Commodities / Raw Materials

[Tok3n]

Buy made in NZ

PRC

[Mick100]

Uraium outlook and other useful insights
http://www.financialsense.com/fsu/ed...2007/0910.html

[duncan macgregor]

Uraium outlook and other useful insights
http://www.financialsense.com/fsu/ed...2007/0910.html

Its a good read MICK thanks. Macdunk

[shasta]

Uraium outlook and other useful insights
http://www.financialsense.com/fsu/ed...2007/0910.html

Great article indeed, thanks Mick

Just shows that the current weakness will stay around a little longer whilst the sub prime problem remains, & then i would expect the price of Uranium will continue to rise in 2008.

Hence the reason im bullish on Uranium, & believe we will hit new highs during 2008 of $US150lb.

[OutToLunch]

Yep thanks Mick, that was a good read. I pasted the link on the AGS thread on HC for folk over there to have a gander at too. It's good to see a rational view of the longer term to remind the panickers why the uranium story hasn't really even got started.

Cheers :-)

[Mick100]

COMMODITY INDEXES SURPASS FUNDSby David Shvartsman
Finance Trends Matter
November 12, 2007

Commodity index investment products are helping mainstream investors ride the bull market in commodities. And as Bloomberg reports, this year the indexes have outperformed the leading commodity focused hedge funds.
Excerpt from, "Calpers beats Pickens as Commodity Indexes Clobber Hedge Funds".
T. Boone Pickens, the billionaire oil trader who predicted crude's rise to $100 a barrel, is lagging behind commodity-index investors for the first time since 2003.
Even California Public Employees' Retirement System, the 75-year-old pension fund that ignored commodities until eight months ago, is beating Pickens. Calpers invested in the Standard & Poor's GSCI Index, up 32 percent this year, while Pickens's BP Capital fund rose 22 percent.
From Dwight Anderson's Ospraie Management LLC to Global Advisors LP, commodities hedge funds failed to anticipate the 58 percent advance in oil and 31 percent gain in gold that powered indexes to their highest levels in two decades. While bullish forecasters at Goldman Sachs Group Inc. and Deutsche Bank AG advised clients to double down on commodities in January, they didn't expect this year's returns.
I have to say, this level of return from the overall commodity indexes was not what I was expecting for this year.
After a four or five year run in the GSCI, I expected a rather muted performance or even the start of an intermediate term correction in the major indices, with the potential for larger gains concentrated in several of the more overlooked individual commodities and commodity sectors.
It turns out Goldman Sachs was right in their 2007 call to "double down on commodities". I was wrong. Congrats to everyone who played it right, including the major pension funds like Calpers, who were highlighted in Bloomberg's recent article.
Whether or not the index players will be able to outperform the leading commodity hedge funds over the longer term is another issue, and it is one that is taken up in Bloomberg's piece.
Still, you have to give it to Jim Rogers and those who predicted the rise of commodity index investing and investors' growing acceptance of these products. They were absolutely right, and the market for these investment products is still growing.
Just last Friday, the Financial Times reported that JP Morgan and BNP Paribas were developing commodity index vehicles that will allow investors to make longer-term bets on commodity prices movements.
It was also noted that S&P had forecast a 20 percent increase in commodities index investment for 2008. Commodity investing has gone mainstream.

© 2007 David Shvartsman
Editorial Archive

[Mick100]

URANIUM WARSby Sol Palha
Tactical Investor
November 14, 2007

When I was a boy I used to do what my father wanted. Now I have to do what
my boy wants. My problem is: When am I going to do what I want?

Samuel Levenson

We have spoken several times in regards to this issue over the course of the last few years. China has already lead the assault on a covert basis but soon they will move to an overt basis and now India will be forced to join them not because they think they might have to but because they desperately need too. The excerpt below will explain our point quite clearly
Faced with an acute shortage of uranium to run existing power stations, the Nuclear Power Corporation of India Ltd has advanced its maintenance schedule and started shutting down individual power units. Usually, these units are shut down in a staggered manner but this time they have been bunched together so that authorities get time to arrange for uranium supplies.
Over the past few weeks, as many as five units amounting to 1000 MW of the total 4000 MW were shut down on account of upkeep of plants: two units from Tarapur (Maharashtra) and one each from Kaiga (Karnataka), Kalpakkam (Tamil Nadu) and Kakrapar (Gujarat).
Already, most of the plants that were running at 90-95 per cent capacity until last year are now down to 50-70 per cent reflecting the serious uranium crisis facing the country.
Acknowledging that there is a fuel supply "mismatch" due to further delays in the commissioning of the milling system in Jharkhand mines, one of the main sources of domestic fuel supply, authorities are having to innovate on their maintenance schedule. Hoping that the fuel situation may ease a bit in the next month or so, sources said, the NPCIL felt that this period could be used for maintenance which anyhow requires shutting down a reactor for about 20 days. Full Story

Known Recoverable Resources of Uranium

Tonnes U

% of world

Australia
1,143,000
24%
Kazakhstan
816,000
17%
Canada
444,000
9%
USA
342,000
7%
South Africa
341,000
7%
Namibia
282,000
6%
Brazil
279,000
6%
Niger
225,000
5%
Russian Fed.
172,000
4%
Uzbekistan
116,000
2%
Ukraine
90,000
2%
Jordan
79,000
2%
India
67,000
1%
China
60,000
1%
Other
287,000
6%
World total
4,743,000

http://www.uic.com.au/nip75.htm

Now just imagine a country such as France had to go through the same situation; total chaos would reign as 80% of France's electricity comes from nuclear power plants. We are not stating that France is in any danger we are just trying to illustrate a point here. For that matter imagine the US had to go through the same situation it would still cause chaos as over 20% of our electricity is generated from nuclear power plants. Actually one has to applaud the French for being so astute as to have had the foresight to continue to develop nuclear technology and move away from coal and natural gas; today the French are one of the leaders in Nuclear power plant technology a position once held by the United States.
We are at the beginning stages of a massive bidding war in Uranium. China is locking in massive deals in Africa and is now working on ever bigger deals in Kazakhstan which holds the worlds second largest reserves of Uranium after Australia. Note to that China signed a multi billion dollar uranium deal with Australia. China is basically locking up Uranium supplies, which means its taking this uranium out of the market place; this effectively means that there will be even less uranium for the rest of the global world players to go after. Now this development alone is bad enough but the situation worsens; Russia which has more than enough uranium has decided to start stock piling on uranium too. They have done this after declaring that Uranium is now a strategic resource and will only be exported in limited quantities. Once again the following news story will best illustrate our point
"This new agreement will allow the supply of Australian uranium for use in Russia's civil nuclear power industry and provide a framework for broader cooperation on peaceful nuclear-related activities," he said. Both Howard and Putin dismissed concerns that Russia would sell Australian uranium to third countries such as Iran.
"I simply don't understand what people are talking about," Putin said, pointing out that Russia already exports large quantities of enriched uranium for military use, including 30 tonnes a year to the United States. "We are buying uranium from Australia for purely economic reasons," he said Full Story
Purely economic reasons and why not; Putin is a smart man he knows that in the future nations will be desperately begging for this valuable commodity and he also knows that he who controls the keys to the energy market controls the world. One other thing to note here is that Russia supplies the US with over 30 tonnes a year of uranium; Russia could cut these supplies on a moments notice especially now that the relationship between these two former cold war enemies has turned rather frosty as of late.
Bottom line is the Uranium bull is one that is going to be driven by the two most powerful forces in the universe and such a development is very rare and provides the astute investor with a window of opportunity that usually presents itself only once in a persons life time. The two forces are fear and greed; usually one of them is enough to produce massive moves but in the near future both of them will be working in unison instead of against each other. This is one of the main reasons why it’s almost impossible to predict how high uranium prices could eventually trade at. Right now the uranium sector has been beaten down and many individuals have given up on this sector as some stocks have truly taken a massive beating. Remember at TI we view disaster as opportunity waiting to be discovered and thus our advice to all our subscribers is to make sure you hold positions in all the various uranium plays that are listed in our portfolios and hold them through thick and thin or until we advise you to unload them. Those that do so will be handsomely rewarded and those that don’t well in the years to come they will most likely shed tears of blood as they wonder what possessed them to let such a wonderful opportunity pass them by. Do not let this opportunity slip by you.
Futures players with deep pockets could start examining the possibility of going long Uranium futures; do so with the mindset that the next leg up will not begin tomorrow.

Who then is free? The wise man who can govern himself.

Horace BC 65-8, Italian Poet

© 2007 Sol Palha, Tactical Investor
Bio and Archive

[Mick100]

Why Commodities Should Be In Your Stocking This Year....
...and the next year....and the year after that!

Emanuel Balarie

For several years now, commodities have garnered attention because of their prolific appreciation. The price of oil has climbed by over $80/barrel during this first stage of this bull market, gold prices have more than tripled in price, and soybeans, corn, wheat and coal have suddenly become part of the investor's vocabulary. At the same time, however, it seems that while investors are now more familiar with commodities (in the general sense), they are still apprehensive about finally taking the steps to add commodities to their investment portfolios. The reasons vary, but it has a lot to do with the fact that most investors focus on the fact that prices are too high (gold at $800/ounce, for instance). As a result, the average investor feels more comfortable waiting for the next bull market in commodities, rather than being the fool that buys in at the "top".

Interestingly enough, not only is it not too late to invest in the commodity bull market, but it is also perhaps one of the best times to start investing. In this article, I will not list the fundamentals for why I believe we are still in the first half of this commodity bull market. I have written about this topic on various occasions, and I write about it in detail in my new book, Commodities for Every Portfolio: How You Can Profit from the Long-Term Commodity Boom. I recommend buying this as a Christmas gift for yourself or your skeptic friend! Instead, I will make the case for why I believe this is probably the best time (since the start of this bull market in 2001) to actually allocate a portion of your portfolio to the commodity markets.
The Last Seven Years
I fully realize that most people will initially scoff at my belief that now is a much better (and critical) time to buy commodities. How could I possibly believe that buying gold today( when it is trading at $800/ounce) is better than buying gold seven years ago (when it was trading around $250/ounce)? Or how could I argue that oil at $90/barrel is a better investment than oil at $15/barrel? Indeed, if one were to look simply at the price of commodities, my argument would not make sense. However, if you look at the bigger picture, it becomes clear that investing in the second leg of this bull market is much more important.
Consider, for instance, the potential investments (and their returns) of the previous seven years. There is no question that the commodity markets have tallied significant gains. But so have other investments. For instance, while commodity bulls point the gains they made investing in the energy sector, real estate investors can readily point to the appreciation that they experienced by investing in housing. While gold bugs boast about the massive gains that they accumulated by buying gold at $300/ounce, stock market investors simply point at the fact that Google has moved from just over $100 in 2004 to over $700 today.
Indeed, it is clear that those that have missed the "boat" during this first stage of this bull market have had ample opportunity to ride other crafts to financial gains. In a sense, the financial opportunities of this decade have been ample and widespread. However, this unprecedented and goldilocks scenario is clearly coming to a screeching halt. As a result, investors can no longer afford to ignore the benefits of holding commodities in their portfolio.
The Next Several Years
The economic environment of tomorrow paints a picture that is polar opposite to what has transpired in the previous years. Whereas investors were able to profit from real estate gains (via the real-estate bubble), they are now realizing losses (via the real-estate burst). Whereas investors were able to profit from a rising stock market (due to consumer spending), the housing decline and upcoming recession will inevitably result in a bear market in stocks. And while the skewed and archaic fed data (think: the core CPI) has failed to warn investors about inflationary pressures, the massive printing of money to finance the war in Iraq, Afghanistan, and other government expenditures will undoubtedly lead to inflationary pressures that will erode the wealth of many investors.
In short, the benefits of commodities can serve as a remedy for the problems of tomorrow. While I have always espoused the profitable reasons for investing in commodities, I believe it is now more a question of protecting your wealth. In other words, the intrinsic benefits of holding commodities in your typical stock and bond portfolio far out way the potential gains you might see. Now don't get me wrong. I still believe commodity prices will soar for another decade or so, but if you are concerned about inflation, a bear market in stocks, and the inevitable recession-commodities make sense.
Why Commodities Belong In Your Stocking
So why exactly do commodities still make sense? And why do they belong in your stocking? Well consider the following study conducted by a couple professors and the gifts (or benefits) that commodities provide investors this holiday season.
In 2004, Professor Gary Gorton of University of Pennsylvania and K. Geert Rouwenhorst of Yale School of Management published "Facts and Fantasies about Commodity Futures". In the study, the two professors examined the long-term relationships of these three different asset classes. Their results were groundbreaking on a number of levels. First, the study shattered several ongoing myths about commodity futures. One of these myths was simply that commodities are more volatile than stocks. Looking back over a period of 45 years, the professors found the opposite to be true; the risk premium for stocks was greater than that for commodities.
Gift #1: Commodities provide investors with a hedge against a bear market in stocks.
In addition to debunking several myths about commodities, Gorton and Rouwenhorst concluded that over a prolonged period of time, commodity futures were negatively correlated to stocks and bonds. This, of course, makes perfect sense. Consider for example the effects higher commodity prices have on companies. As the price of commodities rise, companies have to pay more to make those products. In turn, they will have to pass on those costs to the consumer. Since the price of the product is now more expensive, not as many consumers will buy the product. The end result is lower earnings, and lower stock price.
Gift #2: Commodities provide investors with a hedge against rising inflation.
In addition to commodities being negatively correlated to stocks (and thus serving as a hedge against a bear market in stocks), the study as mentioned that commodity futures were positively correlated with inflation. In other words, commodity prices increase with rising inflation and decrease with declining inflation. Again, this makes perfect sense. Throughout the 1980's and early 90's, a period of low inflation, commodity prices were in a decline. Today, commodity prices are increasing in the midst of rising inflation. For instance, as the price of corn, soybeans, and other food products rise in price, you will have now have to pay more for your food products (See Food Inflation Article). While rising inflation erodes the purchasing power of your dollar (and subsequently diminishes your wealth), investing some of your wealth in tangible real assets can counteract the inflationary pressures.
Gift # 3: Commodities provide investors with the opportunity to profit from the greatest generational bull market of our time.
Of course, commodities can still provide investors with the opportunity to profit from the greatest generation bull market of our time. While there might be pullbacks and consolidation along this bull ride, the sheer demand for commodities from China, India, and other emerging economies will continue to push commodity prices higher. Additionally, while many investors continue to focus on how high commodities prices have risen over the last 7 years, they fail to realize that commodity prices were in a bear market for the previous 20 years. And if you look back at the history of commodity bull markets, they have all lasted longer than 15 years.
It is becoming evident that commodities should have a place in an investors' portfolio. It is no longer simply a matter of whether or not you believe that we are in a bull market or a bubble, but it is a matter of properly diversifying your investments. While diversification might not seem as important when most every investment is going up, it becomes increasingly important during times of economic uncertainty. Hopefully this Christmas Santa will bring you some coal….or oil…or gold. Personally, I prefer gold.


Stay tuned for the official launch of www.commoditynewscenter.com in early 2008. With commodity news, pertinent commentary, quotes, and trading tools, CNC is poised to become your home for commodities online. I will also be launching a daily blog and send my subscribers a free report on which commodities to own…and not own…in 2008!
If you are interested in receiving this report... You can sign up for a free newsletter here.


Emanuel Balarie
Chief Executive Officer
JABEZ CAPITAL MANAGEMENT
Chicago Mercantile Exchange
30 South Wacker Drive, Suite 2200
Chicago, IL 60606
Cell:949-697-3626
Tele: 312-466-5561
Fax: 312-466-5601

[Mick100]

ENERGY SECTOR TRENDS & DEVELOPMENTS LAST MONTHby Joseph Dancy, LSGI Advisors, Inc.
Adjunct Professor, SMU School of Law
December 17, 2007

While we did not see $100 a barrel crude oil in the futures market last month we remain bullish on the energy sector. One of the more interesting charts we happened across last month was from the Oil Drum. It plots global crude oil and natural gas liquid production versus time. (See chart at right)
Texas oilman and hedge fund manager T. Boone Pickens for well over a year now has questioned whether global production of crude oil liquids can exceed 86 million barrels per day. Many analysts disputed his analysis, claiming production could be increased well above the 86 million barrel per day level as new supplies were brought online and older fields were upgraded.
While not making a judgment whether Mr. Pickens is correct or not, the chart at right is quite interesting in light of his comments. Keep in mind global demand for crude oil has been increasing about 1.5 million barrels per day per year with global demand for petroleum liquids correlating very closely with economic growth.
Many countries have experienced robust economic growth and are placing their increasing demands for energy on the global marketplace. Developing countries generally have very energy inefficient economies that require much more energy input per unit of growth than in North America. Should demand for crude oil liquids approach or exceed available supplies prices could skyrocket. The global market players most likely would in that situation move toward a hoarding mentality and resource nationalization would become a larger issue for consumers.
Another interesting chart we ran across last month plotted the oil inventory levels of Organization for Economic Cooperation and Development member nations over the last year and a half and the projected levels going forward.
OECD is comprised of thirty member democratic countries that produce two thirds of the world’s goods and services. Its member countries are primarily located in Western and Eastern Europe, but also include the United States, Canada and Mexico.
The forecast, provided by the Energy Information Administration, indicates that while oil stocks have been well above the 5 year average over the last few years those excess stocks are falling rapidly. In the near future OECD stocks are projected to be below the five year average while OECD demand continues to increase.
Excess inventories are helpful in addressing temporary supply interruptions and keeping the associated price fluctuations to a minimum. On a days of forward demand basis OECD inventories are down 5% from year earlier levels and are expected to fall further - which should keep short term oil prices firm.











Meanwhile, in the United States gasoline inventories have fallen below their long term average. This trend has been reflected in strengthening gasoline prices over the last several months. The long term trend in gasoline prices remains upward.
One of the more interesting articles and charts we can cross last month was in a New York Times article on the comparative value of crude oil and natural gas. (See chart at right)
Due to the fact that domestic natural gas inventories have been at or near five year highs for much of the last year natural gas prices have not risen as much as crude oil prices.
The impact of soft natural gas prices on North American drilling and completion activities has been quite evident – and is one reason the drilling day rates have been well below levels many small drilling companies and equipment providers expected.
Even with the large amount of natural gas in North American storage, and even though many long term forecasts project that winter temperatures will be well above normal cutting into demand, we think that over the next 12-18 months natural gas prices will advance from current levels.
On a heating content basis natural gas is now selling at roughly one-half the value of crude oil.
Last, a slide from investment banker Matthew Simmons is worth reviewing. While the U.S. economy is much more energy efficient than it was 40 years ago demand for crude oil continues to increase. (See chart at left)
The demand for oil in countries such as China is rocketing upward, a function of the incredible economic growth of that country and also a function of the fact that the Chinese economy is not as energy efficient as those in North America or Europe.
Going forward, with the increasing auto sales and urbanization of that country demand for oil should continue to accelerate – which will place additional strains on the global supply network for decades to come.

© 2007 Joseph Dancy
Editorial Archive

[Huang Chung]

All green on the screen again tonight for metal prices, including zinc up 2%. $A off its recent highs as well.

Over the last week or so, metal prices have generally been heading higher, despite all the references to the 'R' word being bandied about.

However, the share prices of many miners have moved downwards, ignoring the small but welcome improvements in metal prices, but in sinc with all the talk of recession. PEM and ZFX being two zinc plays being badly mauled.

Will be interesting to see what the next few weeks brings.