Articles in Category: Commodities

Volkswagen has settled the U.S. portion of its emissions scandal litigation and the Securities and Exchange Commission has written new rules for disclosure of donations by oil, gas and mining companies.

VW Settles U.S. Lawsuts for Nearly $15 Billion

Volkswagen AG will spend more than $15 billion to settle consumer lawsuits and government allegations that it cheated on emissions tests in what lawyers are calling the largest auto-related class-action settlement in U.S. history.

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Under the settlement revealed Tuesday by a U.S. District Court in San Francisco, VW will pay just over $10 billion to either buy back or repair about 475,000 vehicles with cheating 2-liter diesel engines. The company also will compensate owners with payments of $5,100 to $10,000, depending on the age of their vehicles.

SEC Passes New Oil/Gas, Mining Disclosure Rule

The Securities and Exchange Commission on Monday approved a rule requiring oil, gas and mining companies to disclose payments made to foreign governments, capping a process stalled in the courts for years.The rule requires companies to state publicly starting in 2018 how much they pay governments in taxes, royalties and other types of fees for exploration, extraction and other activities.

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An earlier version of the rule was thrown out for being overly broad by a federal judge and the American Petroleum Institute said it is reviewing the new rule and would consider legal action if necessary.

Democracy can be a great system, but it also has some risky aspects.

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One of them is the referendum, especially when it’s done in a period of instability. When people are unhappy, they look for what they think is a short-term solution to their problem, overlooking what’s really best for the country. The Brexit is a perfect example of this. The British people are unhappy because their economy isn’t doing so well, blaming foreigners that cross its borders as part of the European Union and the regulations imposed on member states by Brussels. Read more

Global multinational Tata group is warning the U.K. that losing skilled workers could make it rethink its businesses there and one of China’s important state planners has given a forecast of just how much steel capacity it expects to cut this year.

Tata Warns That Skilled Labor Exodus Would Effect its UK Businesses

India’s $100 billion Tata group said in a statement on Friday that access to markets and the necessity of a skilled workforce would remain important considerations for its businesses in Britain, which on Friday decided to leave the 28-nation European Union bloc.

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Tata has 19 independent companies in the U.K., a Tata Sons spokesman said in the statement, including luxury automaker Jaguar Land Rover, Tetley Tea and its struggling steel plants, which are up for sale.

China Plans 45 Million Metric Tons of Steel Capacity Cuts in 2016

China plans to cut its steel production capacity this year by 45 million metric tons and lower coal output capacity by 280 mmt, the head of the country’s top economic planner said on Sunday.

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The capacity cuts will involve relocating 700,000 workers in the coal sector, and 180,000 workers in the steel industry, Xu Shaoshi, chairman of the National Development and Reform Commission, said at the World Economic Forum in the northern city of Tianjin. Xu said he was very confident that China will achieve the 2016 targets.

The British pound slumped to its lowest level since 1985 early this morning as results of the U.K.’s vote on European Union membership came in with the leave campaign winning the vote by close to a 2% margin.

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The currency tumbled to as low as $1.3460 on Friday, which was its lowest level in 31 years.

It fell about 10% from the 2016 high of $1.50, which it hit just hours earlier when most polls suggested the remain campaign had a slight polling lead. That was before polls closed.

As of this writing, Dow Jones Industrial Average futures are down 600 points, nearly 3%, hours before U.S. markets open. Japan’s Nikkei Average, which was open and trading as the votes were counted, dropped 8% while the U.S. dollar briefly fell below 100 yen to a dollar.

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Investors fled to safe havens as gold climbed 5% and briefly hit $1,330 an ounce. We will update this post in the morning as this story develops.

In a surprise move, Andrew Harding, the head of iron ore at commodities miner Rio Tinto Group has been passed over as CEO to replace outgoing Sam Walsh on July 2 by relative newcomer to the group, Jean-Sebastien Jacques who only joined in 2011 and has headed up Rio’s copper and coal divisions, the Sydney Morning Herald reports.

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Harding has been with Rio for 25 years and had been expected to replace departing Walsh in part due to his experience in iron ore which is central to Rio’s existence. The miner generates about half its revenues and around 90% of its earnings from iron ore sales, just 9% from aluminum and copper and the balance from diamonds and other minerals.

Rio Tinto’s Future

The move is seen as part of future plans for Rio to reduce reliance on iron ore and to divest itself of coal assets. Although the firm would argue otherwise — its cost of production for iron ore is a fraction of what it was five years ago — the firm’s expansion into an already oversupplied market is seen by many as a dead end.

Rio Tinto increased iron ore production by 11% last year to 327.6 million metric tons, and that should rise another 7% to 350 mmt by the end of this year, the Telegraph’s Questor column reports. The miner is not alone as rivals BHP Billiton and Fortescue also ramp up production to offset falling prices.

Source Telegraph

Source: Telegraph

This year, the policy appears to have paid dividends as Chinese demand has risen on the back of a short-term boost from a huge government backed loan splurge at the start of the year, but there are signs the economy there is slowing again. Read more

Vietnam and Thailand placed tariffs on Chinese steel exports. China’s Southeast Asian neighbors are joining an international effort to limit its massive steel industry’s influence on world prices led by Europe and the U.S.

Low oil prices forced OPEC’s accounts to dip into deficit for the first time since 1998.

China’s Neighbors Are Sick of Steel Dumping, Too

Countries such as Vietnam, Indonesia and Thailand are challenging a flood of imports from China. They are retooling their steelmaking technology and imposing tariffs as a construction boom spurs steel demand across Southeast Asia

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Steel from China is expected to dominate the market for many years, but swelling demand is driving efforts in countries such as Vietnam and Indonesia to build more modern plants, impose tariffs and better compete with China’s vast mills.

Vietnam imposed temporary anti-dumping tariffs ranging from 14% to 23% on steel imports from China and elsewhere in March. It recently slapped additional import duties of up to 25% on more Chinese steel products that will last until October 2019.

Thailand’s commerce ministry is working on the final draft of an anti-dumping law. The government there expects to propose the draft for approval by end-2016, according to a spokeswoman.

OPEC Accounts Fall into Deficit, First Time Since 1998

OPEC’s 2015 oil export revenues slumped 46% to a 10-year low, the group said in a report published on Wednesday, underlining the impact on producers’ income from a collapse in prices.

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Oil prices are at about $50 a barrel, half their mid-2014 level after being pressured by oversupply. OPEC’s decision in November 2014 to not cut supply, hoping a drop in prices would curb supply from competitors, deepened that decline.

Reuters_MetalMiner Chart of the Week 062216_550

Source: Reuters

Aluminum reached a one-month high this week as Chinese demand took up more supply at home. As the Shanghai Futures Exchange price has risen, idled smelters has restarted.

A federal judge has ruled the federal government cannot set rules for hydraulic fracturing or “fracking” on public lands and, no matter what the U.K. decides in its EU Brexit vote, gold’s bull run is likely over.

Judge Tells Interior Dept. it Can’t Set Fracking Rules

A federal judge in Wyoming made permanent a temporary block of an Interior Department rule setting stricter standards for hydraulic fracturing on public lands, a blow to President Barack Obama’s environmental agenda in the sunset of his administration.

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U.S. District Judge Scott Skavdahl issued a ruling late Tuesday invalidating the regulation, saying the Interior Department lacked the authority to issue it. The same judge last year issued a preliminary injunction blocking the rule until he made a final decision.

The rule, issued by department’s Bureau of Land Management in March 2015, applies to oil and gas drilling on federal lands, which produce 11% of the natural gas consumed in the U.S. and 5% of the oil, according to government data. The government can appeal the ruling.

Brexit Vote Likely to End Gold’s Run

No matter if the U.K. votes to stay in the European Union or leave, Gold’s sharp gains on uncertainty over its membership are likely to come to an end after Thursday’s referendum.

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Prices hit their highest since August 2014 last week as the $5-trillion a year gold market rose with other “safe” assets, such as German bunds, the Swiss franc and Japan’s yen.

Aluminum price increases this year have been minimal compared to what we’ve seen in steel prices. However, the metal is rising slowly but steadily as investors see an opportunity to buy aluminum when prices fall short-term.

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That’s exactly what happened this month, after prices sold off in May, investors are again jumping on the metal.

Aluminum hits 1-month high. Source: MetalMiner analysis of fastmarkets data

Aluminum hits a one-month high. Source: MetalMiner analysis of Fastmarkets.com data.

Demand Improves

A recovery in demand is a key factor supporting aluminum prices this year. China unleashed a renewed government stimulus in the form of credit expansion and infrastructure building in December, which has — at least momentarily — improved the demand side of the equation for industrial metals.

Trade figures this year showed China’s relatively strong appetite for aluminum. Higher demand means exporting less as Chinese companies are consuming more aluminum domestically. China’s exports of unwrought aluminum and aluminum semis were 420,000 metric tons in May. From January to May, exports are down 7.9% compared to the same period last year.

Overcapacity Still an Issue

China has committed to stop the expansion of steel capacity and to actively and appropriately wind down “zombie enterprises” through a range of efforts, including restructuring and bankruptcy. That’s not the case when it comes China’s equally giant aluminum sector. Read more

Gold is recovering its strength this month. Prices last week rose to the highest levels in almost two years. We already pointed out last month that prices had upside potential.

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There are mainly three factors contributing to the price move:

Gold hits new highs on falling bond yields and economic fears. Source: Stockcharts.com

Gold hits new highs on falling bond yields and economic fears. Source: @Stockcharts.com

Economic Fears

The yellow metal is being bought as a hedge against falling global stocks. The unusually dovish comments from the Federal Reserve last Wednesday showed a lot more pessimism on the U.S. and global economy while investors fear that central banks are losing their ability to boost global stocks or economies. Moreover, this week’s British Brexit vote is causing a lot of global volatility.

NYSE Composite Index acting like 2007’s top. Source: MetalMiner analysis of @StockCharts.com data.

NYSE Composite Index acting like 2007’s top. Source: stockcharts.com

As we warned in May, stock markets pulled back in June. There is no guarantee that the worst has passed. Indeed, so far we are just witnessing choppy action.

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