No relief in sight for the metals and energy complexes sector amid depreciating currencies.
Early days of 2016 seem to be echoing those of last year, and with further negative data coming out of China there could still be plenty of pain in commodities, particularly in the energy and metals complexes.
The statistics are ugly: the benchmark index S&P GSCI ended 2015 with the first three-year consecutive loss in its history, a total of 55.6%; in December, the S&P GSCI Total Return recorded a new maximum drawdown of 80.5% from its peak in July 2008 and posted its fourth biggest annual loss in history since 1970 at 32.9%.
This is the first down cycle where demand has collapsed but production hasn’t collapsed.
“2015 will go down in history as one of the worst years ever for commodities,” wrote Jodie Gunzberg, Global Head of Commodities at S&P Dow Jones Indices in a media alert.
People in the commodities industry are often hard to rattle, with an attitude that: “the cure for low prices is low prices”. But this time might be different, said Robin Bhar, Head of Metals Research at Société Générale, speaking to Finance Magnates.
“This is the first down cycle where demand has collapsed but production hasn’t collapsed. In fact, producers have carried on producing because cost base has collapsed,” he said.
That’s because energy costs for producing mines have fallen and currencies have depreciated. Producers in Russia and Brazil, for example, will get significantly higher prices for commodities in the rouble and real respectively – allowing them to just carry on producing rather than shutting down as would have been the case in previous down cycles.
“I don’t think we’ve seen the bottom. If the (US) dollar stays strong because the Fed continues to tighten, as it is likely to, that means strong dollar (and) weak currencies. Therefore, production costs continue to stay low, go even lower and you don’t get the production cuts that are desperately needed in all metals to rebalance the market,” Bhar added.
Along with weak capital flows and global trade growth, depressed commodities prices are presenting a “very challenging external environment for developing countries”, said Franziska Ohnsorge, Lead Economist for the World Bank’s Development Prospects Group, speaking to journalists in London.
“Not since the 80s have we seen a year in which so many commodities prices fell at the same time,” she said. The World Bank monitors some 50 commodities, and found more than 80% of them fell in 2015.
The World Bank expects economic growth to pick up, to 2.9% in 2016 from 2.4% in 2015, but this year will be a “test of the resilience of emerging markets and developing countries” Ohnsorge added.
Metals to watch: Copper, Gold
Copper is one of a few commodities in backwardation, meaning the spot price is higher than the forward price. Supply is relatively tight, particularly in comparison with other metals, and inventories at the London Metal Exchange are still close to historical lows.
Société Générale's Robin Bhar: Copper has been probably the last metal to rebalance from deficit to moderate surplus. China plays the key role because it consumes so much, almost half of the world’s copper, but it produces very little so there's a natural pull. China considers copper a strategic asset and the red metal is used as a financing tool by companies seeking attractive financing terms.
John Meyer, SP Angel Analyst: Gold appears to be the only metal able to resist the impact of the rebalancing (metals indices adjust their weightings annually) as investors move funds into gold on greater global volatility. George Soros reckons we are back to 2008 in market valuation terms. Gold prices should continue to rise if we are back in 2008 territory, assuming George S. is referring to the post-Lehman part of the year.
Early days of 2016 seem to be echoing those of last year, and with further negative data coming out of China there could still be plenty of pain in commodities, particularly in the energy and metals complexes.
The statistics are ugly: the benchmark index S&P GSCI ended 2015 with the first three-year consecutive loss in its history, a total of 55.6%; in December, the S&P GSCI Total Return recorded a new maximum drawdown of 80.5% from its peak in July 2008 and posted its fourth biggest annual loss in history since 1970 at 32.9%.
This is the first down cycle where demand has collapsed but production hasn’t collapsed.
“2015 will go down in history as one of the worst years ever for commodities,” wrote Jodie Gunzberg, Global Head of Commodities at S&P Dow Jones Indices in a media alert.
People in the commodities industry are often hard to rattle, with an attitude that: “the cure for low prices is low prices”. But this time might be different, said Robin Bhar, Head of Metals Research at Société Générale, speaking to Finance Magnates.
“This is the first down cycle where demand has collapsed but production hasn’t collapsed. In fact, producers have carried on producing because cost base has collapsed,” he said.
That’s because energy costs for producing mines have fallen and currencies have depreciated. Producers in Russia and Brazil, for example, will get significantly higher prices for commodities in the rouble and real respectively – allowing them to just carry on producing rather than shutting down as would have been the case in previous down cycles.
“I don’t think we’ve seen the bottom. If the (US) dollar stays strong because the Fed continues to tighten, as it is likely to, that means strong dollar (and) weak currencies. Therefore, production costs continue to stay low, go even lower and you don’t get the production cuts that are desperately needed in all metals to rebalance the market,” Bhar added.
Along with weak capital flows and global trade growth, depressed commodities prices are presenting a “very challenging external environment for developing countries”, said Franziska Ohnsorge, Lead Economist for the World Bank’s Development Prospects Group, speaking to journalists in London.
“Not since the 80s have we seen a year in which so many commodities prices fell at the same time,” she said. The World Bank monitors some 50 commodities, and found more than 80% of them fell in 2015.
The World Bank expects economic growth to pick up, to 2.9% in 2016 from 2.4% in 2015, but this year will be a “test of the resilience of emerging markets and developing countries” Ohnsorge added.
Metals to watch: Copper, Gold
Copper is one of a few commodities in backwardation, meaning the spot price is higher than the forward price. Supply is relatively tight, particularly in comparison with other metals, and inventories at the London Metal Exchange are still close to historical lows.
Société Générale's Robin Bhar: Copper has been probably the last metal to rebalance from deficit to moderate surplus. China plays the key role because it consumes so much, almost half of the world’s copper, but it produces very little so there's a natural pull. China considers copper a strategic asset and the red metal is used as a financing tool by companies seeking attractive financing terms.
John Meyer, SP Angel Analyst: Gold appears to be the only metal able to resist the impact of the rebalancing (metals indices adjust their weightings annually) as investors move funds into gold on greater global volatility. George Soros reckons we are back to 2008 in market valuation terms. Gold prices should continue to rise if we are back in 2008 territory, assuming George S. is referring to the post-Lehman part of the year.
Institutional FX Demand Continues to Climb in April
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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