aluminium

Metals – Aluminium gains on EU sanction threats

    Aluminium prices rose over 3% yesterday and led the gains among base metals after reports suggesting the possibility of further sanctions by the European Union on Russian aluminium. There are speculations of a potential complete ban on aluminium imports in the upcoming Russian sanctions package scheduled to be released next month. Russian metals had broadly escaped sanctions until last month, when the UK prohibited British individuals and entities from trading physical Russian metals, including aluminum, nickel and copper. UK is the only country in Europe to have adopted such measures. This could potentially lead the LME to reopen the debate over whether it should ban deliveries of Russian metal. Just under 80% of the aluminium on the LME was of Russian origin at the end of November. Steel inventories at major Chinese steel mills rose for a second consecutive week to 15.4mt in mid-January, up 6.7% compared to early January, accordin

Central Banks' Rates Outlook: Fed Treads Cautiously, ECB Prepares for Hike

Gas Price Has Increased As The Transportation Had Been Limited Because Of The Ukrainian War, NYMEX WTI Went Below $100 Yesterday, But The End Fuel Crisis And Supply Chain Issues May Be Far From Now | ING Economics

ING Economics ING Economics 11.05.2022 15:01
Your daily roundup of commodities news and ING views Gas storage tank Energy Oil sold off with risk assets on Monday, but it failed to follow equities higher yesterday. Instead, downward pressure on the market continued, which saw NYMEX WTI settle below US$100/bbl. Growth concerns continue to weigh on commodities, and a stronger USD only adds further downward pressure to the complex. This weakness has continued in early trading this morning after the API reported that US crude oil inventories increased by 1.62MMbbls - the market was expecting a small draw. In addition, API numbers also showed an increase in refined product inventories. Gasoline and distillate fuel oil inventories increased by 823Mbbls and 662Mbbls respectively. If today’s EIA report shows similar numbers, it would be the first weekly increase for US gasoline inventories since late March and the first for distillates since early April. However, the middle distillate market is still very tight and so we would expect US heating oil cracks to remain well supported. In fact, middle distillate cracks around the world should remain well supported, given the tightness in the market and concerns over Russian gasoil exports. The EIA released its latest Short Term Energy Outlook yesterday. The report cut expectations for US oil production growth for 2022 from around 833Mbbls/d to 731Mbbls/d, which implies US oil output averaging 11.91MMbbls/d this year. However, for 2023, supply is expected to grow by 940Mbbls/d (largely unchanged from last month), which would see US output hitting a record 12.85MMbbls/d. Obviously, the biggest concern for the global oil market is around supply in the short to medium term, given the uncertainty over Russian supply. And the downward revisions to 2022 output estimates will do little to ease these concerns. European natural gas prices showed some strength yesterday. TTF rallied by more than 5%, settling close to EUR99/MWh. This strength came after Ukraine’s gas grid operator (GTSOU) declared force majeure on the transit of Russian gas through Sokhranivka, which accounts for about a third of Russian gas transited via Ukraine. GTSOU has said that it is not possible to continue operations through Sokhranivka due to Russia's military aggression in the region. GTSOU said that gas can be rerouted through Sudzha (another entry point), Gazprom has reportedly said that this is not technically possible. Dutch gas network operator, Gasunie has said that it has contracted a second FSRU (floating storage and regasification unit) for the next 5 years, which would allow it to regas LNG imports at Eemshaven in the north of Groningen. The FSRU is expected to arrive in the third quarter of this year, and along with another FSRU already contracted, would provide a total of 8bcm of regasification capacity at Eemshaven. This regasification capacity would exceed the roughly 6bcm of natural gas that the Netherlands imports from Russia every year. The big question though is if there is enough LNG supply to fully use this capacity, particularly with Germany also securing 4 FSRUs, with an annual capacity of as much as 29bcm. Some of this capacity in Germany is also expected to come into operation ahead of the next winter.   Metals Base metals continued to decline in London amid fragile market sentiment. Copper initially rallied but was unable to hold onto these gains at the close. Shanghai is going into the hardest phase of lockdowns, weighing heavily on sentiment as local authorities vow to bring the Covid wave under control at the community level by the end of this week. Meanwhile, the China Car Passenger Association (CAPM) confirmed that retail passenger vehicle sales plunged by 36% in April, its biggest monthly decline since March 2020. LME aluminium prices continue to fall and have largely ignored a steep decline in on-warrant stocks and a large number of cancelled warrants from Asia, signalling further declines. As of Tuesday, on-warrant stocks have fallen to a record low of 294kt, whilst total closing stocks dropped to 560kt - the lowest since 2005. Antaike has reported that China’s aluminium demand fell 5.5% YoY to 3.3mt last month (the biggest decline since March 2020), primarily impacted by the closure of auto producers due to Covid-related lockdowns. In contrast, the impact on Chinese supply has been rather limited so far, with operating capacity rising to 40.31mt by the end of April. As we also pointed out yesterday, Antaike also believes that the recent Covid outbreak has had a larger impact on demand than the early 2020 lockdowns. Agriculture Data from Brazil’s sugar industry group, UNICA show that sugar production in Center-South Brazil increased to 934kt over the 2nd half of April 2022 compared to only around 127kt over the first half of April as more mills started operations; although it is still significantly lower than the 1.52mt of sugar produced over the same period last season. Sugar cane crushing was down around 20% YoY to 23.8mt over the period with the sugar mix falling to 37.2% compared to 44.5% a year ago. Cumulative sugar production so far this season in CS-Brazil is down around 51% YoY to 1.1mt, reflecting a slow start to the crushing season. High energy prices continue to be supportive for ethanol production with mills allocating more cane towards biofuel supply. TagsSugar Russia-Ukraine Natural gas EIA Covid-19 China   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Commodities: Deglobalization, Green Transformation, Urbanization And Other Things That Got Involved

Commodities: Deglobalization, Green Transformation, Urbanization And Other Things That Got Involved

Ole Hansen Ole Hansen 19.08.2022 15:50
Summary:  Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. Overall, however, we do not alter our long-term views about commodities and their ability to move higher over time, with some of the main reasons being underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. The dollar found renewed strength and bond yields rose while the month-long bear-market bounce across US stocks showed signs of running out of steam.The trigger being comments from Federal Reserve officials reiterating their resolve to continue hiking rates until inflation eases back to their yet-to-be revised higher long-term target of around 2%. Those comments put to rest expectations that a string of recent weak economic data would encourage the Fed to reduce the projected pace of future rate hikes.The result of these developments being an elevated risk of a global economic slowdown gathering pace as the battle against inflation remains far from won, not least considering the risk of persistent high energy prices, from gasoline and diesel to coal and especially gas. A clear sign that the battle between macro and micro developments continues, the result of which is likely to be a prolonged period of uncertainty with regards to the short- and medium-term outlook.Overall, however, these developments do not alter our long-term views about commodities and their ability to move higher over time. In my quarterly webinar, held earlier this week, I highlighted some of the reasons why we see the so-called old economy, or tangible assets, performing well over the coming years, driven by underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Returning to this past week’s performance, we find the 2.3% drop in the Bloomberg Commodity Index, seen above, being in line with the rise in the dollar where gains were recorded against all the ten currencies, including the Chinese renminbi, represented in the index. It is worth noting that EU TTF gas and power prices, which jumped around 23% and 20% respectively, and Paris Milling wheat, which slumped, are not members of the mentioned commodity index.Overall gains in energy led by the refined products of diesel and US natural gas were more than offset by losses across the other sectors, most notably grains led by the slump in global wheat prices and precious metals which took a hit from the mentioned dollar and yield rise. Combating inflation and its impact on growth remains top of mind Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver for commodities recently has been the macro-economic outlook currently being dictated by the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing and the longer the process takes to succeed, the bigger the risk of an economic fallout. US inflation expectations in a year have already seen a dramatic slump but despite this the medium- and long-term expectations remain anchored around 3%, still well above the Fed’s 2% target.Even reaching the 3% level at this point looks challenging, not least considering elevated input costs from energy. Failure to achieve the target remains the biggest short-term risk to commodity prices with higher rates killing growth, while eroding risk appetite as stock markets resume their decline. These developments, however, remain one of the reasons why we find gold and eventually also silver attractive as hedges against a so-called policy mistake. Global wheat prices tumble The prospect for a record Russian crop and continued flows of Ukrainian grain together with the stronger dollar helped push prices lower in Paris and Chicago. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace, it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat futures contract touched a January low after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. With most of the uncertainties driving panic buying back in March now removed, calmer conditions should return with the biggest unknown still the war in Ukraine and with that the country’s ability to produce and export key food commodities from corn and wheat to sunflower oil. EU gas reaches $73/MMBtu or $415 per barrel of oil equivalent Natural gas in Europe headed for the longest run of weekly gains this year, intensifying the pain for industries and households, while at the same time increasingly threatening to push economies across the region into recession. The recent jump on top of already elevated prices of gas and power, due to low supplies from Russia, has been driven by an August heatwave raising demand while lowering water levels on the river Rhine. This development has increasingly prevented the safe passage of barges transporting coal, diesel and other essentials, while refineries such as Shell’s Rhineland oil refinery in Germany have been forced to cut production. In addition, half of Europe’s zinc and aluminum smelting capacity has been shut, thereby adding support to these metals at a time the market is worried about the demand outlook.An abundance of rain and lower temperatures may in the short term remove some of the recent price strength but overall, the coming winter months remain a major worry from a supply perspective. Not least considering the risk of increased competition from Asia for LNG shipments. Refinery margin jump lends fresh support to crude oil Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driven by China’s troubled handling of Covid outbreaks and its property sector problems as well as rapidly rising interest rates were the main drivers behind the selling since March across other commodity sectors before eventually also catching up with crude oil around the middle of June. Since then, the price of Brent has gone through a $28 dollar top to bottom correction. While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The mentioned energy crisis in Europe continues to strengthen, the result being surging gas prices making fuel-based products increasingly attractive. This gas-to-fuel switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published, the incentive to switch has increased even more, adding more upward pressure on refinery margins. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. In addition, the previously mentioned increased demand for fuel-based products to replace expensive gas. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold and silver struggle amid rising dollar and yields Both metals, especially silver, were heading for a weekly loss after hawkish sounding comments from several FOMC members helped boost the dollar while sending US ten-year bond yields higher towards 3%. It was the lull in both that helped trigger the recovery in recent weeks, and with stock markets having rallied as well during the same time, the demand for gold has mostly been driven by momentum following speculators in the futures market. The turnaround this past week has, as a result of speculators' positioning, been driven by the need to reduce bullish bets following a two-week buying spree which lifted the net futures long by 63k lots or 6.3 million ounces, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication that investors, for now, trust the FOMC’s ability to bring down inflation within a relatively short timeframe. An investor having doubts about this should maintain a long position as a hedge against a policy mistake. Some investors may feel hard done by gold’s negative year-to-date performance in dollars, but taking into account it had to deal with the biggest jump in real yields since 2013 and a surging dollar, its performance, especially for non-dollar investors relative to the losses in bonds and stocks, remains acceptable. In other words, a hedge in gold against a policy mistake or other unforeseen geopolitical events has so far been almost cost free.   Source: WCU: Bearish macro, bullish micro regime persists
Copper prices hit lowest level this year. Crude oil decreased second day in a row. BoE went for a 25bp hike

Less Precipitation Make Aluminium Smelters In Yunnan (China) Change Its Operating Rate

ING Economics ING Economics 23.09.2022 10:59
Smelters in China’s Yunnan province are reducing output on tight power supply caused by declining rainfall while European and US capacity is being cut amid rising power costs following Russia’s invasion of Ukraine Source: Shutterstock Yunnan province cuts supply Aluminium smelters in Southwest China’s Yunnan province, which accounts for 11% of China’s aluminium output, have been required by the government to reduce their operating rates due to hydropower shortages in the drought-stricken province. The smelters have been ordered to reduce the use of electricity by 15% to 30% from last week, which is expected to cut 800,000 tonnes to 1.6 million tonnes of aluminium production capacity. The output reductions in Yunnan come after Sichuan smelters cut 920,000 tonnes of capacity in August, accounting for 2% of China’s total. The duration of the power cuts in Yunnan has not been officially announced yet but the market believes it will depend on how quickly weather conditions improve in the region. Chinese aluminium output climbs to record highs Still, China’s aluminium output has held up despite the energy crunch. The country’s primary aluminium production hit a record in August surging 9.6% year-on-year to 3.51 million tonnes, according to data from the National Bureau of Statistics, beating the previous high in July. Output in the first eight months of the year gained 2.1% to 26.47 million tonnes. However, output could have been constrained over September due to the ongoing power rationing in Yunnan province. China’s exports of unwrought aluminium and aluminium products have also risen in 2022 - up 31.5% so far this year versus a year earlier to 4.7 million tonnes - and are likely to rise further in the fourth quarter as European and the US producers have been slashing capacity over the past 12 months amid the worsening energy crisis following Russia’s invasion of Ukraine. In August, China exported 540,400 tonnes of unwrought aluminium and aluminium products, up 10.2% versus a year earlier. Meanwhile, imports dropped 19% from a year earlier, reflecting muted domestic demand, record-high domestic production and tightening overseas supply. The country brought in 200,400 tonnes of unwrought aluminium and products in August, according to customs data. On the raw material side, China’s alumina exports are also increasing, with annual shipments through August reaching 720,000 tonnes, from just 100,000 tonnes a year earlier as buyers in Russia seek alternatives after the war in Ukraine cut off their traditional supplies. Globally, despite Chinese smelters facing energy rationing and European smelters slashing output, global aluminium production rose 3.5% year-on-year in August to 5.89 million tonnes, according to the International Aluminium Institute. Global year-to-date output totalled 45.448 million tonnes. Several smelter cuts have already been announced across Europe since December 2021, including Alcoa’s San Ciprian smelter and Hydro’s plant in Slovakia due to high energy costs which account for about a third of aluminium’s production costs. About 1.48 million tonnes of capacity could be cut in Europe and the US, accounting for 1.9% of the global total. European smelters have already cut 1.18 million tonnes of output – around 11% of total installed capacity in the region.  Further smelter closures and curtailments in production are highly likely with Europe heading into the winter months and the war with Russia raging on. Primary aluminium production (% YTD) Source: International Aluminium Institute (IAI) Global demand outlook worsens The rise in Chinese output comes against weakening demand amid global economic gloom. Tighter global monetary policy, China’s property crisis and the dollar’s strength have all put downward pressure on the aluminium market.   However, the Chinese economy started to show some signs of recovery last week. Industrial production climbed 4.2% on the year, faster than July and above the consensus, according to the National Bureau of Statistics' latest data. Retail sales rose 5.4% from a year earlier, higher than expected and up from July. China is also stepping up its efforts to boost its housing and construction sectors with more Chinese cities announcing credit support and subsidies for home purchases. Last week, China’s Evergrande Group removed most of its construction-project freezes as China enters its peak building season, which traditionally lasts until the end of October. Still, China’s government and central banks' stimulus efforts have been mild so far in relation to Covid-19 restrictions in the country. Data last week showed home prices declining for a twelfth consecutive month in August taking house price inflation down to -2.1% year-on-year. LME prices stuck in a range Despite high energy prices, weak demand has continued to outweigh any potential supply concerns with the market’s focus remaining more on the negative macro sentiment for now. LME aluminium prices are now down more than 40% from their year-to-date highs of $3,849/t reached in March and are hovering around their lowest levels since April 2021 amid fears that Russian supply could soon emerge at London Metal Exchange warehouses in Asia. Russian aluminium producer Rusal is reportedly looking to deliver some of its metal directly to LME warehouses in Asia, as it increasingly struggles to find buyers. It is suggested that Rusal could deliver a small amount of aluminium to LME warehouses initially. Increased flows could cause some issues. Firstly, a strong increase in LME inventories could put further pressure on prices, while there could also be a growing amount of aluminium in LME warehouses, which buyers are not willing to touch. This could potentially lead to a disconnect in prices. LME 3M aluminium Source: LME Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Evaluating the Stretch of the Rally

Japan's Total Crude Steel Production Will Decline And India's Sugar Production Will Increase

ING Economics ING Economics 18.10.2022 11:21
LME aluminium inventories continue to grow, raising speculation of inflows of unwanted Russian metal. Meanwhile, the European natural gas market continues to come under pressure with storage still filling up and the European Commission working on a proposal for EU energy markets In this article Energy- European natural gas prices fall further Metals – LME aluminium stockpiles jump most since February Agriculture – rising Indian sugar output Energy- European natural gas prices fall further Although oil prices traded in a fairly large range yesterday, ICE Brent managed to settle little changed from Friday’s close. The strength in equities and the weakness in the dollar failed to push oil prices higher. Instead, the market still seems wary of the demand outlook for the market. President Xi has made it clear that China will continue to follow a zero-Covid policy, which raises uncertainty over Chinese oil demand through 2023. Recession concerns elsewhere only add to the market's uncertainty. The EIA yesterday released its latest drilling productivity report, in which US shale oil production is forecast to average 9.105MMbbls/d in November, up from an estimated 9.001MMbbls/d in October. Unsurprisingly, the Permian region is expected to drive the bulk of this growth with output expected to increase by 50Mbbls/d, whilst Bakken and Eagle Ford are forecast to see output increase by 22Mbbls/d and 18Mbbls/d respectively. The report also showed that drilled but uncompleted wells (DUCs) continue to decline. DUC inventory fell by 10 to total just 4,333 at the end of September. This is the lowest number since at least 2014. US producers have been relying on DUCs to sustain production growth at a time when we are not seeing significant growth in drilling activity. However, as the number of DUCs continues to decline so does the rate at which they decline. In 2021 the average monthly decline in DUCs was 219 vs. 76 so far this year. European natural gas prices came under further pressure yesterday. The Nov-22 TTF contract fell close to 10%, leaving the market at just under EUR128/MWh, which is the lowest level since June.  There is now a fairly strong contango in the front end of the curve, as the market seems less concerned about supply in the near term, but is much more concerned about 2023 supply and the region's ability to build adequate storage ahead of the 2023/24 winter in the absence of Russian supply. For now, though, EU storage continues to increase with the latest numbers from Gas Infrastructure Europe showing storage is more than 92% full. Although, with the 2022/23 heating season still ahead of us, it is important that the market doesn’t get too complacent about the supply/demand picture in the near term. The European Commission also continues to work on proposals for the EU energy markets, which according to reports, could include a proposal for a temporary dynamic price limit on TTF. In addition, there are suggestions that the voluntary gas demand cut of 15% could become a mandatory cut. Proposed measures will be discussed by EU leaders when they meet on 20-21 October. Metals – LME aluminium stockpiles jump most since February LME aluminium prices fell by more than 3% after large inflows into exchange warehouses. The latest LME data showed arrivals of 65.8kt, the biggest daily addition since February, taking total stocks to 433kt, the highest since 8 June. The majority of the inflows were reported in Gwangyang in South Korea and Port Klang in Malaysia, raising speculation that large volumes of unwanted Russian metal could be starting to arrive at the exchange’s warehouses. Union members at Antofagasta’s Los Pelambres copper mine in Chile have reached an agreement with the management, avoiding a strike, according to media reports. The union members failed to reach an agreement during a formal discussion two weeks ago. The mine produced around 336kt of copper last year. According to the latest forecast from the Ministry of Economy, Trade and Industry (METI), crude steel production in Japan is expected to drop by 6.8% YoY (fourth consecutive quarter decline) to 22.5mt in 4Q22. The group expects Japan's total crude steel output to decline by 5.6% YoY to 90.99mt during the 2022 calendar year. Agriculture – rising Indian sugar output The Indian Sugar Mills Association (ISMA) projects that India’s sugar production will increase by 2% YoY to 36.5mt in the 2022/23 marketing year that started this month. Sugar output without the diversion of cane juice and B-heavy molasses is expected to be around 41mt in 2022/23, compared to 39.2mt a year ago. On the consumption side, the group expects Indian sugar demand to total around 27.5mt in 2022/23, while opening stocks were 5.5mt as of 1 October. This leaves a large exportable surplus from India. However, mills are still waiting for an announcement with regard to the export policy for sugar. The Food Secretary in India has said that the government is set to announce the sugar export quota for the season (that began in October) within a week. Data from the National Oilseed Processors Association (NOPA) showed that soybean crushing in the US dropped to the lowest level in a year and also came in below market estimates of 161mn bushels. Soybean crushing fell 4.5% MoM to 158mn bushels in September, as the crushing pace slowed due to seasonal maintenance and repair downtime ahead of the fall harvest. However, it was still up 2.8% YoY. Meanwhile, soy oil supplies among NOPA members dropped to 1.5 billion lbs (lowest since September 2020) as of 30 September, down from 1.6b lbs a month earlier and lower than the 1.7b lbs seen at the same stage last year. TagsTTF Sugar Russian metals European gas Aluminium   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Global Steel Production Declines, Copper Market in Surplus, Nickel Inventories Increase

Metals: Biden Administration May Ban Russian Aluminium, So Does LME

ING Economics ING Economics 19.10.2022 12:36
Global aluminium prices briefly rallied after news that the United States is considering an effective ban on Russian imports of the metal in response to the conflict in Ukraine. This comes at a time when the LME is also discussing the possibility of banning Russian metal from its warehouses US mulls Russian aluminium ban Metals have been mostly spared in the rounds of sanctions imposed on Russia that followed its invasion of Ukraine on 24 February. The news of a potential US ban has revived memories of the chaos in the aluminium market that ensued when the US administration placed sanctions on Russian aluminium producers in April 2018. Back then, LME prices jumped to their highest level in seven years at $2,718/t, before gradually falling in the following weeks and months. Sanctions were then lifted in January 2019. This time around, while we have seen strength on the back of reports of a possible ban, the gains have been more modest given the lack of confirmation from US officials along with the fact there are several forms of action that could be taken. Three potential scenarios for the US The Biden administration is reportedly weighing up three potential measures: a complete ban on Russian aluminium, increasing tariffs to levels that would effectively act as a ban, and sanctioning the company that produces Russian aluminium: Rusal. The scale of the impact will depend on which of the three options the US opts for. The war in Ukraine has had little effect so far on Russian aluminium exports to the US with most customers likely to have entered into long-term contract agreements. US ban or higher import tariffs – limited impact In the scenario that the US imposes a ban or raises tariffs on Russian aluminium, there will likely be a limited impact on the global market. The US is not a significant buyer of Russian aluminium. The US imported about 192,000 mt of primary aluminium from Russia in 2021, accounting for just over 5% of the total 3.64 million mt of primary aluminium imported that year. Russia was the third-largest exporter of primary aluminium to the US in 2021, but imports from the country were far behind the 2.54 million mt and 354,000 mt shipped from Canada and the United Arab Emirates, respectively. In the first half of this year, the US imported about 120,000 mt of primary aluminium from Russia out of 2.12 million mt in total imports. If the US shuns Russian metals, Russia may increase its exports to sanction-neutral countries like China, the world’s biggest aluminium consumer. China would then buy discounted Russian material to use domestically and export its aluminium products to Europe and the US to fill the gap left by the Russian import ban. China imported 230,511 tonnes of primary aluminium from Russia this year through August, accounting for 77% of its total aluminium imports. Unless a US ban is accompanied by an EU or LME ban, any spike in prices that would follow such a move would most likely be short-lived. Sanctions option more of a concern However, if the US decides to sanction Rusal, the impact could be more severe, bearing in mind the market’s reaction to the sanctions in 2018. The move could freeze the Russian producer out of Western markets, depending on the severity of sanctions, which would boost global prices for the metal and distort global aluminium trade flows. Rusal is the largest aluminium producer outside of China and the only primary aluminium producer in Russia. The company produced 3.76 million tonnes of the metal in 2021, accounting for 6% of worldwide production. Rusal is not only a major producer of primary aluminium. It is also deeply embedded in global supply chains needed to make the metal – bauxite and alumina. Rusal’s 2018 sanctions affected operations in Guinea and Jamaica, while smelters in Europe struggled to secure raw material supplies. The Irish government also considered intervention to safeguard jobs at Rusal Aughinish Alumina, Rusal’s largest producer of alumina. If the US sanctions the Russian aluminium producer, it could make other buyers cautious of taking in Russian material, fearing exposure to possible secondary sanctions. Supply tightness and shortages that would likely follow would be most felt in Europe, where the industry is already grappling with low stock supplies and is more reliant on Russian supply. Europe is Rusal’s biggest customer, accounting for 40% of sales revenues. Buyers have been increasingly pushing back as contracts for next year are being negotiated. Some companies, including Novelis and Norsk Hydro, have already rejected Russian material for next year’s supplies.   US sanctions could also encourage the LME to act – the bourse launched a discussion paper earlier this month on a potential ban of Russian metals. Back in 2018, after sanctions were imposed, the LME barred users from delivering any metal made by Rusal into its global warehouses. This would, as a result, make traders and consumers cautious of buying new metal from Rusal, since they wouldn’t be able to deliver it to the LME – the buyer of last resort. LME discussion on Russian metals The LME is considering three options: it could continue to accept Russian metal, set a cap on Russian metal in LME warehouses, or issue an outright ban. Given that Russia accounts for about 5% of global aluminium output, the metal would be one of the most affected if we were to see a ban or limits on Russian deliveries into LME warehouses. Russian aluminium has accounted for as much as three-quarters of LME stockpiles over the past decade, according to the exchange. Clearly, the LME is worried about the risk of Russian metal being dumped into LME warehouses as buyers become less willing to accept Russian metals for next year’s supplies. Russian metals flow into the exchange’s warehouses, in the scenario that the LME doesn’t issue a ban or only limits Russian deliveries, which would cause some issues. Firstly, a strong increase in LME inventories could put further pressure on prices, while there could also be a growing amount of aluminium in LME warehouses, which buyers are not willing to touch. This could potentially lead to a disconnect in prices. There is already speculation that recent LME inventory increases in copper and aluminium are being driven by Russian material. LME on-warrant aluminium stockpiled jumped 63% so far this week and now stands at 527,675 tonnes, according to data from the bourse, with the increase driven by deliveries into Malaysia’s Port Klang warehouses. On-warrant stockpiles have now doubled since the start of October. A full ban on Russian metals would be the most bullish outcome of the LME discussion paper, effectively cutting Russian metals off from the exchange. With LME disappearing as the market of last resort for Russian metals, Russian suppliers would have to look elsewhere for willing buyers. Disruption to trade flows would likely offer an upside to affected metals, including aluminium. Read this article on THINK TagsRussian metals Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

A Volatile Environment For Most Commodities Ahead Of The Year End

Saxo Bank Saxo Bank 22.10.2022 08:04
Supply worries offsetting growth concerns   Multiple uncertainties will continue to create a volatile environment for most commodities ahead of the year end. While the recession drums will continue to bang ever louder the sector is unlikely to suffer a major setback before picking up speed again during 2023. This forecast for stable to potentially even higher prices will be driven by pockets of strength in key commodities across all three sectors of energy, metals and agriculture. With that in mind we see the Bloomberg Commodity Index, which tracks a basket of 24 major commodities, hold onto its +10 percent year-to-date gain for the remainder of the year.   It highlights the behaviour of commodities where supply and demand ultimately set the price. While we are seeing concerns about growth and demand, the supply of several major commodities remain equally challenged. An explosive rally during the first quarter was led by war, sanctions and the backend of a post-pandemic surge in demand for consumer goods and energy to produce them. The market then retraced sharply lower during June when the US Federal Reserve turbocharged its rate hikes to combat runaway inflation, while China’s zero-Covid policy and property sector woes drove a sharp correction. During the third quarter however, the sector has reasserted itself and while pockets of demand weakness will be seen, we see the supply side equally challenged—developments that we see support the long-lasting cycle of rising commodity prices that we first wrote about at the start of 2021.   The multiple uncertainties mentioned will first of all mean a focus on the demand side. There’s no doubt that increased efforts from central banks around the world, led by the US Federal Reserve, to combat runaway inflation by aggressively hiking rates to lower the economic temperature, will lead to some weakness in demand. In addition, China’s month-long and so far unsuccessful battle with Covid and harsh anti-virus restrictions has, together with its property sector crisis, driven a slowdown from the world’s biggest consumer of raw materials. However, we view the current weakness in China as temporary and with domestic inflationary pressures easing, we expect the government and the People’s Bank of China to step up their efforts to support an economic turnaround.  Agriculture: With global demand for food being relatively constant, the supply side will continue to dictate the overall direction of prices. We see multiple challenges that could see those move higher into the winter and next spring. The main culprits are the cost of fertiliser due to high gas prices, climate change and a “triple-dip” La Ninã during the 2022/23 northern hemisphere winter, a weather phenomenon that has driven a change in temperatures around the world and led to several climate emergencies during the past couple of years. Adding to this is Putin’s war in Ukraine which has led to a sharp drop in exports from a major supplier of grains and edible oils to the global market. With global stocks of key food items from wheat and rice to soybeans and corn already under pressure from weather and export restrictions, the risk of further spikes remains a clear and critical danger.   Precious metal traders and investors will continue to focus on the direction of the dollar and US bond yields, with strength in both being the main reason why gold trades down on the year and at the lower end of a current 300-dollar wide range. However, given the fact we have witnessed the strongest dollar rally and fastest pace of rising real yields in decades, this weakness has generally only been seen against the dollar. With that in mind we view gold’s performance so far in 2022 as acceptable and it points to some underlying strength that is likely to reassert itself once the dollar stops rising.   Gold is currently stuck in a wide $1600 to $2000 range and the direction towards year end is likely to be determined by the dollar and whether the US Federal Reserve is successful in bringing inflation under control without driving the US economy into a recession. We believe the latter will be a major challenge, and the market could be forced to reprice future inflation expectations, currently priced below 3% in a year from now. With the risk of a US recession in 2023 and inflation staying higher for longer, we see gold perform well in such a scenario, especially if the dollar, as mentioned, begins to peak out. Following a period of sideways action ahead of the year end, these developments will start to add tailwind to precious metal investments in 2023, and with that the prospect of moving back towards the top of the mentioned range.   We favour silver given the current weak investor participation and the additional support from a recovering industrial metal sector where supply, especially for aluminium and zinc, remains challenged by punitively high gas and power prices. This has forced a reduction in production around the world, most notably in Europe but also in China, where a long period of drought has seen smelters suffer from electricity shortages.   Industrial metals: We maintain a long-term positive outlook on the industrial metal sector given the expected ramp up in demand towards the electrification of the world. With regards to copper, the so-called king of green metals, we expect that the prospect for a temporary increase in production capacity next year by miners around the world, most notably from Central and South America as well as Africa, will likely dampen the short-term prospect for a renewed surge to a fresh record high.   The copper-intensive electrification of the world will continue to gather momentum following a year of intense weather stress around the world and the need to reduce dependency on Russian-produced energy, from gas to oil and coal. But for power grids to be able to cope with the extra baseload, a massive amount of new copper-intensive investments will be required over the coming years. In addition, we are already seeing producers like Chile, the world’s biggest supplier of copper, struggling to meet production targets amid declining ore-grade quality and water shortages. China’s slowdown is viewed as temporary and the economic boost through stimulus measures is likely to focus on infrastructure and electrification—both areas that will require industrial metals.   Crude oil has returned to pre-Russian invasion levels as the market continues to price in the prospect for an economic slowdown hurting demand. The result is lower spot prices and a flattening forward curve to an extent that is not yet backed up by a corresponding rise in inventories. It raises the question whether the macro-economic outlook has driven prices down to levels that are not yet justified by current supply and demand developments.  There is no doubt demand has softened in recent months, especially following the end of summer driving season, and continued but temporary lockdowns in China that are hurting mobility and growth. In Europe, punitively high prices for gas and power have also helped drive a slowdown in fuel demand but the region is still importing around 3 million barrels per day from Russia. The introduction of an import embargo on December 5th will likely tighten the overall market with Russia struggling to find other buyers.   We view the current weakness in oil fundamentals as temporary and side with the major oil forecasters of EIA, OPEC and the IEA who, despite current growth concerns, have all maintained their demand growth forecasts for 2023. During the final quarter prices are likely to remain challenged at times resulting in a potential lower range in Brent crude between $80 and $100 dollar-per-barrel. The main developments that could impact prices include:  China’s continued battle with Covid versus additional stimulus to offset growth risks  Gas-to-fuel switching supporting demand for distillate products  EU embargo on Russian oil potentially forcing a reduction in Russian production  The US plans to begin refilling its strategic reserves  OPEC threat to lower production should prices drop further  The direction of US inflation and the dollar—both key drivers of the general level of risk appetite  US production growth, which is showing signs of stalling, thereby supporting prices  Oil majors swamped with cash, and investors in general, showing little appetite for investing in new discoveries suggest that the cost of energy is likely to remain elevated for years to come. This is driven by the green transformation which is receiving increased and urgent attention, and which will eventually begin to lower global demand for fossil fuels. It’s the timing of this transition that keeps the investment appetite low. Unlike new drilling methods such as fracking where a well can be productive within months, traditional oil production projects often take years and billion-dollar investments before production can begin. With that in mind, oil companies looking to invest in new production will not be focused on spot prices around $90 in Brent and lower in WTI, but instead at +30-dollar lower prices currently traded in the futures market for delivery in five years' time.       Source: https://www.home.saxo/content/articles/quarterly-outlook/a-difficult-and-volatile-quarter-awaits-04102022
Central Banks' Rates Outlook: Fed Treads Cautiously, ECB Prepares for Hike

A Summary Of Futures Contracts, The Funds Increased Their Natural Gas Shortages

Saxo Bank Saxo Bank 24.10.2022 13:08
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, October 18. A week that saw stocks rebound after a solid start to the corporate-earnings season helped offset continued growth worries. The dollar traded softer and bond yields higher while commodities adopted a defensive stance with the biggest amount of net selling hitting crude oil, gold, corn and coffee. Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report Financial Markets Quick Take - October 24, 2022Saxo Market Call Podcast: HangSeng delivers a vote of no confidence in Xi's 3rd term This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, October 18. A week that saw stocks rebound from oversold levels after a solid start to the corporate-earnings season helped offset continued worries about how far central banks are prepared to hike rates in order to combat inflation through forcing a reduction in economic activity.    With exception of the JPY, the dollar traded softer against most major currencies while bond yields rose ahead of a mid-week spike that saw 2-year yield jump to the highest since 2007 as traders pushed expectations for the peak policy rate closer to 5% by early 2023. Commodities traded defensively throughout the week with losses seen across most sectors led by energy, especially natural gas which slumped by close to 13%.  Commodities The Bloomberg Commodity index lost 3.2% during the reporting week with losses being led by the energy sector where the market reversed some of the gains seen in the previous week when OPEC and Russia announced their surprise production cut. Natural gas slumped 13% on the week while renewed yield strength and economic worries sent most metals sharply lower with funds reversing back to net short position in gold, silver and copper.    Responding to these developments, speculators cut their total exposure across 23 major commodity futures by 7% to 1.037,869 contracts with the biggest amount of net selling hitting crude oil, gold, corn and coffee with buying concentrated in soybean oil, sugar and hogs.  Energy Responding to renewed weakness, speculators cut bullish WTI and Brent crude oil bets by a combined 57k lots to 353k lots, thereby reversing the bulk of the buying seen in the aftermath of OPEC+ decision to cut production. The change was led by a combination of longs (-42k lots) bailing out of recently established positions and fresh shorts (+15k) being added. The product market was mixed with buying of the two distillate contracts while gasoline length was reduced. Funds increased their natural gas short by 6% to 82.5k lots in response to a near 13% drop on continued mild weather and rising production.  Metals Sellers returned to the metal sector with the recently established small longs in gold, silver and copper being flipped to decent size short positions while platinum’s small gain on the week managed to attract additional fresh longs. Agriculture  The combined long in across the six major grain and oilseed contracts held steady around 471k lots with buyin of soybean oil being offset by selling of corn and wheat. In softs the main action was seen in coffee where months of relative robust price action supported by tight market conditions gave way to a 10% slump driving a 64% reduction in the net long to just 12k lots, an 18 month low. Sugar meanwhile saw net buying with the net long jumping 36% to 107k while recession worries reduced the cotton long to 22k lots and lowest since July 2020.     Forex In forex, flows remained mixed during a week that saw the dollar index trade softer by 1% after recently hitting a 20-year high. Overall the gross dollar long against nine IMM currency futures and the Dollar index rose by 5% to $15 billion, primarily driven by heavy JPY selling as the under siege currency dropped 2.3% towards the important 150 level. Elsewhere, a recovering Sterling saw net selling with speculators reducing the gross long more than offsetting fresh short selling.Speculators continued to buy euros and since August 30 when EURUSD traded around €1 they have bought €12 billion, driving their net futures exposure from a 48k lots short to a 48k lots long, a four-month high.   What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Source: https://www.home.saxo/content/articles/commodities/cot-crude-oil-sold-on-fading-opec-impact-metal-positions-flip-back-to-net-short-24102022
FXStreet’s Dhwani Mehta Opinion About Gold Movements

Central Banks Increased Their Buying Of Gold Significantly

ING Economics ING Economics 02.11.2022 11:32
The commodities complex was provided with a boost following unverified reports that China could look to ease its zero-Covid policy. Meanwhile, markets today will be fully focused on the outcome of the FOMC meeting In this article Energy- OPEC output edges higher Metals – Aluminium smelters in Henan to reduce capacity on losses Energy- OPEC output edges higher The oil market had a strong day yesterday with ICE Brent settling almost 2% higher after unverified reports that China could look to ease its zero-Covid policy. However, for now, this is nothing more than a rumour. China’s covid policy has weighed heavily on oil demand this year with crude oil imports over the first nine months of 2022 averaging 9.95MMbbls/d, down 4.4% YoY. Numbers from the API overnight have provided some further support to the market in early morning trading in Asia. US crude oil inventories are reported to have fallen by 6.53MMbbls over the last week. This is significantly more than the roughly 200Mbbls draw the market was expecting. For refined products, distillate fuel oil stocks increased by 865Mbbls, while gasoline stocks fell by 2.64MMbbls, which would have boosted sentiment further. Overall, it was a bullish set of numbers. However, we will need to see what the more widely followed EIA numbers show later today. Preliminary numbers from Bloomberg show that OPEC oil production in October increased by 30Mbbls/d to average 29.98MMbbls/d. The largest increases came from the UAE, Nigeria and Iraq, whose output increased 70Mbbls/d, 50Mbbls/d and 50Mbbls/d respectively. While Angola, Congo and Libya saw the largest declines with output falling by 60Mbbls/d, 40Mbbls/d and 30Mbbls/d respectively. Production target levels for the broader OPEC+ group were lowered by 100Mbbls/d for October. However, given that most producers are still producing well below their target production levels, the group is still well ahead in terms of compliance levels. Metals – Aluminium smelters in Henan to reduce capacity on losses Base metals rallied yesterday on speculation that Beijing will prepare to wind down China’s Covid-19 rules. Chinese stocks and the yuan also rallied. An unverified social media post circulating online suggested that a committee is being formed to assess scenarios on how to exit its current Covid zero policy. Three aluminium smelters in China’s Henan province plan to halt 110kt of combined annual capacity on losses and to curb pollution during the winter heating season, according to a report from the Shanghai Metals Market. The plants plan to halt 10-15% of their total capacity by the middle of this month with the restart time unknown for now. In precious metals, gold prices rose as the dollar fell ahead of a Federal Reserve meeting. Gold has been struggling to find direction in recent weeks, trading around $1,650/oz, as investors wait for the Fed’s decision, with market expectations firmly behind a fourth consecutive 75bp interest rate hike. The latest data from the World Gold Council shows that central banks increased their buying of gold significantly over the third quarter. Central banks bought 399 tonnes in 3Q22, which is up 341% YoY and also a record quarterly amount. The data shows that Turkey, Uzbekistan, India and Qatar were the largest buyers of gold over the quarter. Those who report their numbers were net buyers of almost 90 tonnes, which leaves a significant amount of purchases from unknown buyers. TagsOPEC Oil Gold Covid-19 China Aluminium   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read morein
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

China Is The Biggest Consumer Of Such Commodities

Saxo Bank Saxo Bank 07.11.2022 09:04
Summary:  The October US CPI release this week will be key to watch after Fed’s hawkish shift last week. Market pricing for December’s Fed rate hike is closer to 50bps for now, but a stronger than expected core print could move that towards another 75bps expectation. Midterm elections could also cause some volatility given the risk of policy paralysis if Democrats lose control of the Congress. More economic data is due, from UK’s Q3 GDP to China’s credit update and inflation, but a key driver of volatility will likely be further developments on China’s reopening story. In the commodities space, this means industrial metals, iron ore, copper, gold, energy and cotton are key to watch. The earnings calendar cools down, but keep Walt Disney and Adidas on your radar. components Bloomberg consensus expects US October CPI to drop below the 8% mark and come in at 7.9% YoY from 8.2% previously, but still higher at 0.6% MoM from 0.4% in September. The core measure is also expected to ease slightly to 6.5% YoY, 0.5% MoM (prev. 6.6% YoY, 0.6% MoM) but still remain elevated compared to historical levels. Key to watch also will be the drivers of inflation, particularly the stickier shelter and services costs, which if stuck higher could move the December Fed funds future pricing more towards another 75bps rate hike, resulting in another round of selloff in equities and dollar gains. However, with another CPI report due before the next Fed meeting in December, market impact of this week’s report will likely remain restrained unless a major deviation from expectations is seen. For this week’s CPI data, we will be watching the USD, and bond yields, which may be expected to rally up if the data is hotter than expected. What next for the China reopening chatter, and what does that mean for commodity markets? Last Saturday, China’s National Administration of Disease Control and Prevention reiterated China’s adherence to the dynamic zero-Covid policy but at the same time pledged to improve the implementation of the policy so as to avoid massive and protracted lockdowns. Investors will focus on if subtle relaxation of implementation will gather momentum in the coming weeks. This will be key not just for mainland/HK markets, but also for commodity markets. The biggest impact will be seen on industrial metals (watch Copper, Iron ore) and energy prices, as China is the biggest consumer of such commodities. HG Copper broke through several resistances last week, but is seen lower back at $3.60 on Monday morning after Chinese officials hinted at adherence to the zero covid policy. Crude oil prices also remain on watch especially with OPEC+ production cuts set to take effect this month and upcoming EU sanctions against Russian oil, all leading to a tight market. Gold (XAUUSD) reversed its post-FOMC slump on China reopening optimism at the end of last week, and remains supported above $1670 for now. Will it break the short-term downtrend? Also worth watching Cotton, which bounced more than 20% from their low on signs of China’s improving yarn production, but still remains down on a YTD basis. US mid-term elections this Tuesday Pundits suggest that the Republicans have very strong odds of flipping the House of Representatives in their favour, while the odds look finely balanced for whether the Senate ends retaining the slimmest of Democratic majorities. Republicans taking both houses has few immediate ramifications, as US President Biden has the presidential veto, but a stronger than expected Democratic showing that somehow sees them retaining the House and strengthening their Senate majority would be a game changer – opening for more policy dynamism from the US over the next two years rather than the expected lame-duck presidency. Uncertainty is high as pollsters have had a hard time gathering accurate indications for the election results since Trump’s victory in 2016. China is scheduled to release credit data, CPI, PPI, and trade data Among the data scheduled to release this week, investors are likely to focus on the new RMB loans and aggregate financing numbers. After a very strong September in which banks were urged to lend, new RMB loans were expected to decelerate to RMB800 billion in October from RMB2,470 billion in September. New Aggregate Financing was forecasted to fall to RMB 1,600 billion in October from RMB 3,530 billion in September. On the inflation front, China’s PPI is expected to fall 1.6% Y/Y in October, due to the high base last year resulting from increases in material and energy prices. Unlike other major economies, CPI in China is expected to slow to 2.4% in October. On trade, while export growth in RMB terms is forecasted to rise to +12.7% YoY in October from +10.7% in September, exports in US dollar terms are expected to decelerate. China’s Singles’ Day this Friday, Nov 11 Investors will watch closely Alibaba, JD.com, and other online retailers’ sales on Singles’ Day this Friday to gauge the strength of China’s private consumption. Analysts are expecting slower sales growth as recent data indicated slower user growth across online shopping platforms. UK GDP to confirm the onset of a recession On Friday, UK’s Q3 GDP is released and the first negative print of the current cycle is expected to be seen. Consensus forecast is seen at 2.1% YoY, -0.5% QoQ, significantly lower than the second quarter print of 4.4% YoY, 0.2% QoQ. August GDP data had already begun to show a negative print with -0.3% MoM and the trend will only likely get worse in September, exacerbated by a one-off factor relating to Queen Elizabeth II’s funeral in the month, which was a national holiday. The economy is already facing a cost of living crisis, and both fiscal and monetary policy have to remain tight in this very tough operating environment. Technically, a recession may still be avoided as activity levels picked up in October, but still it will remain hard for the UK to dodge a recession going into 2023. This suggests more downside for the sterling may be in store, especially as the market refuses to cater to the Bank of England’s warning that the current expectations of terminal rate may be too steep. Key Earnings to watch Saxo’s Head of Equity Strategy, Peter Garnry, wrote the following, for key focus areas for corporate earnings this week. On Monday our focus is Activision Blizzard which is struggling with negative top-line growth like the rest of the gaming industry as the pandemic boom is over. Analysts are expecting revenue growth of -17% y/y and EPS of $0.50 down 39% y/y. Walt Disney is next week’s biggest earnings release scheduled on Tuesday with analysts expecting Q4 (ending 30 September) revenue growth of 15% y/y but EBITDA at $3bn down from $3.86bn in Q3 highlighting the ongoing margin pressure. Adidas, reporting on Wednesday, is also key due to its size in consumer goods but also because of its costly partnership breakup with Ye; analysts estimate revenue growth up 13% y/y but EPS at €1.24 down 47% y/y due to one-off items. On Thursday, we will focus on ArcelorMittal, because Europe’s largest steelmaker is an important macro driver, and analysts are getting increasingly negative on the steel industry expecting ArcelorMittal to announce a 14% drop in Q3 revenue and a 66% drop in EPS. The week ends with Richemont expected to see revenue growth coming down fast to just 7% y/y in Q3.   Key company earnings releases Monday: Westpac Banking, Coloplast, Ryanair, Activision Blizzard, BioNTech, Palantir Technologies, SolarEdge Technologies Tuesday: Bayer, Deutsche Post, KE Holdings, Nintendo, Walt Disney, Occidental Petroleum, Lucid Group, DuPont Wednesday: National Australia Bank, KBC Group, Genmab, Siemens Healthineers, E.ON, Adidas, Honda Motor, Coupang, Rivian Automotive, Roblox, DR Horton, Trade Desk Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Key economic releases & central bank meetings Monday 7 NovemberChina (Mainland) Trade (Oct)Germany Industrial Production and Output (Sep)Eurozone S&P Global Construction PMI (Oct)Indonesia GDP (Q3) Tuesday 8 NovemberJapan BOJ Summary of Opinions (Oct)Japan All Household Spending (Sep)Eurozone Retail Sales (Sep) Wednesday 9 NovemberJapan Current Account (Sep)China (Mainland) CPI and PPI (Oct)United States Wholesale Inventories (Sep) Thursday 10 NovemberUnited States CPI (Oct)United States Initial Jobless ClaimsChina (Mainland) M2, New Yuan Loans, Loan Growth (Oct) Friday 11 NovemberNew Zealand Manufacturing PMI (Oct)Germany CPI (Oct, final)United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Sep)United Kingdom Goods Trade Balance (Sep)United Kingdom GDP (Q3, prelim)United Kingdom Business Investments (Q3)United States UoM Sentiment (Nov, prelim)     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-7-nov-2022-07112022
Economic Data From China Positively Affected Copper, Aluminum, Zinc And Iron Ore

The LME Prices Reflecting The Price Of Russian Metal More

ING Economics ING Economics 14.11.2022 14:41
The LME's decision to continue to allow Russian metal to be delivered into its warehouses put some downward pressure on metals on Monday morning, easing fears of supply shortages In this article LME aluminium prices retreat LME says many consumers still accept Russian supplies LME aluminium prices retreat The LME aluminium price fell from a two-month high to as low as $2,416/t on Monday morning following the decision. How much further pressure we will see on metals prices going forward will depend on whether we see a significant inflow of Russian metals into LME warehouses in the weeks and months ahead. LME says many consumers still accept Russian supplies After the LME launched a discussion paper on 6 October related to the delivery of Russian metal into LME warehouses, the exchange has been receiving feedback from market players on the potential action, if any, that should be taken. The period for feedback closed on 28 October. The LME set out three options; to take no action on Russian metal, to ban the delivery of Russian metal into LME warehouses, or to introduce thresholds which would restrict the amount of Russian metal that could be delivered into LME warehouses. In the lead-up to the decision, there were a number of producers, who were quite vocal in calling for Russian metal to be banned, whilst consumers were keener for there to be no changes. After going through all the feedback and carrying out its own analysis, the LME has decided to take no action on Russian metal, allowing it to continue to be delivered into LME warehouses. The LME said it believes, after receiving feedback, that a material amount of the market is still accepting and will continue to rely on Russian metals. This was evident in the response from consumers during the discussion period. The LME received 42 written responses - 22 of the responses favoured taking no action, 17 supported a ban on Russian metal and just two supported limiting Russian metal stocks. While a number of respondents said that allowing the delivery of Russian metal into LME warehouses, at a time when we are seeing an increasing amount of self-sanctioning, would see LME prices reflecting the price of Russian metal more than actual traded prices, others said excluding Russian metal would mean that LME prices are not truly reflecting the supply and demand picture. There were also suggestions that the LME's action needs to reflect the global picture, where there are still a number of markets accepting/buying Russian material, rather than just taking a purely Western view, which is where we are seeing most of the self-sanctioning. While there were opposing views on what impact banning or not banning Russian metal would have on liquidity, there was a strong view that nickel should be excluded from any ban, given that it would face the largest liquidity disruption in such an event. The LME acknowledged that its decision to take no action would mean that we likely see increased volumes of Russian metal into LME warehouses. However, the LME believes we would have seen higher inflows of metals into warehouses regardless, given the depressed global outlook. Having said that, the LME has reported that the proportion of Russian metal in LME warehouses has not changed significantly over the discussion paper period. While the LME accepts that LME prices may start to increasingly reflect the price of Russian metal if we see large inflows into LME warehouses, they believe that premia will play an important role, with this likely reflecting a large proportion of the all-in cost, so that non-Russian metal producers continue to receive fair value for their metal. According to feedback, market players do want more transparency on the origin of metal stocks in LME warehouses. Starting in January 2023, the LME will publish a monthly report which will provide the percentage of live tonnage of Russian metal on warrant. If we continue to see an increasing amount of self-sanctioning of Russian metals, the risk is that we see more Russian metal being delivered into LME warehouses, which could potentially mean that LME prices trade at discounted levels to actual traded prices.   Percentage of live tonnage of Russian brands Source: LME Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Commodities: EU Members Manage To Agree On Price Caps For Russian Oil

Commodities: EU Members Manage To Agree On Price Caps For Russian Oil

ING Economics ING Economics 28.11.2022 09:16
Sentiment in markets remains negative given the latest Covid developments in China. Meanwhile, energy markets will be keeping an eye on whether EU members manage to agree on price caps for Russian oil and TTF natural gas futures In this article Energy - price cap decisions Metals – Aluminum stocks decline in China Agriculture – Downside to Argentine wheat output   Shutterstock Energy - price cap decisions Sentiment in the oil market remains negative, and developments over the weekend in China will certainly not help. China continues to see record daily cases of Covid, which has resulted in some cities tightening mobility restrictions. Reports of Covid protests in China will also likely prove harmful for sentiment. Unsurprisingly, investor appetite has taken a hit in recent weeks - one only needs to look at the price action to see this. Positioning data adds confirmation to this thesis. The latest exchange data shows that speculators reduced their net longs in ICE Brent by 70,502 lots over the last reporting week, leaving them with a net long of 138,048 lots as of last Tuesday. This is the smallest position held since August. The market appears not to be concerned about the ongoing uncertainty over Russian supply. Instead, attention seems fully focused on the demand story.    Over the weekend the US government relaxed oil sanctions against Venezuela by allowing Chevron to restart oil production at some of its joint ventures in the country. The easing in sanctions will have a limited impact on the market, given that volumes will be relatively small. The easing also appears to allow the export of this crude to the US. This will be helpful for US refiners on the hunt for heavier grades of feedstock. As for the week ahead, we should start to get some preliminary production numbers for OPEC members for November. This will obviously give a good insight into which members have reduced their output in accordance with the latest OPEC+ supply cuts. OPEC+ agreed back in October to reduce their production targets by 2MMbbls/d from November. However, the market will likely be closely watching price cap developments this week. EU members failed last week to agree on a level for the price cap for Russian oil. The EU and G-7 will want to come to an agreement this week, before the EU ban on Russian seaborne crude oil kicks in on 5 December. EU members will also have to agree on the proposed price cap on TTF gas futures with the Commission last week suggesting setting the cap at EUR275/MWh, which some members believe is too high. Metals – Aluminum stocks decline in China The latest data from the Shanghai Metals Market (SMM) shows that inventories of aluminium ingots have dropped 10% in the last two weeks and currently stand at 51.8kt (the lowest in almost six years) as of Friday. SMM also said that smelters in northern China are reducing output during the winter months to reduce emissions, while a resumption of plants in the southwest (that were forced to halt production due to power shortages) has been slower than expected. Meanwhile, the latest data from the Shanghai Futures Exchange (ShFE) shows that aluminium inventories on exchange dropped by 15kt (-12% WoW) to 110kt - the lowest since 2017. US miner Freeport-McMoRan agreed with the Chinese copper smelters (Tongling Nonferrous Metals Group Co. and Jiangxi Copper Co.) to set treatment charges at US$88/t (+35% YoY) for copper concentrate supply agreements for 2023. The higher treatment charges indicate expectations of rising mine supply relative to smelting capacity.  There are suggestions that two big mines - Quellaveco in Peru and the Quebrada Blanca 2 project in Chile, will roughly add 616kt of copper to the market once ramped up. The latest monthly update from the International Copper and Study Group shows that the supply deficit for copper stood at 10kt in September, compared to a deficit of 13kt in the previous month. Over the first nine months of the year, the copper market encountered a deficit of 295kt, compared to a deficit of 233kt during the same period last year. Global mine and refined copper production increased by 3.5% YoY and 2.3% YoY respectively, whilst overall apparent refined demand grew 2.6% YoY for January-September 2022. Agriculture – Downside to Argentine wheat output The latest data from a crop tour organized by the Bahia Blanca Grain Exchange shows that wheat production in the southern Buenos Aires and La Pampa provinces in Argentina is set to decline by 31% YoY following drought and frost conditions. The survey estimates for the wheat harvest (which starts next month in the region) is around 3.7mt, compared to 5.3mt last season. Meanwhile, barley production in the region is expected to drop by 20% YoY to 2.3mt. TagsSanctions Russian oil price cap OPEC+ Natural gas Aluminium   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Metal Market Insights: Global Aluminium Output Holds Steady, Nickel Spreads Surge, and Indonesia's Copper Exports to Cease

The Aluminium Market Will Significantly Reduce Its Global Deficit

ING Economics ING Economics 30.11.2022 14:25
Negative macro sentiment will continue to put downward pressure on aluminium, with a worsening demand outlook being balanced against tight physical supply In this article Volatility reigns in 2022 High energy costs remain a threat to supply Demand woes take centre stage Russian metal remains the biggest uncertainty Prices to slide in early 2023 on poor near-term economic outlooks   Shutterstock   Volatility reigns in 2022 Aluminium prices have been highly volatile in 2022 due to the Russia-Ukraine war, logistical issues, increasing recessionary fears and the Covid-19 pandemic. LME prices reached a peak of $3,849/t in March but have now declined more than 40% from their post-invasion peaks. LME prices are down more than 40% since March peak LME, ING Research High energy costs remain a threat to supply Soaring energy costs following Russia’s invasion of Ukraine have squeezed producers’ margins, with energy-intensive metals having been particularly affected. Aluminium, the most energy-intensive base metal to produce, requires about 40 times more energy to make than copper. Several output cuts have already taken place since December 2021 at key European smelters, including Alcoa’s San Ciprian smelter and Hydro’s plant in Slovakia. As of mid-October, Europe and the US combined have cut around 1.7 million tonnes of capacity – 25% of European output and 2.1% of the global total – from the second half of 2021. Production cuts in Europe account for around 1.4 million tonnes of capacity. In the US, more than 300,000 tonnes of capacity have been cut, including Alcoa’s Warrick and Century Aluminium’s Hawesville plants. Despite the recent weakness in energy prices, we do not expect capacity to come back online in the short term with Europe heading into the winter months and the war with Russia raging on. Further smelter closures and curtailments in production are highly likely given the uncertainty over energy prices through next year. Any announcement of further closures could see aluminium prices spike but any potential rallies are likely to be unsustainable. We don’t anticipate European smelters restarting before 2024. Although production continues to be cut in Europe and in the US, global primary aluminium output in October rose 3.1% year-on-year to 5.85 million tonnes, according to data from the International Aluminium Institute (IAI). Estimated Chinese production was 3.475 million tonnes, according to the IAI. Total worldwide production on an annualised basis came in at 68.9 Mt, according to the IAI. For Chinese production, the IAI estimated the annualised October output at 40.9 Mt. China’s aluminium smelters are facing constraints, too. In the drought-hit hydro province of Yunnan, which accounts for 11% of China’s aluminium output, aluminium smelters have been required by the government to reduce their operating rates from mid-September. The smelters in Yunnan have cut around 20% of operating capacity, around 1.1 M t/y. It is unlikely that any idled capacity will resume by the end of this year due to current energy issues, with restarts forecast for 2Q 2023 once hydro-reservoir levels have stabilised. This was the second consecutive year that Yunnan cut primary aluminium production. In 2021, smelters in Yunnan experienced three rounds of major curtailments amid power supply shortages, with cuts accounting to 1.74 M t/y of aluminium smelting capacity on an annualised base. The output reductions in Yunnan came after Sichuan smelters cut 920,000 tonnes of capacity in August, accounting for 2% of China’s total. Most smelters in Sichuan have now restarted the idled capacity. More recently, some smelters in Henan province were planning to cut around 10% of their capacity due to a combination of winter season-related cuts and operational losses, which could account for an additional 50,000-100,000 t/y. Still, China’s aluminium output has held up despite the energy crunch. For the first 10 months of the year, China produced 33.33 million tonnes, up 3.3% from the corresponding period in 2021, data from the National Bureau of Statistics showed. In the longer term, as China continues to decarbonise its aluminium industry and increases its share of power generated by green energy, and as capacity shifts from coal power-dominated Shandong province to hydro power-dominated Yunnan, the industry is vulnerable to further disruptions with green energy heavily relying on seasonality and general weather conditions.  China's aluminium capacity breakdown by province National Bureau of Statistics, ING Research Demand woes take centre stage The rise in global aluminium output comes against weakening demand amid global economic gloom. The aluminium market’s focus has shifted to demand woes due to European recession fears amid high power prices, central banks’ monetary tightening and China’s continued Covid-19 restrictions. Industrial metals prices have been battered by fears of weakening global demand, as well as a stronger dollar. Growing recession risks in the US and Europe and an uncertain recovery in China will likely continue to pose downside risks to the demand outlook. In its latest World Economic Outlook, the International Monetary Fund cut its forecast for global growth next year to 2.7% from 2.9% seen in July and 3.8% in January, adding that it sees a 25% probability that growth will slow to less than 2%. About one-third of the global economy risks contracting next year, with the US, the EU and China all continuing to stall. Excluding the unprecedented slowdown of 2020 because of the coronavirus pandemic, next year’s performance would be the weakest since 2009, in the wake of the global financial crisis.  Aluminium consumption has been hit by the bleak global growth outlook, with primary aluminium demand in the world excluding China expected to grow 0.4% YoY in 2022, according to CRU. No dramatic recovery is expected in 2023, as many economies will battle with recession, with demand expected to grow by just 1.8% YoY in 2023 at 28.9 Mt, according to CRU. European demand has been hit the most in 2022 and is expected to be the major reason for weak growth in 2023. In China, demand has stalled in 2022 amid zero-Covid policies and lockdowns, with CRU expecting demand to grow just 0.1% YoY in 2022, at 40Mt, while the recovery in 2023 is expected to be sluggish given a slowdown in the construction sector. Russian metal remains the biggest uncertainty One potential source of price volatility would be sanctions on the Russian material either by the US or the EU. Metals have been mostly spared in the rounds of sanctions imposed on Russia that followed its invasion of Ukraine on 24 February, but it has been reported that the US is considering an effective ban on Russian imports of the metal. The Biden administration is reportedly weighing three potential measures: a complete ban on Russian aluminium, increasing tariffs to levels that would effectively act as a ban and sanctioning the company that produces Russian aluminium, Rusal. The only government to take direct action against Russia’s aluminium sector so far has been Australia, when in March it banned the export of bauxite and alumina into the country, effectively freezing Rusal’s off-take flow from the Queensland Alumina joint venture. In Russia’s other top raw material supplier, Ukraine, the war has closed Rusal’s Nikolaev refinery. The alumina gap has been filled by Chinese producers, which have been increasing their exports to Russia. However, if the US decides to sanction Rusal, the impact could be severe, bearing in mind the market’s reaction to the sanctions in 2018 when the LME prices jumped to $2,718/t, at the time the highest since 2011 before gradually falling in the following weeks and months. Sanctions were then lifted in January 2019. If the US decides to go ahead, the move could freeze the Russian producer out of Western markets, depending on the severity of sanctions, which would boost global prices for the metal and distort global aluminium trade flows. Meanwhile, at least for now, the aluminium market has a bit more clarity following the LME’s decision to take no action on the delivery of Russian metals into LME warehouses, as a significant portion of the market was still planning to buy it next year. The LME was looking at potentially banning the delivery of Russian metal into its warehouses, limiting Russian flows or taking no action. Instead, the exchange said it will publish regular reports from January 2023 detailing the percentage of Russian metal stored under warrant in LME warehouses to provide more transparency. In a response to the LME’s proposal, Rusal has called for the exchange to start disclosing the origin of all metal stocks on warrant rather than singling out Russia as proposed. Alcoa was also supportive of the idea of providing more details about the origin of the material in LME warehouses. If we continue to see an increasing amount of self-sanctioning of Russian metals, the risk is that we see more Russian metal being delivered into LME warehouses, which could potentially mean that LME prices trade at discounted levels to actual traded prices. However, the LME believes we would have seen higher inflows of metals into warehouses regardless, given the depressed global outlook. The LME’s decision to continue to allow Russian metal to be delivered into its warehouses put some downward pressure on aluminium prices, easing fears of supply shortages. How much further pressure we will see on aluminium prices going forward will depend on whether we see a significant inflow of Russian metals into LME warehouses in the weeks and months ahead. While the LME accepts that LME prices may start to increasingly reflect the price of Russian metal if we see large inflows into LME warehouses, they believe that premia will play an important role, with this likely reflecting a larger proportion of the all-in cost, so that non-Russian metal producers continue to receive fair value for their metal. Russia accounts for about 6% of global aluminium output estimated at 70 million tonnes this year. Russian aluminium has accounted for as much as three quarters of LME stockpiles over the past decade, according to the exchange. The LME has reported that the proportion of Russian metal in LME warehouses has not changed significantly over the discussion paper period, with the percentage of live tonnage of Russian aluminium on warrant standing at 17.7% on 28 October, compared to 17% on 6 October when the LME launched the discussion paper. At the same time, the flow of Russian metal into Western markets was strong in the first half of the year. European average monthly imports were up by 13% year-on-year in March through June, while the US increased its Russian imports by 21% in the same period. Most Rusal customers have been accepting deliveries under existing contracts, however, that is likely to change next year. Self-sanctioning is likely to disrupt trade flows with the possibility of Russian metal flowing to the market of last resort – the LME.  Novelis, a division of Hindalco Industries and Norsk Hydro's extrusions unit have already said they will not enter into new Russian purchase contracts for 2023. Rusal has recently said that its sales picked up after the LME’s decision, exceeding 76% of its primary aluminium production and value-added production for 2023. Prices to slide in early 2023 on poor near-term economic outlooks Looking ahead to 1Q 2023, the risk for aluminium prices will be mainly to the downside, with the prolonged war in Ukraine, rising energy prices, low gas availability, high inflation and weakening downstream demand all adding to the bearish outlook for the lightweight metal.  The aluminium market will significantly reduce its global deficit in 2022 and move into surplus in 2023, according to CRU, with an estimated market deficit of 300kt in 2022, down from 1.6Mt in 2021. Given the production cuts, CRU is expecting only a modest surplus next year of 300kt tonnes. This is driven by demand destruction in the world ex-China in 2022 and 2023 and a higher rate of production inside China compared to 2021. The projected surplus in the world ex. China is only 71,000 tonnes. Demand destruction will offset the impact of smelter closures seen in recent months. In the short-term, the market’s focus will remain on the bigger macro-economic and demand-side problems, with prices expected to fall further to $2,150/t in 1Q 2023. We believe a recovery in price should start in 2Q 2023, although any recovery is likely to be slow. ING forecasts ING research TagsCommodities Outlook 2023 Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Metal Market Insights: Global Aluminium Output Holds Steady, Nickel Spreads Surge, and Indonesia's Copper Exports to Cease

The Commodities: Aluminium Production Is Estimated To Rise

ING Economics ING Economics 01.12.2022 09:20
Commodities received a boost along with other risk assets after some mildly dovish comments from the US Fed chairman. No surprise that this led to USD weakness, providing further support to the complex In this article Energy - US crude oil inventories plunge Metals – Copper output recovers in Chile   Energy - US crude oil inventories plunge The oil market received a boost yesterday from multiple factors. ICE Brent managed to settle more than 3.2% higher on the day. Most risk assets rallied on the back of the US Fed chairman signalling smaller rate hikes as soon as December, while hopes of an easing in China’s covid policy also proved supportive. In addition, noise in the oil market continues to build ahead of the OPEC+ meeting this weekend. It is still not exactly clear what action if any, the group will take. The weakness in the market over the last several weeks means that further supply cuts cannot be ruled out. The EIA’s weekly inventory report was also bullish for the market yesterday. The latest data shows that US commercial crude oil inventories fell by 12.58MMbbls over the week - the largest weekly decline since June 2019. When taking into consideration SPR releases, total US crude oil inventories fell by 13.98MMbbls. Trade played a large role in the significant inventory draws with crude oil imports falling by 1.03MMbbls/d over the week and exports rising by 706Mbbls/d. Refiners also increased their utilisation rates by 1.3pp to 95.2% - the highest levels since August 2019. As a result of stronger refinery throughput, gasoline and distillate fuel oil inventories increased by 2.77MMbbls and 3.55MMbbls respectively. Metals – Copper output recovers in Chile Chile, which accounts for about a quarter of the world supply of copper, just registered its first year-on-year output increase since July 2021. October production edged up 2.2% from the same month last year, according to data from the National Statistics Institute. Month-on-month output jumped 11%. Chile’s copper production has struggled for much of this year amid lacklustre ore grades, labour woes and water scarcity. Rio Tinto expects its iron ore production to remain roughly in line with 2022 and forecasts to ship between 320-335mt of iron ore in 2023 from its Pilbara project in Australia, unchanged from its previous guidance. The group expects medium-term iron ore production capacity to remain between 345mt-360mt. Meanwhile, aluminium production is estimated to rise to 3.1mt-3.2mt in 2023, compared to an estimated 3mt-3.1mt for 2022. TagsOPEC+ Iron ore Federal Reseve EIA Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities: The EU Is Looking At A Price Cap Level Of Around US$60/bbl

The Commodities: The EU Is Looking At A Price Cap Level Of Around US$60/bbl

ING Economics ING Economics 02.12.2022 09:33
OPEC+ is set to meet on Sunday to decide on output policy for 2023. While the EU still needs to come to an agreement on the G-7 price cap ahead of the EU's ban on Russian seaborne crude oil, which comes into force on 5 December Energy - OPEC output falls Preliminary OPEC production numbers for November are starting to come through and it is no surprise that the group significantly reduced output over the month due to the recently agreed production cuts. According to a Bloomberg survey, OPEC output declined by 1.05MMbbls/d MoM to 28.79MMbbls/d. Saudi Arabia led the way with their production falling by 470Mbbls/d, whilst the UAE saw their output decline by 240Mbbls/d. The reduction from the group is broadly in line with the cuts expected under the deal. This weekend we will need to see if OPEC+ stick to the current deal or announce even deeper cuts. The group meets on Sunday and given the recent price weakness, there is the potential for further cuts. EU members are still trying to agree on a level for the Russian oil price cap. They will want to come to an agreement before 5 December, which is when the EU ban on Russian seaborne crude oil kicks in. The latest reports suggest that the EU is looking at a price cap level of around US$60/bbl, which is lower than the original US$65-70/bbl suggested, however, it is still above the current levels that Russia is receiving for its crude oil. Therefore, if agreed at this level, it will have little impact on Russian oil revenues at the moment. Metals – Chinese aluminium surplus The latest forecast from Mysteel shows that the Chinese aluminium market will finish 2022 with a deficit of 340kt, while the market is expected to shift to a surplus of 580kt in 2023. Supply is expected to grow as a result of new capacity as well as production restarts. Demand is estimated to have grown by 1.6% YoY this year, despite weak demand from the property sector. For 2023, Chinese demand is forecast to rise by 2.24% YoY.  The latest reports suggest that a major copper smelter, Daye Nonferrous Metals Group Holding Co. located in Huangshi city in Hubei province started producing copper from its new smelter with an operational capacity of 400ktpa. It is estimated that the plant produced its first batch of refined copper at the end of November. Agriculture – US weekly grain shipments remain soft The latest weekly data from the USDA shows that US grain exports remained weak and came in below market expectations for the week ending on 24th November. Weekly export sales of wheat dropped to 163kt, lower than the 450kt expected. Soybean export sales fell to 694kt, also below the roughly 813kt expected, whilst corn export sales declined to 633kt, compared to expectations of around 763kt. CBOT soybean oil fell sharply yesterday with prices reaching their lowest levels in three months due to the latest proposal from the Biden administration for changes to the US biofuel mandate falling short of expectations for biodiesel quotas. As per the latest Environmental Protection Agency proposal, the agency will ask oil refineries and importers to blend 20.82 billion gallons of renewable fuel into diesel and gasoline in 2023. The agency will also keep raising the quota for biofuels until 2025. The proposal would also moderately boost quotas for biodiesel (made from soybean oil and other fats) to 2.82 billion gallons in 2023 from 2.76 billion gallons currently. The market was expecting and hoping for a higher number. Read this article on THINK TagsRussian oil price cap OPEC+ Oil Grains Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
OPEC+ Meeting: Saudi Arabia Implements Deeper Voluntary Cuts to Boost Oil Prices

OPEC+ Supply Cuts Suggests That The Oil Market Will Tighten Over The Course Of 2023

ING Economics ING Economics 11.12.2022 10:12
This year has been extraordinary for commodity markets. Supply risks led to increased volatility and elevated prices. However, demand concerns have taken the driving seat as we approach year-end. Next year is set to be another year plagued by uncertainty and volatility  In this article Tighter oil market European natural gas prices to remain elevated Demand woes take centre stage for aluminium   We believe that the oil market will tighten over the course of 2023 1Tighter oil market There is still plenty of uncertainty over Russian oil supply given the EU’s ban on Russian crude oil and refined products. However, we believe that Russian supply will fall significantly early next year – in the region of 1.8MMbbls/d year-on-year in the first quarter. This supply loss coupled with continued OPEC+ supply cuts suggests that the oil market will tighten over the course of 2023. US supply growth will not be able to fill the gap, with US producers showing a lot more capital discipline. As a result, we expect ICE Brent to average US$104/bbl next year. 2European natural gas prices to remain elevated This winter appears as though it will be more manageable for Europe due to the late start to the heating season. This left European natural gas storage virtually full in mid-November. However, 2023 will be a tough year for the European natural gas market. It is unlikely the region will be able to build storage at the same pace as seen in 2022. Annual Russian gas flows will fall in the region of 60% YoY, even if flows remain at similar levels to what they are currently. Unfortunately, the liquefied natural gas (LNG) market will not be able to fully offset losses. Therefore, demand destruction will need to continue to ensure adequate supply for the 2023/24 winter. In order to see this demand destruction, prices will have to remain at elevated levels. We forecast TTF to average €175/MWh over 2023. 3Demand woes take centre stage for aluminium Aluminium prices have been highly volatile this year due to the Russia-Ukraine war, logistical issues, increasing recessionary fears and the Covid-19 pandemic. Looking ahead to the first quarter of next year, the risk for aluminium prices will be mainly to the downside, with the prolonged war in Ukraine, rising energy prices, low gas availability, high inflation and weakening downstream demand all adding to the bearish outlook for the lightweight metal. In the short-term, the market’s focus will remain on the bigger macroeconomic and demand-side problems, with prices expected to fall further to $2,150/t in the first quarter of 2023. We believe a recovery in price should start in the second quarter, although any recovery is likely to be slow. TagsOil Natural gas Commodities Aluminium 2023 outlook Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Commodities: Production Of Zinc At George Fisher Zinc Mine (Australia) Has Stopped As A Grassfire Continued For A Third Day

Commodities: Production Of Zinc At George Fisher Zinc Mine (Australia) Has Stopped As A Grassfire Continued For A Third Day

ING Economics ING Economics 13.12.2022 12:03
Oil prices continued to rise as no timeline has been given yet for the reopening of the Keystone pipeline, which suffered an oil leak last week.  Source: Shutterstock Energy – US shale production recovery continues The oil market strengthened for a second consecutive session amid supply disruptions and as China further eased its Covid restrictions. However, climbing Covid case numbers in the country are clouding once again the demand outlook as new cases have started to strain medical resources. TC Energy Corp. has yet to submit a restart plan needed to resume the operation of the Keystone pipeline following recent oil spill. The EIA released its latest drilling productivity report yesterday and expects US shale oil production to increase to 9.32MMbbls/d in January, up from an estimated 9.23MMbbls/d in December and 9.13MMbbls/d in November. Most of the addition would come from the Permian region, where output is expected to increase by 37Mbbls/d, whilst Bakken and Eagle Ford are forecast to see output increase by 21Mbbls/d and 10Mbbls/d, respectively. If realized, planned shale oil production in January will surpass the previous record of 9.27MMbbls/d set in November 2019. The report also showed that drilled but uncompleted wells (DUCs) increased last month, after falling continuously for more than two years. DUC inventory rose by 22 to a total of 4,443 at the end of November, rebounding from the lows of 4,421 (lowest since 2014) reported in October. An increase in DUC inventory reflects slower investment in completing oil wells, and could weigh on shale oil production growth in 2023 if crude oil prices remain at lower levels. Metals – China Covid concerns weigh on the complex A resurgence of Covid infections in China weighed across risk assets yesterday, with base metals mostly falling across the board. LME copper fell almost 2% to close at US$8,374/t yesterday with the market largely ignoring the ongoing protests in Peru. The latest market report suggests that the latest move by Peru’s president to bring elections forward to 2024 failed to curb ongoing protests in the country. Freeport-McMoRan reported that its Cerro Verde copper mine is experiencing delays in the transport of supplies and products due to political protests but that mine operations are running normally as of now. For aluminium, the latest LME data shows that total on-warrant stocks for the metal reported an increase of 37.4kt (the biggest daily addition since 19 October) to 261.4kt as of yesterday. All of the inflows were reported from Port Klang, Malaysia warehouses. Meanwhile, Shanghai Metals Market (SMM) reported that aluminium smelters (Zunyi Aluminium Industry Ltd. and Guizhou Liupanshui Shuangyuan Aluminum Ltd) in Guizhou province in China have received orders from the local government to reduce power usage by 20%, starting from 13 December for at least five days. Cold weather across the region has resulted in increased energy consumption and reduced supplies. For zinc, the latest reports suggest that production at George Fisher zinc mine located outside Mount Isa, Australia has stopped as a grassfire continued for a third day. Hundreds of underground workers have been evacuated due to health safety concerns. Stocks of zinc on the LME fell for a tenth consecutive day on Monday and are now  at their lowest level in three decades as producers cut output. Soaring energy costs following Russia’s invasion of Ukraine have squeezed producers’ margins, with energy-intensive metals, including zinc, having been particularly affected. Last week, Nyrstar said its Auby smelter would remain closed indefinitely due to challenging market conditions. Agriculture – UNICA reports higher cane crush The latest fortnightly report from the UNICA shows that sugar cane crushing in Centre-South Brazil increased significantly by 319% YoY to 16.2mt over the second half of November, with cumulative crushing up 2.1% YoY so far this season to stand at 532mt. Sugar production increased 532% YoY to 1.03mt over the 2nd half of November, with around 47.6% of cane allocated to sugar production. Cumulatively, sugar output has risen 2.8% YoY to 33mt in the season so far. UNICA reported that 84 sugar mills were still operating at the end of November 2022, nearly three times more than last year due to a delayed start to the season. The group expects 23 sugar mills to close operations by the first half of December; typically crushing season ends in Brazil by the first half of December. A longer crushing season this year could push up supply from Brazil. The crushing report from UNICA is at odds with other market reports - where crushing looks to have concluded due to adverse weather. USDA weekly export inspection data shows the demand for US grains remained weak over the last week. US weekly inspection of soybean for export fell to 1,840kt over the last week, lower when compared to 2,080kt in the previous week. It was slightly higher when compared to 1748kt same time last year. For wheat, export inspections weakened last week, from 342kt to 219kt; also  lower than the 269kt at the same time last year. Corn shipment inspections fell to 505kt over the last week, compared to 824kt from a week ago and 930kt at the same time last year. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Russia Look Set To Double Its Exports For The First Half Of 2023

Commodities: Soft Wheat Shipments From The EU Rose 6% Year-On-Year

ING Economics ING Economics 14.12.2022 10:57
On Tuesday, gold jumped to its highest price since June after US consumer prices posted the smallest monthly gain in more than a year, sparking hopes that the US Federal Reserve will ease the pace of interest rate hikes Energy – OPEC left supply/demand forecasts largely unchanged ICE Brent was firm yesterday along with the broader commodity index as a softer CPI report from the US buoyed sentiment – lower inflation could push the Fed to slow down its rate hikes and support a recovery in commodities. The Fed is expected to hike rates by 50bp later today. Supply disruptions and the easing of Covid-19 curbs in China provided further support. The monthly oil market report released from the OPEC group yesterday was largely flat for the oil market. The group left demand growth estimates largely unchanged for both 2022 at around 2.5MMbbls/d and 2023 at around 2.2MMbbls/d although it made some adjustments to quarterly demand numbers. The group revised down demand estimates for the first quarter of 2023 from 101.3MMbbls/d to 100.9MMbbls/d and it revised higher demand estimates for the third quarter with similar numbers. Similarly, the group left non-OPEC supply growth estimates largely unchanged at around 1.9MMbbls/d for 2022 and 1.5MMbbls/d for 2023. The group maintained its estimates for OPEC crude oil supply requirements at around 29.22MMbbls/d for 2023 compared to around 28.59MMbbls/d for 2022. The weekly inventory report from the API was bearish for the oil market. The API reported that US crude oil inventories increased by 7.82MMbbls over the last week, compared to market expectations of roughly 3.9MMbbls of withdrawals. The API also reported that gasoline and distillate fuel oil stocks increased by 0.9MMbbls and 3.9MMbbls, respectively, over the week. The official EIA report will be released later today. Metals – softer inflation supports gold rally Yesterday's US inflation report helped gold prices to rally strongly, rising to a near six-month high of US$1,820/oz as a slowdown in rate hikes could increase the investment appeal of gold in the longer term. US retail inflation slowed from 7.7% in October to 7.1% in November whilst core inflation dropped to 6% compared to 6.3% in October. Whilst inflation is still higher than the Fed’s comfortable range, softening of inflation reinforces the view that the peak of the rate-hike cycle might be in sight. The interest rate hike this year has pushed investment money away from gold as investors chased higher returns (along with safety) in US treasuries. Total known gold exchange-traded fund (ETF) holdings have dropped by around 13.2mOz from the peak in April this year as the Fed hiked interest rates. A slowdown in rate hikes or the possibility of rate cuts later in 2023 could reverse the trend and help bring investment money back into gold ETF. Copper traded with high volatility yesterday as low inflation in the US boosted sentiments and pushed LME copper prices to above US$8,600/t at one point, although the rally was quickly followed by a sell-off with LME copper settling at US$8,497/t, still up 1.5% for the day. LME aluminium and zinc also witnessed similar price action as expectations of a slowdown in rate hikes led to optimism. The time spread of LME nickel contracts has widened significantly this week to US$280-290/t of contango as the illiquidity in the spot market makes it challenging for traders to roll-forward long positions without a huge discount. The spread was only around US$100/t at the start of the month. Weaker demand for nickel in the physical market and higher borrowing costs have further accentuated the issue. Agriculture – Russia targets 80mt-85mt of wheat harvest next year The Russian Agriculture Ministry said that the nation is aiming for an 80-85mt harvest target for wheat next year and a total grain harvest of around 125-127mt. These initial targets from Russia are lower compared to the harvest in 2022 and may tighten the global market if realised. The Ukraine Agriculture Ministry said that as the harvesting of grains is nearing completion in the nation, the farmers have harvested 17.2mt (66%) of corn as of 13 December, with a yield of 61.9 centners per hectare. Meanwhile, wheat harvest stood at 19.4mt (100%) during the abovementioned period, with a yield of 41.2 centners per hectare. Weekly data from the European Commission shows that soft wheat shipments from the EU rose 6% year-on-year and reached 15.4mt as of 12 December, up from 14.5mt for the same period last year. Morocco, Algeria and Egypt were the top destinations for these shipments. Meanwhile, given lower domestic output, EU corn imports increased to 13.1mt, compared to around 6mt last year. Read this article on THINK TagsMetals Gold Energy Commodities Agriculture Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
OPEC+ Meeting: Saudi Arabia Implements Deeper Voluntary Cuts to Boost Oil Prices

Commodities: The IEA Now Expects Global Oil Demand To Grow

ING Economics ING Economics 15.12.2022 10:32
Supply concerns eased after TC Energy Corp restarted a section of the Keystone pipeline, allowing some flows to resume, which should see a partial recovery of crude oil supply flow from Canada to the US TC Energy Corp has restarted a segment of the Keystone pipeline a week after a leak triggered the whole pipe's shutdown Energy – IEA revises oil demand outlook slightly higher ICE Brent prices settled higher for a third consecutive day yesterday following an upward revision in the oil demand forecast by the International Energy Agency (IEA). However, the weekly petroleum report from EIA and softer demand data from China this morning weighs on the sentiment. TC Energy Corp restarted a segment of its Keystone oil pipeline, extending between Hardisty, Alberta to Wood River and Patoka, Illinois. This should see a partial recovery of crude oil supply flow from Canada to the US. A restart for the remaining section of the pipeline remains uncertain. The IEA released its latest monthly oil market report yesterday and the agency made revisions higher to its demand growth forecasts for 2022 and 2023 on account of stronger demand from non-OECD countries including China, India and the Middle East. The IEA now expects global oil demand to grow by 2.3MMbbls/d (+140Mbbls/d compared to last estimates) in 2022 and 1.7MMbbls/d (+100Mbbls compared to previous estimates) in 2023. The IEA also said that total OECD oil stocks declined in November, pointing to a rise in refinery demand. As for the Russian oil supply, the agency predicted that the output could fall by 1.4MMbbls/d over the next year following the latest price cap imposed by the G7. Meanwhile, Russian oil exports rose by 270Mbbls/d to 8.1MMbbls/d in November, the highest since April. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM The latest data from the EIA shows that US commercial crude oil inventories increased by a huge 10.2MMbbls over the last week despite the supply disruptions witnessed due to the outages at the Keystone pipeline. Withdrawals from the Strategic Petroleum Reserve (SPR), the world's largest supply of emergency crude oil, continued over the week and SPR crude oil inventory dropped by around 4.7MMbbls, limiting the total crude oil inventory increase to 5.5MMbbls for the week, still the biggest increase since March 2021. The market was expecting a drawdown of 3.4MMbbls. Refined product inventory has also increased over the last week reflecting a slowdown in demand for the fuels. EIA data shows that gasoline inventories rose by 4.5MMbbls, against a forecast of an increase of 2.8MMbbls; whilst distillate stockpiles rose by 1.4MMbbls last week, compared with expectations for a build of 2.7MMbbls. The latest data from China’s National Bureau of Statistics showed that crude oil processing increased around 5% month-on-month to 14.6MMbbls/d in November 2022 as demand for Chinese fuel products in the overseas market increased further. China’s refined products exports increased to 6.1mt in November, the highest in more than a year and up 38% compared to October exports. Meanwhile, domestic demand for crude oil continues to be soft with apparent demand falling 2.5% year-on-year to around 13.8MMbbls/d. The Covid-19 spike this month and previously-imposed restrictions may keep domestic demand under pressure in December and crude oil demand could remain soft in the country in the short term. Metals – China steel output declines further The latest data from the National Bureau of Statistics shows that monthly crude steel production in China declined for a second consecutive month in November, due to the nationwide Covid-19 restrictions, the ongoing property crisis, and the start of winter pollution curbs. Steel production in China dropped by 6.5% MoM (up 7.3% YoY) to 74.5mt in November; cumulatively, output fell 1.4% YoY to 935mt over the first 11 months of the year. Meanwhile, steel products output gained 7.1% YoY to 109mt last month while remaining almost flat at 1,226mt between January 2022 and November 2022. For aluminium, Chinese primary aluminium production rose 9.4% YoY to 3.4mt over the month as the higher runs in Guangxi and Sichuan provinces offset winter production cuts elsewhere. For the first 11 months of the year, output rose 3.9% YoY to a total of 36.8mt. For copper, the latest LME data shows that total on-warrant stocks for copper reported inflows of 5.1kt (the biggest daily addition since 15 November) to 62.8kt as of yesterday. The entire inflows were reported in Rotterdam warehouses. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Data from the International Lead and Zinc Study Group shows that the global zinc market remained in a supply deficit of 117kt over the first ten months of 2022, slightly lower when compared to a deficit of 125kt during the same period a year ago. Total refined production fell 3.2% YoY to 11.1mt majorly due to lower output in Europe, whilst total consumption declined 3.2% YoY to 11.2mt between January 2022 and October 2022. For lead, total production fell 1.3% YoY to 10.1mt, while consumption fell marginally by 0.4% YoY to 10.2mt in the first ten months of the year. The lead market reported a supply deficit of 46kt between January 2022 and October 2022 when compared to a surplus of 48kt during the same time last year. Iron ore dropped for a third day yesterday as traders weigh the impact of China's Covid surge on the economy as the country pivots away from its zero-Covid policy. Covid cases in China are surging after the government embarked on a faster-than-expected reopening, abandoning mass testing and isolation rules. The postponement of an economic policy meeting in China, which was due to start this week, has also weighed on the sentiment. The market was expecting the meeting to announce more measures to support the property sector, which accounts for around 40% of steel consumption. Read this article on THINK TagsSteel Oil Metals Energy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

Saxo Bank Podcast: The Bank Of Japan Shocking Markets, The Japanese Yen Rose

Saxo Bank Saxo Bank 20.12.2022 12:27
Summary:  Today we look at the Bank of Japan shocking markets overnight with a surprise shift in its yield-curve-control policy, as it lifted the cap on 10-year JGB's to 50 basis points from 25 basis points. The JPY rose in stepwise fashion together with the jump in longer Japanese yields and global yields were also impacted, taking risk sentiment lower. In commodities, we discuss metals and natural gas. In equities, we discuss the outlook for European defense stocks, including Rheinmetall and cover upcoming earnings reports from Nike, where the bar of market expectations looks high, and from FedEx, where the bar of expectations is quite low. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Bank of Japan roils markets with a surprise policy tweak | Saxo Group (home.saxo)
Czech National Bank Prepares for Possible Rate Cut in November

CPI In China Rose, US CPI Print Are For A Rise For The Year-On-Year At 6.5%

Saxo Bank Saxo Bank 12.01.2023 09:40
Summary:  Markets have charged higher again, seemingly confident that today’s US December CPI data won’t provide any pushback against this rally, which is pulling up into the psychologically important 4,000 area in the US S&P 500 Index. Elsewhere, the USD remains on its back foot on hopes for a soft CPI print, while EURCHF has suddenly pulled above parity for the first time in over six months in a delayed reaction to ECB hawkishness. Oil jumped.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended momentum all the way up to the falling 200-day moving average closing at 3,990 and in early trading this morning the index futures are hovering around the 200-day moving average. This average was hit back in mid-December before US equities were weighed down by hawkish central bank comments and sold off into New Year. Today’s US December CPI report is naturally the key report to watch today as the previous three inflation reports have caused significant volatility over the release. If the market gets it lower inflation print then S&P 500 futures might push above 4,000 and even all the way up to 4,050. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) After making a new six-month high this morning, Hang Seng Index reversed and pared gains. Profit-taking weighed on recent policy beneficiaries, such as mainland Chinese property developers, domestic consumption names, mega-cap internet stocks, and Macao casino operators. Shares of EV makers bucked the market trend of retracement to advance, led by BYD (01211:xhkg) up 5.7%. FIT Hong Teng (06088:xhkg), a subsidiary of Foxconn, soared 23% on speculation that the company might replace GoerTek (002241:xsec) to assemble AirPods for Apple. In A-shares, defense, aerospace, auto industrial equipment and wind power outperformed as the domestic consumption space retraced. As of writing, Hang Seng Index and CSI300 edged up around 0.3%. FX: USD still low, JPY resurgent. EURCHF blasts higher The greenback remains on its back foot coming into today’s US December CPI release, with market players likely very unclear around the reaction function (more on that below in What’s Next?) to in-line or even soft data today. EURUSD etched marginal new highs above 1.0760 yesterday, but clearly faces a test over today’s data and may have been driven yesterday by flows in EURCHF, which suddenly bursts out of its range and traded well above parity – likely on the hawkish ECB outlook finally sending the pair over the edge. ECB’s De Cos said he sees “significant” rate hikes at the upcoming meetings, while ECB’s Holzmann soft-pedaled the message on QT, saying he was very cautious on moving too fast.  USDJPY dipped on the news flow overnight as described below, and many other USD pairs are still within recent ranges, if toward important USD support in places, especially AUDUSD. Crude oil (CLG3 & LCOH3) remains supported by China recovery story Crude oil prices rallied strongly on Wednesday with the improved outlook for Chinese demand and the softer dollar driving a fifth day of gains. Chinese buyers have become active in the physical market, with Unipec snapping up about 3-4mbbl of US crude for March and April in recent days. This comes following news that China had issued a fresh batch of import quotas as it reopens following years of COVID-19 restrictions. Supply was supported by a huge 19m barrels build in US inventories, the biggest since Feb 2021, but it could not dampen the positive price sentiment as higher inventories was expected after the late December cold blast reduced exports while temporarily shutting down some refineries. Fresh momentum was seen in both WTI and Brent after breaking their 21-day moving averages, now offering support at $76.35 and $81.65 respectively. Gold sees raised correction risk as US CPI looms Gold’s price action and gains during the past week has in our opinion showed us the correct direction for 2023, but while the direction is correct, we believe the timing could be wrong, and with momentum showing signs of slowing ahead of key resistance around $1900, and a potential weaker-than-forecast US CPI print today having been priced in, the risk of correction has risen. Pent-up demand in China ahead of the Lunar New Year may soon fade, while India’s demand may slow as traders adapt to the higher price level. In addition, we have yet to see demand for ETF’s, often used by long-term focused investors, spring back to life with total holdings still hovering around a near two-year low at 2923 tons. The next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with support around $1865 followed by $1826, the 21-day moving average. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields drop, strong 10-year auction supports The US 10-year yield dropped back toward 3.50% support overnight after falling some 7-basis point yesterday, supported in part by a solid US 10-year auction, with bidding metrics sharply improving relative to the prior couple of weak auctions. The 2-10 year yield slope inverted back toward –70 basis points. Treasuries may find additional support if today’s December US CPI report proves softer than expected. Read next: Discussion Of Bank Representatives On Financing The Ecological Transformation | FXMAG.COM What is going on? The Eurozone economy is more resilient than forecasted Economic surprises are improving significantly in the eurozone. The consensus forecasts a drop in GDP of minus 0.1% this year. Based on hard data, this seems excessively conservative. It is bound to be revised up, in our view. The German economy is especially very resilient. While gas consumption has collapsed by double digits, industry output has remained largely flat. This is a remarkable achievement. Based on the latest data on industrial production (for the month of November), it looks like there will be no recession in German industry in Q4. However, the year 2023 will be challenging in the eurozone: credit stress is on the rise (this is the first time in a decade we start the year with European IG credit yield above the 4 % level), and the market will need to absorb about 700bn euros of liquidity due to the ECB quantitative tightening. Metals pause after powering higher on China optimism Industrial metals are pausing ahead of today’s CPI print and after having marched higher on positive signals from China on Zero Covid and policy stimulus. An apparent peak in infections follow the sudden dropping of COVID-19 restrictions has raised the prospect of an earlier than expected jump in industrial activity. Pent up consumer demand is likely to add to the clamour for metals. Aluminium, copper and iron ore, all rose to new highs on Wednesday. Iron ore (SCOF3) could be potentially ripe for a reversal, given China’s warning on tightening the supervision on iron ore pricing on Friday to crack down on speculators. Meanwhile, Copper’s year-to-date gain of 9% to near $4.20 has also been fast and could see scope for a correction, but the sharply improved technical outlook and limited investor positioning may continue to provide some support in the short term. USDJPY drops below 132 on possible BOJ action next week The Bank of Japan meets next Wednesday and may be set to guide for further policy tweaks after a regional Bank of Japan report released overnight . In other news in Japan, the Yomiuri newspaper reported that the BoJ will review the side effects of its policy at next week’s meeting and a quarterly Bank of Japan report raised its assessment of the economy in four of Japan’s nine regions, noting that in “there were many cases where companies were increasing winter bonus payments, or plan to hike wages.” Also JPY-supportive, preliminary data from Japan’s Ministry of Finance suggest that Japan’s life insurers sold a record amount of foreign bonds last month. CPI and PPI inflation remained low in China CPI in China rose to 1.8% y/y in December from 1.6% in November, in line with expectations. The rise was due to a low base and on CPI was unchanged m/m. Excluding food and energy, core CPI came in at 0.7% y/y in December, edging up slightly from 0.6% y/y in November. The change in PPI however rebounded less than expected to -0.7% y/y versus -0.1% expected and -1.3% y/y in November. TSMC Q4 earnings beat estimates The world’s largest foundry of semiconductors beat on net income in Q4 driven by gross margin at 62.2% vs est. 60.1%. TSMC says company to face margin headwinds in 2023 with revenue growth slowing down. CAPEX in 2023 is expected at $32-36bn vs est. $35bn against $36bn in 2022. The company is considering a second manufacturing plant in Japan and a new automotive chips plant in Europe. It has also expanded its 28nm production in China and is planning to mass produce its new 2nm in 2025 in its facilities in Taiwan. Fast Retailing sees big miss in Q1 operating income The parent company behind the Japanese fashion retailer Uniqlo reports Q1 operating income of JPY 117bn vs est. JPY140bn but maintains its outlook for profit and revenue growth amid its commitment from yesterday to raise wages up to 40% for its Japanese retail workers. KB Home outlook hit by interest rates When the price of capital goes up the demand on homes often goes down, and this is exactly what KB Home is experiencing. The US homebuilder reported Q4 EPS of $2.47 vs est. $2.86, but it was the FY23 outlook of revenue between $5bn and $6bn missing the consensus of $6bn in revenue, but with new orders down 80% more profit warnings could come during the year. What are we watching next? WASDE report on tap with grain traders watching stock levels The Bloomberg Grains Index, rangebound for the past six month has opened a new trading year with a loss of 3.5% primarily driven by lower wheat prices on ample supply from the Black Sea region, will receive some fundamental input later today when the US Department of Agriculture releases its monthly supply and demand report. Market estimates point to a trimming of the global corn and soybeans inventories, while wheat is expected to show a small rise. US inventories, meanwhile, is expected to rise across the board driven by weakness in Chinese demand and strong competition from overseas supplies, in part due to the dollar. Also focus on Argentina where an ongoing drought may drive a 6% reduction in the country's soy and corn output. US December CPI up today – what is the reaction function? The latest CPI data out of the US is the next important test for global markets, which seem confident that the Fed will not only halt its policy tightening soon after perhaps 50 basis points of further tightening but will even cut rates cuts by year-end. The US CPI releases have triggered considerable volatility in recent months, and the November CPI release on December 13 ullustrates the potentially treacherous reaction pattern to this data points, as softer than expected inflation levels reported saw risk asset jump aggressively as US treasury yields eased, only for the equity market move to get erased within hours and the US yields to bottom out on the following day. Consensus expectations for today’s CPI print are for a fall in the month-on-month headline data of –0.1% and a rise for the year-on-year at 6.5% versus +7.1% in November. The core, ex Food and Energy number is expected to rise +0.3% MoM and +5.7% YoY vs. +6.0% YoY in November and a peak rate of 6.6% last September. Earnings to watch The Q4 earnings season kicks off tomorrow with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth in 2023. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. In addition, US banks have extended credit at the fastest pace in 2022 since the year leading up to the Great Financial Crisis. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Today: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1330 – US December CPI 1330 – US Weekly Initial Jobless Claims 1345 – US Fed’s Harker (voter 2023) to discuss economic outlook 1530 – EIA Natural Gas Storage Change 1630 – US Fed’s Bullard (non-voter) to speak 1700 – UK Bank of England’s Mann to speak 1700 – USDA's World Agriculture Supply and Demand Estimates (WASDE) Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher
Prices Of The Natural Gas Extended The Rebound

Commodities: US Natural Gas Prices Managed To Strengthen Yesterday

ING Economics ING Economics 13.01.2023 08:38
US CPI data came in line with expectations, which provided broad support to the commodities complex. Next week, there is a fair amount on the energy calendar, including OPEC and IEA monthly oil reports Gold climbed above $1,900/oz (very briefly) for the first time since May after US inflation data matched forecasts Energy: China refined product export surge After a weak start to the trading year, the oil market has performed better this week. ICE Brent is on course to settle higher this week, although we will need to see what happens in trading today. Yesterday’s US CPI data would have provided some support to the market, with it suggesting less aggressive action from the US Federal Reserve in the months ahead. Optimism around the China demand story has only provided further support to the oil market. Our balance shows that the oil market should tighten as we move through the year. This should prove constructive for prices, particularly when you consider the modest net long speculators currently hold in Brent. The latest trade data from China was released this morning, showing that crude oil imports in December averaged 11.35MMbbls/d, up around 4.1% year-on-year. This leaves crude oil imports over the whole of 2022 at 10.21MMbbls/d, down 0.9% YoY. We would expect stronger growth through 2023. In addition, refined product exports in December grew by 138% YoY to total 7.7mt, following the release of substantial export quotas towards the end of the year. However, full-year 2022 exports were still down around 11% % YoY to total 53.7mt. Given the increase in product export quotas we have seen from the Chinese government, it is likely that exports will edge higher this year, although this will also depend on how domestic demand performs over the course of the year. Refined product inventories in the ARA region edged higher over the week according to data from Insights Global. Total refined product stocks increased by 228kt to total 5.87mt. Increases were seen across all products, but naphtha saw the largest weekly move, increasing by 73kt. Gasoil stocks in the region are looking more comfortable than we saw at stages last year, but inventories still remain quite some distance below the 5-year average. In addition, we would expect to see some further tightening in middle distillates once the EU ban on Russian refined products comes into force in early February. US natural gas prices managed to strengthen yesterday, despite storage increasing over the last week. EIA numbers show that US natural gas storage increased by 11bcf, which is very different from a five-year average draw of 157bcf. The market appears to be more focused on a forecast for colder temperatures later this month. In addition, it appears as though Freeport LNG could see yet further delays to its restart. The plant was shut in June following a fire and the restart date has been pushed back several times already. The latest official comment was for a restart in the second half of January, however, recent reports suggest that this could be pushed into February. Metals: gold briefly climbs above $1,900/oz Gold climbed above $1,900/oz (very briefly) for the first time since May after US inflation data matched forecasts, raising hopes that the Fed will slow the pace of its rate hikes. The consumer price index fell 0.1% month-on-month in December, pushing the US dollar lower. Excluding food and energy, the core CPI rose 0.3% last month and was 5.7% higher than a year earlier, the slowest pace since December 2021. Central bank tightening and US dollar strength weighed heavily on gold prices for much of 2022. Russians bought a record 57 tonnes of gold from 13 local banks last year equating to more than 15% of the country’s annual output of gold. That compares to only six tonnes of gold bought in 2021. Russia cancelled value-added tax on retail gold purchases in March following the invasion of Ukraine, to boost gold sales. In July, retail buyers were also exempt from profit tax on gold purchases through to the end of 2023. Russia is the world’s second-biggest gold producer. The country mined more than 330 tonnes of gold in 2021. Aluminium Dunkerque, the EU’s largest aluminium smelter, is ramping up output back to full capacity as power prices decline. The company expects the plant to produce at full capacity by the end of May, with falling electricity prices and government support for heavy energy users helping boost profitability. The plant in Dunkirk, which produced 290,000 tonnes in 2021, cut output by 22% in September amid soaring energy prices. The UK’s FCA is blocking the LME’s plans to resume trading of nickel during Asian hours due to concerns the exchange won’t be able to run an orderly market, according to a report from Reuters. The exchange halted trading of nickel in Asian hours in 2022 after a historic price spike during Asian trading hours. The UK’s FCA had told the exchange its measures to supervise trading during that time zone were still not adequate. Agriculture: WASDE revisions The latest WASDE report from the USDA was constructive for grain prices. US corn production estimates for 2022/23 were lowered by around 200m bushels. And this revision was largely driven by unexpected lower acreage. As a result, ending stocks for 2022/23 were lowered from 1.26b bushels to 1.24b bushels, which was also below the roughly 1.31b bushels the market was expecting. For the global corn balance, 2022/23 ending stocks were marginally lowered from 298.4mt to 296.4mt. It was also slightly below the roughly 297.7mt expected. The USDA lowered its US production estimates by 70m bushels to 4.28b bushels, with yield estimates reduced from 50.2 bushels/acre to 49.5 bushels/acre. The agency decreased 2022/23 US ending stocks estimates for soybeans from 220m bushels to 210m bushels; which was lower than the more than 230m bushels the market expected. For the global market, the USDA increased 2022/23 global soybean ending stocks from 102.7mt to 103.5m, largely on account of higher stocks at the start of the season. However, global soybean production estimates were revised down by around 3.2mt to 388mt, as supply losses from Argentina weighed on total production and offset the slight production gains from Brazil. It was a fairly neutral report for global wheat markets as the USDA left both production and demand estimates largely unchanged at 781mt and 789mt respectively. Global ending stocks for wheat increased slightly from 267.3mt to 268.4mt, broadly in line with market expectations. However, for the US wheat balance, ending stocks for 2022/23 were lowered from 576m bushels to 571m bushels, as higher domestic use offset a sharp rise in beginning stocks. The market was expecting ending stocks of around 580m bushels. In addition to the WASDE, the USDA also released its quarterly grains stocks report which showed that US stocks as of 1 December 2022 all came in below market expectations. US corn stocks totalled 10.8b bushels, down 7% YoY and below market expectations of more than 11.1b bushels. US soybean stocks came in at 3.02b bushels, down 4% YoY and lower than the 3.3b bushels expected. Finally, for US wheat, stocks were down 7% YoY to total 1.28b bushels, which was also below the 1.34b bushels expected. Read this article on THINK TagsWASDE Refined product Oil Natural gas LNG Gold China trade Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Weekly Commitment of Traders update - Buying of crude oil moderated, ICE gas oil net long reduced to a 30-month low

Commodities: The Expected Recovery In Oil Demand Following China’s Reopening, Inventories At Major Chinese Steel Mills Rose

ING Economics ING Economics 18.01.2023 09:26
Large parts of the commodities complex were well supported following stronger-than-expected economic data from China. Yesterday’s OPEC monthly report was a non-event, but today’s IEA oil market report could be more interesting in light of the China reopening story Energy - OPEC sees a tighter market over 2H23 ICE Brent managed to push higher yesterday, settling more than 1.7% up on the day and leaving it within striking distance of US$86/bbl. This is the strongest settlement we have seen in Brent since early December. Stronger-than-expected Chinese economic data yesterday would have provided some support to the market, boosting confidence that we could see a strong recovery in Chinese oil demand this year. The latest output data from China shows that oil refiners processed around 14.17MMbbls/d of crude oil in December, slightly down from the 14.69MMbbls/d processed in November, but up 2% YoY. However, full-year 2022 numbers averaged 13.57MMbbls/d, which is down almost 4% YoY. Weaker domestic demand and low refined product export quotas would have weighed on refinery runs through 2022. Activity should recover this year, given the expected recovery in oil demand following China’s reopening, along with the government releasing larger volumes of refined product export quotas more recently.   OPEC released its latest monthly market report yesterday, which saw few changes to the 2023 numbers. OPEC still expects global oil demand to grow by 2.22MMbbls/d this year to average 101.77MMbbls/d. Non-OPEC supply growth was left unchanged at 1.54MMbbls/d, leaving total non-OPEC supply at 67.16MMbbls/d in 2023. OPEC numbers suggest that the global market will be in balance to a small surplus over the first half of 2023 (if we assume OPEC output remains at similar levels to those seen in December). However, the group does see a tighter market over the second half of 2023 if OPEC production policy remains unchanged. The IEA will also be releasing its monthly oil market report today. We believe the market will be closely watching to see whether the agency makes any upward demand revisions following the China re-opening story. If so, the IEA report could provide some further support to the market. Metals - Chinese aluminium output hits record levels China produced a total of 3.43mt of primary aluminium in December according to the National Bureau of Statistics (NBS), up slightly from the November output of 3.41mt (+0.6%) and up as much as 10.2% YoY. Overall, for 2022, China produced 40.21mt of primary aluminium – up 4.5% from 2021, and a new all-time record, NBS reported. The latest data from China Iron and Steel Association (CISA) showed steel inventories at major Chinese steel mills rose to 14.9mt in early January, up 14% compared to late December. Crude steel production at major mills also edged higher to 1.93mt/d during the period. An Indonesian nickel smelter, run by PT Gunbuster Nickel Industry, resumed operations after protests in the Sulawesi facility led to violent clashes that killed two people. The smelter produces nickel pig iron (NPI) using an electric furnace with an annual capacity of 1.8mt of NPI. Agriculture – Indian sugar output rises The latest data from the Indian Sugar Mills Association (ISMA) shows that 2022/23 Indian sugar production rose 4% YoY to 15.7mt through until 15th January, compared to 15.08mt during the same period last year. The group said that by the middle of January, 515 mills were crushing cane, compared to 507 mills at the same time last year. ISMA expects domestic sugar production this season to total 36.5mt, up from 35.8mt in the previous season. Weekly data from the European Commission shows that soft wheat shipments from the EU rose 6.3% YoY and reached 17.7mt as of 15th January, up from 16.6mt for the same period last year. Morocco, Algeria and Egypt were the top destinations for these shipments. Meanwhile, EU corn imports continued to rise and stood at 15.7mt, compared to 8.3mt last year due to lower domestic output. Read this article on THINK TagsSugar Steel OPEC+ Nickel IEA China economy Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Commodity: The World's Two Biggest Commodity Consuming Nations, Both Delivered Price Softening News

Technical Outlook: The Commodity ETF Could Benefit From A Bull Market

Saxo Bank Saxo Bank 20.01.2023 14:47
Summary:  A technical look at some of the Commodity ETF's both US and London listed that could benefit from a bull market developing in the Base and Precious metals market Today's Saxo Market Call podcast.Today's Market Quick Take from the Saxo Strategy Team  The Bloomberg Commodities Index which tracks futures prices on physical commodities such as Energy, Soft Commodities and Base Metals and Precious metals has been in a corrective phase for the best part of a year now after a strong uptrend starting in 2020.Illustrated here by the Invesco DB Commodity Index Tracker Fund DBC (further below its London listed Commodity ETF) it has formed a Descending triangle like corrective pattern. It is not yet confirmed and could also be a falling Wedge like pattern ( a falling wedge the price must touch the trendlines a total of 5 times)Break out will confirm which one it is.If breaking below 23.42 it is likely to be a falling wedge.Currently the DBC is trying to break above its upper falling trendline and if closing above the correction could be over and DBC set to resume uptrend.Medium-to longer-term uptrend will be confirmed by a close above 26.70.The corrective pattern currently being formed seems to be the 4th corrective wave ABC. If the correction is over and bull trend resumes we can estimate how high the DBC can potentially move.5th wave often moves 1.618 projection of wave 4 i.e., to around 35.10 or 0.618 of wave 1+3 i.e., to around 35.92. If moving 0.618 of Wave 3 alone target is at 34.64. However, 5 wave in commodities can become the longest one i.e., longer than wave 3. If that is the case here then DBC can move to 43.65. But let’s if we get above the above mentioned potential targets.Monthly RSI is bullish with no divergence which indicates likely new highs i.e., supporting the bullish outlook.If DBC closes below 23.42 the correction could be extended down to around 22-21.85 (dashed line on weekly chart) thereby potentially forming a falling wedge.Weekly RSI is still positive (hasn’t closed below 40) with no divergence support the bullish trend to resume   Source all charts and data: Saxo Group European listed Commodity ETF If you cannot trade the US based ETF it is also listed in London:  Invesco Bloomberg UCITS EFT (CMOD:xlon) traded in USD. Strong support at 23 . A close above the falling trendline is like to resume uptrend. An uptrend that will be confirmed by a close above 25.41. CMOD has the same technical picture and will have same upside potential as the DBC i.e., approx. +40%.  A pureplay Metals ETF is Invesco DB Base Metals DBB:arcx  (US Listed) or WisdomTree Industrial Metals AIGI:xlon (London listed)They are both in an uptrend on medium-term. AIGI:xlon if closing above 17.20 today Friday would be in a confirmed uptrend supported by RSI above 60. A double bottom pattern ahs been confirmed with potential target to around 18.76. However, there could be more upside potential. 0.618 retracement of the Q2 collapse at around 22.85 is not unlikely.To demolish this picture a close below 15.65 is needed.  DBB:arcx has also formed a double bottom pattern and in a confirmed uptrend with RSI above 60 threshold. 200% of the double bottom pattern is at 23.90 and 0.618 retracement of the downtrend since Q2 2022 at 23.37.However, there could be more upside. DBB has corrected 0.618 of the 2020-2022 bull market (Monthly chart) and seems set for higher levels. RSI showing positive sentiment with no divergence which indicates likely new highs. Possibly reaching 1.382 projection of the correction to around 30.35.For DBB to demolish this bullish scenario a close below 17.48 is needed. RSI divergence: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend Source: Technical Update - Commodities lead by metals are drawing the picture of a bull market. Commodity ETF's to trade | Saxo Group (home.saxo)
Share of Russian metal grows in LME warehouses

Commodities: Copper Was Trading Near A Seven-Month High, The Global Primary Aluminium Increased,

ING Economics ING Economics 23.01.2023 11:23
Copper was trading near a seven-month high amid continued optimism that China’s reopening from Covid lockdowns will boost demand for the red metal Energy – Price cap on Russian oil products ICE Brent has been trading steady at around US$87.5/bbl in the morning trade today after making gains over the last week on the prospects of improving demand from China. For products, ICE gasoil crack spread increased to a one-month high of US$42.3/bbl as the European ban on Russian diesel cargoes approaches, while the US also announced plans to put a price cap on Russian oil products. The US and its European allies have agreed to institute a price cap on Russian oil products along with an existing cap on Russian crude oil prices to curb Russian oil revenues. The price cap levels on refined products have not been announced yet; the details could be finalised before March 2023 when the group is set to review the existing price cap on Russian crude oil prices. Currently, the price cap on Russian crude oil is set at US$60/bbl, which is significantly below the current market price of Brent oil with some European countries pushing for an even lower price cap. Crude oil flows at TC Energy’s Keystone crude oil pipeline system have recovered to around 559Mbbls/d after falling to less than 200Mbbls/d earlier last week due to power outages. The company had declared a force majeure for crude oil deliveries for the rest of the month due to supply disruptions. The pipeline carries more than 600Mbbls/d of oil and is a major transport channel for oil fields in Canada to refiners in the Midwest including Cushing, Oklahoma. The latest positioning data from CFTC shows that speculators increased their net long position in NYMEX WTI after two consecutive weeks of decline by 25,867 lots (the biggest daily addition since August) over the last week, leaving them with net longs of 182,052 lots as of 17 January. Meanwhile, money managers also boosted their net longs in ICE Brent by 55,340 lots over the last week, leaving them with a net long position of 212,452 lots as of last Tuesday. Metals – Global aluminium output remains strong The latest numbers from the International Aluminium Association (IAI) show that the global primary aluminium increased to 189kt/day in December, compared to 188.6kt a month earlier. Total monthly output for the metal rose 6% year-on-year (+3.6% month-on-month) to 5.86mt last month. Cumulatively, production rose 2% YoY to a total of 68.4mt in 2022. Similarly, Chinese output rose 11.6% YoY (+3.3% MoM) to 3.47mt last month with full-year output rising 4% YoY to 40.4mt in 2022. Meanwhile, aluminium production in Western and Central Europe also posted recovery on a monthly basis with output rising by 3.6% YoY to 232kt in December. However, it continued to remain suppressed on a yearly basis with production declining by 16.5% YoY last month as domestic smelting activities were impacted by higher power prices. Aluminium production in Asia (ex-China) increased by 2.9% MoM last month, while year-to-date output gained 2% YoY last year. With copper, Glencore said that operations at its Antapaccay copper mine in Peru were halted on Friday as protesters in the country entered and damaged a worker camp. Meanwhile, the transportation of copper concentrates continues to remain temporarily suspended. The company also mentioned that before the incident, mine was operating with only 38% of its workforce due to the ongoing protests in the nation. The mine accounts for 8% of Peru’s total copper exports. However, despite the ongoing mine supply disruptions and exchange inventories standing at historically low levels, the LME cash/3m spread moved in a contango last week. As per the recent LME data, the cash/3m spread for copper widened to a contango of US$16.2/t as of Friday, when compared to a contango of US$4.5/t a day earlier. Copper was trading near a seven-month high amid continued optimism that China’s reopening from Covid lockdowns will boost demand for the red metal while supply concerns in Peru linger.  For lead, the latest LME data shows that exchange inventories for the metal declined by 725 tonnes (-3.5% DoD) to 20,250 tonnes (the lowest since March 1990) as of Friday. The majority of the declines were reported from Singapore and Trieste warehouses. Lastly, the latest CFTC data show that speculators increased their bullish bets in COMEX copper by 6,452 lots for a second consecutive week over the last reporting week, leaving them with a net long position of 35,248 lots as of last Tuesday. In precious metals, speculators increased their bullish bets in COMEX gold by 10,783 for a seventh consecutive week, to leave them with a net long of 93,357 lots as of last reporting week. Agriculture – Speculative net bearish bets for CBOT wheat increase The latest CFTC data show that money managers increased their net short position in CBOT wheat by 1,955 lots to 65,089 lots (most bearish in almost four years) as of 17 January, amid expectations of easing supply worries. The move was dominated by rising shorts positions with gross shorts increasing by 1,657 lots to 118,818 lots. For soybean, speculators increased their net longs by 36,594 lots over the last week, leaving them with a net long position of 168,298 lots. The move was predominantly driven by rising long positions with gross longs increasing by 29,027 lots to 186,794 lots. Similarly, speculative net longs in CBOT corn increased by 42,532 lots to 192,137 lots. The USDA’s weekly export inspection data shows the demand for US grains remained strong over the last week. US weekly inspection of soybean for exports rose to 986kt over the last week, higher when compared to 783kt in the previous week and the average market expectation of 865kt. Similarly, corn shipment inspections rose to 1.13mt over the last week, significantly higher when compared to 278kt from a week ago and the average market expectation of 475kt. Meanwhile, wheat export inspections rose last week from 92kt to 473kt, while also remaining higher when compared to the market expectation of 258kt. Read this article on THINK TagsCopper Commodities Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: OPEC+ meeting ahead

The Commodities Feed: OPEC+ meeting ahead

ING Economics ING Economics 31.01.2023 09:11
Commodity markets will be eagerly watching what the Fed decides at its FOMC meeting this week. For oil markets, no change in output policy is expected from OPEC+ when they meet on Wednesday Energy- market awaits Fed decision The oil market sold off yesterday, with a lack of fresh catalysts in the market. ICE Brent fell more than 2% on the day to settle at US$84.90/bbl, after the market failed to successfully break above the 100 day moving average. There are several key events that participants will focus on this week. Firstly, the OPEC+ meeting on Wednesday, where there is no change in output policy expected given the current uncertainty in the market. This will be followed by the FOMC meeting later that day, where our US economist expects the Fed to hike by 25bps. Finally, on 5 February the EU ban on Russian refined products comes into force. The full effect will likely take some time to be seen although, according to Bloomberg, Russia is planning to boost diesel exports from Baltic and Black Sea ports to 2.74mt - the highest levels in three years. It will be interesting to see where this ends up if shipped, given that historically the EU has been the key market. The European gas market continues to see TTF prices consolidating in the EUR55-60/MWh region, with current storage remaining comfortable. The latest data indicates that storage in Europe is 73% full, compared to the 5-year average of 53% full. This should allow the EU to get through this winter in a comfortable manner. Prospects for the region also look better for the 2023/24 winter. Metals - Philippines considers taxing nickel exports Nickel prices settled 1.1% higher yesterday, after the Philippines said it is considering taxing nickel ore exports amid a push for miners in the country to invest in processing capacity rather than shipping raw materials. The Philippines, the world’s second-biggest supplier of nickel, plans to follow Indonesia’s strategy. Indonesia banned exports of nickel ores in 2020 and limited shipments to refined products. The Philippines government is considering whether to impose an export tax on raw nickel exports or ban ore shipments completely. In copper, the latest LME data shows that total on-warrant stocks for copper reported inflows of 3,800 tonnes (the biggest daily addition since 29 December) to 54,375 tonnes as of Monday. The inflows were driven by an increase in German warehouses. MMG’s Las Bambas, one of Peru’s biggest copper mines, will stop production on Wednesday if transport disruptions due to nationwide political unrest don’t stop. The copper mine will be unable to keep producing copper from Wednesday amid a “shortage of critical supplies” caused by road blockages in the area, MMG said in a statement on Monday. In aluminium, Glencore delivered 40,000 tonnes of the Russian metal into LME warehouses in the South Korean port of Gwangyang, according to a report from Reuters. This could raise concerns in the aluminium market that LME prices will weaken as stocks build up. After an industry consultation last November, the LME decided to take no action on Russian metal. The exchange said at the time that a significant portion of the market still planned to buy Russian metal in 2023. Agriculture – Sugar rallies Sugar prices continued to rally yesterday with No.11 raw sugar up almost 1.2% yesterday to settle at USc21.21/lb - the strongest close we have seen in the sugar market since 2016. The strength in the market comes as there are concerns that India may not approve further exports with worries over the domestic crop. Late last year, the Indian government approved a little over 6mt of sugar exports in the 2022/23 season, with the potential for further exports if the domestic balance allowed. The latest data from Ukraine’s Agriculture Ministry shows that the nation exported 26.3mt of grains as of 30 January so far in the 2022/23 season, a decline of 31% YoY. Total corn shipments stood at 15mt (+1.7% YoY), while wheat exports fell 44% YoY to 9.4mt. Read this article on THINK TagsUS Fed TTF Sugar OPEC+ Nickel Natural gas Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Analysis: Gold/Silver Ratio Still On The Rise

For Industrial Metals The Future Looks Bright

Santa Zvaigzne Sproge Santa Zvaigzne Sproge 02.02.2023 14:28
Gold and silver as financial security assets: which offers better security? A weakening dollar means that gold may potentially outperform other major assets in the near term, but silver offers an even better currency hedge in relative terms. The two metals are traded on the same venues, provide the same broad sweep of derivative products, and are exposed to the same financial drivers. Their correlation is about 0.8 over any time frame someone would like to test. However, someone might need to allocate more of their portfolio to gold to gain the same amount of exposure. With a beta of 1.6, silver tends to echo and amplify the swings in gold, meaning about a third less cash is needed to gain the same exposure. For industrial metals, the future looks bright given China abandoning the „zero Covid” policy suite that has pressured the economy for so long and their support for the housing market. However, 2023 may also be gloomy when you consider the anticipated global recession. Assuming the recession would be moderate, industrial metals may be a good place for some exposure in 2023. More precisely, copper is traded at around 8,536 USD per metric ton on the London Metal Exchange, up about a fifth from the lows of July this year, according to FactSet. Aluminium prices on the LME are also up about a fifth from their late September lows. Citi says that copper supply now possibly exceeds demand and that aluminium shifted into surplus during the third quarter. The bank expects further economic weakness, as well as seasonal weakness, to limit the further increases in metal pricesand states that metals such as copper are pricing in a major near-term recovery in demand growth, which might not happen. Read next: USD/JPY Pair Is Trading At 128.48 The Aussie Pair Is Above 0.71$| FXMAG.COM In 2022, we saw a divergence between the price of an ounce of silver in futures form and an ounce of silver in American Eagle coin form that had not been seen for at least a decade. One and the other market priced the same ounce of silver, with the coins usually only slightly higher in value than the futures. By contrast, the divergence now appears to be huge, reaching tens of percent. At the beginning of December 2022, a popular silver coin cost around 36 USD. The futures contract for an ounce of silver cost 22-23 USD, creating a divergence of nearly 50-60%. This divergence should ease as the prices of both assets begin to reverse their historical relationship. Good to watch commodities XBRUSD/XTIUSD Price of the crude oil may manifest an upward trend due to the demand from China and possible further production cuts by the OPEC cartel. XAGUSD The emerging divergence between physical coin prices and futures prices due to shortages of this commodity in circulation does not seem possible to last forever. Therefore, there may be an upside in the futures market for silver. XAUUSD The gold price may be expected to be in a positive territory in the near term due to the weakening of the US Dollar and investors’ preference of less risky assets. XPTUSD As with the oil market, the situation in China could have a major impact on its valuation in 2023. However, assuming the abolition of the „zero Covid” policy by the Chinese government and the support of the property market, we could expect a rise in this commodity. Read the full Yearly Outlook 2023 by Conotoxia here!
The Commodities Feed: Specs continue to cut oil longs

The Commodities Feed: EU refined products ban starts

ING Economics ING Economics 06.02.2023 08:39
The commodity complex came under pressure along with other risk assets following the stronger-than-expected US jobs report, which increases uncertainty over the path the US Fed will take. For oil markets, the EU ban on Russian refined products finally came into force over the weekend Energy - EU products ban The oil market came under further pressure on Friday, along with the broader commodity complex and risk assets. Friday’s US jobs report came in well above expectations, which left the market rethinking the path the US Fed could take in the months ahead. ICE Brent fell by more than 2.7% on the day and settled below US$80/bbl. This left it down almost 7.8% over the course of last week. Sunday saw the EU finally implement its ban on Russian refined products. The ban arrives a couple of months after the region imposed a similar ban on Russian seaborne crude oil. The ban will have the largest impact on Russian diesel and naphtha flows to the EU. However, EU buyers have had time to prepare for the ban. In the period leading to the cut-off, there were increased flows of middle distillates to the EU and this has helped to push gasoil inventories in the ARA region back up towards the 5-year average. The G-7 price cap on Russian refined products also came into effect yesterday. This will allow G-7 shipping and insurance services to be used for the trade of Russian refined products as long as it is at or below the price cap. The group has agreed on a price cap for premium refined products (gasoline, diesel and jet fuel) of US$100/bbl, whilst refined products such as fuel oil and naphtha (which are trading at a discount to crude oil) have had their cap set at US$45/bbl.   Markets will have to wait a bit longer for positioning data in commodity markets following a cyber incident at a third-party provider of derivatives order management. The incident has meant that some clearing members have been unable to provide accurate and timely data to the CFTC. It is not clear when the CFTC will publish the next Commitments of Traders report. For gas and LNG markets, Freeport LNG at the end of last week requested permission to restart ship loading, although the plant will still require further approval in order to restart commercial operations. However, despite the progress with Freeport, along with the cold weather in the US Northeast, Henry Hub continues to trade below US$2.50/MMBtu.   Metals – Zinc stocks jump in China Base metal inventories in Chinese warehouses have started to recover following the Lunar New Year holidays. The latest data from the Shanghai Futures Exchange (ShFE) shows that weekly inventories for zinc increased by 46,735 tonnes (the biggest weekly addition on record) to 90,983 tonnes (the highest since August) as of Friday. Other base metals also reported inflows with copper inventories reaching their highest since May 2021. In mine supply, Southern Copper Corp. said that operations at its mines were running normally despite the ongoing political unrest in Peru that has already forced some major mines to halt their mining activities. The company reported that copper output rose 1.6% YoY to 241.3kt in 4Q22, slightly higher than an estimate of 240.5kt. As for aluminium, the latest LME data shows that total on-warrant stocks for aluminium reported outflows of 5,225 tonnes (the biggest daily decline since 29th December) to 225,900 tonnes as of Friday. The entire outflows were reported from warehouses in Singapore. Cancelled warrants for aluminium rose by 875 tonnes (after declining for six consecutive sessions) to 169,350 tonnes, signalling potential further outflows. Meanwhile, total exchange inventories declined for the sixth straight session by 4,350 tonnes to 395,250 tonnes as of the end of last week. Agriculture – coffee remains volatile Arabica coffee prices softened on Friday and dropped almost 2.9% to settle at US¢172.80/lb on Friday after gaining around 25% over the past 3-4 weeks. Reports of slower exports from South America and weather-related concerns, combined with lower inventory have been supportive of coffee prices over the past few weeks. Current estimates of the market balance for 2022/23 and 2023/24 fall in a wide range which brings additional volatility for coffee prices. Earlier, the International Coffee Organization reported that global coffee exports dropped by around 8.5% YoY to 10.9m bags in December 2022 on slower exports of Arabica coffee, especially from Brazil and Colombia. Arabica coffee exports were down 13.7% YoY to 6.1m bags, whilst Robusta exports were largely flat and fell only 0.9% YoY to 4.8m bags. Cumulatively, global coffee exports dropped by 2.8% YoY to 30.3m bags since the season started in October 2022, with Arabica exports falling 4.5% YoY to 18.3m bags and Robusta exports largely flat at around 12m bags. Read this article on THINK Zinc Russian oil price cap Russian oil ban Natural gas LNG Coffee Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Aluminium production cuts

The Commodities Feed: Potential US aluminium tariffs

ING Economics ING Economics 07.02.2023 08:56
The aluminium market had a limited reaction to reports that the US is looking to impose prohibitively high tariffs on Russian aluminium. Meanwhile, there are supply concerns in the oil market after a devastating earthquake hit Turkey and Syria Energy- oil supply concerns after quake ICE Brent managed to break back above US$80/bbl yesterday, settling more than 1.3% higher on the day. Supply concerns appear to have driven the strength after a deadly earthquake hit Turkey and Syria. Pipeline infrastructure which carries both Iraqi and Azerbaijani crude oil to the Ceyhan terminal in Turkey passes through the region hit by the earthquake. The Ceyhan oil terminal has reportedly been shut as a result, and whilst there has been no damage reported to pipelines, flows from at least Iraq appear to have been halted as a precaution. Exports of Azerbaijani and Iraqi crude oil via the Ceyhan oil terminal have been in the region of 1MMbbls/d.  It is not clear when the terminal will resume operations. Saudi Arabia increased its official selling price (OSP) for most crude grades and regions for March loadings. The market had been expecting that OSPs would be cut for the month. Arab Light into Asia was increased by US$0.20/bbl to US$2/bbl over the benchmark, which is the first increase since September. All grades into Europe and the US saw increases for the month. The ICE gasoil crack came under significant pressure yesterday, falling to its lowest level since March last year. This weakness comes despite the EU ban on Russian refined products coming into force over the weekend. The market has had plenty of time to prepare for the ban with strong middle distillate flows in the lead-up to 5 February. As a result, gasoil stocks in the ARA region have trended back towards the 5-year average more recently. Metals - US plans 200% tariff on Russian aluminium The US is reportedly preparing to impose a 200% tariff on Russian-made aluminium as soon as this week, according to Bloomberg. Russia is the world’s second-largest producer of the metal after China, accounting for about 6% of global output (estimated at 70 million tonnes last year). LME aluminium prices initially gained as much as 0.6% following the announcement, although still managed to settle lower on the day. If the US goes ahead and imposes the tariff on Russian aluminium, it will likely have a limited impact on the global market. The US is not a significant buyer of Russian aluminium, which usually accounts for about 10% of total US imports, though this share has been even smaller recently. These reports shouldn’t come as too much of a surprise given that last year there were reports that the White House was considering either an outright ban of the metal, sanctions on Russian aluminium producer, Rusal, or imposing prohibitively high tariffs. If the US were to go the sanctions route, it would have a more severe impact on the market. China’s Yunnan province could increase aluminium capacity cuts due to power shortages, according to reports from SMM. The capacity cuts could add up to around 700kt in the province. Yunnan is a major aluminium-producing province, accounting for around 13% of national capacity and any supply disruption from the province could tighten the physical market in the short term. However, aluminium inventories in China are relatively high this year and will likely help in mitigating any temporary supply shortages. For copper, First Quantum said loading operations at the Cobre Panama port have been suspended after the miner and the government failed to reach an agreement over tax payments. The mine produced around 92kt of copper in 3Q22. Mining operations at the Cobre Panama mine remain unaffected for now. However, a prolonged disruption to shipping activity could impact mining operations due to limited storage capacity. First Quantum reported that mining operations may need to be curtailed in mid-February if concentrate exports don’t resume by then. Agriculture – Ukrainian grain exports Grain exports from Ukraine under the Black Sea Grain Initiative dropped to 3.1mt in January compared to 3.6mt in December 2022 due to a slowdown in inspections – seaborne exports continue to be significantly below Ukraine’s target of around 5mt per month. Cumulatively, the country has exported around 18mt of grains under the initiative since it started in August 2022. Total grain exports (including by rail and other modes) have dropped by 29% YoY to 27.7mt in the ongoing season (from 1st July to date), with wheat exports down 42% YoY to 9.9mt and corn exports down 1.5% YoY to 15.9mt. Read this article on THINK TagsUkraine Russian oil price cap Oil Gasoil Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The Commodities Feed: US announces SPR purchase

The Commodities Feed: US oil and product stocks grow

ING Economics ING Economics 09.02.2023 08:43
Oil prices moved higher yesterday despite builds in both US oil and product inventories. Meanwhile, LME aluminium inventories surged higher yesterday, which put pressure on prices Source: Shutterstock Energy - US crude oil inventories edge higher Oil prices continued to move higher yesterday despite EIA weekly inventory numbers showing that US oil and product inventories increased over the last week. Crude oil inventories grew by 2.42MMbbls, which takes total US commercial inventories to a little more than 455MMbbls - a level last seen in June 2021. Similarly, crude oil inventories at Cushing increased by 1.04MMbbls, which leaves stocks at the WTI delivery hub at their highest level since July 2021. Strong refinery runs over the week may have provided support to the market. Refinery utilisation increased by 2.2pp to 87.9%, the strongest level so far this year. However, stronger refinery runs mean that there were large builds in product inventories. Gasoline and distillate fuel oil stocks increased by 5.01MMbbls and 2.93MMbbls respectively. Metals – LME aluminium stocks surge LME aluminium prices fell by more than 1.7% yesterday following a surge in LME exchange inventories in South Korean warehouses (viewed as the preferred storage hub for Russian metal), raising concerns over unwanted material being offloaded to the exchange. As per the latest LME data, exchange inventories for aluminium rose by 105,500 tonnes (highest since 10th February 2022) to 495,750 tonnes as of yesterday. Meanwhile, LME zinc stocks increased by 3,825 tonnes to 19,425 tonnes, rising from their lowest level since 1975. Data released by the Energy and Mines Ministry of Peru show that total copper output in Peru rose by 19.8% YoY to 251.7kt in December. Looking at individual mine supply gains, output at Cerro Verde and Southern Peru rose 8.1% and 2.6% respectively, while production at Las Bambas rose by 84.8%. Among other metals, Peru’s zinc production contracted 2.7% YoY in December. In its latest statement,  Glencore said that operations at its Antapaccay copper mine in Peru have resumed. The mine halted its mining activities last month when protesters damaged a work camp at the site. Alcoa confirmed that most workers voted in support of a phased restart of its closed aluminium smelter in Spain, according to a report from SMM. The reopening is planned to start in January 2024 and is expected to be completed by October 2025. By the end of 2026, the smelter will be able to reach a production capacity of at least 228kt/year. Read this article on THINK TagsZinc Refined product Oil EIA Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Bank Quarterly Outlook: Bullish View On Industrial Metals

Saxo Bank Quarterly Outlook: Bullish View On Industrial Metals

Saxo Bank Saxo Bank 10.02.2023 11:02
Summary:  Our Quarterly Outlook highlighted our significantly bullish view on industrial metals such as copper, aluminium and lithium. We highlight potential stocks to watch ahead, given many of the major metal companies including Albemarle, BHP, Rio Tinto and Pilbara Minerals report financial results and their outlooks in the coming weeks. We believe a theme might be to expect higher commodity prices this year. When picking investments, remember markets are forward looking When assessing sectors and stocks to watch, it’s important to note markets are forward looking.As we are at Saxo - we’re thinking about what markets could look in six to 12 month.With that in mind, and reflecting on Saxo’s quarterly outlook; we wanted to share five stocks to watch; as featured in our Equity baskets and focusing on our bullish view of the commodity sector. Read next: Twitter Co-Founder Jack Dorsey Comments New Twitter's Owner| FXMAG.COM Saxo is bullish on copper, aluminium and lithium    At Saxo, as mentioned in our quarterly outlook, we’re significantly bullish on copper, aluminium and lithium; underpinned by demand from the global green transformation and with hundreds of billions to be invested to achieve climate and car makers goals. Here are three considerations Firstly; The International Energy Agency or IEA – made of 31 countries, including, Australia, the UK, Denmark, the United States and Japan vowed to be emission free by 2050. Some nations plan to end the sale of fuel powered engines by 2035. Meaning - demand for green metals will only increase - while supply is not expected to keep up. This means the trend toward higher commodity prices is likely here to stay. Secondl;  consider how much copper, aluminium and lithium goes into an average EV - 10 kilograms of lithium, 83 kilograms of copper. 250 kilograms of aluminium. But metals are also needed for other battery cells and for building materials as well. Thirdly; consider; investment managers have been increasing their positions into such, metals, given the likes of Tesla, Ford, BMW, Merc, and VW will need to buy more raw materials such as these, to ramping up EVs production. Five stocks to watch; across copper, aluminium and lithium- Albemarle, BHP, Rio, Southern Copper Corp and Pilbara Minerals   These stocks are featured in Saxo equity baskets, to find more click here.  Albemarle (ALB) is the world’s biggest lithium producing company by market size with a US$31.3 billion valuation. It has one the broadest customer groups, selling to Toyota, Ford, Mercedes-Benz, Tesla and GM, and Panasonic. Albemarle is due to report financial results on February 16 as well as its outlook, which will be very telling for the lithium industry. For more on Albemarle head to Saxo’s Lithium or green transformation equity theme baskets. BHP (BHP) is the biggest mining company in the world by market size, with an AUD$243 billion valuation. BHP has historically generated some of strongest cashflows across the globe. Given this – it’s also been able to pay some of the highest dividends in the world, consistently. Consensus expects BHP to pay a full-year gross dividend yield of 14%. For the last reporting period BHP made about 48.7% of its revenue from iron ore, 26.7% from copper and 24.6% from coal. BHP is also attempting to take over copper giant, Oz Minerals, while also moving into fertilisers – with plans to be the biggest fertiliser company in the world. BHP reports full year financial results on February 21 as well as its outlook. Which will give us a further glimpse into future demand for copper, as well as iron ore. For more  on BHP- head to Saxo’s Commodity or Australian Resources basket. Rio Tinto (RIO) is the second biggest diversified miner in the world, with an $178 billion valuation. Last reporting year Rio made 58.1% of its revenue from iron ore, 21.5% from aluminium and 10.9% from copper, and the remainder from other metals. Rio is expected to pay a full-year gross dividend yield of about 11% this year. Rio reports full year financial results on February 22 and its outlook for 2023, which will be interesting given it’s a major aluminium producer. For more on Rio head to Saxo’s Commodity or Australian Resources basket. Southern Copper Corp (SSCO) is another large copper miner. It’s not a large as BHP or RIO in size but it’s market cap size is US$57.3 billion. Last reporting year it made most of revenue from copper. The market expects Southern Copper to pay a full yea gross dividend yield of 5.3% this year. For more on Southern Copper head to Saxo’s Commodity equity basket. Pilbara Minerals (PLS) is Australia largest lithium miner. It has a market value of AU$14 billion. Pilbara’s customers include LG Chem, and China’s Great Wall Motor Company. And believe it or not, one of Pilbara Minerals customers is actually China’s Genfeng Lithium Corp, which is China’s largest lithium company. Pilbara is due to report financial results on February 22. For more, read Saxo’s quarterly outlook at analysis.Saxo.To find out more on the stocks mentioned above, refer to our equity baskets under Research, Stocks.    -- For prior episodes of Stocks Watch  click here.For a global look at markets – tune into our Podcast. Source: Stock watch video: Saxo’s bullish view on industrial metals, copper, aluminium, lithium | Saxo Group (home.saxo)
Commodity: The World's Two Biggest Commodity Consuming Nations, Both Delivered Price Softening News

The Commodities Feed: US CPI in focus

ING Economics ING Economics 14.02.2023 08:30
Commodity markets will be eagerly awaiting today’s US CPI data, which will shed some light on how much more work the US Fed has to do to bring down inflation Energy- US SPR release to go ahead Oil prices are under pressure in early morning trading today with NYMEX WTI down more than 1% at the time of writing. This weakness follows the US Department of Energy's announcement that it will sell 26MMbbls of crude oil from the Strategic Petroleum Reserve (SPR) for the period April to June. This release will be part of mandated sales agreed under 2015 legislation. However, there had been suggestions in recent weeks that the US administration would cancel or at least delay this release, after large emergency releases last year. These have left SPR stocks at a little less than 372MMbbls - the lowest level since 1983. As for today, there are two releases the oil market will be focusing on. Firstly, OPEC will release its monthly oil market report, which will provide the group’s latest outlook on the market. However, more important for markets will be US CPI data. The consensus is for a MoM increase of 0.5% and a YoY increase of 6.2%. Anything too far away from these numbers could lead to some volatility in markets by adding further uncertainty over the path the US Fed takes in the months ahead. Freeport LNG has asked the Federal Energy Regulatory Commission to approve an initial commercial restart of its LNG export facility. The request includes bringing back online all three liquefaction trains (a total of 15mtpa), two storage tanks and one loading dock. This follows reports that over the weekend the plant loaded its first cargo since a fire in June last year, after receiving limited approvals from FERC to do so. Metals – Mine supply woes continue for copper Freeport-McMoRan has temporarily suspended mining and processing activities at its Grasberg mine in Indonesia as heavy rains over the weekend flooded part of its concentrate mill and damaged parts of a road. The company said the situation is now under control and expects operations to resume by the end of February. Meanwhile, the company expects to miss its 1Q23 sales target of 900 million pounds of copper following the recent disruptions. MMC Norilsk Nickel revised down its estimates for a 2023 deficit in the palladium market from 800koz to 300koz as recycling and non-Russian production increase. Among other metals, Nornickel expects the global nickel market to be in a surplus of 122kt (versus previous estimates of 110kt) in 2023, mainly due to the ramping-up of new NPI and NPI-to-matte capacity in Indonesia. LME aluminium traded to its lowest level in five weeks following a surge in LME exchange inventories. The latest LME data show that exchange inventories for aluminium rose by 89,850 tonnes to 576,775 tonnes yesterday. This increase follows strong inflows into LME warehouses last week. The increase in stocks will ease fears over supply shortages, at least in the near term. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM Agriculture – Ukraine's grain shipments remain low The latest data from Ukraine’s Agriculture Ministry shows that grain exports so far in the 2022/23 season total 29.2mt, down 28.6% YoY. Total corn shipments stood at 16.7mt (-3.8% YoY), while wheat exports fell 41% YoY to 10.4mt. Read this article on THINK TagsSPR OPEC Nickel LNG Grains CPI Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Specs continue to cut oil longs

The Commodities Feed: Inventory pressure

ING Economics ING Economics 15.02.2023 08:30
Oil prices have come under pressure, driven by a stronger-than-expected US CPI print, further SPR releases and a bearish API inventory report released overnight. Today, the focus will be on the IEA’s latest outlook for the oil market Source: Shutterstock Energy - Higher demand for OPEC oil Oil prices settled lower yesterday as the market digested the US SPR release announcement, while the YoY US CPI print also came in above expectations, which will have weighed further on prices. The market has continued to trade weaker this morning after some bearish API data was released overnight with US inventories increasing across the board last week. US crude oil inventories grew by 10.51MMbbls, while Cushing crude oil inventories increased by 1.95MMbbls. For refined products, gasoline and distillate fuel oil stocks increased by 846Mbbls and 1.73MMbbls respectively. OPEC released its latest monthly oil market report yesterday. This showed that OPEC production over January averaged 28.88MMbbls/d, down 49Mbbls/d MoM. Saudi Arabia saw the largest decline over the month with output falling by 156Mbbls/d.  For 2023 the group revised lower its non-OPEC supply growth estimate by 100Mbbls/d to 1.44MMbbls/d YoY, while global oil demand growth forecasts were increased by 100Mbbls/d to 2.32MMbbls/d YoY. As a result, the call on OPEC production over 2023 is 29.42MMbbls/d, above January production of 28.88MMbbls/d. The call on OPEC supply is strongest in 4Q23, standing at 30.43MMbbls/d. The IEA will release its monthly oil market report today, which will also give the agency’s latest outlook for the market. Bloomberg reports that the European Commission is set to have talks on whether voluntary demand cuts in the European gas market need to be extended beyond March. Previously EU members agreed on voluntary demand cuts of 15% below the 5-year average for the period August 2022 to March 2023. We believe that Europe will need to continue to see demand destruction through the course of the year in order to ensure the market is kept in balance. However, we believe demand cuts needed beyond March can be more modest at around 10%. This assumes we see no further declines in Russian pipeline gas flows to the region. Metals – Aluminium smelters in Europe still facing challenges Despite the recent drop in energy prices, aluminium smelters in Europe still face challenges, Norsk Hydro has said. The company’s CFO said a further 600,000 tonnes of aluminium capacity is still at risk if we see another spike in energy prices.  Mitsui Mining & Smelting Co., Japan’s largest zinc smelter, will raise premiums for Asian ex-Japan buyers for the second year in a row by more than 10% over LME prices for 2023. The company expects zinc supply to remain tight and sees a supply deficit of 150kt in 2023, the third annual deficit in a row. It expects zinc prices to range between $3,000 and $3,400/t in the first half of the year. Agriculture – France raises winter-grain planting estimates France’s agriculture ministry said that French winter-grain plantings for the 2023 harvest are now projected at 6.76m hectares, slightly higher than initial estimates of 6.71m hectares. The latest estimates are up 1.8% YoY, while also remaining 1.7% above the five-year average. Soft wheat area estimates were increased to 4.76m hectares (+2% YoY), marginally higher than the December estimate of 4.75m hectares. Read this article on THINK TagsZinc OPEC Natural gas IEA Grains CPI API Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Commodity: The World's Two Biggest Commodity Consuming Nations, Both Delivered Price Softening News

The Commodities Feed: Hawkishness weighs on the complex

ING Economics ING Economics 20.02.2023 08:21
The commodity complex has come under pressure in recent days, with more hawkish talk from some US Fed officials. Recent data from the US suggests the Fed may have to hike by more than expected US Federal Reserve building in Washington, DC Energy - Natural gas continues to weaken European natural gas prices continue to come under pressure, with TTF falling below EUR50/MWh on Friday and trading at its lowest levels since August 2021. Forecasts for milder than usual weather for large parts of Europe over the next week have put pressure on prices, whilst the imminent restart of Freeport LNG certainly wouldn’t have helped sentiment. However, we are likely getting to levels where the market should find some form of support. Coal-to-gas switching levels are not too far away and so if we see much more weakness this is likely to stimulate some demand from the power generation sector.  The latest data from GIE shows that European gas storage is a little more than 63% full, above the 5-year average of 44% and well above the 31% seen at this stage last year. US natural gas prices also weakened further, trading down to their lowest levels since September 2020. This weakness comes despite the progress made with the restart of the Freeport LNG export plant. Milder than usual weather over large parts of the US is weighing on heating demand. This has meant that the gap between current US storage and the 5-year average is widening. As for oil, prices came under renewed pressure last week, with ICE Brent falling by almost 4% over the week. A raft of strong data in recent weeks has raised expectations for a more hawkish Fed, which has weighed on the bulk of risk assets. There is very little on the calendar for the oil market this week, apart from the usual weekly EIA inventory data, which will be delayed by a day due to a public holiday in the US on Monday. Metals - Lead exchange stocks in China surge The latest data from Shanghai Futures Exchange (ShFE) shows that weekly inventories for metals posted another week of gains as of Friday. Lead weekly stocks jumped by 52% WoW to 77,216 tonnes (highest since September 2022) over the last week. Among other metals, zinc stocks rose 15% WoW to 121,413 tonnes (highest since June), while aluminium inventories climbed 8% WoW to 291,416 tonnes at the end of last week. The latest data from Zambia’s Finance Ministry shows that copper production reached 763.3kt (its lowest since 2015) in 2022, a decline of 4.7% YoY. The decline came despite the government’s aim to boost mining output for copper to 2mt by 2026. The latest statements from Ukraine’s Justice Ministry suggest that the nation’s top anti-corruption court has ordered the seizure of a key alumina plant linked to United Co. Rusal International and more than 300 assets linked to Deripaska. The Mykolayiv alumina refinery has been offline since early March 2022, following Russia’s invasion. The refinery could produce about 1.76mt of alumina annually. Agriculture – Sugar spread strength There are reports that the Indian government has decided not to allow further sugar exports this season beyond the already approved 6mt. There have been growing concerns for several weeks now that the government would not allow further exports, given worries over the domestic crop. The government will once again evaluate the domestic balance in March, at a time when cane crushing nears its end before deciding on exports. The move does raise concerns over tightness in the global market, which is reflected not only in the strength in the flat price, but also the March/May spread, which is trading in deep backwardation of more than USc1.60/lb. Worries over tightness should ease once the CS Brazil harvest gets underway in the second quarter. The Rosario Grains Exchange expects corn shipments in Argentina to fall by 40% YoY between March and June as severe drought impacted crop plantings this season. The exchange projects corn shipments to total just 8.7mt in these four months, as only 19% of the estimated area (7.3m hectares) was planted in the initial weeks. Previously the exchange trimmed its corn production estimates to 42.4mt for the second time following severe drought conditions, much lower than initial expectations of 55mt. Recent numbers from Ukraine’s Agriculture Ministry show that farmers harvested 53.9mt of grain from 98% of the expected area as grain harvests near completion. The wheat harvest stood at 20.2mt, whilst farmers harvested 26.5mt of corn from 94% of the expected area in 2022. Read this article on THINK TagsSugar Oil Natural gas Corn Copper Aluminium Alumina Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Aluminium production cuts

The Commodities Feed: Aluminium production cuts

ING Economics ING Economics 21.02.2023 08:55
Power shortages in China’s Yunnan province has forced some aluminium smelters in the region to reduce operations, which has provided some support to aluminium prices Indian sugar output has risen this year Metals – Yunnan cuts more aluminium production amid power shortages LME aluminium prices rose yesterday amid reports of capacity cuts in China’s Yunnan province due to power shortages. The local power grid in China has ordered an additional 415kt of annualised capacity cuts in Yunnan from 18 February, extending the cuts from last year. The affected smelters are not likely to resume production in the first half of the year amid power supply constraints. The new cuts will impact around 740kt of capacity in Yunnan, adding to about 1.1mt of curtailments since September last year, according to estimates from Mysteel. Yunnan’s operational aluminium capacity accounted for about 5.18mt in September before the capacity cuts were announced.      The latest numbers from International Aluminium Association (IAI) show that the global primary aluminium daily output stood at 188.3kt in January, compared to 189.4kt a month earlier. The total monthly output for the metal remained almost flat month-on-month while rising by 3.3% year-on-year to 5.84mt in January. Similarly, Chinese output rose 5.8% YoY to 3.44mt last month. However, production was down 1.1% monthly. Meanwhile, aluminium production in Western and Central Europe fell 12.2% YoY to 230kt in January as domestic smelting activities remained impacted. Aluminium production in Asia (ex-China) remained almost flat on a monthly as well as an annual basis and stood at 390kt in January. LME on-warrant copper stocks have fallen the most since 8 December, according to data from the exchange. On-warrant stockpiles fell by 7.5% to 51,800 tonnes, with declines coming from warehouses in Germany and the Netherlands. First Quantum will suspend copper ore processing at its Panama mine on 23 February, according to a report from Bloomberg, due to limited storage capacity at the site. The Maritime Authority of Panama banned loading copper at Cobre Panama’s port over a certification issue. The mine accounts for 1.5% of global copper production. Nyrstar said its Auby zinc smelter in France will resume production “on a variable basis”. The smelter initially closed for maintenance in October and remained shut after it was completed amid challenging market conditions. The smelter has a production capacity of 172kt/year. Agriculture – Indian sugar output rises The latest data from the Indian Sugar Mills Association (ISMA) shows that sugar production in the nation rose 2.8% YoY to 22.84mt until 15 February in the 2022/23 season, higher than the 22.22mt produced during the same period last year. The group further said that 505 mills were crushing cane by mid-February compared to 504 mills at the same time last year. However, there are still concerns over where the crop will end the season which is the reason the government appears reluctant to allow further exports. In its monthly crop monitoring MARS report, the European Commission said that the winter cereal and oilseed crops remained in fair condition in most growing regions of Europe. The report further highlights that the return of normal winter conditions after an extremely warm period helped plants gain tolerance against frost damage. However, dry weather conditions in parts of southern Europe are causing concern for grain crops ahead of the spring growing season. The latest data from Ukraine’s Agriculture Ministry shows that Ukraine exported around 30.3mt of grains as of 20 February so far in the 2022/23 season, a decline of 29% compared to the same period last year. Total corn shipments stood at 17.4mt (-7% YoY), while wheat exports fell 39% YoY to 10.8mt. Read this article on THINK TagsZinc Ukraine Sugar Grains Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: First US crude draw this year

The Commodities Feed: First US crude draw this year

ING Economics ING Economics 09.03.2023 08:23
The EIA reported the first weekly decline in US crude oil inventories for the year. However, the market paid little attention to this, with all focus on Fed Chairman Jerome Powell Source: Shutterstock Energy - US crude stocks fall Oil prices settled lower yesterday despite EIA weekly numbers showing the first draw in US crude oil inventories this year. Instead the market appears more focused on the Fed, following Jerome Powell’s hawkish testimony this week. US commercial crude oil inventories fell by 1.69MMbbls over the last week according to the EIA. This is the first decline in stocks since mid-December. The draw was largely in line with market expectations. Cushing crude oil inventories also fell for the first time this year, declining by 890Mbbls. There were fairly small changes on the products side, with gasoline inventories declining by 1.13MMbbls, while distillate fuel oil inventories edged up by 138Mbbls. This leaves US distillate stocks at a little over 122MMbbls - their highest levels since January 2022, but still below the 5-year average for this time of year. Total implied demand was weaker over the period, falling by 1.36MMbbls/d to 19.05MMbbls/d. Freeport LNG in the US has received approval to restart its third and final production train. And it is expected that production at the export plant will return to normal in the coming weeks. Sticking with LNG, strike action in France has affected energy infrastructure in the country, including the stoppage of operations at four LNG terminals. This has done little to support the market, with TTF still settling lower yesterday. Metals – LME aluminium on-warrant stocks decline LME on-warrant aluminium stockpiles fell by 9,950 tonnes to 442,850 tonnes, the biggest fall since 3 February, according to the latest data from the exchange. Most of the outflows were reported from warehouses in Malaysia and Singapore. Cancelled warrants for aluminium rose by 6,325 tonnes (after declining for two consecutive sessions) to 111,450 tonnes as of yesterday, signalling potential further outflows. Exchange inventories for the metal declined for the third straight session by 3,625 tonnes to 554,300 tonnes as of Wednesday. Nickel output in the Philippines fell 11% YoY to 29.3mt in 2022 with lower production from most mining projects, according to data from the Mines and Geosciences Bureau.. In precious metals, the World Platinum Investment Council forecasts the global platinum market deficit to widen to 556koz in 2023 following higher demand from the automotive sector and limited supplies. This compares to a previous estimate of a supply deficit of 303koz for the current year. Total consumption is expected to rise by 24% YoY to 7.98moz, whilst global supply is forecast to increase by only 3% YoY to 7.43moz in 2023. Investment demand is expected to increase significantly this year, whilst automotive demand is expected to grow by 10% YoY and industrial demand is expected to increase by 12% YoY. Agriculture - Argentine crop downgrades The USDA increased estimates for US 2022/23 corn ending stocks from 1.27b bushels to 1.34b bushels on the back of softer exports. This was slightly higher than the roughly  1.3b bushels the market was expecting. For the global corn balance, 2022/23 ending stocks were increased from 295.3mt to 296.5mt. This is higher than the little more than 293mt expected.  Argentina saw further declines in output estimates with hot and dry weather seeing the domestic crop cut by 7mt to 40mt. For soybeans, the USDA lowered its US 2022/23 ending stock estimates from 225m bushels to 210m bushels (the lowest in seven years) with stronger exports offsetting lower consumption. The market was expecting an ending stock number closer to 220m bushels. Meanwhile, the global soybean balance saw production revised lower, which was driven by Argentina. The Argentine soybean crop was cut by around 8mt to 33mt. These supply losses were partially offset by weaker demand. However, 2022/23 global ending stocks were still cut from 102mt to 100mt , which was in line with market expectations. For wheat, the WASDE was fairly neutral. US 2022/23 ending stocks were left unchanged at 568m bushels. Although the market was expecting a number of around 573m bushels. The global market saw 2022/23 ending stocks cut from 269.3mt to 267.2mt, despite expectations for slightly larger output (largely Australia). The lower ending stock number was due to a combination of slightly higher demand and revisions to the stock number at the beginning of the marketing year. The market was expecting ending stocks to be left largely unchanged. Read this article on THINK TagsWASDE USDA Platinum Oil LNG Grains EIA Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Supply disruptions persist

The Commodities Feed: Risk off move continues

ING Economics ING Economics 10.03.2023 15:56
The complex came under further pressure yesterday, dragged down by weakness across risk assets. Price action later today will likely be dictated by the US jobs report Source: Shutterstock Energy - Positioning ahead of US jobs report The oil market came under further pressure yesterday, weighed down by a weaker equity market. We also saw some positioning ahead of today’s US jobs report. A strong report would likely intensify expectations of a more hawkish Fed, which would likely mean weaker risk assets.   Operations at some French refineries remain disrupted with ongoing strike action, which is impacting energy infrastructure around the country. Strike action is blocking the delivery of fuel from a number of refineries. The lack of movement in the gasoil crack suggests there is little concern from the market at the moment. Middle distillate stocks in the ARA region remain comfortable. The latest data from Insights Global shows that gasoil inventories stand at 2.49mt, down 29kt over the week, but still above the 5-year average. In Singapore, middle distillate inventories increased by 1.69MMbbls over the last week to 8.9MMbbls, which still leaves stocks below the 5-year average of around 11.15MMbbls for this time of year. Middle distillate inventories in Singapore remain relatively tight despite the increase in product exports from China in recent months. Trade data released from China earlier this week showed that refined product exports over the first two months of the year increased by 74% YoY to 12.7mt. Read next: British pound against US dollar has been influenced by the UK GDP print. Price action can change if NFP print beats expectations | FXMAG.COM US natural gas prices have come under some pressure this morning, following the EIA’s storage report yesterday. US natural gas storage fell by only 84bcf last week, which is less than the 5-year average of 101bcf. That leaves US natural gas storage 21.5% above the 5-year average, leaving the market in a very comfortable position as we move closer to the end of the heating season. A milder winter has meant more limited draws from storage, while the Freeport LNG outage would have added to the softer domestic supply & demand picture. Freeport LNG has received approvals to restart in recent weeks, which should see US LNG exports edge higher in the coming weeks.   Metals – European aluminium smelters still under pressure Aluminium producer Speira said it will shut down its German plant Rheinwork this year due to the challenging energy market. Last September, the producer reduced capacity by 50% amid surging power prices. Speira said it will now focus solely on recycling and processing aluminium into value-added products. Since the start of the energy crisis, European aluminium production has fallen by more than half. Falling energy costs in Europe more recently have eased fears of a deep recession. But so far, only Aluminium Dunkerque has announced a restart of its curtailed capacity of 60kt/y in France. The plant is expected to be operating at full capacity by the end of May. We still believe, given the uncertainty over the gas market in 2023, smelters will be reluctant to bring back production too quickly. Last month, Norsk Hydro warned that the market remains challenging for aluminium smelters despite a recent drop in power prices and that there is still a risk of further cuts if we see another spike in energy prices. Canada’s First Quantum reached an agreement with Panama’s government over the Cobre copper mine. Operations at the mine have been suspended for three months over a tax dispute. The mine has a production capacity of around 300ktpa of copper concentrate. Processing at the mine is set to resume in the coming days while Panama’s maritime authority will allow First Quantum to resume exporting copper concentrate. First Quantum and Panama have been negotiating new tax terms for more than a year. Copper and aluminium output in China increased in January and February, according to the latest survey by Shanghai Metals Market. Refined copper output in China rose 6.5% YoY to 1.76mt in the first two months of the year. Actual output came in higher than expected due to the ramp-up of new capacity and the restart of three smelters. Primary aluminium output rose 5.8% YoY to 6.51mt in Jan’23-Feb’23, following new capacity and the restart of some units in Southern provinces. Agriculture- slight revision lower to Brazilian soybean output Brazil’s agriculture agency, Conab cut its 2022/23 domestic soybean production estimate from 152.9mt to 151.4mt following some drought losses in Rio Grande do Sul state. Corn production estimates were revised up from 123.7mt to 124.7mt for 2022/23. The recent reports by USDA show that US corn and wheat sales remain strong while soybeans witnessed a drop for the week ending 2nd March. US corn sales increased to 1,525kt compared to 598kt in the previous week. Similarly, US wheat export sales rose to 337kt compared to 301kt a week ago. Meanwhile, soybean export sales fell to 149kt, down from 495kt the week before. Read this article on THINK TagsUS Jobs report Oil Natural gas Grains Gasoil Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Outlook Of Natural Gas Commodity Asset

The Commodities Feed: Natural gas prices surge

ING Economics ING Economics 13.03.2023 08:24
Energy markets have managed to avoid the recent weakness seen in equity markets. For oil, there are signs of stronger demand, while for the European natural gas market, there are concerns following recent developments in France related to strike action and nuclear outages Energy - European gas prices surge The oil market has continued to move higher in early morning trading today, following a strong close at the end of last week. ICE Brent settled almost 1.5% higher on Friday. The strength in the market comes despite the continued weakness we have seen in equities given concerns over SVB and the broader banking sector. Instead, the market seems focused on a somewhat positive demand picture for oil, while more recently, expectations for Fed tightening have also fallen. The more positive demand picture is being driven by reports of some strong buying from China and this also ties in with the move that we have seen in the Brent-Dubai spread, which continues to narrow. This makes sense given the demand recovery that is expected not only from China but broader Asia following a relaxation in China’s Covid policy late last year. The latest positioning data shows that speculators increased their net long in ICE Brent by 12,291 lots over the last reporting week to 298,291 lots as of last Tuesday. This move was driven exclusively by fresh buying, rather than short covering. But although we saw buying coming through for Brent, NYMEX WTI saw speculators reduce their net longs by 26,959 lots to 164,292 lots. The more bearish positioning in WTI shouldn’t be too surprising, given the scale of inventory builds that we have seen in the US so far this year. European natural gas prices rallied significantly towards the end of last week. TTF was up around 25% over Thursday and Friday, which has taken the market back above EUR50/MWh. There are several catalysts for the move higher, including ongoing strike action in France which is affecting operations at 4 LNG import terminals. Also in France, EDF discovered some defects at two of its nuclear reactors, which has led to them being halted. And finally, these concerns are coinciding with a cold snap across large parts of Europe. However, for now, EU gas storage is still comfortable at about 56% full, well above the 5-year average of 36% full for this time of year. Metals – Canada to ban imports of Russian steel and aluminium products Canada will ban the import of Russian steel and aluminium products, the government said in a press release. The ban will include iron and non-alloy steel, semi-finished and finished products, such as tubes and pipes. It will also include all Russian aluminium products, such as unwrought aluminium, aluminium sheets, and finished products, including containers and other household items made from aluminium. In 2021, Canada imported C$45 million of aluminium and C$213 million of steel products from Russia, the government said. LME on-warrant aluminium stockpiles fell by 15,775 tonnes to 427,075 tonnes on Friday, the biggest fall since 29 December, according to the latest data from the exchange. Most of the outflows were reported from warehouses in Malaysia and South Korea. Net outflows for the week totalled 28,350 tonnes compared to inflows of 8,350 tonnes a week earlier. Cancelled warrants for aluminium rose by 12,975 tonnes to 121,300 tonnes, while exchange inventories declined for the fifth straight session by 3,625 tonnes to 548,375 tonnes (the lowest level in a month) at the end of last week. Copper inventories at the Shanghai Futures Exchange warehouses extended their decline for a second consecutive week amid a recovery in industrial demand in China. The latest ShFE data show that copper weekly inventories at the exchange fell by 26,008 tonnes (the biggest weekly decline since 28th October) to 214,972 tonnes as of Friday. Aluminium stocks rose 2.7% WoW to 310,888 tonnes, while lead inventories grew 4.1% WoW to 49,492 tonnes. Agriculture – Coffee market to remain in marginal deficit The International Coffee Organization forecasts the global coffee market to witness a marginal supply deficit for a second straight year in 2022/23 majorly due to concern over the arabica crop. Unfavourable weather conditions in Brazil and Colombia (major arabica-producing nations) in the past few years and labour shortages took a toll on yields. The coffee market witnessed a supply shortfall of 4-5m bags in the last season. The latest fortnightly report from UNICA shows that sugar cane crushing in Centre-South Brazil stood at 72kt for the second half of February, down 55% from a year ago. The cumulative cane crush rose 3.8% YoY this season to stand at 542.5mt. Meanwhile, sugar production stood at just 381t over the fortnight, with around 4.82% of cane allocated to sugar production. Cumulatively, sugar production rose by 4.5% YoY to 33.5mt.CS Brazil is in the middle of its off crop and the new season is set to start in a couple of weeks. Read this article on THINK TagsSugar Speculators Oil Natural gas Copper Coffee Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Supply disruptions persist

Aluminium smelter shutdowns threaten Europe's green transition

ING Economics ING Economics 14.03.2023 22:06
Another aluminium smelter in Europe is shutting down amid the ongoing threat posed by high energy prices. Since the start of the energy crisis, European aluminium output has fallen by more than half. These closures could also prove to be an obstacle to Europe’s green transition Source: Shutterstock High energy prices remain a threat to supply Aluminium producer Speira said it will shut down its German plant Rheinwerk this year due to the challenging energy market. Last September, the producer reduced capacity by 50% at the plant amid surging power prices. Speira said it will now focus solely on recycling and processing aluminium into value-added products. Soaring energy costs following Russia’s invasion of Ukraine have squeezed producers’ margins, with energy-intensive metals being particularly affected. Several output cuts have taken place since December 2021 at key European smelters. Europe had suspended about 1.4 million tonnes of capacity by the end of 2022, accounting for 2% of the global total. Aluminium, often referred to as “congealed electricity”, is the most energy-intensive base metal to produce, requiring about 40 times more energy to make than copper. One tonne of aluminium requires about 15 megawatt-hours of electricity. Falling energy costs in Europe have recently eased fears of a deep recession. TTF prices broke below EUR50/MWh in February, the lowest level seen since August 2021 after reaching an all-time high of EUR345/MWh in August 2022. So far, only Aluminium Dunkerque has announced a restart of its curtailed capacity of 60kt/y in France. The plant is expected to be operating at full capacity by the end of May, following support from the French government. But in the aluminium industry, restarting a smelter is a long and costly process, meaning some of the production halts we have seen since 2021, could be permanent. According to the latest data from the International Aluminium Institute (IAI), Western European aluminium output was at an annualised 2.73 million tonnes in December, down by 540,000 tonnes from December 2021 and the lowest production rate this century. Aluminium requires about 40 times more energy to make than copper Source: IAI, ING Research Production costs still too high for many smelters While LME aluminium prices have fallen by 40% since reaching historic highs a year ago, production costs remain too high for many aluminium smelters in Europe. Electricity is the largest single expense for producers, typically accounting for about 40% of production costs. LME aluminium prices reached a high of $3,849/t in March but have now declined from their post-invasion peaks, battered by fears of weakening global demand, as well as a stronger dollar. Growing recession risks in the US and Europe and an uncertain recovery in China is likely to continue to pose downside risks to the demand outlook. We still believe, with the war with Russia raging on and given the uncertainty over the gas market in 2023, smelters will be reluctant to bring back production too quickly. Further smelter closures and curtailments in production cannot be ruled out given the uncertainty over energy prices throughout this year. Any announcement of further closures could see aluminium prices spike but any potential rallies are likely to be unsustainable. We don’t anticipate European smelters restarting before 2024. Last month, Norsk Hydro warned that the market remained challenging for aluminium smelters despite a recent drop in power prices and that a further 600,000 tonnes of aluminium capacity would still be at risk if energy prices spiked again. European aluminium smelters hit by margin squeeze Primary Aluminium Production in Western and Central Europe (mt) Source: IAI, ING Research Aluminium smelting cost components Source: IAI, CINA, ING Research Smelter shutdowns threaten Europe's climate target path The most recent aluminium smelter shutdown comes at a time when Europe is trying to become more self-sufficient following Russia’s war in Ukraine. The more smelters shut down, the more reliant the region becomes on more expensive imports from more carbon-intensive suppliers, including China and Russia. European smelters generate three times less CO2 than those in China, where coal is most often used to generate electricity. Under the European climate target path, EU countries must cut greenhouse gas emissions by at least 55% by 2030, setting Europe on a path to becoming climate neutral by 2050. Aluminium is a key component in mobility and transport, buildings, construction, packaging, aerospace, and defence. It is also used in almost all energy generation, transmission, and storage technologies, particularly those that will deliver the energy transition, such as wind and solar power, alternative fuel cells, hydrogen production, high-voltage cables, and batteries. As a result, Europe’s 2030 energy transition will require four million tonnes of additional aluminium per year, rising to almost five million tonnes in 2040, equivalent to 30% of Europe’s aluminium consumption today, according to European Aluminium.  Read next: Pfizer Will Buy Biotech Seagen For $43 Billion| FXMAG.COM The highest growth in terms of absolute demand is expected to come from the transportation sector amid a shift to electric vehicles (EVs). By 2026, aluminium content per vehicle will rise by 12% to meet the needs of future hybrid vehicles and EVs, according to the Aluminium Association. Aluminium’s usage in batteries and other EV components will double automobile manufacturers’ consumption of aluminium by 2050, according to forecasts from IAI. Satisfying the increased demand via imports instead of producing in Europe would generate at least an additional 40 million tonnes of CO2 yearly, according to European Aluminium, equivalent to the yearly CO2 emissions of a country like Finland. Earlier this year, Eurometaux, the European metals industry’s main lobbying group, representing major European producers, including Glencore, Boliden and Aurubis, warned that further long-term financial support is needed to help Europe keep control of raw materials that are crucial to the green-energy transition. The European Commission is due to publish this week the Critical Raw Materials Act, which will attempt to lessen the dependence on non-democratic states and boost European autonomy to ensure the EU has access to materials needed to meet the bloc’s target of moving to net zero greenhouse gas emissions by 2050. The regulation is part of Europe’s answer to the US Inflation Reduction Act (IRA), which offers $369bn of subsidies to green-tech manufacturers and has prompted several multibillion-dollar investments into US battery manufacturing. Europe relies on aluminium imports Source: European Aluminium, ING Research Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Treading Carefully: Federal Reserve's Rate Hike Pause, ECB and Bank of England on the Horizon

China's Imports Recover: Crude Oil, Natural Gas, and Copper Boost Market Sentiment

ING Economics ING Economics 07.06.2023 10:48
The Commodities Feed: China's imports recover China’s crude oil and natural gas imports recovered strongly in May, which could help improve market sentiment. For copper, China’s concentrate imports jumped to a fresh high, while unwrought copper imports remain soft.   Energy – China's crude oil imports recover China’s crude oil imports recovered to 51.44mt or around 12.16MMbbls/d (up 17% month-on-month and 12% year-on-year) in May 2023, as some of the refineries increased their utilisation rate after concluding maintenance. Demand slowdown from China has been a major concern for the crude oil market recently, and a recovery in oil imports is likely to provide some comfort to the oil market. Higher refinery utilisation has also increased refined product supplies in the Chinese market, with China reverting to being a net exporter of refined products last month. Among other energy products, natural gas imports into China increased 17.3% YoY to 10.6mt in May as lower gas prices in the Asian market supported demand for storage.   In its latest short-term energy outlook report, the Energy Information Administration (EIA) revised higher domestic oil production estimates, as the decision by OPEC+ to extend output cuts could push oil prices higher and bring more investments into exploration.   The administration revised higher the production estimates to 12.61MMbbls/d for 2023 compared to earlier estimates of 12.53MMbbls/d and output of 11.88MMbbls/d in 2022. For 2024, production estimates are revised higher to 12.77MMbbls/d compared to earlier estimates of 12.69MMbbls/d. On the other hand, US demand for crude oil is revised down from 20.47MMbbls/d to 20.42MMbbls/d on slow demand for distillates – although this is still higher than the 20.28MMbbls/d of consumption in 2022.   Meanwhile, the American Petroleum Institute (API) reported that the US crude oil inventories decreased by 1.71MMbbls over the last week, in contrast to market expectations for the addition of around 350Mbbls. Cushing crude oil stocks are reported to have increased by 1.53MMbbls. On the products side, API reported that gasoline and distillates inventories rose by 2.42MMbbls and 4.5MMbbls respectively over the week ending 2 June. The more widely followed EIA report will be released later today.     Metals – Chinese copper concentrate imports at record highs China released its preliminary trade data for metals this morning, which shows total monthly imports for unwrought copper fell 4.6% YoY to 444kt in May, largely on account of higher domestic production of the refined metal. Cumulatively, unwrought copper imports fell 11% YoY to 2.14mt in the first five months of the year.   Meanwhile, imports of copper concentrate rose 16.7% YoY to a fresh record of 2.56mt last month, with year-to-date imports up 8.8% YoY to 11.31mt from January to May this year. In ferrous metals, iron ore monthly imports rose 3.9% YoY (+6.3% MoM) to 96.17mt last month, while cumulative imports are up 7.7% YoY to 480.7mt from January to May.   On the exports side, China’s unwrought aluminium and aluminium products shipments fell 29.7% YoY to 475.4kt last month while year-to-date exports declined 20.2% YoY to 2.32mt in the first five months of the year. Exports of steel products jumped 41% YoY to 36.4mt from January to May this year.   Meanwhile, data from the Mines and Geosciences Bureau shows that nickel output in the Philippines rose 5.4% YoY to 3.9dmt in 1Q23 despite only a few mines being in production. The bureau reported that only 13 out of the nation’s 33 operating mines reported output for the above-mentioned period, as some were impacted by unfavourable weather conditions while few were undergoing scheduled maintenance.   However, the bureau remains optimistic about the outlook for the mining industry over the long term, following the expected recovery of the global economy and strong demand for nickel ore.     Agriculture – Chinese soybean imports surge The latest trade numbers from Chinese Customs show that soybean imports in China rose 24.3% YoY (+65.6% MoM) to a record high of 12.02mt in May. The imports surged sharply as the delayed cargoes (due to last month's strict inspections) were finally unloaded at ports. Cumulatively, soybean imports rose 11.2% YoY to 42.3mt over the first five months of the year.   Weekly data from the European Commission show that soft wheat shipments from the EU reached 28.9mt for the season as of 4 June, up 11.4% compared to 25.9mt from the same period last year. Morocco, Algeria, and Nigeria were the top destinations for these shipments. Meanwhile, the EU’s corn imports stood at 24.6mt, compared to 15.3mt reported a year ago.
Strong August Labour Report Poses Dilemma for RBA: Will Rates Peak or Continue to Rise?

Chile Copper Output Declines as Operational Issues Persist; Aluminium Stockpiles Show Mixed Trends

ING Economics ING Economics 03.07.2023 09:16
Metals – Chile copper output declines The latest data from the National Statistics Institute of Chile shows that domestic copper output contracted for a second consecutive month by 1.1% MoM and 14% YoY to 413kt in May following a series of operational issues. Cumulative output declined 4.7% YoY and totalled 2.1mt in the first five months of the year. Meanwhile, recent reports suggest that Codelco halted mining activities at its El Teniente copper mine in Chile on Friday, following an accident at the mine while installing a generator. In aluminium, the latest LME data shows that on-warrant stockpiles rose by 13,725 tonnes (the biggest daily addition since 23 May) to 271,475 tonnes on Friday. Most of the rise came from warehouses in Gwangyang, South Korea. Net outflows for June were still higher at 126,025 tonnes, compared to outflows of 94,175 tonnes a month earlier. Total LME exchange inventories for aluminium rose by 11,925 tonnes to 543,150 tonnes on Friday, after having declined for seventeen consecutive sessions. Weekly data from Shanghai Futures Exchange (ShFE) show that inventories for base metals remained mixed over the last week. Aluminium weekly stocks fell by 32,994 tonnes (-25% WoW) to 98,079 tonnes (the lowest since the start of the year). Copper inventories rose by 7,889 tonnes (+13% WoW) to 68,313 tonnes, while nickel inventories declined by 319 tonnes (-9.2% WoW) to 3,133 tonnes at the end of last week.
BoJ's Normalization Process: Factors and Timing Considerations

Metals Rise on Weakening Dollar, China's Trade Data Show Mixed Picture

ING Economics ING Economics 14.07.2023 08:39
Metals – Edging up on dollar weakness Spot gold rose to its highest level in almost four weeks, while industrial metals edged higher yesterday as easing inflation in the US pushed the dollar index to its lowest level since April 2022. Rising market speculation that the Federal Reserve's interest rate hikes may soon be nearing an end further lifted overall optimism across risk assets. China released its preliminary trade data for metals yesterday, which shows total monthly imports for unwrought copper falling 16.4% YoY to 449.6kt in June amid weak demand from the property market. Higher domestic production of the metal also impacted demand for imported copper. Cumulative unwrought copper imports fell 12% YoY to 2.6mt in the first half of the year. In contrast, imports of copper concentrate rose 3.2% YoY to 2.13mt last month, while year-to-date imports rose 7.9% YoY to 13.4mt. In ferrous metals, iron ore monthly imports rose 7.4% YoY to 95.5mt, while cumulative imports are also up 7.7% YoY to a total of 576mt in the first half of the year. On the exports side, China’s unwrought aluminium and aluminium products shipments fell 19% YoY to 492.6kt last month, while year-to-date exports declined 20% YoY to 2.81mt in the first half of 2023. Exports of steel products jumped 31% YoY to 43.6mt over the first half of the year. Recent data from China Iron and Steel Association (CISA) shows that steel inventories at major Chinese steel mills fell to 15.9mt in early July, down 7.6% compared to late June. Meanwhile, crude steel production at major mills fell marginally by 0.3% to 2.24mt/d in early July.
Metals Update: Gold Demand Declines Marginally, Copper and Aluminium Positions Adjusted

Metals Update: Gold Demand Declines Marginally, Copper and Aluminium Positions Adjusted

ING Economics ING Economics 02.08.2023 13:42
Metals – Gold demand falls marginally In its latest update, the World Gold Council (WGC) revealed that global gold demand (excluding OTC) fell by 2.5% year-on-year to 920t in the second quarter. Cumulative demand (excluding OTC and stock flows) declined by 5.6% YoY to 2,062t in the first half of the year on slowing central bank purchases, lower consumption in the technology sector and higher prices. However, cumulative demand (including OTC and stock flows) rose by 5.3% YoY to 2,460t in the first half of the year. Meanwhile, central bank purchases fell by 35% YoY to 103t in the second quarter of the year primarily due to the massive selling by Turkey – releasing 132t of gold in the local market. However, cumulative purchases by central banks reached 387t in 1H23, a record amount bought over a six-month period. Turning to bar and coin, demand gained 6% YoY to 277.5t. Gold ETFs reported net outflows of 21.3t over the second quarter of the year. Global jewellery consumption rose by 3% YoY to 475.9t in the second quarter. In terms of supply, the council reported reasonable growth in mine production (+4% YoY) and recycling (+13% YoY), resulting in a higher gold supply rising by 7% YoY to 1,255.3t in the second quarter of the year. Meanwhile, the latest LME COTR report shows that net bullish positions for copper decreased by 1,343 lots for a second consecutive week to 51,749 lots as of last Friday. Among other metals, speculators decreased their net long positions in aluminium by 5,048 lots to 101,523 lots in the week ending 28 July. In contrast, speculators increased their net long positions in zinc by 4,752 lots for a fifth consecutive week to 33,023 lots as of last Friday.
China's Gold Reserves Surge: Insights into Metals Trade Data

China's Gold Reserves Surge: Insights into Metals Trade Data

ING Economics ING Economics 08.08.2023 10:53
Metals: China's gold reserves increase further China continued to increase its gold reserves for the ninth straight month in July, according to official data. The People’s Bank of China raised its gold reserves by about 23t to a total of 2,137t last month. China added around 188t of gold in its gold-buying spree that started in November. Given the uncertain geopolitical environment, it is likely that central banks will continue to add to their gold holdings in the coming months. China released its preliminary trade data for metals this morning, which shows total monthly imports for unwrought copper fell 2.7% YoY to 451kt in July, indicating persistent weak demand from the property and construction sector. Cumulatively, unwrought copper imports fell 10.7% YoY to 3mt over the first seven months of the year. In contrast, imports of copper concentrate rose 3.9% YoY to 1.98mt last month, while year-to-date imports rose 7.4% YoY to 15.4mt during Jan 23-Jul 23. In ferrous metals, iron ore monthly imports rose 2.4% YoY to 93.5mt. However, that's down from the 95.5mt (-2% MoM) imported in June. Cumulatively imports gained 6.8% YoY to 670mt over the first seven months of the year. On the exports side, China’s unwrought aluminium and aluminium products shipments fell 25% YoY to 490kt last month, while Year-to-Date exports declined 20.8% YoY to 3.3mt over the first seven months of the year. Exports of steel products jumped 27.9% YoY to 50.9mt during Jan 23- Jul 23.
"Global Steel Output Rises as Chinese Production Surges, Copper Market Remains in Deficit

"Global Steel Output Rises as Chinese Production Surges, Copper Market Remains in Deficit

ING Economics ING Economics 23.08.2023 10:01
Metals – Global steel output rises The latest data from the World Steel Association (WSA) show that global steel production rose 6.6% YoY to 158.5mt in July, as rising output in China, India and Russia offset lower production from Europe. However, cumulative global steel output remained almost flat at 1,103mt in the first seven months of the year. Meanwhile, Chinese steel production reported a significant rise of 11.5% YoY to 90.8mt in July, while output in India and Russia also rose 14.3% YoY and 5.8% YoY respectively. In contrast, monthly crude steel output in the EU fell 7.1% YoY to 10.3mt last month. The International Copper Study Group’s (ICSG) latest update shows that the global copper market remained in a supply deficit of 90kt in June. However, the ICSG estimates an apparent surplus of 213kt in the first half of the year following higher output from China and the DRC, compared to a deficit of 196kt during the same period last year. Global mine and refined copper production increased by 2% YoY and 7% YoY, respectively, while overall apparent refined demand increased by 4% YoY in 1H of 2023. In aluminium, recent LME data shows that on-warrant stocks for aluminium witnessed inflows for a second day. On warrant stocks increased by 38,000 tonnes to 246,575 tonnes yesterday, the largest increase since April. Meanwhile, total exchange inventories rose by 38,725 tonnes to 529,775 tonnes yesterday, the highest since 13 July.    
Summer 2023: A Cool Down on the Inflation Front and Implications for Fed Policy

Metals and the Green Transition: Supply Chain Vulnerabilities and Geopolitical Risks

ING Economics ING Economics 01.09.2023 08:53
Metals and global supply chain vulnerabilities Metals are another obvious vulnerability in the global economy, particularly those linked to the green transition. Scarcity due to a lack of production capacity and/or geopolitics are important risks. The challenges in scaling up the production of electric vehicle batteries are a good example, as we highlighted in a recent report. Nickel-based batteries, currently favoured for their superior driving range, not only face constraints from long lead times on new mining development, but 20% of high-grade nickel, the type used in batteries, is sourced from Russia, and trade restrictions are also a key risk for supply. Supply chains of alternative battery technologies – lithium iron phosphate (LFP) and sodium iron (Na-ion) – are almost entirely reliant on China. Geopolitics is clearly a risk here too. That battery story can be expanded to other metals associated with the green transition. While lithium and nickel are the most exposed to critical supply risks, according to analysis by the US Department for Energy (chart below), plenty of others are seen as near-critical. Those include aluminium, where more than 80% of inventory on the London Metals Exchange is Russian material. Meanwhile copper prices – currently dampened by China’s weak recovery – are more likely to rise in the longer term, in part owing to a lack of investment in mining facilities in South America.     Against this backdrop, near-shoring (or “friend-shoring”) will undoubtedly rise – though it’s early days and evidence of companies exiting the likes of China in favour of alternatives is mixed. Green industrial policy, like the US Inflation Reduction Act, is also beginning to reshape supply chains at the margin. Near-shoring is likely to be a slow-moving ship, but ultimately, if firms are trading lower costs for greater resilience, that’s likely to be inflationary. A recent ECB working paper concludes that re-shoring increases the price level for both producers and consumers, particularly in trade-intensive manufacturing. Is any of this capable of pushing inflation to the sorts of levels seen in 2022? Perhaps not. However, the glut of new vehicles and the resulting demand for used cars alone succeeded in adding more than a percentage point to US CPI in 2021. That showed that disruption for key products is capable of generating sizable upward inflation moves.        
Industrial Metals Outlook: Assessing the Impact of China's Stimulus Measures

Industrial Metals Outlook: Assessing the Impact of China's Stimulus Measures

ING Economics ING Economics 08.09.2023 13:04
  Industrial Metals Monthly: China's stimulus in focus Our monthly report looks at the performance of iron ore, copper, aluminium and other industrial metals, as well as their outlook for the rest of the year. In this month's edition, we take a closer look at the recent impact of new stimulus measures introduced in China.   Metals markets assess China policy   China ramping up economic support A mixed picture of China's economy has been painted by the latest releases of official PMI data. While the manufacturing index increased slightly to 49.7 – its third consecutive rise since the lows of 48.8 seen in May – it's still falling short of the 50-level mark associated with expansion.  The non-manufacturing series, which had reflected the bulk of the post-reopening recovery, fell further in August. At 51.0, the index was a little lower than the forecast figures of 51.2 but at least remains slightly above contraction territory.   Meanwhile, the Chinese government has moved forward with a series of stimulus measures designed to turn around the flagging economy and its ailing property sector, which accounts for more than a quarter of China’s economic activity. Included in these measures was the decision to cut down payments and lower rates on existing mortgages. The nationwide minimum down payment will be set at 20% for first-time buyers and 30% for second home buyers. Mortgage rate cuts will be negotiated between banks and customers, and both policies will go into effect on 25 September. The introduction of these measures came after China’s home sales slumped in August. Sales by the country’s largest developers fell 34% from the previous year, according to China Real Estate Information Corp. It was the deepest drop seen in over a year. Further stimulus packages could also be introduced, which could boost the need for industrial metals. So far, Beijing has remained reluctant to back major stimulus that might be necessary to put a floor under falling home sales. News of a surge in home sales in two of China’s biggest cities has offered an early sign that government efforts to cushion a record housing slowdown are helping. Existing home sales for Beijing and Shanghai doubled over the last weekend (2-4 September) from the previous one. Reports of property developer Country Garden avoiding default with last-minute interest payments also restored some additional confidence in China’s property sector.   The metals markets will now be watching how sustainable this pickup in interest is and how long it will last. China’s recovery is still uncertain, and metals are likely to see some continued volatility for a while – at least in the near term. For the remainder of this year, the key factor for the direction of metals prices will be whether China will be able to stabilise its property market. Until the market sees signs of a sustainable recovery and economic growth in China, we will struggle to see a long-term move higher for industrial metals.   Fed pause bets bolster sentiment Sentiment in metals markets also received a boost after last week’s US jobs report that showed a steadily cooling labour market, offering the Federal Reserve room to pause rate hikes this month. Nonfarm payrolls increased 187,000 in August, while hourly earnings rose slightly less than the median economist forecast. The central bank hiked rates by 25 basis points at its July meeting following the recent strength seen in economic data. At the Jackson Hole conference last month, Fed Chair Jerome Powell announced plans to keep policy restrictive until confidence that inflation is steadily moving down toward its target has been fully restored. Over the next few weeks, we'll be keeping a close eye on US data releases which could shed more light on what the Fed may do next.   Higher-for-longer interest rates will ultimately lead to a drop in metals prices September appears set for a pause given recent encouraging signals on inflation and labour costs, but robust activity data means the door remains open for a further potential increase. Markets see a 50% chance of a final hike, while our US economist believes that rates have most likely peaked. US interest rates remaining higher for longer would lead to a stronger US dollar and weakening investor confidence, which in turn would translate to lower metals prices.     US rate cuts to start by the spring   Iron ore rises on China property aid Iron ore prices held above the $100/t mark in August despite China’s worsening property crisis, which in typical years makes up about 40% of demand.   Iron ore has managed to stay above $100/t for most of 2023    
Shift in Central Bank Sentiment: Czech National Bank Hints at a 50bp Rate Cut, Impact on CZK Expected

Central Banks Boost Gold Reserves: Q3 Sees Record Purchases Amid Geopolitical Tensions

ING Economics ING Economics 02.11.2023 12:33
Metals – Central banks' gold purchases increase in third quarter The latest data from the World Gold Council (WGC) showed that the central banks increased their gold purchases to 337t over the third quarter of the year primarily due to higher buying from China (+78t), Poland (+57t), Turkey (+39t) and India (+9t). Cumulatively, purchases by central banks reached 800t over the first three quarters of the year, a record amount bought for a nine-month total as geopolitical concerns pushed central banks to increase allocation towards safety assets. Meanwhile, gold’s demand from other sectors was soft. Demand for bars and coins fell 14% YoY to 296t while gold ETFs reported net outflows of 139.3t over the third quarter of the year. Global jewellery consumption fell 2% year-on-year to 516.2t in the third quarter. Global gold demand (excluding OTC) fell 6% YoY to 1,147t in the third quarter of this year, while cumulative demand (excluding OTC and stock flows) also declined 3.2% YoY to 3,285.7t in the first nine months of the year on slowing jewellery demand, lower consumption in the technology sector and mixed performance of investment sector. However, cumulative demand (including OTC and stock flows) rose 4.7% YoY to 3,692.4t in January-September 2023. In terms of supply, the council reported reasonable growth in both mine production (+2% YoY) and recycling (+8% YoY), resulting in a higher gold supply rising by 6% YoY to 1,267t in the third quarter of the year. Aluminium smelters in China’s southern province of Yunnan are planning to reduce the output again this winter season as the hydropower supply decreases in the dry season, according to the Shanghai Metals Market (SMM). The group further added that the production cuts across four smelters will range from 9% to 40% and are expected to start in the coming days. The total capacity reduction is estimated to be around 1.15mt. Currently, the total operating capacity stands at around 5.65mt as of the end of September. Last year, Yunnan province encountered two rounds of aluminium output cuts due hydropower shortage. Lastly, the latest LME COTR report released yesterday shows that investors decreased net bullish positions for copper by 2,783 lots for a fourth consecutive week to 30,306 lots in the week ending on 27 October, as the recent recovery in the readily available exchange inventories at LME warehouses eased tight supply concerns. A similar move has been seen in zinc with speculators decreasing the net bullish bets by 1,348 lots for a fourth straight week to 30,538 lots over the last reporting week. In contrast, money managers increased net bullish bets in aluminium by 3,014 lots for a second consecutive week to 107,510 lots over the above-mentioned period.
Metals Market Update: Aluminium Surges on EU Sanction Threats, Chinese Steel Mills Restock, Nickel Faces Global Supply Surplus, and Copper Positions Adjust

Metals Market Update: Aluminium Surges on EU Sanction Threats, Chinese Steel Mills Restock, Nickel Faces Global Supply Surplus, and Copper Positions Adjust

ING Economics ING Economics 25.01.2024 15:13
Metals – Aluminium gains on EU sanction threats Aluminium prices rose over 3% yesterday and led the gains among base metals after reports suggesting the possibility of further sanctions by the European Union on Russian aluminium. There are speculations of a potential complete ban on aluminium imports in the upcoming Russian sanctions package scheduled to be released next month. Russian metals had broadly escaped sanctions until last month, when the UK prohibited British individuals and entities from trading physical Russian metals, including aluminum, nickel and copper. UK is the only country in Europe to have adopted such measures. This could potentially lead the LME to reopen the debate over whether it should ban deliveries of Russian metal. Just under 80% of the aluminium on the LME was of Russian origin at the end of November. Steel inventories at major Chinese steel mills rose for a second consecutive week to 15.4mt in mid-January, up 6.7% compared to early January, according to data from the China Iron and Steel Association (CISA). This indicates that Chinese mills are restocking inventories as they remain optimistic about the near-term demand outlook. Meanwhile, crude steel production at major mills rose 3.7% from early January to 2.09mt/d in mid-January, as many mills resumed production activities post-maintenance. In nickel, the data from the International Nickel and Study Group (INSG) shows that the global nickel market remained in a supply surplus of 35,300 tonnes in November, when compared to a marginal surplus of 7,800 tonnes in the same period last year. Earlier, the global nickel market saw an oversupply of 26,000 tonnes in October as well. Cumulatively, the nickel market encountered a supply surplus of 212,500 tonnes in the first eleven months of 2023, up from the surplus of 80,200 tonnes seen in the same period last year. Lastly, the latest LME COTR report released yesterday shows that investors decreased net bullish positions for copper by 2,478 lots for a third consecutive week to 54,375 lots in the week ending on 19 January. Similarly, money managers reduced net bullish bets in aluminium by 4,459 lots for a second straight week to 109,596 lots as of last Friday. In contrast, net bullish bets for zinc rose by 2,322 lots (after reporting declines for two straight weeks) to 29,776 lots at the end of last week.

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