Macquarie Research:: Funds still flowing into commodities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Commodities Comment
Funds still flowing into commodities
Feature article
 Flows into index tracker funds (ITFs) and physical ETFs in late 2010 suggest
appetite for commodities as an asset class is still healthy.

Latest news
 Base metals rose in Wednesday trading, with Nickel posting the best gains of
4.5%. While gold and silver were subdued, platinum and palladium posted
solid gains of 2% and 3.2% respectively.
 European IP was better than expected in November, rising a solid 1.2%MoM,
but all eyes were on the Portugese bond auction which was well-subscribed
and priced successfully at 6.72%
 The latest steel market survey by The Steel Index suggests the bull run in
steel market sentiment is showing the first sign of cracks, with 57% of
respondents now expecting higher demand on a three-month view, down 8%
WoW. However, 72% of respondents expect further price rises in the same
period, notwithstanding the recent price surge.
 Latest prices from Steelbenchmarker show further rises in steel and scrap
prices in all regions over the past two weeks with especially strong rises in
the USA. Latest US hot-rolled coil prices are up 7% from end-December
and 34% from early November. US #1 heavy melting grade scrap is now
quoted at $416/lt, up 36% from mid-October and the highest since August
2008. The so-called global export price for HRC is now $667/t fob, $74/t
higher than in early November. European prices are lagging somewhat
and are only $33/t higher than the recent low seen in late-November.
 Transnet has announced that heavy rains had disrupted coal freight
operations, with 18 trains of coal exports cancelled last week, with flooding
continuing to impact shipments. With coal stocks already critically low at
Richards Bay Coal Terminal, this will heavily impact South Africa’s ability to
try and fill the void left by the rain disruptions in Australia and Colombia.
Thermal coal swaps were a little lower today with Newcastle for February
delivery pricing at $137.25/t.
 Preliminary port data suggests Indian iron ore exports rebounded further in
December to 10.15mt, up 26.1% MoM but down 19.4% on December 2009.
For the year as a whole, Indian exports fell 9.8% to 107.6mt as a combination
of supply restrictions (most notably the Karnataka ore ban), increased
domestic consumption and a more rigorous traceability requirement pressured
exporters. With H1 2010 being particularly strong, we expect exports to
continue in negative YoY territory in the coming months, keeping the spot
market tight.
 Chinese molybdenum prices are rising following domestic supply
disruptions in the October-December period (due to power-related cuts
and wether issues). There are signs of a tightening domestic market and
a potential increase in import demand (imports and exports were in
balance in Jan-November 2010, following net imports of 58m lbs in 2009
of all products).