Commodity Blog

Archive for April, 2008

Gold N.Y. Spot $ 0927.30
Silver N.Y. Spot $ 17.89
Lead LME Cash $ 1.3290
Copper LME Cash $ 4.0298
Zinc LME Cash $ 1.0569
Nickel LME Spot $ 13.35
Aluminum LME Spot $ 1.3794
Platinum N.Y. Spot $ 2021.50
Palladium N.Y Spot $ 458.00
Oil WTI Cushing $ 110.00
Natural Gas (Henry Hub)($/MMBtu) $ 9.90

USD-AUD $ 1.0731
AUD-USD $ 0.9319
CAD-USD $ 0.9810
USD-CAD $ 1.0194
EUR-USD $ 1.5788

Gold may rise to $1,200 an ounce this year, exceeding the record, as investors seek a hedge against credit-market turmoil and mining companies fail to keep up with demand, London-based researcher GFMS Ltd. said.
Buying by jewelers, the biggest users, will keep the price from falling below the ”the high $800s or perhaps even over $900,” GFMS said in a report released today. Gold has climbed 8.7 percent this year, rising to a record $1,032.70 an ounce on March 17 after Bear Stearns Cos. accepted a buyout from JPMorgan Chase & Co. to avoid collapse.
“We’re looking at a peak of $1,100 and $1,200,” GFMS Executive Chairman Philip Klapwijk said in a phone interview from London yesterday. “It’s more likely that 2009 rather than 2008 will be the peak for gold.”
Investment demand that fell 61 percent last year will “soar in 2008, driven by a major growth in demand from funds and private investors that will in turn be fueled by ongoing financial market instability and heightened credit concerns,” GFMS said in the report. Germany is the largest “retail” investment market for gold in Europe, followed by Switzerland and Austria, according to the report.
“Gold’s zero or limited counter-party risk has obvious attractions at a time when the threat of bank failures and low interest rates make cash a less attractive alternative,” GFMS said. “The task that investors will face should be made easier by the lack of a supply surge in most areas.”
Gold, now trading at about $907 an ounce, has climbed for seven years. “We’re a bit nervous about some very aggressive talk that we hear in the market, people are saying it’s going to $2,000,” Klapwijk said. “There is an element of a bubble appearing, certainly above $1,000 an ounce.”
Buying Slumps
Investor buying slumped last year as some unidentified institutions sold the metal in the over-the-counter market, especially during April through August, GFMS said.
Mining supply fell to an 11-year low last year, led by declines in six of the 10 largest producing nations, including South Africa and the U.S.
China overtook South Africa as the largest gold producer, with output gaining by 13 percent to 280.5 metric tons while South Africa’s production dropped 8.7 percent to 269.9 tons, according to the report. Caps on electricity supplies may reduce South Africa’s gold production another 10 percent to 15 percent this year, GFMS said.
Production Declines
The Grasberg mine in Indonesia, owned by Phoenix-based Freeport-McMoRan Copper & Gold Inc., was the largest gold mine in 2007, replacing Newmont Mining Corp.’s Yanacocha deposit in Peru.
Central banks and other governments sold a net 481 tons of gold reserves, up 30 percent from 2006, the report said. Governments that purchased gold included Qatar, Kazakhstan and Jordan, GFMS said.
Gold demand from jewelers increased 5.1 percent last year to 2,401 tons, with most of the gains occurring in the first six months as prices stabilized, GFMS said. After declining 22 percent in the fourth quarter from a year earlier because of higher prices, jewelry purchases may slip below 2,000 tons this year for the first time since 1988, GFMS said.
Manufacturing in Italy, the world’s fourth-biggest market for gold jewelry, slumped for a ninth straight year, even as use climbed in India, China and Turkey, the world’s top three markets, according to the report. For gold jewelry consumption, China overtook the U.S. as the world’s second-biggest market after India, according to GFMS.

Rio Tinto Group, the world’s third- largest mining company, said global demand for copper will grow 4 percent a year for a decade or more led by sales to China.
“That 4 percent growth can be sustained for at least a decade or even a generation,” Vivek Tulpule, chief economist of London-based Rio, said today at a briefing in Melbourne. That’s above historical demand, he said. “It’s a very tight market.”
China’s 11.4 percent economic growth in 2007, the fastest in 13 years, fueled demand for copper and pushed prices to a record $8,820 a ton on the London Metal Exchange on March 6. It may increase imports of copper by 20 percent to a record this year, Trafigura Beheer BV, the nation’s top supplier, said today.
“In 2009, either early or late, there will be an almighty rush to restock copper and we could see quite extraordinary things happen to the price,” Tulpule said. He wouldn’t comment on specific prices. “It’s entirely possible we have not yet seen the top.”
Rio rose as much as A$2.80, or 2 percent, to A$140.20, and was at A$137.50 at 3:05 p.m. Sydney time on the Australian Stock Exchange. It has gained 3 percent this year compared to a 13 percent decline in the benchmark index.
Chinese imports of concentrate, or processed ore containing copper, may rise to 5.4 million metric tons from 4.5 million tons in 2007, Trafigura said today. China would become the world’s top buyer, surpassing Japan which bought 5.05 million tons last year.
The price of copper has gained 28 percent on the London Metal Exchange this year. It fell in London overnight, snapping a four- day advance, on speculation a U.S. economic slowdown will erode demand for metals.
“The slowdown in the U.S. economy is not expected to have an effect on commodity demand,” Tulpule said. “If the Chinese economy does slow, the government could spend money and take its foot off the brakes on spending.”

China, the world’s biggest copper consumer, may increase imports of ore used to make the metal by 20 percent to a record this year, said Trafigura Beheer BV, the country’s top supplier.
Purchases of so-called concentrate, or processed ore containing copper, may rise to 5.4 million metric tons from 4.5 million tons in 2007 as China expands in smelting, said Simon Collins, director of Trafigura Trading Shanghai Co., a unit of Trafigura. China would become the world’s top buyer, surpassing Japan which bought 5.05 million tons last year.
China’s 11.4 percent economic growth in 2007, the fastest in 13 years, fueled demand for copper and pushed prices to a record $8,820 a ton on the London Metal Exchange on March 6. Investment in cities and highways has spread to the center and west of the world’s most populous country, increasing consumption of metals for power, homes, factories and cars.
“If you travel outside of Shanghai and Beijing to provincial capitals and second-tier cities, you’ll see an enormous amount of development going on,” Collins said by telephone from Shanghai April 4. “I’m very bullish on China.”
Trafigura, a closely held commodities trader based in Amsterdam, is the largest seller of copper concentrate to China, supplying about 1 million tons a year, said Collins, who is responsible for metals and minerals operations in the country. The company sells more than 600,000 tons of lead and zinc ore, and about 1 million tons of alumina a year, ranking in the top five suppliers of these materials to China.
200 Million People
Sales from metals and minerals totaled $11.3 billion in 2007, of which Asia contributed $5.4 billion. The company’s total revenue, including oil, was $51 billion.
The nation’s consumption of metals will grow for at least two more decades because of a population shift from rural areas to cities, Collins said.
“You’re going to see a movement of probably 200 million people over the next 20 years to urban areas,” he said.
Rising imports of copper concentrate may push down processing fees as smelters compete for scarce global ore supplies, said Takashi Murata, an analyst at the Daiwa Institute of Research in Tokyo. That may reduce costs for BHP Billiton Ltd. and Rio Tinto Group. BHP won a cut of as much as 25 percent in fees from smelters this year.
China imported 951,860 tons of copper concentrate in the first two months of this year, up 32 percent from 721,850 tons last year, according to the country’s customs. Japan imported 746,570 tons, down 9.4 percent from 823,762 tons a year before, Japanese customs data show.
Top Buyer
“It’s highly possible China will be the world’s top buyer of copper concentrate this year,” Daiwa’s Murata said.
Sumitomo Metal Mining Co., Japan’s second-largest importer of concentrate, plans to cut copper output by 15 percent to 179,000 tons from April to September this year compared with a year earlier because of a 30-day maintenance shutdown at the Toyo smelter starting in May, the company said April 1.
Copper for three-month delivery in London fell 0.4 percent to $8,502 a ton at 4:08 p.m. Singapore time. The price has gained 16 percent in the past year.

Gold N.Y. Spot $ 0928.90
Silver N.Y. Spot $ 18.21
Lead LME Cash $ 1.3381
Copper LME Cash $ 3.9599
Zinc LME Cash $ 1.0714
Nickel LME Spot $ 12.83
Aluminum LME Spot $ 1.3186
Platinum N.Y. Spot $ 2010.00
Palladium N.Y Spot $ 438.00
Oil WTI Cushing $ 108.90
Natural Gas (Henry Hub)($/MMBtu) $ 9.36
Mid-Columbia (US$/MWh) $ 96.62

USD-AUD $ 1.0798
AUD-USD $ 0.9261
CAD-USD $ 0.9910
USD-CAD $ 1.0091
EUR-USD $ 1.5710

Gold N.Y. Spot $ 0906.10
Silver N.Y. Spot $ 17.60
Lead LME Cash $ 1.3172
Copper LME Cash $ 3.9209
Zinc LME Cash $ 1.0347
Nickel LME Spot $ 13.03
Aluminum LME Spot $ 1.2909
Platinum N.Y. Spot $ 1990.00
Palladium N.Y Spot $ 438.50
Oil WTI Cushing $ 105.60
Natural Gas (Henry Hub)($/MMBtu) $ 9.66
Mid-Columbia (US$/MWh) $ 85.60

USD-CAD $ 1.0083
USD-AUD $ 1.0861
AUD-USD $ 0.9207
CAD-USD $ 0.9919
EUR-USD $ 1.5726

The spike in commodities prices driving the Australian economy is likely to be higher for longer, increasing the difficulty of reining in inflation, a senior Treasury official predicts.
The head of Treasury’s macroeconomic group, David Gruen, said in Sydney yesterday that the budget would seek to play a role in coping with the inflationary effect of a once-in-50-year surge in export prices.
Dr Gruen said the effect of higher interest rates on the heavily indebted was even more potent now than in previous periods of rising rates because of the growth in household borrowing.
“The ratio of household debt to annual disposable income is now around 160 per cent, up from around 100 per cent at the time of the 1999–2000 tightening, and around 65 per cent when interest rates were being raised in 1994,” he said.
Among the world’s richest countries, Australia has been the biggest beneficiary of fast growth in China and India. Figures released this week showed another surge in the prices of commodities exported from Australia, even beyond well-publicised jumps in coal and iron ore prices.
The Reserve Bank’s commodity price index for March rose 0.4 per cent in March, after a 4.7 per cent jump in February chiefly on the back of increases in prices for nickel, aluminium and copper.
Asked whether there was a risk that a number of investments in mining projects seeking to cash in on the rising commodity prices would leave Australia facing a ”resources bubble”, Dr Gruen said that if China and India followed the path of smaller developing nations there “is a coherent story about why it might be that Australia’s resources prices might be higher for longer.”
With agriculture also expanding due to an increase in investment and recent rains, Dr Gruen said the rest of the economy would “need to grow quite slowly” to bring inflation back within its 2–3 per cent target range.
He said the Federal Government’s commitment to a budget surplus of at least 1.5 per cent of gross domestic product would seek to alleviate some of the pain caused by the need to slow the economy to combat inflation, and would “spread some of the adjustment more broadly across the economy.”
Dr Gruen, who has attended meetings of the Reserve’s board in place of the Treasury secretary, Ken Henry, also addressed concerns that high interest rates could tip the economy from boom to bust. He said that achieving a ”soft landing” should not beyond the wit of policymakers.

Peter Munk, chairman of Barrick Gold Corp., comments on the outlook for gold. He spoke today at a presentation in London marking the 25th anniversary of the founding of the Toronto-based company, the world’s largest gold producer.
On the gold price:
“I can see more and more reasoning that gold will double or go even higher. Investors should keep a small part of their investments in gold.”
On gold as a commodity:
“All commodities respond to supply and demand, but gold has that little bit extra, the fear factor. You don’t go to aluminum, copper, nickel if there’s chaos in the financial world, but you do go to gold. These are not characteristics that you can subscribe to any other commodity apart from gold.”

Gold N.Y. Spot $ 0878.20
Silver N.Y. Spot $ 16.53
Lead LME Cash $ 1.2456
Copper LME Cash $ 3.7762
Zinc LME Cash $ 1.0267
Nickel LME Spot $ 13.09
Aluminum LME Spot $ 1.3041
Platinum N.Y. Spot $ 1893.00
Palladium N.Y Spot $ 429.00
Oil WTI Cushing $ 100.10
Natural Gas (Henry Hub)($/MMBtu) $ 9.83
Mid-Columbia (US$/MWh) $ 91.44

CAD/USD USD=C$ 1.0292
AUD/USD USD=A$ 1.1068
USD/AUD AUD=US$ 0.9035
USD/CAD CAD=US$ 0.9729
CAD/USD USD=C$ 1.0279
EUR/USD EUR=US$ 1.5594

Gold N.Y. Spot $ 0931.70
Silver N.Y. Spot $ 17.70
Lead LME Cash $ 1.2646
Copper LME Cash $ 3.8644
Zinc LME Cash $ 1.0442
Nickel LME Spot $ 13.52
Aluminum LME Spot $ 1.3309
Platinum N.Y. Spot $ 2005.00
Palladium N.Y Spot $ 443.00
Oil WTI Cushing $ 106.70
Natural Gas (Henry Hub)($/MMBtu) $ 9.35
Mid-Columbia (US$/MWh) $ 81.53

CAD/USD $ 1.0256
AUD/USD $ 1.0954
USD/AUD $ 0.9129
USD/CAD $ 0.9822
CAD/USD $ 1.0181
EUR/USD $ 1.5844

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