Commodity Blog

Posts Tagged ‘market’

Copper is an industrial metal important for housing construction. It’s also used in construction of refrigerators, automobiles, cell phones and other goods. Copper was steadily rising in the past year, but it experienced sharp decline through January to the beginning of February. Then, in the second half of February to March, the metal rebounded. What do analysts say about copper’s perspective? In fact, opinions vary on this matter.

There are voices supporting optimistic outlook for copper price. They are speculating about global economic recovery, supporting demand for the industrial metal. Data from the U.S., one of major copper consumer, about expanding economy especially supports optimism for copper performance, as healthy economy and decreasing jobless rate lead to more housing construction and, as a result, more copper demand. Reports about dwindling stockpiles of LME-monitored copper also can result in price increase. LME-monitored inventories of copper dropped to almost 540,000 metric tones, lowest amount since early February.

But many analysts are inclined to pessimistic view on copper ability to rise or even maintain current price level, some even were going as far as calling current price level “a bubble”. They point out that key reason for the metal’s outstanding performance was huge amount of copper imported by China, one of the world’s greatest consumer, causing copper price to double in 2009. In 2010 it turned out that China imported more copper than it really requires. And it seems that suggestion about demand for the metal rebounding after New Year holidays in China did not prove true. There is also concern that economic recovery may be slow and supply may exceed demand. Earthquake in Chile caused price surge at first but, while being harmful for copper output, didn’t affected copper production as strong as was expected.

So, how can we predict copper moves amid such uncertainty? First answer lies in the very nature of copper as industrial metal. Copper is tied very strongly with overall economical picture, so the world economy can suggest possible copper moves. If economy will continue to rebound, then copper will continue to go up. Another factor worthy consideration is a dollar. Commodities, including copper, are very dependent on the U.S. currency these days, so look for the greenback performance for suggestion where commodities may be heading. It’s also looks like copper performance is strongly correlated with the stock market, so you can plan your trade if you can predict where the stock market is heading.

Corn price surged to the highest level since June and soybeans gained, continuing the three-month rally, as the weaker dollar pushed up demand for commodities. Weak dollar creates an upward momentum for commodities in the market as speculators seek alternative assets for investment to preserve their purchasing power. March futures for corn delivery gained $0.0625 (1.5 percent) to $4.2375 per bushel by 10:00 on the Chicago Board of Trade.

Cattle futures dropped after the report that export demand for U.S. beef fell. Exports declined 20 percent to 162.4 million pounds in September from a year earlier. There is no demand for beef priced at current level, partly because of the global recession. February futures for cattle settlement dropped $0.005 (0.6 percent) to $0.8515 per pound as of 10:13 on CME.

Coffee rose as speculation that world supply will wane and a dollar will drop makes investor buy commodities to preserve their purchasing power. The dollar dropper to a lowest in 15 months versus a basket of major currencies. Global stockpiles of coffee producers may reach 16 million bags, a record low, as a bad weather in Brazil and Vietnam had negative impact on crops. December futures for Arabica-coffee delivery rose $0.0115 (0.8 percent) to $1.4005 per pound on ICE Futures U.S. in New York.

Copper prices gained the first time in three sessions as the dollar slid boosting demand for the industrial metal. The group of 20 industrial nations agreed to maintain stimulus programs to pull the world out of its great slump. These economic stimulus measures help to support the market and show that G-20 are not concerned about the dollar and will let it to fall even further. December futures for copper delivery gained increased $0.015 (0.5 percent) to $2.9675 per pound on NYMEX.

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.