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septembre 2016
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Maritime Piracy

The phenomenon of Piracy is as old as maritime trade and has threatened seafarers ever since. Being famous pirates of the Caribbean hunting Spanish galleys full of precious metals in the 16th century, today we observe modern 21st century piracy targeting merchant vessels on the busy trading routes. The following movie track introduces to the topic (click on the picture to launch).


The three main Conflict Areas


The three main conflict areas comprise:

  • Southeast Asia (SEA): Straight of Malacca & Singapore (SOMS), South China Sea (SCS)
  • Gulf of Guinea (Nigeria etc.)
  • Gulf of Aden / The Horn of Africa (Somalia) / Arabian Sea

It is important to differentiate between incidents of ‘piracy’ and ‘armed robberies against ships’. Piracy incident occurred on board ship on the high seas, while armed robberies against ships occur within a State’s internal waters, archipelagic waters and territorial sea.

In 2015, worldwide, 15 vessels were hijacked, 203 were boarded, and 1 fired upon. Almost 75% of reported incidents of Piracy & Armed Robbery happened in Southeast Asia.


Southeast Asia (SEA)

The Straights of Malacca and Singapore as a bottleneck in global trade represent a multitude of risk. Major quantities of strategic commodities pass through this area and the many surrounding islands favour the ease of attacks. A total of 200 incidents of piracy and armed robbery against ships (comprising 187 actual incidents and 13 attempted incidents) were reported to the ReCAAP ISC, the insert definition, in 2015. Of these, 11 were acts of piracy and 189 were incidents of armed robbery against ships. There has been an increase of 7% from 2014. Of the 200 incidents, 60% (120) incidents occurred on board ships while underway, and 40% (80) on board ships while at anchor/berth. More than 50% of the total number of incidents reported in 2015 occurred in the Straits of Malacca and Singapore (SOMS) on board ships while underway.

The map on the right illustrates the concentration around the SOMS and category of the incidents (Cat. 1 = Organized Perpetrators & Hijacking, Cat. 2 = Violent Robbery, Cat. 3/4 = Opportunistic Petty Thefts).


The Horn of Africa / Gulf of Aden / Arabian Sea

Attacks in the region around the Horn of Africa and the Gulf of Aden peaked in 2011 and significantly dropped in the past two years. Factors that deterred Somali pirates include the enforcement and collaboration of international navies, the equipping of vessels with self-defense systems, the use of private armed security teams, and the stabilizing influence of Somalia’s central government. The following Piracy map illustrates this trend:

Targeted Vessels & Cargoes

In 2015, main target are bulk carriers (86), product- (51) and chemical product tankers (11), container vessels (30), other tankers (20) and general cargo vessels (15). Opportunistic robbery mainly affects smaller and less fast vessels (handysize) where usually groups of 1-9 men carrying knives, guns & machetes are looking for stores, engine spares, cash and property of crew and vessel. In SEA, there are a lot of robberies at ports and anchorage. Organized criminal groups and networks also target bigger vessels. Being informed about cargo, destination and sailing route, common incidences include hijackings of product tankers for cargo theft. Using the method of ‘siphoning’, cargo us pumped over to other smaller ships and carried away. Examples are: chemicals, marine gas oil (MGO), marine fuel oil (MFO), marine diesel oil (MDO), diesel fuel. Cargo is then sold to local markets or sold to a network of buyers serving the black market. There also occur cases where the ships’ identities, documents and crew are changed and the whole ships steered to another port and the cargo sold (ex: metals and scrap metals in the South China Sea). In the peak years of Somalia’s piracy, hijackings often went in hand with ransom demand. The most famous of these happenings was even made into award-winning movie and broadcasted in the cinemas as ‘Captain Phillips’.

Underlying Problems & Motivations favouring Piracy & Armed Robbery

The presence and increase in piracy is attributed to a number of causes including: widespread poverty, political instabilities, organized criminal networks, over-fishing, poor maritime regulations, lack in law enforcements for international waters and politically motivated groups. The case of Somalia shows that in a first instance, fishermen would defend their fishing grounds from illegal foreign fishing vessels. However, when radical formations joined the playground, some of these fishermen that were left without work in the already shattered country would eventually be driven into piracy.

Implications for the Shipping Industry

Not only does piracy represent a threat to maritime transportation, it is also a highly destabilizing threat to the entire industry. Attacks are menacing global shipping markets at a time when the industry is already facing critical financial and economic challenges (as we have seen in our last bulletins). Insurance premiums multiply and the cost of re-routing vessels to avoid danger zones is estimated to be between $2 billion and $3 billion a year. In addition, in order to protect their vessels, ship owners spend between $300 million and $2.5 billion annually on security equipment and the hiring of private security crews (often mercenaries).

Closing Words

For the time being, this is the last in the series of our bulletins on Freight. We hope that we could provide you with interesting insights into the Maritime Shipping industry and the Freight market. In an interconnected world where local trade shifted to international trade, maritime transport plays an even more important role than ever. We would also take the opportunity to express our sincere thanks to Mr. Robert Piller who accompanied us almost fatherly through this major in Commodity Trading.

Further Reading

Somali pirate clampdown caused drop in global piracy

Live Piracy & Armed Robbery Reports by the International Maritime Bureau (ICC IMB)

Annual Report 2015 – Piracy and Armed Robbery against Ships in Asia (by ReCAAP)


© by Cyrill Kressibucher / Pascal Perrin


ICC INTERNATIONAL MARITIME BUREAU IMB, 2014, Somali pirate clampdown caused drop in global piracy, IMB reveals. [online]. 2014. [Accessed 23 May 2016]. Available from:
ICC INTERNATIONAL MARITIME BUREAU IMB, 2015, IMB Piracy & Armed Robbery Map 2015. [online]. 2015. [Accessed 23 May 2016]. Available from:
ICC INTERNATIONAL MARITIME BUREAU IMB, 2016a, IMB PRC (Piracy Reporting Centre). [online]. 2016. [Accessed 23 May 2016]. Available from:
ICC INTERNATIONAL MARITIME BUREAU IMB, 2016b, Annual Report 2015 – Piracy and Armed Robbery against Ships [online]. [Accessed 23 May 2016]. Available from:
ICC INTERNATIONAL MARITIME BUREAU IMB, 2016c, Live Piracy & Armed Robbery Report 2016. [online]. 2016. [Accessed 23 May 2016]. Available from:
INTERNATIONAL MARITIME ORGANIZATION IMO, 2016, Piracy and Armed Robbery against ships [online]. 2016. [Accessed 23 May 2016]. Available from:
NATO SHIPPING CENTRE, 2016, Piracy Alert Map. [online]. 2016. [Accessed 23 May 2016]. Available from:
RECAAP ISC, 2014, Annual Report 2014 – Piracy and Armed Robbery against Ships in Asia [online]. [Accessed 23 May 2016]. Available from:
RECAAP ISC, 2014, Special Report on Incidents of Siphoning of Fuel/Oil at Sea in Asia 2014 [online]. [Accessed 23 May 2016]. Available from:
RECAAP ISC, 2015a, Annual Report 2015 – Piracy and Armed Robbery against Ships in Asia [online]. [Accessed 23 May 2016]. Available from:
RECAAP ISC, 2015b, Piracy and Sea Robbery Conference 2015. In : [online]. 2015. [Accessed 23 May 2016]. Available from:
RECAAP ISC, 2016, ReCAAP ISC – DATABASE. [online]. 2016. [Accessed 23 May 2016]. Available from:
WORLD SHIPPING COUNCIL, 2016, Piracy. [online]. 2016. [Accessed 23 May 2016]. Available from:
YOUTUBE, 2013a, Captain Phillips – Official Trailer (HD) Tom Hanks – YouTube. [online]. 2013. [Accessed 23 May 2016]. Available from:
YOUTUBE, 2013b, CNBC :: Shippers Go Head to Head With Sea Pirates. [online]. 2013. [Accessed 23 May 2016]. Available from:


As mentioned in our previous bulletins, the country is in a bad economical shape due to the decrease of the world oil price and is no longer no1 in African crude oil exports.

The population is despaired to see the business of crude and the money it brings to the state not impacting their quality of life and destroying their environment, thus creating social tensions in the country. There are also been repetitive attacks on oil facilities in the Niger Delta that impacts the economy of the country.

Who are those attackers?

The first group is known as the MEND – Movement for the Emancipation of the Nigerian Delta – a militant group active since 2000. However this group is less active now due to an amnesty agreement with the government. MEND was looking for a more equitable share of the resources from the petroleum industry in the country. In order to do so they organized attacks on oil infrastructures and kidnap employees from the international oil firms.

Source: MEND – Veronique de Viguerie

Meeting the MEND:

The second group who emerged in February is the militant group Niger Delta Avengers (NDA). Their attacks this month targeted the Chevron Valve Platform and they are also suspected of criminal acts on the Eni and Exxon Mobil facilities on the 18th an 19th of May. According to publication on their official website they will carry on their attacks, until their demand are met.

On a post on May 11th entitled “Chevron don’t dare the Avengers”, they showed a clear determination to continue fighting for their cause:

“From our investigation Chevron Plc is about to carry out repair works at the Valve platform that was blown by us (Niger Delta Avengers). We made it clear that no repair works should be done until our demands are fully met. […] Chevron and Nigeria Government are pushing us to do against our belief. Despite making it clear we are not after innocent human lives but as it’s going we might cause human casualties if they don’t listen to us. Be informed that if we decide to strike it going to be bloody. And the contracting firm going to do the repair works we want you to know that your facilities and staff will be our first casualties.”

They claim they want to protect the “Nigerian Delta Interest”, but there is a lack of precision on what they exactly mean by that. Overall, the news report that NDA fights to protect the environment of the Delta which is destroyed by the oil industry, and require an equitable share of the revenues. On their website they state that “We are been oppressed and pushed to the wall on various front hence we (the Niger Delta Avengers) have picked up the challenge to be the worthy outlaws this government will have to contend until the daily production of oil is reduced to zero in the Niger Delta and let use the oil of the North to run the Nigeria’s mono-economy.”

The impact of attacks according to the Nigerian Vice-President represents a decrease of approximately 26% of daily production reaching 1.4 million bpd. The annual budget was based on an output of 2.2 million bdp, thus it can be expected a continuous major decline in the economy in the following months.

Brent spot price

On May 25th, 2016, the Brent spot price stood at 49.14$/b.

Regarding, our last bulletin on May 5th, 2016, the spot price was at 47.12$/b, thus increase in price by $2.02$/b within 20 days.

As illustrated on the graph, since around March 2016, the Brent spot price has gradually increased. (Upward trend but highly volatile)

Reasons: “Disruption in supply”

-          On May 16th, 2016, Militants attacks take Nigerian oil production to 1.4m b/d

-          Decline in the American Shale Oil production

-          Wildfire in Canada


March 2016

-       Nigeria’s Bonny light/Brent= +0.02$/b – premium (US influences – according to OPEC’s monthly report « arbitrage to the US, support African crude differentials.”)

-       Angola’s Girassol/ Brent= -0.10$/b – discounted

April 2016

-       Nigeria’s Bonny light/Brent= +0.03$/b – premium – (+$0.01/b changes)

-       Angola’s Girassol/ Brent= -0.23$/b – discounted even more

Supply and Demand

  • According to the IEA monthly report, global oil supplies rose 250 kb/d in April to 96.2 mb/d as higher OPEC output more than offset deepening non-OPEC declines. Also, OPEC crude output rose by 330 kb/d in April to 32.76 mb/d as a 300 kb/d jump in Iranian flows and a boost in Iraqi and UAE supplies more than offset outages in Kuwait and Nigeria. (Saudi output was steady near 10.2 mb/d. Iranian supply rose to 3.56 mb/d, a level last hit in November 2011 before sanctions were tightened.). Supply for non-OPEC is forecast to drop by 0.8 mb/d to 56.8 mb/d, throughtout 2016.

IEA stated that the “global oil demand growth for 1Q16 was revised upwards to 1.4 mb/d, led higher by strong gains in India, China and, more surprisingly, Russia. For the year as a whole, growth will be around 1.2 mb/d, with demand reaching 95.9 mb/d.

Future Contract

The global oversupply of crude oil is still represented by the Contango curve and the relatively low prices. The basis from $0.99 to $0.6 per barrel, according to our last bulletin on 12.04.2016, thus it continues to weaken. To finish, prices tend to stabilize around $53 per barrel for next year contracts.


Investors have to evaluate well the country-risk factor as there is a lack of security in this region and no improvement is expected for the moment.


Tanya Cole, Chantal Gasser, Nicolas Schenkel


Bloomberg (2016). Brent spot price [online]. [Consulted on :25.05.2016]. Available at:

Crude Oil Future price [online] Barchart. [Consulted on :12.04.2016]. Available at :*

Security issues: ROSS K., Nigeria Delta militants. Available at:

CNBC, 2016. “Niger Delta Avengers”: who they are, and what they want [online]. 20.05.2016. [Consulted on: 26.05.2016]. Available at:

NIGER DELTA AVENGERS, 2016. Official website [online]. [Consulted on: 26.05.2016]. Available at:

ROMANDIE, 2016. Le Nigéria renforce la sécurité autour des installations pétrolières [online]. Romandie. 21.05.2016 [Consulted on: 26.05.2016]. Available at:

ROMANDIE, 2016. Les ex rebelles du MEND dénoncent les attaques d’installations pétrolières au Nigéria [online]. Romandie. 22.05.2016 [Consulted on: 26.05.2016]. Available at:

SAHARA REPORTERS, 2016. NigerDelta Avengers blowup Chevron Platform in Delta state [online]. Sahara Reporters. [Consulted on: 26.05.2016]. Available at:

VERONIQUE DE VIGUERIE, 2016. The oil war, Niger Delta [online]. [Consulted on: 26.05.2016]. Available at:

ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES, 2016. Monthly Oil Market report [online]. OPEC. 13.05.2016. [Consulted on: 25.05.2016]. Available at:

IEA, 2016. Medium-term oil market report 2016– Overview [online]. IEA. [Consulted on: 25.04.2016]. Available at:


Krasnye Barrikady a Russian shipbuilder won a contract of 1 billion US dollar by Iran to build five offshore drilling rigs for use on Iran’s part of the Gulf shelf, according to Reuters.

To note that Iran will soon make a 15% advance payment on the amount of USD 200 which is the price of the first rig.

“The battle for China’s Oil market”

Russian crude oil exports are still going well with China. In April and for the second month of the year 2016 Russia is the largest crude oil supplier of China and so surpassed Saudi Arabia.

Russian crude oil exports had just reached a peak at 1.17 million barrels per day, surpassing the previous record of 1.13 million barrels per day in December 2015. In comparison, China imported 1.0 million barrels per day from Saudi Arabia in April 2016 and 936,500 barrels per day in Mach 2016.

Russian Urals oil : ready to be the next oil benchmark ?

The urals oil is a mix of heavy and high-grade oil of Urals (name of an area in Russia) with light oil of Western Siberia.

Russia has always wanted to put the urals as an independant benchmark.

Even though, Russian government tries to launch since years the urals future contract under the name  REBCO on the NYMEX last 2008: not a single trade was made.

Currently, Urals is sold outside the exchange, mainly through direct long-term delivery contracts. This means that only the counterparts of these transactions know the price of the commodity.

This month, Chinese companies would be interested in Russian Urals blend crude futures trading and also in using the quote for determining the price of long-term oil contracts.

These facts have been confirmed by the Vice President of St. Petersburg Exchange (SPIMEX) :Mikhail Temnichenko and he added that a « bidding mechanism is scheduled to begin in November. »

Crude oil production worldwide

As you can notice on the graph below, the three major crude oil producer in 2016 are Russia, which leads the list, followed by Saudi Arabia and the United States. Those data show us also the highest and lowest production of barrel per day since 1992.

Indonesia – a new investment for Russia?

In fact, Indonesian economic growth reached almost 5% in 2015 and their oil production is more or less 830’000 barrels per day. As Russia is developing their pipeline to the east in direction of Asian countries, they could invest in Indonesia as well as the consumption of crude oil is twice their production so they need to import to smooth the imbalance in the country.

Last week, both presidents of Russia and Indonesia agreed to set up a bilateral cooperation. Let’s have look in the future how this market grows.

Armend Qestaj, Ian Williamson, Mayween Henchoz


Forward curve

Nothing much new about the forward curve, it is still showing a carry, meaning that the market is bearish.


Regarding weather, most areas of Minnesota are now hoping for “a good soaking rain”. Good news is that not only rain but also storms are forecasted for next week though Sunday.


Here are few articles screenshots about corn planting to keep up with last bulletin news about planting being ahead of schedule:




South Dakota



News around the globe

Coldest Mid-May over the last 25 years in the Corn Belt

As the weather reports announced it has been the coldest Mid May over the last 25 years in the Corn Belt, the main corn producing area of United States. The Corn Belt mainly includes parts from the North Central and Eastern States of Minnesota, Dakota, Nebraska, Kansas, Missouri, Ohio, Michigan, Indiana, Illinois and Kentucky. The Corn Belt produces almost 70 % of US corn production.


In the next graph we can see how much the temperature changed from the average mid-May temperature:

All the states of the Corn Belt were affected but those affected massively were Minnesota and Iowa. That was probably one of the reasons except the rising demand for corn that the USDA revealed for the increase in the price of corn in the May.


Hopefully, according to USDA’s weekly crop progress report for Minnesota, 65% of the corn crop is in good to excellent condition despite the frost.



Ukrainian GM Corn

“10 % of Ukraine Corn will be grown this year from a genetically modified seed” the USDA said. Ukraine is a major exporter of corn to buyers including China, which has strict controls over imports of genetically modified crops, and shown a willingness to enforce them. Chinese trade data on Monday showed that of 1.16m tones of corn the country imported last month, 1.01m tones came from Ukraine.

Some commentators believe that Ukraine corn shipments are escaping Chinese sanction either through a lack of testing or their contamination with genetically modified varieties which Beijing has approved for import.



China to auction total of 2.2mn t of state corn, rice on Friday

As we said in our previous bulletin, China’s government plans to reduce its corn stockpiling. The government has decided to auction this week 2.2 million tons of corn including domestic corn from 2012 and imported corn from 2011-2012.

“The corn would be sold in a price of 1,300-1,450 Yuan (USD 198-221), per tonne, based evidently on the quality of the grain.”  Currently, the corn price on the Dalian Commodity Exchange is trading around 1,550 Yuan per tonne. The purpose is to liquidate as quickly as possible their gigantic stocks. Nevertheless, China imported seven times more volume in April 2016 compared to the same month a year ago.

Furthermore, the forecast for 2016 shows us that corn production will decrease by 2.9% due to farmers who are altering with another crop.




Brazil is suffering an enormous dryness in the main producer states, which are Mato Grosso, Goias and Minas Gerais. These 3 main producers represent almost 50% of the total production, which is threatened. Indeed, the production losses may exceed more than 3 million tons in Mato Grosso State.

Thus, the real strengthened against the dollar (4,15 dollars in January to 3,58 on Tuesday).

The main winner of these events is Argentina. Argentina may overtake Brazil export this year knowing that the price of Argentina corn at port was 10$ cheaper than US Golf according to analyst Aedson Pereira.



If you are a big fan of meat and grilled corn, thus you have not organised a trip yet, you should travel to USA, because beef price will decrease for 2% thanks to the bargain corn price.




Our recommendation is to be short knowing that the US Agriculture Department forecasts that US corn output will surpass 360 million tones. The best harvest for 10 years.



Joanna Dupont, Konstantinos Angelakis & David Pereira




United States Department of Agriculture is saying that the 2016/2017 U.S rice crop is projected at 231 million cwt (20 cwt = 1MT so 231 million cwt = 11.55 million MT), which represents an increase of 20% from a year earlier.

It seems that the use of rice crop will bring an increase in term of exports. In fact just to have an idea in 2016 the northeastern Arkansas county which one of the top three rice-producing counties in the state says that the weather has been so favorable for so many rice growers that planting progress has leapt ahead of the five-year average established by the USDA for mid-May, and several counties are now expecting more acreage to be dedicated to rice than growers originally declared in the early spring.

“Last year, we had around 89,000 acres of rice, and I think this year we’ll be over 100,000,” Ginn said. “We’ll be up more than 10 percent is my guesstimate. I am seeing a lot of rice.”

On the other side if we look at the global rice production in 2016/17 we have a projection of 480.7 millions tons but global rice trade is projected to decline for that time. What is the reason of that? India, Thailand or Vietnam are exporting less rice due to bad weather conditions.

In contrast we have the US and even Argentina or Australia that are expected to increase their exports of rice. Result of that situation global trading has slightly increased over the past month. The same demand and less supply have impacted the price.

Situation in Vietnam

Vietnam and other country in the region had to face an important drought that killed Vietnam rice crops. In fact, The Mekong River countries of Vietnam, Thailand, Laos, Cambodia and Myanmar produce about 62 million metric tons of rice, or 13 percent of global output. And this river accounts for as much as 25% of the global freshwater catch and provides livelihoods for at least 60 millions people.

“Rice exports from Vietnam, the world’s third-largest shipper, probably will drop 10 percent this year because of lower production, said Do Ha Nam, the chief executive officer of Intimex Group, a major Vietnam exporter of agricultural products.”

Taking into consideration that approximatively 10% of the global production is traded which represent 48’000’000’ MT for the year 2016/17 and that the total exportation of Vietnam was 7’000’000 MT in 2015/16 accoding our last bulletin. The drop of 10% will represents 700’000 MT, which is 1,4 % of the global rice trade. Concerning the US export, the USDA project an export of 3’600’000 MT which represent an increase of 350’000 MT, and 0,7% of the total exportation.

On the next graph you can see how Vietnam’s rice exports has declined in the last few years due to these parched crops.

The major problem is that Vietnamese and others Asian countries have to produce enough rice to nourish their population, is a question of food security.

So we guess this will create tension between the quantity that they use to export and the quantity that they use to consume, they will be for sure more focused on their own rice consumption before thinking about what export.

Can the extra production of US and other new rice producer countries compensate the loose of Asian Countries?

Our suppositions are US will not produce yet as much as Asia produce but the main rice production can delocalize to America if the climate continue to create choc. And knowing that US is a key player on the rice trading should the traders make prediction of the oversupply in the US or of the decrease production in Asia?

What about the price?

So as we’ve said before prices are expected to increase by the fact that supply is getting smaller from country such as India, Vietnam and Thailand but demand is still maintaining the same level.  In contrast, U.S rice crops are projected to have an important increase of 20% on their production. Is there an opportunity to make some money if we catch the trend?

Here you can see how rice price has been moving for the last months. There is an increase of 6.5% from DEC-2015 to APR-2016.

Huge strike in France

France is facing important strikes that directly impact the gasoline and diesel market. The government forced the implementation of the El-Khomri labor law, resulting in an impressive revolt. Strikes occur at the entry of refinery sites and those refineries are blocked meaning that plenty of gas stations are running out of stocks. French police is currently trying to open and secure the way to the refineries.

Moreover, Total’s CEO is considering to reduce its investment in France. 5 Total’s refineries are currently partially or not working due to the strike.

Finally, it seems that some prices at the pump has increased by almost 10% in certain area.

The issue is so important that the French government must use its own reserve to provide energy to the citizens.

Here is a map of the gas station currently completely or partially running out of stocks:

USA Political Link

Gasoline price does not only defines if people use a lot or not their cars. A study conducted by Moody’s shows that the price of gasoline impact the result of the US election. The price being today around $2.3 per gallon seems to be in favor of the democrat. However, according to their study if the price reaches $3.00 per gallon we could see a shift from a victory of the democrats to the republicans.

Chinese emissions program

The Chinese capital, Beijing, is going to implement new rules in a way to reduce the vehicle emission by 5%. This strict rule will allow the city to reduce its emission by 20 to 30% by 2022. This program is as well expecting a change in the fuel quality, which could lead to an increase in the gasoline price.

Demand and supply


Even though we have seen the highest demand for gasoline in the US during the beginning of this year, we can still see the increase of the level of tank storage. This comes from the important increase in the import of gasoline. Compare to the year 2015, the import of gasoline has double in terms of barrels per day passing from approximately 450 thousand to 900’000.The increase of import comes mostly from the low price of crude which creates very low margins for refineries.


The second biggest country of the world has today reached the first place in the growth market for oil. Since the beginning of the year 200 million cars have been launched on the indian market. India today consume more than 4 million of oil barrels. They have now overpassed japan as the 3rd oil consumer of oil and its derivatives.

Prices and forward curves

We can see that the forward curves as remained constant. However, it has been said that we have moved from a backwardation to a contango for the Gasoline, which is not clearly shown here.

In terms of prices, both commodities continues their increases from the start of the year, mostly due to the correlation with the oil price. Even though diesel demand is decreasing, price tend to grow as some refineries stop or reduce their production of diesel to produce more gasoline.


Since the beginning of the year, both commodities were very volatile and remained interesting commodities for trading houses. We could say that there were no uncertainty related to the futures markets. Moreover, many changes happened or could happen, such as countries deciding to import while others stop importing but started exporting. New strategies in terms of commodities transportation are coming and new regulations in terms of CO2 emissions and taxes could be set which are linked with VW scandal . For those points there are still uncertainties that could help the market to remain volatile. Finally, we could assist to a change of ULSD sulfur standard for the forward market.

Antoine Girard

Alexandre Gay

Saniya Al Turabi



Last bulletin: 125.90 USd/lb

Future curve:

During 2nd semester, after the drought concerns first emerged in February this year, London Robusta coffee prices have rallied by over 25%. The futures market reflected the shortage of Robusta’s crops that generated an incentive to hold production output. On the other hand, the Arabica’s crops faced a high volatility mainly due the uncertainty of its production output in Brazil. Currently in an oversupplied market, the arbitrage between Arabica / Robusta might affect the roasters blending perspective. Where the actual lowest quality of Arabica tend to be cheaper than the highest quality of Robusta. The turning point is that given the hardiness of the Robusta crop, many in the market are expecting the crop situation to not be as bad as many news headlines are proposing.

With all eyes on the skies and Robusta producing countries waiting for rain, the coming months will be a critical period in determining the scale of coffee output and exports.

After a year… Wrap up:

  • Two types of coffee: Robusta and Arabica (or 3 with the Kopi Luwak…)
  • The three main producers are Brazil, Vietnam and Colombia
  • Not a high volatile market, prices are rather stable
  • Prices depend mainly on local currencies and weather’s change (El Nino and La Nina)
  • Complex and long supply chain, where innovation and transparency are important to develop in order to guarantee a prosperous future
  • Futures: always in a carry
  • Traded on the ICE market:
    • Coffee C (Arabica)
    • Coffee RC (Robusta)
    • Physical delivery: 37’500 pounds

Kopi Luwak… a new competitor of Coffee?

Produced in Indonesia (Irian-Jaya Island), the coffee cherries are eaten by an Indonesian jungle cat (Asian Palm Civet), digest and then pick-up by farmers, who roast and transform them into Coffee…

Rarest Coffee → most expensive coffee: approx. 700 €/kg

Annual production only hundreds of kilograms

In comparison, Guatemala, the10th producers worldwide is producing 203’997’725kg a year

If we convert the price per kg into USd/lb and compare it to the Arabica price of 125 USd/lb, the price would be…

…356 USd/lb, which is almost the triple !

Videos link:

Kopi Luwak (French)

Kopi Luwak (English)

Naomi, Nathalie & Dougal


Bulletin n°4 – COCOA

Life is like a box of chocolates.

Cocoa Value Chain

The cocoa value chain faces a number of challenges in growing and selling this delicate crop.

Low productivity

  • Farmers knowledge of modern techniques and management skills
  • Limited access to finance
  • Aging trees

Percentage of the world price received by the farmer

  • Access to market information
  • Understanding of cocoa quality requirements
  • Transportation costs

Pest and disease

  • 30-40% of the crop is lost

Environmental concern

  • Soil fertility levels
  • Composting and application of fertilizer rejuvenates
  • Promoting agroforestry techniques
  • Encourages productive, healthy, and sustainable farms

Access to education

  • Teacher training programs

Mid-crops smaller than expected from dominant West African producers

Mid-crops were smaller than expected due to heavy rains, that is why Cargill forecasts of 160,000 tonnes deficit for the 2015/16. Supply stays good as there was a global surplus in 2014/15.

Beans became smaller due to drought, so they became harder to process and they contain less fat, so these beans cannot be exported.

As we can see on ICE Future Contracts, the curve is inverted from September contract. Inverses are a reflection of the fear factor of a deficit and forward selling by Ivory Coast and Ghana which creates more selling pressure on the back end.

Euro futures contract for Cocoa markets: a good idea? Really?

Futures contracts are essential to secure cocoa flow from farmers to producers. Chocolate makers are key players in futures markets, the three biggest ones control 60% of Cocoa produced and depend on a regular supply of cocoa beans. Traditionally there were two contracts for physical delivery, both managed by the ICE, in USD and GBP.

In March 2015, ICE, and its competitor CME, launch contracts in EUR. But why? There is a logic to have a Euro contract. Indeed, the two main producers, Cote d’Ivoire and Cameroon, have their currency, the CFA pegged with Euro. 60% of chocolate is manufactured in Europe. Therefore, those future contracts are advantageous for producers and buyers.

The CME contract was set up following requests by market players across the cocoa industry. These included calls for a euro contract, the main currency for cocoa trading between Europe and West Africa, and provisions to make delivery of cocoa beans through the market simpler and cheaper.

At the end of the day, buyers and sellers decide with which trading house they trade, so liquidity is essential. As per some analysts, this is the main issue in cocoa futures market and the Euro contracts does not seem to have been able to find their place yet.

Cocoa, a solution against memory loss?

Some researches have shown that flavanols, a cocoa component may reverse memory loss. After testing it on mouses, they tried it on humans with remarkable results. Now there are still a number of questions like how long results will last and can flavanols also improve the memory of those suffering from disease? With this discovery, price of cocoa may probably increase.

You never know what you’re gonna get.

T. Carruzzo, P. Gandara Blanco & L. Marcuzzo


Actual Price

We can see that since a few days gold’s price is falling again. This is mainly due to the pressure of a strong dollar. As gold has «currency attributes» it is in major competition with strong currencies like dollars. This relationship with currencies is becoming always stronger and this is gold’s current issue. Indeed, a higher US interest rate means higher returns from holding dollar and this leads the green currency to be more attractive than gold.

However, if we take the gold’s price from the last 6 months, we can see that gold is still up of about 15%.

Forward Curve

We can see that the forward curve is in contango. The slope becomes steeper from December to February. We could explain that with the market player’s point of view. Indeed, they expect one more rate hike in December. The Fed forecast for rate hikes in December.

Gold News

Gold and US dollar:

As we know US dollar and Gold have an inverted relationship. This is due to the association of gold and dollar. The gold standard was used between 1900 and 1971 to back up the dollar currency.

In 1971 the dollar was released and the price started to be calculated on supply and demand. Since then, the dollar became a fiat currency.

Gold and US Debt/GDP ratio:

It is also interesting to see the relation between gold and the US debt/GDP ratio.  This is the ratio that shows how much a country owes versus how much it earns. Investors use this ratio measure as a country’s ability to make future payments on its debt.

In the graph below we can see the positive relationship between the ratio and the gold price.

This is mainly due to the trust of individuals in gold. As the ratio grows investors fear the impact on the economy of the country and lose “faith in the country’s growth prospects”. Again investors prefer investing in gold. This is again an evidence of the use of gold as a safe heaven.

Fed balance sheet and Gold:

When gold was used to back currency (before 1971) central bankers used to buy gold. This formed a significant part of their reserves. After this system broke off, a flat trend was seen in central banks purchasing gold in the 1970s and 1980s. However, in the 1990s it was the inverse, when banks started to sell their gold. This due to the fact of a good economic growth and other investment were more profitable.

Since then, a Central Bank Gold Agreement was made in 1999 in order to limit sales of gold. In order to reassure investor and increase the demand of gold.

Some commodities are also related to gold

Such as Silver, Copper and Oil! We already know that the price of Silver is linked to the price of Gold. But for Oil it is an indirect relationship. In fact, some researches show that an increase in oil price, will lead to high inflation and high inflation leads to an increase in gold price.


Total supply increased 5% year-on-year and resulted an 8% increase in total mine supply. And while recycling dipped year- on-year about 1%, the rapid rise in gold prices at the start of 2016 increased strong quarter-on-quarter growth.

Mining production summed 774 metric tons at the beginning of 2016. Yet, over the long term, global invention
is stagnating: gold producers continue to focus on maximizing output from existing sources, while the impact of new mines coming on stream reduces.

Production growth in the first quarter was driven by major operations in a handful of countries, such the United States, Mexico, Indonesia, Russian and Peru.

The number of new mines coming on-stream has slowed since 2013. Producers continue to focus on minimizing capital expenditure and maximizing production from existing projects.

Recycling gold

The gold price increase in early 2016 boosted gold recycling about 53%. Consumers took the opportunity to recycle their old gold possession and pocket a higher price for it. In countries such Indonesia, Thailand and Turkey the gold market is highly liquid, with established infrastructures, which allow for quick respond to gold price changes and recycling.

Overall 90% of the recycled gold comes form high value gold such as jewelry and the other 10% from industrial gold such as gold from electronics.

  1. Metals Recovery: Metals come from electronics, industrial scrap, liquid waste from factories and jewelry.
  2. Aqua Riga Dissolution and Reduction: Metal is placed in an acid solution, which has a strong oxidizing power that dissolves most precious metals including gold. Gold loses electrons and becomes ionized, which is called reduction.
  3. Gold Powder Filtering: The reduced gold becomes powder in a solution that looks like muddy water. It gets filtered to become more pure.
  4. Drying: After washing the gold powder, it must be dried. The purity is then approx. 99% – 99.9%.
  5. Refining: By repeating the dissolution and reduction process a second time, the gold purity gets up to 99.99%.
  6. Shot and Casting: The gold powder is melted first at 1’200 degrees Celsius and then cooled down. Gold reduces in size and becomes to gold shots (purity of 99.999%).
  7. Inspection and Stamping: Each gold ingot undergoes an inspection and measurement before it is finally complete and stamped with an authorized melter’s mark.

Short video from Apple: Liam – An Innovation Story

Apple has saved USD 40 millions from recycling gold used in its devices in 2015. They have recovered 2’200 pounds (998 kg) of gold, 3 million pounds of copper, 6’600 pounds of silver and so on.


Gold demand increased by 5% up to 1’134.9 metric tons in the first quarter of 2016 compared to last year. Reasons for this are higher bar and coins demand (+ 1%) and an increase in gold exchange traded funds (+300%), World Gold Council, May 2016.

Links and sources

By Deborah Di Pasquale, Sarah Giroud and Bergita Ibishi

Almost 6 years of tumbling sugar prices.

Sugar prices have been steadily falling for almost 6 years due to persistent oversupply. According to specialists, the stagnating oversupply is due to reasons such as:

  • Depreciation of Brazilian Real against the US Dollar.
  • Cash-strained Brazilian millers.
  • Thai subsidies on sugar cane production.
  • Increase in Indian production

What about magnitude?

Change in flows: the EU will become a net exporter

The global sugar industry (One of the commodity world’s most protected markets : guaranteed payments to farmers, production restrictions or import limits) is about to live some liberalizing reforms that could intensify the production of some players, trade flows and push the prices down.

The EU (the 3rd largest producer) will from October 2017:

  • Remove production quotas
  • Stop minimum payments for sugar-beet farmers

Source: WSJ, May 2016

Liberalization of the sugar market has lagged behind reform of other agricultural commodities. It reflects the motivation of government to protect a labor-intensive industry. Since The EU will stop providing a minimum payment to farmers, the U.S. government will keep guaranteeing a minimum price.

Production: Finally a trend reversal

The removal of the EU production quotas will put the EU in a position of net exporter in a one and a half year time and add uncertainty at a volatile time for the sugar market.

Furthermore, after five years of oversupply, consumption is finally expected to exceed supply in 2016 :

The reasons of this general lower production are mainly due to:

  • Low global sugar prices
  • Stocks carried over
  • Lower imports

“Other News” related to sugar


Unprecedented action was taken in San Francisco USA regarding “warnings” that will be mandatory on Soft drinks such as Coca-Cola, Sprite, etc.

According to the Wall Street journal, the warnings will take the following form:

“WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.”

These messages will be mandatory from the 25th of July this year and will be used on public advertisements.

This will certainly have impacts on other cities and consumption of sugar. The main reasons for these actions were related to the fight against obesity and diabetes.

Will these actions influence the consumption of Sugar in the future? Will this push drink producers to use other sweeteners? To what point will global sugar trade be affected knowing that lots of sugar cane is still used for Ethanol?

Only time will tell.