The biggest bull market in history
Zapata George
http://www.financialsense.com/editor...2006/0306.html
.
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The biggest bull market in history
Zapata George
http://www.financialsense.com/editor...2006/0306.html
.
I hear today that China are talking about putting a cap on the price that they pay for Australian Iron,etc. A few of the big companies,BHP and alike were down today due to this news.
What does everyone recon, would they go through with it? Or is it a bluff? China would be screwed without it wouldn't they, stadiums to build for olypics,etc
What you think Mick
I doubt weather many people will be taking the chinese talk very seriously. They tried manipulating the copper price on the LME late last yr and ended up having to cover a huge short position after trying to talk the price down. They had even indicated that they were going to deliver 200000 tons of copper onto the LME, out of their own inventories, to cover this short position but they never did. They knew, like the other players, that they would have to buy it all back again. When it comes to dealing in free markets the chinese almost appear a bit clueless sometimes.Quote:
quote:Originally posted by moe
I hear today that China are talking about putting a cap on the price that they pay for Australian Iron,etc. A few of the big companies,BHP and alike were down today due to this news.
What does everyone recon, would they go through with it? Or is it a bluff? China would be screwed without it wouldn't they, stadiums to build for olypics,etc
What you think Mick
During the 80's and 90's (the commodities bear market) supply was geater than demand and buyers of resources set the price - times have changed. What the chinese seem to have a problem realising is that they can't set the price while demand is outstripping supply - it's a sellers market. Demand is increasing all over the world, not just in china. The chinese will have to pay for the resourses that they import just like every other country.
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The Chinese Govt is in la la land if they think they'll succeed on this one. You are right Mick, they need to get a crash course on market dynamics. Where does it end? Next they'll try to put a $40 cap on imported oil.
SEC
THE PEBBLE BED MODULAR REACTOR
Cheaper, Safer and Almost Carbon Free
by Kevin McKern
March 8, 2006
Accepting both the peak oil hypothesis and that climate change is real raises questions about the future of nuclear power; its cost, safety and full cycle greenhouse impact. Additionally, as an Australian reader objected to my last item "Nuclear Energy Back in the Mainstream" because I recommended Uranium miners as an investment I feel its important to place my understanding of the facts on the record.
Nuclear reactors generate energy from fission. An atom of uranium splits into two, releasing energy plus two neutrons; and if either of those neutrons hits another uranium atom it can cause that atom to split, which releases more energy and another pair of neutrons, a chain reaction. Most nuclear power today is produced by large PWRs.
According to a 2005 IAEA report, Chernobyl caused 56 direct deaths; 47 accident workers and 9 children who died of thyroid cancer. Additionally it was estimated that as many as 4,000 people may ultimately die from long term accident-related illnesses. Greenpeace, amongst others, dispute that study's conclusions and presume the toll was higher.
Whatever the true toll of the Chernobyl accident, even conceding a worst case scenario, what most characterises the contribution of civilian nuclear power to world energy production is its relative safety compared to all other means of energy production.
In terms of direct deaths per terawatt produced since 1972, Coal killed 342, Hydro 883 and natural gas 85, but only 8 fatalities were recorded per terawatt of nuclear power.(1) In fact, this statistic vastly underestimates the relative hazards of fossil fuels as the indirect deaths from pollution caused by Coal powered stations worldwide is estimated at over 5 million per year.
A 1000 MW(e) coal plant, depending on sulphur content, sends annually millions of tons of Carbon dioxide, 44 000 tonnes of sulphur oxides and 22 000 tonnes of nitrous oxides into the atmosphere causing acid rain and poor human health. Additionally, there are 320 000 tonnes of ash containing 400 tonnes of heavy metals for which abatement procedures themselves produce as much as 500 000 additional tonnes of solid waste that must be disposed of.
If the potential future climate change impact of the billions of tons of carbon emitted yearly from conventional power plants is taken into consideration, the death toll of say, heat waves in Europe or drought in Africa may, sooner or later, need to be added to the already massive indirect costs of conventional power.
Reactor Types
In a Pressurised Water Reactor (PWR), the fuel (ceramic pellets) is packed into fuel rods. Fission heats water to a temperature of about 320 C and via a heat exchanger this heat generates steam that drives turbines in another loop.
The coolant water also serves to slow the neutrons down, allowing them to be absorbed by other uranium atoms, that is, the water acts as the moderator.
PWRs were built based on experience gained building reactors for submarines, where a high power density was required and in theory, if the coolant is lost the chain reaction stops. In practice heat from short lived decay products keep the core hot. A large PWR can produce so much power that without coolant flow the reactor can be damaged and it is this high power density that demands a massive containment structure and safety systems and personnel.
A Pebble Bed Modular Reactor (PBMR) has thousands of pebbles rather than fuel rods. About the size of billiard balls, each micro sphere has a core of enriched uranium, about half a millimetre across, surrounded by three layers, pyrolytic carbon, silicon carbide and graphite. Pebbles are added to the top of the reactor and taken from the bottom. The fuel pebbles removed are inspected and replaced and otherwise returned to the reactor. You do not need to shut the reactor down to refuel, unlike a PWR.
Helium is used as the coolant, entering the core at 482 C and leaving at 900 C. The high temperature of th
Two market commentators who I hold in high regard (Marc Faber & Richard Russell) are calling a downturn in the markets - across the board - including commodities
Faber;
http://www.financialsense.com/editor...2006/0308.html
Russell;
http://www.theaureport.com/cs/user/p...view&id=101256
,
Base Metal technicals
Adam Hamilton
(a good read as usual)
http://www.gold-eagle.com/gold_diges...ton031006.html
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I'm on the same page as you GB
I'v been compiling a shopping list and building up available funds over the past couple of months
It's looking like things are going to fall into place and as you say I wouldn't be surprised to see alot of the juniors get clobbered over the next few months.
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Good stuff Mick-the following is not addressed to anyone in particular- just a late night rant
i have to add that the Chinese can easily succeed in their endeavour to cap the price of steel or whatever commodity they name - if they are unprepared to pay a higher price they will not buy and the seller will have to sell at the rate required or not sell at all- when your biggest customer says jump its normally how high ( think Walmart) (Warehouse)i have read reports that the property market has already started to fall in China - i also disagree with the premise that they will have an ever increasing demand -the premise of China having an ever increasing demand for raw materials is based upon the belief that the buyer of their goods will have an ever incrasing appetite -if as i believe we are about to go into a world wide recession starting in 07 - who will buy their goods in the quantities that we have seen in recent times - they have been around for 2000 years we did not hear from them 10 years ago they were not even on the map- it could well be that they will go quiet for a number of years -to add i wouldnt be surprised to see a new Smoot Hawley tarrif -ala 1930 - the States economy is 2/3 domestic America has enjoyed the relationship of importing deflation and swapping defaltionary items for worthless paper which has helped keep inflation low - two ways
1, importing deflation-
2,by printing more treasuries it has had the affect of flooding the bond market depressing yields- there could come a time soon when both parties think this current relationship stinks-China might want to swap US treasuries for something more tangible and the States may have to politically protect what little maufacturing base they have through protectonism-also they may feel they need to increase inflation after the deflation by reversing the current agreement- China cannot continue the growth rates they have had if suger daddy takes away the punchbowl
as an aside the banking system in China is inherently corrupt and some say terminally flawed- a slow down could well have a dramtic affect on their economy - all hype and no substance-i dont see the approx 900 billion in treasuries being spread among anybody but the communist party and their cronies-sadly the bmw driver might have to go back to the rickshaw for a while
The FED kicks off the next reccessionQuote:
quote:Originally posted by GB
Good stuff Mick-the following is not addressed to anyone in particular- just a late night rant
i have to add that the Chinese can easily succeed in their endeavour to cap the price of steel or whatever commodity they name - if they are unprepared to pay a higher price they will not buy and the seller will have to sell at the rate required or not sell at all- when your biggest customer says jump its normally how high ( think Walmart) (Warehouse)i have read reports that the property market has already started to fall in China - i also disagree with the premise that they will have an ever increasing demand -the premise of China having an ever increasing demand for raw materials is based upon the belief that the buyer of their goods will have an ever incrasing appetite -if as i believe we are about to go into a world wide recession starting in 07 - who will buy their goods in the quantities that we have seen in recent times - they have been around for 2000 years we did not hear from them 10 years ago they were not even on the map- it could well be that they will go quiet for a number of years -to add i wouldnt be surprised to see a new Smoot Hawley tarrif -ala 1930 - the States economy is 2/3 domestic America has enjoyed the relationship of importing deflation and swapping defaltionary items for worthless paper which has helped keep inflation low - two ways
http://www.financialsense.com/fsu/ed...2006/0311.html
GB, I think that the US is headed for a reccession but that dosen't mean that there will be a world reccession. The business cycles of the European countries, excluding the UK, tend to track the German economy, not the US. Japans business cycles certainly don't track those of the US. The european economies and Japan are looking stronger than they did a year ago. My point is that demand for chinese production comes from the whole world , not just the US.
You also have to consider the increased demand coming from within china itself for chinese produced goods. China has a middle class of around 200 million I think
Alot of the demand for commodities in china comes from the developement of infastructure carried out by the govt. I can't see this developement stopping just because there is a reccession in the US. The chinese govt. would risk civil unrest if they stopped the industrialisation of china - it's not an option for them.
Walmart and Wharehouse can always find another supplier if current suppliers don't give in to their demands. China has not got that option when it comes to securing supplies of raw materials that they need. They either pay the world price or drastically reduce the amounts that they are using and I can't see the latter happenning
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We disagree on the above but thats all good - discussion is the key and i know we both agree on the gold deal- good stuff cheers Mick -GB
There's alot of talk going around at the moment about oil dropping to the mid 50's
The daily oil chart is displaying a near perfect H&S pattern which is a trend reversal pattern for the TA people.
I'd just like to point out that, from my amiture point of view, this trend reversal formation is not complete until the price action breaks below the neckline which hasn't happened yet.
http://www.freecharts.com/Commoditie...chart&sym=CLJ6
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Asia
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Uranium May Lead Rally in Metals on Revival in Nuclear Power
March 13 (Bloomberg) -- Nuclear energy's revival can best be seen in uranium, which outperformed the metals markets in 2005 and may do so again this year.
Uranium is poised to climb 27 percent to $50 a pound in the next six months because ``there's not a lot of uranium available,'' said Jean-Francois Tardif, who put 8.4 percent of his C$300 million ($259 million) Sprott Opportunities Hedge Fund LP into uranium. The Toronto-based fund jumped 39 percent in 2005, when its peers on average returned 9.3 percent, according to Hedge Fund Research Inc. of Chicago.
Wellington Management Co. of Boston, which oversees $521 billion, in the fourth quarter raised its stake in Saskatoon, Saskatchewan-based Cameco Corp., the largest uranium producer. The fund holds 13.6 percent of Cameco worth C$2 billion, according to Bloomberg data. The Anglican Church in Sydney took uranium off a list of unethical investments last year, and its funds benefited from a 23 percent gain in BHP Billiton, the No. 4 uranium miner.
Uranium last year gained 76 percent, beating all but one of the 19 commodities in the Reuters/Jefferies CRB Index. Only sugar jumped more.
Not even zinc, the favorite this year among commodity specialists surveyed by Bloomberg News in January, will keep pace with uranium. Analysts surveyed then said zinc would offer the best return from the six primary London Metal Exchange markets, advancing 21 percent.
Nuclear Comeback
Just 60 percent of the uranium consumed in the world's nuclear reactors is mined each year. Without supplies from stockpiles and recycled from Russian warheads, the energy industry wouldn't have enough uranium to keep all of its plants running.
Demand for nuclear power is increasing in China and India because of rising prices for oil, gas and coal. Finland is building a new reactor, and utilities in France and the U.S. are considering additions. Concern that the burning of fossil fuels contributes to global warming is accelerating the push.
Bob Mitchell, the manager of a hedge fund that invests in wholesale uranium, is so bullish that he turned down offers from mining companies to buy his entire inventory. He wouldn't identify the companies or give details on his holdings.
``I remain a buyer of uranium,'' said Mitchell, 52, of Adit Capital Management LP in Portland, Oregon. Mitchell said he began buying uranium in November 2004 at $20 a pound amid reports that some power companies were moving to replenish their inventories. Uranium ended last week at $39.25 a pound, according to Metal Bulletin.
Speculators ``have taken out whatever slack exists in the market,'' said James Cornell, president of RWE Nukem Inc., a trader of uranium and unit of RWE AG of Essen, Germany's second- largest utility. Investors are ``getting to available supplies of uranium before the utilities.''
`A Rebirth'
After three decades of stagnation, the nuclear industry may receive more than $200 billion of investment by 2030, according to the International Energy Agency in Paris. As well as the 24 reactors now being built, another 41, with a capacity of almost 43,000 megawatts, have been ordered or are planned, according to the World Nuclear Association in London.
About a ton of uranium fuel is used every two weeks to supply a 1,000-megawatt power station, according to Australia's Uranium Information Center. About nine tons of uranium oxide would be needed to make the fuel.
``The nuclear industry is currently undergoing a rebirth,'' said Paul Gray, an analyst at Goldman Sachs in London. ``The uranium market will remain tight for at least the next three years.''
Gray was among the Goldman Sachs analysts who at the start of last year correctly predicted uranium prices would extend their advance.
Mining Turnaround
Uranium's surge has revived interest in mining, threatening to end the rally.
London-based Rio Tinto, the worl
Asia
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China Curbs Iron Imports as Suppliers Increase Prices (Update1)
March 14 (Bloomberg) -- China, the world's biggest steelmaker, said it has curbed iron ore imports because price increases by suppliers have damaged ``long-term cooperation.''
``Temporary technical measures'' against imports of the steelmaking material have achieved the ``expected effect,'' the Ministry of Commerce said in a statement on its Web site last night. It didn't say when or how it had limited iron ore imports.
Chinese steelmakers including Baosteel Group Corp. are now locked in annual talks over iron ore prices after they rose to a record last year, eroding profits. Mining companies including Cia. Vale do Rio Doce, BHP Billiton and Rio Tinto Group want further price increases this year as demand soars in China, the world's fastest-growing major economy.
``The Chinese are proving a formidable force,'' Alfred Wong, who helps manage $15 billion at UOB Asset Management including resources stocks, said in Singapore. ``They're trying to bring down prices, but it's too early to say if they will succeed. The producers are saying prices should be set by the market.''
Vale, BHP and Rio Tinto account for about three quarters of seaborne iron ore trade, and the prices they set with steelmakers become the global benchmark. Prices jumped 71.5 percent last year because of rising demand from Chinese steelmakers. Suppliers are seeking another increase.
Kumba Resources
Kumba Resources Ltd., the world's No. 4 iron ore producer, has said prices may rise by another 10 percent as global demand outpaces supply. Baosteel, China's largest steelmaker, is leading the nation's 16 biggest producers in talks with mining companies. Baosteel said March 7 it ``definitely won't agree'' to demands to increase prices.
``The Chinese are saying we won't give in without a fight, and they don't want to back down,'' Rob Clifford, an analyst at ABN Amro Holding NV., said in Melbourne.
China probably capped prices during annual talks between miners and steelmakers, traders including Panzhihua Iron & Steel Group's Wang Chaoyun said March 7. China imposed a ceiling on iron ore prices at about $54 a metric ton for imports from Australia and $70 for those from Brazil, including freight charges, traders said.
``China has imposed import restrictions because some foreign suppliers, participating in the contract negotiations, are selling in the cash market at high prices,'' the ministry said in the statement. ``Their behavior has ruined long-term cooperation between the two sides.''
Smaller Steelmakers
China will also bar the supply of iron ore to smaller steelmakers, which typically buy most of their ore on the spot market and are blamed for being the industry's worst polluters, the ministry said.
Australia's government called China's ambassador to a meeting in Canberra on March 9 to protest the nation's cap on import prices. The Department of Foreign Affairs and Trade asked China's Ambassador Fu Ying to remove any price cap, a department spokeswoman said.
Ian Head, a Melbourne-based spokesman for Rio Tinto, the world's second-largest iron ore exporter, declined to comment. Rio Tinto and partners exported 67 million tons of iron ore to China in 2005, with the country accounting for 47 percent of the company's total exports of the material.
To contact the reporters for this story:
Helen Yuan in Shanghai at hyuan@bloomberg.net;
Tan Hwee Ann in Sydney at hatan@bloomberg.net
Last Updated: March 14, 2006 00:15 EST
Good stuff here Mick and GB .... even though sec seems to be the only other person joining in the discussion
I don't tune in to this thread much W69 - too much idolising of gold for my liking.
Still reckon the easist money from resources is to invest in the construction/consulting/equipment companies servicing the sector, eg WorleyParsons up 40% in a month.
I did like the article about coal gasification. It shows that the technology is economically viable at current oil prices. Coal has a very bright future if sequestration proves effective - oil (out of the ground) and uranium look likely to run out within 50 years.
SEC
Doubled since October, Sec.Quote:
quote:Originally posted by SEC
I don't tune in to this thread much W69 - too much idolising of gold for my liking.
Still reckon the easist money from resources is to invest in the construction/consulting/equipment companies servicing the sector, eg WorleyParsons up 40% in a month.
Echo the sentiments of Winner69 about this thread.
A few of the iron hopefuls will come off a bit in price you'd think....got my evil on on RHI.
My style is to look at the miners (not the explorers - too much risk for my liking, sorry Mr Kidney) so have my eye on PMM and MGX. PMM has dropped nearly 1/3 since early Feb and I'm getting very interested (despite its illiquidity).Quote:
quote:Originally posted by Packersoldkidney
A few of the iron hopefuls will come off a bit in price you'd think....got my evil on on RHI.
SEC
Whatever makes you money, SEC....PMM look as if it might tumble a bit further yet; problem is, as you say, getting your hands on a decent sized stake at a low price.Quote:
quote:Originally posted by SEC
My style is to look at the miners (not the explorers - too much risk for my liking, sorry Mr Kidney) so have my eye on PMM and MGX. PMM has dropped nearly 1/3 since early Feb and I'm getting very interested (despite its illiquidity).Quote:
quote:Originally posted by Packersoldkidney
A few of the iron hopefuls will come off a bit in price you'd think....got my evil on on RHI.
SEC
AP
China Says It Will Protect Steel Makers
Wednesday March 15, 5:53 am ET
China Says It Will Protect Steel Makers if Rising Iron Prices Are Deemed 'Unreasonable'
BEIJING (AP) -- China's government on Wednesday expressed concern at soaring iron prices and warned that it would take unspecified measures to protect its steel makers if talks with foreign suppliers of iron ore fail to produce reasonable prices.
China's iron ore imports from Australia, Brazil and other producers have risen 37 percent over the past year amid high demand for steel for manufacturing and building.
Prices have jumped 71.5 percent during the same period.
"The government will pay close attention to iron ore price talks and take necessary measures if prices are unacceptable and unreasonable," the Ministry of Commerce said in a statement on the government's main Web site.
Chinese buyers are in the midst of price talks with leading suppliers BHP Billiton Ltd. and Rio Tinto Group of Australia and Brazil's Companhia Vale do Rio Doce.
The Commerce Ministry didn't say what it might do. But the official newspaper China Business News said Wednesday that Beijing was considering reducing the number of companies licensed to import iron ore in order to tighten its control over the market.
In Australia, Resources Minister Ian Macfarlane earlier expressed alarm at reports that China was considering trying to cap prices of iron ore imports.
"There is no place for price caps in a commercial market," Macfarlane said.
China imported 51.5 metric tons of iron ore in January and February, according to Customs data released Wednesday.
So do China hold enough weight to cap the price?
If they say "we are not paying any more than $x for iron" what will these companies do?
Is it a matter of who will call whose bluff first?
Sell into the spot market.Quote:
quote:Originally posted by moe
If they say "we are not paying any more than $x for iron" what will these companies do?
China have 45% of the market I think.....since its a 'fixed' price, all China have to do is act tough until contract negotiations cease and they get the price they want. You'd find if the BHP's and the Rio's ganged up together, China would have no leg to stand on...my bet is that is exactly what will happen. The price will be much closer to what the miner's want than what China wants. China has to have that iron....the miners know it.Quote:
quote:Originally posted by moe
So do China hold enough weight to cap the price?
If they say "we are not paying any more than $x for iron" what will these companies do?
Is it a matter of who will call whose bluff first?
It sounds as though the chinese govt is going to shut down the smaller independent steel makers who they blame for buying iron ore on the spot market and driving up prices. This would cut back aggregate demand in the short run but it will mean that china will have less steel in the long run. I understand they hold a couple of months supply in inventories so they may be able to play thier games for a while but in the long run they need the iron ore and will have to pay up. I agree with you packers
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China will have to come to the table; command economies like China's require 'fixed' amounts of materials so they can work. If the big boys just say "no iron for you unless its at this price", I doubt there is much China could do about it. I guess we'll see.Quote:
quote:Originally posted by Mick100
It sounds as though the chinese govt is going to shut down the smaller independent steel makers who they blame for buying iron ore on the spot market and driving up prices. This would cut back aggregate demand in the short run but it will mean that china will have less steel in the long run. I understand they hold a couple of months supply in inventories so they may be able to play thier games for a while but in the long run they need the iron ore and will have to pay up. I agree with you packers
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Long term outlook for oil demand
http://www.financialsense.com/fsu/ed...2006/0318.html
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Hi Mick, 1,000 barrels/second. That is a very catchy [8D] number.
A shrine where all gold bugs on this site can make their pilgrimmage:
Theme park that glitters
Beijing
March 19, 2006 - 6:01PM
Gold-hungry China plans to open what it has billed the world's first theme park dedicated entirely to the precious metal, state media reports.
Construction of the theme park started on Saturday near a working mine at Rushan city, east China's Shandong province, the Xinhua news agency said today.
When the 3.6-square-kilometre, $US25 million ($A33.93 million) park is completed, it will allow visitors to watch gold being mined and processed.
It will also include a DIY area where the visitors themselves can be gold miners for a day, according to the agency.
China is the world's third-biggest market for gold after India and the United States, according to the World Gold Council, an industry organisation.
Last year, Chinese demand for gold rose eight per cent to more than 250 tonnes, the council's data showed.
Gold plays an important role in Chinese culture and is evident everywhere from temple decorations to the jewellery of newlyweds and the dental cavities of the rich.
Last year, the China Economic Daily issued a special edition, published in gold. It came in two versions, the more expensive priced at $US8,300 ($A11,265) and using 500 grams of gold.
AFP
"Theme park that glitters"
Sounds almost as good as shantytown
(down on the West Coast, South Island)
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The Chinese Govt is backpedalling already - it was never going to succeed in its quest to manipulate iron ore prices. The miners would sell elsewhere.Quote:
quote:Originally posted by SEC
The Chinese Govt is in la la land if they think they'll succeed on this one.
SEC
Oil stock trends
-By Adam Hamilton
http://www.gold-eagle.com/gold_diges...ton032406.html
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Are any of you commodity bulls interested in agricultural products - wool, meat, grains, dairy
I know that they are renewable resources which puts some people off them
They appear to be at the bottom of their cycle price wise right now - maybe a good time to think about taking a position.
Any thoughts?
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Dunno, Mick.....some commodities can stay down for a hell of a long time; would be interested to see if you've come across any articles lately that address the issue.Quote:
quote:Originally posted by Mick100
Are any of you commodity bulls interested in agricultural products - wool, meat, grains, dairy
I know that they are renewable resources which puts some people off them
They appear to be at the bottom of their cycle price wise right now - maybe a good time to think about taking a position.
Any thoughts?
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I honestly think the bull market in gold and silver has a long way to go....and if this thing goes through with China next week, we have only just started to see the beginning of the uranium bull market. There is enough (ahem) bull around now not to saddle yourself by taking a stake in a market that may not fire for some time.
I haven't read much at all on the agricultural commodities packers. The grains are doing poorly on the comex but sugar is going ballistic - energy related I guess (enthanol)
With the growing middle class in china surely they are going to be seeking a bit more protien in thier diets. Their main source of meat at present is chickens and the bird flue is well established in aisea so they may turn to NZ/OZ diary and meat products for their protein
I must admit that in previous commodity bull markets the agricultural commods have been the last to fire. As you say, I may be jumping the gun on this one
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Copper Rises to a Record in London After Inventory Declines
March 27 (Bloomberg) -- Copper futures rose to a record on the London Metal Exchange for a third consecutive session after inventory dropped, reducing supply of the metal used to make power cables and pipes.
Copper for delivery in three months on the LME increased as much as $30, or 0.6 percent, to $5,280 a metric ton, and was at that price as of 7:37 a.m. London time. That beat the previous record set March 24 by $4.
Inventory tracked by the LME and commodity exchanges in New York and Shanghai slumped 7.7 percent last week to 190,187 tons, a seven-week low, according to data complied by Bloomberg.
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Commodities boom raises fears
Published: March 29 2006 22:10 | Last updated: March 29 2006 22:10
The commodity price boom of the past three years has aroused investor attention on an unprecedented scale, with most investors placing their funds into passively managed commodity indices.
About $80bn is estimated to be in funds tracking the main commodity indices – the Goldman Sachs Commodity Index, AIG-Dow Jones, the Reuters/Jefferies CRB index and the Deutsche Bank Commodity Index – up from $15bn three years ago.
This has been spurred by record-breaking runs for oil prices, natural gas, copper and zinc, together with long-term highs for gold, sugar, aluminium and silver.
The funds tied to commodity indices swamp the estimated $10bn that pension and mutual funds have allocated to actively managed commodity hedge funds.
More funds may be on the way: consultants such as Mercer and Watson Wyatt are advising UK pension funds to allocate more money to commodity funds.
Yet fund managers and analysts are concerned that the index funds may eventually be a victim of their own success: the weight of money they have funnelled into commodity markets has contributed to severe price distortions.
The GSCI has risen 160 per cent in the past five years, buoyed by strong gains in commodity prices. However, commodity index levels are based not only on price movements of the underlying commodity futures, but on the rolling yield.
Most nearby dated futures contracts expire each month so investors have to sell the contract that is coming up to expiry and purchase the next deliverable monthly contract. The difference between the sale and purchase is known as the rolling yield. This has mainly been positive in the past four years, a situation known as backwardation.
However, with more money flowing into commodity indices, the yield is turning negative, creating what traders know as a contango. Here, nearby prices are below those of contracts for later delivery.
A contango can be a sign of temporary surplus in physical commodity markets, and it encourages inventory building.
However, crude oil futures markets have been in contango for the past 12 months, as the oil price has hit record highs and remained close to $60 a barrel, reflecting market worries about the security of future supplies rather than about oversupply.
The contango in the crude futures markets, West Texas Intermediate and Brent, have a big impact on the commodity indices. Together they represent 45 per cent of the GSCI. Other energy futures are in contango: heating oil, US natural gas, UK gasoil as well as other commodities including gold, wheat and coffee. In all, commodities representing more than two-thirds of the GSCI weighting are in contango.
Michael Lewis, head of commodities research at Deutsche Bank, said both the GSCI and AIG-Dow Jones index were down 5 per cent so far this year, entirely due to the negative roll yield. Mr Lewis said last year’s 40 per cent gain in WTI and Brent prices outweighed the 20 per cent negative roll yield.
With the WTI in contango until June next year, commodity indices will be relying on future positive performances from commodity prices that are already at or near record levels. “Oil prices would have to reach $77 in order for the energy component of the GSCI to break even,” said Mr Lewis.
David Mooney, portfolio manager at NewFinance Capital, a fund of commodities funds, said the contango in oil was a result of new money going into the crude futures market.
“These commodity indices are a one-way bet. They are long only and do not offer the flexibility that more active commodity funds can offer,” said Mr Mooney.
Douglas Hepworth, director of research at Gresham Investment Management in New York, said more worrying was the predictability surrounding the funds’ rolling of their exposure from the nearby futures contract into the next. Funds tracking the GSCI roll their contracts from the fifth to the ninth business day of each month.
“The whole market knows when these guys
Read a good article in Your Trading Edge magazine, Mick, about trading commodities via options....worth a look. The March/April edition, about 9 quid, but worth it.
No end in sight for commpdities Bull
http://www.resourceinvestor.com/pebble.asp?relid=18359
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Commodity prices on a roll as demand rises
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Commodity prices are rising rapidly, a factor that could lead to higher consumer prices and overall inflation in the U.S. and world economies.
Commodity prices rose to a 71/2-week high Thursday and are up 8.5% from a year ago, according to the Commodity Research Bureau.
Prices for energy, metals and agricultural goods have all risen as demand for commodities has increased in a growing world economy. At the same time, supplies have remained relatively stagnant.
Unless the global economy changes dramatically, prices likely will continue to rise, says CRB chief economist Richard Asplund.
"The current commodity bull market is far from over," he says.
But Michael Helmar, senior economist at Moody's Economy.com, says the combination of an expected slowing in the world economy to a more sustainable pace and an increase in supplies to meet demand will lead to a softening in commodity prices in the second half of 2006.
Federal Reserve policymakers cited "elevated prices of energy and other commodities" as risks for inflation in their post-meeting statement Tuesday. Previously, the Fed, which raised interest rates for the 15th-consecutive meeting this week, had named energy prices but did not mention commodities.
That suggests the Fed is keeping an eye not just on energy but on rising prices for metals, David Rosenberg, chief North American economist at Merrill Lynch, said in a note to clients.
Bear Stearns senior economist Conrad DeQuadros says higher commodity prices are starting to be seen in prices of products at the intermediate, but not final, stage of production.
The big question is if those higher prices will begin to be seen by consumers or if they will continue to be absorbed by firms selling their products in a highly competitive price environment.
"Those increases could then eventually be passed along to the consumer," DeQuadros says.
Prices have been up for a variety of commodities:
•Metals. Metals prices are up nearly 30% from a year ago as a variety of metals products are sought for construction products, particularly in China, where an urban building boom is underway. Copper prices recently hit an all-time high, and gold, silver and platinum prices are all up by double digits.
•Energy. Oil prices have risen nearly 10% this month and wholesale gasoline costs have also increased. Analysts, including those at First Enercast Financial and Alaron Trading, say oil prices will likely climb higher because of strong demand.
•Agriculture. Prices for a number of agricultural goods have risen rapidly this year, particularly for products such as sugar, that are being used to make renewable fuels, such as ethanol.
http://www.usatoday.com/money/econom...y-prices_x.htm
T10 [8D]
Oil, gold prices to continue up
San Francisco: The closely watched financial website MarketWatch.com said this morning that political and economic uncertainty will drive commodity prices higher in the short term. Look for $70 oil and gold trading at 25-year highs near, or over, $600.
A weekend analysis of the first quarter by MarketWatch writer Myra P. Saefong said that while anything is possible - this is "a market that's been known to trade contrary to fundamental factors" - the likely direction for commodities like crude and gold is to watch the first-quarter gains of mutual funds dedicated to natural resources and precious metals.
Figures from Morningstar Inc showed that precious metals funds rose an average of 17.4% while funds of natural resources added 8.7% for the year through March 29.
Peter Grandich, editor of Grandich Publications has commented that, "It's clearly unfashionable, if not suicidal, to be bearish on oil, but from a contrarian standpoint, it's the only position to be in."
Still, US government data show that crude inventories stand at their highest level since April 1999.
The MarketWatch.com column is at (copy and paste into your browser)
http://tinyurl.com/nff8n
It continued, in part:
Even so, May crude futures closed above $67 a barrel Thursday for the first time in two months with fresh tension between Western countries and Iran over Tehran's nuclear activities fueling the rally.
Prices aren't that far from the front-month futures record of $70.85 a barrel set on Aug. 30 and they're up over $4 so far this year.
Meanwhile, precious-metals prices have climbed to new heights, with gold and silver futures at levels not seen since the early 1980s.
"Gold as well as silver continues to benefit from a robust global growth pattern and consumption of all types of commodities," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
Gold futures closed Thursday at close to $592 an ounce -- up 12% year to date, and silver futures neared $12 an ounce, up 30% year to date.
Hardly anything could ruin the outlook for the metals - except perhaps world peace, said Thomas Hartmann, an analyst at Altavest Worldwide Trading, who sees higher prices for gold and silver by the end of the second quarter.
Summer weather and tension surrounding Iran remain major factors in the outlook for energy commodities.
http://tinyurl.com/nff8n
http://www.bangkokpost.com/breaking_...s.php?id=88537
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The Associated Press/NEW YORK
By VIVIAN CHU
AP Business Writer
"Metals producers surge as prices climb"
MAR. 30 3:08 P.M. ET Shares of metals producers surged on Thursday, as traders pushed prices of gold, silver and other metals to their highest levels in more than two decades on speculation that precious metals prices will stay strong.
On the New York Mercantile Exchange, gold prices climbed $9.50 to a 25-year high of $588.10 an ounce, while prices for silver rose 29 cents to $11.40 an ounce, a 22-year high. Copper prices rose 4 cents to a record high of $2.47 while platinum and palladium also gained.
Metals prices have rallied over the past year as investors bet the price of gold, silver and other precious metals will keep climbing.
Investors typically buy gold and other metals during times of geopolitical uncertainty or to hedge against inflation or a weakening currency, but recent bullish sentiment toward metals has been driven more by speculative activity and not by industry fundamentals, said Tim Evans, senior commodity analyst for IFRMarkets, part of Thomson Financial in New York.
"What's really going on here is that investors are fearful they'll miss out on further gains, so they're just chasing the market," Evans said. "I would strongly caution people about simply joining this rally without thinking twice about how much risk they're taking. High prices also mean high risk," he said.
In afternoon trading on the New York Stock Exchange, shares of Barrick Gold Corp. rose 87 cents or 3.3 percent, to $27.57, Anglogold Ashanti Ltd. shares rose 95 cents or 1.8 percent, to $53.23, Gold Fields Ltd. shares rose $1.09, or 5.2 percent, to $22.10, Goldcorp Inc. shares rose 93 cents, or 3.3 percent, to $29.51, Harmony Gold Mining Co Ltd. shares rose 36 cents, or 2.3 percent, to $16.19, Glamis Gold Ltd. shares rose $1.41, or 4.5 percent, to $32.59 and Newmont Mining Corp. shares rose $1.32, or 2.6 percent, to $52.81.
A pair of bullish broker notes on two big metals producers reinforced positive sentiment toward the sector.
Earlier Thursday, Morgan Stanley analyst Wayne Atwell raised his rating on Freeport McMoran Copper & Gold Inc.'s stock to "Equal-weight" from "Underweight," citing an improved outlook for the copper market. The company is one of the world's largest copper and gold producers and majority owner of a massive mine in Indonesia producing gold, copper and silver.
Atwell predicted Freeport's stock price would benefit from a growing risk of supply shortfalls this year and next, which he said will push copper prices higher.
"We believe a robust outlook for the copper market and recent strength in gold will continue to offset near-term concern over below-budget production levels in the first half of 2006," he wrote in a client note. Copper prices will likely stay above the key $2 per pound level until 2008, he added.
Separately, Lehman Brothers analyst Christopher LaFemina raised his earnings estimates for Rio Tinto PLC, the London-based diversified mining company with interests in copper, gold, diamonds and iron ore, due to expected gains in copper prices.
In a client note, LaFemina predicted copper prices would stay high as labor disruptions, equipment shortages, and high utilization rates at existing mines would contribute to unexpected supply disruptions. "With a relatively strong demand outlook, copper prices are likely to continue to exceed consensus estimates," he wrote.
Silver prices have also been bolstered by talk of a new silver exchange-traded fund, or ETF, that Barclays Global Investors is expected to launch shortly. That fund, now waiting for approval by securities regulators, is expected to trade on the American Stock Exchange.
Rio Tinto shares rallied $9.67, or 5 percent, to $208.66, while Freeport shares gained $1.42, or 2.4 percent, to $61.12
http://www.businessweek.com/ap/finan...e_down&chan=db
T10 [8D]
sorry cujodog,
But I JUST CAN NOT AGREE WITH YU ON THIS.....
Maybe the other way around ?????
WE in Australia are blessed by resources and until at least 2008 we will be smilling big time......
You watch and see.....
US does not have resources like here in AUS.....US are only good atm in making enemies around the world .....
GO AUSSIE GO !
T10 :D:)
Agree cujo,
But, little adjustments like happened in FEB already and rises..... just like a TA- chart..... FACTS - That is = demand for raw materials atm....
Inevitable a correction sometime but not just now....and of course IMHO.....
T10 :)
COMMODITY FUTURES FORECAST WEEKLY REPORT
COMMODITIES GONE WILD!
Philip Gotthelf
(March 30, 2006) With silver rocketing to multi-decade highs and gold roaring forward with platinum and palladium on its heels, the media is awash in "reasons" for the commodity market boom that permeates everything from metals to softs. In glittering generalizations, the press associates the bull market with demand from China and India. Perhaps this is because it is the easiest one-liner, requiring the least explanation. However, there are considerable complexities to current commodity price trends that require more than a reference to China or India. In particular, the potential squeezes in markets like silver, palladium, and platinum moves have less to do with China and more to do with U.S. and European developments.
From the beginning, Fed Chairman Bernanke made his second "debut" before lawmakers to explain his policy and the state of our economy. He offered the perception if "transparency" according to The Wall Street Journal front page today. In keeping with his predecessor, Bernanke suggested that further rate hikes might be required to keep inflation in check. The consensus is that this is a status quo statement that means rates will move to 5% before any policy change is considered. Yet, there is a growing number of analysts that believe Bernanke is likely to moderate rate increases. In particular, a further weakening in real estate represents a trigger for policy change.
It is this limited possibility that has stimulated further interest in commodities. If the world is in the grips of a 1970's style inflation, prices for standard inflation hedges like silver and gold can easily reach and exceed their 1979 all time records. Platinum and palladium have already raised the bar from the "go-go" years of precious metals with palladium reaching $1,075/ounce and platinum touching new records as I write.
Recall that the 1970's inflationary spiral began with agricultural sectors as grains responded to the 1970 corn leaf blight and progressed with the decimation of the Peruvian fish meal (El Nino) and the failure of the Russian winter wheat crop. This spawned the infamous Russian Wheat Deal and subsequent price rockets in wheat, corn, soybeans, and oats.
The grain surge was immediately followed by the oil embargo. In turn, rising energy prices pulled the rest of the economy along for a protracted inflation, stagflation, and a confidence crisis. For those who remember, President Nixon imposed price controls to stem the greenback's deterioration. He was forced to close the U.S. gold window to halt a raid on U.S. supplies. When U.S. gold ownership was legalized in 1975, consumers were already numb from the energy crisis, high foods costs, labor dissatisfaction and unrest, 63¢ sugar, and no end for the dull economy in sight. Coffee inflated after the Brazilian freeze in 1975. In 1976 into 1977, meat prices made new highs and Congress was asked to investigate. The entire wave of commodity inflation culminated Bunker Hunt's plan to return to a metallic monetary system when he attempted to corner the silver market.
The tumultuous 1970's were followed by a decade of adjustment. The 1980's were a response to the 1970's. We saw the creation of financial derivative like Ginnie Mea futures, T-bonds, and T-bills to combat growing price volatility risks. The Fed embarked upon a concerted anti-inflation campaign that took interest rates to the highest levels. Restrictive monetary policy was blamed for the crash of '87. The complexion of financial markets was forever changed as the breadth and scope of participation expanded with explosive growth in retirement accounts and other fiduciary funds. Even individual participation by "the average Joe" altered market behavior and dynamics. The little guy began to count...and still does.
I reiterate this exceptionally condensed history because history repeats. While we have not experienced the same exact sequence of events as in the 1970's, parallels are unmistakable. Absent an oil embar
Bloomberg News
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Copper, Zinc Rise to Records as Funds Buy on Stockpile Decline
April 5 (Bloomberg) -- Copper rose to a record, leading a rally in aluminum, nickel and tin, as declining supplies led investment funds to increase purchases of the metal. Zinc also climbed to an all-time high.
Strikers at Grupo Mexico SA have shut the Latin American country's second-biggest copper mine at a time when inventories have plunged to their lowest in more than a month. The amount of money in index-linked commodity funds will rise 38 percent this year to $140 billion, according to Barclays Capital.
``Most funds are long in base metals,'' Stephan Wrobel, chief executive officer of Diapason Commodities, who oversees about $3 billion in assets, said in an interview in London. ``The supply and demand dynamics of copper still have a long way to go.''
Copper for delivery in three months on the LME rose as much as $137.30, or 2.5 percent, to $5,686.30 a metric ton, beating the previous record set April 3 by $69.30. It was at $5,670 at 4:56 p.m. in London. Copper has risen in five of the past six weeks, taking its gain this year to 29 percent.
Copper inventory tracked by the London Metal Exchange fell for a third consecutive day, dropping 2 percent to 113,925 metric tons, the LME said in a daily report. Stockpiles are equal to less than three days of global usage.
No new talks have been arranged between management and miners at Grupo Mexico's La Caridad mine to resolve the stoppage that began March 24, company spokesman Juan Rebolledo said today. The strikers don't belong to a government-recognized union, he said, adding that he expects authorities to reopen La Caridad's concentrator by the end of the week.
On the Comex division of the New York Mercantile Exchange, copper for May delivery jumped as much as 5.90 cents, or 2.3 percent, to a contract-high of $2.5945 a pound.
`Rally Not Over'
Bullish metals forecasts are prompting investors such as pension funds and hedge funds to place more money in funds that track commodity indexes.
``There are no signs that funds have lost appetite,'' said Angus MacMillan, a metals analyst at Bache Financial Ltd. in London. ``As long as you have a list of problems, funds will keep piling in.''
Copper prices may keep gaining as strikes by miners demanding a larger share of rising profits curb production, Credit Suisse, Switzerland's second-largest bank, said today. The metal will average $2.17 a pound this year, 21 percent more than its previous prediction, the bank said.
``The three-year rally in the metals is not over,'' said Credit Suisse analysts led by David Gagliano in New York.
Demand for copper, which is used to make wiring and plumbing, will rise 5.1 percent this year to 17.8 million tons, beating production by 100,000 tons, the analysts said.
Mine Expansion
``The trend over the next 10 to 15 years should be bullish for commodities,'' Daniel R. DiMicco, chief executive officer of U.S. steel producer Nucor Corp., said in an interview from Nucor's headquarters in Charlotte, North Carolina today. ``There will be ups and downs during that period, but the downs won't be as severe as they have been in the prior 20 years.''
Copper's rally has encouraged companies including BHP Billiton, the world's largest miner, to increase production. The Melbourne-based company may spend $5 billion to double output at its Olympic Dam mine in Australia, it said today. The expansion would be BHP Billiton's most expensive project.
Zinc rose $93.50 to $2,781 a ton. Earlier, it gained as much as $114, or 4.2 percent, to $2,801.50 on a ton on the LME.
Zinc inventory has dropped 30 percent this year to 276,325 tons. Credit Suisse forecasts demand for the metal, which is used to galvanize steel, will exceed production this year by 466,000 tons.
Other metals rose on the LME. Aluminum gained $45 to $2,508 a ton. Nickel increased $575 to $16,450 and lead climbed $1 to $1,1
Some interesting scraps of info on oil
Joseph Dancy
http://www.financialsense.com/fsu/ed...2006/0407.html
.
Lately everytime i pick up a newspaper,switch on the tv or even jump onto forums and hear/read about commodities i can not help but be reminded about the hysteria that surrounded dot com stocks in the late 90s and early this turn of the century.
Everyone is going bonkers over them! Dont get me wrong i own shares myself in a couple of the big players and have smaller amounts in a few speculative plays (which i can afford to lose, god forbid), but am now beginning to read and hear about average "mums and dads" plowing into cheap mining/exploration companies that have and may never extract a grain from the earth ever.
My point being, there seems to be the case arising that people are purely buying into mining stocks for fear of missing out of the new best thing since slice bread, without fully understanding of what they are getting themselves into. They have no idea about the operations that these companies undertake and the risk that come with them.Just like the dot com boom.
Is it fair to make a possible comparision between the two? Just thought i would get some banter going...
Investors choose profit
Michael Quinn
Monday, April 10, 2006
METAL prices remained at high levels but after recent weeks of buying frenzy, equity investors paused for breath today, with concerns over US interest rates and the shorter business week ahead cited as other possible reasons for the profit-taking.
Of the big guns, Oxiana had yet another positive day, with managing director Owen Hegarty and the management team at the Melbourne-based miner evidently unable to put a foot wrong. Oxiana's main metals of copper and zinc are fetching record prices, while even its lesser lights of gold and silver are trading at more than 20-year highs. The company's non-hedging policy looks pure genius.
Overall, a clutch of juniors showed there was still heat in the uranium sector, with Bullion Minerals the standout as investors pushed the stock up more than 40% on news and appointments associated with its morph into Uranium Equities.
As well as Canadian company Laramide Resources expressing an interest in taking an equity stake in Uranium Equities – Canadian company Mega Uranium's recent takeover of another uranium junior Hindmarsh Resources is the sort of template investors would like – Bullion said it had secured the services of two experienced geologists and one experienced uranium chemical/metallurgical engineer.
Bullion also said it was "formalising Mark Chalmers' long-term working relationship with International Nuclear Inc (iNi), an independent consulting organisation based in Golden, Colorado focused on the front end of the nuclear fuel cycle".
Chalmers, formerly a "key" manager at the Beverley uranium mine will be managing director at Uranium Equities, while David Brunt, also previously of Beverley fame, will be an executive director.
Berkeley Resources was another new uranium explorer with a Canadian tinge attracting investor interest today as it rose 26% on the back of its strategic alliance with French nuclear heavyweight Areva. This Areva deal presumably made sense to Canadian outfit Dundee, which told the ASX on Friday it now owns 6.9% of the junior.
One of last week's favourites, Uranex, completed the trifecta for uranium juniors (up 23.1%), while elsewhere Tawana Resources had a turnaround of sorts as its shares rose 20% to 36c following a horrendous downturn in market fortunes over the past year.
Once upon a time back in 2004, the diamond explorer saw its shares fetching over $2, but it's been a precipitous fall since as the costly, difficult and time-consuming hunt for sparklers has wreaked havoc with the patience of investors.
http://www.miningnews.net/storyview....5§ionsource=s0
T10 [8D] GO TORO GO ! :D
http://www.miningnews.net/premiumarea.asp
500 year-old lessons in mining management
Monday, April 10, 2006
BUSINESS challenges that we face in the mining world today are seldom new. Allan Trench* suggests that mining companies can learn from past experiences, even those nearly 500 years old!
Originally published in 1556, Agricola's De Re Metallica represents the first book on mining to adopt a scientific approach based on field research and observations. It stands out as a classic text to the present day. It is therefore insightful to revisit the book to ascertain what Agricola had to say regarding the management and ownership of mines.
Three lessons from De Re Metallica stand as true today as in the 16th century. Firstly, on mine management (described by Agricola in the role of the mine owner), he recognised the importance of gathering first-hand facts regarding the performance of a mine.
Agricola stated: "It is important that the owner who is diligent in increasing his wealth should frequently himself descend into the mine, and devote some time to the study of the nature of the veins and stringers, and should observe and consider all the methods of working, both inside and outside the mine."
Do you agree? I suspect so. But ask yourself when was the last time the senior decision-makers in your company spoke directly with and visited those workers facing the production challenges at the frontline?
Secondly, Agricola recognised the importance of frontline morale to the success of a mining venture. His words were "…sometimes he (the owner) should undertake actual labour, not thereby demeaning himself, but in order to encourage his workmen by his own diligence…"
Do you agree? I suspect so. But ask yourself the above question once again! Was it today that the senior management and/or directors visited the frontline? Was it yesterday? Last week? Last month? Last year?
On mine ownership, Agricola arguably pre-empted Markowitz' (1952) Nobel prize-winning portfolio theory of ownership and investment returns by almost 400 years. He stated: When one man alone meets the expense for a long time of a whole mine, if good fortune bestows on him a vein abundant in metals, or in other products, he becomes very wealthy.
If, on the contrary, the mine is poor and barren, in time he will lose everything that he has expended on it. But the man who, in common with others, has laid out his money on several mines in a region renowned for its wealth of metals, rarely spends it in vain, for fortune usually responds to his hopes in part.
In these heady times when many companies are reaping great financial benefits from a resources boom that has reached parts of the Periodic Table that previously only chemists knew of, the third lesson from Agricola also stands true today. Ask yourself whether your company has all its 'eggs' in one commodity basket? After all, commodity prices can still fall too. Can't they?
*Allan Trench is Adjunct Professor of Mine Management & Mineral Economics, Western Australian School of Mines and is a non-executive director of Heron Resources, Navigator Resources and Pioneer Nickel.
http://www.miningnews.net/premiumarea.asp
T10 [8D]
I don't take much notice of main stream media but I do buy a newspaper once a week and watch the news on TV ocassionally. Unless I'm missing something here I have to say that I havn't seen much of anything that I would consider "hype" about commodities apart from the rising oil price ocassionally getting a mention on the news.Quote:
quote:Originally posted by moe
Lately everytime i pick up a newspaper,switch on the tv or even jump onto forums and hear/read about commodities i can not help but be reminded about the hysteria that surrounded dot com stocks in the late 90s and early this turn of the century.
Everyone is going bonkers over them! Dont get me wrong i own shares myself in a couple of the big players and have smaller amounts in a few speculative plays (which i can afford to lose, god forbid), but am now beginning to read and hear about average "mums and dads" plowing into cheap mining/exploration companies that have and may never extract a grain from the earth ever.
My point being, there seems to be the case arising that people are purely buying into mining stocks for fear of missing out of the new best thing since slice bread, without fully understanding of what they are getting themselves into. They have no idea about the operations that these companies undertake and the risk that come with them.Just like the dot com boom.
Is it fair to make a possible comparision between the two? Just thought i would get some banter going...
In my opinion there are very few people even aware that there is a bull market in commodities leave alone investing in speculative shares. To be honest I know of only a few people in real life who is playing this commodities bull. Sounds as though I must be living a very sheltered life.
,
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
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
Jim Rodgers is bullish on agricultural commodities
Interview
http://www.financialsense.com/fsu/ed...2006/0414.html
,
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."
Chart on crude oil (looking bullish)
Paul Skarp
http://www.financialsense.com/fsu/ed...2006/0416.html
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This is the SMH .... and they still don't get the big pictureQuote:
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
http://www.smh.com.au/news/business/...344154036.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.
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
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
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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.
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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.
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
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.
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
Clive Maund on gold and commodities
http://www.gold-eagle.com/editorials...und043006.html
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Jim Rodgers interview
http://www.resourceinvestor.com/pebble.asp?relid=19298
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Gold versus oil
Steve Saville
http://www.gold-eagle.com/editorials...use050206.html
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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
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
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
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.
Commodities - New highs or the same old lows
http://www.financialsense.com/fsu/ed...2006/0509.html
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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.
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.
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
Hi Mick, gas producers!:) NEO continues to look promising[8D]
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
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.
,
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.
.
Gold going great guns tonight....good indicator of what is tradable tomorrow on the ASX.
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.
I tend to agree sharpieQuote:
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 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.
.
Mick you r %100
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.
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.
Gold getting absoutely slammed in New York as I type: down to $661.80......
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.
Looks like another Red Letter Day on the ASX come Monday!!
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
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.
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.
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?
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.
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.
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.
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!
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?".
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
Commodity ETF's
Scott Wright
http://www.gold-eagle.com/gold_diges...ght060206.html
.
End of cheap oil
Saxena
http://www.gold-eagle.com/editorials...ena060606.html
.
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.
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