Commodities

Gold’s prospects are dull

25 Jan 2016

The precious metal isn’t behaving like a safe haven should. The dollar’s rise is weighing on its price, Asian demand is dented, investors don’t need inflation hedges, and past price gyrations have tarnished its defensive allure. Grimmer news is needed to restore gold’s lustre.

Sweeter Cairn bid is Vedanta’s least bad option

25 Jan 2016

Anil Agarwal’s Vedanta Resources is edging towards loan covenant limits. Bondholders are losing faith in the mining tycoon’s ability to tap buried cash and repay $8 bln of debt. The stress may force Agarwal to sweeten a deal to merge subsidiaries and simplify the group structure.

Chancellor: Best cure for low oil is low prices

21 Jan 2016

Having invested heavily, both mining and energy firms are struggling with oversupply and weak prices. New mining production from BHP and others will continue to weigh on commodities for years. But oil investment cuts set the stage for the next bull market in the black stuff.

BHP Billiton plays catch-up with $7 bln shale hit

15 Jan 2016

Plunging energy prices forced the miner to write down its U.S. oil and gas assets again. The non-cash charge is large but just brings BHP’s balance sheet closer to the outside world’s estimation. A bigger step would be to follow the market’s lead once more and slash the dividend.

Noble’s banks matter more than its credit score

8 Jan 2016

A second rating agency has downgraded the struggling commodity trader to “junk”. That’s a further blow to sentiment. But investors were already wary and the financial impact should be limited. What matters is that Noble’s lenders, acting in their own interests, remain supportive.

Ivan Glasenberg may be mining’s last man standing

31 Dec 2015

The Glencore chief outlasted his peers when the commodity boom turned in 2013. The sector may be due another shakeout in 2016 if prices keep falling. But Glasenberg’s big stake in Glencore and his newfound dash of humility mean his copper plating should last another year.  

Coal is biggest risk to China’s $6 trln green goal

17 Dec 2015

The best way to cut carbon and smog is to limit the economy’s dependence on coal. Mammoth investment in alternative energy and efficient industry is required, or China will flunk its Paris vows. But finding the private capital needed to drive change will be tough.

Oil price slump takes gloss off Paris climate deal

14 Dec 2015

Brent crude trading close to an 11-year low could be a big boost to global growth. But at least in the short-term, the cheaper oil price will stoke fossil fuel demand. Even if the Paris accord helps longer-term, both oil prices and consumption are set to tick up. 

Glencore deserves credit for lessons learned

10 Dec 2015

The Swiss miner and commodities trader will cut debt even faster than it vowed in September. Planning for copper prices below current levels is wise. Chief Executive Ivan Glasenberg can’t control China’s demand for metals, but at least his balance sheet now reflects reality.

Anglo American is facing a crisis of confidence

8 Dec 2015

Collapsing commodity prices led the coal, copper and diamonds miner to suspend its dividend on Dec. 8. It’s also slashing jobs and investment. Big London-listed miners including Anglo American have lost 47 percent of their market value this year. Yet things could still get worse.

Rio Tinto capex cuts won’t stop race to the bottom

8 Dec 2015

The Anglo-Australian miner is cutting spending by $1.5 billion to save cash amid the rout in commodities. But it’s not the same as slashing production – which is what’s needed to bring metals prices back up. The current strategy should make shareholders nervous.

New type of dealmaker gives Keurig $14 bln respite

7 Dec 2015

The single-serve coffee group is selling to the family-backed JAB. The 78 pct premium is surely a welcome exit for investors in the struggling company. The novelty, though, is JAB’s caffeine-themed consolidation play, reminiscent of Brazilian 3G’s effort with Heinz and Kraft.

Betting against copper is a dangerous game

23 Nov 2015

Shares of Anglo American, BHP Billiton and Glencore fell on Nov. 23 as copper dropped below $4,500 a tonne. Once tipped as the metal of the future, copper is now a symbol of global miners’ past misjudgments. The red metal price seems destined to sink further.

Glencore can’t delay with $2 bln agri-sale

17 Nov 2015

The debt-laden commodities trader is slimming down in agriculture. But two months into the disposal process, one potential buyer says he thinks the business is “not really on the market”. With copper prices hitting a fresh six-year low, Glencore can’t afford to drag its feet. 

Cox: Drought, not just of ideas, challenges Africa

12 Nov 2015

The sub-Saharan region, once a bright spot for global growth, faces a worrying triple whammy. A lack of rainfall threatens agriculture and hydropower. Low commodity prices are taking a bite. Fold in sliding currencies, and inflation threatens stability and economic prospects. 

Lonmin buys time but platinum is bigger problem

9 Nov 2015

A $407 mln rights issue at an eye-popping 94 pct discount will allow the South African miner to postpone a day of reckoning with its creditors. Lonmin has bought itself a reprieve, but this won’t fix the platinum price, or help it avoid another strike at its Marikana mines.

European crisis will bend but not break Tata Steel

6 Oct 2015

The Indian steelmaker’s net debt of $9 bln is three times its market value. Its European business, acquired in 2007, is suffering from cheap Chinese imports. Yet last year’s timely refinancing and support from its parent means Tata Steel can avoid the fate of British rival SSI.

Potash selloff shows flaws in K+S takeover defence

5 Oct 2015

Slumping demand for the fertiliser ingredient has prompted Canada’s Potash Corp to withdraw a 7.9 billion euro ($8.9 billion) offer for its German rival. For three months, K+S played hard to get even as prices fell. Shareholders may now regret its reluctance to negotiate.   

Glencore shares priced for commodity apocalypse

28 Sep 2015

The Swiss trader’s shares fell by a quarter after an analyst suggested its equity could be worthless. The fear rests on cataclysmic maths. But Glencore’s quirky model means its valuation is highly dependent on confidence in management – a resource that is much depleted.

Glencore model is battered but not broken

14 Sep 2015

Ivan Glasenberg’s mining creation has been wrong-footed by commodity prices, China, and shareholder worries about debt. The pressures may undermine Glencore’s premium valuation and its penchant for doing big deals. Its mix of trading and mining, however, is logical and robust.