Archive for the ‘RESOURCES COMMODITIES’ Category

Company Investors going wild for world no 1 commodities player

Friday, December 11th, 2015


At the end of trading in London on Thursday shares in Glencore plc (LON:GLEN) was priced at 89p, up 7.4% in colossal volumes of more than 134 million shares traded.

In New York Glencore’s (GLCNY) over the counter stock advanced by more than 10% in equally busy trade bringing the company’s market value back to within shouting distance of $20 billion.

The reason behind the surge is the Swiss mining and commodities trading giant’s announcement that it has increased its debt reduction target and cut spending plans. Again.

That these type of corporate initiatives (which are now a common feature of the industry) can inspire such a frenzy is a good indication of just how much turmoil and uncertainty there is in the mining sector.

The Baar-based company said it now aims to reduce its debt load by $13 billion from the previous target of just over $10 billion. Some $8.7 billion has been cut under the plan. By the end of next year Glencore wants the pile down to $18 billion to $19 billion.

Down 70% just this year despite today’s bump, Glencore is now worth $15 billion less than before the Xstrata takeover

Glencore CEO Ivan Glasenberg also announced its capital expenditure for 2015 will come in at $5.7 billion, $300 million below previous targets while next year’s outlays will be cut to $3.8 billion from $5 billion.

Apart from idling copper mines in central Africa, cutting coal production in Australia, reduce lead and zinc production in central Asia and inking streaming deals for its precious metals byproducts in South America, Glencore is also putting up assets for sale to cut costs and raise money.

In October, Glencore said it began the sales process for its Australian copper mine New South Wales and its Lomas Bayas copper mine in the Atacama desert in Chile. The company expects initial bids by mid-December and completion some time during the first half of 2016. Glencore has the same timeline to sell a stake in its agriculture business.

Glencore was first floated in May 2011 and two years later the company acquired coal giant Xstrata, turning it into the world’s fourth largest miner. Down 70% just this year despite today’s bump, Glencore is now worth $15 billion less than before the Xstrata takeover.

Image supplied by Glencore show Anibal Contreras clearing slag at the company’s Altonorte metallurgical facility, northern Chile.


Henry Sapiecha


True giants of mining: World’s top 10 iron ore mines

Saturday, September 19th, 2015

Vladimir Basov | September 17, 2015

The price of iron ore  on Thursday turned positive amid new signs that China, which dominates the seaborne trade in the steel making raw material, will be pushing ahead with stimulus programs to boost its slowing economy.

The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin added 1.4% to $56.80 a tonne. Iron ore reached a 10-week high last week according to data provided by The SteelIndex and is trading up some 28% from record lows for the spot market hit early July 8.

While today’s price is nowhere near record highs above $190 a tonne reached in February 2011, it is worth noting that iron ore traded for less than $20 a tonne for 40 years before China’s rapid expansion transformed the industry at the turn of the century and made iron the second most traded commodity after crude oil.

Due to rapid global urbanization the world steel consumption nearly doubled over the past decade, from about 800 million tonnes in 2000 to more than 1,500 million tonnes in 2014. China is the leader in both steel production (50% of world total) and iron ore mining (47% of global output in terms of tonnage). China is also the biggest iron ore importer and, as of April 2015, consumed more than 80% of the 1.3 billion tonne seaborne trade.

Steel-consumption-in-China-and-the-world-graph image

Steel consumption in China and the world. Source: LKAB Annual Report

Given that iron is the fourth most abundant element on Earth, comprising about 5% of the Earth’s crust by weight, global iron ore market is highly competitive.

These factors led to a significant increase in the supply of iron ore from new mines in recent years, with a number of lowest-cost production centers commissioned mainly in Australia.

Iron-ore-supply-and-demand-graph image

Iron ore supply and demand relationship. Source: LKAB Annual Report

An oversupply of iron ore combined with China  adding more steel-making capacity than it needed, resulted in a slump in the iron ore spot prices over the past two years, including a staggering 47% decline in 2014 and a further 18% retreat so far this year.

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Spot iron ore prices. Source: Vale’s website.

As a result, a number of high-cost iron ore mines have been closed and suspended throughout the world in 2014, with up to 30% of low-grade iron mines shut down in China in 2014 alone.

Some experts argued that higher-cost producers, mainly from China, are falling victim to a strategy pursued by the biggest producers of iron ore, namely BHP Billiton, Rio Tinto and Vale.

Along with Fortescue, these companies account for more than 60% of global iron-ore exports.  Those iron behemoths have been relentlessly increasing lowest-cost production output.

Cumulative-Mt-we-as-delivered-graph image

China’s 2015 Iron Ore Supply CFR Costs (including royalties & ocean freight). Published in Fortescue’s investor presentation

As can be seen from this chart, nearly all iron ore production in China is uneconomic under current market conditions, and many local mines have been recently closed / suspended.

Because of the massive scale of closures of iron ore mines, current supply growth is lower than expected. This, combined with recently announced infrastructure spending boost in China, are believed to be the main reasons behind a revived iron ore market.

Our iron ore ranking is based on data from IntelligenceMine:
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Having driven out smaller inefficient producers, the world’s giant iron ore centers are best positioned to capitalize on a rising price environment.

Who are those global leaders in iron ore mining?

The following analysis covers those iron ore production centers that have two main distinctive features: disclosure of production numbers by the owner/operator and separate production units running as a single operation. Therefore the iron ore operations ranked here be individual mines or a complex of clustered mines.

The top 10 iron ore mining centers, ranked by ore mined in 2014 calendar year

Top-10-iron-ore-mining-centers-raned-by-iron-ore-mined-in-2014-calendar-year-table.2 image

Source: IntelligenceMine

  1. Hamersley.

The biggest iron ore mining center is the Rio Tinto’s Hamersley Mines that incorporates nine mines in Western Australia. These assets are run as a single operation managed and maintained by Pilbara Iron, and produced a total of 163Mt iron ore. Being the biggest iron ore production center in the world, Hamersley is also the lowest-cost operation.

Mount-Tom-Price-mine-part-of-Hamersley-mine-complex-Rio-Tinto image

Mount Tom Price mine, part of Hamersley mine complex, Rio Tinto. Photo: Wikimedia commons.

  1. Carajas

Vale’s Carajas Mine Complex is the second biggest iron ore production center, which consists of three open-pit mines, namely Carajas N4E, N4W and N5, and operated as the Serra Norte Mining Center. In 2014, Carajas mines produced 120Mt of iron ore. With an average iron ore grade in reserves of about 66%, this is believed to be the highest grade iron ore center in the world.


Ponta de Madeira Terminal – Carajas Mine Complex. Reclaimers and stackers can be seen. Photo courtesy of Vale.

  1. Chichester Hub

Fortescue’s Chichester Hub consists of Christmas Creek and Cloudbreak iron ore mines. In 2014, it is believed that Chichester Hub has achieved its annual production capacity of 90Mt of iron ore. For only five years since its commissioning in 2008, Chichester Hub became one of the biggest iron ore producing centers globally.


Christmas Creek mine – Chichester Hub. Image courtesy of Fortescue Metals Group.

  1. Yandi

BHP Billiton’s Yandi mine, located in Western Australia, is the biggest single-pit open-cut iron ore in the world in terms of annual production. In 2014, 80Mt of iron ore were produced there.


Yandi iron ore mine. Image courtesy of Flickr.

  1. Mt Whaleback

Another BHP Billiton’s operation, the massive Mt Whaleback mine, is the biggest single-pit open-cut iron ore mine in the world in terms of pit size. This mine is more than 5 kilometres long and nearly 1.5 kilometres wide. 77Mt of iron ore mined here in 2014.


Mount Whaleback iron ore mine. Photo courtesy of Flickr.

  1. Solomon Hub

Fortescue’s Solomon Hub that comprises Firetail and Kings producing mines. Together, Firetail and Kings have an annual production capacity in excess of 70Mt.  In 2014, Solomon Hub is believed to produce about 58Mt of iron ore.


Solomon Hub operations. Photo: Fortescue’s website.

  1. Area C

The Western Australia’s Area C mine, led by POSMAC JV with major BHP Billiton’s ownership, is seventh with 57Mt of iron ore produced in 2014.


Area C mine. Source:

  1. Hope Downs

Eighth biggest operation is Hope Downs mine in Western Australia, operated by the Hope Downs Joint Venture, a 50 / 50 joint venture between Hope Downs Iron Ore, led by Australia’s richest person and iron ore tycoon Gina Rinehart, and Rio Tinto Iron Ore.  In 2014, iron ore output at this mine achieved 43Mt.


Hope Downs Mine. Stockyard Machines. Photo courtesy of P&J Project Services.

  1. Mariana Hub

Vale’s Mariana mining hub in Brazil consists of three mines, and produced roughly 39Mt of iron ore in 2014.


Alegria mine – Mariana Hub. Photo courtesy of International Mining

  1. Sishen

Anglo American’s flagship’s Sishen iron ore mine in South Africa is tenth in terms of iron ore output with 36Mt of iron ore mined out in 2014. Being some 14km long, Sishen mine is one of the largest open pit mines in the world.


Sishen mine. Photo courtesy of Anglo American.

Seven out of the top 10 biggest iron production centers are located in Western Australia, and with whopping 697Mt of iron ore produced in 2014. This Australian state is believed to be the biggest jurisdiction in the world in terms of iron ore output.

IntelligenceMine is global mining market intelligence for Researchers, Investors and Suppliers. Get access to more than 45,000 company and property profiles, a powerful multi-faceted search with comparative result grids, sorting and download capabilities, an online interactive mapper and much more. Find out more at


Henry Sapiecha

HISTORICAL CHART – On the precipice: Will global markets follow commodities off the cliff?

Tuesday, August 25th, 2015

chart-market-to-follow-commodities image

From 1970 to 2004, commodities moved the opposite direction of assets like equities and bonds. For example, it was during times such as the 1990s that cheap inputs like oil and metals helped to fuel growth in industries across the globe.

When the oil price spiked, like in instances such as the Iranian Revolution and the subsequent Iran-Iraq War in 1980, the market reacted accordingly. In that particular case, inflation jumped to 11.3% in 1979 and 13.5% in 1980, a US recession was triggered, and many economic sectors were hit hard.

However, as we see in today’s chart, from 2001-2012 commodities (as measured by the Bloomberg Commodities Index) have more or less kept in line with the S&P 500. This is historically unusual and many analysts expected it would not last. In 2012, commodities diverged in a big way.

Gold and silver were the first to drop off. More recently, it was base metals and oil that fell off the cliff because of slowing growth in China and supply gluts. Today, the Bloomberg Commodity Index and the TSX Venture Composite Index are lower than they have ever been since their inception. The former is down -19.9% from the beginning of 2001. The Venture is down -40.1% since then.

Today may be the end of this trend of divergence. US equities are at a precipice: fueled by low rates and quantitative easing for years, they have finally started to tumble from record highs. Yesterday, the Dow had its largest one-day drop since April 2014 as it slid 350 points. Even tech darlings were down as $49 billion in market capitalization was wiped out, with Apple, Google, Netflix, Facebook, and Twitter all getting crushed in trading yesterday. Market sentiment is decidedly worse than it has ever been in recent years with the tailwinds of Greece, Puerto Rico, China, and other problems.

Making predictions are the dumbest possible idea, but they say that fortune favours the brave.

So here are some bold predictions:

Gold will at least hold its current value, if not see gains in the upcoming six month. US equities do not see sizable gains for awhile. The Fed does not hike rates in September (or if they do, it will be to a lack of fanfare from the markets). Industrial commodities like base metals will continue to drop off a little further as the overall market feels like it has lost momentum and supply gluts remain supreme.

What do you think will happen in the short and medium term?


Henry Sapiecha

US Dollar destruction of commodity prices is almost at an end

Friday, November 28th, 2014


The gold price drifted lower on Thursday falling below $1,200 and down nearly $10 overnight, hurt by a 6% slide in the price of oil.

The two commodities often move in tandem because cheaper crude leads to lower inflation, tarnishing gold attractiveness as a hedge against faster rates of price growth.

The fall in the price oil has given another boost to the US dollar. Commodities priced in US dollar usually have an inverse relationship to the world’s reserve currency.

The greenback’s rise to near five-year highs against a basket of currencies has pressurized not on the price of gold, but everything from copper and cotton to milk and molybdenum.

InvesTRAC passed on this price graph to indicating that the US dollar’s stunning run since May may be close to correcting.

The technical research and investment blog notes the advance from the May low has “unfolded in five waves which ought to be followed by a three wave correction”:

The top of wave 5 seems to be tracing out a head and shoulders top and a dip through 87.50 would open the way to violate the uptrend and teat the bottom of wave 4 at 84.50. The technical picture shows InvesTRAC’s short term direction indicator has turned down from an overbought situation with the forecaster showing weakness could be expected until the last week of December. So the stage is set for declining dollar and rising to soon get underway.

investrac-dollar-index image

InvesTRAC believes the dollar chart confirms movements in the CRB Commodities index and that the decline in the broader commodities index from its June high was probably terminating after a 15.5% decline.

The InvesTRAC short term model shows that the OB/OS indicator has just begun to rise with the forecaster showing a rising ternd into early February. The daily chart below shows a 15 percent rise form the January lows which has more than been taken back by the second half slump…the index has ticked up slightly and is encountering the downtrend with a massive divergence on its RSI. My conclusion is that the worst is over and that we should now (or very soon) see the hard hit commodity prices lifting off their lows.

investrac-commodity-index image

Henry Sapiecha

Here is when the world’s resources will run out as shown in this infographic

Monday, September 8th, 2014


Here is when the world’s resources will run out

How many times have we heard humans are “using up” the world’s resources, “running out” of oil, “reaching the limits” of the atmosphere’s capacity to cope with pollution or “approaching the carrying capacity” of the land’s ability to support a greater population?

Studies there are many, but this infographic, posted in the popular social media site Reddit by CrazyHors3, shows you just how much is left.

Henry Sapiecha

born-in-2010-how-much-is-left-infographic image




Sunday, May 5th, 2013


Glencore completed its takeover of Xstrata on Thursday, becoming the world’s fourth largest mining company and the world’s largest commodities trader.

The announcement comes after 15 months of difficult negotiations and lengthy antitrust reviews.

The merger adds coal, copper, zinc and lead mines to Glencore’s trade empire,  which will now include more than 90 commodities “from copper to barley and from oil to vanadium.”

The newly formed company currently employs 190,000 people across 50 countries but CEO Ivan Glasenberg notified managers today that job cuts are coming.

“By restructuring and refocusing, we will be better able to take advantage of the opportunities that will inevitably present themselves over the coming years to the benefit of all…those who will be affected within the various management structures will be notified directly and as soon as practicable.”

Glencore’s share price jumped up 4.4% to 328 pence in London trading Thursday.

Henry Sapiecha



Monday, April 15th, 2013

Commodity traders’ $250bn harvest

Net income of largest trading houses since 2003 surpasses that of combination of the biggest Wall Street banks or that of an industrial giant like GE

Fantasy Footwear

Henry Sapiecha



Tuesday, December 11th, 2012


On Friday Ottawa green-lighted the takeover of Nexen, an Alberta petroleum producer, by China’s CNOOC for $15.1 billion, making it China’s largest ever overseas acquisition.
Emu Oil - Denis Baker Emus - Life just got better!

The Harper government has also given the thumbs up to the Progress Energy Resources deal, which would see Malaysian national energy company Petronas buy the company for $6 billion.

During the announcement, Harper said there will be limits to the government’s willingness to let future deals proceed when the transactions are conducted by foreign state-owned entities and will only proceed in “exceptional circumstances”.

The BC government lauded the deal.

Resources minister Rich Coleman said the deal is a “real sea change for British Columbia” and will allow an LNG plant to proceed at Prince Rupert, according to a report by the Canadian Press. The opposition NDP said they are also happy to see an LNG plant proceed at Prince Rupert, but would’ve liked more work on greenhouse gas implications.

The federal NDP called the deal irresponsible. Resource critic Peter Julian, in an interview with CBC’s The House, said the public should be more widely consulted and the government should more clearly define the net benefit of the deal.

Andrew Coyne writing for the Ottawa Citizen, is happy about the deal but says there is no clarity about overseas investment.

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So: the right decision this time, but the promise of endless wrong decisions in future. By accepting CNOOC’s bid for Nexen (and, at the same time, Petronas’s smaller bid for Progress Energy), while all but slamming the door to other foreign state-owned firms with acquisitive ambitions in this country, the prime minister has probably struck the right balance, politically. He has done so, however, at the cost of total incoherence in policy terms.

Certainly he has done nothing to clarify Canada’s famously murky approach to foreign takeovers. Indeed, he has taken a policy that was already restrictive by international standards, and tightened it further. Where before our foreign investment rules were merely opaque, they are now both complex and opaque.

Jim Stanford, economist with the Canadian Auto Workers union, says Canada doesn’t need the money.

The only thing these foreign investors bring to the table is money – and we’ve got plenty of that. Our real national capacity to produce isn’t enhanced by these transactions, and may actually be undermined (given the risks posed by foreign control over a strategic, non-renewable resource).

In short, there’s no real economic sense in which Canada truly needs foreign capital (whether physical, human or financial) to develop our own natural resources. We’re quite capable of doing it ourselves, thank you – and we’d be much better off if we did it that way.

Weirdly, Andrew Nikiforuk at The Tyee says the whole oil thing is coming to an end anyway, and Harper decided to lock in a price for an over-valued asset:

Economic desperation, for one, also explains why the prime minister has seemingly abandoned his own conscience on China. Several years ago Harper criticized China’s human rights record and its totalitarianism. He even refused to attend the Beijing Olympics.

But with bitumen’s fortunes falling faster than the NHL’s prospects, Harper now proposes to sell the whole Canadian bitumen farm to Chinese state-owned corporations. Why? Well, they have enough almighty yuan to keep the overheated engine going.

Harper’s singular desperation has thoroughly infected every government department. The country’s new foreign policy document, drafted by Foreign Affairs Department, a new branch plant for Big Oil, not only calls for more trade with China (which consumes half the world’s coal and one-fifth of its oil), but the abandonment of ethics at home or abroad in the name of the almighty dollar.
Emu Oil - Denis Baker Emus - Life just got better!

On the other end of the spectrum, the Canadian Council of Chief Executives thought the sale was a grand idea.

MacLean’s has a nice chart to remind us that most of Nexen’s assets are overseas.

Picture of North Sea oil rig by Tuftronic10000

Sourced & published by Henry Sapiecha


Monday, May 14th, 2012


CHEVRON remains bullish on the outlook for conventional liquefied natural gas prices after signing a non-binding heads of agreement with the Japanese utility Tohoku to sell gas from its $US29 billion Wheatstone development near Onslow in Western Australia.

Chevron Australia’s managing director, Roy Krzywosinski, said the deal to sell Tohoku 1 million tonnes a year over 20 years was in line with traditional pricing for conventional LNG, adding ”we have not seen a degradation in prices”.

Mr Krzywosinski questioned whether low Henry Hub gas prices in the US, caused by a glut of shale gas, were sustainable and said while it was likely that LNG exports from North America would grow, he did not expect they would be ”of a volume that will have a material impact on what we believe will be the LNG demand coming out of the Asia-Pacific region”.

He said the Wheatstone project now under construction and the first LNG hub in Australia to accept third-party gas, was off to ”a flying start” and Chevron expected further gas discoveries would be made in the Carnarvon Basin.

Soldsmart International

”We estimate there is between 25 and 35 trillion cubic feet of gas of what we would call uncommitted or yet to be discovered gas in the Carnarvon Basin and much of that gas … will need a home, so we think the hub concept is going to be the right concept to support this gas.”

After yesterday’s deal, struck with partners Apache Energy and Kuwait Foreign Petroleum Exploration Company, Chevron has long-term contracts over 80 per cent of its gas to come from the two-train Wheatstone project. It expects to expand it, potentially up to 25 million tonnes a year.

Chevron is also developing the giant three-train, 15 million tonnes a year Gorgon LNG project at Barrow Island, where it is sticking to its $US43 billion budget and target of first LNG by 2014. The project – Australia’s largest – is 40 per cent complete. Mr Kryzwosinski said front end engineering and design on a $US10 billion-plus fourth train would begin later this year, before a final investment decision planned for next year.

Gorgon is running two years ahead of Wheatstone, which Mr Krzywosinski said was a ”sweet spot” offering significant synergies in terms of purchasing power and equipment from running the two projects as a portfolio.

Chevron is a partner in the Woodside-operated Browse project, where design work is under way on the controversial $US35 billion plan to build an LNG hub on the Kimberley coast. Chevron was supporting the design work, but Mr Krzywosinski said Browse ”does have a lot of challenges – technically, environmentally and from a heritage perspective”.


Sourced & published by Henry Sapiecha


Monday, January 16th, 2012


Chinese malls look for more shoppers

By Simon Rabinovitch in Beijing

As crowds shouted and pushed for the latest iPhone in Beijing on Friday, a glitzy mall across the street was bathed in silence, with just a handful of shoppers hunting for bargains.

The frenzy at the Apple store underscored the rise of the Chinese consumer, a development that analysts say is needed to support the global economy and make China’s growth more sustainable.


But the empty SOHO complex cast a different light on what is happening in the world’s second-largest economy: consumption is rising, but not nearly as fast as vast shopping centres are being built.

A boom in the number of malls without a matching increase in actual shopping gets to the heart of what analysts see as the fundamental problem of the Chinese economy: too much investment, too little consumption.

“There was an exponential two or three years where record numbers of malls were built around the country,” said Frank Marriott, senior director for Asia at property consultant Savills. “It has to take a bit of a breather.”

Within a half-hour walk from Beijing’s fashionable Sanlitun district, eight shopping complexes have opened in recent years. While one mall called the Village – home to the Apple store that was pelted with eggs on Friday – is bustling, many of the others are visibly struggling.

At the SOHO mall, shuttered stores in its six retail buildings drastically outnumber the open ones. One building was entirely padlocked, while the only activity in another was a five-day garage sale of discount clothes.

“We came here just because one of the restaurants was recommended. We wouldn’t actually shop here when there’s so many good stores (in the Village) across the street,” said He Tian, a university student, walking with his girlfriend.

When China announces its 2011 growth rate on Tuesday, the figure is expected to be about 9 per cent as the country continues its three-decade-long boom.

It might also reveal that China has finally reached a turning point, with consumption becoming the biggest driver of growth. The problem is that this change does not appear to be happening quickly enough.

Household consumption has fallen over the past decade to just over a third of GDP, according to official data which even if understated is exceptionally low for a major economy in peacetime. Meanwhile, investment has soared to 48.6 per cent of GDP, which economists say marks an unhealthy dependence on capital spending.

“Hopefully we have started to see the beginning of improvement, but the imbalance problem is still very serious in China,” said Huang Yiping, an economist with Barclays Capital.

With much of Chinese investment concentrated in property, fears have mounted about the waste and the potential for bad debts. Concerns have focused on the vacant apartments that can be found throughout China, but empty shopping malls are a very public symptom of the same disease.

A little south of SOHO, Beijing’s cavernous new Fortune Mall echoed with the sounds of gunfire – a bored retailer was playing a loud video game during what was supposed to be the peak shopping period a week before China’s new year festival.

On the second floor, a lady in a red parka paced outside one of the several stores whose windows had been papered over. “They sold jade here. I was their part-time accountant. But they seem to have left and didn’t even tell me,” she said.

Amid the competition, one of Sanlitun’s mainstays, the Pacific Department Store, which was seen as ancient after its 10 years, closed its doors late last year.

Tianyi, a low-end mall in downtown Beijing, gave further evidence of a saturated marketplace. It was full of shoppers, but not quite as packed as in the past, according to store workers.

“We used to need two people, but now I can look after it myself and I have little to do,” said Mr Zhang, standing at a counter stacked with bathroom accessories.

The glut of retail space in Beijing is part of a broader trend. Guo Zengli, president of the Mall China Information Centre, said last year that the number of shopping centres nationwide would increase 893 per cent between 2001 and 2015.

The developers are hoping that a new generation of Chinese consumers will spend far more, emboldened by rising wages and government efforts to build up the social security system. To a certain extent, they are correct.

“Whatever money I make, I spend …?we don’t have to worry about saving for old age like our parents,” said Jiang Qiong, 24, manager of a jewellery shop in Tianyi.

With shoppers like Ms Jiang, Chinese retail sales have risen about 17 per cent annually for the past couple of years. The growth is impressive – but hardly enough to fill the 760 shopping centres that Mr Guo forecast will open across China over the next three years.

Sourced & published by Henry Sapiecha