Articles in Category: Commodities

A vicar at one medieval church in the U.K. now finds himself sleeping on a mattress in the church tower, hoping to deter criminals. As metals thefts remain high, religious institutions are starting to face a new plague: metals thieves. We’ve reported metals thefts in foreclosed houses and public parks, but the latest slew of thieves could someday face a higher power than the police.

Last winter, for example, copper thieves ripped apart the Kesser Israel Synagogue in Springfield, Mass., completely destroying the building in a search for baseboard heaters, copper wiring and copper piping. The synagogue suffered $30,000 worth of damage, and a broken water pipe caused flooding. Meanwhile, an entire steeple was pulled from a church in England, leading to £750,000 worth of damage. Read more

It would appear that Tungsten, despite a tight supply market and the lack of any new facilities coming on stream is not immune to the general downturn and rather than prices continuing to rise as expected earlier this year they have in fact drifted off slightly from the March highs. The decision of the Chinese government to increase export taxes on tungsten products and reduce the export quotas for tungsten and APT (starter stock for tungsten production) at the beginning of this year initially had a bullish effect on the market but as the earlier trend of rising imports and reducing exports flattened out and global demand for machine tools and drill bits slowed, prices for both APT and Ferro Tungsten eased.

The one new mine expected to come back on stream this year, Golden Predator, in Nevada would have been the only US mine in operation but the credit crunch has made raising the funding difficult and plans have been postponed. North American production remains solely north of the border for now and even there the New Brunswick project Sisson Brook must be in question in the current economic situation. The delay is that Golden Predator is unlikely to materially affect the market until there is a significant pick up in demand. With China, by far the largest consumer and producer, which is  experiencing a slow down in growth, the price for tungsten is unlikely to see a return to the highs of earlier this year. With tungsten and steel prices both easing, buyers should track the raw material costs in the months ahead and seek tool steel price reductions. Imports play a significant role in the US market and with the dollar retaining much of its summer gains we can expect this to have a downward effect on tool steel prices as stocks work their way through.

–Stuart Burns

At the mining market’s earlier peak, private equity funds steered clear, avoiding miners and their high valuations. “Valuations were too high to provide the returns they sought, while booming demand from institutional and individual, or Ëœretail,’ investors for mining shares meant smaller companies could easily obtain capital for their projects through stock sales,” the Wall Street Journal recently reported. But declines have hit the industry hard, halting development of new projects after the credit crunch and drop in metal prices.    Through high interest rates, private equity financing could provide a solution to the troubles facing mining companies and save the companies from debt.

WSJ predicts a “shake-out” for mining stocks in the approaching year, citing hedge-fund groups that “had been providing funding withdraw.” Several private equity firms now plan to spend several hundred million dollars on investments in the mining industry. Sentient Group, Pacific Road Capital Management, Resource Capital Funds, Black River Asset Management LLC and Emerging Capital Partners are some of the investment groups that expect the next seven years to yield returns more than two to five times their investment. Other private equity funds are looking at pre-existing metals and mining operations. “Last year, U.K.-based Klesch & Co. agreed in principle to purchase a 290,000-metric-ton aluminum smelter in the Netherlands from Alcan, now owned by Rio Tinto, and is in talks with European steelmaker Corus to buy its two aluminum smelters in Germany and the Netherlands,” the WSJ reports.

Earlier this summer, Seeking Alpha’s Michael Dawson shared his own insight on the private equity issue, surprised that private equity might consider such a cyclical business. “The day a private equity firm buys a mining company will signify to me that we are in phase two of a bull market in mining stocks,” he wrote. “Phase two is when the institutional money such as private equity starts buying … Once we enter phase two, the computer goes off and I am going fishing.” If this new trend takes hold, it might not be long until that fishing trip takes place.

–Amy Edwards

Gold Futures Give and Take

by on
Style:
Category:
Commodities

Gold futures  are falling, falling, falling, but it’s possible that the bottom is close. Last Wednesday, gold futures fell to their lowest level in the past 11 months, dropping to $762.50 an ounce on the Comex division of the New York Mercantile Exchange. Gold hasn’t seen closing levels this low since October 24, 2007.

Long-term, the drop doesn’t appear too significant, according to Gold Market Update. “Although the decline has taken the price some way below the 300-day moving average — the first time this happened since the bull market in gold began — and beneath the trendline shown on our chart, the price has not breached the first really important underlying support level, that arising from the big 2006-2007 trading range, and thus far it has barely touched the upper boundary of this strong support,” the site reads. Gold Market Update concludes that the future for gold still shimmers.

Despite ups and downs, investors remain bullish  when  gold comes to mind. Recently, Mark Huber analyzed why some “gold bugs” have still been recommending gold bullion, despite a $200 price drop. He reports that the Hulbert Gold Newsletter Sentiment Index didn’t budge after gold’s fall, reflecting “abnormally high” levels: “To put [the HGNSI] level in perspective, it is higher than where it stood in early August, when bullion was trading above $900 per ounce … From a contrarian perspective, the bottom of gold’s decline will come when enough of the gold timers throw in the towel. Ironically, from that perspective, the gold bugs’ bullish persistence is extending the agony and postponing that eventual bottom.” We would suggest reading Huber’s article for more information on the topic, and keeping your eyes on the ball (or, perhaps, the bullion) in this volatile market.

–Amy Edwards

Hurricane Gustav Strikes Metals Futures

by on
Style:
Category:
Commodities

Fact of life: Natural disasters almost always have an impact on commodity prices, as we noted after the disastrous earthquake in China  earlier this year. However, commodities producers down South recently noted that Hurricane Gustav, which weakened before hitting land, had a lower impact than expected.

It’s too early to assess all damage, but producers and facility-owners are hopeful. “A spokesman for a London Metal Exchange warehouse, which houses base metals like copper and zinc, said his facility was elevated above the canal and Ëœhighly unlikely’ to see flooding. He said he would have to wait until the storm subsided before he could get back to the warehouse,” one article reports.

“It would have to be one hell of a deal for the water to get up to the warehouse,” the spokesman told Reuters while watching the news. “If any roof damage has occurred that let rain in, I can’t say. I’m not saying flooding is impossible, but it seems highly unlikely right now.”

Alcoa was also optimistic: “Alcoa spokesman Kevin Lowery said Gustav was too far from its alumina refinery in Point Comfort, Texas, and it was too early to know the condition of its anode plant in Lake Charles, Louisiana. By around 3 p.m., wind speeds in Lake Charles ran around a tolerable 16 miles an hour, but were forecast to accelerate to 50 mph later on Monday.”

Gustav caused crude oil prices to plunge last week, and certain base metals futures were hit hard. Headlines now read “Gustav heads north; commodities, south”  — but if the impact isn’t as bad as expected, commodities could return to normal  during the calm after the storm.

However, you might want to stay tuned for Hurricane Ike…

–Amy Edwards

The LME confirmed that the exchange has decided to launch cobalt and molybdenum contracts  in the second half of 2009. No details have been released yet by the LME as to the contract size or delivery points but the news has been well received by the investment community who see the development as adding liquidity and  transparency to the markets for these two very important alloying elements. Both metals have gone through substantial price  increases along with the general commodity boom but have held onto their gains better than nickel and copper the two primary metals from which cobalt and  molybdenum respectively are produced as by-products. Prices have been supported  largely due to demand for speciality steel grades even though general stainless steels have been falling in price and demand. 75% of molybdenum is used in the production of high grade stainless steels for the oil and gas industries. Cobalt is used more in aircraft parts, particularly engine components and in batteries for mobile devices from ipods to laptops.  Though the producers have generally welcomed the move saying it would create a clear benchmark for pricing, one trader commented that he thought it would actually add to volatility “A big percentage of the (cobalt) market would be in the hands of the hedge funds, I can’t see how consumers would benefit.” He may have a point.

–Stuart Burns

A recent UBS research  report broadly supports the predictions made in our detailed metals review posted in a series of articles over the last few weeks on steel here, here,  and here  as well as here on base metals. UBS  sees certain metals such as zinc, aluminum and copper being supported around current levels on the supply side by the marginal cost of production –  the first zinc  and copper mines are beginning closed or scaled back due to low prices and aluminum is very sensitive to any power disruptions or oil price volatility. Apart from short term volatility, the report does not expect any of these factors to push up the prices during this year providing the world does not slide into a global recession. Prices will however, move up next year the report suggests.

UBS sees spot iron ore prices on the other hand, continuing to weaken as demand softens in China. Both spot and contract prices should come more into line from their current 35% spot premium, reducing the miners justification for further massive  increases next year. 10% UBS suggests is a likely iron ore increase in next spring’s round of price adjustments. We think a lot of water will pass under the bridge between now and then. Let’s see what global steel demand looks like in the new year. UBS is  predicting steel prices will come  down next year. We are already seeing further surcharge increases being quietly dropped in North America and base prices softening in Europe and Asia.

–Stuart Burns

Decoupling: Not One Big Happy Market

by on
Style:
Category:
Commodities

The so called decoupling of emerging markets from developed markets, that concept much bandied about in the press a year back has been shown to be just another bright idea, with  little foundation in reality. With the many benefits that globalization has brought to both developed and emerging markets on the back of improved communications, logistics and supply chain management has also come the close alignment of economies around the world. As North American, European and Japanese consumers have closed their wallets, export volumes from the emerging markets have declined at the same time as rising fuel and food costs have had the same dampening effect on consumers in developing markets. The net result is a global lack of consumer confidence which is leading to lower growth in all markets. As the Financial Times puts it, The US consumer is not the only one feeling down and out.” Most vulnerable says the FT are large cap companies in industries such as airlines, automobiles, consumer durables, travel and leisure, and restaurants. Along with lower consumer demand will come lower metal demand. With the exception of major infrastructure projects metal demand is likely to grow more slowly than previously thought next year in emerging markets. The extent to which this continues to impact prices will be interesting to follow.

–Stuart Burns

Platinum, that classic white metal, ended last week with some significant gains. Companies don’t seem worried about the old “No white after Labor Day!” advice. Comex prices for October finished Thursday at $1484, a remarkable three percent increase.

The dramatic increase partially came from traders, who saw a chance earlier this week to purchase the white metal at lower prices. In addition, precious metals futures increased when France announced possible EU sanctions against Russia. During times of political instability, precious metals rise even higher in demand, given their safe haven status.

Last week, Reuters noted buoyed profits among platinum producers: “Impala Platinum Ltd. (Implats), the No. 2 producer of the precious metal, said high prices buoyed annual profit but a power crunch in South Africa delayed its long-term production target.” The January power shortage in South Africa caused platinum and gold mines in the area to close for five days. Although the power has returned, output has lowered from previous levels as companies like Implats receive less power than usual.

Although a return to this year’s  record highs of $2,290 an ounce are close to impossible, Implats’ CEO told the reporter that he sees platinum prices sticking at current levels or possibly rising a bit,  rotating between  $1,400 to $1,600. In current markets, however, platinum is quite the volatile metal. With decreasing demand from the automotive sector and possible declines hitting the mining industry, we don’t expect platinum to stay put at  last week’s  high levels. The white metal might be popular today, but fashionistas and investors alike may soon avoid white after Labor Day highs.

–Amy Edwards

sol01.jpg
Photo Credit: Gehrlicher Solar.  

One of the more interesting articles that we ran across this week discusses cadmium telluride solar panels. Although they’re a bit less efficient than silicon solar cells, cadmium telluride has even more advantages. To quote one of our favorite “green” blogs:

The necessary electric field, which makes turning solar energy into electricity possible, stems from properties of two types of cadmium molecules, cadmium sulfide and cadmium telluride. This means a simple mixture of molecules achieves the required properties, simplifying manufacturing compared to the multi-step process of joining two different types of doped silicon in a silicon solar panel.

Cadmium telluride absorbs sunlight at close to the ideal wavelength, capturing energy at shorter wavelengths than is possible with silicon panels

Cadmium is abundant, produced as a by-product of other important industrial metals such as zinc.

On top of all that, these solar panels are produced at less than $1 per watt. They’re not perfect, though. Debates over potential environmental problems still reign. We’ll study this topic more thoroughly at a later date, but for now, check out some of above-linked articles (plus this one!)  to learn more.

–Amy Edwards

1 449 450 451 452 453 460