Steel, Copper, Gold and Aluminium

• Has steel turned around? In late April, John P Surma, chairman & CEO of US Steel, said that “we continue to face an extremely difficult global economic environment. We expect an operating loss in the second quarter as our order book remains at low levels and idled facility carrying costs continue to be incurred.” 

• World refined copper production outpaced demand by about 150,000 tonnes in January, compared with a deficit of about 20,000 tonnes a year earlier, according to International Copper Study Group which anticipates a surplus of 345,000 tonnes in 2009.

• Gold price is struggling to stay above $900 as there is increasing confidence in the world about US and global economic recovery. It is not clear whether that hope would eventually turn out to be misplaced but, right now, nobody is in a mood to play safe.

• The quarterly commodity review of Royal Bank of Scotland paints a bleak picture for aluminium because of the metal's heavy exposure to the transport and construction. Demand is expected to contract by 8% in 2009 while cutbacks in production have not been commensurate.

 

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Crude Oil

Crude oil production is outpacing demand with the result that millions of barrels of oil are getting added to the inventory. Commercial crude stockpiles as reported by the US Energy Information Administration is at 19-year highs. And yet oil shows no signs of declining below $50. What is the reason for the oil market to defy the laws of demand and supply? Traders are betting on the US economy picking up later this year, though there is still little supportive data. In fact, on 29th April the US Commerce Department reported that gross domestic product shrank 6.1% in the first quarter - the third consecutive quarter of contraction. This is the first time something like this has happened in the last 34 years. But equity markets searched and found a silver lining - an increase in consumer spending. That created a sharp rally in stock indices and, therefore, in crude oil. How long will it last?

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Sugar, Jefferies CRB Index, Gold and Silver

• According to a report by Merrill Lynch, sugar prices are expected to rise by as much as 20% over the next five months and remain firm till September 2011 caused by a tight supply due to lower production and a decline in inventory (buffer stock). Sugar is available in the range of Rs23-Rs25 per kg in the retail market as against Rs17-Rs18 per kg in August last year. 

• According to Credit Suisse, after declining the most in half a century, commodity prices have reached a bottom and are likely to rebound over the next several years as demand outpaces supply. After declining 36% last year, the Reuters/Jefferies CRB Index of 19 commodities fell another 4% in the first quarter. “There are some signs of stabilization and we are becoming more optimistic that we have seen the lows of the cycle,” said Adam Knight, head of Credit Suisse Glencore Commodities Alliance.  

• Gold and silver imports are picking up in the wake of declining prices of the precious metals. According to the Bombay Bullion Association, over 10 tonnes of gold arrived in India in the first half of April; despite some silver stocks still available, imports of silver too have begun.

 

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