inventory

The Commodities Feed: China surprises with a cut in short-term rates The Environmental Investigation Agency (EIA) estimates that US shale oil production could remain flat in July, with drilled but uncompleted wells (DUCs) inventory falling further in May. For metals, China’s surprise cut in short-term rates has been supportive of prices as Beijing appears to be taking measures to support economic growth   Energy – US shale production flat In its latest drilling productivity report, the EIA estimates that US shale oil production could be flat at around 9.38MMbbls/d in July compared to an estimated 9.37MMbbls/d in June. The report also showed that drilled but uncompleted wells dropped by 30 over the month of May 2023 to 4,834 wells, the lowest level since May 2014. DUCs have been falling continuously since the start of the year with a year-to-date drop of around 270 wells since the end of 2022, reflecting lower investment in oil exploration for the year. A low inventory of DUCs could also make it challenging for the US to increase production quickly even if prices move up.   Canada is witnessing an increase in wildfires once again which could hurt oil and gas production in the region. The Alberta province reported 76 active wildfires on Monday compared to 71 on the previous Friday, while across Canada, around 431 wildfires were reported of which around 208 were reported to be out of control. Last month, the country faced an oil and gas production disruption of around 200-300Mbbls/d at one point, although some of the oil fields have subsequently restarted production since then. Spreading wildfires could increase disruption again this month as well. The WCS discount over the WTI has dropped back to US$12.9/bbl currently after increasing to around $15/bbl at the start of the month.

Metals – Share of Russian aluminium in LME warehouses grows Industrial metals (except for nickel) edged higher in the morning session as China trimmed its short-term policy interest rate unexpectedly. The People’s Bank of China lowered its 7-day reverse repurchase rate by 10bps to 1.9% in a sign that Beijing has been taking measures to support flagging economic growth. The move also provides some confidence to the market that China could take further steps to push up economic growth.   Recent data from LME shows that the share of Russian aluminium inventory out of total exchange inventory increased to 68% in May from 52% in April following increased withdrawals of aluminium from LME warehouses in Asia. The data shows that there was a total of 263,125 tonnes of Russian aluminium in exchange warehouses, while Indian-origin aluminium stood at 116,800 tonnes falling from 46.5% in April to 30% in May. Meanwhile, the exchange said that 19% of the 167,550 tonnes of aluminium requested for delivery in May was still Russian metal.   Agriculture – USDA slashes weekly corn crop ratings on dry weather The United States Department of Agriculture's (USDA’s) latest crop progress report shows that US soybean plantings continue to rise with 96% planted as of 11 June, well above the 87% seen at the same stage last year and above the five-year average of 86%.     Similarly, spring wheat plantings are 97% complete, which is above the 92% planted at the same stage last season, and in line with the five-year average. On the crop condition, the agency rated around 38% of the winter wheat crop in good-to-excellent condition, up from 36% a week ago, and 31% seen last year. On the other hand, the USDA rated 61% of the corn crop in good-to-excellent condition as of 11 June, lower from 64% a week ago and 72% seen at the same stage last year, largely on account of dry weather.   The USDA’s weekly export inspection data for the week ending 8 June pointed towards weakening demand for US grains. USDA’s export inspections of corn stood at 1,169.1kt in the abovementioned period, lower than the 1,206.8kt in the previous week and 1,221.8kt reported a year ago. For wheat, US export inspections stood at 246.6kt, down from 304.4kt from a week ago and 411.9kt reported a year ago. Meanwhile, US soybean export inspections fell to 140.2kt compared to 222.3kt from a week ago and 609kt from a year ago.

Metals – China steel production extends decline The latest numbers from the National Bureau of Statistics (NBS) show that monthly crude steel production in China fell by 7.3% year-on-year and 2.7% month-on-month for a second consecutive month to 90.1mt in May 2023 as domestic steel producers continue to curb output amid falling margins.   Meanwhile, cumulative output rose by 1.6% YoY to 444.6mt over the first five months of the year – overall growth was impacted by the lower production numbers in the April and May months. Among other metals, Chinese primary aluminium production rose by 1.1% YoY to 3.42mt in May 2023. Cumulatively, output rose almost 3.4% YoY to a total of 16.7mt over the first five months of the year. Chinese primary aluminium production might pick up in the coming months given the recent plans of Yunnan to bring back about 1mt of capacity from the end of next month.   Meanwhile, spot gold prices extended the downward rally for a fifth straight session and were trading marginally down this morning, following the latest comments from the Federal Reserve that more rate hikes are possible as the risks to inflation are still on the upside. At its latest meeting, the Fed kept interest rates steady at 5-5.25%.   Looking at the ETF holdings, gold ETFs reported outflows of 12.9koz yesterday, (the 12th consecutive session of outflow) taking the total known gold ETF holding to 93.8mz as of yesterday, the lowest level since 8 May.       Agriculture – Coffee quality premium continues to fall The spread between Robusta and higher-quality Arabica coffee dropped to around US¢59.7/lb this week (the lowest since December 2020), following the diverging fundamentals between the two types of coffee. Robusta coffee inventories in major producing regions such as Vietnam, Indonesia, and India are shrinking given the increased demand. Moreover, concerns about the potential impact of El Nino weather on crops in the nations near the Pacific have also been supporting robusta prices. The USDA projected a 5% YoY decrease in Brazil's Robusta coffee output for the season to 21.7m bags due to poor weather conditions. On the other hand, Arabica coffee prices have been under pressure due to the prospects of a massive crop from Brazil and weaker global demand. The commencement of harvest in Brazil for the season, following two years of lower production due to bad weather, has added to the downward pressure on Arabica prices.

Wishful thinking?  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank    America had another 'bad news is good news' moment yesterday; softer-than-expected ADP and growth data further fueled expectations that the Federal Reserve (Fed) is – maybe – good for a pause. The ADP report, released yesterday, showed that the US economy added 177K new private jobs in August, lower than expected and more than half the number printed a month earlier, while the US GDP was revised from 2% to 2.1% instead of 2.4%, due to lower business investment than initially reported and to downside revisions in inventory and nonresidential fixed investment. Household spending, however, continued leading the US economy higher; it was revised up to 1.7%. All in all, the data was certainly weaker than expected but the numbers remain strong, in absolute terms.     The S&P500 gained for the 4th consecutive session yesterday, the index is now above the 4500 level and has around 85 points to go before recovering to July highs. The US 2-year yield settles below the 5% level on expectation that the Fed has no reason to push hard to hike rates; it could just wait and see the impact of its latest (and aggressive) tightening campaign.  In the FX, the softening Fed expectations are weighing on the US dollar. The dollar index fell to its 200-DMA and could sink back to its March to August descending channel. But the seasonality is on the dollar's side in September. Empirical data shows that the US dollar performed better than its peers for six Septembers in a row since 2017, and it gained 1.2% on average, thanks to increased quarter-end dollar buying, and an increased safe haven flows before October – which is seasonally a bad month for stocks, according to Bloomberg.       But the dollar's relative performance is also much influenced by the growth and price dynamics elsewhere. Looking at the latest Euro-area CPI numbers, the picture in Europe is much less dovish despite morose business and consumer sentiment in Europe and weak PMI numbers printed recently. Despite the dark clouds on the European skies, the latest inflation numbers showed that inflation in both Spain and Germany ticked higher in August for the second month – a U-turn that could be explained by the re-surge in oil prices since the end of June. This morning, the aggregate CPI number may not confirm a fall to 5.1% in headline inflation. And a stronger-than-expected CPI print will likely boost the ECB hawks and get the euro bulls to test the 50-DMA, near 1.0970, to the upside.     Later today, investors will focus on the US core PCE data, which has a heavier weight on the international platform.  Therefore, the strength of the US core PCE will say the last word before tomorrow's jobs data. Analysts expect a steady 0.2% advance on a monthly basis, and a slight advance from 4.1% to 4.2% on a yearly basis. A bad surprise on the topside could eventually wash out the past days' optimism regarding the future of the Fed policy. So, fingers crossed, we really need the US inflation to fall, and to stay low.    But looking at energy prices, a sustainable fall in headline inflation could be wishful thinking for the upcoming months. US crude remains upbeat near the $82pb, as the latest EIA data showed that crude inventories fall more than 10mio barrel last week, as separate data showed that crude stored on ships at sea fell to the lowest levels in a year - a clear indication that OPEC's supply cuts are taking effect. Plus, Russia is discussing with OPEC to extend oil-export cuts and Saudi is expected to prolong its supply cuts.    

Dadelo. Strong omnichannel sales momentum, development costs drag on profitability. Focus on scaling the business will weigh on performance in the coming years. Central to DAD's value creation at the moment is scaling the business. Q3 results are in line with this scenario, and for the full year we now see room to exceed PLN 180mn in revenue (+55% y/y). Moreover, we assume that the company is selectively benefiting from overstocking the market by selectively 'picking up' the overhang of stock from distributors and manufacturers at attractive discounts. In the quarters ahead, we expect inventory to grow as the company seeks to take advantage of further difficulties from competitors, while at the same time, high sales momentum should not exacerbate store rotation. In contrast, GM may erode further.    

Miraculum reported its 3Q23 results with EBITDA of PLN 715k and net profit PLN of PLN 159k (both above our expectations) driven by improvement of gross margin by 4.0pp y/y and operating costs maintained under control. Below please find key highlights: • Revenues came in at PLN 10.8m (-4% y/y), in line with monthly data including PLN 3.2m in July (-6% y/y), PLN 3.6m in August (+7% y/y) and PLN 3.9m in September (-9% y/y). Miraculum reported a 25% y/y increase in sales of perfumes to PLN 3.2m (supported by Chopin brand), while shaving and makeup cosmetics deteriorated by 6% y/y and 20% y/y, respectively. The company informed that export sales declined by 23% y/y to PLN 3.1m and accounted for 29% of total sales (impact of high base in 3Q22 driven by contracts to Saudi Arabia). • Gross profit reached PLN 4.2m (+7% y/y), implying gross margin of 39.3% (+4.0pp y/y). The improvement was mainly related to sales-mix and higher share of high margin Perfumes segment (margin of 45%). • EBITDA came in at PLN 0.7m (+25% y/y), resulting in EBITDA margin of 6.6% (vs. 5.1% in 3Q22). SG&A costs increased by 2% y/y to PLN 3.8m at that time. • Net profit amounted to PLN 159k (vs. our forecast PLN 20k) with net financial costs of PLN 35k. • Operating cash flow amounted to PLN -566k (vs. PLN -501k in 3Q22). The company had inventory of PLN 13.1m as of end-3Q23 (-4% y/y), resulting in reduction of inventory cycle from 171 days in 3Q22 to 155 days in 3Q23. Miraculum had net debt of PLN 19.0m as of end-3Q23 (-10% y/y).   Positive, as reported results were above our expectations on improved y/y gross margin (driven by high-margin perfumes segment) and SG&A costs kept under control (4% below our estimates). Additionally, the company has managed to y/y reduce its inventory and net debt levels. We point that 9M23 EBITDA reached PLN 1.5m (vs. PLN 0.9m in 9M22), that is already above our FY23E forecast of PLN 1.4m. Finally, we note that the company reported solid revenues of PLN 5.0m in October (+8% y/y, slightly above our assumptions)