Commodities

Warehousing rules put LME’s new owner on the spot

16 Sep 2013

Hong Kong’s securities exchange paid a fortune for the metals marketplace last year. It’s been a bumpy start with plans to reform price-distorting warehouse rules proving divisive. Yet China-fuelled expansion will fail if market participants lose faith in LME prices.

Big Oil’s growth addiction is counterproductive

11 Sep 2013

The industry pours billions into projects with marginal returns to keep production rising. Yet the oil majors’ huge size means big new finds barely move the needle. Oil bosses should ditch their fixation with growing output. The sector’s best option may be to shrink.

Glencore digs deeper for huge Xstrata cost savings

10 Sep 2013

The miner-trader expects $2 bln of cost savings next year from its takeover of Xstrata - four times an initial synergy target. That goal was clearly undercooked. The new figure also reflects boss Ivan Glasenberg’s purge of former Xstrata staff and mines.

Middle East turmoil perpetuates OPEC charade

5 Sep 2013

Increasing energy supply from North America might have caused a global glut. But a steady stream of crises - in Iran, Iraq and Libya - has restrained OPEC’s output, and spared the cartel the difficulty of enforcing strict quotas on its more unruly members.

Commodity decoupling hints at return to old normal

4 Sep 2013

Raw material prices have split from equities after a period of tight correlation. Different commodities are diverging, too. If the trends hold, it is a healthy sign. It suggests markets are more focused on supply and demand than money printing and financial distortion.

Big miners adjust, slowly, to austere times

20 Aug 2013

Glencore and BHP Billiton are on opposite sides of the mining spectrum. But both the trader and the low-cost producer are girding for a long, slow period with goodwill writedowns and leaner investments. The strategy is right, but shareholders will have to wait for rewards.

Metals warehouse mess: a guide for the perplexed

15 Aug 2013

Angry users say big commodity traders, including Goldman and Glencore, trapped industrial metals in warehouses, artificially pumping up prices. As a U.S. probe gathers steam, Breakingviews explains how slick middlemen managed to turn a once-sleepy utility into a money-spinner.

Angry aluminium users should sue the Fed as well

9 Aug 2013

Lawsuits against JPMorgan, Glencore and Goldman allege they all artificially pumped up aluminium prices by keeping metal off the market. The ire is understandable, but some of it should be directed at central bankers. Their low rates make hoarding profitable. 

Gold warns markets of an anxious September

7 Aug 2013

As in April, the yellow metal’s slide to a three-week low suggests broader troubles for markets. Better U.S. data means Fed asset purchases could be reduced in September. Less central bank cash is good for the dollar - and bad for most other global assets.

Mongolia’s economic fairytale faces reality check

31 Jul 2013

The failure of its fifth-largest bank and delays to the development of a giant copper mine underscores the vulnerable foundations of the country’s boom. Weakness in emerging markets, and commodities, provide further tests. Yet greater economic realism may ultimately be welcome.

Piecemeal may be best for JPMorgan commodity sale

29 Jul 2013

The U.S. bank has good reasons to offload its physical electricity-to-metals business, but rival banks also have good reasons not to bulk up. Glencore might be tempted, but Ivan Glasenberg isn’t known as a generous bidder. JPMorgan may choose to sell in bits and pieces.

End of warehousing gravy train is reason to cheer

23 Jul 2013

Low rates, light regulation and a lack of publicity let banks and commodity traders pocket easy profits hoarding metal in their own warehouses. Banks were already eyeing the exit, but U.S. authorities’ fresh scrutiny of the socially useless practice should accelerate its demise.

Banks dodge a bullet with transatlantic swap deal

15 Jul 2013

A deal between U.S. and European regulators will allow transatlantic swaps to be booked outside America. The CFTC seems to accept Brussels’ own reforms could help stop another AIG-style blowup. Just as well: a tougher U.S. line could have wrecked business at all global banks.

Commodity traders need to show they’re crisis-proof

8 Jul 2013

Regulators are driving some investment banks out of commodities, increasing trading houses’ market share. Traders aren’t as systemically important as banks, but big price swings can still cause damage. Opaque business models make it hard for outsiders to gauge the risks.

Marc Rich leaves empire at the peak of its powers

26 Jun 2013

The commodities king and former fugitive, who spawned Glencore Xstrata, has died in Switzerland aged 78. Rich’s willingness to trade with almost anyone made him billions, but often posed moral questions. And though he created an industry, its best years may be in the past.

Brazil’s new-look resource nationalism still hurts

19 Jun 2013

A long-awaited mining bill reflects weakening commodities prices. Instead of a windfall tax, royalties may double. The market expected worse, but a levy on mine revenue rather than profit will still make future projects less viable. The new law could dent investment – and Vale.

Shale offers China exit from U.S. dependency curse

13 Jun 2013

The Middle Kingdom now imports over half its oil and a fifth of its gas. The U.S. – where shale output is curbing a longstanding reliance on foreign fuel – points to a solution. China needs to overcome water shortages and vague licensing rules to emulate America’s success.

Markets suffer too much central bank attention

12 Jun 2013

It’s Goodhart’s law: indicators start misbehaving as soon as they are seen to be telling gospel truths. The monetary authorities think strong asset markets and weak currencies will help growth, but their financially orientated policies are now more confusing than helpful.

Glencore Xstrata gets the message on governance

12 Jun 2013

The newly merged miner has done well to hire John Mack, the former Morgan Stanley chair, and Peter Grauer, of Bloomberg, as independent directors. Both are outsiders with serious reputations and wide experience. The appointments set a high bar in the search for a new chairman.

Buoyant markets too sanguine on end-of-QE threat

22 May 2013

The bursting of the gold bubble is just the harbinger. Other asset classes are vulnerable to the U.S. central bank dialling down its money-printing programme. Safe-haven bonds are already easing. Commodities look next in line. Stocks are the best bet but they too may suffer.