Global Commodities Outlook

[greengiraffe]

BHP Billiton’s Andrew Mackenzie warns on growth

• DOW JONES
  
• SEPTEMBER 17, 2015 7:33AM
  

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“Protectionism is the grit in the engine,” says BHP Billiton CEO Andrew Mackenzie.Source: News Corp Australia
[b]The head of the world’s largest mining company warns a slump in international trade will jeopardise global growth just as major economies are struggling to prevent another downturn.[/b]
Andrew Mackenzie, chief executive of BHP Billiton, said trade restrictions such as the US crude oil export ban were hampering global commerce — which is lagging far behind its historical pace of expansion — and would limit job growth and stifle innovation. He cautioned governments worldwide against introducing new barriers, such as tariffs on steel, to protect domestic industries.
“Protectionism is the grit in the engine,” Mr Mackenzie said in a speech in Washington, according to prepared remarks seen in advance by The Wall Street Journal. “Job creation, economic growth and innovation: All are jeopardised by the pressure placed on global trade over the last decade.”
Economists say a dearth of major new trade agreements and the erection of extra barriers after the global financial crisis have curtailed exports globally. The World Trade Organisation is expected to cut its 2015 trade forecast a second time after a sudden contraction in trade during the first half of the year — the first in six years.
The International Monetary Fund is preparing to downgrade its outlook for global growth this year, already at its weakest since the financial crisis. “Growth is too low, productivity is too low, trade numbers are too low, investment is too low, infrastructure projects are too few, and the only thing that is too high is unemployment,” IMF Managing Director Christine Lagarde said earlier this month.
Several of the world’s largest emerging markets are already in recession or facing sharply slowing growth. Countries reliant on resource exports such as Canada and Australia have also seen their economies slow or contract in recent times, official data show.
Ms Lagarde said earlier this month that policymakers needed to act with a renewed sense of urgency.
In the US, more than a dozen energy companies, including ConocoPhillips, have been pressing Congress to lift the nation’s four-decade moratorium on oil exports. House Republicans plan to vote in the coming weeks on a bill to lift the ban, although the White House opposes it.
“If the US revises its policies on the trade in natural resources, particularly the crude oil export ban, it will be a stand for open markets,” Mr Mackenzie said. Removing the oil export ban would reduce the price consumers pay to fill up their cars with gas, he said.
The mining chief said politicians in many countries had engaged in a “clamour for protectionism” since the financial crisis, in various attempts to shore up their nations’ economic fortunes.
Most recently, steelmakers in the US have sought import tariffs to protect the domestic industry from increased exports of cheap Chinese steel.
“We need not fear the global trade that makes the growth of China, India and other emerging economies possible,” Mr Mackenzie said. “Their continued development will create jobs, raise productivity and lift living standards in the US and beyond.”
In Australia, critics of a new free trade pact with Beijing are demanding it be killed by Parliament because they contend it threatens jobs. “But I say free trade doesn’t take jobs; it makes them,” Mr Mackenzie said.
The Australian government signed the agreement with China, the country’s biggest trading partner, this year after a decade of negotiations.
Mr Mackenzie also urged politicians to resuscitate talks for the proposed Trans-Pacific Partnership, a trade agreement that would span the Pacific. A spat over which cars should be eligible for duty-free trade surfaced during high-level talks in July, holding up an agreement that Mr Mackenzie said would “seriously benefit global economic growth.”
Dow Jones

[butcher]

Anyone knows the outlook for palm oil prices?

[greengiraffe]

Price-pressured WA resources sector focuses on productivity, costs
DateSeptember 28, 2015 - 12:00AM

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Angela Macdonald-Smith
Energy Reporter[Image: 1443346944814.jpg]

Rio Tinto and BHP Billiton are relying on automation to further drive down iron ore production costs. Photo: Bloomberg

Anchored in sparkling turquoise waters off BHP Billiton's iron ore loading terminals in Port Hedland, some 20 huge vessels wait to take on their precious cargo. Down the coast at Rio Tinto's Cape Lambert port, another 15 are waiting.
At the ports themselves the lack of bustling human activity is deceptive. Operations are humming, as befits the queue of waiting ships.
At BHP's Nelson Point site at Port Hedland, a car dumper installed in a cavernous building unloads one railcar after another of iron ore lump from Mt Whaleback, the world's biggest single-pit open-cut iron ore mine, about 450 kilometres away.
The dumper upends each railcar in turn, sending a roaring, dusty red avalanche of ore down into a hopper, to be transported by conveyor and stockpiled waiting for loading. Not a human operator is to be seen.
Between the Nelson Point and adjacent Finucane Island 24-hour operations, BHP fills about 1000 vessels a year. A 175,000-tonne vessel takes 30 hours to fill, all from operations controlled remotely from BHP's office at the Brookfield Place skyscraper in Perth. Only the shiploaders, with their extendable boom, are manned with a driver ensuring ore is placed evenly throughout the holds.
Despite worries about stalling Chinese demand, the key ports in Western Australia show no sign of any softening.
Iron ore exports from Port Hedland, the world's largest bulk export terminal, reached a record 39.2 million tonnes in August, including an all-time high of 33.9 million tonnes to China.
At Rio, where work was recently completed on a $US10 billion-plus expansion of iron ore port and rail infrastructure in WA to 360 million tonnes a year, operations are being ramped up.
Iron ore chief Andrew Harding says the focus has switched to improving efficiency and productivity, with the aim of adding to the almost $US1 billion of cumulative operating cost savings made since 2012. As at BHP, increased use of high-tech automation systems is driving progress.
Harding points to new technology as providing Rio with a "productivity edge" over rivals.
Increased use of automation by the majors has facilitated the expansion of low-cost supply that has sent iron ore prices in July to their lowest for at least six years and is hurting smaller, higher-cost players. 
Near $US56 a tonne, iron ore prices have slumped 61 per cent since early 2014. Prices for another key WA commodity, liquefied natural gas, have also plummeted, tracking crude oil prices, which are down at sub-$US49 a barrel, from $US115 last June.
The tumble in prices has put additional pressure on a sector already in a state of transition from a major construction phase into an operational one, says Reg Howard-Smith, chief executive of the Chamber of Minerals and Energy in WA.
"Clearly, whilst it had been widely accepted there would be a softening there has been more than that in both of those bulk commodities," Howard-Smith says.
"That's meant additional pressure and obviously, jobs have been lost in addition to that transition, but volumes are up and will increase further." 
On the Burrup Peninsula, Norway-based Yara International is less than three months away from starting up a $US800 million ammonium nitrate project that will supply miners for use in iron ore extraction.
Yara Pilbara plant manager Rob Stevens appears little concerned about the price weakness in the plant's target market.
"The market hasn't slowed at all," Stevens says, noting that while the iron ore prices have dropped, overall production volumes have been maintained. Output from the new 330,000-tonnes-a-year technical ammonium nitrate (TAN) plant, owned partly by explosives giant Orica and US oil player Apache, is intended to match demand from the mines.
As the TAN plant moves into commissioning, the workforce has fallen from a peak of 560 to fewer than 300, and will fall further. It is reflective of what is occurring throughout the WA resources sector, where jobs are forecast to fall from 105,200 in 2014 to 87,000 by 2025 as more projects start up.
Construction on Chevron's mammoth Gorgon LNG project is in its final stages, and the US major's $US29 billion Wheatstone LNG venture is also due to complete in 2016. The $10 billion Roy Hill iron ore project, controlled by Gina Rinehart's Hancock Prospecting, is due to ship its first cargo in the coming months.
Deloitte is predicting that by 2020 the construction workforce in the WA resources sector will be 17,300 lower than last year's. The operational workforce is still growing and it set to peak at 4300 above 2014 levels in 2019 before turning down.
"There's clearly going to be further people exit when Gorgon and Wheatstone in particular come to an end, and Roy Hill, which is very, very close," Howard-Smith says. "But on the positive side employment will be more than double on an ongoing sustainable basis from when we started this 10 years ago, from about 40,000 to the high 80,000s: that's a significant increase."
Volumes are rising as a result of the investments, with WA resources sector exports forecast by Deloitte to be 480 million tonnes greater than in 2013 by 2018. The drive to lift efficiency means productivity in the production is forecast to increase 40 per cent by 2017.
The sector has rationalised as a result of weaker prices for several commodities, high production costs and the scaling back of projects and investments.
Expectations of an early expansion of Gorgon beyond the 15.6 million tonnes a year under construction, faded several years ago because of cost blowouts in the initial phase, and have become more distant with the drop in LNG prices.
At $US54 billion, Gorgon is the largest single resource development in Australia's history, with production set to begin late this year or in 2016 from the first of its three 5.2 million-tonnes-a-year liquefaction trains being built on Barrow Island, about 60 kilometres off the WA mainland.
Within months, instead of providing a convenient harbour for a cruise ship being used to accommodate construction workers, the 2.1-kilometre jetty jutting out from the eastern flank of Barrow Island will start to see the arrival of LNG tankers to ferrying gas to customers in Japan, South Korea, India and elsewhere. A domestic gas plant will supply 300 terajoules a day of gas into the WA market.
With a lifespan of 30-40 years, Chevron has said it remains "comfortable" with the economics over the course of the cycle, despite the slump in crude oil prices that has slashed expected initial revenues from the project.
But cost and price hurdles have dashed hopes for expansion. Howard-Smith acknowledges in the short and medium term, investment in new LNG capacity "seems unlikely".
At Yara, Stevens says a landmark decision to use a modular style of construction – where large components are built overseas and placed together on site – rather than the traditional "stick-build" style was what made that investment economic. The plant is the first technical ammonium nitrate plant to be delivered by modular construction worldwide.
"I don't believe this plant would have been erected here if it wasn't modular based," Stevens says.
Howard-Smith points to the gold sector as another brighter spot, helped by the weakening of the Australian dollar. Exploration activity is higher than elsewhere in the sector and augurs well for future production, he says.
Technology is playing a part here too, allowing miners to increasingly operate underground mining equipment from the surface even at smaller operations.
"It isn't all gloom and doom by any means," Howard-Smith says.
The writer was hosted in the Pilbara by the CME, the Australian Petroleum Production & Exploration Association and the Minerals Council of Australia.

[BlueKelah]

Anyone knows the outlook for palm oil prices?

I'll pm you some recent outlook ;D.

IIRC prices are almost at GFC levels. But compared to historical lows there is still a ~50% downside.

[greengiraffe]

Anyone knows the outlook for palm oil prices?

I'll pm you some recent outlook ;D.

IIRC prices are almost at GFC levels. But compared to historical lows there is still a ~50% downside.

is there something so secretive that an open forum can't share or is it your insights are so invaluable...

[greengiraffe]

Brazil’s sugar rush turns sour as flagging demand canes market

• JULIE WERNAU
  
• THE WALL STREET JOURNAL
  
• SEPTEMBER 29, 2015 12:00AM
  

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Bust Source: TheAustralian

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[b]Virgolino de Oliveira is treading what has become a well-worn path for emerging market companies that built up capacity to meet China’s demand for commodities only to watch it crumble.[/b]
The Brazilian sugar producer missed a bond payment in February and hasn’t been able to renegotiate the terms of its debt, according to Fitch Ratings. The company couldn’t be reached for comment, but Fitch analyst Claudio Miori said it was likely to seek bankruptcy protection, joining the roughly one-fifth of Brazil’s sugar cane mills that already are requesting relief from unpaid bills and debt payments.
“They stopped paying sugar cane farmers,” Mr Miori said. “They stopped paying banks. They are only one notch from default.”
The woes of Brazil’s sugar cane industry offer a stark illustration of the problems confronting emerging markets. The combination of slower growth in China and excess production capacity of many commodities sent raw materials prices spiralling lower over the past several years.
That led to declines in the currencies of countries reliant on commodity exports. Now companies are struggling to pay back the debt they issued to build up capacity when times were good.
Virgolino de Oliveira sold $US300 million ($426m) in dollar-denominated bonds in 2012 to expand its operations, anticipating the price of raw sugar at the time — US25c a pound — would remain at that level. Other sugar executives in Brazil, the world’s largest producer of the sweetener, were making the same bet: that a rising global middle class would keep prices of food, especially sugar, aloft. They were wrong. Sugar prices hit a seven-year low in August and now hover around US12c a pound. “It wasn’t just the sugar rush in Brazil,” said Rashique Rahman, head of emerging-market debt at Invesco, which has $US776.4bn under management. “It was a broadbased bull run for emerging markets. You had low interest rates, China was buying everything in sight. It was happy days. That cycle is now, we believe, turning.”
Since the start of 2010, investors ploughed more than $US1 trillion into emerging-market bonds, according to the Institute of International Finance. Ten per cent of that went to Brazil. But inflows into emerging-market bonds slowed sharply this year, to a net $US53.8bn in the first eight months of the year, according to IIF. That is down 49 per cent from the corresponding period a year earlier. As anxiety about emerging-market growth deepened, investors began yanking money out of Brazilian bonds in June, with $US5.9bn flowing out in the three months through August.
The prospect of higher US interest rates this year, which Federal Reserve chairwoman Janet Yellen last week signalled as likely, further dims the allure of risky and high-yielding emerging-market debt. In Brazil, political turbulence is adding to the pressure on government and corporate bonds as well as on the currency.
Earlier this month, Standard & Poor’s was the first ratings firm to cut Brazil to “junk”. The Brazilian real has tumbled 33 per cent against the dollar this year, making it among the worst performing emerging market currencies.
The epicentre of the carnage can be found in the south central region of Brazil, which processes 90 per cent of the nation’s sugar cane. Since the commodity boom of the 2000s began to sputter, 80 mills have closed out of 300, according to Unica, the country’s sugar cane industry group. An additional 10 are expected to close this year.
In these factories, sugar cane is shredded then squeezed under high pressure to extract cane juice. The juice is then converted into crystals, which are then packed and sent to port. Ethanol, which is a widely used fuel in Brazil, is often manufactured at the same plants.
Insolvent mills are attempting to sell as much sugar as possible to stay afloat, traders and producers say, adding to a glut that is driving down world prices. Stockpiles of the sweetener are at their highest in at least 35 years amid the rush to produce, according to the US Department of Agriculture.
Sugar production in Brazil hit a record of 38.4 million tonnes in 2010, double the level of a decade earlier. In the next crop year beginning October 1, the country’s sugar output is pegged at 36 million tonnes, according to USDA estimates. Meanwhile, there are signs of flagging demand. China imported 25 per cent less sugar in August than a year earlier, according to Price Futures Group.
“Brazil relied too much on commodities,” said Michael McDougall, head of the Brazil commodities desk at Societe Generale in New York. “Now you have the after-effect.”
Some sugar mills in Brazil are thriving despite accelerating inflation and high interest rates inside the country. “This is a very big industry,” said Andy Duff, head of the food and agribusiness research department at Rabobank Brazil. “There is a tremendous amount of diversity in terms of business models, in terms of financial states.”
Mills faring better tended to be more diversified, have larger parent companies to keep them afloat and were close to ports, Fitch said.
Still, the outlook for the industry is grim. On average, sugar mills are carrying 27 per cent more debt this year, in local currency terms, than last year per tonne of sugar cane, according to Rabobank.
And the depreciation of the real versus the dollar had not ­materially enhanced Brazilian exporters’ competitiveness, Fitch said.

[BlueKelah]

Anyone knows the outlook for palm oil prices?

I'll pm you some recent outlook ;D.

IIRC prices are almost at GFC levels. But compared to historical lows there is still a ~50% downside.

is there something so secretive that an open forum can't share or is it your insights are so invaluable...

Paid private report, dun wan to get the forum in trouble putting in a public link.

sent from my Galaxy Tab S

[greengiraffe]

• Oct 2 2015 at 8:52 AM 
   
  

RBA commodity index hits near 10-year low

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/x/r/g/1/image.related.afrArticleLead.620x350.gjzf5x.png/1443739967631.jpg[/img]A fall in coal prices pushed the RBA's commodity index lower in September Fairfax
by Jonathan Barrett
Falling coal prices have pushed the Reserve Bank of Australia's monthly commodity price index down to near 10-year lows, days before an interest rate decision.
The commodity index, which includes oil, base metals and rural commodities, fell 1 per cent in September, representing a third consecutive monthly decline. It is at the lowest level since June 2006 on SDR terms (Special Drawing Rights – an International Monetary Fund measure used by central banks).
The decline was largely attributed to falls in coal and lamb prices, which overshadowed an iron ore price rise. The commodity price movements negatively affect the country's terms of trade – the ratio of export prices to import prices – which undermines income flowing to individuals, companies and a federal government in a precarious budget position.
In Australian dollar terms, the index rose by 2.7 per cent in September; while it dropped when calculated in US dollars.

Most economists expect the RBA board to keep the cash rate at 2 per cent at next Tuesday's meeting – the market is pricing in a 27 per cent chance of a 25 basis point rate cut next week according to Bloomberg – however there is an expectation that any future increases in the unemployment rate may lead to as many as two cuts by the end of next year.
Falling cash rates and a lower dollar – one of the usual outcomes of a rate cut – can encourage businesses to invest and hire, and it helps exporters. The IMF's latest World Economic Outlook warned that investment outside of mining was not picking up the slack left by persistent commodity price weakness.
Bankwest chief economist Alan Langford said that while economic conditions were soft and all RBA meetings were "live", he did not expect a rate cut next week. "I don't think we are there yet but crikey it's a bit soft," Mr Langford said.

[greengiraffe]

As resources dive, it’s the time to buy

• THE AUSTRALIAN
  
• OCTOBER 05, 2015 12:00AM
  

0

Michael Roddan
[Image: michael_roddan.png]
Reporter

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Simon Mawhinney says Allan Grey has been increasing its allocation towards the resources sectorSource: News Corp Australia

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Resources slump Source: TheAustralian


[b]It may not have hit bottom just yet, but for one contrarian investment firm, now is the best time to buy into the beaten-down resources sector for many years.[/b]
Allan Gray chief investment officer Simon Mawhinney told The Australian investing in the resources sector has been “like trying to catch a falling knife” over the last 12 months, despite the firm increasing its allocation towards the sector and looking at further opportunities to buy.
“We decided to invest at the more cyclical end of the spectrum and it’s done very badly since 2011,” Mr Mawhinney said. “The cheap stocks have gotten cheaper and the expensive stocks have gotten more expensive.”
Investors have quickened their exit from resources stocks over the last year, as falling global growth forecasts hit company earnings. The materials index on the ASX200, which aggregates mining stocks, has lost more than 20 per cent of its value in the last six months, falling to its lowest weighting on the benchmark index in more than a decade.
The Investec research report, which sparked a 30 per cent crash in the shares of commodities giant Glencore last week and encouraged a $56 billion resources-led rout on the Australian sharemarket, was a further sign of the high risks of holding mining shares amid an uncertain global outlook.
But for a contrarian firm such as Allan Gray, events like the Glencore flash crash are a resources-buying opportunity to jump at.
“I’m not saying blindly go out and buy them,” he said. “But everyone seems to be turning their back on some of these big resource names and it’s a much better time to buy them now than it has been in many, many years.”
Peters MacGregor Capital Management head of research Nathan Bell said one misunderstanding was that contrarian investing is just doing the opposite of what everyone else is doing.
“It’s about looking under rocks,” he said. “The more rocks you look under the more likely you are to find something undervalued.”
Peters MacGregor invests in stocks “people don’t want to buy”, such as the British banks which have to pay high amounts for protection insurance following the GFC, which distorts their profits. But the firm stays clear of the cyclical resources industry.
While Allan Gray invests solely in Australian-listed firms, Peters MacGregor diversifies abroad in a bid to reach more industries and what it sees as better-run companies, but also to get away from the local banking and resources stocks, which have led the Australian market to its lowest point in two years.
Sharemarkets globally have reacted with volatility to shaky Chinese industrial numbers and mixed signals coming from the US Federal Reserve as it considers hiking interest rates for the first time in a decade.
“Contrarians can operate against these variables,” IG markets Chris Weston said. “But that really depends on their style.
“As things stand, and taking all the various factors into account, the time to be a contrarian is not upon us. If the GFC taught us anything, it’s that it’s best not to own assets when you don’t understand why they’re going down.”
Rob Hopkins, managing director of stock-picking firm Smallco, said when there was a scare in the market there was a buying opportunity. But his firm, which until recently was one of the best performing funds managers in Australia, has stayed away from mining stocks.
“While that hurt us for the first 10 years of our investment, the last five has been quite good,” Mr Hopkins said.
The Reserve Bank’s commodity price index showed a further 1 per cent decline in September to the lowest point in nearly 10 years, after already weak coal prices continued to soften.
“We’ve spent a reasonable amount of time looking at China and it’s hard to work out what exactly is happening there,” Mr Hopkins said, explaining his wariness of resources investments. “It’s a very opaque economy.”
Mr Mawhinney said while China’s future was unclear, and large swathes of the resources market were still overvalued or on their way to bankruptcy, energy stocks were becoming an increasing part of Allan Gray’s portfolio, along with a select few resources stocks.
He said putting a blanket ban on cyclical companies was irrational, and every stock had a price at which Allan Gray was willing to buy it — unless the company was insolvent.
“If you want to find bargains, find out what people are desperate to sell, put them in the draw and hold on to them,” he said.
“We haven’t picked the bottom, but we hope in five years’ time we hope to significantly outperform the broader market.”

[Behappyalways]

Caution: More Commodity Price Weakness Ahead
http://www.bloombergview.com/articles/20...hit-bottom