INSIDE COMMODITIES Thursday, November 6, 2014 GLOBAL PMI MARKETS SNAPSHOT Click on the chart for full-size image Brent rose after U.S. crude stockpiles rose much less than forecast last week, Copper edged down on slowing economic growth in Europe and China. Grains edged lower on rapid harvesting of record U.S. crops would boost global supplies. European stocks were expected to open lower, while Most Asian shares stumbled on lingering concerns over slower global growth. Wall Street ended high on Wednesday. To read more, please click here Contract (AS OF 0614 GMT) Last Change YTD NYMEX light crude $78.61 -0.09% -20.06% NYMEX RBOB gasoline $2.09 0.06% -25.10% $726.00 -0.48% -22.74% $4.22 0.72% -0.85% ICE gas oil NYMEX natural gas Spot Gold $1,145.50 0.39% -5.30% LME Copper $6,614 -0.37% -9.81% LME Aluminium $2,053 -0.34% 14.44% CBOT Corn $3.70 -0.07% -12.26% CBOT Wheat $5.24 -0.14% -13.30% R2,261 0.40% -15.31% Malaysia Palm Oil (Ringgit) (3M) TOP NEWS China details measures to support imports as economy cools Index (Total Return) Thomson Reuters/Jefferies CRB S&P GSCI Latest Close Change YTD 268.92 0.29% -4.22% -14.66% -14.45% Silver lining in precious metals rout catches out mints 4115.9867 0.46% Rogers International 3165.29 0.00% Libya's el Sharara oilfield shut after armed group seizure Dow Jones - UBS 134.6268 - - Emboldened republicans to strike early on keystone Cont Commod Indx 476.8726 -0.46% -6.14% Latest Close Change YTD pipeline approval GMO labeling fails in Colorado, Oregon; GMO ban passes in Maui Russia's wheat prices jump on Rouble's continuing slump Brazil sugar and ethanol group Cosan posts sharp drop in profit London metal exchange may temper trading fee rise after complaints China large steelmakers' daily output down 7.5 pct in late Rare earths miner Molycorp posts another loss, shares BEYOND THE HEADLINES Malaysia's Oct palm stocks seen at 19-month high as exports stutter For India, China-backed lender may be answer to coal investment CLICK HERE FOR TECHNICAL CHARTS Index (Total Return) US STOCKS (DJI) 17484.53 0.58% 5.48% US DOLLAR INDEX 87.235 0.53% 9.26% US BOND INDEX (DJ) 337.45 -0.04% 6.28% ECONOMIC WATCH GMT Indicators Unit Reuters Prior 09:30 GB Manufacturing output mm pct 0.3 0.1 09:30 GB Manufacturing output yy pct 2.8 3.9 09:30 GB Industrial output mm pct 0.4 0.0 09:30 GB Industrial output yy pct 1.5 2.5 12:00 GB BOE bank rate pct 0.5 0.5 12:45 EZ ECB deposit rate pct -0.2 -0.2 12:45 EZ ECB refinancing rate pct 0.05 0.05 13:30 US Initial jobless claims k 285 287 13:30 US Labor costs prelim pct 0.5 -0.1 13:30 US Productivity prelim pct 1.5 2.3 INSIDE COMMODITIES November 6, 2014 MARKET MONITOR Brent crude rose above $83 a barrel, bouncing further from its lowest level since 2010 after a lower-than-expected rise in U.S. crude stocks and solid U.S. job growth provided relief after a string of negative Chinese data. Brent rose 0.7 percent to $83.02 per barrel. U.S. crude rose 0.12 percent to $78.80 after data showing U.S. crude inventories had edged up 460,000 barrels in the week to Oct. 31 compared with analysts' expectations of an increase of 2.2 million barrels. Gold languished near its lowest level since April 2010 as investors dumped the safe-haven metal amid strength in the dollar and on fears that $1,000 an ounce is the next target. Spot gold ticked up 0.3 percent to $1,143.80 an ounce. It tumbled over 2 percent to a 4-1/2 year low of $1,137.40 on Wednesday, following sharp losses after falling through support at $1,160 and $1,150. Chicago corn and soybean futures edged lower, giving up some of the previous session's gains amid expectations that rapid harvesting of record U.S. crops would boost global supplies. CBOT spot-month soybeans slid 0.4 percent to $10.143/4 a bushel, while corn dipped 0.1 percent to $3.69-3/4 a bushel. Wheat was unchanged at $5.24-3/4 a bushel after dropping 2.5 percent in the previous two sessions. The dollar stumbled against the yen as investors sold into a steep rally ahead of key events including the European Central Bank's policy meeting and U.S. nonfarm payrolls. The dollar was down 0.2 percent at 114.39 yen after storming to a sevenyear high of 115.52. The dollar index fell 0.3 percent to 87.224 after hitting a 4-1/2 year peak of 87.606 overnight. The euro last traded at $1.2515, flirting once again with a two-year low of $1.2439 set early in the week. European stocks were expected to open lower, with many traders focusing on the European Central Bank's policy meeting later in the day. Most Asian shares stumbled on lingering concerns over slower global growth. Wall Street ended high on Wednesday. London copper edged lower, still under pressure from a stronger U.S. dollar and further signs of slowing economic growth in Europe and China. Three-month copper on the LME stood at $6,622.25 a tonne, down 0.2 percent. The mosttraded January copper contract on the SFE was down around 0.2 percent at 46,850 yuan($7,663) a tonne. TOP NEWS Silver lining in precious metals rout catches out mints China details measures to support imports as economy cools A tumble in silver prices to four-year lows has triggered a global scramble by consumers to purchase silver coins and bars as the metal has reached its cheapest level relative to gold in more than five years. The U.S. Mint said on Wednesday it has temporarily sold out of its American Eagle silver bullion coins after recent "tremendous" demand, while retailers and distributors in Asia and the United States said they were struggling to get supplies of items such as Canadian Maple Leaf silver coins. Demand for silver has been strong over the past few months, but retailers say buying interest has soared in recent days as the metal has slid towards its lowest since 2010. Silver fell to 4-1/2-year lows at $15.13 an ounce on Wednesday, down 21 percent this year so far. Gold and silver Philharmonics are issued by the Austrian Mint, while the U.S. Mint issues American Eagle coins. Demand for silver coins and bars accounted for more than a fifth of total demand in 2013, according to a report by the Silver Institute. An ounce of gold is now about equal in price to 74 ounces of silver, the biggest spread between them since early 2009. Due to its greater affordability, silver sales tend to outstrip gold in volume terms and attract a lot more retail buyers. China's cabinet issued detailed measures on Thursday to support imports of high-tech equipment, resource products and consumer goods, in its latest efforts to support the cooling Chinese economy. The government will encourage banks to expand credit support for imports of high-tech equipment and key components to promote industrial upgrading, according to a statement published on the central government's website. The government also will rally local firms to speed up overseas investment, develop offshore energy resources and ship strategic resources back to China to help stabilise supply of energy and other resources. China aims to improve the national reserve system on resources and support enterprises to establish their own commercial reserves, the cabinet said. To spur imports of consumer goods, the government will speed up the process of signing quarantine agreements with relevant countries on aquatic products, fruits, beef and mutton, it said without elaborating. The latest step to boost imports will help restructure the economy, rebalance trade and "make good use" of the country's massive foreign exchange reserves, the cabinet said. 2 INSIDE COMMODITIES November 6, 2014 TOP NEWS (Continued) Libya's el Sharara oilfield shut after armed group seizure sources Emboldened republicans to strike early on keystone pipeline approval Libya's major El Sharara oilfield has ceased production after being seized by an armed group, oil ministry sources said on Wednesday. An oil worker at the large southern field said there was shooting, but no further details were available. Hours after the initital attack, workers were still trapped inside company buildings. "We cannot leave," the worker said, asking not to be named. "There is shooting." The field produced at least 200,000 barrels per day before the shutdown, the sources said. Senate Republicans will charge ahead early in 2015 with a bill to approve the long-stalled Keystone XL oil pipeline from Canada, a move that would back President Barack Obama into a corner and set the tone for how the party taking control of Congress will govern the next two years. The $8 billion project would deliver heavy Canadian oil sands crude from Alberta to Nebraska and make it easier to deliver oil from North Dakota’s Bakken region to the U.S. Gulf Coast. It has languished for six years awaiting presidential approval, which is needed because the pipeline crosses a national border. Legislation earlier this year to approve the pipeline in a proposed end-run around the administration already had an estimated 57 votes in the 100-member Senate, and is now thought to have a filibuster-proof 61 votes after Republican gains in Tuesday's mid-term elections. GMO labeling fails in Colorado, Oregon; GMO ban passes in Maui The defeat of twin measures in Oregon and Colorado that would have required labeling of foods made with genetically modified ingredients sets the stage for a battle over the issue in the nation's capital, both sides of the debate said on Wednesday. The Oregon measure lost 49 to 51 percent, according to unofficial results reported by the Oregon Secretary of State's Office on Wednesday, while voters in Colorado rejected labeling by a margin of 66 percent to 34 percent. "The GMO labeling discussion deserves a national solution," Jim Greenwood, chief executive officer of the Biotechnology Industry Organization (BIO), said in a statement. BIO's membership includes biotech seed companies. Russia's wheat prices jump on Rouble's continuing slump Export prices for Russian wheat rose sharply last week supported by a slump in the local rouble currency, which has lost about a quarter of its value against the dollar in 2014 on the back of the Ukraine crisis, analysts said on Wednesday. The rouble lost more than 3 percent of its value last week and fell to a new low on Wednesday as the central bank altered its exchange rate policy to scale back its defence of the Russian currency. "This factor together with the global price rise has increased the margin of export operations sharply," said SovEcon, a leading Moscow-based agriculture consultancy. Brazil sugar and ethanol group Cosan posts sharp drop in profit Brazil's largest sugar and ethanol group Cosan SA said thirdquarter profit fell 92 percent as a weaker Brazilian real caused the local-currency value of its debt to rise. The company recorded net income of 15.2 million reais ($6 million), in the quarter compared with 205.9 million reais a year earlier, according to a filing with Brazil's securities regulator, the CVM. The company's earnings before interest, taxes, depreciation and amortization, or EBITDA, a measure of the company's ability to generate profit from operations, fell 12 percent to 1.06 billion reais in the three months ended Sept. 30. London metal exchange may temper trading fee rise after complaints The London Metal Exchange (LME) said it might revise a planned hike in trading fees after customers complained that it could hurt their businesses. The 137-year-old LME announced an average 34 percent increase in fees in late September as owner Hong Kong Exchanges and Clearing Ltd (HKEx) (0388.HK) moved to boost profits after buying the exchange for $2.2 billion. But customers protested. Broker Triland Metals warned that the higher fees due to take effect on Jan. 1 would force brokers and banks to ditch some commission-free terms and review their business models. China large steelmakers' daily output down 7.5 pct in lateOct Average daily crude steel output from China's large steel mills fell 7.46 percent to 1.631 million tonnes over the Oct. 21-31 period, official data showed on Thursday, as measures to cut smog during a major international summit began to take effect. Figures from the China Iron and Steel Association (CISA) also showed that steel product stockpiles at major mills reached 14.143 million tonnes by Oct. 31, down 9.7 percent compared to Oct. 20. Out of 163 steel mills surveyed, 43 were already conducting smelter overhauls by Oct. 24, taking the opportunity to renovate their facilities before industrial restrictions during the Asia-Pacific Economic Cooperation (APEC) summit in Beijing kick in. Rare earths miner Molycorp posts another loss, shares slide Molycorp Inc reported a much bigger quarterly loss, hurt by lower prices of rare-earth metals and a steep jump in production costs, sending its shares down 20 percent in extended trading. Molycorp, which produces 13 different rare metals used in industries such as consumer electronics and defense, said sales volumes fell 7 percent in the third quarter. The company, which is trying to ramp up production at its flagship Mountain Pass facility in California, said cash cost for production doubled to $33.80 per kg over the second quarter. 3 INSIDE COMMODITIES November 6, 2014 BEYOND THE HEADLINES elled by bullish projections from industry experts that palm supplies could ease into 2015 and eat into stockpiles. Leading vegetable oil analysts expect prices to rise moderately towards the end of the year and to 2,500 ringgit by March, up 10 percent from current levels of 2,272 ringgit, but gains could be capped if comparative oil markets drop further. "The good news is that the crude palm oil production from Malaysia and Indonesia has peaked in either August or October, and we could start to see a seasonal decline in production from now till February 2015, which will be supportive of CPO prices," said CIMB Investment Bank analyst Ivy Ng. "Our only concern is the recent pick-up in prices has eroded CPO's competitiveness against other edible oils and crude oil prices." PREVIEW-Malaysia's Oct palm stocks seen at 19-month high as exports stutter By Anuradha Raghu Malaysian palm oil stocks likely rose further above the 2-milliontonne mark to a 19-month high at the end of October as exports of the tropical oil dipped, a Reuters survey showed. High inventory in the world's No.2 producer after Indonesia could dent a recovery in benchmark Malaysian prices that have risen about 19 percent from a more than five-year low of 1,914 ringgit ($586.94) per tonne hit in early September. Malaysian palm oil stocks were expected to have risen 3.4 percent to 2.16 million tonnes by the end of October, the highest since March last year, according to a median survey of five planters, traders and analysts. Crude palm oil (CPO) output was seen easing 2 percent to 1.86 million tonnes from the prior month. Analysts estimate that output peaked in August at a record 2.03 million tonnes. The drop in production was, however, offset by bleak exports, contributing to the expected rise in end-stocks. The poll pegged overseas sales of Malaysian palm oil at 1.58 million tonnes for October, down 3.1 percent from September. Cargo surveyor data for the same period showed that while demand from most major buyers was firm, exports to the world's No.1 edible oil consumer India had weakened last month. LOCAL CONSUMPTION The median figures from the survey implied domestic consumption in October of about 250,469 tonnes. DEMAND CONCERNS STAY While bigger stockpiles will continue to weigh on palm prices, traders and analysts said factors like prices of competing soy and crude oil will also give direction to benchmark Malaysian futures. "Now the trade is more focused on grains and crude oil, and whether low palm prices can stir demand," said a trader with a local commodities brokerage in Kuala Lumpur. Weak crude oil futures could dent demand for palm by making the latter a less attractive option for biodiesel feedstock, while lower prices of soyoil could prompt buyers to shift away from palm to the rival edible oil instead. Brent oil prices slumped to a four-year low of $81.63 per barrel on Wednesday, as weak economic data from top energy consumer China intensified worries about demand as a global supply glut grows. The U.S. soyoil contract for December , which is commonly tracked by palm, and the most active January soybean oil contract on the Dalian Commodities Exchange have both plunged about 18 percent so far this year, outstripping palm's losses of around 15 percent. The discount of free-on-board refined palm olein to Argentina soyoil has narrowed to around $66 from around $130 at endAugust. Demand for palm oil is also set for a seasonal slowdown in winter as cold weather solidifies the oil and makes it unusable. LOWER SUPPLIES AHEAD But projections for a drop in output in the top two producers of palm oil should help keep a floor under prices, the survey participants said. Malaysian palm prices have risen in the past two months and last week posted their biggest weekly gain in nearly a year, fu- INSIGHT-For India, China-backed lender may be answer to coal investment By Manoj Kumar and Tony Munroe India is hoping a new China-backed multilateral lender will fund coal-based energy projects, an official said, putting it in direct conflict with the World Bank, whose chief has maintained that it would stick to its restrictions on such lending. A senior Indian official told Reuters the Asian Infrastructure Investment Bank (AIIB), sponsored by China, is expected to allow funding of coal-fired power plants that the World Bank has almost totally blocked. "When you have 1.3 billion people starved of electricity access and the rest of the world has created a carbon space, at this point denying funding is denying access to cheap energy,” said the official, who spoke on condition of anonymity. India sits on the world's fifth-largest reserves of coal, and the commodity generates three-fifths of India's power supply. But the demand for electricity far outstrips supply, and according to data compiled by the World Resources Institute in 2012, proposals have been made to set up 455 new coal-fired plants in the country. Research house Integrated Research and Action for Development said earlier this year India needs to invest $250 billion in the power sector by 2017. Since 2013, the World Bank's energy strategy limits the financing of coal-fired power plants to "rare circumstances", making it part of a push by U.S. President Barack Obama to fight climate change. "We have got to redouble and redouble again our efforts at fighting climate change," World Bank President Jim Yong Kim told Reuters in an interview in Seoul on Wednesday. "And our way of doing it is to just do everything we can to avoid coal." Kim has said the World Bank has not signed any agreements to support coal-based power plants since he took office in July, 2012. The Asian Development Bank (ADB), a multilateral lender dominated by the United States and Japan, says it will selectively support coal-based power projects if cleaner technologies and other safeguards are adopted. Last year, it approved a $900 million loan to help build a 600 megawatt coal-fired plant in Pakistan. The articles of agreement of the AIIB, which will include its lending strategy, will not be finalised until the end of 2015, Chinese officials have said. 4 INSIDE COMMODITIES November 6, 2014 BEYOND THE HEADLINES (Continued) Kim said he understood India's position on coal-fired energy projects, but the World Bank's stand would not change. "We have to be sensitive to the fact that climate change is something that, India for example, has contributed much less to than the United States or Europe or other countries and what they're saying is, that we need energy," he said. "And what they're saying is: that we need energy now so that our economies can grow, so that we can provide jobs for our people," he said. "Now we won’t be engaged in coal unless there’s absolutely no other option, and we’ll see where they go," Kim said. SIGNED UP DESPITE RIVALRY India signed up late last month to be a founder-member of the AIIB, and is also a member of a new development bank from the BRICS group of emerging markets - Brazil, Russia, India, China and South Africa. The cooperation comes despite traditional rivalry - the two Asian giants fought a brief war in 1962 and have overlapping territorial claims along their Himalayan border. The Indian official, who was involved in the AIIB decision, said the funding of infrastructure in the region by the World Bank and the ADB was inadequate. "Had the World Bank resourced its capital base, had the World Bank done reforms that are due, and ADB also resourced the capital base, perhaps there would have been no need to set up the (new) bank," the official said. Experts say the Asia-Pacific region needs about $1-1.5 trillion per year to fund infrastructure needs. The World Bank's total lending to East and South Asia was about $16.6 billion last year. At the end of 2013, the ADB's lending amounted to $21.02 billion, including co-financing with other development partners. "The infrastructure financing gap in Asia, in emerging Asia, is so big and even the existence of ADB, World Bank, and other multilateral development banks cannot fulfil that demand," Indonesian Finance Minister Bambang Brodjonegoro told Reuters last week. "AIIB will be a welcome newcomer." The AIIB was launched at a ceremony in Beijing at which 21 nations were represented, but Australia, South Korea and Indonesia were absent. Australia and South Korea were pressured not to join by the United States, local media in both countries said, but Indonesia said it did not attend because its new government had not taken office. On Tuesday, Brodjonegoro said Indonesia could join the AIIB as early as next week. Analysts say Washington's fears about the AIIB are that the new bank will encroach on its role in providing funds to the region through Western-backed institutions and that it will allow China to assume leadership in Asia. "Don't imagine for a moment that the AIIB is just about economics," said Hugh White, professor of strategic studies at Australian National University. "Asia really does need more infrastructure and there does need to be some new funding mechanisms, but it's also an opportunity for China to build its political and strategic leadership role in Asia." 5 INSIDE COMMODITIES November 6, 2014 3 month TECHNICAL CHARTS (12 and 50 days Exponential Moving Average) Click on the chart for full-size image NYMEX Crude ICE BRENT Crude Spot Gold Spot Silver CBOT Corn CBOT Wheat (Inside Commodities is compiled by xxxx in Bangalore) For more information: Learn more about our products and services for commodities professionals, click here Contact your local Thomson Reuters office, click here For questions and comments on Inside Commodities click here Your subscription: To find out more and register for our free commodities newsletters click here © 2014 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters and its affiliates. 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