Blog posts tagged by tag: Commodities
The commodity super cycle is well and truly over, as has been exemplified by the tumble in commodity prices over the last few years. Emerging market economies that depend heavily on commodities exports for economic growth have been floundering as a result. However, Commodities prices are on their way back with underlying fundamentals of the commodity markets remaining positive through Q1 and are expected to continue to support the recovery throughout this year. But will the comeback in commodities prices impact the emerging market economies' economic growth? In this post we take a look at some of the commodities that are making a comeback and the outlook their biggest exporters.
The OPEC deal is done and the news sent oil prices soaring yesterday. The deal, which is designed to curb record-high global oil inventories, has been mooted as a possibility since last February when prices dropped to their lowest prices in over a decade.
It’s taken almost a year, but the deal is done, overcoming disputes between the cartel’s three biggest producers, Saudi Arabia, Iraq and Iran. The deal, which also includes non-OPEC member Russia, represents the first time in 8 years that OPEC agreed to cut oil production and the first time Russia, one of the largest oil producers outside of the cartel, has agreed to cut production in 15 years.
On 4 July 1837, Ralph Waldo Emerson’s poem Concord Hymn was read at the unveiling of the Concord Monument in Massachusetts to commemorate the Battle of Concord of the American Revolutionary War. The name of the poem may not ring any bells to you, but one phrase in particular from the poem probably will, the shot heard ‘round the world.
The phrase has been used to describe many a historical event. It was famously used to describe the assassination of Archduke Franz Ferdinand of Austria, which kicked off the First World War. For any baseball fans out there, Bobby Thomson’s walk-off home run to win the 1951 National League pennant tie-breaker was also famously referred to as the shot heard ‘round the world.
The largely unexpected event that took place on 8 November in the United States of America is also probably worthy of the phrase.
Gold production in many countries, especially in developing or emerging markets, has declined in recent years as the global economy has largely improved since the global financial crisis. Many mining operations have shut down or downsized significantly. However, prices have been increasing in 2017 as safe haven buying has increased. In part 3 of our series on gold, we begin with a section explaining why the price of gold has been fluctuating in recent years. This is followed by a section on the history and news on gold production in each of the top gold producing economies globally in 2016 according to the United States Geological Survey as well as the 2017 economic outlook for each according to the FocusEconomics Consensus Forecast.
Click on the image to see a larger version
In an effort to convey why gold is such a precious metal, in part one of this series, we provided a thorough explanation of the history of gold and the gold standard along with a discussion on the potential viability of the gold standard today. In part two, we can further our discussion on why gold is so unique by explaining how it is mined and processed and discuss how its unique physical properties make it one of the most useful metals. Finally, we end the post with a section on gold's importance to the global economy, the factors that set it apart from all other commodities, and how it can be classed as both a commodity and a monetary asset. If you like, you can click on the links to the left to skip ahead in the document.
When Hernán Cortes, the famous Spanish Conquistador, first came to the New World in the 16th century, he and his men encountered indigenous civilizations that had been established there for millennia. They had never interacted with each other. They were separated by a vast ocean, did not have a common language, culture or customs, yet the one thing that they did have in common was their insatiable appetite for gold. From the very beginning, something about gold attracted civilizations all over the world without those civilizations ever having made contact with each other. It has been a symbol of beauty, power, purity and accomplishment since its discovery. Not only does gold’s natural beauty make it so mysteriously precious, but it may also be the most useful metal in the world. It is a good conductor of electricity, it does not tarnish or oxidize, and it is extremely malleable allowing it to be worked with, pounded and shaped without breaking. It is so malleable, in fact, that it can be rolled thin enough to let light pass through it. Gold is also one of the few commodities that can also be thought of as a currency or monetary asset. Many currencies around the world used to be backed by gold until recently and, although the gold standard is long since abandoned, gold is still very effectively used as a safe haven asset in times of economic turmoil to preserve wealth. With all of that said, this series of blog posts on gold will seek to explain why it is such a precious metal, by giving a history, discussing its properties, the mining and production process, the uses for gold, the top gold producing countries and lastly explain its role as a traded commodity.
The names Pannawonica, Paraburdoo, Koolanooka and Koolyanobbing, may sound unfamiliar, and indeed these small communities are isolated geographically from the rest of the world in the remote hinterlands of the Western Australian outback. However, these communities are some of the first to be impacted by forces stemming from well outside of Australia’s borders. These communities, as well as many others across Australia, are major iron ore mining areas, and are first in line to feel the effects of the collapse of the decade-long commodities super cycle. Some analysts expect that the rest of the Australian economy will follow suit.
We are pleased to announce the publication of the new Commodities Consensus Forecast report. The report includes the latest price forecasts for 33 commodities in the energy, metals and agricultural sectors from leading local and global economic institutions, such as BMI Research, Goldman Sachs, Oxford Economics, Deutsche Bank and HSBC, to name just a few.
Click the infographic to open a full-sized version
As Iran ordered a ramping up of production by 500,000 on Monday, Persian tankers were already filling their hulls with millions of barrels of low-sulphur crude, destined mostly for European markets. Although there are some factors restricting the accessibility of Iranian crude to foreign markets, especially given that U.S. institutions are still barred from Iranian oil transactions, Iran will want to regain market share it has either lost, or never had access to. This will most likely translate to more supply of high-quality hydrocarbons and downside pressure on prices.
China’s meteoric rise in the past has been a boon to developing and advanced economies alike. Its seemingly insatiable consumption of raw materials destined for its rapidly-expanding urban centers and capital investments in a number of sectors helped to inflate what is often referred to as the “commodities super cycle” that has characterized the past 15 years. In an effort to secure such commodities, China has expanded its presence in sub-Saharan Africa, sending substantial sums of capital, expertise and workers to develop extraction industries and infrastructure in several countries. However, China’s rapid growth is unwinding, and its objectives in Africa are likely to reflect this fact. This month, Chinese leader Xi Jinping visits Zimbabwe and South Africa to engage in talks with African leaders.
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