Commodities

Glenstrata deal needs rejig

7 Feb 2012

Some Xstrata investors say they will vote no to the mining merger with Glencore. But a deal may still be possible if both sides can agree a proper board and a sweeter premium for Xstrata. There’s a big incentive to talk: given the mess, neither can go back to the status quo.

Don’t bet against Glenstrata antitrust roadblock

7 Feb 2012

Many customers see Glencore and Xstrata as one, even before their all-share merger. But that won’t stop regulators everywhere poking into Glencore’s secretive business. Market share in copper and zinc isn’t the only concern: bigger miners exert pressure on governments too.

Xstrata holders right to fret over Mick’s rewards

6 Feb 2012

CEO Mick Davis’s contract promises millions from any takeover, even if he doesn’t hold out for the best price. True, Davis’s existing shares help align his interests with outside shareholders’. But investors should still examine any Glencore deal closely.

Stock up on gold, tinned food and shotgun shells

30 Dec 2011

OK, there’s no need to be too melodramatic. But hard times bolster the case for hard assets. When protesters fill the streets and the only cure for debt crises is printing money, it’s tempting to head for the hills. Assets offering true security fit in a suitcase.

Don’t shoot the emissions-market messenger

21 Dec 2011

The EU is under pressure to prop up its carbon trading market because falling prices have killed the incentive to invest in clean energy. But the market is accurately weighing supply and demand. Any intervention for public-policy goals must be within clearly prescribed limits.

Even gold fails as markets head down from summit

13 Dec 2011

Stocks and the euro have been hit. Even gold has provided no safe haven. Investors are approaching the year-end decidedly risk averse, with concerns about near-term euro zone financing uppermost. With so many assets vulnerable, the dollar and cash are among the few refuges.

Glencore resilience brings Xstrata deal closer

11 Oct 2011

Mining M&A’s clearest fantasy deal has inched closer to reality. A Glencore takeover of its $43 bln mining affiliate looks easier after the commodity trader’s shares held up better in the recent rout. But Xstrata investors are unlikely to roll over without a substantial premium.

Cash beats commodities as markets panic

26 Sep 2011

Supply and demand don’t matter when investors dive for cover. Commodities were soaring on prospects for Asian growth, a sinking dollar and inflation. But fear that Europe’s crisis will compel investors to liquidate means gold, silver, oil and copper are losing their lustre.

Glencore share price recovery depends on M&A

25 Aug 2011

The commodity trader’s performance sagged slightly between Q1 and Q2. The business is coasting along, and the latest numbers were free of nasty surprises. But without an opportunistic acquisition, a recovery in the shares - still 25 pct below their issue price - will be a slog.

Shell’s big bets are paying off

28 Jul 2011

The AngloDutch oil major is pushing the boundaries. It is turning gas into diesel fuel and building a floating LNG vessel several times the weight of the Titanic. Technology gives Shell an advantage despite the challenge of making the economics work. So far, so good.

China oil barter system won’t solve Iran’s woes

26 Jul 2011

It isn't unusual for countries to trade goods in exchange for oil. But even if China sends machinery instead of money to circumvent U.S. sanctions, and with supply to India cut for similar reasons, Iran still needs hard currency to insulate itself from economic problems.

Financial engineering won’t help Euro oil majors

25 Jul 2011

Big European oil companies are trading at large discounts and could be tempted to follow Conoco's lead and demerge upstream and downstream activities. But valuations in Europe are low because oil majors are barely growing reserves. Splitting up wouldn't change that.

Will the real price of oil please stand up?

21 Jul 2011

Oil is a quintessential global commodity. But the price of the black stuff has got harder to grasp thanks to the gap between the two main benchmarks. Brent and WTI may diverge more, to the delight of U.S refiners. Then questioning about the true price of oil could get louder.

Hoarding gold makes sense only for the hopeless

19 Jul 2011

Compared to U.S. share prices, gold has rarely been more expensive. The yellow metal was even more valuable during the economic disasters of the 1930s and 1970s. Today's worries could push it higher. But only the gloomiest can think gold will maintain its glittering trajectory.

Australia is the canary in China’s coalmine

19 Jul 2011

Chinese commodities demand created a mining boom, and turned Australia's credit market into a proxy for its trade partner's economy. That market is now flashing red for Australia's exposure to a Chinese slowdown. Even if China averts a dreaded hard landing, Australia may not.

Glencore slump shatters UK IPO market

16 Jun 2011

The commodity trader's shares are down 10 pct since floating, twice as much as the market. That shows the importance of offering new shares at a decent discount. Having embarrassed investors, it also makes life incredibly hard for other firms which would like to list in London.

Rothschild’s latest M&A machine has weak precedent

15 Jun 2011

The financier's new Vallares acquisition vehicle is an energyfocused replica of his Vallar coal venture. Vallar has created value. But shareholders would have done just as well in the index. While it's early days, Vallar isn't a great advert for the new project.

Glencore move on ENRC would be logical but tricky

13 Jun 2011

The commodities trader would get instant heft in mining by buying ENRC and inexpensively, given the boardroom disarray that has hurt the Kazakh miner's shares. But the timing is bad, and adopting ENRC's assets and investors won't help Glencore win over the sceptics.

Hostile paper bid encounters more than David Brent

7 Jun 2011

International Paper's $3.3 billion bear hug for TempleInland is up against stronger defenses than what The Office manager might have proffered. The target is armored with a staggered board and just adopted a poison pill. Without a sweeter bid, the battle could be protracted.

Peru narrowly votes to imperil commodity wealth

6 Jun 2011

Ollanta Humala promises Lula's Brazil, ushering in growth despite leftwing tendencies. But investors expect something more like Chavez' Venezuela. Peruvians missed a chance to reinforce freemarket wealth, and instead should brace for an unhappy turn of the commodity cycle.