Commodity Blog

Archive for February 4th, 2009

The IMF has warned the US against pursuing protectionist policies such as a ”buy American” clause inserted into the US stimulus-package legislation, saying such approaches don’t work and would be harmful to the recovery.
Speaking at a briefing on the outlook for Asia, the IMF’s chief-executive, Dominique Strauss-Kahn, said that in crises, the idea of finding a domestic solution was always tempting.
“The problem is with globalisation, even more than previously, it won’t work. The idea is understandable, but really, no one can believe there is a solution in that direction, and we have to explain and explain again that beggar-thy-neighbour policies do not work,” he said.
The Obama Administration faces its first real test on free trade when it confronts moves by both the Senate and the House to insert “buy American” provisions in the stimulus bill.
Virtually every major trading partner of the US — including the EU, Australia, Canada, Japan and China — has warned that such a move could trigger a trade war and would be a breach of international obligations.
Mr Strauss-Kahn also said the idea that Asia had been decoupled from the rest of the world economy had clearly been demonstrated to be false and that it had held up only because of a delay in the way the downturn affected the region.
The IMF is now forecasting 6.8 per cent growth for China in 2009, down from 9 per cent forecast in November. Developing Asia is expected to growth by 5.5 per cent. But Mr Strauss-Kahn stressed there was “a lot of downside risk”.
He said a driver for recovery in Asia would be an upturn in demand in the US and Europe, which are expected to recover somewhat in late 2009 or early 2010. Asia could be expected to recover in 2010, he said.
Mr Strauss-Kahn stressed that there had been early measures by Asian nations to implement countercyclical responses that should help speed Asia’s recovery.

Someone had to do it. Call the bottom of the market that is. Given he was briefly Australia’s richest man with a $12 billion fortune in Fortescue shares, it was fitting it was Andrew Forrest who has made the call.
The Fortescue chief told 620 mining types at a Melbourne Mining Club lunch at the Town Hall that while 2009 was set to be quiet in terms of growth, he was prepared to call that we are “at or around the bottom of the stockmarket”.
And on the more mundane issue of Fortescue’s iron ore business, Mr Forrest disclosed that Fortescue would today issue a clarifying statement on its exposure to freight contracts that it cancelled when freight rates collapsed. Analysts estimate the group’s exposure at more than $200 million.
It would be tempting to think that Mr Forrest’s call that the market has bottomed would be his hope given his personal stake in Fortescue is now worth a little less than $2 billion. But Mr Forrest has continued faith in the urbanisation and industrialisation of China to once again fuel good times.
While it might take a few more fiscal stimulus packages to get things moving — Fortescue reckons China has another another six in the pipeline if needed — the ”fundamental factors of the boom have not changed”. “The stockmarket is bumping along the bottom and financial crises come and go,” Mr Forrest said.
What’s more, it could take 12–18 months for the pessimism to pass. As a result, there will be “fabulous opportunities out there” in the time being.
Fresh from news that Rio was in talks with Chinese state-owned Chinalco on its own $US15 billion-plus ($A23.5 billion-plus) stimulus package, Mr Forrest said that the level of interest from China/Asia to get “involved in Australian resources businesses is without parallel right now”.
“So if you think everything is crook in Tallarook and nobody is investing, I would say think again,” he said.
He said that as a result of the global financial crisis, there was now an understanding in China that “assets that really weren’t for sale at any price just might be for sale”. “So they have crossed the first Rubicon that perhaps they can get in to these industries. That doesn’t mean that people are going to sell them cheaply,” Mr Forrest said.
His comments came as Rio is understood to be planning to sell Chinalco a minority stake in its prized Pilbara iron ore business to overcome its debt woes. Fortescue itself “would never say never” to a Rio-type deal.
“We would always look at opportunities, but at this point of time we are well capitalised. If an opportunity comes across out table which really locks in long-term customer supply and which really locks us further and deeper in to China, of course, we will look at it seriously,” Mr Forrest said.
He said talk of Chinalco’s possible deal with Rio has been around for months. “All of us have received very strong interest,” he said of the iron ore producers.

Gold N.Y. Spot $ 898.20
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Lead LME Cash $ 0.5049
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Zinc LME Cash $ 0.5108
Nickel LME Spot $ 5.12
Aluminum LME Spot $ 0.6058
Platinum N.Y. Spot $ 0965.50
Palladium N.Y Spot $ 192.00
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