Commodities

China’s vanishing metals corrode confidence

12 Jun 2014

Traders may have pledged copper or aluminium as collateral for multiple loans. Lenders can’t always spot such behaviour, and may have reasons not to complain too much or pull back too quickly. But metal-related antics are another sign of the weakness in China’s financing chains.

Chinese hiccup temporarily deflates dairy bubble

5 Jun 2014

The price of milk-related products is down 25 pct this year, according to auction platform GlobalDairyTrade. While supply has improved, demand from China has also fallen. The lull is unlikely to last: even slower growth in the People’s Republic would outstrip domestic supply.

Gold miners ominously prospect for M&A treasure

23 Apr 2014

The Newmont and Barrick talks came amid a bidding war for the Canadian Osisko. That’s one deal short of a trend. A 30 pct drop in the bullion price means those with higher-valued shares may spy a chance to nab production on the cheap. The logic behind such digging has holes.

Barrick’s empire building deserves skeptical eye

21 Apr 2014

The Canadian giant is reportedly considering a $33 bln deal with Newmont. Barrick’s outgoing chairman said “hubris” drove past deals. Ex-Goldmanite John Thornton, who takes the chair next month, faces a big hurdle in convincing shareholders this won’t be another value-destroyer.

JPMorgan commodities sale shows trading’s opacity

19 Mar 2014

The bank is selling what is probably a low-return unit with regulatory headaches to privately held Mercuria. The lack of financial details makes the price hard to judge, but at $3.5 bln the buyer seems to be paying top whack. With commodities under pressure, that’s a bold move.

Temasek buyout throws sovereign weight behind Olam

14 Mar 2014

The Singapore state investor is taking the commodities trader private with a $4.3 bln offer. Though Olam saw off short-sellers in 2012 its shares never fully recovered. Temasek’s ownership will shield it from public scrutiny – and remove any questions over its creditworthiness.

China’s push into food trading will be piecemeal

6 Mar 2014

State-backed COFCO is eyeing an agriculture joint venture with Singapore’s Noble, a week after taking control of Dutch grain trader Nidera. COFCO’s mission to ensure China’s food security is finally translating into large overseas acquisitions. Yet targets remain in short supply.

Miners are finding that disinvestment pays

20 Feb 2014

For an industry wrestling with the end of a once-in-a-lifetime demand surge, big miners aren’t faring badly. Prices are still high, and results at Rio Tinto and BHP Billiton show austerity working. Supply trends favor lower ore prices, but diggers may reap big profits for a while yet.

TPG’s bitter coffee should wake up private equity

4 Feb 2014

David Bonderman’s shop and Israel’s Strauss family are feuding over their java joint venture. Buyout firms prefer control for good reason, though it isn’t always possible. While the payoffs from different ownership structures can be big, the risks are often commensurate.

Ambitions exceed delivery in Europe market reform

15 Jan 2014

The aims of the revamp of regional market trading rules are laudable: more transparency and greater investor protection. Some of the changes are good. Others, notably caps on off-exchange share trading, may prove heavy-handed. But it’s not too late to refine the implementation.

Commodities set to distinguish themselves

3 Jan 2014

From gold to grain, raw materials will in 2014 trade less in line not just with equities, but each other. That’ll continue a trend started in the summer. Thank a calm euro zone and the prospect of a Fed taper. Commodity costs set by fundamentals, not fear, would be good for many.

Governance will matter south of the U.S. border

23 Dec 2013

A 10-year boom in natural resources and easy money allowed bad Latin governments to do as well as good ones. Now with commodities flat and rates rising, regimes that respect investor and property rights, while spending money and allocating capital wisely, should shine.

Australia too mealy-mouthed on protectionism

29 Nov 2013

Blocking ADM’s $3.1 billion takeover of GrainCorp is illogical. The U.S. buyer was paying a tidy premium for the Sydney-based wheat trader. While foreign investors won’t be happy, Canberra’s real mistake is in not saying plainly that it prefers a local bully to a foreign one.

Cotton pile tests China’s new appetite for markets

29 Nov 2013

The government has tentatively begun to sell cotton reserves it bought from farmers, valued at an estimated $32 billion. If a recent promise to give markets a “decisive” role were sincere, China’s domestic cotton industry would be hobbled. Theory and practice are still far apart.

Lower inflation can spur global growth

15 Nov 2013

The trend towards lower inflation rates is unlikely to end in massive global deflation. There may be a risk in the euro zone, but most disinflation is a healthy response to falls in oil and commodity prices. Consumers and growth will benefit. Policymakers shouldn’t panic.

Market underestimating commodity bust hangover

23 Oct 2013

The end of the 10-year mining super-cycle was bound to cause pain. Yet equipment-maker Caterpillar surprised itself and investors with its fourth earnings miss in a row. The industry leader and rivals are trading at valuations that imply a recovery soon. That’s wrongheaded.

Mongolia gives a little in investment tug-of-war

7 Oct 2013

As Rio Tinto thrashes out terms for its stalled copper project, a promise of equal treatment for foreign investors bodes well. Mongolia’s rich resources mean overseas groups will tolerate occasional bad behaviour as long as they mostly get their way. That now looks more likely.

Xstrata 2.0 is a bet that other miners are wrong

30 Sep 2013

Former Xstrata boss Mick Davis has raised $1 bln from commodity trader Noble and buyout fund TPG to build a new mining group. The idea is that the industry’s current conservatism provides opportunities. Even if that’s right, Davis won’t easily duplicate Xstrata’s high returns.

CIC’s potash stake bodes ill for cartel revival

24 Sep 2013

The Chinese sovereign wealth fund’s 12.5 pct stake in Uralkali will give Beijing some leverage in the Belarus-Russia potash spat. A purely financial investor might prefer a return of the producers’ cartel. But China is unlikely to support any move to drive up global prices.

Failed petrostates threatened by new oil bounty

20 Sep 2013

Oil majors are becoming less tolerant of the political risks and corruption they’ve coped with in the past. That’s bad news for the likes of Nigeria or violence-prone Libya. With safer crude on offer in the U.S. and elsewhere, troubled states risk an exodus of expertise.