Thursday, October 20, 2016

11 things every metal investor needs to know about Zinc

Here’s why the metal is back in fashion:

1. Zinc is a $34 billion per year market.
It’s bigger than the silver ($18 billion), platinum ($8 billion), and molybdenum ($5 billion) markets combined. In fact, it is the fourth-most used metal worldwide.
2. Zinc smelting and production technology came way later than it did for other metals.
The ancients were able to smelt copper, lead, and iron, but it wasn’t until much later that people were able to work with zinc in any isolated state.
3. Even despite this, it was a crucial metal for ancient peoples.
They would smelt zinc-rich copper ores to make brass, which was used for many different purposes including weaponry, ornaments, coins, and armor.
4. Zinc is also crucial to produce many alloys today.
For example, brass is used for musical instruments and hardware applications that must resist corrosion. Solder and nickel-silver are other important alloys.
5. The world’s first-ever battery used zinc as an anode.
The voltaic pile, made in 1799 by Alessandro Volta, used zinc and copper for electrodes with brine-soaked paper as an electrolyte.
6. The metal remains crucial for batteries today.
Zinc-air, silver-zinc, zinc-bromine, and alkaline batteries all use zinc, and they enable everything from hearing aids to military applications to be possible.
7. Galvanizing is still the most important use.
About 50% of the metal is used in galvanizing, which is essentially a way to coat steel or iron so that it doesn’t rust.
8. China is both a major producer and end-user.
China mined 37% of the world’s 13.4 million tonnes of zinc production in 2015. It consumed 47% of the world’s supply that same year.
9. Major mines have been shutting down.
In 2016, China ordered the shutdown of 26 lead and zinc mines in parts of the Hunan province for environmental reasons. Meanwhile, Ireland’s Lisheen Mine and Australia’s Century Mine both shut down last year after being depleted of resources. That takes 630,000 tonnes of annual production off the table.
10. Stockpiles are dwindling.
Warehouse levels are less than half of where they were in 2013.
11. Zinc has been one of the best performing metals in 2016 in terms of price.
It started the year around $0.70/lb, but now it trades for $1.04/lb.

Courtesy of: Visual Capitalist

Tuesday, August 2, 2016

This is what a broad-based metals and mining rally looks like

Gold may be grabbing the headlines with its best year-to-date performance in decades and silver's 48% surge in 2016 to above $20 an ounce is a big swing even for such a volatile metal, but this year's rally in commodities is broad-based and becoming more so.
After under performing gold in 2016, platinum has now overtaken the yellow metal with a year to date advance of a shade under 34%. A  chunk of those gains came in July, the metal's best monthly performance since 2012. Sister metal palladium has also enjoyed its best month for nearly a decade, soaring 21.1% in July. With a 52% or $250 an ounce gain from trough to peak in 2016, palladium is now even besting silver.
Thermal coal is probably the biggest upset – seaborne prices are up 22% in 2016 to above $60 a tonne with most of those gains coming in recent weeks
Base metals have also enjoyed a breakout 2016 with across the board gains year-to-date. Measured from recent lows which mostly occurred at the end of 2015 and in January and February this year the recovery in prices this year is even more impressive.
One of the few decliners until recently, lead is still a laggard but now boasts a 2.7% rise in 2016 scaling $1,800 a tonne in July. Bellwether copper has also been lack luster adding only 3.3% in 2016 as it remains stuck below $5,000 a tonne, but elsewhere in the complex prices are in rapid advance.
Aluminum and cobalt, both up 9.4% so far this year haven't enjoyed the spectacular gains of the likes of likes of zinc (+40% to $2,275 a tonne) and tin (+24% just short of $18,000), but like nickel (+24%) which regained the $10,000 a tonne level in May, the metals could play catch up over the remainder of the year as Chinese demand picks up steam.
Steel making raw materials iron ore (+41% to top $60 a tonne on Monday) and coking coal (+29% and back in triple digits) have also come back strongly despite all predictions. Thermal coal is probably the biggest upset – seaborne prices are up 22% in 2016 to above $60 a tonne with most of those gains coming in recent weeks as a domestic clampdown by Beijing opens up opportunities for exporters.
Oil dipped below $40 a barrel today as the 2016 rally comes off the boil, but the commodity is still up more than 50% from its February low. Potash at levels not seen since 2007 and uranium languishing around $25 with few signs of improvement appear to be the exceptions that prove the rule for mined commodities this year.
commodities broad-based metals and mining rally looks like
Source: Steel Index, LME, Comex, Nymex, UX, Infomine. Prices at August 1, 2016

Wednesday, April 6, 2016

Commodity prices set for significant rebound in 2016: Scotiabank

Commodity prices set for significant rebound in 2016: Scotiabank
While commodity prices fell 0.3% in February and 25% year-over-year, the second half of the month saw the beginning of a price rally that is expected to continue throughout 2016, according to Scotiabank’s commodity price index released March 29.
As China’s economy has become less of a concern and the U.S. dollar has grown weaker, the outlook for commodity prices has improved. In March, prices are expected to see a “significant” rally, according to the index, from a decade low.
“Equally important, hedge and investment funds appear to be looking for reasons to bid commodity prices higher, after the rout of recent years,” said Scotiabank’s vice-president of economics and commodity market specialist Patricia Mohr.
“2016 should be a transition year for commodity prices, with the current slowdown in global capital spending in oil and gas and mining setting the stage for a strong rebound going into the next decade.”
Commodity prices set for significant rebound in 2016: Scotiabank
The 0.3% dip was driven by a 7.4% decrease in the oil and gas index, which has fallen almost 50% year-over-year. West Texas Intermediate (WTI) hit a low February 11, reaching US$26.21. This is down from a high of $147.90 in July 2008, which was right before the price plummeted and hit as low as $32 that same year.
As of March 28, WTI was priced at US$39.39 per barrel, an increase of 50% over the price recorded six weeks prior.
The recent rally relates to the increasing likelihood of a production freeze between OPEC and Russia, which will be the subject of an April 17 meeting in Doha.
“While cuts are not in the cards and Iran will not participate, a ‘freezing’ of production—particularly by Saudi Arabia and Iraq—will contribute to a gradual rebalancing of world supply with demand by late 2016 or early 2017,” Scotiabank said in its report.
“Pipeline sabotage and outages in northern Iraq and Nigeria contributed to firmer prices in February.”
The metal and mineral index grew 1.4% in February, and March is expected to see another increase. One reason for the rally is the rebound in prices for some metals, as demand is increasing above supply. Zinc prices are expected to strengthen as demand grows 3.6% this year due to increasing auto sales and production, construction in Europe and infrastructure spending in China and India. Iron prices have also jumped in advance of China’s peak construction period in April and May.

Wednesday, March 16, 2016

Industrial Metals: Bull Market or Dead Cat Bounce?

After a disastrous year in 2015, industrial metals started off on the right foot in 2016. Indeed, every single base metal is up in price on the year-to-date.
But, is this price rally just another dead cat bounce or the start of new bull market? and, what factors do we need to watch for more clues?

Sharp Rallies Are Usual in Bear Markets

Industrial Metals: Bull Market or Dead Cat Bounce?
Since the commodity bear market started in the spring of 2011, we’ve had several price rallies in industrial metals (see the graph above), that made some people think that a new bull market was underway. It wasn’t. Sharp price rallies are not unusual in bear markets and, although base metals are showing strength, we need more evidence before confirming that this won’t be another bounce followed by further declines like we’ve seen before.

Crude Oil and Base Metals Move Simultaneously

The main driver causing metal prices to rally this quarter is the oil price recovery that’s been happening since February. Lower fuel prices have compounded the longest commodity slump in a generation as oil is also key input in the cost of producing industrial commodities.
Oil prices rally since February
Moreover, oil is an asset closely followed by commodity investors. Falling oil prices make investors move away from commodities and, of course, industrial metals. Finally, the latest recovery in oil prices has caused oil-exporting countries such as Russia and Canada to strengthen their currencies against the US dollar. Therefore, higher oil prices contributed to a weaker dollar these past few weeks as we’ll explain soon.

As we just reported in our latest MMI, Saudi Arabia and other powerful OPEC members are reportedly discussing how to boost oil prices to $50 per barrel. Despite reports of a Russia and Saudi Arabia-approved production freeze, however, other non-OPEC nations such as Iraq still have not committed to cutting their own oil production. New production from Iran has entered the market at a much lower pace than most expected, but there is also good reason to believe Iran will ramp up production gradually as it deals with the nuances of re-entering global oil trading.
Similarly to what we see in base metals, it’s not possible to know if this oil price rally is sustainable or not. What is true is that we’ve seen oil prices bouncing in previous years, only to then see them slump so we need more evidence to believe oil prices will continue to rise. What oil prices do from now will have a huge impacts on metal prices.

Did the US Dollar Bull Market Just End?

US dollar index moving sideways for over a year

Base metals as commodities move in opposite directions to the dollar. In Q4 of 2015, a rising US dollar contributed to the slump in base metals. However, some factors have made the dollar weaken this quarter, helping push metal prices up.
As explained above, a recovery in oil prices contributed to a weaker dollar this quarter. Also, the Euro is gaining against the dollar after the European Central Bank recently announced that it probably won’t lower interest rates more.
The dollar index (shows the performance of the dollar against a basket of currencies) has traded within main support and resistance levels (red lines in chart above) for over a year. The dollar might be topping, but it’s to early to say that. We would to see if the index breaks below support levels to call for the end of the dollar’s bull market. If that happened, we would be more inclined to call a sustainable rebound in metal prices.

China: No Signs of Rebound

Shanghai stock market composite index

Another big factor that affects the price performance of industrial metals is China. For a sustainable rally in industrial metals we’d like to see a recovery in China, but we haven’t seen that yet. That could change but, so far, it makes the rally in base metal prices a bit suspicious. Investors’ sentiment on China hasn’t become bullish yet, at least we see that reflected in the performance of China’s stock market, which is hovering near the lows recorded in January.
Chinese February imports hit a new 6 year low

Fundamentally we don’t see signs of a turnaround, either. Indeed, if anything fundamentals are signaling more choppiness ahead. Recently, China reported a large drop in exports since the beginning of the financial crisis, with February exports down 25% year over year, confirming weak global demand which will likely be a drag on China’s economic growth in 2016. Even more worrisome for commodities might be the slump in imports. China’s imports in February fell to the lowest levels in six years, confirming weak demand in China.

Is it Now a Good Time to Buy Forward?

Well, that depends on what type of buyer you are. If you are a bottom picker then you are probably tempted to buy large quantities at these low prices. However, picking bottoms is easier said than done and it’s hardly ever a good strategy.

Zinc seen as best metal pick

Zinc seen as best metal pick
Supply cuts by major global producers and bright demand prospects support the bullish trend
Global markets were battered brutally in January, the worst since the financial crisis in 2008.
Circuit breaker mechanism, which was introduced in January to cushion the Chinese equity markets from excessive volatility, ironically spurred panic and hurt global market sentiments. Amidst such gloom, the only metal which stood the test of time was zinc, thanks to the supply tightening measures by major producers.
Mines closure
Australia’s giant Century mine and Ireland’s Lisheen mine ultimately called it off earlier this year after proposing output cuts in 2014. Mining company MMG exported its final shipment of zinc concentrate from Karumba, marking the end of production at Century Mine, one of the world’s largest zinc and lead deposits.
Another major support came from Switzerland-based mining and trading giant Glencore’s decision to mothball around 500,000 tonnes per year of mining capacity, mostly in Australia and Peru, apart from Europe’s biggest zinc producer Nyrstar’s suspension of its 50,000-tonne-per-year Middle Tennessee mines.
This is in addition to Glencore’s announcement in October 2015 that it will cut 500,000 tonnes of annual zinc production, equivalent to around four per cent of global supply.
Furthermore, Horsehead Holding Corp, a large US zinc producer, which has been operating for around 150 years, filed for Chapter 11 bankruptcy on February 2, hurt by slump in metals prices and a shortage of cash.
Owing to such aggressive supply reductions, Treatment Charges (TCs) or fees paid by miners to smelters to process raw material into metal has tumbled to around $125 a tonne from $220 a few months ago.
Higher imports
The closure of major zinc mines has reduced supply, resulting in lower treatment fees charged by smelters.
This shows that the concentrate is not as readily available as last year but imports show a positive trend as steel mills gear up for the Chinese production of galvanised steel products.
Recent data released by the General Administration of Customs showed refined imports of zinc soared by 150 per cent in January.
Zinc imports surged by 440 per cent in December 2015 after shipments nearly quadrupled in November and almost tripled in October. Taking tightening measures into consideration, Mitsui Mining & Smelting Co., Japan’s top zinc supplier, stated that zinc market balance is likely to shift to deficit of 440,000 tonnes, the most in more than a decade and prices likely to surge by about a third in 2016.
Strong demand
Along with supply constraints, demand prospects too brightened as Chinese car sales were up 9 per cent year-on-year in January after rising 13.4 per cent in the fourth quarter of 2015 from the corresponding period of last year. Global automotive market is a large component of demand for zinc and numbers show the industry remains robust.
Overall, output cuts and anticipation of higher deficit in 2016 place the grayish white metal in a win-win situation.
Hence, we expect zinc prices to trend higher from a two-month perspective and LME zinc (CMP: $1,808) prices can possibly head higher towards $2,000/tonne while MCX zinc (CMP: ₹121.35) prices may surge towards ₹140/kg as rupee depreciation towards 70-mark will also be a supporting factor.

Tuesday, March 15, 2016

The LME aluminium mystery

The LME aluminium mystery
While aluminium inventories appear high on paper, the market is quite tight
How can a market be burdened with millions of tonnes of excess stock and at the same time be prone to almost continuous tightness?
This is the conundrum posed by the aluminium contract traded on the London Metal Exchange. (LME). LME front-month spreads have just passed through another period of extreme turbulence.
At its most acute, on February 29, the cost of borrowing metal for the three weeks to the March prompt date flexed out to $29 per tonne. The cost of borrowing for a single day, known in the London market as ‘tom-next,’ reached almost $8.5 per tonne on March 3.
The benchmark cash-to-three-months period has so far this year spent twice as much time in backwardation as in contango.
Yet this is a market defined by massive legacy inventory. Most of it is ‘hidden’ in off-market storage — some say this is not less than 10 million tonnes.
Something’s not quite right. Maybe it’s the fact that for many months now someone has been holding much of the LME inventory and using that position to exert pressure on shorts rolling their positions forward. But that in itself is a sign of a more fundamental problem with the LME aluminium contract.
Last time, it was the disconnect between LME price and physical premiums. This time it’s the disconnect between nearby and forward spreads. There’s a worrying possibility that the LME’s solution to the first problem, attacking the persistent load-out queues in its delivery system, is now creating a new problem.
Who’s got the metal?

As of the close of business Tuesday one entity was holding between 50 and 80 per cent of all the ‘live’ stock in the LME system. That would make the position somewhere between 1.43 and 2.29 million tonnes.
This is not news to anyone trading the LME aluminium market. That dominant position holder has been there for many months, albeit with a fluctuating amount of metal at any one time. This sort of long position requires very deep pockets.
And our ‘mystery long’ is not breaking any LME rules. The LME doesn’t prohibit such big positions but it does put limits on their potential abuse. In this case, such a massive holder of metal must lend to shorts at a prescribed rate. Moreover, the LME’s compliance department will have been in regular contact with this buyer.
Money out, stocks out

It is also becoming easier to squeeze the LME aluminium contract’s nearby dates. Firstly, the withdrawal of investment money from commodities by passive index investors, has reduced the amount of lending generated by funds rolling their long positions forward.
Secondly, the amount of underlying stock liquidity in the LME warehouse system has been steadily declining. ‘Live’ tonnage, meaning that which isn’t earmarked for physical withdrawal, hit a seven-year low of 1.63 million tonnes in December.
This year has seen that figure rebound to a current 2.87 million tonnes as previously cancelled metal has been re-warranted.
Distressed shorts have delivered fresh units into the system too. But not all of that headline figure on stocks is available for settlement of LME positions. Some of it is locked up in long-term financing deals.
The outlook is for LME stocks to continue declining over the medium term. This is where the LME’s increasingly draconian anti-queue rules are having an effect.
Accelerating outflows

Even while new aluminium units are arriving, ever increasing amounts are leaving. The daily load-out rate at Vlissingen, the location of the longest queue, has just accelerated from 3,000 to 4,000 tonnes per day.
That’s because Pacorini, the warehouse operator that ‘owns’ the queue at the Dutch port, is complying with the LME’s new elevated load-out rules.
The Vlissingen outflow will accelerate again from next month when another new rule, limiting the rent on queue-locked metal, kicks in. Most, if not all of this metal, is headed for off-market storage, which is considerably cheaper than LME storage. Warehouse rental is the single-biggest cost for metal financiers, who seek to make a return on the difference between short- and long-dated futures.
Stock financing is a core function of any commodity market. Consider the implications of it not being there and 10 million-plus tonnes of aluminium swamping the physical market.
Vicious circle?

But this financing function is creating a potentially vicious circle in the LME aluminium market right now. Those looking to move stocks out of the LME system will be rewarded with ever faster load-out.
The promise of faster outflow leaves the aluminium contract even more vulnerable to the sort of dominant-position pressures seen over the last couple of months. Unless the dominant long gives up, it’s difficult to see how this cycle is going to be broken. And even if the current buyer (long) does cash in, another one could just as easily play the same game, given the continuing migration of inventory from LME to off-market storage.
Aluminium looks set to continue to be plagued by LME delivery issues, just a whole different set of issues to last time. It would be deeply ironic if the solution to the previous abnormality is the cause of the new one. - Reuters


Sunday, March 6, 2016

The Reason For Copper's Dramatic Surge: Chinese Copper Inventories Hit Record

Two weeks ago we reported that one month after China created a record $520 billion in total credit (TSF), through February 18 Chinese banks had followed through with another CNY2 trillion according to MarketNews, meaning that in the first two months of the year China will have created a gargantuan $1 trillion in new credit between loans and unregulated shadow banking issues.
The Reason For Copper's Dramatic Surge: Chinese Copper Inventories Hit Record

A question that emerged is what China is spending all this newly created money on. One answer emerged overnight when Bloomberg reported that after tumbling in the first half of 2015, copper inventories at the Shanghai Futures Exchange had been steadily rising, and in the most recent week soared by 11% to an all time high of 305,106 tons.
At the same time reserves at the London Metals Exchange declined for 11 days to the lowest level in more than a year, in other words China is shifting idle inventory from Point A to Point B.
The Reason For Copper's Dramatic Surge: Chinese Copper Inventories Hit Record
Bloomberg adds that as a result of this massive spending spree, inventories tracked by the Shanghai Futures Exchange are higher than stockpiles monitored by the London Metal Exchange for the first time in a more than a decade.
This explains two things:
  • for all talk of reform, China is once again building a bubble in excess capacity and stockpiling surplus commodities, which will likely last as long as China floods the economy with newly created bank loans;
  • The recent surge in the price of copper, which has been a direct function of China's recent massive restocking
The Reason For Copper's Dramatic Surge: Chinese Copper Inventories Hit Record

Most importantly, this means that the world is now back to the "old regime" China, where it was stockpiling massive amounts of inventory as only possible the "use of capital" of trillions in new money created, which of course is precisely the "regime" that created the hard landing scenario that China finds itself in at this very moment.
And so, can kicked. The only question is for how long.

21 Ways to Achieve Wealth and Success

21 Ways to Achieve Wealth and Success

Traders has seen these 11 Situations

Traders has seen these 11 Situations

Monday, February 29, 2016

What commodity markets want from FM

What commodity markets want from FM
Traders seek, among other things, CTT abolition to improve volumes
The Indian markets are gearing up for the big event today — the Union Budget. We take a look at what the commodity market participants expect from it.
Commodity Transaction Tax

If there is one wish that tops the list for almost all participants in the commodity sector, it is the removal of the commodity transaction tax (CTT) that was introduced in July 2013. This tax is levied on the sale transaction of the commodity futures except for exempted agricultural commodities such as chana, soyabean, turmeric, etc.
The introduction of this tax has taken trading volumes sharply lower in both the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX). PK Singhal, Joint MD, MCX, says, “CTT has increased the cost of trading derivatives by almost 300 per cent and trading volumes have come down more than 50 per cent after its introduction.”
Singhal also adds that the increased trading cost has moved the domestic trading business to offshore markets like Dubai and Singapore. Data from MCX shows that trading volumes have declined from an average ₹149 lakh crore in 20011-12 to ₹54 lakh crore in 2014-15. In NCDEX, the volumes have slumped from an average ₹18.22 lakh crore in 2011-12 to ₹10.22 lakh crore in 2014-15.
Some of these volume declines are also a result of the commodity price meltdown. NCDEX too expects some relief on CTT for processed agri-commodities like sugar and soyaoil.
Import duty change demands

Hareesh V, Research Head, Geofin Comtrade, says the gold and gem industry is expecting a reduction in import duty on gold to 2 per cent from 10 per cent.
Increasing the gold import duty in August 2013 was one of the several measures the government had taken in order to bring down the current account deficit (CAD). India’s CAD has improved from $21.8 billion in June 2013 to $8.2 billion as of September 2015.
Other expectations

Hareesh adds that in order to protect domestic growers from cheap imports, the rubber industry is expecting an increase in the import duty on natural rubber to 40 per cent from 25 per cent. Similarly, an import duty cut to 5 per cent from 30 per cent is expected for oilseeds.
Sushil Sinha, Head of Karvy Comtrade, wants the Centre to introduce measures to help companies hedge their commodity exposure risk. He also wishes that the Centre allocates more fund and speeds up the process of setting up a national unified agri-commodity market.
He also wants improvement to infrastructure in terms of warehouses, testing labs, research, etc. Sinha believes participation in the commodity market will improve if a clearing and settlement corporation comes up for commodities, like the one prevailing for equities.
NCDEX wants the Budget to introduce measures to allow banks and asset management companies to invest in the commodity futures market.
Also, with commodity market regulation being taken over by the Securities and Exchange Board of India, NCDEX expects the introduction of new products like options and new indices, going forward.

Thursday, February 25, 2016

ICSG releases February 2016 Copper Bulletin

ICSG releases February 2016 Copper Bulletin
The International Copper Study Group (ICSG) has released preliminary data for the month of November last year in its February 2016 Copper Bulletin. According to preliminary ICSG data, copper production and usage data points to a marginal production deficit of nearly 25,000 metric tonnes.
The refined copper market balance for the month of November ‘15 showed an apparent production deficit of nearly 25,000 metric tonnes. The production deficit for the month, after making seasonal adjustments for global refined copper production and usage, stood at 20,000 metric tonnes. The refined copper balance for the initial eleven months of the year ended in production surplus of around 50,000 metric tonnes as compared with a deficit of around 545,000 tonnes during the corresponding period in 2014.
World refined production increased by nearly 1.6% (nearly 330,000 t) during the first eleven months of 2015. Primary production was up 2%, whereas the secondary production held steady. The refined copper production during the month witnessed significant growth of 4.0% in China. The production by the US witnessed an increase of 1.5%. On the other hand, the refined copper output by Chile and Japan dropped by 1.5% and 4% respectively. The African and Asian region recorded 3% rise in refined copper production each. On the other hand, refined output declined by 5% in the Oceania region.
The world copper mine production has increased by around 3.5% (nearly 580,000 t) during the first eleven months of 2015. Concentrate production was up 4% during the period. The mine output from Peru and Indonesia recovered during this period. The mine production by Peru-the world’s third largest copper mine producer, increased by 19%. The production increased marginally by 0.8% and 2% in Chile and the US respectively. Region-wise, Asia recorded 8% rise in production. Also South America and North America recorded 4% and 2% increased output respectively. On the other hand, Africa and Oceania region recorded production decline of 1% and 3.5% respectively.
Meantime, global usage of the metal is estimated to have declined by around 1% (nearly 260,000 t) during January to November in 2015. The Chinese apparent demand increased marginally by nearly 2%. The usage by world countries excluding China has dropped by 4%. The Russian apparent usage dropped sharply by 48% whereas the EU demand declined 4%. Japanese apparent demand too witnessed sharp decline of 7%.

Wednesday, February 24, 2016

Gold and the 34-Month Moving Average

Gold gave up $8.70 last week (after the previous week's gain of $81.30/oz.) to close at 1,230 and printed a bearish harami candlestick on the weekly chart. Friday's close was on resistance at 1,230. Look for support at 1,190.

A breakout from the 34-month exponential moving average (chart) would be very bullish. Assuming a breakout, our price target is 1,370.

A 4yr cycle low is due in the first half of 2016 possibly as early as Feb/March but It looks increasingly as if it may have arrived last December. Wait for a breakout from the 34-month moving average to make that decision. Weekly cycles point to a high in late March.

Gold and the 34-Month Moving Average

Friday, February 19, 2016

Visualizing The World's Stock Exchanges

There are 60 major stock exchanges throughout the world, and their range of sizes is quite surprising.
As Visual Capitalist's Jeff Desjardin notes, at the high end of the spectrum is the mighty NYSE,representing $18.5 trillion in market capitalization, or about 27% of the total market for global equities.
At the lower end? Stock exchanges on the tiny islands of Malta, Cyprus, and Bermuda all range from just $1 billion to $4 billion in value. Even added together, these three exchanges make up just 0.01% of total market capitalization.

Visualizing The World's Stock Exchanges
Courtesy of: The Money Project

The Trillion Dollar Club
There are 16 exchanges that are a part of the “$1 Trillion Dollar Club” with more than $1 trillion in market capitalization. This elite group, with familiar names such as the NYSE, Nasdaq, LSE, Deutsche Borse, TMX Group, and Japan Exchange Group, comprise 87% of the world’s total value of equities.
Added together, the 44 names outside of this aforementioned group combine for just $9 trillion, or 13%, of the world’s total market capitalization.
Northern Dominance
From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.
Notable exchanges that are south of the equator include the Australian Securities Exchange, the Indonesia Stock Exchange, the Johannesburg Stock Exchange and the Brazilian BM&F Bovespa.

S&P and Distressed Debt Issuers

It's definitely different this time...
The 2008 analog lines the current trajectory up with August 2008 right after Treasury Secretary Paulson told the world reassuringly that:
"Our economy has got very strong long-term fundamentals. And you know, your policy-makers and regulators here - we're very vigilant."
And we all know what happened next...
S&P and Distressed Debt Issuers

Could never happen again?
Yeah you're probably right...
S&P and Distressed Debt Issuers

If "everything's fixed," then why is the number of distressed debt issuers still the highest "since Lehman."
S&P and Distressed Debt Issuers
And the answer is not - it's just energy and it's different this time.

Thursday, February 18, 2016

Global Primary Aluminum market ends in deficit in 2015

Global Primary Aluminum market ends in deficit in 2015
The latest report published by the World Bureau of Metal Statistics (WBMS) indicates that global primary aluminum market has recorded a deficit during the year 2015. As per the report, the market reported a deficit of 356,000 tons when matched with the deficit of 589,000 reported during entire year 2014.
The production of primary aluminum was up by 8% during the entire year when matched with the previous year. The global production rose by 4,103 kt during this period, when compared with a year ago. The total reported stock of metal has declined further by 6,000 tonnes during the month of December 2015. The stocks at the end of the year stood at 3,783 kt, which is sufficient to meet 24 days demand. It must be noted that the stock levels at the end of 2014 had stood at 5,020 kt. The combined stocks held in London, Shanghai, USA and Tokyo exchanges totaled 3,228 kt at the end of 2015, down by 1,217 kt when matched with end-2014 levels.
Global production increased by 8% during the year 2015. China, with estimated production of 31,410 kt, accounted for more than 55% of the world production. Production in the EU-28 region rose by 9.3% whereas the output by NAFTA region fell by 2.2% year-on-year. The primary aluminum production for the month of December 2015 alone was 4,502.80 kt, whereas the consumption totaled 4,441.30 kt.
The Chinese net exports of aluminum semis totaled 4,227 kt during 2015, significantly higher when matched with the exports of 3,652 kt during the year before that. The Chinese net exports totaled 342 kt during the whole of 2015 as against the exports of 313 kt in 2014.
The WBMS report also states that the global aluminum demand rose by 7.19% during 2015 to total 57.71 million tonnes, when compared with 2014. The Chinese apparent demand went higher by almost 14.2% when compared with 2014. Also, EU-28 demand ended slightly higher during January to December 2015 by 25 kt when compared with 2014.

WBMS: Copper market records marginal surplus in 2015

WBMS: Copper market records marginal surplus in 2015
The global copper market has recorded a surplus of 146,000 tonnes during the whole year 2015, as per the latest metals balances report published by the World Bureau of Metal Statistics (WBMS). It must be noted that the worldwide copper market had reported a surplus of 116,000 tonnes for the entire year 2014.
The global mine production during 2015 totaled 19.28 million tonnes. The mine production has grown by 4.3% when matched with 2014. Meantime, global refined copper output jumped higher by 0.7% over the previous year to 23.08 million tonnes. Refined copper output by NAFTA region countries reported significant increase of 85,000 tonnes during the year. Also, refined copper production was up sharply by 27,000 tonnes in India during 2015.
The global copper demand during 2015 stood at 22.931 million tonnes, essentially flat when compared with 22.811 million tonnes during 2014. The Chinese apparent consumption increased marginally by 148,000 tonnes during the year to total 11.451 million tonnes. The Chinese demand accounted for nearly 50% of the global demand. Also, EU-28 apparent consumption reported marginal decline of 2.4% from 2014 levels to 3.311 million tonnes.
According to the report, reported stocks of the metal stood higher by 143,000 tonnes during the entire year 2015 when compared with 2014 closing. However, stocks fell during the month of December last year.
The refined copper output during the month of December 2015 alone was 2,000.60 kt, whereas consumption during the month totaled 2,046.10 kt.

Taking stock of commodity trading

Better liquidity makes non-agri contracts less risky than agri commodity contracts
The recent rout in commodity prices has sent global markets into a tizzy. But the ongoing volatility could be a friend of a commodity trader. For traders in India, there are two categories of commodities available for trading.
The first is agri-commodities, such as cotton, cardamom, soybean and castor seed that are traded on the National Commodity and Derivatives Exchange (NCDEX) and the Multi Commodity Exchange (MCX).
The second is non-agri commodities, such as base metals, precious metals and energy commodities that are more actively traded on the MCX. Now, unless you know what really moves agri-commodity prices, the risk of burning your fingers is quite high. Also, the market depth is low.
Nithin Kamath, founder and CEO of discount brokerage firm Zerodha, says “agri commodities are riskier to trade and it is better to avoid trading them unless you know the factors that drive their prices”.
The risk is lesser with non-agri commodities.
There is better liquidity and the prices move in sync with global rates; so, the scope for market manipulation is low. Here’s a quick reckoner for trading in non-agri commodities on the MCX.
Trading features

Gold, silver, aluminium, nickel, lead, zinc, copper, crude oil and natural gas can be traded on the MCX. You can take bets on the price movements of these commodities by buying or selling futures contracts, the prices of which move in sync with the global prices of the commodities and the local currency movements.
The futures contracts on the commodities are available for trading on the MCX between 10 am to 11:30/11:55 pm on weekdays, much longer than the trading window for equity futures contracts.
The sizes of these contracts are generally huge, for instance, five tonnes of aluminium and 100 barrels of crude oil — that’s to suit the requirements of those who physically deal in these commodities.
But traders who seek smaller bets can make use of the mini contracts that come with smaller lot sizes of, say, one tonne of aluminium and 10 barrels of crude oil. So, a 10 barrel crude oil mini contract will currently have a notional value of about ₹21,500 against ₹2,15,000 for a normal 100 barrel contract.
Also, you don’t have to put up the ₹21,500 upfront. Futures contracts allow you to take bets by placing margin money — a portion of the notional value of the contracts.
For instance, by putting up ₹1,075 (5 per cent of ₹21,500), you can buy or sell one lot of the crude oil mini contract.
But note that you have to keep adequate money in your trading account to make up for the day-to-day price fluctuations in the contract until you exit your position — this is called mark-to-market provisioning.
So, if the contract price moves against your bet, your account will be debited and if it moves in your favour, you will get money in your kitty.
From a time perspective, you can trade either in short-term contracts or those with longer tenures.
Liquidity and price discovery may not be good in long-term contracts; so, it may be better to trade in those with shorter tenures.
Settlement modes

The trade position, whether buy or sell, automatically gets settled on the expiry date of the contract or it can be squared-off and closed even before by taking an opposite position.
As a seller, if you intend to settle on expiry instead of squaring-off before, take note of the dates and timeline by when you need to inform the exchange about specific settlement modes — whether physical or in cash.
Gold and silver are the only commodities that have to be compulsorily settled in physical form if the seller holds on till contract expiry.
In other commodity contracts, intimation to the exchange on or before the cut-off date will enable a seller to settle in cash on the contract expiry date.
What to factor in
Taking stock of commodity tradingWhether you profit or lose on a trade, the broker, exchange and the government must be paid their due.
So, factor in costs such as brokerage, commodity transaction tax (CTT), service tax and SEBI charges that add to the cost of your bet.
If you think silver price will go up over the next month, you could buy a silver mini contract with a lot size of 5 kg currently trading at around ₹34,000 per kg. The margin money will be ₹8,500 and you also have to account for brokerage and other charges.
If the contract moves up to ₹35,500 and you close the trade by taking a reverse position, that is selling the contract, you earn a profit of ₹7,500 (₹1,500 per kg) less brokerage and other charges, which will be credited to your account.
But if the contract falls to ₹32,500, you will have to pay up ₹7,500 plus brokerage and other charges.