Commodity Blog

Archive for April, 2009

Gold N.Y. Spot $ 909.85
Silver N.Y. Spot $ 12.95
Lead LME Cash $ 0.6237
Copper LME Cash $ 1.9530
Zinc LME Cash $ 0.6083
Nickel LME Spot $ 4.99
Aluminum LME Spot $ 0.6341
Platinum N.Y. Spot $ 1154.50
Palladium N.Y Spot $ 228.00
Oil WTI Cushing $ 049.20
Natural Gas (Henry Hub)($/MMBtu) $03.29

USD-AUD $ 1.3988
AUD-USD $ 0.7149
CAD-USD $ 0.8269
USD-CAD $ 1.2093
EUR-USD $ 1.3112

Gold N.Y. Spot $ 906.25
Silver N.Y. Spot $ 12.75
Lead LME Cash $ 0.6629
Copper LME Cash $ 2.0598
Zinc LME Cash $ 0.6450
Nickel LME Spot $ 5.18
Aluminum LME Spot $ 0.6468
Platinum N.Y. Spot $ 1182.00
Palladium N.Y Spot $ 232.50
Oil WTI Cushing $ 049.20
Natural Gas (Henry Hub)($/MMBtu) $03.47

USD-AUD $ 1.4079
AUD-USD $ 0.7103
CAD-USD $ 0.8091
USD-CAD $ 1.2360
EUR-USD $ 1.3035

Gold N.Y. Spot $ 867.75
Silver N.Y. Spot $ 11.93
Lead LME Cash $ 0.6917
Copper LME Cash $ 2.1432
Zinc LME Cash $ 0.6813
Nickel LME Spot $ 5.64
Aluminum LME Spot $ 0.6534
Platinum N.Y. Spot $ 1208.00
Palladium N.Y Spot $ 233.50
Oil WTI Cushing $ 050.50
Natural Gas (Henry Hub)($/MMBtu) $03.53

USD-AUD $ 1.3868
AUD-USD $ 0.7211
CAD-USD $ 0.8290
USD-CAD $ 1.2062
EUR-USD $ 1.3050

Canada’s dollar touched the highest in three months amid speculation that a rebound in global economic growth will benefit commodity-linked currencies.
The loonie, as the Canadian dollar is known, strengthened for a third straight day as increased investor risk appetite drove the currency through key technical barriers. Copper prices climbed 5.3 percent, extending a 51 percent surge this year. Raw materials including copper generated 56 percent of the nation’s export revenue last year.
“We’re seeing some pretty steady interest in Canadian assets and the Canadian dollar,” said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the largest custodial bank. “If you’re looking for opportunities in developed markets, you’re looking at those that are potentially positioned for eventual recovery in economic growth. People are positioning themselves for that, so there’s been a renewal of interest in commodity currencies.”
Canada’s currency gained 1 percent to C$1.2027 per U.S. dollar at 4:17 p.m. in Toronto. It touched C$1.2014, the strongest since Jan. 12, when it reached C$1.1872. One Canadian dollar buys 83.14 U.S. cents.
After reaching a four-year low of C$1.3064 on March 9, the loonie appreciated as investors ventured out of haven currencies such as the U.S. dollar and the Japanese yen to purchase riskier assets, including stocks and commodity currencies.
‘Fear’ Lessened
Events such as the Group of 20 nations summit in London this month, where leaders announced a $250 billion initiative to support trade finance, and higher-than-forecast earnings April 9 from Wells Fargo & Co. have “helped turn around the Canadian dollar,” said David Watt, senior currency strategist at RBC Capital Markets Inc., a unit of Canada’s biggest bank by assets.
“These seem to have lessened the ’fear’ in markets,” Toronto-based Watt said. “As the Canadian dollar had lagged the Australian dollar and other commodity currencies during the recent love affair with risk, the Canadian dollar had some catching up to do.”
The loonie gained 5.6 percent against the greenback over the past month, compared with a 10.6 percent advance by the Aussie and a 10.7 percent increase by the New Zealand dollar.
“We’ve seen how well the Aussie and the kiwi rebounded recently while the Canadian dollar underperformed until the beginning of last week,” said Sacha Tihanyi, a strategist at Scotia Capital Inc., a unit of Canada’s third-largest bank. “This is likely due to Canada’s greater leverage to U.S. economic performance, auto-sector worries and the prospect for quantitative easing in the country.”
‘Everyone’s Doing It’
Bank of Canada Governor Mark Carney is scheduled to announce guidelines on April 23 about quantitative easing, a policy in which a central bank buys government debt to try to revive economic growth. Although similar measures weakened currencies in the U.S. and U.K. when they were announced, strategists said that’s not likely to happen in Canada.
“People are looking at how their policy makers are handling things,” said Shankar at Bank of New York Mellon, which administers more than $20 trillion. “There’s been a steady hand on the wheel in Canada. You’ve had relative policy stability.”
The Canadian dollar could strengthen to C$1.20 in the next “couple of days,” said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Bank of Montreal.
“Other currencies have dealt fine with respect to their own quantitative easing,” Askari said. “Everyone’s doing it.”
Canadian government bonds dropped today. The yield on the two-year note increased three basis points, or 0.03 percentage point, to 1.12 percent. The price of the 1.25 percent security due in June 2011 fell 6 cents to C$100.27.
Trading Patterns
The loonie earlier extended gains as crude oil for May delivery rose as much as 2.8 percent. Energy products such as crude and natural gas generated a quarter of Canada’s exports last year, according to the nation’s statistics office.
Most of today’s advance was due to technical trading patterns, based on levels where traders put automatic stop-loss orders, said Steve Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada’s third- largest bank.
“The Canadian dollar is on fire today,” Butler said. “We definitely hit some stops when we got through yesterday’s lows, around C$1.2064,” meaning the currency reached levels that triggered orders to sell the U.S. dollar and buy the loonie.
The breach of the technical level was “a solid catalyst for today’s move,” said Scotia Capital’s Tihanyi in Toronto.
In a separate note to clients, Tihanyi wrote that “there may be nothing much standing in the way from a technical perspective of an eventual retest of early January lows just south of the C$1.18 level.”
Canada’s currency will weaken to C$1.26 against the greenback by the end of this quarter before rebounding to C$1.16 in 2010, according to the median forecast in a Bloomberg survey of 38 economists and analysts.

Copper prices have been on a tear this year, as Chinese demand for the metal — both for stockpiling for future use and loading factories to satisfy more immediate demand — has proved surprisingly resilient.
The metal rocketed 8 per cent higher Tuesday to $2.08 (U.S.) a pound in London, its highest level since hitting a low of $1.26 in December. It’s a tidy gain — but still leaves prices about 50 per cent short of where they were a year ago.
“There is a real reason for copper’s rebound, and that is the strategic interest in China and a pickup in the country’s industrial activity, which is what I was hoping for,” said Patricia Mohr, vice-president and commodities specialist at Bank of Nova Scotia.
Desjardins Securities said Tuesday it expects copper to trade around $2.50 a pound through the rest of this year, before hitting $3 in 2010.
“We believe demand from China over the next 18 months and a slow-economic- growth scenario for the Western world are sufficient to sustain copper prices at higher levels,” Desjardins wrote in a report to clients.
That’s good news for Canadian producers, said Ms. Mohr; at current levels, most miners are able to make money.
“We’re at a fairly profitable price for copper,” she said. “It is a generally profitable number for most mines around the world, including Canada. This is a good piece of news.”
Here are three Canadian companies poised to profit from increasing demand for the industrial metal, which is used in the production of cable, wire and electrical products. It’s also a key component in pipes used for plumbing, heating and ventilation systems.
First Quantum Minerals Inc.
The company has copper and gold properties in Zambia, the Democratic Republic of Congo, Mauritania and Finland. This month, it raised $345-million (Canadian) in a share offering.
“The completion of the equity financing increases the company’s financial flexibility and enables the company to take advantage of opportunities that may emerge in the current market,” said Lawrence Smith, an analyst at Scotia Capital who just raised his 12-month price target 30 per cent to $52 a share.
According to Bloomberg, 20 analysts follow the company’s shares. Nine have “buy” ratings, 11 have “holds.” Their average 12-month price target is $42.93.
The shares are substantially higher than their 52-week low of $13.51 set in December, but a way off of their year-ago highs of $93.97.
“We note that 94 per cent of First Quantum’s gross revenue during 2008 was generated by the company’s copper division,” Desjardins Securities analyst John Hughes said.
The company lost $491-million in the fourth quarter, including a $245- million impairment charge. It pinned the loss on a collapse in copper prices, and finished its fiscal year with a $45-million profit.
HudBay Minerals Inc.
Despite a failed merger with Lundin Mining Corp. and a new board of directors elected largely by dissident shareholders, Desjardins Securities says HudBay’s copper holdings could push its shares higher in the coming months.
Mr. Hughes raised his price target to $9.45 a share, from $7.35, noting that 55 per cent of the company’s gross revenue last year came from the company’s copper division.
“We believe demand from China over the next 18 months and a slow-economic- growth scenario for the Western world are sufficient to sustain copper prices at higher levels,” he said.
Fourteen analysts cover the shares, with six “buy” ratings and eight “holds. ” According to Bloomberg, their average 12-month price target is $7.50.
“On March 23, the company announced that the board had resigned, with the nominees of SRM Global Master Fund appointed in their place. Peter Jones has been appointed CEO,” noted National Bank Financial analyst Ian Howat.
“The new management has made it clear that they wouldn’t be taking over the board just to dividend out the cash. They will be revisiting all of the operations and coming up with a plan for the company. They expect to make a transaction within three to six months.”
The company — which has mines in Canada and the United States — earned $15.8- million in the fourth quarter, compared to $28.5-million in the year-ago quarter.
Inmet Mining Corp.
Desjardins Securities raised its rating on Toronto-based Inmet to ”buy” from “hold,” boosting its 12-month target to $47.30 from $35.75 — pointing out that every 30 cent increase in the price of copper adds $1.54 to the company’s earnings per share.
Analyst opinion is mixed on the company’s shares, however, with five “buy” ratings, six “holds” and five “sells.” Their average 12-month price target, according to Bloomberg, is $35.23.
Its 52-week trading range is between $13.38 and $98.61.
Scotia Capital’s Mr. Smith said Inmet is a strong company, but that it may be overpriced at current levels. He downgraded the shares to ”sector underperform” from “sector perform,” but raised his price target to $33 from $26.75.
“Inmet continues to have a strong balance sheet, solid and diverse operating assets, and a good management team,” he said. “However, we note that Inmet is currently trading at a premium relative to its mid-tier mining peer group.”
The miner lost $32.5-million in the fourth quarter, compared to a profit of $63.6-million a year ago.

Gold N.Y. Spot $ 888.15
Silver N.Y. Spot $ 12.64
Lead LME Cash $ 0.6464
Copper LME Cash $ 2.0784
Zinc LME Cash $ 0.6355
Nickel LME Spot $ 5.17
Aluminum LME Spot $ 0.6675
Platinum N.Y. Spot $ 1217.50
Palladium N.Y Spot $ 235.00
Oil WTI Cushing $ 050.20
Natural Gas (Henry Hub)($/MMBtu) $03.46

USD-AUD $ 1.3734
AUD-USD $ 0.7281
CAD-USD $ 0.8189
USD-CAD $ 1.2212
EUR-USD $ 1.3276

Gold prices could easily trade above $1,000 a troy ounce in the coming months and may even trade above $1,100/oz from investor demand, but the rise won’t be a straight line, U.K.-based GFMS Metals Consulting said Tuesday.
“The price may have pulled back a fair bit from the February highs but that was largely just the market’s reaction to jewelry demand crumbling and scrap booming,” Philip Klapwijk, chairman of GFMS, said at the group’s Gold Survey launch. “It’s far from game over for investors and it will be that crowd which sets the price alight.”
However, Klapwijk warned that a summer lull or the need for inflationary pressures to build could mean sub-$900/oz prices in the short term to between $800/oz and $850/oz. Furthermore, rising scrap supplies are weighing on prices, he said.
The global supply of scrap gold in 2008 rose 27% to a record high of over 1,200 metric tons.
“We expect another record year for scrap sales,” Klapwijk said.
Countering that, net investment last year soared by nearly 76%, with record inflows into gold exchange-traded funds during the year providing significant support to prices, GFMS said.
That investment will grow in 2009 due to ongoing concerns over the global economy and health of the financial system.
GFMS said fiscal and monetary policies currently being enacted, particularly by the U.S. administration, is the root cause of gold’s potential, because of their ability to generate inflationary pressures.
Central banks will also be reluctant to raise interest rates while prospects for economic growth are still uncertain and the dollar could weaken if other countries lose their interest or ability to finance U.S. debt. Both will support gold prices, GFMS said.
In addition to forecasting strong investment demand, the group said central bank gold sales should fall further in 2009 and that should help offset a drop in jewelry use to its lowest level since 1988 last year and increased scrap sales.
However, gold mine output should recover from its 12-year low hit in 2008 and rise by 30 tons in 2009, GFMS forecasts.
“Strength in investment will certainly be needed to overcome weakness in the fundamentals,” Klapwijk said.

Base metal share prices are soaring this year as investors look for growth from China and India, but the recovery in commodity prices could be slow.
“With several uncertainties still surrounding the global financial system, the recovery will likely be later than originally thought, and much more shallow,” said Dina Cover, an economist with TD Securities Inc. in a report to clients.
TD Securities expects its TD Commodity Index will rise 25 per cent through 2010, which is less than half the rate it had previously forecast. “Excluding energy, the index will advance by a more muted 8 per cent (previously 22 per cent) next year.” Oil prices are forecast to rise almost 40 per cent.
Realization that world economic growth will fall short of expectations could result in a further 7-per-cent decline in the commodity index during the second and third quarters of 2009, Ms. Cover said.
The base metal stocks could be vulnerable. The S&P/TSX metals and mining index has climbed 68 per cent from depressed levels this year, compared with only a 1-per-cent rise in the S&P/TSX.
“While it is the case that production has been curbed in recent months, these curtailments have not prevented inventories from growing dramatically,” she said.
The rise in the investment demand may also be more tepid than expected. Ms. Cover predicts investors will gravitate to equities rather than making direct investments in commodities over the next 12 to 18 months. “Equity markets, in particular, will be an attractive lure for investor flows once the global economy begins to recover,” she said. “They have a major advantage in that they pay an income stream.”
However, by the end of 2010, TD expects zinc prices could increase almost 40 per cent, nickel and aluminum almost 20 per cent and copper 15 per cent. Galvanized steel producers, which use zinc, have been holding inventories in check.
Much of the recent investor enthusiasm for lead, zinc, aluminum and nickel stems from the rise in copper prices, one of the most economically sensitive metals.
Copper has increased to $1.94 (U.S.) a pound from a low of $1.26 a pound late last year. Scotia Capital Inc. estimates the average break-even cost for copper, including depreciation and interest expenses, is $1.36 a pound.
However, some of that strength stems from buying by China’s State Reserve Bureau, which could exit the market, causing a quick price drop. “Copper prices … likely have the most room to fall, while the rest of the base metal prices are already well below [their] marginal cost of production,” Ms. Cover said.
Although demand for copper will be poor and prices may fall over the next few months, it is “unlikely to test recent lows as financial conditions are improving and secondary supplies are sliding due to relatively low prices,” said Bart Melek, global commodity strategist for BMO Nesbitt Burns Inc.

Gold N.Y. Spot $ 898.50
Silver N.Y. Spot $ 12.71
Lead LME Cash $ 0.5711
Copper LME Cash $ 1.8645
Zinc LME Cash $ 0.5910
Nickel LME Spot $ 4.63
Aluminum LME Spot $ 0.6260
Platinum N.Y. Spot $ 1139.50
Palladium N.Y Spot $ 220.50
Oil WTI Cushing $ 051.90
Natural Gas (Henry Hub)($/MMBtu) $03.55

USD-AUD $ 1.3935
AUD-USD $ 0.7176
CAD-USD $ 0.7910
USD-CAD $ 1.2643
EUR-USD $ 1.3443

Gold N.Y. Spot $ 915.75
Silver N.Y. Spot $ 12.74
Lead LME Cash $ 0.5770
Copper LME Cash $ 1.8303
Zinc LME Cash $ 0.5897
Nickel LME Spot $ 4.27
Aluminum LME Spot $ 0.6192
Platinum N.Y. Spot $ 1124.50
Palladium N.Y Spot $ 215.00
Oil WTI Cushing $ 047.90
Natural Gas (Henry Hub)($/MMBtu) $03.61

USD-AUD $ 1.4395
AUD-USD $ 0.6947
CAD-USD $ 0.7943
USD-CAD $ 1.2590
EUR-USD $ 1.3277