INSIDE COMMODITIES Thursday, November 6, 2014 Brent

INSIDE COMMODITIES
Thursday, November 6, 2014
GLOBAL PMI
MARKETS SNAPSHOT
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Brent rose after U.S. crude stockpiles rose much less than forecast last
week, Copper edged down on slowing economic growth in Europe and
China. Grains edged lower on rapid harvesting of record U.S. crops
would boost global supplies. European stocks were expected to open
lower, while Most Asian shares stumbled on lingering concerns over
slower global growth. Wall Street ended high on Wednesday.
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Contract (AS OF 0614 GMT)
Last
Change
YTD
NYMEX light crude
$78.61
-0.09%
-20.06%
NYMEX RBOB gasoline
$2.09
0.06%
-25.10%
$726.00
-0.48%
-22.74%
$4.22
0.72%
-0.85%
ICE gas oil
NYMEX natural gas
Spot Gold
$1,145.50
0.39%
-5.30%
LME Copper
$6,614
-0.37%
-9.81%
LME Aluminium
$2,053
-0.34%
14.44%
CBOT Corn
$3.70
-0.07%
-12.26%
CBOT Wheat
$5.24
-0.14%
-13.30%
R2,261
0.40%
-15.31%
Malaysia Palm Oil (Ringgit) (3M)
TOP NEWS
China details measures to support imports as economy
cools
Index (Total Return)
Thomson Reuters/Jefferies CRB
S&P GSCI
Latest Close
Change
YTD
268.92
0.29%
-4.22%
-14.66%
-14.45%
Silver lining in precious metals rout catches out mints
4115.9867
0.46%
Rogers International
3165.29
0.00%
Libya's el Sharara oilfield shut after armed group seizure
Dow Jones - UBS
134.6268
-
-
Emboldened republicans to strike early on keystone
Cont Commod Indx
476.8726
-0.46%
-6.14%
Latest Close
Change
YTD
pipeline approval
GMO labeling fails in Colorado, Oregon; GMO ban
passes in Maui
Russia's wheat prices jump on Rouble's continuing
slump
Brazil sugar and ethanol group Cosan posts sharp drop
in profit
London metal exchange may temper trading fee rise
after complaints
China large steelmakers' daily output down 7.5 pct in late
Rare earths miner Molycorp posts another loss, shares
BEYOND THE HEADLINES
Malaysia's Oct palm stocks seen at 19-month high as
exports stutter
For India, China-backed lender may be answer to coal
investment
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Index (Total Return)
US STOCKS (DJI)
17484.53
0.58%
5.48%
US DOLLAR INDEX
87.235
0.53%
9.26%
US BOND INDEX (DJ)
337.45
-0.04%
6.28%
ECONOMIC WATCH
GMT
Indicators
Unit
Reuters
Prior
09:30
GB
Manufacturing output mm
pct
0.3
0.1
09:30
GB
Manufacturing output yy
pct
2.8
3.9
09:30
GB
Industrial output mm
pct
0.4
0.0
09:30
GB
Industrial output yy
pct
1.5
2.5
12:00
GB
BOE bank rate
pct
0.5
0.5
12:45
EZ
ECB deposit rate
pct
-0.2
-0.2
12:45
EZ
ECB refinancing rate
pct
0.05
0.05
13:30
US
Initial jobless claims
k
285
287
13:30
US
Labor costs prelim
pct
0.5
-0.1
13:30
US
Productivity prelim
pct
1.5
2.3
INSIDE COMMODITIES
November 6, 2014
MARKET MONITOR
Brent crude rose above $83 a barrel, bouncing further from its
lowest level since 2010 after a lower-than-expected rise in U.S.
crude stocks and solid U.S. job growth provided relief after a
string of negative Chinese data. Brent rose 0.7 percent to
$83.02 per barrel. U.S. crude rose 0.12 percent to $78.80 after
data showing U.S. crude inventories had edged up 460,000
barrels in the week to Oct. 31 compared with analysts' expectations of an increase of 2.2 million barrels.
Gold languished near its lowest level since April 2010 as investors dumped the safe-haven metal amid strength in the dollar
and on fears that $1,000 an ounce is the next target. Spot
gold ticked up 0.3 percent to $1,143.80 an ounce. It tumbled
over 2 percent to a 4-1/2 year low of $1,137.40 on Wednesday,
following sharp losses after falling through support at $1,160
and $1,150.
Chicago corn and soybean futures edged lower, giving up
some of the previous session's gains amid expectations that
rapid harvesting of record U.S. crops would boost global supplies. CBOT spot-month soybeans slid 0.4 percent to $10.143/4 a bushel, while corn dipped 0.1 percent to $3.69-3/4 a
bushel. Wheat was unchanged at $5.24-3/4 a bushel after dropping 2.5 percent in the previous two sessions.
The dollar stumbled against the yen as investors sold into a
steep rally ahead of key events including the European Central
Bank's policy meeting and U.S. nonfarm payrolls. The dollar
was down 0.2 percent at 114.39 yen after storming to a sevenyear high of 115.52. The dollar index fell 0.3 percent to 87.224
after hitting a 4-1/2 year peak of 87.606 overnight. The euro last
traded at $1.2515, flirting once again with a two-year low of
$1.2439 set early in the week.
European stocks were expected to open lower, with many
traders focusing on the European Central Bank's policy meeting
later in the day. Most Asian shares stumbled on lingering concerns over slower global growth. Wall Street ended high on
Wednesday.
London copper edged lower, still under pressure from a
stronger U.S. dollar and further signs of slowing economic
growth in Europe and China. Three-month copper on the
LME stood at $6,622.25 a tonne, down 0.2 percent. The mosttraded January copper contract on the SFE was down around
0.2 percent at 46,850 yuan($7,663) a tonne.
TOP NEWS
Silver lining in precious metals rout catches out mints
China details measures to support imports as economy
cools
A tumble in silver prices to four-year lows has triggered a global
scramble by consumers to purchase silver coins and bars as the
metal has reached its cheapest level relative to gold in more
than five years.
The U.S. Mint said on Wednesday it has temporarily sold out of
its American Eagle silver bullion coins after recent "tremendous"
demand, while retailers and distributors in Asia and the United
States said they were struggling to get supplies of items such as
Canadian Maple Leaf silver coins.
Demand for silver has been strong over the past few months,
but retailers say buying interest has soared in recent days as
the metal has slid towards its lowest since 2010.
Silver fell to 4-1/2-year lows at $15.13 an ounce on Wednesday,
down 21 percent this year so far.
Gold and silver Philharmonics are issued by the Austrian Mint,
while the U.S. Mint issues American Eagle coins.
Demand for silver coins and bars accounted for more than a fifth
of total demand in 2013, according to a report by the Silver Institute.
An ounce of gold is now about equal in price to 74 ounces of
silver, the biggest spread between them since early 2009. Due
to its greater affordability, silver sales tend to outstrip gold in
volume terms and attract a lot more retail buyers.
China's cabinet issued detailed measures on Thursday to support imports of high-tech equipment, resource products and consumer goods, in its latest efforts to support the cooling Chinese
economy.
The government will encourage banks to expand credit support
for imports of high-tech equipment and key components to promote industrial upgrading, according to a statement published
on the central government's website.
The government also will rally local firms to speed up overseas
investment, develop offshore energy resources and ship strategic resources back to China to help stabilise supply of energy
and other resources.
China aims to improve the national reserve system on resources
and support enterprises to establish their own commercial reserves, the cabinet said.
To spur imports of consumer goods, the government will speed
up the process of signing quarantine agreements with relevant
countries on aquatic products, fruits, beef and mutton, it said
without elaborating.
The latest step to boost imports will help restructure the economy, rebalance trade and "make good use" of the country's
massive foreign exchange reserves, the cabinet said.
2
INSIDE COMMODITIES
November 6, 2014
TOP NEWS (Continued)
Libya's el Sharara oilfield shut after armed group seizure sources
Emboldened republicans to strike early on keystone pipeline approval
Libya's major El Sharara oilfield has ceased production after
being seized by an armed group, oil ministry sources said on
Wednesday.
An oil worker at the large southern field said there was shooting,
but no further details were available.
Hours after the initital attack, workers were still trapped inside
company buildings. "We cannot leave," the worker said, asking
not to be named. "There is shooting." The field produced at least
200,000 barrels per day before the shutdown, the sources said.
Senate Republicans will charge ahead early in 2015 with a bill
to approve the long-stalled Keystone XL oil pipeline from Canada, a move that would back President Barack Obama into a
corner and set the tone for how the party taking control of Congress will govern the next two years.
The $8 billion project would deliver heavy Canadian oil sands
crude from Alberta to Nebraska and make it easier to deliver oil
from North Dakota’s Bakken region to the U.S. Gulf Coast. It
has languished for six years awaiting presidential approval,
which is needed because the pipeline crosses a national border.
Legislation earlier this year to approve the pipeline in a proposed end-run around the administration already had an estimated 57 votes in the 100-member Senate, and is now thought
to have a filibuster-proof 61 votes after Republican gains in
Tuesday's mid-term elections.
GMO labeling fails in Colorado, Oregon; GMO ban passes
in Maui
The defeat of twin measures in Oregon and Colorado that would
have required labeling of foods made with genetically modified
ingredients sets the stage for a battle over the issue in the nation's capital, both sides of the debate said on Wednesday.
The Oregon measure lost 49 to 51 percent, according to unofficial results reported by the Oregon Secretary of State's Office
on Wednesday, while voters in Colorado rejected labeling by a
margin of 66 percent to 34 percent.
"The GMO labeling discussion deserves a national solution,"
Jim Greenwood, chief executive officer of the Biotechnology
Industry Organization (BIO), said in a statement. BIO's membership includes biotech seed companies.
Russia's wheat prices jump on Rouble's continuing slump
Export prices for Russian wheat rose sharply last week supported by a slump in the local rouble currency, which has lost
about a quarter of its value against the dollar in 2014 on the
back of the Ukraine crisis, analysts said on Wednesday.
The rouble lost more than 3 percent of its value last week and
fell to a new low on Wednesday as the central bank altered its
exchange rate policy to scale back its defence of the Russian
currency.
"This factor together with the global price rise has increased the
margin of export operations sharply," said SovEcon, a leading
Moscow-based agriculture consultancy.
Brazil sugar and ethanol group Cosan posts sharp drop in
profit
Brazil's largest sugar and ethanol group Cosan SA said thirdquarter profit fell 92 percent as a weaker Brazilian real caused
the local-currency value of its debt to rise.
The company recorded net income of 15.2 million reais ($6 million), in the quarter compared with 205.9 million reais a year
earlier, according to a filing with Brazil's securities regulator, the
CVM.
The company's earnings before interest, taxes, depreciation and
amortization, or EBITDA, a measure of the company's ability to
generate profit from operations, fell 12 percent to 1.06 billion
reais in the three months ended Sept. 30.
London metal exchange may temper trading fee rise after
complaints
The London Metal Exchange (LME) said it might revise a
planned hike in trading fees after customers complained that it
could hurt their businesses.
The 137-year-old LME announced an average 34 percent increase in fees in late September as owner Hong Kong Exchanges and Clearing Ltd (HKEx) (0388.HK) moved to boost
profits after buying the exchange for $2.2 billion.
But customers protested. Broker Triland Metals warned that the
higher fees due to take effect on Jan. 1 would force brokers and
banks to ditch some commission-free terms and review their
business models.
China large steelmakers' daily output down 7.5 pct in lateOct
Average daily crude steel output from China's large steel mills
fell 7.46 percent to 1.631 million tonnes over the Oct. 21-31 period, official data showed on Thursday, as measures to cut
smog during a major international summit began to take effect.
Figures from the China Iron and Steel Association (CISA) also
showed that steel product stockpiles at major mills reached
14.143 million tonnes by Oct. 31, down 9.7 percent compared to
Oct. 20.
Out of 163 steel mills surveyed, 43 were already conducting
smelter overhauls by Oct. 24, taking the opportunity to renovate
their facilities before industrial restrictions during the Asia-Pacific
Economic Cooperation (APEC) summit in Beijing kick in.
Rare earths miner Molycorp posts another loss, shares
slide
Molycorp Inc reported a much bigger quarterly loss, hurt by
lower prices of rare-earth metals and a steep jump in production
costs, sending its shares down 20 percent in extended trading.
Molycorp, which produces 13 different rare metals used in industries such as consumer electronics and defense, said sales
volumes fell 7 percent in the third quarter.
The company, which is trying to ramp up production at its flagship Mountain Pass facility in California, said cash cost for production doubled to $33.80 per kg over the second quarter.
3
INSIDE COMMODITIES
November 6, 2014
BEYOND THE HEADLINES
elled by bullish projections from industry experts that palm supplies could ease into 2015 and eat into stockpiles.
Leading vegetable oil analysts expect prices to rise moderately
towards the end of the year and to 2,500 ringgit by March, up 10
percent from current levels of 2,272 ringgit, but gains could be
capped if comparative oil markets drop further.
"The good news is that the crude palm oil production from Malaysia and Indonesia has peaked in either August or October,
and we could start to see a seasonal decline in production from
now till February 2015, which will be supportive of CPO prices,"
said CIMB Investment Bank analyst Ivy Ng.
"Our only concern is the recent pick-up in prices has eroded
CPO's competitiveness against other edible oils and crude oil
prices."
PREVIEW-Malaysia's Oct palm stocks seen at 19-month
high as exports stutter
By Anuradha Raghu
Malaysian palm oil stocks likely rose further above the 2-milliontonne mark to a 19-month high at the end of October as exports
of the tropical oil dipped, a Reuters survey showed.
High inventory in the world's No.2 producer after Indonesia
could dent a recovery in benchmark Malaysian prices that have
risen about 19 percent from a more than five-year low of 1,914
ringgit ($586.94) per tonne hit in early September.
Malaysian palm oil stocks were expected to have risen 3.4 percent to 2.16 million tonnes by the end of October, the highest
since March last year, according to a median survey of five
planters, traders and analysts.
Crude palm oil (CPO) output was seen easing 2 percent to 1.86
million tonnes from the prior month. Analysts estimate that output peaked in August at a record 2.03 million tonnes.
The drop in production was, however, offset by bleak exports,
contributing to the expected rise in end-stocks.
The poll pegged overseas sales of Malaysian palm oil at 1.58
million tonnes for October, down 3.1 percent from September.
Cargo surveyor data for the same period showed that while demand from most major buyers was firm, exports to the world's
No.1 edible oil consumer India had weakened last month.
LOCAL CONSUMPTION
The median figures from the survey implied domestic consumption in October of about 250,469 tonnes.
DEMAND CONCERNS STAY
While bigger stockpiles will continue to weigh on palm prices,
traders and analysts said factors like prices of competing soy
and crude oil will also give direction to benchmark Malaysian
futures.
"Now the trade is more focused on grains and crude oil, and
whether low palm prices can stir demand," said a trader with a
local commodities brokerage in Kuala Lumpur.
Weak crude oil futures could dent demand for palm by making
the latter a less attractive option for biodiesel feedstock, while
lower prices of soyoil could prompt buyers to shift away from
palm to the rival edible oil instead.
Brent oil prices slumped to a four-year low of $81.63 per barrel
on Wednesday, as weak economic data from top energy consumer China intensified worries about demand as a global supply glut grows.
The U.S. soyoil contract for December , which is commonly
tracked by palm, and the most active January soybean oil contract on the Dalian Commodities Exchange have both plunged
about 18 percent so far this year, outstripping palm's losses of
around 15 percent.
The discount of free-on-board refined palm olein to Argentina
soyoil has narrowed to around $66 from around $130 at endAugust.
Demand for palm oil is also set for a seasonal slowdown in winter as cold weather solidifies the oil and makes it unusable.
LOWER SUPPLIES AHEAD
But projections for a drop in output in the top two producers of
palm oil should help keep a floor under prices, the survey participants said.
Malaysian palm prices have risen in the past two months and
last week posted their biggest weekly gain in nearly a year, fu-
INSIGHT-For India, China-backed lender may be answer to
coal investment
By Manoj Kumar and Tony Munroe
India is hoping a new China-backed multilateral lender will fund
coal-based energy projects, an official said, putting it in direct
conflict with the World Bank, whose chief has maintained that it
would stick to its restrictions on such lending.
A senior Indian official told Reuters the Asian Infrastructure Investment Bank (AIIB), sponsored by China, is expected to allow
funding of coal-fired power plants that the World Bank has almost totally blocked.
"When you have 1.3 billion people starved of electricity access
and the rest of the world has created a carbon space, at this
point denying funding is denying access to cheap energy,” said
the official, who spoke on condition of anonymity.
India sits on the world's fifth-largest reserves of coal, and the
commodity generates three-fifths of India's power supply. But
the demand for electricity far outstrips supply, and according to
data compiled by the World Resources Institute in 2012, proposals have been made to set up 455 new coal-fired plants in
the country.
Research house Integrated Research and Action for Development said earlier this year India needs to invest $250 billion in
the power sector by 2017.
Since 2013, the World Bank's energy strategy limits the financing of coal-fired power plants to "rare circumstances", making it
part of a push by U.S. President Barack Obama to fight climate
change.
"We have got to redouble and redouble again our efforts at
fighting climate change," World Bank President Jim Yong Kim
told Reuters in an interview in Seoul on Wednesday. "And our
way of doing it is to just do everything we can to avoid coal."
Kim has said the World Bank has not signed any agreements to
support coal-based power plants since he took office in July,
2012.
The Asian Development Bank (ADB), a multilateral lender dominated by the United States and Japan, says it will selectively
support coal-based power projects if cleaner technologies and
other safeguards are adopted. Last year, it approved a $900
million loan to help build a 600 megawatt coal-fired plant in
Pakistan.
The articles of agreement of the AIIB, which will include its lending strategy, will not be finalised until the end of 2015, Chinese
officials have said.
4
INSIDE COMMODITIES
November 6, 2014
BEYOND THE HEADLINES (Continued)
Kim said he understood India's position on coal-fired energy
projects, but the World Bank's stand would not change.
"We have to be sensitive to the fact that climate change is
something that, India for example, has contributed much less to
than the United States or Europe or other countries and what
they're saying is, that we need energy," he said.
"And what they're saying is: that we need energy now so that
our economies can grow, so that we can provide jobs for our
people," he said.
"Now we won’t be engaged in coal unless there’s absolutely no
other option, and we’ll see where they go," Kim said.
SIGNED UP DESPITE RIVALRY
India signed up late last month to be a founder-member of the
AIIB, and is also a member of a new development bank from the
BRICS group of emerging markets - Brazil, Russia, India, China
and South Africa. The cooperation comes despite traditional
rivalry - the two Asian giants fought a brief war in 1962 and have
overlapping territorial claims along their Himalayan border.
The Indian official, who was involved in the AIIB decision, said
the funding of infrastructure in the region by the World Bank and
the ADB was inadequate.
"Had the World Bank resourced its capital base, had the World
Bank done reforms that are due, and ADB also resourced the
capital base, perhaps there would have been no need to set up
the (new) bank," the official said.
Experts say the Asia-Pacific region needs about $1-1.5 trillion
per year to fund infrastructure needs. The World Bank's total
lending to East and South Asia was about $16.6 billion last
year. At the end of 2013, the ADB's lending amounted to $21.02
billion, including co-financing with other development partners.
"The infrastructure financing gap in Asia, in emerging Asia, is so
big and even the existence of ADB, World Bank, and other multilateral development banks cannot fulfil that demand," Indonesian Finance Minister Bambang Brodjonegoro told Reuters last
week. "AIIB will be a welcome newcomer."
The AIIB was launched at a ceremony in Beijing at which 21
nations were represented, but Australia, South Korea and Indonesia were absent. Australia and South Korea were pressured
not to join by the United States, local media in both countries
said, but Indonesia said it did not attend because its new government had not taken office.
On Tuesday, Brodjonegoro said Indonesia could join the AIIB as
early as next week.
Analysts say Washington's fears about the AIIB are that the new
bank will encroach on its role in providing funds to the region
through Western-backed institutions and that it will allow China
to assume leadership in Asia.
"Don't imagine for a moment that the AIIB is just about economics," said Hugh White, professor of strategic studies at Australian National University.
"Asia really does need more infrastructure and there does need
to be some new funding mechanisms, but it's also an opportunity for China to build its political and strategic leadership role in
Asia."
5
INSIDE COMMODITIES
November 6, 2014
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Spot Gold
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CBOT Corn
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