Commodity market headline (7th of Jan)

[곰이좋아]

BALTIC INDICES	INDEX		T/C LEVEL
BDI	468	-5	-
BCI	462	-10	4,676
BPI	466	+2	3,722
BSI	445	-4	4,656

 

Worldwide Bunker Prices
PORTS	IFO380		IFO180		MDO		MGO-0.1%, L.S.
PIRAEUS	160.00	0 Ø	180.00	0 Ø	-	0 Ø	340.00	0 Ø
ISTANBUL	176.00	-4	193.00	-2	-	0 Ø	370.00	0 Ø
FUJAIRAH	160.00	0 Ø	200.00	5	-	0 Ø	545.00	10
SINGAPORE	177.00	-3	180.00	-5	325.00	5	335.00	5
ROTTERDAM	130.00	-5	151.00	-15	-	0 Ø	296.00	-5
HOUSTON	135.00	0 Ø	180.00	0 Ø	-	0 Ø	365.00	0 Ø
SANTOS	155.00	0 Ø	175.00	0 Ø	-	0 Ø	585.00	0 Ø

 

 

 

Why 2015’s Best Commodity Could Turn Into This Year’s Nightmare

Last year’s best-performing commodity is poised to become the market’s worst nightmare.

After the longest rally in London cocoa futures since at least 1989, farmers from Ivory Coast to Peru are preparing to revive supplies in the 2016-17 season that starts in October, creating a surplus that Rabobank International says will be the largest in six years. With demand slowing, the bank is most bearish about prices for the chocolate ingredient this year among the dozen agricultural commodities it tracks.

 

Prices surged 60 percent during a four-year rally through 2015, forcing candy makers from Hershey Co. to Lindt & Spruengli AG to charge more for their products. Last year, El Nino weather patterns left dry conditions that hurt cocoa crops, including in West Africa, which produces about 70 percent of the world’s beans. London futures in December reached 2,332 pounds ($3,423) a metric ton, the most since 2011, when a civil war disrupted exports from Ivory Coast, the top supplier.

“We expect these very good international prices to incentivize production,” said Carlos Mera, an analyst at Rabobank in London. “We don’t think these levels are justified given the political stability in West Africa.”

Cocoa was an anomaly last year, rising 14 percent in London, when almost every other major commodity tumbled. The gain was the biggest of the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index, which slid more than 25 percent. Rabobank says cocoa futures in London may slide to 1,800 pounds by the fourth quarter, down 17 percent from Tuesday’s close at 2,163 pounds.

Here are five reasons for the bearish outlook:

1. Farmer Profit

The government in Ivory Coast, which accounts for almost 40 percent of global production, raised prices paid to farmers for a third consecutive year. Growers will get 1,000 CFA francs ($1.62) per kilogram during the bigger of two annual harvests in the 2015-16 season, an 18 percent increase from a year earlier.

It’s the first time farmers across the country have had such a high fixed price for an entire growing season, said Edward George, head of soft commodities research at Ecobank Transnational Inc., a lender based in Lome, Togo. Previously, if prices ever got that high, they were only in certain areas or didn’t last long, George said.

2. Weaker Demand

With the cost rising for chocolate makers, many have tapped into inventories, cutting demand for new supplies. Global grindings by processors, an indication of consumption, will probably be unchanged or rise as little as 0.5 percent in the 2015-16 season that started Oct. 1, according to a November estimate by Cargill Inc., the world’s second-biggest processor.

Barry Callebaut AG, the top processor and largest maker of bulk chocolate, is closing a factory in Thailand and reducing output in Malaysia. The company said overcapacity, high prices and slowing demand made grindings less profitable.

3. Rains Return

Dry conditions from El Nino probably will be replaced by a more favorable La Nina pattern that will bring more moisture to cocoa crops, according to MDA Weather Services. Three of five strong El Ninos since the 1950s were followed by La Nina, said Kyle Tapley, a forecaster for MDA.

“As far as cocoa is concerned, La Nina generally leads to wetter-than-normal conditions across West Africa,” Tapley said in an e-mailed response to questions.

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4. Latin America

While farmers in Ivory Coast and Ghana continue to dominate supply, output is growing in Latin America. Countries in the region have been planting high-yielding trees, according to the London-based International Cocoa Organization. Production in Ecuador rose 6.8 percent in 2014-15, and expansion is occurring in Colombia and Peru, the industry group said.

“Offers are starting to increase from places like Central America as producers look to cocoa to replace coffee,” Jack Scoville, vice president at Price Futures Group Inc. in Chicago, said by e-mail. “This is small now but has really gained traction over the last couple of years and will expand.”

5. Surplus Ahead

After a production deficit of about 150,000 tons in the 2015-16 season that started in October, the world will soon have more supply than it needs. Output will exceed demand by 93,000 tons in the 2016-17 season, according to Rabobank. That would be the biggest glut since 2010-11.

Source: Bloomberg

 

 

Seaborne iron ore pellet premiums level out as fundamentals improve

Seaborne iron ore pellet premiums were unchanged for a third week, as fundamentals appeared to be changing, with supply showing signs of easing and some demand emerging.

Platts assessed the spot blast furnace pellet premium against 62% Fe Iron Ore Index, or IODEX, at $10.60/dmt CFR North China Wednesday, after adjustment to 65% Fe basis, steady week on week.

The assessed pellet premium was normalized to typical specifications of 65% iron, 0.35% alumina, 5% silica, 0.02% phosphorus and 0.003% sulfur.

Physical properties specified by the assessment are 250 cold crushing strength or CCS and a maximum sizing of 2.5% under 5 mm.

“I am hearing that Ukrainian pellet supply is reducing, possibly because not that many producers can actually keep up with the current low prices,” a Hebei-based steelmaker said.

“If this is true, we might see some stability or even improvement in pellet premiums, but this is also doubtful because it is tough to find buyers in China who really want to accept such expensive feedstock when they have cheaper alternatives like lump.”

Additionally, with wintry conditions in China, domestic concentrate production has been falling. That has caused a decline in available raw material which Chinese mills can use to pelletize, sharpening the market’s appetite for imported pellet, with demand heard to be on the rise after a lengthy period of weakening.

“Pellet is actually not that expensive now for a mill like us,” a steelmaker in central China said. “Our pelletization costs are around $15/dmt and more expensive than other mills. So, imported pellet cargoes are better for us in terms of lowering our costs.”

The steelmaker also said it was buying pellet from Australia in smaller lots and was planning to increase its uptake of imported pellet due to higher pelletization costs.

Seaborne pellet premiums still likely had a little room to fall because supply still outperformed demand, the steelmaker said. “But once supply eases, we will start to see support.”

A steelmaker in eastern China said it made sense for mills to use more pellet now, adding it had increased the proportion of pellet used in blast furnaces because the cost of such material had fallen so much.

“I have received some buying inquiries for seaborne pellet cargoes. They are more popular compared to pellet material at the ports as premiums have gone down a lot for imported shipments,” a Beijing-based trader said.

Since the start of assessments by Platts on October 7, 2015, pellet premiums have almost halved in value, having fallen $8.65/dmt, or 45%.

Source: Platts

 

 

 

China iron ore futures fall as buying slows; steel dips

Chinese iron ore futures dropped on Wednesday, with demand in the world’s top consumer expected to weaken amid deepening output cuts by steel mills.

Chinese mills have curbed steel production and slowed purchases of steelmaking raw material iron ore due to a persistent cash crunch and weak sales.

The most active May iron ore futures contract on the Dalian Commodity Exchange was 1.6 percent lower at 317.5 yuan ($48.51) a tonne by the midday break. “The rapid rebound that has driven spot prices to above $40 a tonne has come to an end, and the supply glut for iron ore in the medium term has not changed,” said Wang Yilin, an analyst with Sinosteel Futures in Beijing.

Spot iron ore for immediate delivery to China’s Tianjin port tumbled 2.3 percent to $42.10 a tonne on Tuesday, posting the biggest daily drop in one month, according to The Steel Index (TSI).

The benchmark rebar futures contract for May settlement on the Shanghai Futures Exchange had dipped 0.2 percent to 1,774 yuan a tonne by the midday break.

Rebar and iron ore prices at 0332 GMT

  Contract                          Last    Change   Pct Change            

  SHFE REBAR MAY6                   1774     -4.00        -0.22            

  DALIAN IRON ORE DCE DCIO MAY6    317.5     -5.00        -1.55            

  THE STEEL INDEX 62 PCT INDEX      42.1     -1.00        -2.32            

  METAL BULLETIN INDEX             43.11     -1.26        -2.84

Dalian iron ore and Shanghai rebar in yuan/tonne

Index in dollars/tonne, show close for the previous trading day

Source: Reuters

 

 

 

India’s coal imports fall for sixth straight month in December

India’s coal imports fell for a sixth month in December, a government official said Wednesday, as the world’s third-biggest buyer of the fuel expands domestic mines to boost output and expand power generation.

India shipped in 12.35 million tonnes of coal last month, a 34.3 percent decline from the same month a year ago. Imports slipped thanks to a jump in production by state-run Coal India (COAL.NS), the world’s biggest miner of the fuel that is opening one new mine a month as the government fast-tracks environmental clearances.

“Record coal production by Coal India leads to further reduction in imports,” Coal Secretary Anil Swarup tweeted.

Coal India’s April-December production grew by a record 9 percent, keeping the country on course to reduce annual imports for the first time in five years.

Source: Reuters

 

 

 

Thermal Coal-Markets start 2016 warily as demand outlook remains bleak

Thermal coal prices started the new year warily with physical cargo values around $50 per tonne and futures testing $40 a tonne for the first time since 2003, as last year’s commodity rout spills into 2016.

Physical coal cargoes for prompt shipment from Australia’s Newcastle terminal last settled at $50.35 a tonne, below levels seen during the global credit crisis of 2008/2009.

But prices for cargoes from South Africa’s Richards Bay terminal jumped almost 7 percent from late December to $53 as demand from its main buyer India was strong and domestic coal mining output remained volatile due to frequent disruptions to power supplies.

The weakest of the main physical coal prices were European, where cargoes for delivery into Amsterdam, Rotterdam or Antwerp (ARA) were at $48.20 a tonne, also below 2008/2009 levels.

“Demand for coal in Europe remains weak due to significantly warmer than average temperatures,” said commodities brokerage Marex Spectron.

Meteorological data shows that Europe’s winter has so far been much milder than usual, although a current cold spell could last until later in January.

The overall mild weather has been in large part due to the global El Nino weather phenomenon which causes mild weather across the northern hemisphere.

Reflecting an expectation that prices will not rise anytime soon because of falling demand and ample supplies, benchmark API2 2017 coal futures were not far off $40 a tonne, down over 80 percent since their historic peak in 2008 and to a level not seen since 2003.

“The macroeconomic conditions do not offer any support … Manufacturing activity in key coal consuming countries has slowed,” Marex Spectron said, referring to a slowdown in growth especially in coal-reliant Asia.

Consultancy FGE said that coal demand in the world’s top consumer China was slowing due to “a slowdown of the economy and in an effort to control air pollution, including shutting down coal-fired power plants and capping their running hours to give way to renewable power”.

While most commodities from oil to copper and iron have seen prices tumbling on the back of supplies exceeding demand, the coal sector has been hit particularly hard as, unlike other commodities, many analysts do not believe that its demand will ever fully revive.

The International Energy Agency (IEA) said in December that coal consumption in China had likely peaked, paving the way for a decline in global use even as India becomes the main driver for demand.

Source: Reuters

 

 

 

How the Energy component spearhead Commodities price slump in 2015?

2015 has been one of the worst years for commodities as it sent ripples in economies across the world. Interestingly, the downward journey of commodities has been led by energy commodities.

The energy component of the widely followed S&P Goldman Sachs Commodity Index (GSCI) fell 41% from the start of 2015, a larger decline than the industrial metals, grains, and precious metals components, which declined 24%, 19%, and 11%, respectively, in 2015.

“Weakness in global economic growth contributed to the overall decline in commodity markets in 2015, but unique supply-side factors within certain commodity markets also affected prices,” according to the US Energy Information Administration(EIA).

Each of the 16 commodities in the S&P GSCI Energy, Grains, Industrial Metals, and Precious Metals indices declined in 2015, with prices of some of the energy commodities falling more than 30%.

Nickel, diesel, and crude oil had the largest price declines among the 16 commodities in the four S&P GSCI indices, while lead, corn, precious metals, and gasoline had relatively smaller price declines. Each commodity in the S&P GSCI is reweighted each year based on the commodity’s world production and trading volume to measure its relative importance in the global economy.

Source: Commodity Online

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