| BDI | 805 |  |
1 | .12% |
| BCI | 1338 |  |
5 | .38% |
| BPI | 776 | |
10 | 1.27% |
| BSI | 877 | |
4 | .46% |
| BHSI | 526 | |
3 | .57% |
China's coal demand set to double - Wood Mac
Despite its efforts to limit coal consumption and focus on alternative fuel sources, China’s thermal coal demand was expected to double by 2030, analyst Wood Mackenzie reported this week.
In a paper titled 'China: The Illusion of Peak Coal', Wood Mackenzie reported that the Asian major’s demand would grow to around seven-billion tons a year of thermal coal, which was contrary to speculation that China's thermal coal demand may be reaching a peak in the next decade.
“It is very unlikely that demand for thermal coal in China will peak before 2030,” said William Durbin, Wood Mackenzie’s Beijing-based president of global markets.
“Why? Because China’s aggressive investment programme for nuclear, natural gas and renewables capacity is centred in the coastal region while coal-fired capacity grows in the central and western provinces. Indeed, there are also a plethora of coal-intensive conversion projects being built or planned that are significantly adding to demand.”
Durbin noted that Wood Mackenzie’s analysis already took into account a rapid improvement in energy efficiency the likes of which had not previously been seen.
“We expect power demand per unit of gross domestic product (GDP) to fall by half in just 17 years, an extraordinary achievement for an economy experiencing such sustained growth. In spite of this efficiency improvement, power demand is still set to nearly triple to 15 000 Terawatt hours (TWh) by 2030. Indeed, if expected efficiency improvements do not materialise, then in the absence of alternatives, coal demand could increase further.”
Durbin pointed out that coal was an important natural resource for a number of provinces seeking investment, jobs and tax revenues, adding that already there were government-approved coal conversion projects account for over 0.25-billion tons a year of thermal demand.
Additionally, there were planned projects that will increase demand by another 0.6-billion tons a year.
“Total Chinese industrial demand for thermal coal is expected to grow from 1.5-billion tons a year to nearly 2.1-billion tons a year by 2030. In comparison, the US, the world’s second largest domestic market for coal, consumes only one-billion ton a year in total. If a cap on coal consumption in China is imposed, it will come at a cost to provincial economies.”
In order for China to reduce power-driven demand for coal, a significant increase in the availability of natural gas for the power and industrial sectors was required.
However, Wood Mackenzie believed that natural gas supplies would struggle to meet demand growth owing to modest investment in conventional reserves and the very slow development of domestic unconventional shale gas reserves.
Additionally, the high cost of liquefied natural gas (LNG) and pipeline imports was uncompetitive with low-cost coal.
Durbin noted that China’s gas price and power tariff regulations would need to be reformed in order to create incentives for the national oil companies (NOCs) to make expensive investments in unconventional gas.
“Our analysis already assumes an intensive investment program in unconventionals post-2020. To ramp-up shale gas developments and production faster to displace coal will require a near-doubling of investment. We expect coal to hold its cost advantage until shale gas breakeven costs fall by 40% to 50%.”
Aside from coal substitution by natural gas, China hoped to reduce coal usage in the coastal demand centres by building Ultra High Voltage (UHV) electricity transmission lines from the Northwest and Southwest.
Wood Mackenzie's report noted that this would have a limited impact on coal demand. The transmission lines from the northwest would transmit coal-fired generation; hence, it just moves coal demand from the coast to the interior.
The UHV lines from the southwest will transmit seasonal hydro, requiring base load coal when hydro output falls. The net effect of the UHV lines and the non-coal-fired capacity is a flattening in thermal coal demand in the coastal power region.
“Government mandates to improve the environment by reducing coal use will require steep investments in alternatives, the use of emission control technology or reduce economic growth rate targets further—options which are not currently happening,” Durbin said.
“But what is noteworthy, however, is that there is greater potential for further demand growth beyond our expectations. Failure to meet an aggressive non-coal power capacity build, investment in more efficient technologies and the expansion of the UHV network will increase the dependence on and use of coal. In the end, China's thermal coal demand will see persistent growth until 2030, rendering peak coal an illusion.”
Source: Mining Weekly
In a paper titled 'China: The Illusion of Peak Coal', Wood Mackenzie reported that the Asian major’s demand would grow to around seven-billion tons a year of thermal coal, which was contrary to speculation that China's thermal coal demand may be reaching a peak in the next decade.
“It is very unlikely that demand for thermal coal in China will peak before 2030,” said William Durbin, Wood Mackenzie’s Beijing-based president of global markets.
“Why? Because China’s aggressive investment programme for nuclear, natural gas and renewables capacity is centred in the coastal region while coal-fired capacity grows in the central and western provinces. Indeed, there are also a plethora of coal-intensive conversion projects being built or planned that are significantly adding to demand.”
Durbin noted that Wood Mackenzie’s analysis already took into account a rapid improvement in energy efficiency the likes of which had not previously been seen.
“We expect power demand per unit of gross domestic product (GDP) to fall by half in just 17 years, an extraordinary achievement for an economy experiencing such sustained growth. In spite of this efficiency improvement, power demand is still set to nearly triple to 15 000 Terawatt hours (TWh) by 2030. Indeed, if expected efficiency improvements do not materialise, then in the absence of alternatives, coal demand could increase further.”
Durbin pointed out that coal was an important natural resource for a number of provinces seeking investment, jobs and tax revenues, adding that already there were government-approved coal conversion projects account for over 0.25-billion tons a year of thermal demand.
Additionally, there were planned projects that will increase demand by another 0.6-billion tons a year.
“Total Chinese industrial demand for thermal coal is expected to grow from 1.5-billion tons a year to nearly 2.1-billion tons a year by 2030. In comparison, the US, the world’s second largest domestic market for coal, consumes only one-billion ton a year in total. If a cap on coal consumption in China is imposed, it will come at a cost to provincial economies.”
In order for China to reduce power-driven demand for coal, a significant increase in the availability of natural gas for the power and industrial sectors was required.
However, Wood Mackenzie believed that natural gas supplies would struggle to meet demand growth owing to modest investment in conventional reserves and the very slow development of domestic unconventional shale gas reserves.
Additionally, the high cost of liquefied natural gas (LNG) and pipeline imports was uncompetitive with low-cost coal.
Durbin noted that China’s gas price and power tariff regulations would need to be reformed in order to create incentives for the national oil companies (NOCs) to make expensive investments in unconventional gas.
“Our analysis already assumes an intensive investment program in unconventionals post-2020. To ramp-up shale gas developments and production faster to displace coal will require a near-doubling of investment. We expect coal to hold its cost advantage until shale gas breakeven costs fall by 40% to 50%.”
Aside from coal substitution by natural gas, China hoped to reduce coal usage in the coastal demand centres by building Ultra High Voltage (UHV) electricity transmission lines from the Northwest and Southwest.
Wood Mackenzie's report noted that this would have a limited impact on coal demand. The transmission lines from the northwest would transmit coal-fired generation; hence, it just moves coal demand from the coast to the interior.
The UHV lines from the southwest will transmit seasonal hydro, requiring base load coal when hydro output falls. The net effect of the UHV lines and the non-coal-fired capacity is a flattening in thermal coal demand in the coastal power region.
“Government mandates to improve the environment by reducing coal use will require steep investments in alternatives, the use of emission control technology or reduce economic growth rate targets further—options which are not currently happening,” Durbin said.
“But what is noteworthy, however, is that there is greater potential for further demand growth beyond our expectations. Failure to meet an aggressive non-coal power capacity build, investment in more efficient technologies and the expansion of the UHV network will increase the dependence on and use of coal. In the end, China's thermal coal demand will see persistent growth until 2030, rendering peak coal an illusion.”
Source: Mining Weekly
Australian Newcastle port's coal exports rise 5.7% on week despite strike
Coal exports from Australia's Newcastle port rose 5.7% week on week to 2.56 million mt in the seven-day period to 7 am Monday Sydney time (2000 GMT Sunday), despite a one-day strike at two of its three terminals in the period, Newcastle Port Corporation said in a weekly report Tuesday.
In the previous seven-day period to 7 am May 27, Newcastle port loaded 2.42 million mt of coal, according to NPC's report last week.
Around 220 unionized workers at the two port terminals operated by Port Waratah Coal Services walked off the job for 24 hours last Wednesday in an ongoing dispute over the company's plan to expand the use of contract staff.
Operations at the third terminal operated by a separate company were not affected.
The Hunter Valley Coal Chain Coordinator, which arranges coal exports via the PWCS terminals, said in its May report released Sunday that the two terminals had shipped 8.44 million mt of coal in the month, but did not break down the total by week.
Other HVCCC reports show the PWCS terminals' throughput was approximately 6.8 million mt over May 1-26, and subtracting this from the May monthly total gives throughput for last week, which included Wednesday's 24-hour strike, at 1.64 million mt.
This would represent a decline of 220,000 mt from the 1.86 million mt of coal the PWCS terminals shipped in the preceding seven-day period to May 26, when compared with an earlier HVCCC report.
Data from the Newcastle Coal Infrastructure Group, which operates the third terminal adjacent to the PWCS facilities, was not immediately available. Platts calculates its throughput to be around 920,000 mt last week, up from 560,000 mt the week before.
Talks are continuing in a bid to settle the industrial dispute at the PWCS terminals.
AGREEMENT REACHED IN TRAIN DRIVERS' DISPUTE
A separate industrial dispute that paralyzed the Hunter Valley coal chain for two days in February has been settled following long-running talks hosted by Australia's Fair Work Commission.
Australian freight and ports company Asciano said in a filing to the Australian Securities Exchange Monday that it had reached an in-principle agreement with a union representing hundreds of train drivers and operations staff in its Pacific National Coal division, which employees 840 people.
The enterprize agreement would be put to a vote of members of the Rail, Tram and Bus Union at an unspecified date, Asciano said.
The industrial action had cost the company A$2 million-3 million ($1.9 million-2.9 million), which will be included in its accounts for the financial year ending June 30, the company added.
Several hundred train drivers belonging to the RTBU went on a 48-hour strike over February 8-10, halting deliveries of 600,000 mt of coal exports to the New South Wales ports of Newcastle and Port Kembla, according to company and union sources at the time.
The union was seeking a 7-9%/year pay increase over the three-year life of the new enterprise agreement. The company was offering a 3%/year rise. Asciano officials did not immediately respond to Platts' requests for more details of the in-principle agreement.
Source: Platts
In the previous seven-day period to 7 am May 27, Newcastle port loaded 2.42 million mt of coal, according to NPC's report last week.
Around 220 unionized workers at the two port terminals operated by Port Waratah Coal Services walked off the job for 24 hours last Wednesday in an ongoing dispute over the company's plan to expand the use of contract staff.
Operations at the third terminal operated by a separate company were not affected.
The Hunter Valley Coal Chain Coordinator, which arranges coal exports via the PWCS terminals, said in its May report released Sunday that the two terminals had shipped 8.44 million mt of coal in the month, but did not break down the total by week.
Other HVCCC reports show the PWCS terminals' throughput was approximately 6.8 million mt over May 1-26, and subtracting this from the May monthly total gives throughput for last week, which included Wednesday's 24-hour strike, at 1.64 million mt.
This would represent a decline of 220,000 mt from the 1.86 million mt of coal the PWCS terminals shipped in the preceding seven-day period to May 26, when compared with an earlier HVCCC report.
Data from the Newcastle Coal Infrastructure Group, which operates the third terminal adjacent to the PWCS facilities, was not immediately available. Platts calculates its throughput to be around 920,000 mt last week, up from 560,000 mt the week before.
Talks are continuing in a bid to settle the industrial dispute at the PWCS terminals.
AGREEMENT REACHED IN TRAIN DRIVERS' DISPUTE
A separate industrial dispute that paralyzed the Hunter Valley coal chain for two days in February has been settled following long-running talks hosted by Australia's Fair Work Commission.
Australian freight and ports company Asciano said in a filing to the Australian Securities Exchange Monday that it had reached an in-principle agreement with a union representing hundreds of train drivers and operations staff in its Pacific National Coal division, which employees 840 people.
The enterprize agreement would be put to a vote of members of the Rail, Tram and Bus Union at an unspecified date, Asciano said.
The industrial action had cost the company A$2 million-3 million ($1.9 million-2.9 million), which will be included in its accounts for the financial year ending June 30, the company added.
Several hundred train drivers belonging to the RTBU went on a 48-hour strike over February 8-10, halting deliveries of 600,000 mt of coal exports to the New South Wales ports of Newcastle and Port Kembla, according to company and union sources at the time.
The union was seeking a 7-9%/year pay increase over the three-year life of the new enterprise agreement. The company was offering a 3%/year rise. Asciano officials did not immediately respond to Platts' requests for more details of the in-principle agreement.
Source: Platts
U.S. steps up natural gas exports
The United States will soon start exporting more of its energy bounty. That's making oil and gas companies happy, American manufacturers nervous, and some environmentalists livid.
Last month, the Energy Department approved a second application to export natural gas, this time from a facility along the Gulf Coast partly owned by ConocoPhillips (COP, Fortune 500). The approval came two years after DOE granted the first natural gas export license to Cheniere Energy (LNG), which also has a plant on the Gulf Coast.
The two-year gap was the result of DOE waiting for studies on how gas exports would impact the economy. Would exports significantly raise prices for consumers? Would they cause manufacturers to leave, taking jobs with them? Those studies -- along with several from the private sector -- are now done. The reports all generally said exports would be a good thing.
So now there's every indication that the pace of export licenses will quicken. At a recent congressional hearing, a DOE official told lawmakers that it took about two months to approve the most recent application. Although newly appointed Energy Secretary Ernest Moniz said he'll review the permit process before the next application, analysts took that to mean that new permits could start rolling out as fast as one every two months.
"Our view is that the Moniz review is most likely to be short and lead to the same conclusion as many reviewers of the issue -- that LNG (liquefied natural gas) exports will provide a net benefit to the U.S," Whitney Stanco, an energy analyst at Guggenheim Securities' Washington Research Group, wrote in a research note last week.
While many may believe exports will have a net benefit, that opinion is certainly not unanimous.
The bounty: The push to export natural gas stems from the fact that the country now has too much of it. Thanks to the fracking-led energy boom, U.S. natural gas prices have collapsed. The flow of gas from many recently drilled wells has actually been shut off, as pumping it out costs more than the gas can be sold for.
Prices in other parts are the world aren't nearly so low. In Europe, they are three times higher than in the United States. In Japan they're nearly five times as high. That offers an incredible incentive for energy companies to put their gas on a ship and send it abroad.
DOE currently has 20 export applications pending. Most of the applications are from smaller firms, but the facilities could be used to ship gas for any of the big oil companies, such as Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500) or BP (BCONQ).
DOE has so far taken a cautious approach. It commissioned two studies on exports -- one on prices from the Energy Information Administration, and one on impacts to the overall economy from NERA Economic Consulting.
EIA said natural gas prices may rise by between 3% and 9% if exports are increased, with a corresponding 1% to 3% rise in overall utility bills for residential consumers. The NERA study said any job losses in manufacturing should be minimal, and more than offset by the positive economic effects of more drilling and greater export revenue.
Related: In U.S. energy boom, a growing tax dodge
Two recent studies from think-tank heavyweights basically said the same thing.
"There are ample domestic supplies of natural gas to meet future demand without significant price increases," the Bipartisan Policy Center wrote in a recent report.
"[DOE] should say yes, within prudent limits, and leverage U.S. exports for broader gain," Michael Levi, an energy expert at the Council on Foreign Relations, wrote in a research paper.
Jittery nerves: American manufacturers are concerned that too many exports could drive up the price of natural gas, a key energy source or material for making plastics and polymers, chemicals, steel, cement, fertilizer and other industrial products. Natural gas plays a role in the supply chain for everything from iPhone casings to windmill blades.
The industry says it has launched more than 100 new projects in recent years specifically designed to take advantage of America's low natural gas prices, investing billions of dollars and creating 500,000 new jobs. Going forward, manufacturers claim that up to 5 million jobs could be on the line if exports are not handled properly.
Right now, American manufacturers are cautiously comfortable with the fairly slow pace of export approval.
"We're pleased," said Kevin Kolevar, head of public policy at Dow Chemical (DOW, Fortune 500). "We advocate for a balanced approach, and by every measure that's what they are doing."
But that won't be the case if DOE approves all 20 of its applicants. Kolevar said Dow would be comfortable with an export level of about a fifth of that.
No one expects all 20 permits to actually go through -- these plants are hugely expensive, and some companies will probably back out. But it's certainly possible that many more get build than Dow and its allies would like.
The environment: The environmental community is not united on the issue. Some cautiously support a limited amount of exports, as natural gas could replace dirtier coal for making electricity overseas. Others see that benefit as negligible at best.
Water pollution from increased fracking is a big concern for many. The government is supposed to consider those effects as part of each plant's approval process, but fracking concerns have not held up either of the two export facilities approved so far. The Obama administration believes water contamination problems from fracking -- or, more likely, from related drilling -- are isolated incidents, and that the process can be done safely.
Many in the environmental community dispute that. The Environmental Protection Agency is studying the issue, but isn't expected to issue a report until next year.
Other concerns include air pollution from all the trucks and generators associated with drilling, the massive amounts of water that fracking uses, and the possible increased use of dirtier coal in the United States if natural gas prices rise.
But the biggest concern seems to be with the investment itself: Environmentalists fear that spending billion of dollars now on gas projects with multi-decade lifespans will make it that much harder to deal with climate change in the future.
"Increased use of any fossil fuel is the wrong move if we want to limit climate disruption," Michael Brune, executive director of the Sierra Club, wrote in a blog post last week. "Future generations will be incredulous that we ever debated the wisdom of increasing exports."
Source: CNN Money
Last month, the Energy Department approved a second application to export natural gas, this time from a facility along the Gulf Coast partly owned by ConocoPhillips (COP, Fortune 500). The approval came two years after DOE granted the first natural gas export license to Cheniere Energy (LNG), which also has a plant on the Gulf Coast.
The two-year gap was the result of DOE waiting for studies on how gas exports would impact the economy. Would exports significantly raise prices for consumers? Would they cause manufacturers to leave, taking jobs with them? Those studies -- along with several from the private sector -- are now done. The reports all generally said exports would be a good thing.
So now there's every indication that the pace of export licenses will quicken. At a recent congressional hearing, a DOE official told lawmakers that it took about two months to approve the most recent application. Although newly appointed Energy Secretary Ernest Moniz said he'll review the permit process before the next application, analysts took that to mean that new permits could start rolling out as fast as one every two months.
"Our view is that the Moniz review is most likely to be short and lead to the same conclusion as many reviewers of the issue -- that LNG (liquefied natural gas) exports will provide a net benefit to the U.S," Whitney Stanco, an energy analyst at Guggenheim Securities' Washington Research Group, wrote in a research note last week.
While many may believe exports will have a net benefit, that opinion is certainly not unanimous.
The bounty: The push to export natural gas stems from the fact that the country now has too much of it. Thanks to the fracking-led energy boom, U.S. natural gas prices have collapsed. The flow of gas from many recently drilled wells has actually been shut off, as pumping it out costs more than the gas can be sold for.
Prices in other parts are the world aren't nearly so low. In Europe, they are three times higher than in the United States. In Japan they're nearly five times as high. That offers an incredible incentive for energy companies to put their gas on a ship and send it abroad.
DOE currently has 20 export applications pending. Most of the applications are from smaller firms, but the facilities could be used to ship gas for any of the big oil companies, such as Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500) or BP (BCONQ).
DOE has so far taken a cautious approach. It commissioned two studies on exports -- one on prices from the Energy Information Administration, and one on impacts to the overall economy from NERA Economic Consulting.
EIA said natural gas prices may rise by between 3% and 9% if exports are increased, with a corresponding 1% to 3% rise in overall utility bills for residential consumers. The NERA study said any job losses in manufacturing should be minimal, and more than offset by the positive economic effects of more drilling and greater export revenue.
Related: In U.S. energy boom, a growing tax dodge
Two recent studies from think-tank heavyweights basically said the same thing.
"There are ample domestic supplies of natural gas to meet future demand without significant price increases," the Bipartisan Policy Center wrote in a recent report.
"[DOE] should say yes, within prudent limits, and leverage U.S. exports for broader gain," Michael Levi, an energy expert at the Council on Foreign Relations, wrote in a research paper.
Jittery nerves: American manufacturers are concerned that too many exports could drive up the price of natural gas, a key energy source or material for making plastics and polymers, chemicals, steel, cement, fertilizer and other industrial products. Natural gas plays a role in the supply chain for everything from iPhone casings to windmill blades.
The industry says it has launched more than 100 new projects in recent years specifically designed to take advantage of America's low natural gas prices, investing billions of dollars and creating 500,000 new jobs. Going forward, manufacturers claim that up to 5 million jobs could be on the line if exports are not handled properly.
Right now, American manufacturers are cautiously comfortable with the fairly slow pace of export approval.
"We're pleased," said Kevin Kolevar, head of public policy at Dow Chemical (DOW, Fortune 500). "We advocate for a balanced approach, and by every measure that's what they are doing."
But that won't be the case if DOE approves all 20 of its applicants. Kolevar said Dow would be comfortable with an export level of about a fifth of that.
No one expects all 20 permits to actually go through -- these plants are hugely expensive, and some companies will probably back out. But it's certainly possible that many more get build than Dow and its allies would like.
The environment: The environmental community is not united on the issue. Some cautiously support a limited amount of exports, as natural gas could replace dirtier coal for making electricity overseas. Others see that benefit as negligible at best.
Water pollution from increased fracking is a big concern for many. The government is supposed to consider those effects as part of each plant's approval process, but fracking concerns have not held up either of the two export facilities approved so far. The Obama administration believes water contamination problems from fracking -- or, more likely, from related drilling -- are isolated incidents, and that the process can be done safely.
Many in the environmental community dispute that. The Environmental Protection Agency is studying the issue, but isn't expected to issue a report until next year.
Other concerns include air pollution from all the trucks and generators associated with drilling, the massive amounts of water that fracking uses, and the possible increased use of dirtier coal in the United States if natural gas prices rise.
But the biggest concern seems to be with the investment itself: Environmentalists fear that spending billion of dollars now on gas projects with multi-decade lifespans will make it that much harder to deal with climate change in the future.
"Increased use of any fossil fuel is the wrong move if we want to limit climate disruption," Michael Brune, executive director of the Sierra Club, wrote in a blog post last week. "Future generations will be incredulous that we ever debated the wisdom of increasing exports."
Source: CNN Money
Iron Ore Surges Most Since October as Plunge Spurs Cargo Demand
Iron ore jumped the most since October amid speculation that a collapse in prices for the steelmaking raw material is spurring a surge in demand.
Ore with 62 percent iron content climbed 4.2 percent to $116.60 a dry metric ton at Tianjin in northeast China, according to prices from The Steel Index Ltd. That’s the biggest gain since the 6.2 percent increase on Oct. 9.
Stronger demand spurred the rebound, Ben Goggin, a London-based broker of iron-ore swaps at ICAP Plc, said by e-mail today. Traders began increasing purchases on May 31, when the price slumped to $110.40 a ton, the lowest in almost seven months, he said.
“It appears that traders are diving in,” Goggin said by e-mail today. “It looks like they are making a play based on the expectation that it dropped to a level and found support.”
Source: Bloomberg
Ore with 62 percent iron content climbed 4.2 percent to $116.60 a dry metric ton at Tianjin in northeast China, according to prices from The Steel Index Ltd. That’s the biggest gain since the 6.2 percent increase on Oct. 9.
Stronger demand spurred the rebound, Ben Goggin, a London-based broker of iron-ore swaps at ICAP Plc, said by e-mail today. Traders began increasing purchases on May 31, when the price slumped to $110.40 a ton, the lowest in almost seven months, he said.
“It appears that traders are diving in,” Goggin said by e-mail today. “It looks like they are making a play based on the expectation that it dropped to a level and found support.”
Source: Bloomberg
India may gain little from Japan, Korea ban on US wheat imports
Though suspension of wheat imports from the US by Japan and South Korea is likely to offer opportunities to other nations exporting the foodgrain, India is unlikely to gain much from the development.
During the weekend, Japan, the second largest wheat importer in Asia after Indonesia, and South Korea suspended wheat purchases from the US after a non-approved genetically modified wheat was found growing on a farm in Oregon.
The US is nowhere nearer to finding how this happened, though the Department of Agriculture officials said that a probe was on to see how the wheat which has a gene altered to make it resistant to herbicides reared its head. The US has allowed cultivation of various genetically-modified crops such as corn, soyabean, cotton and alfa-alfa grass but not wheat.
As an immediate reaction to the finding of the wheat, prices on the Chicago Board of Trade dropped. However, prices in the other origins such as Europe gained.
“Prices of Europe, Australian and even Black Sea region wheat have gained. But this is likely to be a short-term gain. Once the US comes out with the result of its probe, things could change,” said Tejinder Narang, a consultant with a wheat export firm.
“Impact on Indian wheat is likely to be minimal since it is treated more as a feed wheat abroad, where the US wheat is a soft one for milling,” he said.
This also means India, which is trying to export more wheat from its warehouses, may not find a buyer in Japan or South Korea in the short-term.
“It will be hard for India to meet Japan’s specifications. They also need a more clean wheat which goes against the Indian grain.
“Though facilities for cleaning wheat have come up at places such as Adani port, they are yet to be accepted,” said Pramod Kumar, Director of Sunil Agro Mills in Karnataka.
“Maybe, Korea could accept our wheat,” he said.
“Even Korea considers Indian wheat for feed purpose only,” said Narang.
“It is not easy for Indian wheat to gain in markets where the look for high-protein produce which the US will be able to deliver. Japan mills have specifications for their products and we won’t be able to meet them,” said M.K. Dattaraj, former president of the Roller Flour Mills Federation of India.
India is looking to export wheat to cut its warehouse stocks. As on May 1, the Food Corporation of India held 11.7 million tonnes of wheat as stocks.
This is almost thrice the norms fixed by the Centre for buffer stocks that help meet any food emergency in the country.
In April, the Government gave its approval to export three million tonnes of wheat but there have been a few buyers for Indian wheat abroad.
This is because India is looking for a price of $300 a tonne that is much higher than the prevailing prices in the global market.
The Government appeared a bit desperate to export wheat since it has estimated the current year’s crop at 93.9 million tonnes.
“Some Indian wheat has been sold at $280 a tonne c&f for delivery in August. This is against $265 quoted for Black Sea region wheat,” said Narang.
Indian wheat is finding its way through West Asian and North African markets. Still, prices are considered high.
Though Indian wheat can be cleaned and efforts could be made for its acceptance for milling by mills abroad, the cost is seenprohibitive.
“There will be at least 2-3 per cent wastage when Indian wheat is cleaned.
This could mean a loss of $10 a tonne. Even if $7 a tonne premium is given for clean wheat, it will still be a loss proposition,” he said.
“Australia will be able to supply the quality that Japan requires,” said Pramod Kumar.
“Canada can also supply quality wheat to Japan. But all these could be short-term developments only,” Dattaraj said.
Wheat prices at the New Delhi Lawrence market, a benchmark for the country, increased to Rs 1,590 a quintal on Saturday.
On the National Commodities and Derivatives Exchange, wheat for delivery in July closed at Rs 1,624.
On the Chicago Board of Trade, wheat July contracts quoted at $7.05 a bushel or $259 a tonne.
Source: The Hindu Business Line
During the weekend, Japan, the second largest wheat importer in Asia after Indonesia, and South Korea suspended wheat purchases from the US after a non-approved genetically modified wheat was found growing on a farm in Oregon.
The US is nowhere nearer to finding how this happened, though the Department of Agriculture officials said that a probe was on to see how the wheat which has a gene altered to make it resistant to herbicides reared its head. The US has allowed cultivation of various genetically-modified crops such as corn, soyabean, cotton and alfa-alfa grass but not wheat.
As an immediate reaction to the finding of the wheat, prices on the Chicago Board of Trade dropped. However, prices in the other origins such as Europe gained.
“Prices of Europe, Australian and even Black Sea region wheat have gained. But this is likely to be a short-term gain. Once the US comes out with the result of its probe, things could change,” said Tejinder Narang, a consultant with a wheat export firm.
“Impact on Indian wheat is likely to be minimal since it is treated more as a feed wheat abroad, where the US wheat is a soft one for milling,” he said.
This also means India, which is trying to export more wheat from its warehouses, may not find a buyer in Japan or South Korea in the short-term.
“It will be hard for India to meet Japan’s specifications. They also need a more clean wheat which goes against the Indian grain.
“Though facilities for cleaning wheat have come up at places such as Adani port, they are yet to be accepted,” said Pramod Kumar, Director of Sunil Agro Mills in Karnataka.
“Maybe, Korea could accept our wheat,” he said.
“Even Korea considers Indian wheat for feed purpose only,” said Narang.
“It is not easy for Indian wheat to gain in markets where the look for high-protein produce which the US will be able to deliver. Japan mills have specifications for their products and we won’t be able to meet them,” said M.K. Dattaraj, former president of the Roller Flour Mills Federation of India.
India is looking to export wheat to cut its warehouse stocks. As on May 1, the Food Corporation of India held 11.7 million tonnes of wheat as stocks.
This is almost thrice the norms fixed by the Centre for buffer stocks that help meet any food emergency in the country.
In April, the Government gave its approval to export three million tonnes of wheat but there have been a few buyers for Indian wheat abroad.
This is because India is looking for a price of $300 a tonne that is much higher than the prevailing prices in the global market.
The Government appeared a bit desperate to export wheat since it has estimated the current year’s crop at 93.9 million tonnes.
“Some Indian wheat has been sold at $280 a tonne c&f for delivery in August. This is against $265 quoted for Black Sea region wheat,” said Narang.
Indian wheat is finding its way through West Asian and North African markets. Still, prices are considered high.
Though Indian wheat can be cleaned and efforts could be made for its acceptance for milling by mills abroad, the cost is seenprohibitive.
“There will be at least 2-3 per cent wastage when Indian wheat is cleaned.
This could mean a loss of $10 a tonne. Even if $7 a tonne premium is given for clean wheat, it will still be a loss proposition,” he said.
“Australia will be able to supply the quality that Japan requires,” said Pramod Kumar.
“Canada can also supply quality wheat to Japan. But all these could be short-term developments only,” Dattaraj said.
Wheat prices at the New Delhi Lawrence market, a benchmark for the country, increased to Rs 1,590 a quintal on Saturday.
On the National Commodities and Derivatives Exchange, wheat for delivery in July closed at Rs 1,624.
On the Chicago Board of Trade, wheat July contracts quoted at $7.05 a bushel or $259 a tonne.
Source: The Hindu Business Line
Copper Climbs for Second Day as Indonesia Mine Output Stays Shut
Copper advanced to near the highest level in more than a week amid a shutdown at the world’s second-biggest mine and signs of improvement in manufacturing activity in China, the biggest consumer.
Metal for three-month delivery climbed as much as 0.6 percent to $7,380.25 a metric ton on the London Metal Exchange at 11:43 a.m. in Seoul. Prices yesterday touched $7,397.75, the highest since May 23. Futures for September rose 0.2 percent to 53,090 yuan ($8,667) a ton on the Shanghai Futures Exchange.
Freeport-McMoRan Copper & Gold Inc. (FCX)’s production in Indonesia is shut for a government probe into accidents at its Grasberg mine that may take as long as three months. A tunnel collapse on May 14 killed 28 people and another worker died on June 1 from a separate incident. An official purchasing managers’ index released June 1 in China rose to 50.8 in May from 50.6 a month earlier. Economists had forecast 50, the dividing line between expansion and contraction.
“We remain bullish copper,” said Will Yun, a commodities analyst at Hyundai Futures Corp. “We’ve recently had some signs of improvement that can support demand. Still, there are many others who are skeptical about China’s recovery.”
The suspension at Grasberg, lack of production at Bingham Canyon in Utah and reduced output at Collahuasi in Chile are set to reduce supplies in what is normally a seasonally strong period for demand, said Goldman Sachs Group Inc. The bank expects copper at $8,000 in six months.
On the LME, most of the other base metals including aluminum and zinc declined. Copper for July delivery was little changed at $3.339 a pound on the Comex in New York.
Source: Bloomberg
Metal for three-month delivery climbed as much as 0.6 percent to $7,380.25 a metric ton on the London Metal Exchange at 11:43 a.m. in Seoul. Prices yesterday touched $7,397.75, the highest since May 23. Futures for September rose 0.2 percent to 53,090 yuan ($8,667) a ton on the Shanghai Futures Exchange.
Freeport-McMoRan Copper & Gold Inc. (FCX)’s production in Indonesia is shut for a government probe into accidents at its Grasberg mine that may take as long as three months. A tunnel collapse on May 14 killed 28 people and another worker died on June 1 from a separate incident. An official purchasing managers’ index released June 1 in China rose to 50.8 in May from 50.6 a month earlier. Economists had forecast 50, the dividing line between expansion and contraction.
“We remain bullish copper,” said Will Yun, a commodities analyst at Hyundai Futures Corp. “We’ve recently had some signs of improvement that can support demand. Still, there are many others who are skeptical about China’s recovery.”
The suspension at Grasberg, lack of production at Bingham Canyon in Utah and reduced output at Collahuasi in Chile are set to reduce supplies in what is normally a seasonally strong period for demand, said Goldman Sachs Group Inc. The bank expects copper at $8,000 in six months.
On the LME, most of the other base metals including aluminum and zinc declined. Copper for July delivery was little changed at $3.339 a pound on the Comex in New York.
Source: Bloomberg
Man Says Commodities Divergence Increasing Supply-Demand Role
Diverging prices for raw materials and other “risk assets” is a sign that traders will once more focus on supply and demand, said Scott Kerson, the head of a commodities unit at Man Group Plc (EMG) in London.
The Standard & Poor’s GSCI (SPGSCI) gauge of 24 commodities fell 3.9 percent this year, while the MSCI All-Country World Index of equities rose 8.3 percent. The 30-week correlation coefficient between the two measures is at 0.56, down from as much as 0.88 in 2010. A figure of 1 means the two move together.
“What’s going on in commodity markets right now, and in particular the de-linkage between commodities and other risk assets, is actually a positive thing for trend followers generally and specifically for systematic commodities traders,” said Kerson, who heads commodities at Man Systematic Strategies and AHL. Assets under management at the two funds were $16.3 billion at the end of March 2013. About 25 percent of the funds’ assets are allocated to commodities.
The S&P GSCI gauge declined this year after an almost fourfold gain since the end of 2001 spurred new mines, oil wells and crop acreage. This year will probably signal “death bells” for the raw materials supercycle as China’s economic growth slows and the nation focuses less on infrastructure and urbanization, Citigroup Inc. said May 20. Deutsche Bank AG also called an end to the longer-than-average time of rising prices.
Man’s Assets
The divergence between raw materials and other assets means commodities should “start to trade on their own fundamentals and markets should evolve according to the underlying supply and demand characteristics of each individual market as opposed to a more general reflection of the overall macro economy,” said Kerson, who joined the company in November 2011.
Man Systematic Strategies and AHL, which were merged in February, have more than 100 employees, with eight in the commodity team in London and Switzerland, he said. Man’s total assets under management are $54.8 billion, making it the world’s largest publicly traded hedge-fund manager.
Natural gas and cotton are the best performers in the S&P GSCI index this year, with silver and gold dropping the most. Commodities are down about 30 percent since July 2008, when the worst recession since World War II curbed demand. While economic growth in China, the biggest user of everything from copper to cotton to coal, accelerated in 2009 through the start of 2010, it slowed in eight of the past nine quarters.
Commodities rose in 10 of the last 11 years. Raw materials have been in a supercycle since 2001 and the average length of each phase since the late 1700s has been almost 21 years, Chris Watling, chief executive officer of London-based Longview Economics Ltd., said in October at a conference in London.
Commodities Cycle
“We’re less interested in calling the beginning or the end or the middle of the cycle, and much more interested in how we think price dynamics should play out for underlying markets,” Kerson said. “Crude oil markets we’d characterize as being in a transition phase and not particularly friendly for systematic trading. Metals, and in particular gold and silver, have been a much more interesting place for us to be.”
Oil is up 1.3 percent this year at $93.05 a barrel in New York and traded in a $17 range since the beginning of July. Gold slid 16 percent to $1,411.60 an ounce in London this year and silver tumbled 25 percent to $22.6875 an ounce, with both metals falling into a bear market in April.
Kerson was formerly the owner of Alpha Dog Commodities LLC, a California-based consultancy which focused on quantitative analysis of the global commodity markets, from 2009 to 2011. He also previously worked as a trader at Ospraie Management LLC, Amaranth Advisors LLC, and Standard Bank Group Ltd. in New York.
Source: Bloomberg
The Standard & Poor’s GSCI (SPGSCI) gauge of 24 commodities fell 3.9 percent this year, while the MSCI All-Country World Index of equities rose 8.3 percent. The 30-week correlation coefficient between the two measures is at 0.56, down from as much as 0.88 in 2010. A figure of 1 means the two move together.
“What’s going on in commodity markets right now, and in particular the de-linkage between commodities and other risk assets, is actually a positive thing for trend followers generally and specifically for systematic commodities traders,” said Kerson, who heads commodities at Man Systematic Strategies and AHL. Assets under management at the two funds were $16.3 billion at the end of March 2013. About 25 percent of the funds’ assets are allocated to commodities.
The S&P GSCI gauge declined this year after an almost fourfold gain since the end of 2001 spurred new mines, oil wells and crop acreage. This year will probably signal “death bells” for the raw materials supercycle as China’s economic growth slows and the nation focuses less on infrastructure and urbanization, Citigroup Inc. said May 20. Deutsche Bank AG also called an end to the longer-than-average time of rising prices.
Man’s Assets
The divergence between raw materials and other assets means commodities should “start to trade on their own fundamentals and markets should evolve according to the underlying supply and demand characteristics of each individual market as opposed to a more general reflection of the overall macro economy,” said Kerson, who joined the company in November 2011.
Man Systematic Strategies and AHL, which were merged in February, have more than 100 employees, with eight in the commodity team in London and Switzerland, he said. Man’s total assets under management are $54.8 billion, making it the world’s largest publicly traded hedge-fund manager.
Natural gas and cotton are the best performers in the S&P GSCI index this year, with silver and gold dropping the most. Commodities are down about 30 percent since July 2008, when the worst recession since World War II curbed demand. While economic growth in China, the biggest user of everything from copper to cotton to coal, accelerated in 2009 through the start of 2010, it slowed in eight of the past nine quarters.
Commodities rose in 10 of the last 11 years. Raw materials have been in a supercycle since 2001 and the average length of each phase since the late 1700s has been almost 21 years, Chris Watling, chief executive officer of London-based Longview Economics Ltd., said in October at a conference in London.
Commodities Cycle
“We’re less interested in calling the beginning or the end or the middle of the cycle, and much more interested in how we think price dynamics should play out for underlying markets,” Kerson said. “Crude oil markets we’d characterize as being in a transition phase and not particularly friendly for systematic trading. Metals, and in particular gold and silver, have been a much more interesting place for us to be.”
Oil is up 1.3 percent this year at $93.05 a barrel in New York and traded in a $17 range since the beginning of July. Gold slid 16 percent to $1,411.60 an ounce in London this year and silver tumbled 25 percent to $22.6875 an ounce, with both metals falling into a bear market in April.
Kerson was formerly the owner of Alpha Dog Commodities LLC, a California-based consultancy which focused on quantitative analysis of the global commodity markets, from 2009 to 2011. He also previously worked as a trader at Ospraie Management LLC, Amaranth Advisors LLC, and Standard Bank Group Ltd. in New York.
Source: Bloomberg
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