Category Archives: Commodities

Coal is dead……

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Looks like it, unless there is another side of this story we don’t know about, but seems highly doubtful

The only legal place you can store mercury is in your mouth, by the way.

Mercury Found in Every Fish Tested, Scientists Say

By Cornelia Dean

August 19 (NYT) — When government scientists went looking for mercury contamination in fish in 291 streams around the nation, they found it in every fish they tested, the Interior Department said, even in isolated rural waterways. In a statement, the department said that some of the streams tested were affected by mining operations, which can be a source of mercury pollution, so the findings, by scientists at the United States Geological Survey, do not necessarily reflect contamination levels nationwide. But Interior Secretary Ken Salazar said the findings underlined the need to act against mercury pollution. Emissions from coal-fired power plants are the largest source of mercury contamination in the United States. A quarter of the fish studied had mercury levels above safety levels set by the Environmental Protection Agency for people who eat the fish regularly, the Interior Department said.


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China steel expansion halted

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Yes, this further supports the notion that some of the world economic improvement was due indirectly to ‘one time’ inventory building and additions to capacity in China, including the eurozone, where exports nudged France and Germany to positive GDP reports.

China stops expansion projects in steel industry for three years

August 13 (China Daily) — China’s Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.

MIIT Minister Li Yizhong said overcapacity in the steel industry was “the most evident” of all the industrial sectors, with this year’s estimated total output capacity at 660 million tons, compared with estimated demand at 470 million tons.

He called for steel mills to stop expansions for the next three years. Projects with total capacity of about 58 million tons already under construction would continue, he said.

“If the trend goes down like this, the steel industry will come to a dead end,” he said.

Another move to step up elimination of outdated capacity was consolidation of the industry, he said. Steel mills in Hebei province would reduce their overall capacity from 120 million tons to 80 million tons annually over the next two to three years.

He said the ministry was drafting steel industry consolidation guidelines aimed at reforming the world’s largest market. He gave no time for their publication.

The Shanghai Securities News reported in late July that China would release the guidelines in September.

The ministry will issue another guideline on energy conservation and emissions reductions in key sectors, including the chemical and steel sectors in the second half of this year.

The country’s steel mills produced 50.68 million tons of steel in July, up 12.69 percent year on year.


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valance chart review

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Not a lot to say in this short review.

Looks like credit worthiness is on the mend thanks to federal deficit spending.

While what’s been done hasn’t been my first choice for public policy, it nonetheless has added net financial assets to the non govt sectors and helped bring down debt ratios.

As they used to say, when Detroit sneezes the economy catches a cold.

The Great Mike Masters Inventory Liquidation that began in July ended around year end.

The weakening economy caused the federal deficit to rise the very ugly way via the automatic stabilizers.

By year end the deficit was high enough to turn the tide.

The rising federal deficits added to savings of net financial assets and began easing debt ratios.

Headwinds remain, including US domestic loan loss issues and China looking like markets could take a breather with talk of government action to slow credit expansion, but as long as US federal deficit spending persists at sufficiently high levels, it looks like the worst is behind us for US GDP, with unemployment likely to peak later this year at about 10%.

This is creating unwelcome social tensions for the administration, with the apparent winners being banks, corporations, the investor class in general, and higher income earners.

State and local governments are also in a bind, as they lay off essential employees while funding a few ‘shovel ready’ federal infrastructure projects.

Health care reform held the promise of adding to aggregate demand but it now looks like the final bill will be ‘revenue neutral.’


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DOEs: Industrial Demand Rises Above 2008

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With any kind of meaningful recovery the saudis will be able to increase price substantially without fear of demand falling off.

Right now they are just setting the hook.
Letting the world economies stabilize and financial markets recover before making their next move, while no conservation efforts of consequence are being put in place by the consumers.

DOEs: Industrial Demand Rises Above 2008!

We have been discussing the industrial demand for oil products as a leading indicator to identify signs for a recovery in Industrial Production. However, we were not as optimistic to think that demand would surge to surpass the prior years’ level of demand in the near-term. We were looking for signs of stabilization. So, this week, we highlight this point that reinforces our belief that U.S. oil demand appears to have bottomed and you should start to see more coincidental indicators of industrial demand.

Broadly speaking, Total Product demand in the U.S. continues to rebound and has risen to 19.287 Mbpd from the trough of 17.697 Mbpd at the end of May ’09. Inventory levels continue to be an overhang and much attention is being paid to stocks at Cushing that remain lofty. However, we are demand focused and see continued and substantial improvement. In addition, year-over-year comparisons will be favorable into the later part of 3Q09.

For Industrial demand for oil products, we use residual, asphalt, propane, propylene, waxes, still gas, etc. We believe that these are “leading” and should be closely watched as the industry goes thru a period of restocking. The next data points we believe investors should see in coming months are increases in power generation and also increases in distillate demand. Both of which are “coincidental” indicators of demand in our opinion.


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Taking a side on commercial real estate

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Today’s news- rising oil/declining dollar means costs of materials and replacement costs rising.

The only inflation risk comes with rising oil costs which are back up over 71 dollars this am, up from low 60’s last week.

Rising consumption overseas in general seems to be driving up prices here as we compete with a billion new consumers for scarce resources.

Commercial Real Estate – Make Up Your Own Mind

By Malay Bansal


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Commodities speculation

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I’ve also hear reports that pension funds have been adding to passive commodity strategies:

The green shoots will grow slowly

by David Robertson

May 25 (Business 24/7) — By the middle of this month, copper prices were 60 per cent up on the start of the year and platinum was up by a third. The rebound has been driven by a conviction that these metals were oversold and as construction demand (copper) and automotive demand (platinum) pick up, the price of the metals will return to more sensible levels. However, I bring bad news. Industrial demand is not returning nearly as fast as the London Metal Exchange or London Stock Exchange would have us believe – and that means we are still some way off from seeing a return to the sort of growth levels achieved prior to 2008.

Two things are currently distorting metal prices: Chinese stockpiling and speculation. The Chinese have taken advantage of the low price of metals to fill their warehouses and this has been mistaken for a dramatic ramp up in “real” industrial demand. I have no doubt that Chinese demand from factories and construction companies has increased recently but at nothing like a rate that would support a 60 per cent surge in copper prices.

Speculation has also played a significant role in boosting prices as investors have piled into commodities, partly because they have been fooled by Chinese demand and partly because a lot of people are already thinking about where to stash their cash in the event of rampant inflation next year.

Last week Investec, the South African bank, highlighted the impact speculation was having on market-traded metals by focusing on commodities that are not easily traded. For example, ferrochrome, which is used to make stainless steel, actually fell 13 per cent in price between the first and second quarter of this year and it is off 63 per cent from its high at the end of last year. Manganese contract prices are off 70 per cent and the steel makers are pushing for a 45 per cent cut in iron ore contract prices.

There is no “hot money” in these commodities so they give us a better guide to real industrial demand – and clearly there is little to get excited about yet. As a result, I expect to see a repeat of last year’s oil bubble: everyone will shortly wake up and realise that the shoots are not quite as green as had been hoped and prices will fall back by 20 to 30 per cent (again).


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