expires and removes a considerable amount of supply from the market."

As a result, Deutsche Bank is forecasting price increases through to the end of 2008, a decline until 2013, and then renewed upward pressure.

The U.S-Russian HEU agreement, reached in 1993, allows for a significant amount of uranium from dismantled Russian nuclear weapons to be sold to U.S. power plants each year.

This secondary supply helps to make up the substantial difference between current worldwide mine production of about 100 million pounds per year and consumption by power utilities in the order of 175 million pounds per year.

But when the agreement expires in 2013, Russia is expected to keep its uranium for domestic use or for use in Russian-designed reactors in other countries. Russia would be at a significant advantage in marketing its reactors if it were able to offer uranium supplies on long-term contracts.

The big difference between current supply and demand, as well as prospects for a ramp-up in demand arising from dozens of nuclear plants being built in the coming decade, especially in India and China, have attracted some hedge-fund and other investment buying of uranium. However, Deutsche Bank says this is relatively small and, in any event, the upward swing in prices started long before investment demand came in.

Price triggers have included supply disruptions from fires and flooding in mines in Australia and Canada in 2001 and 2003.

Such supply problems persist, Deutsche Bank says. Uranium production from Australia's three mines in the first half of 2006 was down 27 per cent from a year earlier due to acid plant problems and a cyclone. Additionally, production from Canada's three major mines was down 33 per cent in the same time frame.

The uranium market is relatively small. Around $5 billion was consumed last year, compared with $57 billion of gold. And the radioactive metal is not traded on an exchange, so it has not been easy for investors to buy it or even keep track of the price - certainly not as easy as precious metals.

One way for investors to participate in the uranium boom is the Uranium Participation Corporation, which holds uranium, trades on the TSX under the symbol U and is managed by Denison Mines. Shares were issued last year at $5 each and recently traded at $9.

The Uranium Participation shares were a top pick of Toronto portfolio manager John Zechner on ROBTV's Market Call Tonight on September 27. He said he prefers holding uranium directly in this way rather than investing in major uranium companies, such as Cameco, whose shares currently have a high valuation and are subject to the risk of mine problems.

Investors can also participate by buying shares in the large number of junior uranium exploration companies active in various parts of the world. However, this is very high risk. While all will search for uranium, only a few will end up finding enough for an economically viable mine.

The exploits of junior explorers are sometimes chronicled by advisory letters, such as the on

[Mick100]

Wheat Prices May Reach Record, Hurting Kellogg, Helping Funds

By Tony C. Dreibus and Jeff Wilson

Oct. 30 (Bloomberg) -- A growing scarcity of wheat may send prices for the world's most-planted crop to their highest in the next six months, threatening to spur inflation in China and India and increase costs for food companies.

Reduced production because of droughts in Australia, Ukraine and the U.S. sent wheat skyrocketing 50 percent this year. Prices may jump 47 percent more to $7.50 a bushel on Chicago futures markets, matching the 1996 record, said Brent Harris, who runs the $14 billion Commodity Real Return Strategy Fund for Pacific Investment Management Co. in Newport Beach, California. Michael Lewis at Deutsche Bank AG in London said grains will outperform all other commodities in 2007.

Wheat's rally has boosted costs for Kellogg Co., the largest U.S. cereal producer, and Kraft Foods Inc., the world's second- biggest food maker. Third-quarter expenses for flour at Canada Bread Co. surged 35 percent, the most in a decade. The major economies most affected are China and India, where staples such as bread are a bigger share of consumer spending. Two-thirds of the world's wheat harvest is used for food.

``I expect to see new records being set in the next two to three years because of global shortages,'' said Stephan Wrobel, chief executive officer at Diapason Commodities Management SA based in London and Lausanne, Switzerland, which oversees $5.5 billion. ``Agriculture has outperformed energy and metals since September, and I expect that to continue into 2007.''

Wheat rose 0.7 percent last week to $5.085 a bushel on the Chicago Board of Trade after Australia forecast the smallest crop in 12 years and consumer nations accelerated purchases, locking in supplies before prices race higher.

Inventories Plunge

Egypt, the world's biggest wheat importer, bought 180,000 metric tons for $34.4 million, triple what it had initially sought. A state-run grain trading company in India said it wants to purchase as much as 35,000 tons after already buying 6.5 million tons this year.

World inventories will fall 43 percent by June to 119.3 million tons, the lowest since 1982, the U.S. Department of Agriculture said Oct. 12. Australia, the third-biggest exporter, will see its wheat crop decline 61 percent to 9.5 million tons. Ukraine, the sixth-largest exporter, expects its harvest will drop 10 percent.

Hedge funds say they're increasing their bets on wheat. Rudolphe Roche, who co-manages the $97 million commodity fund at Schroders Plc in London, forecasts prices on the Kansas City Board of Trade will to more than $7 a bushel in 2007. The fund has a 10 percent holding in wheat, its maximum for a single commodity.

``I am extremely bullish on wheat given the shortages in global inventories,'' Roche said. ``All the major producers have suffered from dry weather conditions.''

Rising Costs

Kellogg estimates higher costs for wheat, sugar and fuel will cut profit by as much as 30 cents a share this year, equal to 11 percent of last year's total. The Battle Creek, Michigan- based company will eliminate about 220 jobs at a Corn Flakes plant in Manchester, England, to save money.

Canada Bread, the Etobicoke, Ontario-based unit of Canada's largest food processor, Maple Leaf Foods Inc., reported a net loss of C$2.7 million on Oct. 26, in part because the company wasn't able to raise product prices fast enough to offset the surge in the cost of flour.

Shares of Panera Bread Co., the Richmond Heights, Missouri- based operator of almost 1,000 bakeries and cafes, on Oct. 25 sank 6.2 percent after the company reported third-quarter profit missed some analysts' estimates and that costs may rise next year, including expenses for wheat and flour.

Demand Increases

Demand is rising in the $21 billion-a-year wheat market. India, the second-largest producer and consumer of wheat, will import 6 million tons this year, compared with 300,000 tons last year, making it a net importer for the first time

[Mick100]

Corn prices hit 10-year high
By Kevin Morrison

Published: November 2 2006 11:56 | Last updated: November 2 2006 18:13

Corn prices surged to a 10 year high on Thursday after private forecasters said the 2006 US corn crop would be lower than the latest government estimates.

Informa Economics said US corn production this year would reach 10.73bn bushels a year. This is lower than the US Department of Agriculture’s estimate of 10.9bn bushels. The USDA releases its latest forecast next Thursday.



The current USDA corn production forecast for the US, the world’s largest producer, is already 2 per cent below the 2005 level and about 7 per cent below the record 2004 year. A further fall in US corn production will tighten the global corn market, where global inventories are near 25 year lows, and demand has increased more than 3 per cent in the past two years.

A strong rise in demand for ethanol is partly responsible for the increase in global corn consumption. Corn futures for December delivery on the Chicago Board of Trade reached a peak of $3.5350 a bushel, its highest level since September 1996 when corn prices hit $5.54 a bushel. By early afternoon US trade, the December CBOT corn contract was trading at $3.50 a bushel, up 16.5 cents on the day.

The rise in corn prices also fuelled a rally in CBOT soyabean and wheat futures. December CBOT soyabeans rose 13 cents to $6.58 a bushel. December CBOT wheat futures added 13.5 cents to $5.01 a bushel.
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[Mick100]

Copper Falls to Four-Month Low on Higher Chinese Inventories

By Millie Munshi

Nov. 10 (Bloomberg) -- Copper plunged to a four-month low, capping the biggest weekly decline since September, as higher inventories renewed speculation that demand may be slowing in China, the world's largest user of the metal.

Stockpiles in warehouses monitored by the Shanghai Futures Exchange rose 15 percent this week and Chinese imports dropped 22 percent in the first 10 months of the year, the Beijing-based customs office said on its Web site Nov. 8. Surging demand from China helped send prices to a record high in May, and copper prices had quintupled since 2001.

``If China's demand doesn't come back roaring, there would be very few copper-hugging people out there,'' said Michael Widmer, head of metals research at Calyon in London.

Copper futures for December delivery fell 17.9 cents, or 5.4 percent, to $3.13 a pound at 11:46 a.m. on the Comex division of the New York Mercantile Exchange, after reaching $3.117, the lowest since June 28. Prices are down 5.6 percent for the week, the third straight decline, and have fallen 23 percent from a record $4.04 on May 11.

On the London Metal Exchange, copper for delivery in three months fell $395, or 5.4 percent, to $6,930 a metric ton ($3.143 a pound), the first time it has traded below $7,000 since June 29. Prices still are up 74 percent from a year ago.

Copper will fall to $2.40 a pound next year and $1.65 in 2008, Merrill Lynch & Co. said today, reiterating an earlier forecast. Mine supply, which has been trailing demand during copper's rally, will exceed demand by 500,000 tons next year, Merrill said in its report.

Rising Inventories

Total inventory of copper at warehouses monitored by exchanges in London, New York and Shanghai jumped to 210,541 tons as of today, the highest since March 13.

A slowing U.S. housing market also will dampen copper prices in the next year, Merrill said. Home construction fell last quarter at the fastest rate since 1991. Builders are the biggest buyers of copper, which is used in wire and pipe.

``We do not believe the worst of the U.S. housing cycle is behind us and the full impact of reduced demand for copper may not be felt until early-mid 2007,'' Merrill said in the report.

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

To contact the reporters on this story: Millie Munshi in New York at mmunshi@bloomberg.net ;

Last Updated: November 10, 2006 11:48 EST

[leonchai]

http://www.bloomberg.com/apps/news?pid=20601012&sid=aoSr2_FYOq3Q&refer=commodities

http://www.bloomberg.com/apps/news?pid=20601087&sid=aL__sOXXfqPg&refer=home

Looks like many major funds are taking advantage of the current market correction to move into the commodity markets...gotta be a good sign of confidence for all of us with resource stocks!

[Mick100]

Corn Has Biggest Gain in Four Days as Argentina Halts Exports

By Jae Hur

Nov. 20 (Bloomberg) -- Corn prices had their biggest gain in four days on concern demand may exceed supply as Argentina, the world's second-largest exporter, suspends new export orders starting today to curb inflation.

The halt on new requests by exporters to sell corn abroad in the coming season will allow the government to audit existing orders for 10.5 million tons, said Agriculture Secretary Miguel Campos Nov. 17. Campos cited concerns that overseas demand will limit domestic corn supplies and lead to higher prices for Argentine consumers and livestock producers.

Corn futures for delivery in March climbed as much as 9 cents to $3.795 a bushel in electronic trading on the Chicago Board of Trade. That was the biggest intra-day gain since Nov. 14. The contract traded at $3.7825 at 2:58 p.m. Singapore time. Prices reached a decade high of $3.8175 on Nov. 8 after hot, dry summer weather did more damage than expected to Midwest crops.

``The Argentine news was the best bullish factor for the market,'' said Gokon Kaname, a commodities strategist with Okato Shoji Co. in Tokyo. ``The corn market was also supported by talk of possible shipment delays of China's corn exports.''

China, the world's second-largest corn producer, competes with the U.S., the world's largest grower and shipper of corn, in the export market. Corn is used in food, animal feed and to make ethanol, a gasoline additive.

The data from the U.S. Commodity Futures Trading Commission after the Chicago's open out-cry session closed on Nov. 17 also aided today's gain in corn prices, Gokon said.

Hedge-fund managers and other large speculators increased their net-long position in Chicago corn futures in the week ended Nov. 14, according to the CFTC data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 242,979 contracts on the CBOT, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 12,011 contracts, or 5 percent, from a week earlier.

Soybeans, Wheat

Soybeans for January delivery rose 11 cents, or 1.7 percent, to $6.7150 a bushel after touching $6.72. Futures reached $6.8325 on Nov. 8, the highest since August 2005.

Soybeans, the second-biggest U.S. crop after corn, have gained 20 percent in the past three months on speculation surging corn prices may reduce global plantings of the oilseed.

Wheat for March delivery rose 10 cents, 2 percent, to $504 a bushel.

Australia's drought, the worst in 100 years, may cause a shortage of wheat and stoke inflation in India, the world's second-biggest consumer of the cereal, Finance Minister Palaniappan Chidambaram said today. India will this year be a net importer of the grain for the first time since 2000.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

-- With reporting by Eliana Raszewski in Buenos Aires, Tony C. Dreibus and Jeff Wilson in Chicago, Cherian Thomas in New Delhi and Oriel Morrison in Sydney. Editor: Shirodkar

[Mick100]

The Big Picture; East and South Asia

http://www.financialsense.com/editorials/saxena/2006/1120.html
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[stolwyk]

Resources revival?
By Alan Kohler
Watch the Tobin Gorey interview
Hear the Tobin Gorey interview
Base metals: Tracking growth rates
China slows to a run


PORTFOLIO POINT: Commodity prices in leading metals have further to rise, good news of Australian stocks leveraged to Chinese growth.


Australia's biggest mining stocks, especially BHP Billiton and Rio Tinto, have drifted in recent months as fears of a sharp slowdown in the Chinese economy rattled the markets.

But it is becoming clear there is no sharp slowdown in China. As Tobin Gorey, a commodities strategist at Commonwealth Bank, explains in today's video interview, China is set to grow next year at a phenomenal rate. Moreover, China is in a “metals intensive” phase of its economic development as the country becomes the new workshop of the world.

So why are investors so fearful about next year's economic growth? Gorey says a key reason institutional investors remain cautious is an over-emphasis on US economic indicators. As the attached report from Gorey (click here) demonstrates, the US simply does not matter as much as it used to, particularly when it comes to underpinning international metal prices. Similarly, the attached report from Martin Arnold, an equities economist with CommSec, (click here) confirms that worries about China growth were overcooked in recent months.

As Charlie Aitken argues today, (click here) there may be growing concerns among investors that future price negotiations between Australian metal producers and Chinese buyers could tilt in China's favour. But the producers — the people who actually sit around the table in these price negotiations — believe the dynamics have changed fundamentally and the Chinese will be “price-takers” for some while yet.

What does it all mean for metals and Australia's mining stocks? Well, it has to be interpreted as a positive signal. First, commodity prices in leading metals such as lead and zinc appear to have further to rise. Second, the global demand for all metals from China will be sustained.


The interview

Alan Kohler: Metal prices have been soft for six months. They’re off a high base of course, but you’ve been looking at the fundamentals of the market in base metals. How do you see things?

Tobin Gorey: I guess two pieces of the picture. One is there’s a very good fundamental story there in terms of economic growth; globally we’ve sort of gone through and weighted the global growth, the global growth outlook by base metals consumption and that says growth was a bit slower this year, or through in 2007 than 2006, but still a pretty high level compared to the last decade or so.

You mean you’ve been weighing them according to their demand for base metals, not just the size of the economy.

That’s right, and because there’s been such a big change in the global economy over the last 10 or 15 years, now we all know that China’s much larger and so on but all the time when you’re consuming all the data that comes out you’re force-fed a lot of US data; in fact probably three times as much US data as you are Chinese data. Sometimes people form an impression about what’s going on by the amount of things they hear rather than the real information, so we try to get around that by weighting the outlook by who’s important for base metal consumption. China is the biggest consumer of base metals nowadays and so we give it a bigger weight. So, yes, there is slower growth next year because the US economy is slowing, but the rest of them are going very, very well so that slowdown … it’s there but it’s pretty modest.

Let’s just look at China. You say it’s the most important consumer of base metals. Isn’t it likely to have a slowdown next year?

It could probably slow down a little but it’s still up around … anything in the 8–10% region of growth is doubling income very, very quickly: every eight to 10 years. That’s a phenomenal growth rate still. And China is [a big metals consumer] for two reasons: it’s partly a factor of it becoming a world manufacturing centre, but also

[denpal]

Growth in tourism in China is unbelievable, adding to the demand for raw materials. If you haven't been to China, you can't understand the scale of what is happening there. Just recently Lawrence Roulston visited and was gob-smacked by his own accounts of what he saw there.

We are led to believe that a big drop in new housing starts in the US has a significant effect on world copper demand. Compared to what is happening in China right now, a variation in new housing starts in the US is virtually irrelevant in the big picture. The US is rapidly becoming less relevant as Asia grows and grows with a lot of the growth servicing internal and Asian demand.

Quote:

Boosted by such events as the Beijing Olympics and the Shanghai World Expo, China is expected to become the most visited country on the planet by 2020, playing host to around 180 million overseas visitors annually.

To accommodate the hordes, gleaming new airports are going up across the country, new rail lines are being laid, and new highways are being paved.

China's hotel scene has also seen furious activity with establishments under construction in almost all the major cities. In the big economic centers such as Shanghai, Beijing, Guangzhou and Shenzhen, the appetite for hotels shows little sign of abating. Beijing's Olympic Committee, for example, plans to more than double the city's portfolio of 392 star-rated hotels in time for the 2008 Games.

Shanghai also plans to double its tally of 342 hotels in time for the opening of the 2010 World Expo.

[Mick100]

No critical copper shortages, but zinc price to continue to rise
By: Dorothy Kosich
Posted: '23-NOV-06 08:00' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) --In a recently published report, Scotia Capital indicated that critical copper shortages are not likely to occur in the near future, mine reserves are adequate to meet 16 years of needs, and that most copper miners can break-even at $1.10 copper prices.

Analysts Alec Kodatsky, Onno Rutten, Jasmit Gouri and Alex Terentiew also proposed, though, that copper prices will remain significantly above historic norms.

COPPER SUPPLY
While Scotia’s analysts acknowledge the tight physical market and inadequate mine supply. “we do not foresee a critical shortage of copper in the near to medium term and believe that what is now a roughly balanced refined market is set to swing into a modest surplus in 2007.”

Nonetheless, Scotia forecasts that copper prices will remain “well supported at level significantly above historic norms. Existing producers should therefore enjoy a protracted period of above-average margins, greatly making for a favorable investment climate.”

In their analysis, Scotia predicted fundamental copper prices of $1.45/lb this year and $1.48/lb next year. When taking investment into account, however, “we forecast average realized copper prices of $3.11/lb and $2.27/lb” 2006 and 2007.

The analysts revised their long-term price outlook from $1/lb to $1.15/lb, partially based on the following assumptions:

• The copper industry has had a very good success rate in reserve replacement and discovering new economic ore bodies. “There are currently approximately 28 years of annual global consumption contained in identified global reserves. While this is one of the lowest levels of consumption-weighted supply in the past 25 years, it is not what we would consider a critical shortage.”

• Displacement between sources of mine supply, the smelting/finery conversion complex, and end-users of copper …will remain intact for the medium term. “We believe that given the increase levels of capital intensity associated with developing mining operations, companies will be slow to increase their appetite for risk in politically unstable regions in the absence of an adequate return promoted by higher metal prices.”

• Thanks to the current metal price environment, the copper industry will be able to achieve mine production growth given the geographic diversity of projects and strong mining company balance sheets.

Scotia suggested that global supply of copper concentrate will increase 2.6% to 12.6 million tonnes this year and increase 5% to 13.2 million tonnes in 2007. Their analysis also asserted that “supply-drive speculation in copper is losing steam,” citing the muted response to recent events at the Escondida and Chuquicamata mines in Chile.

Fifty-eight percent of current copper reserves (16 years of consumption) are located in seven reasonable politically stable countries, Chile, Peru, Mexico, United States, Australia, Poland and Canada, which is easing the reliance of copper miners on the DRC for future copper sources, Scotia’s analysis suggested.

The Scotia Capital report identified three key elements of the current copper market that will allow both the development of adequate new copper supply and the balancing of the physical market in conjunction with lower forecast copper prices.

1) Chinese Demand: As most analysts have already noted, Chinese demand is critical to copper consumption. Scotia believes that Chinese demand will remain healthy for the foreseeable future. The analysts are monitoring five output metrics, which can capture 70% of China’s copper consumption including power capacity, air conditioner production, refrigerator production, washing machine production and automobile production.

Scotia forecasts that China’s copper demand will grow until the end of the decade at a Compound Annual Growth Rate (CAGR) of 7%. While the analysts anticipate another decade of consistent growth in Chinese copper consumptio

[denpal]

Goldman Sachs raises '07 forecasts for nickel, zinc, platinum prices on supplies

Source: Bloomberg


See also
Non-Ferrous Metals Board

Non-Ferrous Metals Catalog

Goldman Sachs Group Inc., the most profitable investment bank in Wall Street history, increased its 2007 forecasts for nickel, zinc and platinum prices, saying supplies are "tighter." The bank also rated Xstrata Plc a "best buy idea."

Prices of nickel, used in stainless steel, will average $25,000 a metric ton next year, Goldman Sachs analysts led by Peter Mallin-Jones in London wrote in a report dated yesterday. That's a 33 percent increase from the previous estimate.

"Stainless-steel related demand for nickel has likely played a significant role in depleting nickel inventories this year," the analysts said. Supplies will lag behind demand by 20,000 tons this year, and the deficit will persist to next year, they said.

A strike at Eramet SA's Doniambo unit in New Caledonia, the world's largest ferronickel plant, has contributed to declining supplies as deliveries have dropped 8.5 percent since the strike started on Sept. 25, New York-based Goldman Sachs said.

Prices will average $17,750 a ton in 2008, before dropping to $15,000 tons in 2009, the bank said.

Shares of Xstrata, which acquired Canadian nickel producer Falconbridge Ltd. in September, are "underpriced," Goldman Sachs said. The Falconbridge acquisition has transformed Zug, Switzerland-based Xstrata into a global diversified miner and offers "the most potential upside" among the stocks the analysts covered, the bank said.

The analysts raised their share-price target for Xstrata 40 percent to 3,165 pence. Xstrata shares have gained 93 percent in the past year and were at 2,341 pence as of 10:12 a.m. in London.

The $17 billion purchase of Falconbridge, the world's fourth-largest nickel producer by 2005 output, also helped Xstrata to be the world's fourth-largest copper producer.

Zinc, Platinum

Goldman Sachs increased its zinc-price forecast 49 percent, saying the metal will average $4,298 a ton, peaking in the first quarter when prices are expected to average $4,520 a ton.

"Demand for galvanized steel looks strong currently, driving strong demand for zinc metal," the analysts said. Zinc is mostly used to galvanize steel. Prices will average $3,323 a ton in 2008 and $1,900 a ton in the following year.

The bank kept its 2007 forecasts for copper and aluminium unchanged at $5,875 a ton and $2,425 a ton, respectively. Aluminium will be in a surplus of 125,000 tons next year on rising production of alumina, the raw material used to produce the metal. Copper's oversupply is projected to be 230,000 tons next year, the analyst said.

The platinum market is also tighter than what the analysts previously expected, they said. Prices will average $1,225 an ounce next year, 11 percent higher than the previous estimate. Prices will average $1,085 an ounce in 2008 and $1,000 in 2009.
? Back

[Mick100]

WHEAT MAY BE THE WILD CARD WINNER IN 2007
by Shailendra Kakani
Managing Editor, CommodityResearch.In
December 15, 2006


Want a winning investment for 2007? Well...then forget the advise of seasoned fund managers and CTAs, and follow the farmers of India. According to them, wheat is the commodity to watch during the coming year. Putting their money where their mouth is, they have upped their stake in wheat acreage this season, cumulatively sowing a whopping amount of land with wheat.

As a result, by the first week of December wheat sowing has crossed the 20 million hectares mark and touched a landmark 20.74 mha, a record 22.5 per cent more than the corresponding last year's area of 16.92 mha. The sowing area has increased across the board, gaining almost equally among all the major wheat-growing States.

Farmers are no commodity analysts but they are the primary stakeholders, and they have been prompted by the buoyant market prices. Wheat prices are up 67% in the past year, reaching $5.6 on October 17, the highest since 1996. In India the prices have been steadily strong, and have made the farmers in a state recently threaten to stop selling their stock at government-fixed prices, which are usually lower than those prevailing in the markets.

At the back of it all is a shortage in production and increase in consumption. FAO’s latest forecast of world wheat output in 2006 stands at roughly 592 million tonnes, almost 33 million tonnes, or 5.3 percent, down from 2005. Price rises have been supported by supply shortfalls due to setback in Australian wheat output as well as due to low global stocks.

Though FAO expects a turnaround, with increased winter plantings - as has been the case in India and elsewhere - and good growing conditions raising expectations for a strong rebound in 2007 harvests, at least the coming few months may witness wheat prices continue to rule firm. Reason enough why a report by J P Morgan Chase has been bullish on the grain. "Global wheat reserves will fall to 118.8 million tonnes on May 31, the lowest since 1982 because Australian production will drop 57% to 10.5 million tonnes and US output has declined 14%."

Leave aside wheat, other grain production is also a cause for worry. For example global production of co**** grains is lower by 2.1 per cent over last year, at 981 million tonnes. Maize output is lower by 2.2 per cent at 694 million tonnes. More than two billion people are used to consume co**** grains, and are likely to select either wheat or co**** grains depending upon various factors like availability and comparative price.

Similarly rice growth is predicted to be affected by the typhoons, drought, flooding, diseases and insect attack. Rice again is staple for more than two billion people, most of them in Asia, and any stress in supply will only spur them to consume wheat.

Although Indian Ministers have been shouting from the rooftops that there was no threat to country's food security, and that the available food grain stocks are much higher than the mandatory buffer norms, the fact is everybody in the trade knows about the ensuing shortages. India is estimated to import 6 million tonnes of wheat in 2006-07. The forex outgo for this, at an average price of $200/tonne, is Rs 5,300 crore.

India has already begun importing wheat, and according to informed sources there are problems even though the stocks have landed in India. There have been reports about contamination on account of the use of substandard packing, thus feeding the speculations that India was going to be a sustained customer in the global markets. And as the trend has been; the prices harden smartly any time India is a buyer.

India is forced to import substantial quantities of wheat since other grains' output is also markedly down. For example the production of corn, which is the third most important cereal crop in India after wheat and rice, has fallen from 12.4m tonnes to 11.5m tonnes this year, a significant reduction in the face of overall declining grain output.

While supply ha

[Mick100]

Tin reaches 17 yr high – and further price rises predicted
By: Lawrence Williams
Posted: '28-DEC-06 17:00' GMT © Mineweb 1997-2006



LONDON (Mineweb.com) --Tin, the least traded by volume of the primary base metals, and one where prices had been in the doldrums until recently, is currently trading at a 17-year high on the London Metal Exchange (LME). With demand expected to increase and supplies being curtailed, many metals analysts reckon there will be further rises ahead in the short to medium term. This puts tin alongside zinc and nickel as base metals where demand is expected to exceed supply over the next few months at least.

The immediate price surge has been due, though, to the Indonesian crackdown on around 20 small independent tin smelters which are operating illegally and whose output is reported to be of unreliable quality. The nervousness comes from uncertainty as to whether all, or any, of the smelters will reopen in the short to medium term if, and when, they become legally permitted.

The current market shortfall in tin production over rising consumption is put at some 25,000 tonnes for next year. Tin consumption is said to be increasing as pressures rise as solder manufacturers are under pressure to eliminate lead on environmental and health grounds. This coupled with an increase in electronics manufacture, particularly in China, is deemed to be enough to cause the supply problems. The predicted shortfall for 2007 amounts to around the volume that has been produced by the small Indonesian smelters in the past.

Today, spot tin traded on the LME at US$11,500 a tonne, with 3-month tin at $11,400 – the highest level since 1989.
/

[Mick100]

Base metals prices to moderate in 2007
By: Tessa Kruger
Posted: '03-JAN-07 09:00' GMT © Mineweb 1997-2006



JOHANNESBURG (Mineweb.com) --Base metals prices will moderate in 2007, but remain at “favourable” levels that will allow producers to generate excess cash flow.

Moody’s Investor Services believes prices will continue to be positive for producers although they will dip as lower demand from the United States is offset by continued strong demand from China next year, it says in a recent report titled Base Metals Industry Outlook 2007.

Supply will also continue to be constrained by lack of new capacity in copper, zinc and nickel. Price levels of these metals are likely to continue to derive support from “continued production challenges and ongoing labour disputes”.

The biggest threat to prices, apart from a significant reduction in Chinese demand, will be from the fund sector which has supported growth in prices over the past few years, but also contributed significantly to increasing volatility witnessed in 2006.

“Other significant negative factors for the entire mining industry are both operating cost platforms and development costs”, Moody’s says.

COPPER

Prices are expected to drift lower than current levels in the coming months towards a more sustainable level.

“With growing signs of a weakening US housing market, moderating demand growth from China, increased substitution due to high prices, and new mine production coming on line, we anticipate copper prices to settle below today’s levels, but to remain well above historic averages.”

New capacity will be brought on stream via BHP Billiton’s Spence project in Chile, which went into production in the fourth quarter of 2006 and is expected to produce 200,000 tonnes of cathodes annually. Phelps Dodge’s Cerro Verde mine will add 200,000 tonnes to annual production.

NICKEL

Moody’s expects a price correction from current levels, which could be significant, but it believes that the price will remain high.

The nickel price has been on a rise for a year as demand for stainless steel has been strong; the exchange inventory has dwindled to just over one day’s supply, supply
disruptions have persisted and the timetable for new mine supply has been pushed out.

“It is now accepted that the deficit expected in 2006, could occur again in 2007.”

Moody’s said the biggest negative factor for nickel producers today, was the rapid escalation in development costs.

While these costs and delays support the nickel price, they also have a direct negative impact on companies involved in producing the metal.

ZINC

As with copper and nickel, Moody’s believes the zinc price is likely to correct in 2007, but will remain at attractive levels for producers.

Strong demand from China is likely to continue as it expands its galvanizing capacity. Zinc has wide-ranging uses in construction, automotive, aerospace and pharmaceuticals.

“The greatest risk to zinc would be a reduction in demand for galvanized steel, a sector that Moody’s believes will perform well in 2007.”


ALUMINIUM

Moody’s expects aluminum prices to track within in last year’s levels, on the back of “current metal exchange inventory levels” and still acceptable demand fundamentals.

Continued cost pressures are likely to again restrain the degree of margin improvement that can be achieved in this price environment in 2007.

[Mick100]

General Motors Say China Sales Jumped
Monday January 8, 5:28 am ET
By Joe Mcdonald, AP Business Writer
General Motors Say China Sales Jumped 32 Percent in 2006


BEIJING (AP) -- General Motors said Monday its sales in China's booming car market grew by 32 percent last year, a boost for an automaker that has seen demand slump in its key North American market.
The company said it sold 876,747 vehicles in China last year, up about 208,000 units from 2005. It said sales of its flagship Buick brand grew by 24.9 percent to 304,230 units.




"Vehicle sales continued to outpace most projections as a result of unprecedented consumer demand for passenger cars," Kevin Wale, president of GM China, said in a statement.

Foreign automakers are competing aggressively for a share of China's market, where sales are expanding at double-digit annual rates and major U.S., European and Asian producers have set up factories.

On Friday, U.S. rival Ford Motor Co. said its China sales last year more than doubled to 129,790 units.

Total vehicle sales this year are expected to rise by 15 percent to 8 million, up from 7 million in 2006, according to the China Association of Automobile Manufacturers, an industry group.

GM says China is its biggest single national market outside the United States. In 2005, it overtook Germany's Volkswagen AG last year as China's No. 1 automaker, with an estimated market share of 11.8 percent.

General Motors Corp. plans to invest $3 billion in China in 2004-07 in hopes it will drive a revival for the company, which is cutting production and closing factories in its home North American market.

The automaker set up its first Chinese venture with a $750 million factory in Shanghai in 1998 and now has five joint venture assembly plants that make nearly all GM vehicles sold in the country. It also has an engine plant, an auto financing venture and is quickly expanding dealerships.

Japan's Toyota Motor Corp., on track to surpass GM as the world's No. 1 automaker in the next couple years, is well behind GM in China. In 2005, Toyota had just 3.5 percent of the market. But it has set a target of 1 million sales a year by 2010.

General Motors says sales in China and other foreign markets surpassed U.S. sales for the first time last year, reaching 55 percent of the worldwide total of 9.2 million.

GM chairman Rick Wagoner said in November the company would expand further in China and "invest ahead of demand," confident that robust sales growth will continue.

[Mick100]

from the January 05, 2007 edition

New prospect for US: glut of ethanol plants
By Mark Clayton | Staff writer of The Christian Science Monitor

Like at least four others building new ethanol plants in Illinois, Mike Smith expects his new biorefinery to begin pumping out fuel from corn by summer.
Unlike the other plants, Mr. Smith's Canton, Ill., facility is nowhere to be found on a key industry tally, which the US government and Wall Street analysts use to track ethanol plants under construction. A study released Thursday reports that at least 14 new biorefineries - representing nearly 1 billion gallons of extra fuel - are not on that tally. That oversight could mean problems ahead for the food supply and the "green fuel" industry, some analysts say.




• Ethanol production could pull so much corn out of the food supply by 2008 that US corn exports could plummet.

• The food-fuel competition could push corn prices so high that some ethanol producers in the fledgling industry, which many deem vital to US energy security, would merely break even - or, if corn gets pricey enough, actually lose money.

Even before Thursday's report, some analysts had warned of a future glut of ethanol production capacity.

The immediate concern of the Earth Policy Institute (EPI), which released the new report, is the impact on the global food supply.

"We're worried there will be less to feed the world if we're using too much corn to make fuel," says Lester Brown, EPI's president. "The US ... supplies 70 percent of the world's corn exports. These previously unidentified distilleries could have a big negative impact."

Wall Street investment banks and farm cooperatives continue to pour billions of dollars into building ethanol plants, basing their decisions in part on predictions of future capacity by the Renewable Fuels Association. The RFA lists 65 plants under construction. But EPI, which put together its own tally using several industry lists, has found 79 such plants.

That extra capacity has major implications for agriculture and the ethanol industry. Using the RFA's lower estimate, the US Department of Agriculture has forecast that ethanol biorefineries - also called distilleries - will need about 60 million tons of corn from the 2008 harvest. But if EPI's higher estimate for plants is correct, then up to 139 million tons of corn will be needed.

For its part, the RFA defends its more conservative estimate. "Our list is a pretty accurate snapshot - about the best you can get in an industry that changes as quickly as this one," says spokesman Matt Hartwig. "If we were to do our list based on announcements, it would be much longer. But that would be misleading because not all those come to fruition. Those on our list we believe will be built and up and running."

Last month, the RFA added about a dozen new facilities to its list, which suggests about 11.4 billion gallons in capacity by 2008, which is still lower than the EPI's range of 12 billion to 15 billion gallons.

Besides the potential impact on food exports, the glut in capacity could throw the ethanol industry into turmoil. The problem isn't demand for ethanol. The energy industry could use far more than what's currently produced. The real challenge is that competition for corn could drive its price so high that profits evaporate, some analysts warn.

"We see significant overcapacity in the short term, 2007-2010," warned a Deutsche Bank analysis last month. That analysis, based in part on RFA data, sees capacity of only about 8.3 billion gallons a year by 2008 - similar to a Citibank analysis in September.

Factor in the EPI numbers and the crunch gets worse.

"We've got to come up with enough corn acres to meet the demand," says Jerry Gidel, grains analyst for North America Risk Management in Chicago. "We're chasing a kite right now that keeps on rising." He predicts that capacity could reach 11 billion gallons a year by early 2008. The 1.7 billion gallons of capacity RFA added late last year was "totally unexpected and has me a little

[stolwyk]

China's Copper Imports May Rise as Stockpiles Rebuilt (Update4)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCrRxt7iM1ng&refer=home

[Mick100]

Merrill Lynch forecasts excellent nickel results
By: Dorothy Kosich
Posted: '25-JAN-07 08:00' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) --Merrill Lynch analysts declared Wednesday that nickel still “has the best fundamentals of the industrial metals” and that “nickel companies should deliver excellent results during the reporting season.”

Research Analysts Daniel Hynes and Vicky Binns wrote that “we remain bullish on the longer term prospects for nickel,” despite their predictions that the “nickel price will be under pressure once the stainless steel industry begins de-stocking” during the first quarter of this year.

In their analysis, the analysts explained that about two-thirds of all nickel is consumed in the production of stainless steel, “and there is strong evidence that stainless steel stocks are rising to alarm levels that could precipitate a stainless steel producer de-stock (similar to H2 2005).

“There is not doubt that some of the slowdown in demand has been the result of record high prices in the nickel market,” they said. “With nickel prices hitting all time highs, it is likely that stainless steel producers and end consumers will look to reduce inventory and keep their cupboards as bare as possible, just in case the nickel market suffers a correction.” Based on stainless steel de-stocking/re-stocking cycles, ML forecast stainless steel destocking during the current quarter, “and do believe this will have a negative impact on spot nickel prices (no matter what investor/hedge funds own) and on nickel-leverage equities.”

The analysts also predicted a surge in stainless steel production when China’s Baosteel gets its new capacity to full production and a giant mill at Taiyuan is commissioned. Meanwhile, ML suggested that China is using pig iron as an alternate supply of nickel.

“Despite our forecast that nickel prices can come under severe pressure from current record spot price levels due to stainless de-stocking, we would look at the pull-back, after the dust settles, as a buying opportunity as we do believe the nickel market has a lot more life left in it,” they said.

The analysts also asserted that supply issues will continue to dominate the world nickel market this year with frequent supply disruptions, as well as a loss of nearly 4% of potential nickel production.

Meanwhile, a British shipwreck has also put pressure on nickel prices as more than 1,000 tonnes of nickel is on board the MSC Napoli, which was deliberately run aground on Britain’s south coast near Branscombe, England, last week to prevent the ship from sinking.

To compound potential supply disruption concerns, Swiss mega-miner Xstrata is still negotiating with unions at Falconbridge nickel operations in Sudbury, Ontario, which produces about 4% of yearly international nickel production. Schedules to bring new nickel mines into production have been delayed at BHP Billiton’s Ravensthorpe in Australia and CVRD Inco’s Goro project in New Caledonia.

[Mick100]

By David Harman
17 Jan 2007 at 08:58 AM EST


SHANGHAI (Interfax-China) -- China's zinc consumption will rise 4.5% to 3.1 million metric tonnes this year, resulting in a supply shortage of around 370,000 metric tonnes, said Lei Wanjun, an analyst at Great Wall Securities.

"Zinc consumption will maintain its rapid growth in 2007, which may push average prices higher to around RMB 32,000 ($4,156) in 2007," said Lei. Zinc prices in the physical market stand at around RMB 31,000 ($4,025) in the current market.




"Technical upgrades and industrial consolidation in the domestic steel industry will boost zinc consumption this year," said Lei. Zinc is mainly used in the steel industry.

China's galvanized sheet output grew by 40% per year during the past three years. Current domestic capacity stands at 10 million metric tonnes and is expected to exceed 15 million metric tonnes by the end of this year.

Domestic galvanized sheet output will reach 10.5 million metric tonnes in 2006, up 45% from the previous year, and increase zinc consumption by 145,000 tonnes from last year.

Lei added that the currently low LME zinc stocks will also push prices up this year. LME stocks are at less than 10,000 metric tonnes, equivalent to four days of world consumption.

World zinc output reached 10.669 million metric tonnes in 2006. China's output was 2.75 million metric tonnes, and it been the largest zinc producing country in the world for 15 straight years.

China became a net zinc importer in 2004 and imported about 400,000 metric tonnes zinc per year in the past couple of years. China's net imports of zinc products, including mined output, or so-called concentrates, were at 860,000 tonnes last year.

Interfax recently reported that the Shanghai Futures Exchange may launch zinc futures trading soon.

Jianjun, general manager of the trading body of Zhu Zhou Smelter Company Ltd., China's biggest Zinc production company, said the contract would be launched in February or March of this year. Tong Leshen, director of the market information department at Shanghai Nonferrous Metals Association, said zinc futures would be launched sometime in the first half of the year.

However, a senior official from Shanghai Futures Exchange refused to comment on the news.

Commentary

A 4.5% rise in consumption would be at the low end of estimated growth which may turn out to be 8% or more. Forecasts for demand to 2010 are suggesting up to a 50% increase and these figures have been the driver of prices, which saw new highs in November last year.

Prices have retreated 16% or so since then and continue to ease off. China is committed to exporting high end finished steel products and, until that industry reaches an apex, demand for zinc will continue to grow.

© Interfax-China 2007

[Mick100]

increasing demand for corn

http://www.usatoday.com/money/industries/food/2007-01-24-corn_x.htm
.

[Mick100]

Massive metals deposits revealed along China’s Qinghai-Tibet Railway
By: Dorothy Kosich
Posted: '29-JAN-07 09:00' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) --Chinese geologists have disclosed one of the closely-held secrets that motivated the nation to spend US$3.7 billion on the Tibet railway: the discovery of large mineral deposits that may reduce the nation’s dependence on mineral imports.

Critics had long questioned China’s claim that the development of Tibet was the sole reason behind the building of the 1,956-km Qinghai-Tibet Railway. Now, the official Chinese news agency Xinhua has reported that Meng Xiani, director of the China Geological Survey (CGS), has revealed that 16 large copper, lead, zinc, iron iron and crude oil deposits along the railway are expected to yield 18 million tons of copper, and 10 million tons of lead and zinc.

One copper deposit on Qulong has a proven reserve of 7.89 million tons, second only to the country’s largest copper mine in Dexing in China’s Jiangxi Province. The CGS believes the copper reserves in Quolong could reach 18 million tons, making it the largest copper deposit in the country.

Zhang said three major copper deposits in Qulong and in Yunan Province’s Pulang and Yangla regions, will add 26.78 million tons of copper to China’s reserves, increase total mined copper output by almost a third, and reduce China’s dependence on copper imports. China’s copper miners currently produce about 600,000 tons of copper annually. The nation imported another 731,200 tons of refined copper from January to November last year, more than a quarter of its domestic output.

Chinese steel mills are extremely dependent on imported iron ore. The Chinese Geological Survey announced it has found estimated reserves of 760 million tons of high-grade iron ore along the rail line in the Kunglun Mountain on the western Qinghai-Tibet plateau and the southern Xinjiang Province, according to Deputy Director Zhang Hongtao.

Zhang also noted that the Midwestern part of the northern Qiangtang Basin in northern Tibet has favorable conditions and promising resources for oil and gas, according to the Beijing office of the Press Trust of India.

Meanwhile, the official Chinese Government news service Xinhau reported that the China Iron and Steel Association has vowed to cut the number of domestic companies importing iron ore to 90 this year. All outdated steel mills will be closed by the end of the year. The world’s top iron ore consumer, China imported 326 million tons of iron ore in 2006.

At a recent steel and iron ore industry meeting in Kuming City, it was disclosed that 20% of the nation’s iron-ore importers are expected to be out of business at the end of this year.

Meng said it China’s economic security would ultimately be endangered if the nation continued to rely on imports of major mineral resources in the long term. He added that the results of the geological survey along the railroad proved it was possible to improve China’s natural resources security.

[Mick100]

Continued market growth for zinc expected in 2007
By: Lawrence Williams
Posted: '29-JAN-07 12:00' GMT © Mineweb 1997-2006




LONDON (Mineweb.com) --In his latest research report, Numis Securities analyst, John Meyer, points out that, according to the International Lead & Zinc Study Group (ILZSK), world zinc consumption is forecast to reach 11.35million tonnes this year, up 2.6% from 2006. China is expected to account for 30% of world zinc demand with growth of 6.9% expected.

In the report, Meyer comments that China has been helping to drive up zinc prices with its high consumption levels as the economy continues to develop. It is by far the largest consumer with the US a distant second place with only 10% market share according to the ILZSG. 47% of zinc is consumed to galvanise steel which protects the steel against corrosion.

Also he adds that a zinc futures trading contract is to be launched in Shangahai to enable local consumers and producers hedge against risk, and he feels that this may expose the metal to further speculation and volatility.
.
He points out too that zinc prices are currently well below the US$4,600/t high of December 2006. Prices have fallen back in response to concerns on US manufacturing data, which had particularly affected copper prices with that metal being seen to move into surplus in 2007. The fall in copper prices dragged other base metals down too, but Meyer notes that the supply/demand position for zinc is likely to be rather different with supplies still likely to be in deficit by the end of the year, even though supply growth is expected to exceed demand growth over the period.

“Fears over security of supply are likely to prevent significant downward price moves for the time being, and there is considerable scope for a recovery. Market commentators have talked about a recovery in zinc prices to back over the US$4,000/t level” says Meyer.

Although there is new production anticipated to come on stream during the year (7.3% mine supply output growth is expected), any delays, labour disruption and other factors which may cause output to be curtailed, even temporarily, could have an immediate effect on the market. Warehouse stocks are still very low.

[Mick100]

Corn-based ethanol push could affect other crops
Farmers are expected to try to meet increased demand and devote fewer acres to tomatoes and wheat. That could lead to higher food costs.
From the Associated Press
February 1, 2007


SACRAMENTO — As California becomes more aggressive in pushing for cleaner-burning fuels, the state's farmers are expected to plant more corn where they typically cultivate other crops.

The increased focus on corn — from which ethanol is produced — could mean fewer acres planted for tomatoes, wheat and other crops. That would lead to higher prices for tomato sauce, bread and the feed corn used by ranchers, potentially boosting the prices of turkey and chicken at the grocery store.

Gov. Arnold Schwarzenegger has called for California refiners to cut the carbon content of vehicle fuels 10% by 2020. Using cleaner-burning fuel would help reduce the amount of atmosphere-warming gases produced in the state, the world's 12th-largest emitter of greenhouse gases.

Alternative fuels supply 4% of California's transportation needs. Schwarzenegger's executive order could increase the state's use of renewable fuels such as ethanol three- to fivefold, administration officials said.

His action to promote the use of biofuels was the first major step toward cutting California's greenhouse gas emissions under a landmark bill Schwarzenegger signed last fall. Industries also are targeted under the law, which aims to reduce greenhouse gas emissions 25% by 2020.

The focus on biofuels comes amid increased demand for feed corn nationwide, driving up the cost and prompting some farmers to consider switching to a crop that mainly comes from the Midwest.

"Recently, because of ethanol production driving up the price of corn, it's becoming more attractive to tomato growers," said Ross Siragusa, president of the California Tomato Growers Assn.

"We'll definitely see more farmers making the decision. It's a lower-risk crop."

That could mean higher prices for foods that use processed tomatoes such as salsa and sauce, he said.

Higher wheat prices led to an increase in acreage planted this year, said Bonnie Fernandez, executive director of the California Wheat Commission. But wheat farmers could shift quickly to corn in the future if they find a market for ethanol.

In turn, that would trigger higher prices for bread and other wheat products.

Most corn used by California ethanol producers, as well as some major livestock operations, is shipped by train from the Midwest at prices cheaper than it can be grown on the West Coast, said Kent Brittan, a University of California Cooperative Extension advisor.

"What's happened now, this year, is that ethanol has put a price floor in the market. It's up in the area where it's profitable for California growers to grow corn," Brittan said. "I'm thinking it's going to stay that way because there are more ethanol plants coming on line."

Brittan said he expected the price of corn to remain relatively high because of the increased competition between livestock and ethanol producers.

Although better prices translate into higher profits for grain farmers, they mean lower margins for livestock producers who depend on corn-based feed.

About two-thirds of the cost of raising chickens or turkeys is for feed, most of which is from corn, said Bill Mattos, president of the California Poultry Federation. He expects the price of poultry feed to double this year.

[denpal]

Metals dive on report of fund losses

Fri Feb 2, 2007 5:56 PM GMT163



LONDON (Reuters) - Base metals prices fell sharply on the London Metal Exchange on Friday on a report of heavy losses at a hedge fund and in the absence of Chinese buyers, dealers said.

"The market is collapsing," a European trader said.

Three-months zinc fell by nearly 9 percent at one stage, copper was down by over 6 percent and aluminium dropped by some 3 percent in a general sell-off.

Traders said the selling was mostly on behalf of funds, triggered by a report of heavy losses at a hedge fund that specialises in metals trading.

Once prices hit specific chart levels the fall for most metals accelerated.

"Fund liquidation...a lot of stops triggered -- a lot of the stuff on the back of the Red Kite news," the trader said.

Hedge fund Red Kite, which posted strong gains in 2006, has suffered a roughly 20 percent loss in the first days of January and is now trying to stall investors who want to pull money out, The Wall Street Journal reported.

"It is quite scary, actually, a lot of volume going through and no one is buying the stuff," analyst Michael Widmer at Calyon said.

By 1520 GMT benchmark copper for delivery in three months was at $5,330/5,340 per tonne, down from the close of $5,600 on Thursday.

Widmer said the market was also influenced by data from the United States this week.

The global indicator produced by JP Morgan with research and supply management organisations fell to 52.4 in January -- its lowest since August 2005 -- from 53.4 in December.

Global factory output growth also sank to its lowest in three and a half years to 53.0 from 54.3.

Copper is down more than 12 percent since the start of the year and around $3,000 below the peak it hit in May last year.

Zinc was down $300 at $3,090/3,110.

"There's no evidence of fresh buying from speculative quarters, and all the indications are that the Chinese are going to wait until after the New Year holidays before coming to the market," another dealer said.

In previous months, some of the investment funds that play the commodities markets have used the first few days of the month to add more metals to their portfolios, but that pattern has become less pronounced recently.

Aluminium was down $58 at $2,695/2,700.

The only metal trading in positive terrain was steel-making input nickel, up $750 or 2 percent at $37,600/37,800 after inventories of metal, already low, fell another 144 tonnes to 3,222.

"General sentiment remains positive because of the current low stock levels," LME broker Sucden said in a market report.

Lead was down $25 at an indicated $1,640/1,655 and tin was indicated down $105 at $11,795/11,800.

[Huang Chung]

Just wondering how people view the plunge in the Zinc price....is it the beginning of the end for our Zinc plays such as Zinifex and Kagara, or just a rough patch that we need to negotiate.

In other words, are we likely to be buyers or sellers next week[?]

[Steve]

quote:Originally posted by Huang Chung

Just wondering how people view the plunge in the Zinc price....is it the beginning of the end for our Zinc plays such as Zinifex and Kagara, or just a rough patch that we need to negotiate.

In other words, are we likely to be buyers or sellers next week[?]


What does your strategy tell you?

[whiteheron]

Huang Chung

I belong to the stronger for longer brigade
More people in the world striving for a better standard of living which consumes greater quantities of resources and the resources are finite and are costing more to extract as time goes on
This results in both cost increases and higher metal values

My opinion only, and I am no expert but do a lot of reading on both base and precious metals

I believe that the current price pull back for zinc is of a temporary nature and that the price will hold up well for at least the next couple of years ( but dont take my word as gospel )
Zinc galvanising increases the life of iron by about five times --- this must continue to create a very healthy demand

Time,as always, will tell

[Huang Chung]

It seems that a number of things have impacted the price of Zinc....recommencement of Chinese exports last year, the problems at Red Kite hedge fund, stop losses being triggered causing other funds to sell, current absence of Chinese buyers etc.

Yet, strangely, the LME stockpiles are currently around 98,000 tonnes, where as, I seem to recall they were around 100,000 tonnes a week so ago.

I have read one report which suggested that Chinese buyers should reappear after the (Chinese) new year...I presume that new year must be the Chinese 'go slow' time, a bit like us with Christmas / New Year.

I don't know what to make of hedge fund selling...will they keep going and drive the price down further?....where is the likely bottom?

[SEC]

quote:Originally posted by whiteheron


I believe that the current price pull back for zinc is of a temporary nature and that the price will hold up well for at least the next couple of years ( but dont take my word as gospel )


Perfect storm at the moment, and almost all of the issues are transient.

1. Red Kite Hedge fund in trouble. Looks like a similar situation to the Amaranth losses on natural gas late last year. That was short term - just look at the gas price now!
2. The Chinese were paid rebates to export as much as they could prior to mid December, the ramifications of which were felt in increasing stockpiles over the following weeks. Looks to have settled down now.
3. Surplus of concentrate at the moment (commented on by Greig Gailey) since shipments from Alaska delayed in Q306 were delayed into Q406 and Q107. Witness the acceleration of zinc stockpile depletion around September-October. Any drawdown in stocks in the next month will be muted as a result but should accelerate again from March-April.
4. Market perception that the US housing recession is having an impact on zinc demand. If true, why are US zinc stockpiles still decreasing?
5. Market perception based on a Bloomberg article that China is a net exporter of zinc. Wrong. There was no account of zinc concentrates, of which China still imports millions of tonnes. China is still a huge net importer of zinc products. The report only shows that the global zinc smelting capacity is shifting to China from elsewhere.

As I've mentioned previously, the real supply response may start to kick in from late 07. In the meantime the chequebook is ready for topping up on some quality zinc miners.

SEC

[Huang Chung]

SEC

'Perfect Storm'.....nicely put.

Thank you for that detailed post.

HC

[Mick100]

Commodity prices forecasted to be well above historic trend
By: Dorothy Kosich
Posted: '02-FEB-07 10:00' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) --Rio Tinto Chief Economist Vivek Tulpulé Thursday forecast that most commodity prices are expected to average well above their long historical trend this year.

“Although economic activity is expected to slow in 2007, global growth is expected to remain strong enough to support solid increases in demand for most metals and minerals,” Tulpulé said, noting “continued strong commodity intensive growth is expected for China. At the same time, relatively low stocks and likely ongoing production difficulties suggest that most commodity prices can be expected to average well above their long historical trend over 2007.”

Tulpulé forecast that over the longer run, strong growth from China should continue to provide ongoing momentum for commodity demand, while production can be expected to expand. Over the long run Chinese GDP growth can be expected to average more than 8% annually, which will provide sustained basis for commodity demand growth, the economist suggested.

The extent of the U.S. economic slowdown in response to the domestic housing slump and the effect of this on global economic activity is the key overarching risk this year, according to Tulpulé. “Given the importance of fund money in exchange-traded commodities, high volatility is expected to be a persistent feature of those markets.”

“The importance of investment funds in some metal and minerals markets means that large price movements could take place on the back of speculative shifts—well in advance of any fundamental change in the physical market,” Tulpulé suggested. “The implication is that volatility should continue to be a feature of markets in the coming months.”



“While [commodity] prices should eventually move back down toward their long run trends those trends are likely to assume higher levels due to structural increases in industry marginal costs since 2003.”

Finally, Tulpulé concluded that it is likely “that it will take longer for prices of many minerals and metals to approach trend than has been the case historically because of constraints on the speed with which production capacity can be expanded over the next few years.”
.

[Mick100]

Oil Prices Spike on Iran, Cold Weather
Friday February 9, 12:09 am ET
By Tanalee Smith, Associated Press Writer
Oil Prices Continue Rise on Iran-U.S. Tension, Violence in Nigeria and Frigid Temperatures


SINGAPORE (AP) -- Oil prices rose above $60 a barrel Friday as traders followed a $2 leap the day before, stirred by Iran-U.S. tension, violence in Nigeria and frigid U.S. temperatures.
While oil prices had been rising over the past two weeks on news of cold U.S. weather, they continually settled below the psychological $60-a-barrel mark. But a surge Thursday lifted prices to $59.71 a barrel -- the highest settlement since Dec. 29 -- and Asian traders on Friday continued those gains.



Light, sweet crude for March delivery was up 50 cents to $60.21 in electronic trading on the New York Mercantile Exchange, midmorning in Singapore.

Crude oil on the Nymex has not traded above $60 a barrel since Jan. 3, the first trading day of the year.

Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo, thought the price increase was an overreaction.

"The surge is quite hard to understand. It seems traders are looking at the short-term -- heating oil demand and geopolitical tensions -- when they should be looking at the medium and long-term," Emori said. "We have to remember that the geopolitical risks, especially in relation to Iran, have not really been realized in terms of affecting supply, and that the winter season will be over in a month."

On Thursday, Iran stepped up its warnings to the United States, which rekindled worries that supplies out of the oil producer could be hindered. Iranian supreme leader Ayatollah Ali Khamenei said Tehran would strike U.S. interests around the world if his country is attacked.

Though the comments didn't immediately cause a spike in prices, it kept prices from falling, as did ongoing forecasts of cold weather throughout the United States, and news of a shutdown at an Occidental Petroleum Corp. crude and natural gas field in California.

The market was also watching violence in Nigeria, where a Frenchman was kidnapped Thursday in the latest of a spate of violence targeting oil workers.

More than 100 foreigners have been seized in a year of stepped-up attacks across Nigeria's southern region, where the crude is pumped. More than 40 have been seized in the past month alone. The violence in Africa's biggest oil producer has cut daily output by nearly a quarter.

In other Nymex trading, natural gas also rose, trading up 13.9 cents to $8.01 per 1,000 cubic feet. A day before, it settled at $7.871, its highest settlement price of the year. Natural gas, the more popular form of home heating in the United States, has risen more than 60 percent over the past month on the recent cold weather. It is trading around the same level it was this time last year.

Heating oil rose 0.61 cent to $1.7311 a gallon.

The National Oceanic and Atmospheric Administration continues to forecast normal to below-normal temperatures across the United States until at least Feb. 22.
.

[Mick100]

Commodities may be in a funk, leavings stocks up in the air
By: Barry Sergeant
Posted: '07-FEB-07 23:00' GMT © Mineweb 1997-2006



JOHANNESBURG (Mineweb.com) -- Recent woes at London-based hedge fund Red Kite – whether truth or rumour – have taken the shine off a number of commodities, but the market jostling may be concealing a secular change in fundamentals. If so, investors would need to closely examine the implications for innumerable listed metal and commodity stocks.

Commodities in general cruised into a protracted bull market early in 2002, in parallel with the dollar’s entry into a longer-term bear market. For years, resources stocks have been the leaders on global equity markets, based on robust world economic growth, China’s voracious demand for raw materials, and helpful supply-demand idiosyncrasies within each commodity market, ranging from crude oil to uranium.

But for some commodities, the boil has already been off for quite some months. It was during the second quarter of 2006 that copper, leader in the base metals complex, started to retrace sharply. Copper’s downtrend remains firmly in place, but even current prices may still be ahead of what some analysts consider a longer-term equilibrium level.

Zinc has also taken a pounding, starting late last year. The downtrend remains in place. But while zinc prices continue correcting, following the lead of copper prices, nickel prices, as the Bank Credit Analyst notes, “and a select few other industrial metals, have not yet weakened”. Precious metals have maintained a robust momentum, but gold is well off highs seen in 2006.

Many investors are becoming despondent. A Toronto-based trader moans that it “seems as if the tabloids are running out of ideas to report in the market amidst the shifting sands of sentiment and uncertain fundamentals. So they are now resorting to sniffing out winners and losers again”.

According to the trader, “The conspiracy theorists are rubbing their hands again amidst gossip” hinging around just who is long (bullish) on aluminium and copper, and who is short (bearish) on nickel, and on “who is taking the pain”. Aluminium is expected to move into surplus later this year, a bearish sign. Even more concerning, nickel is beginning to show signs of so-called vertical fatigue, and almost irrespective of reserves is beginning to attract its share of “bear vultures”, a term from the trading pits. In the plain words of a trader: “We are now becoming wary of cracks and fear nickel is very vulnerable to attack”.

But the fears are hardly restricted to individual commodities. In the words of a London trader, “some of the duck-shoving price action over month-end, and in the valuation of forward spreads each night on the close reeks of investor self-interest rather than any fundamentals which by-and-large remain passive regardless of the mutterings of self-interest being uttered by some”.

Beyond the trading pits, BCA Research observes that those commodity markets which still have tight supply conditions have seen prices stay firm, despite the weaker US economy and some cooling overseas activity. But investors beware: “the lesson from copper, and now zinc, however, is that once inventories start to rise, prices have already rolled over”. These sentiments are now increasingly dogging investors. For BCA Research, the bottom line is that while the long-run demand outlook for commodities remains upbeat, “investors should tread cautiously at this time”.

[Mick100]

I'm almost completely out of base metals at the moment. I holding a couple of silver/gold companies - both going into production this yr.
I,m still very bullish on energy - oil, nat gas, coal, uranium and ag commodities are also becoming an energy play with the advent of bio fuels.

I believe the commodities bull is alive and well but the commodities driving the bull market will change. I think energy is the place to be at the moment as well as precious metals later in the year. I have also moved some money into ag commodities over the past 12 months.
,

[steve fleming]

Interesting article that talks about the problem analysts have in forecasting medium to long term commodity prices...and how current valuations revert to conservative price forecasts based on long term means as compared to spot prices:

----------------------------------------------------------------

Big miners a gift if commodities bull keeps running
Stephen Bartholomeusz
February 10, 2007



BHP's remarkable $10 billion increase in its capital returns program may owe something to the belief within BHP that the market is undervaluing its condition and prospects - the group wouldn't commit that sort of money to a buyback unless it were convinced its shares were badly undervalued.

As Goodyear said, BHP can only manage those things within its control but it would be irksome, and worrying, for both BHP and Rio that they are, at less than 10 times earnings, being valued at about half the market average.

The obvious explanation for the treatment the market has afforded the big resource companies is that analysts and fund managers regard the bull market in commodity prices as a temporary phenomenon. Concern about a slowdown in the US economy and some slowing in the growth rate in China are incorporated within the market's shorter term assessments of the big miners.

Goodyear tried to address those concerns in his prepared remarks to analysts, saying the outlook for this year - and the medium to longer term - was positive and that BHP expected demand for commodities to continue to grow in the years, even decades, ahead.

One of the problems for analysts confronted with the commodity cycle is how to factor its duration into valuation models. A common approach is to plug the current prices and near-term outlook into the models for the next two or three years and then assume prices revert to their long-term averages. The miners do something similar in assessing the economics of new projects.

The problem with that approach is the potential for the bull market in commodities to extend beyond a couple of years.

In 2005, UBS produced a fascinating analysis that shows the potential for the market to undervalue resource groups. It compared its own forecasts of commodity prices and its valuations of resource companies with the valuations that would be derived if the spot market prices of the day were sustained in perpetuity.

For BHP, it forecast earnings of $US9.4 billion in 2006 and valued it at $18.61 a share. BHP actually earned $US10.45 billion. Using spot prices rather than its own assumptions, UBS concluded BHP would earn $US10.33 billion - close to the actual result - and be worth $43.86 a share. Goldman Sachs conducted a similar exercise this week. Using its own forecasts, it believes BHP will generate earnings before interest and tax (EBIT) at an operational level of about $US9 billion in the second half of 2007-08. But if spot prices are used, EBIT would be closer to $US11 billion. By the second half of 2009-10, the gap would widen dramatically. Goldman's assumptions produce EBIT of about $US7 billion, compared with EBIT of more than $US12 billion using spot prices.

While theoretical exercises - even super cycles eventually end - the analyses are illuminating because of the scale of the value differential created by different assumptions about the duration of the cycle.

The potential for the market to consistently underestimate the length of the bull market in commodities and therefore to severely undervalue the big resource houses has been underscored this week by presentations made by investment guru Jim Rogers to UBS clients. Rogers, co-founder of the Quantum Fund with George Soros, believes fervently the commodity boom could last until somewhere between 2014 and 2022.

If Rogers is right, BHP and Rio and the sector-at-large are badly undervalued. Given that no one will know whether Roger's call is correct, or not until the boom ends, the more conservative approach by the market is rational. But the extent of the potential valuation gap does create some interesting implic

[Mick100]

As commodities lose luster, S&P very positive on nickel and reasonably so on copper
By: Dorothy Kosich
Posted: '15-FEB-07 07:55' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) -- While there is no question that “commodity prices have lost their luster,” Standard & Poor’s analysts suggested Wednesday that “the average price curves for the next five years should be meaningfully higher than they were for the prior five years ending 2004.”

In an analysis published Wednesday, S&P’s Ratings Services said they believe “the essential message is that healthy fundamentals should remain in place for at least the next couple of years, and will sustain prices at levels that offset rising costs and serve to maintain or even improve credit quality.”

“We expected the decline in the price of some base metals. The lofty perches they attained were not supported by underlying supply and demand fundamentals, but rather by speculation and unfounded exuberance among traders and commodity funds, which pushed prices well beyond forecast levels to historic highs,” said Primary Credit Analyst Thomas Watters.

“No question commodity prices have lost some of their luster,” Watters said. “However, there needs to be some weeding out of the speculative trading that has been occurring. Eventually, prices need to reflect cyclical macro-economic issues and supply/demand fundamentals.”

While copper has returned to earth from its record price of $4.075/lb last May, Watters said S&P remains positive on copper’s near- to-medium-term prospects. He noted that few large-scale copper projects are coming on stream over the next two years, while China’s economy should remain healthy.

“Also, much of the new production slated to come on line starting in 2008 will be in politically unstable countries, and long-term supply fundamentals may be buffered by the risks of operating in such challenging regions,” according to Watters. “Moreover, rising power, environmental, and labor costs, along with declining ore grades, could force higher cost producers to curtail production. We would be hard-pressed to imagine copper prices ever reaching 60-cents to 70-cents per pound territory anytime soon.”

While nickel recently soared to a lofty $17.15/lb, Standard & Poor’s believes this year’s outlook for nickel “remains highly favorable as London Metal Exchange inventories remain at about only day one of global production. Stainless steel production…remains strong, and fundamental supply constraints should limit downward pressure on nickel prices.”

S&P’s analysis also stressed that the higher capital costs and potential delays in achieving commercial production at three major nickel projects “should maintain the tight supply-demand balance in nickel through 2008.”

[Mick100]

Oil to Gold ratio

http://www.financialsense.com/fsu/editorials/ti/2007/0213b.html
.

[Mick100]

Chinese buying picking up for copper: imports up sharply
By: Lawrence Williams
Posted: '16-FEB-07 22:00' GMT © Mineweb 1997-2006



LONDON (Mineweb.com) --According to the latest analysis by Numis Securities in London, Chinese import statistics indicate a strong pick up in Chinese copper imports implying that re-stocking is taking place following a year where the Chinese have been running down their inventories. January refined and alloy copper imports reached 147,650t up 70% year on year.

Numis Securities has been in the forefront of regular analysis of the Chinese metals sector, so one needs to pay some attention to its findings.

Numis says that Chinese copper imports in January were at levels not seen since 2005. Market participants in the region estimate that February imports could hit 150,000 t as consumers secure metal ahead of the Chinese Lunar New Year celebrations and week-long holiday starting 18th February. Copper imports were down in 2006 in response to high prices prompting heavy de-stocking activity throughout the consumption pipeline. The lower prices seen in recent weeks have encouraged re-stocking which has long been expected. Additionally the lower prices of recent weeks, have reduced scrap supply.

Traditionally, Numis says, prices are often stronger at this time of year as manufacturers build stock levels ahead of the construction season. It is therefore possible that copper prices prove to be resilient during the spring and into the Northern Hemisphere’s summer period. However, manufacturing and demand frequently slows over the summer.

Copper prices received a further boost on Wednesday due to a weakening of the US$ following comments from US Federal Reserve Chairman, Ben Bernanke saying that inflationary pressures “are beginning to diminish”, which could lead to an interest rate cut this year.

Despite the recent strong recovery in copper prices to US$5,865 per ton this morning from a recent low of US$5,270 on 8 February, Numis remains cautious for the outlook over the year ahead. The next few months may well prove to be strong but new supply is coming to the market, and if prices are too high, then demand will no doubt fall away and re-stocking activity cease as happened in 2006.

On the negative side for copper, LME copper inventories have almost doubled since October 2006, although they still only represent a fraction of world usage. Additionally, the high copper prices last year were in part due to metal supply being in deficit during the year – boosted by some disruptions at key producers. This year the metal is expected to be in surplus by 197,000 tons according to Bloomsbury Minerals Economics – one of the most reliable forecasters of copper prices.

For exposure to copper Numis recommend: Xstrata, BHP, Rio Tinto, Antofagasta, First Quantum, African Copper, and Monterrico Metals. (Numis points out it is broker and adviser two of these – First Quantum and African Copper).

[airedale]

Re: Oil to Gold ratio, interesting chart, Mick, my feeling is that oil AND gold will both be winners in the next decade.

[Mick100]

I would be interested to hear from anyone else out in sharetraderland who is trading commodities. I'v been dabbling in commodities for about 18 months now and have had mixed results but overall positive. I consider myself to be a novice, learner at this game. The volatility is unbelievable - especially with futures.

================================================== =

Corn prices hit fresh 10-year high
By Kevin Morrison

Published: February 21 2007 12:03 | Last updated: February 21 2007 18:08

Agricultural commodity prices reached long-term highs on Wednesday following trader talk that a weather forecaster had hinted the key US midwest crop growing region could be facing a hot and dry summer.

US grain and oilseed markets are very sensitive just now with demand from biofuels having a significant impact on prices, and any rumours of a poor US corn crop is likely to have a big influence on prices.


Corn for March delivery rose to a 10-year high of $4.26 a bushel on the Chicago Board of Trade, up more than 10 cents on the day.

Corn prices have almost doubled since August as the US, the world’s largest corn grower, cut its crop estimates following a dry summer.

Another dry summer could reduce the US corn crop at a time when demand is set to rise strongly due to more ethanol plants starting production this year.

If corn production is affected, there is not much in the way of inventories as US corn stockpiles are at their lowest levels in 12 years in absolute terms, and at their lowest in relative terms in more than a quarter of a century.

The higher corn price also pushed up other crop futures with March CBOT soybean futures touching $7.81 a bushel, their highest level since July 2004. Soyabean prices have risen almost 50 per cent since September.

US farmers have cut the total area that they plan to plant soyabeans this year, as they turn more of their land over to corn.

Higher soyabean prices had a knock-on effect on CBOT soymeal futures, which hit $232 a tonne, also the highest level since July 2004 prices when soyameal hit $378.5 their highest level in more than 20 years.

CBOT wheat prices also joined in the gains, rising 14 cents to $4.79 a bushel.

Oil prices were also higher, reversing declines from Tuesday’s morning session and two days of falls. ICE Brent for April delivery added 72 cents to $58.74 a barrel in late afternoon London trade.

April West Texas Intermediate gained 48 cents to $59.30 a barrel on the New York Mercantile Exchange. The March WTI finished $1.04 down at $58.35 on expiry on Tuesday.

Oil prices were pushed up on reports of a leak that shut a 240,000 barrels a day refined products pipeline in Indiana.

Nickel struck yet another record high, its second this week, when it reached $40,300 a tonne on the London Metal Exchange, before receding to $39,500 in late trade, down $350 on the day.

Not to be outdone, tin kept up its record-breaking run, peaking at $13,900 a tonne, up more than $400 from the previous close.


Copyright The Financial Times Limited 2007

[airedale]

Hi Mick, I am not doing it but I wonder how one gets started and set up to trade commodities. Any advice?

[Mick100]

advice for getting started in commodity trading;
- use a maximum of 5% of your capital for commodities trading
- don't deal in futures until you have some experience and understand the risks and volatility involved - stick with options which limit your downside.
- don't neccessarily go for the cheapest broker - a good broker who has the patience to deal with novices is worth paying extra for.
- start off with long dated options - you will have to pay a higher premium for these but it is well worth it - you can always close them out before expiry if they spike in price. I very rarely hold an option full term - unless it's a loser of corse
- don't put all your eggs in one basket - stay diversified - energy, metals, grains, softs
- don't get too greedy - remember to take profits when the markets are running your way.
.

[airedale]

Thanks, Mick, plenty to study there over the weekend.
Airedale

[Mick100]

Blow for beer as biofuels clean out barley
By Kevin Morrison in London

Published: February 25 2007 20:56 | Last updated: February 25 2007 20:56

The rapid expansion of biofuel production may be welcome news for environmentalists but for the world’s beer drinkers it could be a different story.

Strong demand for biofuel feedstocks such as corn, soyabeans and rapeseed is encouraging farmers to plant these crops instead of grains like barley, driving up prices.

Jean-François van Boxmeer, chief executive of Heineken the Dutch brewer, warned last week that the expansion of the biofuel sector was beginning to cause a “structural shift” in European and US agricultural markets.

One consequence, he said, could be a long-term shift upwards in the price of beer. Barley and hops account for about 7-8 per cent of brewing costs.

Barley, which is used for making beer, whisky and animal feed, has seen prices prices soar over the last 12 months.

Futures prices for European malting barley, which is used for brewing and distilling, have risen 85 per cent to more than €230 ($320) a tonne since last May.

Barley feed futures have risen by a third to C$180 ($155) a tonne on the Winnipeg Commodity Exchange over the same period.

Meanwhile, barley production in America fell to 180.05m bushels in 2006, the lowest level since 1936. The value of the crop was the lowest since 1970 – at $498m.

This decline is partly due to the fall in the land area used for growing barley, which dropped to about 2.95m acres – the lowest since records began in 1866.

The rise in barley prices has also been driven by the Australian drought, which cut the country’s crop by two-thirds, and heavy rains in Europe last summer which reduced the quality and yield of the harvest.

The US department of agriculture estimates global barley production will reach 138m tonnes in the year to August, level with 2006 but down 10 per cent on 2005. Global demand for barley has risen 2 per cent to an estimated 145.5m tonnes this year, the fourth year in the last five in which demand has exceeded supply.

As a result, global stockpiles have shrunk by a third in the past two years and left the barley trade vulnerable to further supply problems this year.

“In the US, land that was cultivated for growing barley has been given over to corn because of the ethanol demand,” said Levin Flake, a grains trade analyst at the US department of agriculture.

The US, which in the 1980s was a leading exporter of barley, is now a net importer as barley acreage has shrunk from more than 13m acres in 1985 to 4m this year, said Mr Flake.

The USDA expects US barley acreage over the next 10 years to remain flat. That might not be the case for the price of beer.

[airedale]

Mick, this is serious, good malting barley is also necessary for whisky;)

[Mick100]

APRIL 29: A DAY TO WATCH
FOR URANIUM INVESTORS
by Doug Casey
Chairman, CaseyResearch.com
February 28, 2007

The Casey Files: For more than twenty years, Australia—with its rich uranium resources—has been largely closed for yellowcake mining. But now the country may be preparing to open its doors to junior uranium explorers and producers, which, in view of the Cigar Lake breakdown, would be a major step to ramping up production in the foreseeable future—and could provide some excellent investment opportunities. Below, senior researcher Chris Gilpin breaks down some key developments expected Down Under during the coming months… Doug Casey, Casey Energy Speculator

Australia is poised for a breakout in uranium production. The land down under hosts 36% of the world’s reasonably assured uranium resources (recoverable at low cost)—more than any other country—and yet it accounts for only 23% of global output. But that picture could change drastically in the next few years.

The current opposition party in Canberra—the federal wing of the Australian Labour Party—could have the largest influence on the future of the uranium industry. Their leader, Kevin Rudd, supports a rethinking of Labour’s opposition to uranium mining. The federal Labour conference takes place on April 27-29 and will be a pivotal event for Australian uranium politics.

Why? A federal election must occur in Australia sometime in the second half of 2007. Kevin Rudd is a popular figure, and polls show that Labour has pulled ahead of John Howard’s ruling coalition for the first time in years. The last Morgan poll gives Labour 48% of the popular vote, while John Howard’s coalition sits at 38%.

Labour holds the balance of power in each and every one of Australia’s states and territories. Its regional governments’ attitudes toward yellowcake vary. New South Wales and Victoria ban all uranium-related industrial activity, even exploration. Queensland and Western Australia straddle the fence, allowing uranium exploration but not uranium mining. Tasmania has no ban in place, but has never drawn interest from uranium explorers. Only South Australia and the Northern Territory (neighbors in the middle of the continent) have allowed uranium mining.

Here’s why the April Labour conference could be a game-changer: Queensland’s premier, Peter Beattie, says that his state will fall in line with the policy that reaches consensus at April’s gathering, which could signal an immediate boon to companies working in that province.

The stakes are enormous. Because of past governmental disincentives, few of Australia’s prospective uranium regions have been explored with up-to-date technology. There’s big potential for a significant discovery in the Northern Territory, where, according to a November 2006 report by the Northern Territory Minerals Council, only 20% to 25% of the prospective rock units have been effectively explored.

Most likely this holds true for other regions of Australia as well. Today airborne electromagnetic surveys can yield useful data from ten times deeper into formations than they could in the 1970s. Many authorities, including the Uranium Information Centre and Geoscience Australia, believe that past exploration was superficial by today’s standards and that there are several resources at depth waiting to be found.

A look at history makes it even more apparent how groundbreaking Labour’s potential change of attitude could be. In 1984, the federal Labour government instituted the “three mines policy,” which was intended to eventually end all uranium mining in Australia. The law stipulated that only the three uranium mines in production at the time would be given permits to export uranium: the Olympic Dam project (the world’s largest uranium mine) in the state of South Australia, and the Ranger and Nabarlek mines in the Northern Territory. Provisional approvals for other would-be uranium mines were cancelled. Labour’s notion was that when the three producing deposits had been exhausted, uranium mining in Australia would be finished for good

[Mick100]

looks like copper could be in for a good year this yr
Some stats on china's import/exports of copper, nickle, zinc and lead.

http://www.resourceinvestor.com/pebble.asp?relid=29391
,

[Mick100]

Outlook on china economy and sharemarket

http://www.ampcapital.com.au/K2DOCS/site_corporate/A22E0361-FE5F-4D57-85BC-C2DFB1A58368/OINo4.pdf?DIRECT

,

[Mick100]

By Jane Merriman and Barbara Lewis

LONDON (Reuters) - Baskets of commodities, established as the obvious choice for long-term investors, have recovered from last year's lows, but are unlikely to repeat the returns delivered before the asset class was widely discovered.

The leading Goldman Sachs Commodity Index (GSCI) (GS.N: Quote, Profile, Research) last year fell by 15 percent, its first fall since 2001. It also declined in the first month of 2007, but is now 1.7 percent higher than at the end of last year.

The rally has coincided with strength in energy futures, which dominate the index, but it has fallen from a two-month high touched at the end of February as oil prices and other commodities were shaken by a deep stock market sell-off.

The outbreak of selling has raised concerns commodities are losing their traditional role as a portfolio diversifier.

"You can't be sure commodities will zig when stocks and bonds zag," said Bob Greer, executive vice president at PIMCO, one of the biggest players in commodities investment.

"I know of no better diversifier than commodities, but there is no guarantee that they will move differently," he said.

But he added that for the long term raw materials were still likely to behave differently from stocks and bonds.

Last year, commodities were negatively correlated to equities. The Standard & Poor's 500 Index of leading U.S. companies (.SPX: Quote, Profile, Research) gained 13.6 percent in 2006.

VICTIM OF ITS OWN SUCCESS

Other analysts say that as more money enters the commodities asset class, even over the long term, its power to diversify a portfolio will diminish.

It is argued the markets will be increasingly dominated by purely financial players, influenced as much by investments in other assets as by the factors moving individual commodities.

"If commodities become more mainstream, they will become more correlated," said Anatol Feygin, head of global commodity strategy at the Bank of America (BAC.N: Quote, Profile, Research).

Some have blamed the increased number of investors for the contango structure in oil and some other commodities, meaning the promptest contract is worth less than raw materials for later delivery.

Contango is atypical in oil, for instance, because of the high cost of storage.

Historically, the opposite condition, backwardation, has prevailed in oil and allowed indexes to make returns, even in falling markets, by rolling positions from prompt contracts into later ones.

"As we looked at 2007, it was pretty clear the negative roll-yield was a large headwind," said Feygin, with reference to the entrenched contango.

For some, the contango is merely a reflection of oversupply and has not been created by investment money.

Although the Organization of the Petroleum Exporting Countries has just implemented two output cuts totaling 1.7 million barrels per day, until late last year, it was pumping at near full capacity.

At the same time, U.S. stockpiles have been supplemented by increased Canadian output, which has flowed into storage tanks at Cushing, Oklahoma, accentuating the contango on U.S. futures.


"There does not seem to be any sign of contango ending," said Mike Wittner of Calyon investment bank. "There is a structural issue with Canadian flows."

For some investors, contango has been a reason to turn away from indexes toward other investment tools, such as structured products, which use a variety of techniques to access commodities.

But they will always need a benchmark, such as the GSCI, to measure their success.

"You need an index as a measure of commodities as an asset class... you can use it as a benchmark and adopt a strategy to try to outperform it," said PIMCO's Greer

.

[Mick100]

Copper Prices Increase After Metal Imports Surge in China

By Millie Munshi and Halia Pavliva

March 12 (Bloomberg) -- Copper prices rose in New York after demand surged in China, the world's biggest consumer of the metal used in pipes and wires.

China's copper imports rose 70 percent in February from a year earlier and 4.7 percent from January, preliminary data from the Beijing-based customs office showed. Prices have more than doubled in the past three years, boosted by consumption in China, the world's fastest growing major economy.

``The import data shows a pretty large increase, which is important because normally imports tend to weaken in February,'' said Catherine Virga, an analyst at CPM Group, a commodities research firm in New York. ``This is pretty bullish.''

Copper futures for May delivery rose 4.85 cents, or 1.7 percent, to $2.8325 a pound at 11:43 a.m. on the Comex division of the New York Mercantile Exchange. Before today, prices had gained 26 percent in the past 12 months.

A futures contract is an obligation to buy or sell a commodity at a fixed price for delivery by a specific date.

China's year-on-year imports of copper, used in construction and appliances, have gained since December as domestic stockpiles dwindled. The country imported 239,772 metric tons of unwrought copper and copper products in February, up from 141,076 a year earlier and 229,077 tons in January, according to the customs-office and data compiled by Bloomberg.

``China's strong, growing demand for metals and minerals, which has been a key driver of market strength, seems set to continue,'' Paul Skinner, chairman of Rio Tinto Group, one of the world's largest mining companies, said in its annual report filed today. ``We expect prices in 2007 to continue at levels significantly above the long-term trend.''

`Growing Faster'

China buys about 20 percent of the 17 million metric tons of copper sold annually, while Asia as a whole buys about 50 percent, according to Prudential Equity Group LLP.

``China will need more copper than expected as the economy is growing faster,'' said Michael Widmer, director and head of metal research at Calyon in London.

Stockpiles monitored by the London Metal Exchange declined 0.8 percent to 201,025 metric tons. They have dropped 5.1 percent since Jan. 31.

On the LME, copper for delivery in three months rose $102.50, or 1.7 percent, to $6,232 a metric ton ($2.83 a pound). Prices have dropped 29 percent from a record $8,800 on May 11.

[Mick100]

Energy update

http://www.financialsense.com/fsu/editorials/dancy/2007/0316.html
,

[Mick100]

BHP Sees `Tight' Copper Market in the Second Quarter (Update2)

By Tan Hwee Ann and Chanyaporn Chanjaroen

March 19 (Bloomberg) -- BHP Billiton Ltd., the world's largest mining company, said the copper market will be ``tight'' in the second quarter of the year amid rising Chinese demand, with a metal surplus projected for the second half.

The market is moving from deficit to a ``modest surplus,'' the Melbourne-based company said in a slides presentation posted on its Web site. It cited data from research companies Brook Hunt and CRU, which showed supply will exceed demand in the final six months of 2007.

BHP Billiton has benefited from a five-year surge in commodities prices, with copper reaching a record last May. Copper futures had their biggest weekly gain in nine months last week on signs of rising demand from China, the world's top user.

``Current view is still very positive for refined demand,'' the company said. Copper ``remains very vulnerable to supply disruptions and problematic ramp-up of new production.''

The price of copper, used to make pipes and wires, has risen 3.5 percent this year on the London Metal Exchange. The three-month contract traded at $6,560 a metric ton at 9:11 a.m. London time today.

BHP is hosting an analysts' tour of its South American business this week.

Copper concentrate, used to smelt and refine into metal, will be in a shortage through 2009, extending a deficit that started last year, the company said in a separate presentation on its Web site.

Capacity Expansion

Miners aren't producing enough to fill the gap created by smelters' capacity expansion, especially in China and India, BHP said. Mining companies will start negotiating contracts with smelters for the year starting in July, known as mid-year contracts, in May, it said.

Mining companies such as BHP benefit amid shortages of concentrate because the processing charges imposed by smelting companies for turning it into metal drop. Smelting charges, known as treatment charges, fell to $60 a metric ton this year while refining charges declined to 6 cents a pound. They were $95 a ton and 9.5 cents a pound respectively in 2006.

``We expect some volatility but upside to treatment charges and refining charges should be limited,'' the company said.

BHP Billiton supplies concentrate to companies including Pan Pacific Copper Co. and Sumitomo Metal Mining Co., Japan's biggest smelters.

To contact the reporters on this story: Tan Hwee Ann in Melbourne at hatan@bloomberg.net or; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net .

[Mick100]

Copper Climbs for Third Week in a Row as Inventories Dwindle

By Millie Munshi and Halia Pavliva

March 23 (Bloomberg) -- Copper rose the third week in row, extending a rally to the highest since December, on signs of a rebound in demand for the metal used in pipes and wires.

Stockpiles monitored by the London Metal Exchange slid for six straight weeks, the longest slump since July 2005. Imports by China, the biggest user of the metal, surged in February. Jose Pablo Arellano, executive president of Chile's state-owned Codelco, the world's biggest copper producer, said demand for the metal will continue to rise through next year as construction surges in China, the world's fastest-growing major economy.

``They are building cities at an unimaginable rate,'' Arellano said ``Urbanization in general demands a lot of copper. China is going precisely through that stage of development.''

Copper futures for May delivery were little changed at $3.069 a pound on the Comex division of the New York Mercantile Exchange. Earlier, prices touched $3.133, the highest since Dec. 12. Prices gained 1.9 percent this week after jumping 12 percent in the previous two weeks.

On the LME, copper for delivery in three months rose $15, or 0.2 percent, to $6,735 a metric ton ($3.05 a pound). Prices have gained 29 percent in the past year.

A futures contract is an obligation to buy or sell a commodity at a fixed price for delivery by a specific date.

Inventories in warehouses monitored daily by the LME dropped 4,125 tons, or 2.2 percent, to 183,650 tons today. Stockpiles tumbled 5.5 percent this week.

``The fact that those stocks have been declining steadily lately is a good sign of demand,'' said David Meger, a senior analyst at Alaron Trading Corp. in Chicago. ``The LME stock draw didn't happen with big increases in inventories in China. That means these Chinese imports are being taken and being used.''

Chinese Imports

Chinese imports of refined copper and alloys rose to 152,651 metric tons in February, the Beijing-based Chinese customs office said yesterday. That's the most since May 2005.

Copper prices have rallied every year since 2002 amid falling stockpiles, and supply disruptions from major producers such as Chile. The metal on Comex reached a record $4.04 a pound on May 11.

``Copper is being supported by drawdown in inventories,'' said John Gross, director of metals management at Scott Brass Inc. in Cranston, Rhode Island.

Sales of previously owned homes in the U.S. unexpectedly rose 3.9 percent in February, the biggest monthly gain in almost three years and a sign that the housing market may be recovering.

Builders are the biggest users of copper, putting about 400 pounds of the metal into the average U.S. home, according to data from the Copper Development Association.

To contact the reporters on the story: Millie Munshi in New York at mmunshi@bloomberg.net ; Halia Pavliva in New York at hpavliva@bloomberg.net .

[Mick100]

Asia's Developing Economies Seen Slowing
Tuesday March 27, 1:56 am ET
By Hans Greimel, Associated Press Writer
Asia's Developing Economies Seen Slowing Over Next 2 Years From Blistering 2006


TOKYO (AP) -- Asia's developing economies will slow over the next two years, the Asian Development Bank projected Tuesday, but the more moderate pace is seen stabilizing the region and putting it on better footing for solid growth in the future.


Asia's economy excluding Japan is expected to grow by 7.6 percent in 2007 and 7.7 percent in 2008 from a blistering 8.3 percent last year, its fastest growth in more than 10 years, the Manila-based bank said. Both China and India, which together accounted for about 70 percent of last year's expansion, are also forecast to slow.

"Growth in developing Asia will ease gently," ADB chief economist Ifzal Ali, said at a news conference in Tokyo to mark the release of the bank's annual Asian Development Outlook report. "This will ensure that growth will obtain a more sustainable level in the years ahead."

That rosy outlook counters worries that the region's economies -- particularly those in China and India -- are overheating, which could spur higher inflation or a debt crisis if imprudent loans go bad.

Still, the bank warned that while recent turmoil in regional stock markets had subsided, a steep drop in asset prices could stifle future growth.

"Markets have moved to re-price risks, but calm could yet give way to less settled conditions," ADB President Haruhiko Kuroda said in a foreword to the report. "If asset prices get badly punctured and reversals occur, the chill would be widely felt."

Looming risks include another possible increase in oil prices, which would pinch a region that imports most of its energy. A slowdown in the U.S. economy, a key destination for Asian exports, would also hurt the region's growth, which has been largely fueled by exports, the ADB said.

But the bank, which was established in 1966 to provide loans and economic aid to promote development, said a re-emergence of the sort of financial crisis that erupted in 1997 was unlikely.

"Overheating pressures will gradually ease in the years ahead," Ali said. "The kind of instability we had in the past, I don't think will happen again."

The bank raised its projection for Chinese growth to 10 percent this year from an earlier forecast of 9.5 percent -- both down from last year's sizzling 10.7 percent rate -- and warned of the dangers posed by China's rapid investment-led expansion.

"Should investment continue to run at more than 20 percent a year, what has been a source of growth for many years could turn out to be a curse, if it leads to a further buildup in excess capacity and deflation," the report said.

The upward revision was made following China's annual congressional session earlier this month approving a continued focus on raising rural livelihoods and domestic demand. Beijing needs to rebalance the economy so it relies more on domestic consumption and services, instead of exports and investment, the ADB said.

In 2008, China's growth is expected to dip to a still strong 9.8 percent, which would snap five straight years of double-digit growth, the bank said.

India booked a growth rate of 9.2 percent last year, its highest since 1988. But it's seen easing down to 8 percent in 2007 and 8.3 percent the following year.

Southeast Asia, which includes Thailand, Singapore and Malaysia, is projected to slow to 5.6 percent this year and hit 5.9 percent in 2008. Their economies logged 6 percent growth in 2006, the ADB said.

Inflation throughout developing Asia -- a group of 43 countries -- is expected to ease to an average 3.0 percent this year from 3.4 percent last year, before rising back to 3.2 percent in 2008.

"Set against this background, robust growth is again expected in 2007 and 2008," the ADB said.

[stolwyk]

BHP's Goodyear says metals to stay high for 'several decades'

BHP Billiton CEO Chip Goodyear said prices of copper, nickel and other metals will remain high for several decades...

Millie Munshi and Cris Valerio, Bloomberg
27 March 2007

BHP Billiton CEO Chip Goodyear said prices of copper, nickel and other metals will remain high for several decades as demand from China and India climbs.

"I'm excited about what we'll see over the next several decades as 2,5bn people in China and India and other parts of the developing world enter the world economy," Goodyear said on Sunday in an interview in Santiago. "Is China and India the next reason for a multidecade increase in commodity prices?

We're positive about that."

Metals prices surged to records in the past three years, boosting mining company profits, as construction soared in China, the world's fastest-growing major economy. Nickel, used in stainless steel, has more than doubled in the past year on speculation supplies from mines will trail demand. Melbourne-based BHP is the world's biggest mining company.

"The real driver in China is 15m people a year moving from a rural or agrarian economy to an urban economy," Goodyear said. "We don't see that ending for a long time. People are striving for a better way of life."

China's economy grew almost 11% last year, the fastest pace since 1995 and was the source of about a tenth of global growth. On March 17, the Beijing-based People's Bank of China raised interest rates for the third time in 11 months to slow growth.

"They've said they'd like to slow" the economy, Goodyear said. "But it's very difficult to see that happening in the near term."

A slowdown in the US economy won't hurt demand for metals, Goodyear said. He is in Chile for a copper conference.

"The fact is that the big drivers for commodity consumption in the world are taking place in other parts," he said. For "most of our commodities, the biggest consumer is China, not the US," he said.

A slowdown in residential construction cut metals demand in the US and shaved 1,16 percentage points off growth in the fourth quarter.

BHP will not change production plans on the basis of an economic slowdown in the US, Goodyear said.

http://www.moneyweb.co.za/mw/view/mw/en/page1329?oid=82434&sn=Detail

[Mick100]

Copper Gains in New York on Signs of Strengthening China Demand

By Millie Munshi

April 23 (Bloomberg) -- Copper futures rose in New York after monthly imports more than doubled in China, the world's biggest consumer of the metal.

Imports of refined copper and alloys surged in March to 208,014 metric tons, 142 percent more than a year earlier, according to data issued by the Beijing-based customs office today. Prices for the metal, used in pipes and wires, have gained 27 percent this year as China's copper imports surpassed last year's pace for four straight months.

``The overall trend for demand is very strong,'' said Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago. ``I fully expect the price to keep going higher as demand in China is good.''

Copper futures for July delivery gained 1.9 cents, or 0.5 percent today, to $3.64 a pound at 11:12 a.m. on the Comex division of the New York Mercantile Exchange. Prices have climbed for seven straight weeks, the longest rally in a year, and gained 19 percent this month alone.

Earlier, prices fell as much as 1.4 percent to $3.571 after Freeport-McMoRan Copper & Gold Inc. settled a dispute over wages at its Grasberg mine, the source of almost 4 percent of the world's mined copper last year.

``In a weaker market, the Grasberg news would have had a much larger impact,'' Zeman said. ``The fact that it's not is a sign of strength.''

Copper inventories monitored by exchanges in London, New York and Shanghai declined 0.3 percent today, falling for the second session in a row, to 267,394 metric tons. Global stockpiles have fallen 6.1 percent since March 15, according to Bloomberg data.

On the London Metal Exchange, copper for delivery in three months rose $25, or 0.3 percent, to $7,980 a metric ton as of 4:24 p.m. local time.

A futures contract is an obligation to buy or sell a commodity at a fixed price for delivery by a specific date. The Escondida mine in Chile is the world's biggest source of copper.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net ; Millie Munshi in New York at mmunshi@bloomberg.net .

[Mick100]

WASHINGTON'S GIFT OF COAL
by Elliott H. Gue
Editor, The Energy Letter
June 15, 2007


When the Democrats took control of Congress at the beginning of 2007, many investors assumed coal would become a dirty word. After all, although the abundant fuel has many advantages, limiting pollution and carbon-dioxide emissions isn't one of them.

And Democrats have placed the global warming issue among their top priorities. The rhetoric out of Washington strongly suggests that Congress would like to pass some sort of federal carbon regulation or cap-and-trade scheme eventually.

It's ironic that despite all the talk of carbon regulation, prominent congressional Democrats are actually planning to hand investors in coal-mining firms a massive gift this summer--a package of subsidies, guarantees and direct cash payouts large enough to make even heavily subsidized ethanol producers jealous.

The package is spearheaded by such prominent Dems as Sen. Barack Obama and former House Majority Leader Dick Gephardt. However, that's not to say the Republicans aren't on board. The bill has actually attracted wide appeal on both sides of the aisle. In fact, it's perhaps even more widely supported among congressional Republicans.

The new Energy Independence Act is designed to promote the use of coal-derived liquid fuels and so-called coal-to-liquids (CTL) technology. For those unfamiliar with CTL, the basic process of converting coal into synthetic diesel fuel--Fischer-Tropsch (FT)--is named after the two German scientists who established it in the 1920s, Franz Fischer and Hans Tropsch.

FT has been employed on a large scale several times since its invention. The German military was starved of energy during World War II; Germany's comparatively large coal supplies were liquefied to produce a fuel.

During the apartheid years, South Africa was under an embargo and used FT-generated diesel fuel as a source of energy. Even the US at one time produced FT diesel in smaller-scale plants along the Gulf Coast; those projects were largely abandoned when oil prices dropped in the ’80s.

At present, the total global capacity for FT diesel production of just 150,000 barrels per day comes from three operating plants. All of those plants are located in South Africa, which has retained its leadership in this technology.

The beauty of FT is that coal is an ultra-cheap fuel relative to oil. So, if you can convert plain old coal into expensive liquid fuel, the value of that coal rises almost tenfold.

I've long felt that CTL has wide appeal purely on economic grounds. The US has the world's largest coal reserves and could significantly reduce dependence on foreign oil with CTL fuels. Moreover, with oil prices above $40, advanced FT plants would be cost-competitive and proven technology already exists.

But the Energy Independence Act offers another catalyst for this investment theme and, more important, draws public attention to CTL. On May 29, an article on CTL made the front page of The New York Times. The paper detailed that one of the plans circulating through Congress is to offer loan guarantees for six to 10 major US CTL plants, a 51-cent tax credit per gallon of CTL fuels used until 2020 and additional subsidies should oil prices drop below $40.

The US Air Force even has plans to offer long-term contracts to buy as much as 1 billion gallons of CTL fuel per year; that's equivalent to around 40 percent of Air Force fuel use. Simply put, this package of subsidies is reminiscent of the subsidies currently given for ethanol. It's the sort of generous package that Washington just loves to put together.

The FT process is a closed reaction; that makes it easier to remove some pollutants, such as sulphur and mercury, from the coal during the process of converting it into fuel. Therefore, CTL fuels are cleaner in terms of sulphur-dioxide emissions than burning coal in a plant and, in many cases, even cleaner than conventionally produced fuel.

But there are potential concerns with reference to carbon-dioxide emissions, which is

[Mick100]

China's Iron Ore Stockpiles Down to 43.38Mt on June 15

By Interfax-China
19 Jun 2007 at 09:03 AM GMT-04:00


SHANGHAI (Interfax-China) -- Iron ore stockpiles in China's major 23 ports amounted to 43.38 million tonnes on Friday, June 15, dipping 2.25% from the previous Friday. Indian iron ore concentrate stockpiles were also down 1.97% to 10.97 million tonnes.

The delivery price of Indian grade 63.5% concentrate in Chinese ports fluctuated between RMB 870 ($114.15) and RMB 880 ($115.47) per tonne last Friday, with Indian 61% concentrate at RMB 780 ($102.34) per tonne.




The delivery price for Australian grade 64.5% fines in Chinese ports stood at RMB 930 ($122.03) per tonne, with Brazilian grade 66% fines reaching RMB 1,100 ($144.33) per tonne. The delivery price consists of the iron ore CIF price, import taxes paid to the Indian government (if required), value-added tax and port fees.

International iron ore freight costs continued to fall last week, after reaching an all time high in mid-May.

Freight costs from Brazil's Tubarao Port to Beilun/Baoshan ports stood at $40.83 per tonne on June 15, falling 16.45% from June 8. Freight costs from Western Australia to Beilun/Baoshan ports stood at $15.03 per tonne on June 15, plummeting 21.47% from the previous Friday, according to the latest information provided by Shanghai Mysteel.

In other news, Taiyuan Iron and Steel (Group) Co. Ltd. (TISCO), China's largest stainless steel maker, will purchase more scrap stainless steel this year, TISCO officials told Interfax today.

A TISCO official, surnamed Guo, said the company will increase scrap stainless steel purchases from 200,000 tonnes last year, to between 500,000 tonnes and 600,000 tonnes this year, in order to both supply the company's new stainless steel lines and reduce the impact of continued soaring nickel prices, the major raw material for stainless steel.

A TISCO raw materials procurement department official, surnamed Zhang, said that the company's long-term scrap stainless steel contracts with both domestic and overseas suppliers will aid in stabilizing the quality of scrap stainless steel.

"We also recycle scrap stainless steel from our own plants, with approximately 8% of stainless steel production recycled and used in primary stainless steel production," Zhang said.

To combat increased nickel prices, TISCO is increasingly using nickel substitutes for stainless steel production, such as nickel pig iron and scrap stainless steel.

According to a Ministry of Finance (MOF) statement issued today, China will cancel the current 13% value-added tax (VAT) rebate on welded carbon-steel pipe exports, as well as the rebate on aluminium rod and bar exports that is between 8% and 11% on July 1.

According to the MOF statement, VAT export rebates on products in 2,831 tax codes will be either reduced or cancelled on July 1 in order to alleviate pressure from the increasing trade surplus and to curb the export of highly polluting and energy-intensive products.

VAT export rebates will be cancelled for welded steel pipe, tax code 7305 and 7306, as well as for aluminium rod, bar, and profile and aluminium alloy rod, bar and profile, tax code 7604 and 7605, on July 1. Aluminium strip and foil will be excluded from this policy.

VAT export rebates will be reduced from a current 13% to 5% for seamless steel pipe, stainless steel pipe, steel rail, welded steel angle and steel section.

Furthermore, VAT export rebates for semi-finished nonferrous metals products such as nickel and nickel alloy pipe, lead and lead alloy sheet, foil, bar, rod and profile, zinc and zinc alloy sheet, foil, bar, rod and profile, and tin foil, will be slashed from a current range of between 8% and 13% to 5%.

VAT export rebates on semi-finished minor-metals products including tungsten filament, wrought molybdenum rod, bar and profile, wrought titanium products, wrought magnesium, titanium alloy, and cobalt products will also be lowered from a current 13% to 5%.
.

[Mick100]

ENERGY SECTOR COILED TO SPRING
by Joseph Dancy, LSGI Advisors, Inc.
Adjunct Professor, SMU School of Law
June 25, 2007


Living quiet, unpretentious lives Mr. and Mrs. Othmer - a professor of chemical engineering and a former teacher - died a few years ago in their nineties. When the Othmer's died, friends were shocked to learn that their estate was worth $800 million.

How did the Othmer’s get so rich? Like many long term investors, they put their money into well managed undervalued companies and left it there. The Othmers had an additional benefit: in the early 1960s they each invested $25,000 with Warren Buffett.



Choosing An Attractive & Profitable Sector



No less an expert than Mr. Buffett points out the importance of choosing investments that are well positioned in a growing and profitable industries. He identifies his largest investment mistake was buying the company his firm is still named after (Berkshire Hathaway) - not because the company was flawed, but because the industry it was in (textiles) was so unattractive.



No matter how well managed, Berkshire would always have subnormal returns. The textile industry was a commodity business, competitors had facilities located overseas that were low cost producers, and substantial excess capacity existed worldwide.



Looking for a growing, undervalued, and profitable industry in which to invest we can think of no better area to look for opportunities than the energy sector. That said, we found the following developments in the energy sector of interest last month:

While a number of U.S. refineries have experienced operational issues gasoline demand has continued to rise. As a result companies are importing more gasoline to meet demand. Imported gasoline now accounts for more than 11 percent of the total gasoline used in the U.S. This is roughly double the share of imports a decade ago according to the Energy Information Administration. Our reliance on imported gasoline is expected to grow.

Fuel demand in the U.S. averaged 20.9 million barrels a day in the four weeks ended May 25, up 2.4 percent from a year earlier. The Energy Department measures shipments from refineries, pipelines and terminals to calculate demand. With supply issues created by the refinery outages, increasing demand has added to price pressures.

A KPMG survey of 553 financial executives from oil and gas companies revealed that sixty percent of the executives believe the developing trend of declining oil reserves is irreversible. When asked what the impact of emerging markets, such as China, will have on declining oil reserves almost 70 percent of the executives said that it would lead the situation to worsen.

The Energy Information Administration reports that as of 2006 the nation's 149 refiners could process more than 17.3 million barrels of crude oil a day. As recently as 2001 there were 155 refineries nationwide that had a maximum capacity of 16.6 million barrels of crude a day. Refinery capacity peaked in 1981, when there were 324 refineries that could process a total of 18.6 million barrels of crude oil per day. Economies of scale seem to be prevalent in this sector, with fewer but larger facilities.

Some experts speculate the new EPA mandates reducing the amount of sulfur allowed in diesel fuel has had the unintended consequence of causing more refinery outages. Removing the sulfur requires operators to run the refining units harder and at higher temperatures and higher pressure, possibly leading to equipment failure.

In an April report, The International Energy Agency wrote, "Anecdotal evidence suggests refinery reliability is deteriorating due to existing sulphur removal requirements, lowering average utilization rates. The need to run these units harder to meet the tighter specifications is leading to a higher incidence of unit failures, posing additional problems for refiners."

Increasing state ownership and rising resource nationalism are emerging as two of the main long-term threats to global oil supplies according to a

[Mick100]

Zinc Remains a Solid Investment as China's Demand Grows Nearly 10%

By Laura Bobak
05 Jul 2007 at 09:51 AM GMT-04:00


TORONTO (CP) - Despite fears that China may return to its past as a net exporter of zinc, the commodity is still a solid bet for investors looking to cash in on the growing demand for the metal used to prevent steel from corrosion, experts say.

China's demand for slab zinc is expected to grow 9.5% this year and about 9% next year, said Patricia Mohr, a vice-president of economics with Scotiabank. In 2006, China, the world's biggest consumer of refined zinc, saw its demand jump 11%.




Worldwide, consumption is expected to jump 4.5% this year and then again next year, which is only a slight decrease from the 5% seen in 2006.

''These are very strong growth numbers in terms of demand,'' said Mohr, noting the growth is fuelled by the demand for galvanized steel in Asia, especially China, where overall industrial production was up 18% year in May year-over-year, and Europe, where it is used in construction.

World demand for zinc is currently greater than supply, but that should balance out next year as more mine production comes onstream, she said.

Mohr said investors looking to invest in zinc should consider waiting until late summer, when stock prices will likely drop somewhat in response to summer manufacturing slowdowns in Europe and elsewhere.

Stock prices should then increase in the fall as demand surges, she said.

China has a massive smelter capacity, but a shortage of zinc concentrate, so it has been importing the concentrate in massive quantities to produce the refined metal. When it produces a surplus, it exports it, which has some concerned about downward pressure on the price.

Zinc is now selling for about US$1.57 per pound on the London Metal Exchange. That's down from $1.67 in May, and nearly $2 late last year, but Mohr said her forecast for the average price for this year is $1.65. She predicts that will decrease to $1.35 next year, but that's still very profitable since the break even price was about 63 cents last year. Prices were an average of 48 cents in 2004, she said.

''Anything over a dollar is very good,'' Mohr said, noting current prices are at a very ''lucrative level.''

[Mick100]

CHINESE COAL & MARKET THOUGHTS
by Yiannis G. Mostrous
Editor, Growth Engines
July 5, 2007


Bears of any kind (i.e., perma or otherwise) continue to find reasons why the markets will collapse any day now. At the same time, the global markets continue to defy all those extremely intellectual observers and have done so for the past four years.

Of course, some of these commentators feel such a thrill every time they manage to call a top--which is often--that they now live in fear that the top may come and, if they're not there to "call it," they'll miss the greatest opportunity in their professional lives.

Asia especially is on everybody's "fundamental purity" radar as the region of the world that's so out of sync with reality that a collapse is imminent.

It's understandable a lot of people are upset with Asia; their main concern in the past five to six years has been to identify reasons for its collapse. And now that the global economy--led by the US--is showing some signs of a slowdown, their voices have become even louder as they proclaim the end of the "high beta-growth proxy" Asian markets.

I profess no knowledge on the timing of a market slowdown. But absent a US recession, every prolonged market weakness should be viewed as a buying opportunity by long-term investors.

I concede that Asia-–and the emerging markets as whole--have a lot to prove regarding their ability to weather a severe economic slowdown in the US, and maybe they're not ready to do that yet. The fact of the matter is, though, that Asia in particular has been able to weather the US slowdown that's been taking place since last year.

Asia continues to grow as a whole. China and India remain the main engines, but there’s room for everyone. Asia’s growth potential, although influenced by global growth, should be viewed in the context of an economic region that’s developing while ensuring long-lasting structural change. In other words, Asia is counting more on itself now for its economic development than on the kindness of foreign investors, as it did before.

Headwinds will always be present; after all, nobody’s immune to economic cycles and disruptions to global trade. But they should be viewed as short-term slowdowns in the context of a long-term economic trend that will make Asia an equal partner and a strong contributor to the world’s economic growth.

My view remains benign when it comes to the danger of a financial disaster in Asia because of the increased portfolio inflows. Aside from the fundamental improvement in Asian economies, net portfolio inflows remain much lower today at 4.5 percent of the region’s GDP than they were 10 years ago--during the Asian Crisis--at more than 6 percent of GDP.

As changes in Asia continue to take place, I expect the market to stay stronger for longer, even trading at par to US valuations given its superior growth characteristics. If the selloff scenario materializes--in a tactical rather than a recessional context--expect the Asian markets to rebound, finishing the year 40 to 50 percent above current levels.

Coal In China

A little more than two months ago, Saudi Arabia hosted a roundtable discussion featuring Asian energy ministers. During these meetings, the Chinese representative--Deputy Commissioner of the National Development and Reform Commission Chen Deming--informed the participants that China will try to increase its use of domestic resources to meet its energy needs.

As I’ve noted here previously, the political leadership in China has made diversification of energy dependence away from oil a matter of national security. Given that China's not only a big consumer of energy but also a big producer, there’s scope for the country to achieve its objective.

Although China will have the opportunity to exploit its gas resources or continue to explore opportunities in the hydro, solar and bio energy areas, its main source of energy will remain coal for years to come. It seems that the Chinese leadership has realized that fact and has taken the necessary steps t

[Mick100]

Gold outlook

Sol Paha

http://www.financialsense.com/fsu/editorials/ti/2007/0702.html
.

[Mick100]

Crude oil supply/demand

http://www.financialsense.com/fsu/editorials/iacono/2007/0711.html
.

[Mick100]

Long term bull market in resources

Puru Saxena

http://www.financialsense.com/editorials/saxena/2007/0713.html
,

[airedale]

Three interesting posts, Mick, with gold now back at $US660, it looks as if the market has moved up faster than Sol Paha has anticipated.
Cheers...

[Mick100]

Hi airedale
I sold out of my gold miners last yr due to major operational problems - HIG, BGF (not because I lost faith in the gold bull)
I have had a couple of gold miners on my watchlist for about 6 months now looking to take a position. I'm not convinced that it's time to jump on board yet but I'm getting very tempted.
I watch the gold/oil ratio closely - it's currently at 9. I'm looking for a spike down to 7
Assuming that oil will keep rising to say $85 by aug/sept then with a gold/oil ratio of 7 would put gold at 595
If it was later in the yr I wouldn't be waiting for a new low in gold but from past experience I don't expect gold to enter into a sustained uptrend just yet - more likely this will happen in sept/oct.
The USD is currently testing it's alltime lows - if it breaks lower then I expect gold will take off. If the USD holds above 80 I will continue to wait for a lower low in gold.
It's certainly getting interesting!
,

[Mick100]

COAL EARNINGS
by Elliott H. Gue
Editor, The Energy Letter
July 27, 2007


We’re now in the heart of earnings season for the energy patch. By and large, energy companies have reported impressive numbers, but there are some clear winners and losers.

Some of the losers this quarter were the coal stocks, which have seen unprecedented selling pressure during the past two weeks and haven’t reacted well to their earnings releases. I think the weakness is vastly overdone.

When evaluating coal stocks, it’s useful to divide the sector into two pieces: the Eastern-focused miners and those focused on mining in the Powder River Basin (PRB) or other markets in the Western US. The Appalachian coal region in the East has been a prolific coal producer for more than a century.

But this region has seen a growing list of problems of late. It’s getting harder and more expensive to mine these reserves as seams become thinner; that’s why many miners in the region have missed their production targets in recent years.

The bear case for the coal mining stocks is simple and, in fact, very similar to the bearish case for natural gas. Because of the hangover from the warm winter of 2005-06, stockpiles of coal at utilities have risen to excessive levels.

This is the same basic reason that natural gas storage levels are so much higher than normal right now. Because the utilities are well supplied, demand for coal has fallen and so have prices.

Adding to that are concerns regarding climate change policy. Coal is public enemy No. 1 when it comes to global warming, and a few plants that had been slated for construction have been delayed or canceled because of uncertainty surrounding the future of US environmental regulations governing carbon emissions.

These two points were discussed ad nauseam on every one of the five coal miner conference calls that I’ve listened to so far this season. The question-and-answer sessions have become an endless debate over these factors.

As I’ve stated before, these are valid points. However, the weakness in coal is massively overdone. The fact is that the US needs more generation capacity soon, and as I’ve outlined on numerous occasions, alternative energy and conservation efforts just won’t meet those needs.

Nuclear plants take a long time to build, so they’re also not a great candidate for meeting near-term (two to three years out) needs. Coal and gas are the only realistic solutions, and coal is far and away the cheaper alternative--even with natural gas prices at depressed levels.

Although it’s clear that uncertainty over climate change policy will affect new coal plant construction, new coal plants will be built in the US. In fact, about 9 gigawatts of new coal-direct capacity is already under construction, and an additional 10 gigawatts have received permits and are close to breaking ground. Assuming just the 9 gigawatts of plants under construction are built, that’s another 35 million tons of coal demand annually.

Outside this broader argument, a few additional points surrounding shorter-term production trends are worth noting.

New regulations being imposed on East Coast miners are starting to have a dramatic impact on coal production from the region. Recently, the Mine Safety and Health Administration (MSHA), part of the US Dept of Labor, drastically changed the regulations governing how mines are sealed.

Basically, in underground mines, abandoned sections of mines are sealed off from the rest of the mine. This is to prevent any dangerous gases from moving to areas that are being mined.

During the past year and a half, MSHA has changed regulations governing the way mines are sealed on a few occasions. The end result is that about 372 of the 670 active underground mines in the US will need to make changes. MSHA estimates that this will cost the industry some $40 million annually to comply. According to the management team over at International Coal Group--a stock I recommend avoiding--some mines in the East have more than 100 seals in them.

No one really

[Mick100]

IS THE END NIGH?
by Puru Saxena
Editor, Money Matters
August 7, 2007


Over the past few days, the ongoing credit-crunch in the US has grabbed all the media attention and the capital markets have responded with sharp declines. At present, there is an ongoing debate as to whether the sub-prime debacle will sink the US into the next “Great Depression”. Not surprisingly, the bears are out of their dens again, forecasting the very end of capitalism! So, what should we make of the current situation and more importantly, how should we invest during these volatile times?

There is no doubt in my mind that the US economy is past its prime. Gone are the days when the international markets used to shudder in fear at the very thought of American investors withdrawing their capital from overseas. Remember, not so long ago, financial crises used to spawn in some far-flung “emerging” nations in Asia, Latin America and Eastern Europe. And the US establishment used to stand firm as the lender of last resort. This time around, however, it is ironic that the world’s most influential nation is weighing down on the global economy and causing a mini-panic in the markets. A few years ago, the US was a creditor nation, but today it is the largest debtor nation the world has ever seen. Previously, Americans used to fund other less fortunate nations, however these developing nations are now funding the American way of life by financing those horrendous deficits! Based on these facts, it is clear to me that over the coming years, the over-leveraged American society will have to undergo some sort of adjustment. Moreover, I suspect that this adjustment will not be easy. In other words, I expect the standard of living in the US to gradually decline in the years ahead.

Now, I am aware that there are a number of well-respected economists and analysts out there who are forecasting the end of the world due to the ongoing problems in the credit-markets. I tend to agree with their assessment that the US economy is in a bad shape but I do not expect a deflationary collapse in global asset-prices due to the sub-prime mess for the following reasons:

Firstly, it is worth noting that the size of the US economy is roughly US$13.5 trillion, global exports are over US$13 trillion, global non-gold foreign exchange reserves are above US$5 trillion and under the worst-case scenario, sub-prime mortgage losses could amount to US$300-400 billion. No doubt, these losses would be a total disaster for the effected households, but they are not big enough to cause a major recession at least in nominal terms.

Secondly, I believe that with its ability to print an unlimited quantity of Dollars, the Federal Reserve will come to the “rescue” at the cost of the American currency. After all, we are in the third year of the US Presidential cycle (historically, the best year for stocks) and you can bet your bottom Dollar that the American establishment will do everything in its power to avoid a major bear-market or recession prior to the elections next year.

Now, I can almost hear some of you say that this era of endless prosperity cannot go on forever and that a deflationary bust is inevitable. For sure, this fantasy “fix” through even more inflation and a further debasement of the US Dollar cannot continue ad infinitum. However, as long as the public remains oblivious to the inflation menace and keeps buying into the low-inflation propaganda, our current “monopoly-money” system could easily continue for several more years.

I happen to believe that the US Dollar will be sacrificed in order to avoid a painful contraction in the economy and asset-prices. The necessary adjustment in the US economy will be stealth and is likely to occur through a weakening currency rather than an outright crash in asset-prices. Already, since 2002, American savings have depreciated by 50% against the major European currencies and even more so against the major commodity-producing economies (Canada, Australia and New Zealand). In the period ahead, I expect the US Dollar to diminish in value against the Asian and Latin American currencies, which are still grossly undervalued against the greenback.

The final reason why I do not expect a deflationary collapse is due to the fact that despite the ongoing credit-problems in the US, the emerging economies of Asia, Eastern Europe and Latin America continue to expand rapidly. This should act as a cushion against any major financial set-back in the US.

So, given the current economic outlook, how should investors position themselves? First and foremost, I suggest that investors continue to avoid exposure to US financial assets as the risks far outweigh the potential for return. Moreover, if my assessment is correct, after some additional near-term weakness in the markets, I expect the up-trends in natural resources and emerging-markets to continue. As a money-manager with the capability to invest in global assets, I have allocated our clients’ capital to these sectors.

Despite the rally over the past 5 years, stocks in the emerging-markets are reasonably priced in terms of valuations (with the exception of China) and commodities remain extremely cheap when adjusted for inflation. After the big run-up over the past several months, these markets had become somewhat over-stretched and are now in the process of consolidating their recent gains. Such periodic pull-backs are normal within long-term bull-markets and should be used as a buying opportunity. Accordingly, I would urge investors to shake-off their sub-prime blues and take advantage of the ongoing panic by buying solid resource-producing companies positioned to benefit immensely from the ongoing growth in the emerging-nations. Remember, in the business of investing, it usually pays to buy the panic!


© 2007 Puru Saxena
Editorial Archive

[Mick100]

GLOBAL BOND MARKETS RE-ADJUST TO A NORMALIZATION OF SPREADSby Monty Guild
Guild Investment Management, Inc.
August 10, 2007

http://www.financialsense.com/editorials/guild/2007/images/0810home.jpgSpreads are the differences that financial institutions get between their cost of money and the price they demand for loans. Spreads in effect reflect evaluations of current and expected risk. Clearly, the current bond market problems are due to a very over-optimistic evaluation of risk by many lenders. The lenders have realized their mistakes and are rapidly adjusting their risk premiums back to the historical levels of risk premium that have prevailed for the better part of 30 years. As I wrote recently, every type of loan from government paper to all types of mortgages and corporate and consumer credit will become more expensive. This will reverberate through the U.S.andglobal debt markets and raise the cost of borrowing for everyone.


GOOD FOR STOCKS AND COMMODITIES

This will also make investors more cautious about future commitments to debt. Historically, when interest rates were rising, investors shunned long-term debt in favor of short-term debt and moved more into equities (stocks).

Many aggressive investors have been using leveraged debt instead of equities to maximize returns..We believe that many of those seeking high returns will return to stocks and commodities in order to maximize returns.

In this area, there are statistics suggesting why base metals and energy remain in demand. We have stated these things before in different ways in hopes of capturing your attention.

From an economic point of view, world economic growth determines the demand for raw materials to build economies.

The estimated GDP growth for the last four years and the coming four years is as follows:

India 8-9%
China 10% +
Developing world other than India and China 6-8%
Developed world 2-3%

If the developing world contributes about 40% of the global GDP as many economists think, and the developed world is contributing about 60%, then the blended world growth rate is roughly 5% per annum.
We believe, based upon the research of economists from many parts of the world, that global GDP growth has been about 5% a year for the past few years, and will probably continue at about that rate for the next few years.



LONG TERM GLOBAL ECONOMIC GROWTH LIKELY TO BE STRONG

We further believe that world economic growth will remain strong for two or more decades as the current 6.5 billion world population grows by more than 50% by 2050.

TO GROW A WORLD ECONOMY BY 5% PER YEAR..you must consume resources at the rate of about 3% per year.

In today's tight markets for oil and minerals, the supply of many commodities is growing at about 1% a year or less. If demand is growing at 3% per year PRICES MUST RISE SUBSTANTIALLY for energy and for many other commodities.

AS WE HAVE SAID, WE ARE OPTIMISTIC ABOUT THE OUTLOOK FOR SOME STOCK MARKETS AND THE MARKETS FOR ENERGY, BASE METALS AND PRECIOUS METALS.

LET'S MAKE A LIST OF WORLD NEGATIVES AND POSITIVES..THEN LET'S DECIDE WHO IS HURT BY THE NEGATIVES AND WHO IS HELPED BY THE POSITIVES..THIS WAY WE CAN DETERMINE WHERE TO INVEST AND WHERE TO AVOID INVESTING.

POSITIVES

SOME COUNTRIES ENJOY:
<LI style="MARGIN: 0in 0in 0pt">Rapid economic growth <LI style="MARGIN: 0in 0in 0pt">Rapid growth in corporate profits <LI style="MARGIN: 0in 0in 0pt">Availability of low cost labor <LI style="MARGIN: 0in 0in 0pt">Availability of raw materials and energy
Availability of capital in the local marketsThose in the positive category are: China, India, Norway, Canada, Brazil, Hong Kong, Singapore, and Korea. Much of Latin America and Eastern Europe are on the fence with some positives, but they also have some negatives.

NEGATIVES

SOME COUNTRIES SUFFER FROM:
<LI style="MARGIN: 0in 0in 0pt">Rising interest rates <LI style="MARGIN: 0in 0in 0pt">Lowering of P/E ratios as interest rates rise <LI style="MARGIN: 0in 0in 0pt">Slower economic growth <LI style="MARGIN: 0in 0in 0pt">Weakness of the financial system <LI style="MARGIN: 0in 0in 0pt">Lack of availability of capital in some markets <LI style="MARGIN: 0in 0in 0pt">Threats to corporate profits from tax policy after 2008 [U.S.]
Increasing restrictions on global trade (potentially the biggest problem)

GLOBAL INVESTING EXPERTISE A MUST!!!

In our opinion investing solely with a U. S. (or for that matter any one country centric) strategy will become more difficult in coming years. We further believe that expertise in global investing will become an important attribute for investment success in a increasingly globalizing world. We have worked very hard over the past few decades developing such expertise. We look forward to the changes taking place in the global economy as we expect they will create some very profitable opportunities in coming years.

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© 2007 Monty Guild
Editorial Archive (http://www.financialsense.com/editorials/guild/main.html)

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[Mick100]

LENDERS TAKE THE JAB, BORROWERS TAKE THE KNOCKOUT
by Peter Schiff
Euro Pacific Capital
August 20, 2007

The current weakness in domestic markets has recently been magnified overseas as panic spread to foreign investors with exposure to U.S. asset backed debt. Some commentators point to this reaction in an attempt to disprove the belief that foreign assets offer protection from falling U.S. stocks. I believe such conclusions are premature. Global stock markets will soon decouple from ours, and strong returns overseas will occur even as U.S. stocks slump.

I believe that the recent sell off in global stocks is liquidity-driven and will likely be short-lived. Many of our foreign creditors, particularly those using leverage, were forced to meet margin calls by selling assets to raise cash. Since the assets causing the problems had little, if any, value, they were forced to sell other assets instead, causing prices to fall sharply. In addition, the increased risk aversion that followed led to de-leveraging of other speculative positions; particular yen carry trades, putting additional downward pressure on many of the foreign assets that had been purchased with borrowed yen.

In contrast to the recent declines in U.S. stocks, which are driven by deteriorating fundamentals and a poor outlook for corporate earnings and the U.S. economy, the steep drops in many foreign stocks do not stem from financial distress in the companies themselves, but simply from the short-term distress of their highly leveraged shareholders. Remember, the root of the problem lies in the inability of American borrowers to repay their debts. While foreign lenders may be getting stung a bit, they will take their losses and move on. On the other hand, American borrowers will face much bleaker futures.

In a mortgage crisis, such as the one we are currently experiencing, lenders typically get hit first. As it so happens at present, America's lenders usually carry foreign passports. Although foreign creditors may be the first to take it on the chin, American borrowers will ultimately be knocked out by the combination punch of much higher interest rates and vanishing home equity.

Foreigners are suffering now because they loaned money to Americans who could not repay. However, as we are the ones who are broke, we are the ones who are in real trouble. Furnished with a greater appreciation of the risks, foreigners will now buy fewer dollar-denominated bonds collateralized by U.S. real estate, automobiles, receivables, credit card debt, etc. Without a ready secondary market for asset-backed debt, Americans will find it increasingly difficult to buy consumer goods or real estate on credit. As discretionary consumer spending grinds to a halt, real estate prices plunge and our economy falls into a protracted recession, the developing bear market in U.S. stocks will continue. However, as foreign consumers and businesses enjoy the benefits of additional goods and credit previously provided to Americans, overseas economies will grow faster, extending the lives of what are very powerful bull markets.

On a similar note, the recent global rout in stocks produced similar declines in both gold and gold stocks. Here again I feel that we are witnessing liquidity events that will likely reverse as the true nature of our problems become apparent. As Fed officials continue to talk tough on inflation and deny the obvious threats to our economy from the growing credit crunch and collapsing real estate market, gold is being sold in favor of treasuries. Soon however, the markets will see through this charade and gold will shine more brightly than it did in 1980. The key for those of us holding the yellow metal or other non-dollar assets in anticipation of a major economic crisis in the U.S. is not to panic out of our positions. I am confident that we are holding the winning hand; all we need do is not throw it away.


© 2007 Peter Schiff
Editorial Archive

CONTACT INFORMATION
Peter Schiff
Euro Pacific Capital
Darien, CT USA
Email l Website

[Huang Chung]

Metals not looking too flash at the moment. Short term outlook for U continues to deteriorate. Buying opportunity coming up??

http://www.bloomberg.com/apps/news?pid=20601012&sid=aqcWfgxkWYwU&refer=commodities

[OneUp]

AGP note that "the price of coking coal has “increased sharply” over the last few months. Recent reported sales of spot coking coal have been at considerably higher levels than the long term contract rates of circa US$100 per ton used in the past two years. This price rise is reflected in the Group’s coal royalty interests being independently valued at 30th June 2007 at £59 million compared to £48 million at 31st December 2006."

Could be a good time to buy (coking) coal stocks.

[Tok3n]

Buy made in NZ

PRC :)

[Mick100]

Uraium outlook and other useful insights
http://www.financialsense.com/fsu/editorials/ti/2007/0910.html

[duncan macgregor]

Uraium outlook and other useful insights
http://www.financialsense.com/fsu/editorials/ti/2007/0910.html Its a good read MICK thanks. Macdunk

[shasta]

Uraium outlook and other useful insights
http://www.financialsense.com/fsu/editorials/ti/2007/0910.html

Great article indeed, thanks Mick

Just shows that the current weakness will stay around a little longer whilst the sub prime problem remains, & then i would expect the price of Uranium will continue to rise in 2008.

Hence the reason im bullish on Uranium, & believe we will hit new highs during 2008 of $US150lb.

[OutToLunch]

Yep thanks Mick, that was a good read. I pasted the link on the AGS thread on HC for folk over there to have a gander at too. It's good to see a rational view of the longer term to remind the panickers why the uranium story hasn't really even got started.

Cheers :-)

[Mick100]

COMMODITY INDEXES SURPASS FUNDSby David Shvartsman
Finance Trends Matter
November 12, 2007

http://s7.addthis.com/button1-bm.gif (http://www.addthis.com/bookmark.php?v=12&winname=addthis&pub=financialsense&s=&url=http%3A%2F%2Fwww.financialsense.com%2Ffsu%2Fed itorials%2Fshvartsman%2F2007%2F1112.html&title=FSU%20Editorial%3A%20%22Commodity%20Indexes% 20Surpass%20Funds%22%20by%20David%20Shvartsman%201 1%2F12%2F2007)
Commodity index investment products are helping mainstream investors ride the bull market in commodities. And as Bloomberg reports, this year the indexes have outperformed the leading commodity focused hedge funds.
Excerpt from, "Calpers beats Pickens as Commodity Indexes Clobber Hedge Funds" (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arcL_rRc0oFo).
T. Boone Pickens, the billionaire oil trader who predicted crude's rise to $100 a barrel, is lagging behind commodity-index investors for the first time since 2003.
Even California Public Employees' Retirement System, the 75-year-old pension fund that ignored commodities until eight months ago, is beating Pickens. Calpers invested in the Standard & Poor's GSCI Index, up 32 percent this year, while Pickens's BP Capital fund rose 22 percent.
From Dwight Anderson's Ospraie Management LLC to Global Advisors LP, commodities hedge funds failed to anticipate the 58 percent advance in oil and 31 percent gain in gold that powered indexes to their highest levels in two decades. While bullish forecasters at Goldman Sachs Group Inc. and Deutsche Bank AG advised clients to double down on commodities in January, they didn't expect this year's returns.
I have to say, this level of return from the overall commodity indexes was not what I was expecting for this year.
After a four or five year run in the GSCI, I expected a rather muted performance or even the start of an intermediate term correction in the major indices, with the potential for larger gains concentrated in several of the more overlooked individual commodities and commodity sectors.
It turns out Goldman Sachs was right in their 2007 call to "double down on commodities" (http://financetrends.blogspot.com/2007/01/double-down-on-commodities.html). I was wrong. Congrats to everyone who played it right, including the major pension funds like Calpers, who were highlighted in Bloomberg's recent article.
Whether or not the index players will be able to outperform the leading commodity hedge funds (http://financetrends.blogspot.com/2007/10/volatility-in-commodities-market.html) over the longer term is another issue, and it is one that is taken up in Bloomberg's piece.
Still, you have to give it to Jim Rogers and those who predicted the rise of commodity index investing and investors' growing acceptance of these products. They were absolutely right, and the market for these investment products is still growing.
Just last Friday, the Financial Times (http://www.ft.com/cms/s/0/2d41221a-8e66-11dc-8591-0000779fd2ac.html) reported that JP Morgan and BNP Paribas were developing commodity index vehicles that will allow investors to make longer-term bets on commodity prices movements.
It was also noted that S&P had forecast a 20 percent increase in commodities index investment for 2008. Commodity investing has gone mainstream.

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© 2007 David Shvartsman
Editorial Archive (http://www.financialsense.com/fsu/editorials/shvartsman/archive.html)

[Mick100]

URANIUM WARSby Sol Palha
Tactical Investor
November 14, 2007

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When I was a boy I used to do what my father wanted. Now I have to do what
my boy wants. My problem is: When am I going to do what I want?

Samuel Levenson
We have spoken several times in regards to this issue over the course of the last few years. China has already lead the assault on a covert basis but soon they will move to an overt basis and now India will be forced to join them not because they think they might have to but because they desperately need too. The excerpt below will explain our point quite clearly
Faced with an acute shortage of uranium to run existing power stations, the Nuclear Power Corporation of India Ltd has advanced its maintenance schedule and started shutting down individual power units. Usually, these units are shut down in a staggered manner but this time they have been bunched together so that authorities get time to arrange for uranium supplies.
Over the past few weeks, as many as five units amounting to 1000 MW of the total 4000 MW were shut down on account of upkeep of plants: two units from Tarapur (Maharashtra) and one each from Kaiga (Karnataka), Kalpakkam (Tamil Nadu) and Kakrapar (Gujarat).
Already, most of the plants that were running at 90-95 per cent capacity until last year are now down to 50-70 per cent reflecting the serious uranium crisis facing the country.
Acknowledging that there is a fuel supply "mismatch" due to further delays in the commissioning of the milling system in Jharkhand mines, one of the main sources of domestic fuel supply, authorities are having to innovate on their maintenance schedule. Hoping that the fuel situation may ease a bit in the next month or so, sources said, the NPCIL felt that this period could be used for maintenance which anyhow requires shutting down a reactor for about 20 days. Full Story (http://in.news.yahoo.com/071023/48/6mbip.html)


Known Recoverable Resources of Uranium




Tonnes U

% of world
Australia
1,143,000
24%
Kazakhstan
816,000
17%
Canada
444,000
9%
USA
342,000
7%
South Africa
341,000
7%
Namibia
282,000
6%
Brazil
279,000
6%
Niger
225,000
5%
Russian Fed.
172,000
4%
Uzbekistan
116,000
2%
Ukraine
90,000
2%
Jordan
79,000
2%
India
67,000
1%
China
60,000
1%
Other
287,000
6%
World total
4,743,000



http://www.uic.com.au/nip75.htm (http://www.uic.com.au/nip75.htm)
Now just imagine a country such as France had to go through the same situation; total chaos would reign as 80% of France's electricity comes from nuclear power plants. We are not stating that France is in any danger we are just trying to illustrate a point here. For that matter imagine the US had to go through the same situation it would still cause chaos as over 20% of our electricity is generated from nuclear power plants. Actually one has to applaud the French for being so astute as to have had the foresight to continue to develop nuclear technology and move away from coal and natural gas; today the French are one of the leaders in Nuclear power plant technology a position once held by the United States.
We are at the beginning stages of a massive bidding war in Uranium. China is locking in massive deals in Africa and is now working on ever bigger deals in Kazakhstan which holds the worlds second largest reserves of Uranium after Australia. Note to that China signed a multi billion dollar uranium deal with Australia. China is basically locking up Uranium supplies, which means its taking this uranium out of the market place; this effectively means that there will be even less uranium for the rest of the global world players to go after. Now this development alone is bad enough but the situation worsens; Russia which has more than enough uranium has decided to start stock piling on uranium too. They have done this after declaring that Uranium is now a strategic resource and will only be exported in limited quantities. Once again the following news story will best illustrate our point
"This new agreement will allow the supply of Australian uranium for use in Russia's civil nuclear power industry and provide a framework for broader cooperation on peaceful nuclear-related activities," he said. Both Howard and Putin dismissed concerns that Russia would sell Australian uranium to third countries such as Iran.
"I simply don't understand what people are talking about," Putin said, pointing out that Russia already exports large quantities of enriched uranium for military use, including 30 tonnes a year to the United States. "We are buying uranium from Australia for purely economic reasons," he said Full Story (http://sg.biz.yahoo.com/070907/1/4b30t.html)
Purely economic reasons and why not; Putin is a smart man he knows that in the future nations will be desperately begging for this valuable commodity and he also knows that he who controls the keys to the energy market controls the world. One other thing to note here is that Russia supplies the US with over 30 tonnes a year of uranium; Russia could cut these supplies on a moments notice especially now that the relationship between these two former cold war enemies has turned rather frosty as of late.
Bottom line is the Uranium bull is one that is going to be driven by the two most powerful forces in the universe and such a development is very rare and provides the astute investor with a window of opportunity that usually presents itself only once in a persons life time. The two forces are fear and greed; usually one of them is enough to produce massive moves but in the near future both of them will be working in unison instead of against each other. This is one of the main reasons why it’s almost impossible to predict how high uranium prices could eventually trade at. Right now the uranium sector has been beaten down and many individuals have given up on this sector as some stocks have truly taken a massive beating. Remember at TI we view disaster as opportunity waiting to be discovered and thus our advice to all our subscribers is to make sure you hold positions in all the various uranium plays that are listed in our portfolios and hold them through thick and thin or until we advise you to unload them. Those that do so will be handsomely rewarded and those that don’t well in the years to come they will most likely shed tears of blood as they wonder what possessed them to let such a wonderful opportunity pass them by. Do not let this opportunity slip by you.
Futures players with deep pockets could start examining the possibility of going long Uranium futures; do so with the mindset that the next leg up will not begin tomorrow.


Who then is free? The wise man who can govern himself.

Horace BC 65-8, Italian Poet
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© 2007 Sol Palha, Tactical Investor
Bio and Archive (http://www.financialsense.com/fsu/editorials/ti/archive.html)

[Mick100]

Why Commodities Should Be In Your Stocking This Year....
...and the next year....and the year after that!
http://www.gold-eagle.com/images/clear.gif
Emanuel Balarie
http://www.gold-eagle.com/images/clear.gif
For several years now, commodities have garnered attention because of their prolific appreciation. The price of oil has climbed by over $80/barrel during this first stage of this bull market, gold prices have more than tripled in price, and soybeans, corn, wheat and coal have suddenly become part of the investor's vocabulary. At the same time, however, it seems that while investors are now more familiar with commodities (in the general sense), they are still apprehensive about finally taking the steps to add commodities to their investment portfolios. The reasons vary, but it has a lot to do with the fact that most investors focus on the fact that prices are too high (gold at $800/ounce, for instance). As a result, the average investor feels more comfortable waiting for the next bull market in commodities, rather than being the fool that buys in at the "top".

Interestingly enough, not only is it not too late to invest in the commodity bull market, but it is also perhaps one of the best times to start investing. In this article, I will not list the fundamentals for why I believe we are still in the first half of this commodity bull market. I have written about this topic on various occasions, and I write about it in detail in my new book, Commodities for Every Portfolio: How You Can Profit from the Long-Term Commodity Boom (http://www.amazon.com/dp/0470112506/?tag=commodnewsce-20). I recommend buying this as a Christmas gift for yourself or your skeptic friend! Instead, I will make the case for why I believe this is probably the best time (since the start of this bull market in 2001) to actually allocate a portion of your portfolio to the commodity markets.
The Last Seven Years
I fully realize that most people will initially scoff at my belief that now is a much better (and critical) time to buy commodities. How could I possibly believe that buying gold today( when it is trading at $800/ounce) is better than buying gold seven years ago (when it was trading around $250/ounce)? Or how could I argue that oil at $90/barrel is a better investment than oil at $15/barrel? Indeed, if one were to look simply at the price of commodities, my argument would not make sense. However, if you look at the bigger picture, it becomes clear that investing in the second leg of this bull market is much more important.
Consider, for instance, the potential investments (and their returns) of the previous seven years. There is no question that the commodity markets have tallied significant gains. But so have other investments. For instance, while commodity bulls point the gains they made investing in the energy sector, real estate investors can readily point to the appreciation that they experienced by investing in housing. While gold bugs boast about the massive gains that they accumulated by buying gold at $300/ounce, stock market investors simply point at the fact that Google has moved from just over $100 in 2004 to over $700 today.
Indeed, it is clear that those that have missed the "boat" during this first stage of this bull market have had ample opportunity to ride other crafts to financial gains. In a sense, the financial opportunities of this decade have been ample and widespread. However, this unprecedented and goldilocks scenario is clearly coming to a screeching halt. As a result, investors can no longer afford to ignore the benefits of holding commodities in their portfolio.
The Next Several Years
The economic environment of tomorrow paints a picture that is polar opposite to what has transpired in the previous years. Whereas investors were able to profit from real estate gains (via the real-estate bubble), they are now realizing losses (via the real-estate burst). Whereas investors were able to profit from a rising stock market (due to consumer spending), the housing decline and upcoming recession will inevitably result in a bear market in stocks. And while the skewed and archaic fed data (think: the core CPI) has failed to warn investors about inflationary pressures, the massive printing of money to finance the war in Iraq, Afghanistan, and other government expenditures will undoubtedly lead to inflationary pressures that will erode the wealth of many investors.
In short, the benefits of commodities can serve as a remedy for the problems of tomorrow. While I have always espoused the profitable reasons for investing in commodities, I believe it is now more a question of protecting your wealth. In other words, the intrinsic benefits of holding commodities in your typical stock and bond portfolio far out way the potential gains you might see. Now don't get me wrong. I still believe commodity prices will soar for another decade or so, but if you are concerned about inflation, a bear market in stocks, and the inevitable recession-commodities make sense.
Why Commodities Belong In Your Stocking
So why exactly do commodities still make sense? And why do they belong in your stocking? Well consider the following study conducted by a couple professors and the gifts (or benefits) that commodities provide investors this holiday season.
In 2004, Professor Gary Gorton of University of Pennsylvania and K. Geert Rouwenhorst of Yale School of Management published "Facts and Fantasies about Commodity Futures". In the study, the two professors examined the long-term relationships of these three different asset classes. Their results were groundbreaking on a number of levels. First, the study shattered several ongoing myths about commodity futures. One of these myths was simply that commodities are more volatile than stocks. Looking back over a period of 45 years, the professors found the opposite to be true; the risk premium for stocks was greater than that for commodities.
Gift #1: Commodities provide investors with a hedge against a bear market in stocks.
In addition to debunking several myths about commodities, Gorton and Rouwenhorst concluded that over a prolonged period of time, commodity futures were negatively correlated to stocks and bonds. This, of course, makes perfect sense. Consider for example the effects higher commodity prices have on companies. As the price of commodities rise, companies have to pay more to make those products. In turn, they will have to pass on those costs to the consumer. Since the price of the product is now more expensive, not as many consumers will buy the product. The end result is lower earnings, and lower stock price.
Gift #2: Commodities provide investors with a hedge against rising inflation.
In addition to commodities being negatively correlated to stocks (and thus serving as a hedge against a bear market in stocks), the study as mentioned that commodity futures were positively correlated with inflation. In other words, commodity prices increase with rising inflation and decrease with declining inflation. Again, this makes perfect sense. Throughout the 1980's and early 90's, a period of low inflation, commodity prices were in a decline. Today, commodity prices are increasing in the midst of rising inflation. For instance, as the price of corn, soybeans, and other food products rise in price, you will have now have to pay more for your food products (See Food Inflation Article (http://www.commoditynewscenter.com/index.php?option=com_content&task=view&id=237)). While rising inflation erodes the purchasing power of your dollar (and subsequently diminishes your wealth), investing some of your wealth in tangible real assets can counteract the inflationary pressures.
Gift # 3: Commodities provide investors with the opportunity to profit from the greatest generational bull market of our time.
Of course, commodities can still provide investors with the opportunity to profit from the greatest generation bull market of our time. While there might be pullbacks and consolidation along this bull ride, the sheer demand for commodities from China, India, and other emerging economies will continue to push commodity prices higher. Additionally, while many investors continue to focus on how high commodities prices have risen over the last 7 years, they fail to realize that commodity prices were in a bear market for the previous 20 years. And if you look back at the history of commodity bull markets, they have all lasted longer than 15 years.
It is becoming evident that commodities should have a place in an investors' portfolio. It is no longer simply a matter of whether or not you believe that we are in a bull market or a bubble, but it is a matter of properly diversifying your investments. While diversification might not seem as important when most every investment is going up, it becomes increasingly important during times of economic uncertainty. Hopefully this Christmas Santa will bring you some coal….or oil…or gold. Personally, I prefer gold.


Stay tuned for the official launch of www.commoditynewscenter.com (http://www.commoditynewscenter.com/) in early 2008. With commodity news, pertinent commentary, quotes, and trading tools, CNC is poised to become your home for commodities online. I will also be launching a daily blog and send my subscribers a free report on which commodities to own…and not own…in 2008!
If you are interested in receiving this report... You can sign up for a free newsletter here (http://www.commoditynewscenter.com/index.php?option=com_acajoom&act=subone).


Emanuel Balarie
Chief Executive Officer
JABEZ CAPITAL MANAGEMENT
Chicago Mercantile Exchange
30 South Wacker Drive, Suite 2200
Chicago, IL 60606
Cell:949-697-3626
Tele: 312-466-5561
Fax: 312-466-5601

[Mick100]

ENERGY SECTOR TRENDS & DEVELOPMENTS LAST MONTHby Joseph Dancy, LSGI Advisors, Inc.
Adjunct Professor, SMU School of Law
December 17, 2007

http://s7.addthis.com/button1-bm.gif (http://www.addthis.com/bookmark.php?v=12&winname=addthis&pub=financialsense&s=&url=http%3A%2F%2Fwww.financialsense.com%2Ffsu%2Fed itorials%2Fdancy%2F2007%2F1217a.html&title=FSU%20Editorial%3A%20%22Energy%20Sector%20Tr ends%20%26%20Developments%20Last%20Month%22%20by%2 0Joseph%20Dancy%2012%2F17%2F2007)
http://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.31.jpgWhile we did not see $100 a barrel crude oil in the futures market last month we remain bullish on the energy sector. One of the more interesting charts we happened across last month was from the Oil Drum. It plots global crude oil and natural gas liquid production versus time. (See chart at right)
Texas oilman and hedge fund manager T. Boone Pickens for well over a year now has questioned whether global production of crude oil liquids can exceed 86 million barrels per day. Many analysts disputed his analysis, claiming production could be increased well above the 86 million barrel per day level as new supplies were brought online and older fields were upgraded.
While not making a judgment whether Mr. Pickens is correct or not, the chart at right is quite interesting in light of his comments. Keep in mind global demand for crude oil has been increasing about 1.5 million barrels per day per year with global demand for petroleum liquids correlating very closely with economic growth.
Many countries have experienced robust economic growth and are placing their increasing demands for energy on the global marketplace. Developing countries generally have very energy inefficient economies that require much more energy input per unit of growth than in North America. Should demand for crude oil liquids approach or exceed available supplies prices could skyrocket. The global market players most likely would in that situation move toward a hoarding mentality and resource nationalization would become a larger issue for consumers.
http://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.32.jpgAnother interesting chart we ran across last month plotted the oil inventory levels of Organization for Economic Cooperation and Development member nations over the last year and a half and the projected levels going forward.
OECD is comprised of thirty member democratic countries that produce two thirds of the world’s goods and services. Its member countries are primarily located in Western and Eastern Europe, but also include the United States, Canada and Mexico.
The forecast, provided by the Energy Information Administration, indicates that while oil stocks have been well above the 5 year average over the last few years those excess stocks are falling rapidly. In the near future OECD stocks are projected to be below the five year average while OECD demand continues to increase.
Excess inventories are helpful in addressing temporary supply interruptions and keeping the associated price fluctuations to a minimum. On a days of forward demand basis OECD inventories are down 5% from year earlier levels and are expected to fall further - which should keep short term oil prices firm.
http://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.33.jpghttp://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.34.gifhttp://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.35.gif










http://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.36.jpgMeanwhile, in the United States gasoline inventories have fallen below their long term average. This trend has been reflected in strengthening gasoline prices over the last several months. The long term trend in gasoline prices remains upward.
One of the more interesting articles and charts we can cross last month was in a New York Times article on the comparative value of crude oil and natural gas. (See chart at right)
Due to the fact that domestic natural gas inventories have been at or near five year highs for much of the last year natural gas prices have not risen as much as crude oil prices.
The impact of soft natural gas prices on North American drilling and completion activities has been quite evident – and is one reason the drilling day rates have been well below levels many small drilling companies and equipment providers expected.
Even with the large amount of natural gas in North American storage, and even though many long term forecasts project that winter temperatures will be well above normal cutting into demand, we think that over the next 12-18 months natural gas prices will advance from current levels.
On a heating content basis natural gas is now selling at roughly one-half the value of crude oil.
http://www.financialsense.com/fsu/editorials/dancy/2007/images/1217a.37.jpgLast, a slide from investment banker Matthew Simmons is worth reviewing. While the U.S. economy is much more energy efficient than it was 40 years ago demand for crude oil continues to increase. (See chart at left)
The demand for oil in countries such as China is rocketing upward, a function of the incredible economic growth of that country and also a function of the fact that the Chinese economy is not as energy efficient as those in North America or Europe.
Going forward, with the increasing auto sales and urbanization of that country demand for oil should continue to accelerate – which will place additional strains on the global supply network for decades to come.


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© 2007 Joseph Dancy
Editorial Archive (http://www.financialsense.com/fsu/editorials/dancy/archive.html)

[Huang Chung]

All green on the screen again tonight for metal prices, including zinc up 2%. $A off its recent highs as well.

Over the last week or so, metal prices have generally been heading higher, despite all the references to the 'R' word being bandied about.

However, the share prices of many miners have moved downwards, ignoring the small but welcome improvements in metal prices, but in sinc with all the talk of recession. PEM and ZFX being two zinc plays being badly mauled.

Will be interesting to see what the next few weeks brings.

[Mick100]

It's stocks that are taking a beating at the moment - not commodities. Commodity related stocks are being dragged down by falling stock markets but I doubt whether this positive correlation between general stocks and commodity related stocks will last much longer.


==========================================

How Do Commodities and Stocks Perform
During Economic Downturns?

by Mary Rivas, PowerPathtoMoney.com | January 25, 2008

Print (javascript:printWindow())
In an article published January 23, 2008 in the Financial Times, George Soros stated that a recession in the U.S. is now more or less inevitable. He noted that China, India and some of the oil-producing countries however are in a very strong countertrend. Soros went on to explain that “the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the U.S. and the rise of China and other countries in the developing world. “
A growing number of economists, money managers and analysts have begun issuing warnings that a recession may be hard to avoid in 2008. On top of that, recent data is indicating an increase in inflation that is being fueled by higher prices for commodities such as oil, wheat and corn.
Given the growing concerns of the future of the economy, I thought it would be extremely helpful to provide readers with some history on how commodities and stocks have performed over various economic cycles.
Performance of Commodities vs. Stocks
To understand how commodities and stocks perform during economic downturns, let’s look at past trends.
In a revolutionary study from the Yale School of Management’s Center for International Finance entitled Facts and Fantasies About Commodity Futures, research revealed very important differences in how commodities and stocks perform over time. The research team analyzed how commodity investments performed compared to stocks and bonds over the last half century.
Below are some key highlights of the research findings over various investment horizons:

Stocks and bonds are negatively correlated with inflation. In other words, as inflation increases, stocks and bonds tend to move in the opposite direction. Commodities futures, in contrast, are positively correlated with inflation. When inflation rises, commodity futures tend to rise as well.
Commodity prices can rise even during economic downturns. Commodities can serve as a hedge against stock market and economic risk.
Commodities and stocks have a negative correlation. In other words, commodities and stock perform tend to perform oppositely over time. When stocks go down, commodities, over time, tend to move up and vice versa. Thus, a portfolio invested in stocks and commodities, is likely to experience less volatility than a portfolio that is comprised of only stocks.
From 1959 to 2004, commodities futures produced comparable annual returns to stocks and greatly outperformed bonds.
Commodities have had less risk than stocks over time. The volatility (i.e., fluctuations in portfolio returns) of the returns of commodities futures over a 43-year period was less than the volatility of the S&P 500 index over the same period.
While no one can be certain if the looming recession will be global or more or less confined to the developed world, one thing is clear: ignoring commodities in a declining stock market is irrational.
In a recent interview with Bloomberg (January 7, 2008), Jim Rogers, known by many as the world’s expert on commodities investing, reaffirmed his positive outlook on commodities. He stated that ``All commodities are going to be in much shorter supply for another decade.'' Rogers indicated that in the event of a global recession, agricultural commodities may be the best investment among commodities.
The findings of the Yale study and others have triggered huge changes in the financial industry---many which affect you. Investment companies are increasingly creating new investment vehicles to enable individual investors to participate in commodity investing. Today there are easily accessible ways for you to invest in commodities and to find which investment vehicle is right for you. Anyone can now invest in commodities in low-cost and easy ways that were not available during the last commodity bull market.

[Huang Chung]

Possibly some positive news on the zinc front.

http://www.platts.com/Metals/News/9369222.xml?sub=Metals&p=Metals/News&?undefined&undefined

[Harry7]

Mick/All,

Was reading this w/end (Saturday's Aust) some hedge funds coming into Aust with the view to possibly shorting commodities. Are they able to do this with same degree of effectiveness as what they've done say to ABC Learning etc. They don't have to come to Aust I suppose to do this, as these are traded on LME

What's your opinion on near term commoditiy prices - some sources are saying big falls expected, others that they'll remain strong. Particularly Nickel

[AMR]

A possible head and shoulders pattern forming on BHP.
http://img502.imageshack.us/img502/6867/bhp24032008qj4.png

[Mick100]

What's your opinion on near term commoditiy prices - some sources are saying big falls expected, others that they'll remain strong. Particularly Nickel

I think any weakness in metal prices will be short lived, 6 months, then showing strength again towards the end of the year. Inventories are still low so I don't expect a big decline in prices.

I suggest you keep an eye on copper. Copper usually leads the way with the metals. It looked as though it had broken out of a long consolidation a couple of weeks ago but has since fallen back a bit

I,v closed out all my metal positions in my commodities account and only have open positions in oil, corn, sugar and live cattle. I'm more bullish on food and energy than metals at this moment

[Mick100]

Futures Commentary and Analysis
http://media.barchart.com/cm/users/4390/Photo%201.jpg
$125 Next...
Friday, April 18, 2008
by Mark Pasek of Ira Epstein & Company (http://www.iepstein.com/)


As published on InsideFutures.com (http://www.insidefutures.com/)

ENERGY MARKET NEWSLETTER

April 17, 2008
In case you have been living under a rock, or just haven't filled up your SUV in the last 24 hours, Crude Oil traded above our $115 price target, which provided RBOB with the momentum to break through the $2.775 resistance level I detailed out last week.
So what happened?
More bad economic news. Partly. Poor first quarter earnings. Not so much. A feeble attempt by the G7 to balance the currencies. Probably the most likely.
First , the economic news. You and I know the real state of the economy is usually worse than data that is reported to us. You and I don't need understated employment figures to tell us that the job market is drying up. You and I don't need understated CPI and PPI numbers to feel the effects of inflation, we simply fill up our gas tanks and drive to the grocery store. And you and I are smart enough to know that the FED has not solved the problem nor will the problem be ending any time soon. Therefore, you and I know that when the FED expands the M3 money supply and subsequently stops reporting the M3 money supply data, that the resulting inflation will take a very long time to fully materialize in the markets. Since monetary expansion leads to price inflation, let us not be too surprised that Crude Oil is making new highs.
Next, lets deal with first quarter earnings. All is not well. Pay no attention to the Talking Heads reacting to lower earnings as "better than expected;" earnings will continue to suffer as higher energy prices inflate costs. But higher energy costs are only the beginning. Rising food prices are now starting to work their way into the mix. I don't see corporate earnings increasing in the short term. Where would you like to place your investment dollar during a rising inflationary period and stagnant corporate earnings?
And finally, the attempt by the G7 last weekend to bring the currencies into balance was in my opinion, a complete waste of time. There is a very real and significant interest rate differential between the United States and the European Union. Whereas the U.S. Central Bank's policy is to lower interest rates and to inject unprecedented amounts of liquidity into our system, the European central bank's policy is that they will not lower rates and they will actually fight inflation with higher interest rates.
With poor economic data, a not-so-rosy outlook on future corporate earnings, and the FED's current monetary policy I cannot figure out how the US Dollar is even trading in the 70's! There is nothing dollar-positive about anything I mentioned here. The interest rate differential between the US and Euroland, by itself, is enough to sink the Dollar. Keep in mind that there is an unlimited number of Dollars that will be trying to buy a limited number of commodities.
I think we are looking at the beginning of the next short term run-up in commodity prices. (I am also expecting a corresponding retracement/pullback/profit-taking to follow, who cares what you call it.)
EIA Inventories
To view the EIA's Weekly Petroleum Status report, click here: http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt (http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt).
Crude Oil
http://media.barchart.com/cm/users/4390/4-17-08/Crude%20Oil%20Daily.jpg
Crude Oil established a new record high at $115.54 today, after breaking through the $115 level on Wednesday. If Crude Oil holds on to this gain I think the new range will move up to $115 and $125. I also think a break to the upside in all of the commodities will be starting.
Stochastics are embedded as Crude Oil trades to new record prices. I see $125 as the next upper level resistance.
May RBOB
May RBOB has broken though massive resistance at the $2.75-$2.775 level (Light Blue Dashed Line), which will now be a technical support level. It is free and clear, and I regret to inform you that $4.00 per gallon at the pump might be in the very near future.
http://media.barchart.com/cm/users/4390/4-17-08/Rbob%20Daily.jpg
RBOB is free and clear of both the 18 and 45 day moving averages and Stochastics are embedded. As I mentioned last week, now that Crude Oil has broken $115 RBOB it is free to make new highs. I will not even speculate on how high this can go. However, look for RBOB to pull back to the $2.77 level on a retracement. $2.77 just happens to be the 18 Day Moving Average (in Red) and what used to be the resistance should now be the support.
Call me to discuss, 800-284-1065 or markp@iepstein.com.

Good Luck and Good Trading,

[Mick100]

http://www.financialsense.com/fsu/editorials/dancy/2008/0707.html

[Mick100]

Decision Time For Gold And The Dollar
http://www.gold-eagle.com/images/clear.gif
Roy Martens
www.resourcefortunes.com (http://www.resourcefortunes.com/)
http://www.gold-eagle.com/images/clear.gif
h2 { color:#008000; } h4 { font-weight:normal; }It’s rather amazing that despite the firm rise in Gold and Silver these past few weeks, the mining stocks aren’t moving at all. Well, that’s not entirely true. The mining stocks do tend to move at times, only in the opposite direction! Needless to say, this is incredibly frustrating to all gold and silver bugs.



Mining stocks appear to be moving in sympathy with the major equities markets. Although we have seen this before, it’s still amazing to see the holders of mining stocks lose faith so easily. Eventually, buyers of quality mining companies (http://www.resourcefortunes.com/) at today’s bargain prices will be handsomely rewarded.


All charts are courtesy of Stockcharts.com (http://www.stockcharts.com/)

GOLD



http://www.gold-eagle.com/editorials_08/images/martens070808a.gif

The chart for gold is improving and it looks like we are in for a new jump higher very soon.



Although the presented EW count hasn’t been confirmed yet (we need a rise above the black B), the conditions for a move higher are getting better and better. The 14 and 50 d. MAs are starting to rise, indicating that the LT trend is turning positive again, and as long as Gold remains above them the expectation of a breakout to new highs is valid.



The MACD is telling us that this move higher has legs to stand on, and once Gold takes out the resistance zone around $960, we can expect a strong advance to higher levels.




SILVER


http://www.gold-eagle.com/editorials_08/images/martens070808b.gif
Silver seems to be in the process of rounding up a bottoming pattern. This pattern will be completed once Silver breaks above the resistance at $18.60.



The conditions in the charts are getting ready for a big move higher, with the RSI, DMI (Buying Power) and MACD all in perfect shape to support a breakout above the nearby resistance zone. With Silver now just below the resistance level, not much is needed to trigger the rise. The bulls will only have to push Silver a little bit more for things to really start moving.



Above the resistance at $18.60 there are no real resistance levels to hold the price back except the double top made in March around $21.00. Therefore, it is reasonable to expect a similar rise like the one experienced at the beginning of 2008 when the resistance at $16.00 was taken out.


OIL


http://www.gold-eagle.com/editorials_08/images/martens070808c.gif
This chart is telling the whole story. Words are hardly necessary!



The strength in Oil is amazing. Every tiny sign of weakness attracts more and more buyers causing the price to rise higher and higher. Although this can’t be sustained forever, for now we must look at the yellow channel to get some clues for the next targets. As long as the channel remains valid, we should just go with the flow.



For now, the target at the higher end of the channel is $150+ and at the lower end, $135. However, keep in mind that these targets are rising daily along with the advancing channel lines.


USD


http://www.gold-eagle.com/editorials_08/images/martens070808d.gif
The dollar is at a crucial stage. It has to choose which way it will go very soon.



The support at 72 has to be defended or else the positive sentiment will fade very quickly. Should the dollar manage to take out the magenta line and the MA’s, we will get the prolonged rise that was anticipated last month.



For now, the signals in the chart are mixed. Things can still go either way, so we have to wait and see what the dollar has in store for us. The epic struggle between the dollar bears and bulls is in full force once again.


COPPER



http://www.gold-eagle.com/editorials_08/images/martens070808e.gif
Copper put in a very powerful rise this past month, and is now back up at the $400 level. Although the technical conditions are a bit overheated, it looks that this time the resistance could be taken out very quickly. While we may experience a minor correction first, the move higher was so powerful that Copper could simply blast through the resistance this coming week without any sort of breather.



The presented EW count suggests that this is only the first wave 5 higher, meaning that we should expect even more dramatic price increases going forward.

8 July 2008
Roy Martens
Chief Technical Analyst
Resource Fortunes LLC
Email rmartens@resourcefortunes.com (http://us.f355.mail.yahoo.com/ym/Compose?To=rmartens@resourcefortunes.com)
Web http://www.resourcefortunes.com/ (http://www.resourcefortunes.com/)
The above is an excerpt from the technical analysis portion of the monthly Resource Fortunes Premium Newsletter publication, available in its entirety for subscribers at http://www.resourcefortunes.com/ (http://www.resourcefortunes.com/). We currently offer a 30-day trial subscription (http://www.resourcefortunes.com/payment.htm) for $2.99.

[Mick100]

a good read on where we are at in the bear market

http://www.gold-eagle.com/gold_digest_08/hamilton071808.html

[Packersoldkidney]

a good read on where we are at in the bear market

http://www.gold-eagle.com/gold_digest_08/hamilton071808.html

Interesting read, Mick - he doesn't mention (as far as I can see) that calcluating ratios using earnings from the previous bull run is a fraught exercise. Obviously earnings in a booming economy are going to be more than those in ones that are busting. Buying stocks on the basis of what happened last year is obviously wrong headed - I think he is quite correct to infer that the bear market will be with us for some time and that at best indexes like the Dow will be trading sideways for some time. TBH I can't see this thing being over and done with for some years yet.

Obviously, I have an issue with him claiming that commodities will continue a bull run, but I've been over that ground before on here, so won't go back over it again.

[Huang Chung]

A most welcome jump in metals this evening. Wouldn't it be nice if we could string together gains like this for a few days or weeks :rolleyes:.

http://www.kitcometals.com/

[Mysterybox]

Nearly 25% of US fuel production shuts down

http://money.cnn.com/2008/09/12/news/economy/hurricane_ike/index.htm?source=yahoo_quote

[Huang Chung]

http://www.kitco.com/ind/dorsch/jan082009.html

[Mick100]

Gold, Silver, Oil, Copper, USD:
End of the Run or Just the Beginning?
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Roy Martens
www.resourcefortunes.com (http://www.resourcefortunes.com/)
3 June 2009
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Last Month has been a very good one for the Gold and especially the Silver community, both prices went up nicely. Silver registered its biggest monthly gain since 1987, rising by 27%.

It looks like more and more people are beginning to see the light. Although most of the gains are said to be explained by the recent fall of the dollar, this is not entirely the case. Gold is also rising in other currencies, albeit at a more modest pace. Nonetheless it is rising. The inverse relationship between the Dollar and Gold is still an important factor to keep in mind but we have to look at it with a broader perspective.
More and more institutions and Central Banks have increasingly shown interest in adding Gold to their reserves, not only as a safe haven for the falling greenback but also as a hedge against future inflation expectations. This interest will be a driving force behind the future rise of Gold in all currencies and makes it one of the safest investments for the coming decades.
As far as the "poor man's Gold" (Silver) is concerned, last month has shown the enormous potential that investing in Silver presents versus Gold. While Gold rose by almost 10% last month, Silver added 27 percent. Will Silver keep outperforming Gold? I think so, because Silver doesn't only have a correlation with Gold as a safe haven, it is also used as an industrial commodity.
Roy Martens


All charts are courtesy of Stockcharts.com (http://www.stockcharts.com/)



GOLD


http://www.gold-eagle.com/editorials_08/images/martens060309a.gif

The outlook for Gold is very promising. The breakout from the flag pattern and the possible reversed Head and Shoulders pattern paint a very rosy picture for the upcoming month.
The "only" hurdle that could spoil this positive outlook is a potential double top around the $1,000 mark. We can expect some resistance at this level because it is the last chance for the bears to launch a significant counter attack, there last line of defense so to speak.
A break to new highs will invite more investors to join the party and will thus trigger a new flow of fresh money to push Gold higher. The technical conditions are all set and ready to go. We are in for an interesting month.


SILVER


http://www.gold-eagle.com/editorials_08/images/martens060309b.gif

Like Gold, Silver performed very well last month.
The break above the resistance line at $14.50 is a very important move. It signals that a wave 3 (or at least C) is underway with a price target between $17 and $18.
The readings in the chart suggest that this breakout will have some decent follow-through with fresh buy signals in the RSI, DMI (buying power) and the MACD.
The readings from the MACD are an especially good indication that the current weekly trend is very positive. The MACD successfully retested the 0 line and bounced higher, indicating that the long correction from the high at $21 is definitely behind us.


OIL


http://www.gold-eagle.com/editorials_08/images/martens060309c.gif

Oil experienced some difficulty breaking through the resistance, now support zone, just below $60. But last week it pushed higher with a 7.5% gain.
The chart is still improving, and if Oil consolidates within the current rise we will witness an important new Long Term buy signal, a positive cross between the 17 and 34 w. MA. The last time this cross occurred (May/June 2007) it signalled the start of a huge rally, from $65 to over $140. If history is any sort of guide, oil could be in for a nice rise.
The conditions in the chart are quite similar to this last positive crossing so let's sit back and see what is in store for us these upcoming months.


USD


http://www.gold-eagle.com/editorials_08/images/martens060309d.gif

Finally the $ chart broke down. As was expected, once the $ fell below the 34 w. MA, the 82 level couldn't act as support and it was all downhill from there. This could just be the beginning of a much bigger fall. Unless the bulls can stop this decline very soon we expect the $ to breach the blue support lines with force.
The chart is turning negative at a rapid pace with sell signals in the RSI, the DMI (Selling power) and the MACD indicators. An upcoming negative crossing of the 17 with the 34 w. MA will add more negative sentiment to the picture. For reference, just look at what happened the last time we got such a crossing in April 2006!!


COPPER


http://www.gold-eagle.com/editorials_08/images/martens060309e.gif

The positive outlook for Copper remains alive, although it still has some heavy overhanging resistance to take out. The current pattern suggests that a wave 5 is still yet to being. This wave should take Copper to levels above the resistance zone, thus triggering new buy signals.
The technical implications are in favour of such a rise. They are all in perfect positions to support a powerful wave higher.

[Mick100]

This bounce in the dollar should be stopped at the 200 day MA at 83-84





http://www.gold-eagle.com/editorials_08/images/maund060709c.gif

[Hoop]

This bounce in the dollar should be stopped at the 200 day MA at 83-84

Yeah...and looking at your chart I can see a resistance line at 83 as well.

[macduffy]

A thought provoking article on why commodity prices are firming.

http://www.thebull.com.au/articles_detail.php?id=3706

[Mick100]

http://www.gold-eagle.com/editorials_08/images/maund062109c.gif

[Huang Chung]

Lead hits 90c lb, despite talk of large Chinese stockpiles (on top of the LME ones) and falling sales of 'e bikes' in China.

[macduffy]

Important news for those interested in coking coal stocks.

http://www.theaustralian.com.au/business/bhp-coal-breakthrough-as-japanese-sign-quarterly-deal/story-e6frg8zx-1225837963269

[JBmurc]

Why It’s Time to Invest in Commodities, and How to Do It

https://archive.fo/q3NXg

[denpal]

Check out @graddhybpc on Twitter, you don't need to join it to view lots of really interesting posts. He's a big commodities bull and has a great track record with long-term trends.

[JBmurc]

Check out @graddhybpc on Twitter, you don't need to join it to view lots of really interesting posts. He's a big commodities bull and has a great track record with long-term trends.

LOL already following him ... I agree

[greater fool]

https://www.smh.com.au/business/companies/critical-shortage-miners-face-talent-crunch-as-metals-demand-fires-up-20220116-p59oj7.html

"Mining companies are struggling to find workers to fill specialist roles from engineers to train drivers as COVID-19 travel restrictions between states and
a collapse in skilled migration exacerbate the industry’s labour squeeze.
While mining job numbers have swelled by almost 22,000 in the past 12 months, a shortage of specialist workers has forced companies to lower production
targets and now threatens to complicate the sector’s expansion just as the clean-energy revolution drives greater demand for a range of Australian metals.
In Western Australia, the world’s biggest iron ore and lithium-mining region, ongoing coronavirus-related border restrictions have reduced mobility of fly-in,
fly-out staff between states. At the same time, miners are having to compete harder for skilled workers amid a government-backed construction boom on the east coast.
“We expect labour market tightness and competition for skills to increase in 2022.”
Rio Tinto, the nation’s second-largest miner, last year cited “modest delays” in commissioning new greenfield mines and mine-expansion projects due to WA’s tight
labour market as the reason for trimming its full-year target for shipments of iron ore."


https://www.smh.com.au/business/companies/rio-tinto-s-iron-ore-exports-fell-in-2021-amid-labour-crunch-20220117-p59ozh.html

"Mining giant Rio Tinto has reported a drop in its yearly shipments of iron ore, the nation’s most valuable export, after a labour squeeze in Western Australia and
pandemic-related supply chain disruptions delayed the commissioning of new resources projects last year.
Rio Tinto, the top producer of the key steel-making raw material, told investors on Tuesday it had shipped 84.1 million tonnes of ore from its Pilbara operations
in the December quarter, in line with its target and analysts’ expectations, but 5 per cent lower than the same time in 2020.
The result brings Rio Tinto’s total shipments of iron ore last year to 321.6 million tonne, down 3 per cent from the year before.
Rio Tinto chief executive Jakob Stausholm said operating conditions remained “challenging” including due to prolonged pandemic-related disruptions across its
operations."

[JBmurc]

Yes and this is why I sold out of the likes of OBM and haven’t been investing much in start up miners in Aus (outside WWI but as located in SA close to major city shouldn’t be as bad )

risks around securing staff and retaining with skills I understand nightmare in Aus esp...

When it comes to producers I’m liking the O&G sector CUE kicking on today should yet again report a great revenue for DEC Qty

[arekaywhy]

Nice bump to coal miners in Oz. Makes me wonder how long it'll go for.

Also, I note that there are noises from other countries in EU for Oz coal. Good times ahead?

[JBmurc]

https://www.mining.com/web/commodities-in-perfect-storm-says-erg-as-crisis-starts-super-cycle/

Sobokta believes a fossil fuel resurgence is temporary, and the transition to a lower carbon economy “cannot be stopped,” which will require a projected $50 trillion in the next three decades.

“Anything between $200-$300 billion in investment per year will be required for the mining industry to satisfy demand for the energy transition,” he said, with much of this invested into the mining of copper, nickel, cobalt and other metals.

In an environment of high prices and supply chain pressures, Sobokta expects companies and countries to stockpile strategic raw materials, including oil, copper, cobalt and other metals.

“If you get small supply disruptions, you are going to see big swings in prices,” Sobokta said, adding that he expected to see an impact in the second half of 2022.

[JBmurc]

Commodities setting up too boom higher


https://twitter.com/MrBreakouts/status/1547866498760183808?s=20&t=1qYEkbnc0zIdug2Fy18hmg

[JBmurc]

Japan signs highest ever coal supply deal ever!!
https://oilprice.com/Latest-Energy-News/World-News/Japan-Signs-Its-Most-Expensive-Coal-Supply-Deal-Ever.amp.html

Been buying into the smashed AHQ of late 11.5c ...high risk ...but with markets trending north + higher coal prices = bounce in the SP I hope

[Ferg]

Been buying into the smashed AHQ of late 11.5c ...high risk ...but with markets trending north + higher coal prices = bounce in the SP I hope
What was the trigger for the recent sell off?

[JBmurc]

What was the trigger for the recent sell off?

Looks like the company was under-capitalised and unable to fund the equipment and works needed to properly operate its current mines and had some staffing issues ..

Strategic Review
The Company has been unable to successfully ramp up production to previous expectations at its two
operating mines. In addition, the Company has been unable to secure medium term equipment financing at
both Black Warrior and New Elk, which has driven lower than expected performance. In light of the lack of
available financing, the Company is considering different capital initiatives to fund equipment acquisition and
upgrades at both mines.
Legacy coal sales contracts at New Elk, coupled with production constraints, staffing issues and poor logistics
performance in transporting coal to port, have meant that the mine is running at an operating cash flow loss
which has significantly constrained cash flows.
It is currently unclear if Black Warrior or New Elk have the capability to meet, within a material margin,
previously advised target production rates. As such the Board has made the decision to commence a strategic
review. The outcome of the strategic review is expected before the end of August 2022.

[JBmurc]

Looks like the company was under-capitalised and unable to fund the equipment and works needed to properly operate its current mines and had some staffing issues ..

Strategic Review
The Company has been unable to successfully ramp up production to previous expectations at its two
operating mines. In addition, the Company has been unable to secure medium term equipment financing at
both Black Warrior and New Elk, which has driven lower than expected performance. In light of the lack of
available financing, the Company is considering different capital initiatives to fund equipment acquisition and
upgrades at both mines.
Legacy coal sales contracts at New Elk, coupled with production constraints, staffing issues and poor logistics
performance in transporting coal to port, have meant that the mine is running at an operating cash flow loss
which has significantly constrained cash flows.
It is currently unclear if Black Warrior or New Elk have the capability to meet, within a material margin,
previously advised target production rates. As such the Board has made the decision to commence a strategic
review. The outcome of the strategic review is expected before the end of August 2022.


After this ann... AHQ dropped from 56c to 18c ...now 11.5c

Personally I think Coal prices will keep high for sometime and AHQ will get through these issues ... HIGH risk HIGH return..

https://www.iea.org/news/global-coal-demand-is-set-to-return-to-its-all-time-high-in-2022

https://www.bloomberg.com/news/articles/2022-07-18/russia-ban-seen-tightening-coal-market-that-s-already-surging

[Ferg]

Thanks for the reply JBMurc. Not for the faint hearted then.....as you say high risk, high reward.

[JBmurc]

Thanks for the reply JBMurc. Not for the faint hearted then.....as you say high risk, high reward.

Yes its one trade I'm keeping a very close eye on ...latest Analyst report. 32c target.. I think AHQ has many options maybe even selling off a project ..raising capital ..
Good developments And I'd certainly be doubling my position ...

Allegiance Coal Limited (AHQ) - Pending strategic review Production and operating costs continue to lag budgeted figures and AHQ has commenced a Strategic Review, expected to be completed in August. To provide interim funding, AHQ has established a A$5M facility with Regal Funds Management. This facility provides breathing room whilst new mine plans are established.

Pending increased certainty post the review, we have significantly reduced our assumed ramp-up at New Elk. Despite this, value is still apparent, primarily at Black Warrior, and we back the new MD to deliver an achievable plan. Maintain Buy, TP reduced to A$0.32/share (prev. A$1.22/sh).Another quarterly missWhile volumes are trending in the right direction, AHQ delivered another big quarterly miss in Jun.Q’22 (Fig. 1).Critically, we did not see the scale of improved production that was needed.

Pending the outcome of the Strategic Review, we have reduced our ultimate scale to 0.3mtpa (sales) at New Elk and 0.5mtpa (sales) at Black Warrior, with development of Short Creek deferred to FY25 (from FY23).A lost year, multiple issues now impacting AHQMultiple issues are affecting both production and sales, with staffing, underground roof conditions, equipment availability/reliability, and lack of equipment finance all impacting production rates, and staffing issues within the rail provider impacting exports.

With thermal coal now achieving record prices, the company is looking to supply into the highly priced ARA Rotterdam thermal market. US High Vol Met is well suited to thermal coal replacement.As a result, recently appointed Non-Executive Chairman, Paul Vining, has resigned to avoid strategic conflict with Westmoreland where he is Chairman.Pending review outcome, we assume nominal debtCommentary in the quarterly suggests capital expenditure is required at New Elk, on existing continuous miners, and at Black Warrior on additional mining equipment.

Additional funding will be required to replace equipment finance facilities that AHQ has been unsuccessful in obtaining, to sustain planned production rates at Black Warrior.With delayed ramp up, and a concomitant delay in materially lower operating costs, we see additional funding being required; we assume A$5M debt in FY23.Key Dates AheadAugust 2022 - completion of Strategic Review.September 2022 – FY22 Annual Report.

[JBmurc]

Goldman's Currie Says Commodities Will Surge in 2023

https://www.youtube.com/watch?v=RIG2G--9fV0


I agree and am positioned in what I believe will be continued hot commodities - Graphite,Lithium,Copper,REE ...new tech minerals etc ...and of course the ever expanding demand for energy because of the tech driven economy's ...so Oil,Gas,Coal,U308 etc

[blackcap]

Goldman's Currie Says Commodities Will Surge in 2023

https://www.youtube.com/watch?v=RIG2G--9fV0


I agree and am positioned in what I believe will be continued hot commodities - Graphite,Lithium,Copper,REE ...new tech minerals etc ...and of course the ever expanding demand for energy because of the tech driven economy's ...so Oil,Gas,Coal,U308 etc

I too have been topping up on oil, gas and coal the last 2 years. We are getting these stocks ever so cheap at the moment because of the ESG nonsense that pervades the markets. Get in while you can, it is going to be an exceptional long term play.

[JBmurc]

I too have been topping up on oil, gas and coal the last 2 years. We are getting these stocks ever so cheap at the moment because of the ESG nonsense that pervades the markets. Get in while you can, it is going to be an exceptional long term play.

yes I feel when people are freezing in their homes and investors are hunting for yields in a high interest rate environment high returns from commodities producers of the likes of O&G Coal etc are going be the go to Vs the low return investment of the solar/windmill crew

[JBmurc]

The IEA Pathway to a low carbon future
forecasts that the world will be making more steel using coking coal in 2050 than it is today and
that this is unavoidable. The transition to a low carbon future has to be managed thoughtfully
and carefully to avoid shortages of old energy sources until the world has actually transitioned
to new sources. There is no evidence that any country is exercising that care, so the next
decade is likely to see critical shortages of steel and energy driven by under investment in coal,
meaning above expectation prices and super normal profits for companies

[JBmurc]

Bad days like we see in the resources sector of late I like to watch Rick rule and his common sense


https://www.youtube.com/watch?v=TAnLvDxdA-s&t=2032s

[nztx]

Some interesting deep value being exposed after the recent slide, for those who know where
it is buried ..

[Valuegrowth]

Some postive news for consumers. Commodity prices are going to drop further. One of the main reasons for high inflatioin worldwide is historically high commodity prices.

https://www.agupdate.com/farmandranchguide/news/state-and-regional/commodity-prices-expected-to-drift-lower-heading-into-summer-months/article_dc4cb06c-bd0d-11ed-a1f0-eb2e95e412c5.html

[Valuegrowth]

https://www.barrons.com/articles/oil-price-per-barrel-opec-economy-5b1df0af


OIL (https://www.barrons.com/topics/oil?mod=article_flashline)

Oil Prices Tumble. Worst Case Could Be $40 a Barrel.

[Valuegrowth]

Natural Gas

https://www.eia.gov/dnav/ng/hist/rngwhhdm.htm (https://www.eia.gov/dnav/ng/hist/rngwhhdm.htm)

[Valuegrowth]

Grain futures prices

https://www.barchart.com/futures/grains

[Valuegrowth]

Iron Ore
ps://www.hellenicshippingnews.com/iron-ore-extends-losses-on-concerns-over-china-demand-prospects/

[Valuegrowth]

https://www.miragenews.com/commodity-prices-to-see-steepest-fall-since-995064/

[nztx]

An interesting article on developments in CATL's Electric Batteries -

https://www.abc.net.au/news/science/2023-05-03/catl-announces-battery-to-make-electric-aviation-possible/102289310

CATL unveils battery that may power electric airplanes and 1000km-range EVs

[Valuegrowth]

https://www.youtube.com/watch?v=rTawvzH0MQ4

[Valuegrowth]

https://www.youtube.com/watch?v=DK7MjajHMAY

[SBQ]

@Valuegrowth:

The real problem with Toyota as Sandy Munro (EV specialist and critic) is they've missed the boat. Here's a quick chart on what Covid did to these auto makers:

https://i.imgur.com/dwyKj51.jpg

BTW, that Toyota YouTube video did not answer the basic question why Toyota is struggling to make EVs so as an excuse, they say "EV'S Not The Answer" as a cop out to losing their market share. Don't believe Toyota is losing their customers? Here's a news release last week:


The latest report from used car retailer CarMax (https://www.carmax.com/articles/rising-consumer-interest-in-electric-vehicles) says that search volume for EVs has doubled in the last year, spurred on by higher gas prices (https://jalopnik.com/news/gas-price-watch) throughout the country. More car shoppers are now seeing these searches through to the purchase of a used EV, trading in their ICE-equipped cars in the process. And according to CarMax (https://www.carmax.com/articles/rising-consumer-interest-in-electric-vehicles), Toyotas (https://jalopnik.com/toyota-wants-you-to-think-of-phevs-as-practical-electri-1850374407) are the “most traded in brand for EVs,” which is telling for the Japanese automaker that has been more reluctant than most (https://jalopnik.com/how-did-toyota-end-up-so-far-behind-on-electric-vehicle-1850013131) to transition to fully-electric cars.

https://jalopnik.com/toyota-owners-trade-cars-for-evs-more-than-other-brands-1850386992

I don't know about you but I sure wouldn't want to be a Toyota shareholder. Not when you have a decarbonisation plan set by the Paris Accord with commitments from all the major OECD nations.

[JBmurc]

https://www.youtube.com/watch?v=DK7MjajHMAY

Toyota aren't stupid,,,, Toyota pioneered the hybrid EV...I think they are a few steps ahead of many of these pure EV player outlooks... this will come to light later in the decade IMHO

[Valuegrowth]

We can clearly see sell-off in commodities and commodity stocks world wide.

https://www.reuters.com/world/americas/tsx-futures-down-crude-prices-us-debt-deal-woes-weigh-2023-05-30/

[Valuegrowth]

https://www.foodbusinessnews.net/articles/7-progressing-harvest-pulls-wheat-futures-to-four-month-lows

[Joshuatree]

We can clearly see sell-off in commodities and commodity stocks world wide.

https://www.reuters.com/world/americas/tsx-futures-down-crude-prices-us-debt-deal-woes-weigh-2023-05-30/

I'm thinking longer term and a long tail as traditional energy needed for green energy/tech transformation. Arabs further reduction in oil output also underpins the oil price.

[Valuegrowth]

https://www.cmcmarkets.com/en-nz/news-and-analysis/downward-paths-likely-for-crude-oil-and-gold

[Valuegrowth]

https://www.cgiar.org/news-events/news/commodity-crash-signals-disinflation-is-taking-hold-for-now-bloomberg/

"From copper to wheat to natural gas, the cost of some of the world’s most important products is crashing, bringing long-awaited relief for consumers that were stung by last year’s soaring prices,” reports Bloomberg (https://www.bloomberg.com/news/articles/2023-05-31/commodity-crash-signals-disinflation-is-taking-hold-for-now#xj4y7vzkg)."

[JBmurc]

https://www.cgiar.org/news-events/news/commodity-crash-signals-disinflation-is-taking-hold-for-now-bloomberg/

"From copper to wheat to natural gas, the cost of some of the world’s most important products is crashing, bringing long-awaited relief for consumers that were stung by last year’s soaring prices,” reports Bloomberg (https://www.bloomberg.com/news/articles/2023-05-31/commodity-crash-signals-disinflation-is-taking-hold-for-now#xj4y7vzkg)."

I don't think these low commodities will last much longer ... reality is we aren't seeing anywhere near the investment from miners to even keep at present demands let alone the massive increase predicted ... the smart investors will be positioning for that fact with 1Yr+ outlook

[Daytr]

I don't think these low commodities will last much longer ... reality is we aren't seeing anywhere near the investment from miners to even keep at present demands let alone the massive increase predicted ... the smart investors will be positioning for that fact with 1Yr+ outlook

Commodities are up against a stronger dollar driven by higher interest rates. But I agree cam only last so long and good particularly has held up well considering.

[Joshuatree]

I don't think these low commodities will last much longer ... reality is we aren't seeing anywhere near the investment from miners to even keep at present demands let alone the massive increase predicted ... the smart investors will be positioning for that fact with 1Yr+ outlook
One brickbat I think is the building apartment (investment)boom in China is over for some time or maybe will never reach new peaks again with the uncountable number of empty unsellable? Buildings around.

[JBmurc]

One brickbat I think is the building apartment (investment)boom in China is over for some time or maybe will never reach new peaks again with the uncountable number of empty unsellable? Buildings around.

Yes of course the insane apartment blocks in the 90+ Chinese cities will slow down ... but so it did in the USA decades ago and yet they still have the highest consumption of resources per person ....

Material consumption footprint per capita in high-income countries is 60% higher than in upper-middle-income countries and more than 13 times the level of low-income countries.,....

CHINA is moving to a much higher income country as is INDIA ...AFRICA etc ...

[audiav]

I’d never heard of hydrogen (or helium) mining until I read this article on CNN.
https://edition.cnn.com/2023/10/29/climate/white-hydrogen-fossil-fuels-climate/index.html

One of the companies mentioned, Gold Hydrogen on the ASX has just come out of a trading halt and jumped a wee bit. guessing based on the exposure they received.

Interesting area, anyone know of other companies doing similar?

[audiav]

One of the companies mentioned, Gold Hydrogen on the ASX has just come out of a trading halt and jumped a wee bit. guessing based on the exposure they received.

Interesting area, anyone know of other companies doing similar?

Looking a little more into this. ASX has listed Buru Energy BRU an oil and gas company with an offshoot 2HResources also exploring for natural hydrogen and helium.

Only looking at explorers of natural hydrogen atm.

Disclosure: hold super small amount of GHY

[audiav]

Disclosure: hold super small amount of GHY
Over the last week or so GHY Price has jumped to just under 1 buck. Quick institutional cap raise at 75 cents after discovering reasonable amounts of hydrogen and helium. Slow burner this one I think.

The crowd at hotcopper got quite excited…..for a few days.

[Valuegrowth]

Demand for commodities appears weak.I began re-balancing my portfolio gradually to benefit from falling commodity prices when commodity sector was hot.

[kiora]

"Potentially life-changing greenfields exploration still drawing investors hungry for the next big one"
https://www.livewiremarkets.com/wires/potentially-life-changing-greenfields-exploration-still-drawing-investors-hungry-for-the-next-big-one?utm_medium=email&utm_campaign=Trending%20on%20Livewire%20-%20Tuesday%206%20February%202024&utm_content=Trending%20on%20Livewire%20-%20Tuesday%206%20February%202024+CID_52badf058b956 f09c527c97aa96f89d7&utm_source=campaign%20monitor&utm_term=RISING%20STARS