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7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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Commodities MonthlySoft Chinese growth helps metalssupply catch-up
23 OCTOBER 2012
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
2/20
Commodities Monthly
Soft Chinese growth helps metals supply catch-up
GENERAL 0-3 M 4-6 M 7-12 M Central bank monetary stimulus pledges are becoming less
effective while both the World Bank and IMF have
downgraded their global growth estimates and investors arebecoming increasingly concerned regarding the impending USfiscal cliff.
Signs of US economic improvements are being offset by thepersistent grim Eurozone outlook.
While the slowing Chinese economy showed tentative signs ofstabilization in September, neither a strong rebound nor panicdriven investment stimulus measures (such as occurred backin 2008-10) are likely.
ENERGY 0-3 M 4-6 M7-12 M Further downward revisions of global growth prospects and
the solid supply growth outlook are particularly negative for
long-term crude oil price projections. We lower our H2-13 and FY-14 average price forecasts $5/b to
$110/b while maintaining our Q4-12 estimate at $110/b andour H1-13 expectation at $105/b.
In the short- to medium-term the crude oil market is mainlysupported by geopolitical tension and tight middle distillatemarkets. OPEC policy and producer incentive prices alsoprovide a firm foundation.
INDUSTRIAL METALS 0-3 M4-6 M7-12 M Most metals are trading close to or below their marginal
production costs as supply catches up with softer demandgrowth.
The super cycle is over for high cost miners was CRUsmessage to its LME week audience.
Small- and medium-sized mining companies may decreaseinvestments as a result of current high capital costs andfinancing problems.
PRECIOUS METALS 0-3 M4-6 M7-12 M Gold has seriously disappointed over the last month. Despite
near ideal conditions prices have failed to climb above$1800/ozt during the QE3 driven rally.
In the short- to medium-term we retain our main bullishscenario despite increased downside risks. Gold is unlikely tohold ground in a risk-off environment.
However, we raise our H2-13 average gold price forecast by$50/ozt to $1700/ozt due to the open ended QE3 support onoffer and weaker global growth forecasts.
AGRICULTURE 0-3 M4-6 M7-12 M As expected, grain prices have begun to fall from last months
exceptionally high levels with downside risks dominant in theshort-, medium- and long term.
However, we do not anticipate an imminent price collapsegiven current low inventories, adverse local weather and risksof hoarding and protectionism.
We expect persistent high short- to medium-term supplyconcerns potentially triggering temporary rallies in individual
grain prices.
Arrows indicate the expected price action during the period in question.
(price indices, weekly closing, January 2010 = 100)
80
90
100
110
120
130
140
150
160
170
180
jan-10
feb-10
m
ar-10
a
pr-10
m
aj-10
jun-10
jul-10
aug-10
sep-10
o
kt-10
nov-10
dec-10
jan-11
feb-11
m
ar-11
a
pr-11
m
aj-11
jun-11
jul-11
aug-11
sep-11
o
kt-11
nov-11
dec-11
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feb-12
m
ar-12
a
pr-12
m
aj-12
jun-12
jul-12
aug-12
sep-12
o
kt-12
Industrial Metals
Precious Metals
Energy
Agriculture
(MSCI World, UBS Bloomberg CMCI price indices)
-6
-4
-2
0
2
4
6
8
10
12
Equities
Commodities
Energy
Industrial
metals
Precious
metals
Agriculture
YTD (%) M/M (%)
(%)
-12
-8
-4
0
4
8
12
16
20
24
28
32
Zinc
Soybeans
Aluminium
Coffe(Ar.)
PalladiumSilver
Lead
Gasoline(US)
Nickel
Copper
GoldWTI
Cocoa(US)
Platinum
WheatTin
Corn
Power(Cont.)
Brent
Cotton
Steelbillets
Heat.oil(US)
CO2(EUA)
Sugar
Power(Nordic)
Nat.gas(US)
Chart Sources: Bloomberg, SEB Commodity Research
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Commodities Monthly
General(price index, weekly closing)
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
15001600
1700
1800
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2
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2
009
2
010
2
011
2
012
The US economic surprise index continues toimprove as do housing statistics and car sales.However, the countrys equity rally has stalled since
September when it benefited from central bankstimulus pledges made during August. The US fiscalcliff (including possible budget cuts and taxincreases) is of major concern for next years growthoutlook, potentially depressing market sentimentgoing forward. While European investors are lesspessimistic following announcements of ECBsupport, the regions macroeconomic situationremains grim with OECD Leading Composite Indicessuggesting a continued deterioration. We thereforesee little reason to expect improved Europeandemand for imports from China, the worlds biggestcommodity consumer. Despite tentative signs
suggesting its growth may be bottoming, there isconsiderable evidence highlighting the countryscurrent very poor growth environment.
(monthly, PMIs >50 expansive)
30
35
40
45
50
55
60
65
2005
2006
2007
2008
2009
2010
2011
2012
While Chinas Q3-12 GDP growth y/y slowed even furtherto 7.4%, it improved slightly q/q from 2.0% to 2.2%.Commenting on the data release, Premier Wen Jiabaostated that the worst was probably over for the Chineseeconomy. Still, we do not expect an immediate strongrebound, a view corroborated by the countrys NationalBureau of Statistics which forecast only a modestrecovery in Q4-12, similar to September. Last months
improvement in Chinese retail sales, exports andindustrial production also supported the view that theslowing Chinese economy is beginning to bottom. Even ifnew Yuan bank lending in September was disappointingat CNY 623bn, total social financing was higher thanexpected at CNY 1.65tn, up from CNY 1.24tn in August.The governments recently announced total socialfinancing measure comprises several initiatives includingbond issuance as well as bank, trust and FX loans.Tentative stabilization of the Chinese economy furtherreduces the likelihood of a sudden, massive investment-led stimulus package from the government. Still, manymetrics confirm that Chinas economy is very weak.While PMI manufacturing data published by HSBC Markitimproved slightly in September to 47.9, it still clearlysuggests lower manufacturing activity. At the same timeChinese power production fell 0.3% y/y whileconsumption by heavy industry fell 0.1% y/y. Moreover,Chinese railway freight traffic volume also continued tofall in August, decreasing 6.8% y/y to near 2010 levels.
(monthly, 100 corresponds to long term trend growth in industrial production)
93
94
95
96
97
98
99
100
101
102
103
104
2005
2006
2007
2008
2009
2010
2011
2012
China
Eurozone
OECD
USAReference
Chart Sources: Bloomberg, SEB Commodity Research
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7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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Commodities Monthly
Crude oil
Despite high spot prices, future price expectations areunder increasingly bearish pressure. Firstly, globalgrowth expectations continue to deteriorate with
considerable uncertainty still affecting particularlyEurope and China. Further, supply remains strongerthan anticipated, fuelling expectations of even higherincreases in supply, and implying a less tight marketbalance in coming years, especially if growth remainslackluster. High oil prices during times of crisis alsoboost efforts to improve energy efficiency. However,given major geopolitical supply risks, tight oil productmarkets, high incentive prices necessary to stimulatesufficient investments, and the need for producercountries to defend prices to balance budgets, thecrude oil price appears unlikely to collapse unlessgrowth forecasts are substantially downgraded. As
emphasised earlier, our average Brent crude priceforecasts regarded downside risk as dominant. Whilemaintaining our Q4-12 $110/b and H1-13 $105/baverage price forecasts, we now choose to revise ourH2-13 and FY-14 estimates from $115/b to $110/b.
While the crude oil market balance remains loose themiddle distillate situation is different. Globally, inventoriesare low. Indeed, the situation could become very tight once
winter fuel restocking accelerates in Europe, predictably thetightest market given its large diesel car fleet. An even more
difficult situation could arise if northern hemisphere wintertemperatures become abnormally low. Even under normalcircumstances refineries are unable to produce enough
middle distillates during the heating season, makinginventories a key factor in balancing the market. The long-term structural balance for the middle distillate market is
also worrying as it leads demand growth. Meanwhile, thelikelihood of US SPR releases occurring has apparentlydiminished as politicians realize high product prices are due
to correspondingly tight markets, and that releasing crudeoil stocks would be an inefficient way of driving them down
(unlike their European counterparts, US SPRs comprisealmost exclusively crude oil).
The border conflict between Turkey and Syria remainssupportive for the crude oil market. A substantial escalation,however, is still unlikely given current Turkish public opinion
that bad relations with Syria are unfortunate and the factthat Syria has little interest in committing military resources
to tasks other than ending its civil war. Primarily, Turkishrhetoric should be regarded as a deterrent, unless NATOconsiders using Turkey as a pretext to launch air strikes to
support Syrian rebels. We also note rising geopoliticaltension in Lebanon and Libya. Meanwhile, Iran appearsincreasingly willing to return to the negotiation table as the
deterioration in its domestic living standards continues toaccelerate, with potentially bearish price implications if
correct. The big question remains: Is there a compromisepossible that could satisfy global opinion while enabling theIranian leadership to avoid a public loss of face.
(NYMEX/ICE, $/b, front month, weekly closing)
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
2
002
2
003
2
004
2
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2
006
2
007
2
008
2
009
2
010
2
011
2
012
NYMEXWTI
ICE Brent
(DOE, mb, weekly data)
315
320
325
330
335
340345
350
355
360
365
370
375
380
385
390
j f m a m j j a s o n d
2007-2011 avg.
2011
2012
Chart Sources: Bloomberg, SEB Commodity Research
2012
(mb/d)
Revision
(kb/d)
2013
(mb/d)
Revision
(kb/d)IEA 89.7 -100 90.5 -100EIA 89.17 +170 90.60 +80
OPEC 88.81 +70 89.60 +40
($/b) Q1 Q2 Q3 Q4 FullYear
2012 - - - 110 1122013 105 105 110 110 107.52014 - - - - 110
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Commodities Monthly
Energy
(NYMEX, $/b) (ICE, $/b)
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
aug-15
nov-15
feb-16
maj-16
aug-16
nov-16
12-08-17
12-09-19
12-10-19
9293949596979899
100101102103104105106107108109110111112113114
dec-12
mar-13
jun-13
sep-13
dec-13
mar-14
jun-14
sep-14
dec-14
mar-15
jun-15
sep-15
dec-15
mar-16
jun-16
sep-16
dec-16
12-08-17
12-09-1912-10-19
(NYMEX, /gal, front month, weekly closing) (DOE, mb, weekly data)
50
100
150
200
250
300
350
400
450
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
NYMEXGasoline
NYMEXHeating oil
110
120
130
140
150
160
170
180
190
200
210
220
230
240
250
j f m a m j j a s o n d
Gasoline 2007-2011 avg.
Gasoline 2012
Distillate fuel oil 2007-2011 avg.
Distillate fuel oil 2012
(NYMEX, $/MMBtu, front month, weekly closing) (NYMEX, $/MMBtu)
1
2
3
4
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6
7
8
9
10
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1213
14
15
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2,50
2,75
3,00
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4,75
5,00
okt-12
feb-13
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okt-13
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jun-14
okt-14
feb-15
jun-15
okt-15
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jun-16
12-08-17
12-09-19
12-10-19
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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6
Commodities Monthly
Nordic power
Overall, the Nordic Power situation is largely unchangedsince our previous report. Last month weather wasgenerally unsettled. Even though temperatures have
decreased and consumption increased, we see nosignificant relief for stressed hydro producers. Withreservoirs very well filled, they need to maximiseproduction irrespective of price. Currently, thehydrological balance comprises a 12 TWh surplus. Alsoweighing on prices, Swedish nuclear plants are reportinghigher availability than for several years with all blocksplanned up and running soon.
While the Nord Pool System price was EUR 25.38/MWhin September EUR +1.81/MWh vs. previous month, it hassubsequently increased, trading for most of Octoberbetween EUR 32/MWh and EUR 37/MWh.
The marginal cost of coal fired power productionhas continued to decrease with thermal coal pricesfalling further. Still, forward electricity prices havebeen mainly stable. The market is currently sensitiveto any sign of drier and/or colder weather. Q1-13currently trades at EUR 42.00/MWh.
(by Mats Forsell and Mats Hedberg, Commodities Trading)
(Nord Pool, /MWh, front quarter, weekly closing)
20
25
30
35
40
45
50
55
60
65
70
75
80
2006
2007
2008
2009
2010
2011
2012
(EEX, /MWh, front quarter, weekly closing)
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
2006
2007
2008
2009
2010
2011
2012
(ECX ICE, /t, Dec. 12, weekly closing)
5
10
15
20
25
30
35
2006
2007
2008
2009
2010
2011
2012
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
7/20
7
Commodities Monthly
Industrial metals
Latest Chinese data provide hope that the economyis at last beginning to bottom. Still, we do not expectan immediate strong rebound. We regard a near-
term demand shock involving metals as unlikelygiven the absence of any indication that Chinesepoliticians want a repeat of the investment stimulusboom seen in 2009. With the countrys demand formetals remaining soft, supply is beginning to catchup. Most are now priced at or below fair marginalcost except copper which remains high.
At the annual LME week in London most participantsstated that while they believe the commodities supercycle may have peaked plenty of growth in commoditiesconsumption remains and for many years yet.Nevertheless, protracted investments in new supply arebeginning to impact just when demand growth hasbegun to slow. Therefore, for now, the commodity supercycle is over for high cost producers although their lowcost counterparts will continue to enjoy healthy margins.Cost pressures affecting equipment and services areeasing while mining companies are increasingly reluctantto accept striking workers wage demands. Althoughmetals markets are currently becoming more balanced,several LME metal concerns were identified. For nickel,high acid pressure leach technology continues tostruggle, creating major future supply uncertainties.There were also concerns regarding zinc supplies in
coming years with large mines set to close with only lessreliable supplies ready to replace it. The copper market isstill regarded as having the biggest supply issues incoming years with major additions from unstableregions. However, aluminium was regarded as the futurevolume growth winner, being cheap, stable andabundant. Also, it is closely aligned with megatrendsinvolving increased use in many economic sectors, and iswell positioned as China refocuses its economy onconsumption rather than investments. Even if tightnessin most metals markets is easing, several more generalconcerns remain. Medium-sized mining companies are
currently facing a capital crunch due to high capitalcosts. They are working to improve profitability, retainingcash and reducing investments. With larger mininggroups also cutting investments most metals marketsmay be less oversupplied in coming years thanconsumers may have hoped. Further, as regards futurenominal metals prices the keynote speaker on the USeconomy at the LME week warned that the USD willweaken and future nominal metals prices increase.
(weekly closing)
900110013001500170019002100230025002700290031003300350037003900
4100430045004700
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(LME, indexed, weekly closing, January 2010 = 100)
60
70
80
90100
110
120
130
140
150
160
170
180
190
200
jan-10
feb-10
mar-10
apr-10
maj-10
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aug-10
sep-10
okt-10
nov-10
dec-10
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feb-11
mar-11
apr-11
maj-11
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-12
apr-12
maj-12
jun-12
jul-12
aug-12
sep-12
okt-12
CopperNickel
AluminiumZinc
LeadTin
(LME)
+134.5
-12-10-8-6-4-202468
10121416182022
Aluminium
Copper
Nickel
Zinc
Lead Ti
n
Steel
Price (%)
Inventories (%)
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
8/20
8
Commodities Monthly
Industrial metals
(weekly data)
Global overproduction of aluminium continues whilerecent high prices have postponed capacity reductions
already desperately needed to balance the market.Currently, oversupply looks likely to increase further in2013.
While we see no reason why aluminium prices should notfall back to levels seen this summer, should they do sowe would expect medium- to long-term downside risk tobe fairly limited due to production costs.
Ironically, despite near record high inventories physicalsupply remains tight due to warehouse financing deals.
Positively, global vehicle production remains relativelystrong but there have been recent indications ofweakness in Europe.
0
500000
1000000
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5500000
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2750
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3500LME inventoris (t, left axis)
LME price ($/t, right axis)
(weekly data)
During the recent overdue industrial metal marketcorrection copper was supported by stronger sector-relative fundamentals.
In the short-term, speculators also regard copper as thepreferred sector exposure as shown by the continuedbuild-up in speculative longs.
ICSG data show copper mine production increased 2.4%to 8007 kt in H1-12 vs. H1-11, refined production 3.8% to
9913 kt and consumption 7.3% to 10386 kt. Seasonallyadjusted, the H1-12 refined copper deficit was 292 kt.
Given significant uncertainties particularly regardingChinese demand, risk appears skewed to the downside.In particular, the recent sharp build-up in SHFEinventories is a worrying indicator.
0
100000
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(weekly data)
From a supply perspective nickel does not appearparticularly bullish. Oversupply is likely to continue to
increase in 2013 as several new projects begincommercial production while demand is likely to remainlacklustre.
In recent years the supply outlook has become relativelyopaque due to technical challenges attached to HPALtechnology. Still, so far the overall outcome of theseprojects has been relatively positive despite severaldisappointments.
We see little short- to medium-term upside risk in nickelthough marginal production costs are likely to limitfurther downside as prices approach levels seen this pastsummer.
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Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
9/20
9
Commodities Monthly
Industrial metals
(weekly data)
Predictably, zinc fell back sharply as soon as the post-summer industrial metals rally lost steam.
ILZSG data are poor. The market surplus betweenJanuary and July totalled 135 kt. Despite a concurrentincrease in mine supply of 10.5% y/y to 7993 kt, refinedsupply fell 1.4% to 7389 kt while refined demandincreased 0.5% to 7254 kt. The long-term pictureremains weak with a 293 kt surplus expected in 2013.
Meanwhile, LME zinc inventories continue their five yearuptrend to currently less than 15% below their 1994record high. Due to overproduction concentrateinventories are also rising.
Interest in physical zinc remains very weak. We see littlereason to hold it other than as the short leg in spreadtrades.
0
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500
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3500
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5000LME inventoris (t, left axis)
LME price ($/t, right axis)
(by Maximilian Brodin, Commodities Sales)(weekly data)
Ferrous metal markets still focus on the Chinesesituation. The iron ore Fe 62% index has jumped over30% since the start of September due to recentincreases in most Chinese steel prices of between 10%and 20%.
Conversely, coking coal prices continue to decrease(down 14% in September) while those of other steelinput factors such as energy, alloys and steel scrap havemoved sideways.
Rising iron ore prices are probably a sign of restockingrather than an increase in steel production, a viewsupported by the fact that Chinese power consumptionfrom heavy industry declined 0.1% y/y in September.
Macroeconomic indicators for September showed only amodest upturn. We believe additional improvements arerequired for iron ore and steel prices to continueupwards.
0
10000
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(weekly data) (weekly data)
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LME price ($/t, right axis)
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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10
Commodities Monthly
Industrial metals
(LME, $/t) (LME, $/t)
1800
1850
1900
1950
2000
2050
2100
2150
2200
2250
2300
23502400
2450
2500
2550
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
aug-15
nov-15
feb-16
maj-16
aug-16
nov-16
12-08-17
12-09-19
12-10-19
7400
7500
7600
7700
7800
7900
8000
8100
8200
8300
8400
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
aug-15
nov-15
feb-16
maj-16
aug-16
nov-16
12-08-17
12-09-19
12-10-19
(LME, $/t) (LME, $/t)
15400
15600
15800
16000
16200
16400
16600
16800
17000
17200
17400
17600
17800
18000
18200
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
aug-15
nov-15
feb-16
maj-16
aug-16
nov-16
12-08-17
12-09-19
12-10-19
1750
1800
1850
1900
1950
2000
2050
2100
2150
2200
2250
2300
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
aug-15
nov-15
feb-16
maj-16
aug-16
nov-16
12-08-17
12-09-19
12-10-19
(LME, $/t) (LME, $/t)
1850
1900
1950
2000
2050
2100
2150
2200
2250
2300
2350
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
aug-15
nov-15
feb-16
maj-16
aug-16
nov-16
12-08-17
12-09-19
12-10-19
18000
18500
19000
19500
20000
20500
21000
21500
nov-12
dec-12
jan-13
feb-13
mar-13
apr-13
maj-13
jun-13
jul-13
aug-13
sep-13
okt-13
nov-13
dec-13
jan-14
12-08-17
12-09-19
12-10-19
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
11/20
Commodities Monthly
Precious metals
11
Gold has proved a major disappointment over the lastmonth. The late summer rally, triggered by the mostrecent round of quantitative easing and central bankpromises of both liquidity injections and low interestrates ahead did not result in gold hitting even a new 12month high. Moreover, buying interest could not havebeen much stronger with physical ETF holdings and netspeculative long positions still increasing to record andnear record highs, respectively. Several other factorsalso remain strongly supportive including, for example,US real interest rate expectations and the thirst ofcentral banks worldwide for gold. Overall, thesecircumstances emphasise that it will take a majordevelopment to push back gold to the long term bullishtrend. Before any additional catalyst comes into play,gold will also be very sensitive to risk aversion.However, with market sentiment relatively positiveand liquidity rather than growth expectations, weretain our bullish short- to medium-term view (Q4-12and Q1-13 $1800/ozt, Q2-13 $1750/ozt) but risk isskewed to the downside. We also raise our H2-13average price forecast $50/ozt to $1700/ozt due to theopen-ended nature of QE3 and downgraded growthprospects for next year.
While QE3 reduces the downside risk for gold prices nextyear current conditions appear unable to decisively returngold to its bullish long term trend. If they are to do so, they
will probably require liquidity to work its way downwardthrough the system. With central banks pumping out money
on the one hand and borrowers deleveraging on the other itis probably only a matter of time before central banks win.By that time, they may well have unleashed an
uncontrollable inflation monster, particularly given theexperimental nature of current monetary policy and their (atbest) sketchy exit plans. However, given Japans experience
in recent decades it is almost impossible to say when thiswill happen and it is not our main scenario. If rising inflation
expectations are necessary to drive the gold price higher,then it may well remain soft, possibly for several years. Sofar, worries are focused more on the risk of deflation rather
than inflation. US gold and silver coin sales, a popularindicator of grass root inflation expectations, have trended
lower for several years to currently near multi-year lows.
The labour dispute affecting the South African mining
sector remains supportive for precious metals markets. Theescalating conflict currently affects one third of theindustry, substantially impacting precious metal production.
From a global supply perspective, rhodium, platinum and tosome extent palladium markets have been worst affected,while the impact on gold and silver supply is more limited.
Higher wages could potentially squeeze margins for SouthAfrican mining companies potentially resulting in mine
closures.
(COMEX/NYMEX, indexed, weekly closing, January 2010 = 100)
8090
100110120130140150160170180190200210220230240250260270280290
jan-10
feb-10
mar-10
apr-10
maj-10
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
mar-11
apr-11
maj-11
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-12
apr-12
maj-12
jun-12
jul-12
aug-12
sep-12
okt-12
Silver
Platinum
Gold
Palladium
(front month, weekly closing)
30
34
38
42
46
50
54
58
62
66
70
74
78
82
86
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
GOLD EUR JPY GBP SEK RUB NOK CHF
YTD(%) MoM (%)
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
12/20
12
Commodities Monthly
Precious metals
(COMEX, $/ozt, front month, weekly closing)
Over the last two months, net speculative long positionsin COMEX gold have increased more sharply than at any
time since 2009, driven both by a sharp reduction inshort positions and substantial build-up in long.
During the same period physical ETF holdings have risenby almost 200 tonnes to 2582 tonnes after stabilisingaround 2400 tonnes for nearly a year.
However, US mint gold coin sales have been unaffectedby the buying frenzy, falling 25% y/y to 68500 ozt inSeptember.
Gold ore production resumed positive growth y/y in July(+2%) after having been surprisingly weak over the pastyear in spite of extremely strong incentives for manyminers to boost production.
200300400
500600
700800900
10001100120013001400
150016001700
18001900
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(COMEX, $/ozt, front month, weekly closing)
Following a sharp rise in September, net speculative longpositions in COMEX silver have now stabilized at theirhighest level since 2010. Short positions have alsolargely normalised after increasing to unusual highs thissummer.
Having printed a new record high of 18635 tonnes in lateSeptember, physical silver ETF holdings have declined to18420 this month.
US Mint silver coin sales remain weak with those inSeptember down 27% y/y to 3.23 mozt.
Currently, the gold-to-silver ratio is 53.5, near its postone year average after almost hitting 60 over thesummer.
2468
101214161820
222426283032343638404244464850
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(NYMEX, $/ozt, front month, weekly closing)
With bullish news concerning the South African labourconflict and easier monetary policy, both platinum and
palladium net speculative longs at NYMEX have sky-rocketed, returning to very near record highs due, like goldand silver, to decreased short and increased long positions.
Recently, physical platinum ETF holdings printed a newrecord high of 47.4 tonnes after remaining stable for almosttwo years. On the other hand, palladium holdings have
continued on their now five month long slow downtrend tostand currently at 58.4 tonnes.
Global vehicle sales remain strong despite signs ofEuropean weakness.
100
200
300
400
500
600
700
800
900
1000
1100
2
002
2
003
2
004
2
005
2
006
2
007
2
008
2
009
2
010
2
011
2
012
300
550
800
1050
1300
1550
1800
2050
2300Palladium (left axis)
Platinum (right axis)
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
13/20
13
Commodities Monthly
Precious metals
(COMEX, $/ozt) (COMEX, $/ozt)
1575
1600
1625
1650
1675
1700
1725
1750
1775
1800
18251850
1875
1900
okt-12
jan-13
apr-13
jul-13
okt-13
jan-14
apr-14
jul-14
okt-14
jan-15
apr-15
jul-15
okt-15
jan-16
apr-16
jul-16
okt-16
jan-17
apr-17
jul-17
okt-17
12-08-17
12-09-19
12-10-19
27,0
27,528,0
28,5
29,0
29,5
30,0
30,531,0
31,5
32,0
32,5
33,033,5
34,0
34,5
35,0
dec-12
mar-13
jun-13
sep-13
dec-13
mar-14
jun-14
sep-14
dec-14
mar-15
jun-15
sep-15
dec-15
mar-16
jun-16
sep-16
dec-16
mar-17
jun-17
12-08-17
12-09-19
12-10-19
(NYMEX, $/ozt) (NYMEX, $/ozt)
600
610
620
630
640
650
660
670
680
dec-12
mar-13
jun-13
sep-13
dec-13
12-08-17
12-09-19
12-10-19
1460
1480
1500
1520
1540
1560
1580
1600
1620
1640
1660
okt-12
jan-13
apr-13
jul-13
okt-13
12-08-17
12-09-19
12-10-19
(weekly data, tonnes) (weekly data, tonnes)
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
2400
2500
2600
jan-10
feb-10
mar-10
apr-10
maj-10
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
mar-11
apr-11
maj-11
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-12
apr-12
maj-12
jun-12
jul-12
aug-12
sep-12
okt-12
Silver holdings / 10
Gold holdings
20
25
30
35
40
45
50
55
60
65
70
75
jan-10
feb-10
m
ar-10
apr-10
maj-10
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
m
ar-11
apr-11
maj-11
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
m
ar-12
apr-12
maj-12
jun-12
jul-12
aug-12
sep-12
okt-12
Palladium holdings
Platinum holdings
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
14/20
Commodities Monthly
Agriculture
14
As discussed last month exceptionally high grain pricesduring the late summer months minimised furtherupside risks. In fact, to keep prices so high conditionsprobably need to deteriorate continuously to countergradually increasing demand destructive forces. Inaddition, with bearish headwinds still dominating themacroeconomic outlook, exogenous factors areunlikely to boost grain prices. Predictably, they havetherefore trended lower once again over the pastmonth. Current strained conditions and potentialadditional pitfalls are well understood, closelymonitored and largely discounted. In addition, as thenorthern hemisphere harvest progresses uncertaintiesdiminish reassuring markets. On the one hand, we stillsee supportive factors at work including, for example,the tight overall inventory situation, continuedabnormal weather conditions in many regions, and therisk of hoarding and protectionism. Examples of thelater have already been seen in the FSU. However, froma strategic perspective we remain emphaticallybearish.
The long term equation governing agricultural markets is afairly easy one to understand, i.e. prices trend lower in realterms as production becomes increasingly efficient due to
developments in infrastructure, technology, breeding, andfertilizing. Generally, only adverse weather conditions cancause dramatic and substantial deviations from the long-
term trend. When prices rise, incentives to increaseproduction also increase. The longer they remain high the
stronger these incentives become. Consequently, longperiods of high prices due to adverse weather are likely tocause sharp and substantial price falls once conditions
normalize. Of course, adverse weather could continue butthat would hardly be a rational main scenario.
Concerning the three main grains, we note that wheatremains comparatively resilient, partly due to moderate
problems connected with planting, crop development andharvesting in both the northern and southern hemispheres.While the market is mainly focused on dry pre-harvest
conditions in Australia, uncertainties regarding FSU exportsalso provide support. With the northern hemisphere
soybean and corn harvest almost over, the existence ofexceptionally strong incentives to plant and relativelyfavourable planting conditions in South America, not
surprisingly both markets have softened. Regardingsoybeans, the USDAs recent and substantial supplyupgrade has dampened sentiment considerably even
though Chinese demand apparently remains strong despitelocal macroeconomic headwinds. Meanwhile, US cornethanol production has both clearly and inevitably rolled
over. However, producers remain profitable, albeit barelyand only when by-products are included. Absent recent
strong gasoline prices corn demand from this source wouldprobably have already weakened further.
(CBOT, indexed, weekly closing, January 2010 = 100)
70
80
90
100
110
120
130
140
150
160
170
180
190
200
jan-10
feb-10
mar-10
apr-10
maj-10
jun-10
jul-10
aug-10
sep-10
okt-10
nov-10
dec-10
jan-11
feb-11
mar-11
apr-11
maj-11
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-12
apr-12
maj-12
jun-12
jul-12
aug-12
sep-12
okt-12
Wheat
SoybeansCorn
(WASDE, yearly data updated monthly)
45
55
65
75
85
95
105
115
125
135
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
Wheat
Soybeans
Corn
(WASDE, monthly data, %, 2012/2013)
-14-13-12-11-10-9-8-7-6-5-4-3-2-10123456789
jun-12
jul-12
aug-12
sep-12
okt-12
Corn productionCorn stocksWheat production
Wheat stocksSoybean productionSoybean stocks
Chart Sources: Bloomberg, USDA, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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15
Commodities Monthly
Agriculture
(CBOT, /bu, front month, weekly closing)
Net speculative long positions in CBOT corn have beenslowly falling backward after peaking well below 2010
highs in late August. Short positions remain nearmultiyear lows.
The USDA revised end-of-year stocks even lower inOctober due to decreased carry-over, furtherconsolidating corns reputation for enjoying thestrongest fundamentals.
So far, high US gasoline prices have ensured cornethanol producers have remained profitable, though onlyjust. Without by-products their businesses would havebeen loss making.
Although the northern hemisphere harvest is nearingcompletion under primarily dry conditions, SouthAmerican planting is progressing in the rain, a situationso far largely favourable.
150
200
250
300
350
400
450
500
550
600
650
700750
800
850
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(CBOT, /bu, front month, weekly closing)
CBOT wheat speculators have recently reduced longpositions while remaining net long since the summer.
The USDA continued to downgrade its global wheatproduction and ending stock forecasts in its OctoberWASDE, largely due to the Australian drought. So far12/13 supply forecasts have been lowered every monthsince initial estimates were first published in June.
To date, US winter wheat planting has progressed
normally although conditions remain uncomfortably dryin the US interior resulting in slow crop development.Further less serious weather-related issues are alsoadversely affecting the global wheat production outlook,the Australian drought being the most important.However, the crop is now almost fully grown, reducingthe risk of additional downgrades. Meanwhile, dryconditions are harvest positive.
200
300
400
500
600
700
800
900
1000
1100
1200
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(CBOT, /bu, front month, weekly closing)
Recently, long CBOT soybean positions have been
substantially reduced although given net longpositioning is decreasing from extremely high levels theyremain well above normal. Surprisingly, short positionshave also been lowered slightly lately.
Soybean global production estimates were revisedsubstantially higher in the October WASDE, almostentirely due to raised US production estimates.
Currently, soybean demand is supported nearlyexclusively by the feed (soybean meal) market while itssoybean oil counterpart is under pressure from presentplentiful supplies of palm oil. In fact, meal hasoutperformed beans so far this year while oil has traded
sideways.
400
600
800
1000
1200
1400
1600
1800
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
16/20
16
Commodities Monthly
Agriculture
(CBOT, /bu) (CBOT, /bu)
560
580
600
620
640
660
680
700
720
740
760780
800
820
dec-12
mar-13
jun-13
sep-13
dec-13
mar-14
jun-14
sep-14
dec-14
mar-15
jun-15
sep-15
dec-15
12-08-17
12-09-1912-10-19
790
800
810
820
830
840
850
860
870
880890
900
910
dec-12
mar-13
jun-13
sep-13
dec-13
mar-14
jun-14
sep-14
12-08-17
12-09-19
12-10-19
(CBOT, /bu) (NYBOT, /lb)
1200
1250
1300
1350
1400
1450
1500
1550
1600
1650
1700
nov-12
feb-13
maj-13
aug-13
nov-13
feb-14
maj-14
aug-14
nov-14
feb-15
maj-15
12-08-17
12-09-19
12-10-19
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(NYBOT, /lb) (NYBOT, $/t)
20
40
60
80
100
120
140
160
180
200
220
2
002
2
003
2
004
2
005
2
006
2
007
2
008
2
009
2
010
2
011
2
012
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
3600
3800
2
002
2
003
2
004
2
005
2
006
2
007
2
008
2
009
2
010
2
011
2
012
Chart Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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Commodities Monthly
Commodity related economic indicatorsEUROZONE Current Date Previous Date NextIndustrial production (%, YoY) -2,9 2012-08-31 -2,8 2012-07-31 2012-11-14
Industrial production (%, MoM) 0,6 2012-08-31 0,6 2012-07-31 2012-11-14
Capacity utilization (%, sa) 77,8 2012-09-30 79,7 2012-06-30
Manufacturing PMI 46,1 2012-09-30 45,1 2012-08-31 2012-10-24
Real GDP (%, YoY) -0,4 2012-06-30 2012-03-31 2012-11-15
Real GDP (%, QoQ, sa) -0,2 2012-06-30 2012-03-31 2012-11-15
CPI (%, YoY) 2,6 2012-09-30 2,6 2012-08-31 2012-11-15
CPI (%, MoM) 0,7 2012-09-30 0,4 2012-08-31 2012-11-15
Consumer confidence -25,9 2012-09-30 -24,6 2012-08-31 2012-10-23
USA
Industrial production (%, YoY) 2,8 2012-09-30 2,6 2012-08-31
Industrial production (%, MoM) 0,4 2012-09-30 -1,4 2012-08-31 2012-11-16
Capacity utilization (%) 78,3 2012-09-30 78,0 2012-08-31 2012-11-16
Manufacturing PMI 51,5 2012-09-30 49,6 2012-08-31 2012-11-01
Real GDP (%, YoY) 2,1 2012-06-30 2,4 2012-03-31
Real GDP (%, QoQ, saar) 1,3 2012-06-30 2,0 2012-03-31 2012-10-26
CPI (%, MoM) 2,0 2012-09-30 1,7 2012-08-31 2012-11-15
CPI (%, MoM, sa) 0,6 2012-09-30 0,6 2012-08-31 2012-11-15
OECD Composite Leading Indicator 103,4 2011-03-31 103,1 2011-02-28Consumer confidence (Michigan) 83,1 2012-10-31 78,3 2012-09-30 2012-10-26
Nonfarm payrolls (net change, sa, 000) 114 2012-09-30 142 2012-08-31 2012-11-02
JAPAN
Industrial production (%, YoY, nsa) -4,6 2012-08-31 -0,8 2012-07-31 2012-10-30
Industrial production (%, MoM, sa) -1,6 2012-08-31 -1,0 2012-07-31 2012-10-30
Capacity utilization (%, sa) 85,8 2012-08-31 88,1 2012-07-31
Manufacturing PMI 48,0 2012-09-30 47,7 2012-08-31 2012-10-31
Real GDP (%, YoY) 3,2 2012-06-30 2,9 2012-03-31
Real GDP (%, QoQ, sa) 0,2 2012-06-30 1,3 2012-03-31 2012-11-12
CPI (%, YoY) -0,7 2012-09-30 -0,7 2012-08-31 2012-10-26
CPI (%, MoM) 0,1 2012-08-31 -0,3 2012-07-31
OECD Composite Leading Indicator 104,9 2011-02-28 104,2 2011-01-31
Consumer confidence 40,4 2012-09-30 40,6 2012-08-31
CHINAIndustrial production (%, YoY) 9,2 2012-09-30 8,9 2012-08-31 2012-11-09
Manufacturing PMI 49,8 2012-09-30 49,2 2012-08-31 2012-11-01
Real GDP (%, YoY) 7,4 2012-09-30 7,6 2012-06-30
CPI (%, YoY) 1,9 2012-09-30 2,0 2012-08-31 2012-11-09
OECD Composite Leading Indicator 102,3 2011-03-31 102,1 2011-02-28
Consumer confidence 99,4 2012-08-31 98,2 2012-07-31
Bank lending (%, YoY) 16,3 2012-09-30 16,1 2012-08-31
Fixed asset investment (%, YoY) 20,4 2012-06-30 20,9 2012-03-31
OTHER
OECD Area Comp. Leading Indicator 103,2 2011-03-31 103,0 2011-02-28
Global manufacturing PMI 48,9 2012-09-30 48,1 2012-08-31
Sources: Bloomberg, SEB Commodity Research
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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Commodities Monthly
PerformanceClosing
last weekYTD(%)
1 m(%)
1 q(%)
1 y(%)
5 y(%)
UBS Bloomberg CMCI Index (TR) 1326,80 4,6 -1,3 1,1 3,6 7,0UBS Bloomberg CMCI Index (ER) 1247,08 4,6 -1,3 1,1 3,5 4,2UBS Bloomberg CMCI Index (PI) 1598,48 5,1 -1,3 1,2 4,5 30,6UBS B. CMCI Energy Index (PI) 1527,40 2,3 2,8 3,7 4,4 13,8UBS B. CMCI Industrial Metals Index (PI) 1066,53 2,0 -5,8 3,0 2,9 -9,7UBS B. CMCI Precious Metals Index (PI) 2560,22 10,7 -3,6 10,8 4,4 121,4UBS B. CMCI Agriculture Index (PI) 1886,67 8,0 -2,6 -6,5 3,4 60,5Baltic Dry Index 1010,00 -43,7 39,9 -4,1 -52,8 -90,6
Crude Oil (NYMEX, WTI, $/b) 90,05 -8,9 -2,1 -2,8 4,6 1,6Crude Oil (ICE, Brent, $/b) 110,14 2,6 1,8 2,2 1,6 31,4Aluminum (LME, $/t) 1970,00 -2,5 -7,9 1,3 -9,7 -23,0Copper (LME, $/t) 8015,00 5,5 -4,0 3,7 11,2 1,8Nickel (LME, $/t) 16950,00 -9,4 -4,5 5,6 -9,8 -47,4Zinc (LME, $/t) 1885,00 2,2 -11,2 -0,1 2,6 -36,2Steel (LME, Mediterranean, $/t) 350,00 -34,0 2,9 -15,7 -34,6 N/AGold (COMEX, $/ozt) 1722,80 10,0 -2,6 9,0 4,7 125,5
Corn (CBOT, /bu) 761,50 17,8 0,7 -5,7 19,3 105,7Wheat (CBOT, /bu) 872,50 33,7 -1,0 -6,7 40,8 2,0Soybeans (CBOT, /bu) 1534,25 28,0 -8,1 -11,5 25,2 56,0
Sources: Bloomberg, SEB Commodity Research
Major upcoming commodity eventsDate Source
Department of Energy, US inventory data Wednesdays, 16:30 CET www.eia.doe.gov
American Petroleum Institute, US inventory data Tuesdays, 22:30 CET www.api.org
CFTC, Commitment of Traders Fridays, ~21:30 CET www.cftc.gov
US Department of Agriculture, Crop Progress Mondays, ~22.30 CET (season) www.usda.gov
International Energy Agency, Oil Market Report November 13 www.oilmarketreport.com
OPEC, Oil Market Report November 9 www.opec.org
Department of Energy, Short Term Energy Outlook November 6 www.eia.doe.gov
US Department of Agriculture, WASDE November 9 www.usda.gov
International Grains Council, Grain Market Report November 29 www.igc.org.uk
OPEC ordinary meeting, Vienna, Austria December 12 www.opec.orgSources: Bloomberg, SEB Commodity Research
Contact listCOMMODITIES Position E-mail Phone MobileTorbjrn Iwarson Head of Commodities [email protected] +46 8 506 234 01
RESEARCH
Bjarne Schieldrop Chief analyst [email protected] +47 22 82 72 53 +47 92 48 92 30
Filip Petersson Strategist [email protected] +46 8 506 230 47 +46 70 996 08 84
SALES SWEDEN
Pr Melander Corporate [email protected] +46 8 506 234 75 +46 70 714 90 79
Karin Almgren Institutional [email protected] +46 8 506 230 51 +46 73 642 31 76SALES NORWAY
Maximilian Brodin Corporate/Institutional [email protected] +47 22 82 72 73 +47 92 45 67 27
SALES FINLAND
Jussi Lepist Corporate/Institutional [email protected] +358 9 616 285 21 +358 40 844 187 7
SALES DENMARK
Peter Lauridsen Corporate/Institutional [email protected] +45 331 777 34 +45 616 211 59
TRADING
Niclas Egmar Corporate/Institutional [email protected] +46 8 506 234 55 +46 70-618 560 4
7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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Commodities Monthly
COMMODITY RESEARCH DISCLAIMER
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Skandinaviska Enskilda Banken AB (publ) is incorporated in Sweden, as a Limited Liability Company. It is regulated byFinansinspektionen, and by the local financial regulators in each of the jurisdictions in which it has branches or subsidiaries,including in the UK, by the Financial Services Authority; Denmark by Finanstilsynet; Finland by Finanssivalvonta; Germanyby Bundesanstalt fr Finanzdienstleistungsaufsicht and Norway by Finanstilsynet. In the US, SEBAB is a U.S. broker-dealer,registered with the Financial Industry Regulatory Authority (FINRA). SEBAB is a direct subsidiary of SEB. SEB is active onmajor Nordic and other European Regulated Markets and Multilateral Trading Facilities, in as well as other non-Europeanequivalent markets, for trading in financial instruments. For a list of execution venues of which SEB is a member or
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7/31/2019 SEBs Commodities Monthly: Metal supply catch-up
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www.seb.se
SEB Commodity Research
Bjarne Schieldrop, Chief Commodity [email protected]
+47 9248 9230
Filip Petersson, Commodity [email protected]
+46 8 506 230 47
