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novembre 2017
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Historical sugar prices US Sugar #11 Futures (6 months, in USD)

Since our last bulletin, the price, which remains volatile, has increased from 14,12$  to 15,00$ cents per pound as of 16 November 2017. The main reason is the ethanol demand, which is increasing. The Center-South Brazil has seen its hydrous ethanol demand rising by 22% in October. As a result, there is a shift in the utility of sugarcane from sugar production to ethanol production leading to the increase in the price of sugar.

Sao Martinho, one of the largest ethanol and sugar producers in Brazil revealed a sharp slowdown in its forward sales of sugar as prices are expected to be higher. The company said it had aimed most of the extra sugar at making ethanol. The proportion of cane expected to be directed at sugar was at 48%, down 6 points on the last season’s result.

Forward curve

Data source:

The upward sloping curve shows a contango. It indicates that the market is bearish and that there is more supply than demand for the sugar market. The contango situation provides us information to store the commodity. It is a normal curve and it is reflected in the price of each possible contract, which is composed of the spot price, plus the carrying cost hence its increasing trend.

Since the first bulletin, the curve has shifted up reflecting the increase in price mentioned in the price movement going from a 14,100$ to 15,090$  cents per pound for March 18.

The sugarcane harvest is between June and December it is why the curve is going up during this period. As a generality, sugar prices tend to reach a high in November due to supply and demand factors. Production at this time is still underway since the European crop has not reached the market yet. In the Northern Hemisphere, the demand reaches its peak in the fall.

Illustrations supply and demand dynamic and inventory levels


There is no change in the level for the moment has our figures are calculated by year.



As we are bullish on sugar, we would recommend to be long in the futures market for the next 3 or 6 months, indeed we could profit from a rise in sugar price.

Ariana, Elisa and Diego


Renewables now, Brazil’s Centre-South hydrous ethanol sales rise 22% in October, 14th November 2017[consulted on 16.10.2017]. Available at:

Mike Verdin, Agrimoney, Sao Martinho slows sugar hedging forseeing continued price revival, 10thNovember 2017 [consulted on 16.10.2017]. Available at:


  • 145.47 USD per metric ton US No. 2 Yellow, FOB Gulf of Mexico, 14. November 2017
    • 04 October 2017: 148.92 USD per metric ton
    • 18 October 2017: 147.83 USD per metric ton
  • China, Hebei, Baoding City, 246 per mt 10.11.2017, compare (29 October 2017) 243 USD.
    • China announced a cut in maize planting area to around 670’000 hectares, to soybeans production.

Inventory level

This year, the production of corn in the US hits records. As farmers are about to end the harvest period in the US, the stock levels are increasing faster than the demand of the rest of the world for corn. As you can see in the graph, the US ending stock is at 2.487 billion bushels the highest in more than 20 years. This implies more cost for stocking the commodity.

Stock to use ratio: How much inventory, carried over from the previous period, is available as a percentage of total consumption. High supply towards demand → a higher stock/usage ratio → negative prices.

“Global corn stocks, at 203.9 million tons, are up 2.9 million from last month. Corn outlook is for larger production, increased feed and residual use and exports, and greater ending stocks. Corn production is forecast at 14.578 billion bushels, up 298 million from last month on a record-high yield.”


Harvest monitor

In the last month, weather conditions in the Ukraine got worse due to drought. In many parts of the world, such as China, information’s about conditions are not available. Nevertheless, in North America harvest is underway and expectations are very good due to good yields and increased area in Canada. Bumper crops (unusually normal productive crop) in Southern America and Southern Africa, supporting a record high production in 2017.

The harvest period in the US, it is ending slowly and with delays. As corn production is dependent on weather conditions, this harvest period had not been optimal due to excessive rains in the US Corn Belt.

Ethanol update

In October, Ethanol production increased and the gasoline prices declined after refineries recovered from Hurricane Harvey.

Brazil announced that they will start producing ethanol with soybeans. The company that started with this trend said, the production will mainly go to the domestic market. This announcement may decrease the demand for corn to produce ethanol.

Forward Curve: Bearish market

Price: cents per bushels

Contract units: 5’000 bushels (~127 metric tons)

We observe a “carried” forward curve pretty much stable. Now that the harvest season in USA is coming to an end, thus the supply>demand. It is time for the farmers to dry and store the maize, we expect the curve to be carry as the carrying cost should be covered.


The supply is higher than the demand (carry forward curve), thus, our advice will be to buy now, store the corn and sell it when the supply will be smaller than the demand (inverse forward curve).


Extension of the cut-deal – not the unanimity

The cut-deal agreement between Russian and OPEC is likely to be extend but many Russian oil companies are upset about it. A barrel of crude above 20$ is enough to get profit thanks to their very low production costs.

The cut-deal put a spoke in the wheel because their (Rosneft and Lukoil especially) new projects are ready to be launched. But exploration and development of new fields cost a lot and if they cannot produce as much as they want in order to reimburse the initial investment, that makes no sense to invest.

Finally, Rosneft’s CEO has argued (about the cut-deal) that “rising production by US shale producers […] has undermined its effectiveness”.

Forward Curve – The curve is reflecting a light backwardation, but the slope still remains relatively flat (spread between futures Dec.2017 and Dec. 2018 is USD 3.01). We can describe the market as “bullish” and deduct that inventories are being reduced. That makes sense since we know that Russia participates to the cut-deal with OPEC and market is uncertain about its extension (meeting between Russia and OPEC on Nov 30th). Currently, the supply is lower than the demand. This phenomenon pushes the companies to sell their output rather than store it.

Differential – We can notice that Urals is today (16.11.17) sold at a discount of 0.76 USD/bbl to Brent crude. The differential became tighter the last 3 weeks. The decreasing differential on the 11th November is explained by interrupted loadings from Primorsk due to a storm. That made the supply decreased and the Urals’ price rose.

We also think that the Urals rising price to Brent is due to market’s expectations of lower November and December exports of Russian crude.

Exports – Urals November and December exports are expected to be lower due to higher consumption of Russian domestic refineries. Having a look at Russian gasoline prices on Spimex, we noticed that it has increased sharply since the beginning of November. This can explain why crude is going to be sold more locally until the end of the year (high price of gasoline is an incentive for Russian refineries to process more crude themselves in order to increase their gasoline output and get a bigger margin). Moreover, some defaults in Russian refineries have been repaired and that explain higher runs expected in domestic plants as well.

Finally, datas from the Russian finance ministry showed that Russia’s oil export duty is expected to rise of about 9$ per tonne in December (1 tonne is a bit over 7 barrels).

Sources :

Refineries are subject to market pressures at both input and output levels. It is subject to changes in crude oil prices and in demand for refined products which may vary according to the season, country, market price etc.

As a result, the choice of the type of refinery is strategic and requires billions of dollars in investments. Knowing that the commodity market is defined by a market with small margins, the economy of scale is important.

That’s why refineries that are built have as big capacities as possible. Which explains why old refineries are usually smaller. They call them teapot refineries. China has a lot of them.

In addition, their ability to adapt to the market and to be able to offer different products and quality must be considered. As a result, one of the most important points in the construction of a refinery is its complexity, its capacity to refine heavy and sour crudes and turn them into high quality end products, such as fuels. This allows to increase margins.

This is measured by the NCI Nelson Complexity Index. “The higher the index number, the greater the cost of the refinery and the higher the value of its products”. However, these
facilities are expensive.

“Fluid catalytic cracking:  The refining process of breaking down the larger, heavier, and more complex hydrocarbon molecules into simpler and lighter molecules.”
Source : EIA Glossary

The biggest Indian refinery, the Jamnagar Oil refinery is also the biggest refinery in the world. It produces around 1.24 million barrels a day and has a NCI of 11.8. This is twice as much as the biggest American oil refinery, the Port Arthur refinery which has a NCI of 12.4. This refinery is owned by Saudi Aramco since may 2017.

India has the second biggest refining capacity in the world. The one with the biggest capacity is China.

In China, we have the world’s biggest oil refinery company, Sinopec. They own 11 refineries all over China. They are situated around the coast and produce around 990’000 barrels a day.

Sinopec is investing 29bn US dollars to update four of their refineries in order to raise their complexity and production levels.

The biggest refiners are now asian countries. This is due to their economic growth, which is tied to a need in oil products. They have high NCI refineries and high capacities and they still invest in R&D… Somebody said OPEC ?

Sources :

Light, sweet crude for December delivery gained $1.10, or 2%, to $55.64 a barrel on the New York Mercantile Exchange, the highest level since July 2015. Brent, the global benchmark, also rose to another two-year high, settling up $1.45, or 2.4%, to $62.07 a barrel. Last year, OPEC, along with several other countries including Russia, agreed to cut production by 1.8 million barrels a day to alleviate the global overhang of crude that dragged down prices. Because of that threat of supply going down, prices are going up on the global oil market.


U.S. crude oil exports have become more attractive because of the price differential between Brent and NYMEX.  Exports have increased to 2 million barrels per day.


In thousand barrels

Prices have also gotten a boost from data showing that the amount of crude oil in storage has fallen in recent weeks. On Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell by 2.4 million barrels in the week ended Oct. 27, extending a trend. The reserves are going down because exports are going up.


Oil production in the U.S. has risen almost 13% since mid-2016 to 9.5 million bpd. We can compare the reserves going down with the production. Exports increased from 750’000 to 2’000’000 barrels in 2017. Production itself was not enough to cover the exports, so that’s one of the reasons why the reserves are going down.

Pipeline Projects

At present, pipeline capacity to transport crude oil from production fields to refineries is under capacity. Many projects have emerged and the five largest are represented on the map. The goal is that there is no bottleneck during shipping and especially easier access to the seaport so that oils can access the international market more easily. Donald Trump supports these projects, but he faces a lot of resistance from the ecological association and the population living in these lands.

Spread WTI – Brent

In September and October 2017, the difference between domestic and foreign crude oil prices has risen to the highest level since 2015. In the past, price differences between West Texas Intermediate (WTI) and Brent crude oil led to changes in crude oil supply for petroleum refineries in the U.S. East Coast region. However, recent price changes are not expected to affect East Coast crude oil supply unless the gap continues and widens.


Our recommendation for the next 3 to 6 months is mainly to long the North American crude oil, because of the advantage it is taking in front of the Brent.

In fact, the competition is in U.S. favour. The Brent price is currently going higher in comparison with the WTI so the demand of NA crude would probably be more important in the next month, which will lead to a higher price. So we think the spread getting bigger will not last very long



Forward curves


Major event:

Prince of Saudi Arabia announced to maintain supply cut of crude oil in order to increase the value of Armanco, a future listed company. This announce goes in line with Vision 2030, the diversification strategy of Saudi Arabia. Consequently, crude oil price went up to reach 2-years high.

Gasoline spot price US and EU:

Unit variation between US and EU US gallon = 3,78L.

US spot price variation of gasoline:

Forward curves RBOB US & ULSD EU:


Gasoline: as represented in the graph on the above-left, we can observe a high peak in the demand for the April contract, which reflects the beginning of the summer driving season where people (especially in the US drive a lot and so consume a lot of gasoline) and then the lower price reflects the winter demand that is quite low as people drive less.

Diesel: There is almost no seasonality, except a small increase in December where the demand increases because of the demand for heating oil (which is essentially diesel without the sulfur limit).

RBOB & ULSD Futures prices:

RBOB prices rose by 21 cents/gal from October 2nd to $1.77/gal level on November 2nd. The RBOB-Brent crack spread (diff. between price of RBOB and Brent crude oil) rose by 11 cents/gal over the same period to 33 cents/gal. Following Hurricane Harvey, the RBOB-Brent crack spread* returned to seasonally lower levels which usually occurs because winter-grade gasoline is cheaper to produce for refineries.  EIA estimates US gasoline consumption for October at 9.3 million b/d.

ULSD prices went up 9 cents/gal from October 2nd to $1.85/gal level on November 2nd. The ULSD-Brent crack spread declined 2 cents/gal over the same period to 41 cents/gal.

US market Inventory

Inventories level of gasoline went down by 4 million barrels from last week to 212.8 million barrels, (in the middle of average range). Diesel inventory went down by 0.3 million barrels from last week 128.9 million barrels, (in the lower half of average range). Production level of gasoline went up by 2.8% however, Diesel went down by 9.3% from same period last year.


As we can see on the forward curves the prices of futures contract are going down (Backwardation) this means the right time to sell is today (higher price than in the future). The switch from contango to backwardation could be explained by the reduction of inventory level of crude oil and future supply cut of it.


Copper Price

Copper price has reached a three-year high record last month at 7.073$ per ton. During the past year, copper price has gone up by +30.16% and is expected to steadily rise. As of today, 7th November 2017, it is priced at 6,826$ per ton.

However, Copper price is currently experiencing pressure from the weak China trade of October due to rigid financial condition, as well as pressure from the strong dollar appreciation. As China is the major importer and the commodity is priced in USD, these factors are affecting negatively the commodity’s price in the short-term.

Source: Bloomberg

Moreover, we can observe a contango situation, as the spot-cash price is lower than future prices.

Copper supply and demand

On average, copper demand is currently high. As seen on the link below, the inventories of copper are decreasing.

However, this high demand causes as previously mentioned a higher price. Due to this reason, China’s import (China is the biggest copper importer) are lower this week but still higher than last year; 330’000 tonnes at the end of october 2017 compared to 290’000 tonnes at the end of october 2016.

On the Supply side, BHP Billiton, the world’s largest copper Miner is willing to increase copper resources in their portfolio. As the demand is high and inventories are going lower, it I s believed that a possible shortage at the beginning of the next decade. The company is willing to invest 2.5BN USD to expand their Spence Mine in Northern Chile.

On a long term run, copper producers are willing to invest in the commodity due to a surge in demand in Electric Vehicles (Copper being one of the main component). Currently, the total of EV’s represents an 1 million vehicles over a total fleet of 1.1 Billion (Estimated by BHP). The total could rise to 140 millions EV’s in 2035. This rise of EVs will lead to a rise of copper price in a long term run.

Furthermore, along with the copper price increase, miners except higher revenue on the commodity.


Traders currently think that the price should rise, so they are taking bullish positions.

As we are in a Contango situation, we would recommend to go long on physical positions and short on Futures.



Bloomberg (2017) Copper Traders Are Making High-Flying Bets About the Future of the Metal [online] Available at:

Metal Bulletin (2017) Base metals under downward pressure as China’s trade data disappoints [online] Available at: (2017) BHP $2.5bn expansion of Spence copper mine in Chile approved [online] Available at:

Adam Webb Market Intelligence (2017) Copper profit margins to continue improving [online] Available at:

Smog in China:

1.  Price

This historical price graph depicts the price per ton of aluminum for the last 4 months. The tendency is an increase due to Chinese government decision to reduce aluminum production during winter (starting in October) by 30%. There had been rumors in the market since April, and this augmented speculation on the commodity. In August, this information has been confirmed by the China’s state council meeting, which explains the upward trend in this period.

On this graph, we see the prices express in USD per ton for the last 3 weeks. In October 18th, the aluminum reached its highest price in the last 5 years. It is a highly volatile market; however, we have observed high prices in comparison of the average price of the previous years. We know that in November 1st, China had already started to cut its production this could explains the peak of 2187 USD/ton.

Forward Curve

Bloomberg (2017) Bloomberg Professional [Online]. Available at: Subscription Service (Accessed: 8 November 2017)

The forward curve for aluminum is contango. Even though the inventory level is decreasing, we see that the market is still well supplied as we have a “normal” forward curve. This could be explained by the storage cots.

2. Supply and Demand: Inventory LME level

LME, 2007. LME Aluminium Monthly Overview – Oct 2017 [document PDF].

Aluminum LME Warehouse Level are decreasing since October. This is explained by the production cut undertaken by China this winter. As they produce 60% of the global supply of aluminum a cut in production of 30% is significant. Investors speculation may have led to an increase of demand in aluminum in the beginning of October.

China’s winter aluminum and alumina productions cuts

Aluminum smelters in 28 northern cities must cut their production by more than 30% during winter (from October to March). According to Reuters calculations, the cuts over 3 months would reduce China’s aluminum output by 17%.

President Xi Jinping, declared at the opening of the CCPC last month that these measures will be implemented every winter from now on.

3. Recommendations

Our recommendations for the next 3 months are:

  • Physical position: long
  • Hedging position: short

Camille Badollet, Senait Hailu, Bryan Merryweather


REUTERS STAFF, 2017. “LMEWEEK-Aluminium producer margins hit by high input costs –Rusal”. Reuters (online). 3 November 2017. (viewed 5 November 2017). Available from:

KOCIENIEWSKI, David, 2013. ”A Shuffle of Aluminum, but to Banks, Pure Gold”. The New York Times (online). 20 July 2013. (Viewed 4 November 2017). Available from:

BURNS, Stuart, 2015. “Falling Exchange Inventories Don’t Mean a Tightening Aluminum Market”. Metal Miner (online). 14 December 2015. (Viewed 4 November 2017). Available from:

WANG, Yanchen, 2017. “China gears up for hefty aluminium production cuts” Financial Times (online – subscription). 2 November 2017. (Viewed 3 November 2017). Available from:

DALY, Tom, 2017. “China’s early winter smelter cuts boost prospects for “blue sky” Congress”. Reuters (online). 29 September 2017. (Viewed on November 5). Available from:

BURTON, Melanie & LIAN Ruby, 2017. “China orders aluminium, steel cuts in war on smog”. Reuters (online). 1 March 2017. (Viewed on November 7). Available from:

LME – LME Aluminium Monthly Overview – October 2017

LME, 2007. LME Aluminium Monthly Overview – Oct 2017 [document PDF].

Bloomberg Terminal – consulted on November 8th 2017

Bloomberg (2017) Bloomberg Professional [Online]. Available at: Subscription Service (Accessed: 8 November 2017)

Price recap

Coal price in USD/Metric Tons (2012-2017)

Price decrease from 2012 to 2016:

  • Falling demand from main consumers (China and US)
  • The shift towards cleaner energies

Coal price in USD/MT (2016-2017)

Price variation 2016-2017:

The Chinese government has taken measures to reduce oversupply, pollution, and keep control over price.

  • Reduce miners working days from 330 to 276 days/year
  • Closed 1000 coal mines (2016)

In 2016, the mining capacity was cut by 280 million MT and should reach 500 million MT by the end of 2020, which represents 4,300 coal mines.

Australia coal Price in USD/MT



India is the 2nd largest consumer, importer and producer of coal. In 2016, India consumed 922 Million MT, imported 218 Million MT and produced 704 Million MT.

Since September 2017, India’s imported demand of steam coal has increased. It is imported from Indonesia, Australia and South Africa.

  • Power plants are in shortfall in stocks because companies did not build up stocks, despite recommendation from the Central Electricity Authority
  • Coal stocks availability at power plants average: 6 days
  • Supreme Court banned use of Pet Coke (cheaper alternative to coal) in New Delhi to reduce air pollution


China is the 1st consumer, importer and producer of coal. In 2016, China consumed 3,546 Million MT, imported 231,5 Million MT and produced 3,210 Million MT of coal.

  • Insufficient output

Forward curve generic 1st Newcastle

Source: Bloomberg

As of November 8th, 2017, the forward curve shows that the coal market is in backwardation, which indicates that it is bullish (i.e. less supply than demand) at the moment. The price is expected to decrease in 2018-2019, mainly due to the shift towards cleaner energies.


Even though the price trend is increasing, the price of coal is expected to decrease since the market is currently bullish, according to the forward curve.

  • Recommended physical position: short
  • Recommended hedging position: long

However, these recommendations can affect the supply/demand ratio and alter the “predictions” made above, so these recommendations are only valid as long as the forward curve shows backwardation.


THE ECONOMIC TIMES, 2017. Coal imports up 10% in September as power plants face fuel shortage [online].  [Consulted on 1st November 2017]. Available at:

ENERDATA, 2017.Global Energy Statistical Yearbook 2017 [online].  [Consulted on 1st November 2017]. Available at

TRADING ECONOMICS,2017. Coal. [online]. [Consulted on 2nd November 2017]. Available at:

YCHARTS,2017. Australia Coal Price. [online]. [Consulted on 2nd November 2017]. Available at:

FOREST, Dave, 2017. Coal Prices Soar As Demand Heats Up. [online]. [Consulted on 2nd November 2017]. Available at:

1. Crude Palm Oil Price

On Wednesday 1st November, crude oil price reached its highest level since 2015. It influences the price of crude palm oil since palm oil is used as a component in biofuel as a substitute to crude oil products. Indeed, we can observe a rise in crude palm oil price during last weeks.

(Currency : RYM per tonnes)

2. Supply and demand

  • The demand for October is high due to two major importers India and China who are rebuilding their low stock level.
  • Exportation of Malaysian’s crude palm oil rose of 2.3 % compare to September.
  • The production in the first 3 weeks of October rose by 10.5% compare to September

3. Price of competing vegetable oils

An article on the following website, (c.f source) shows that FAO did every month a measure of food prices. It says that prices for food has increased in September 2017, especially because of the vegetable oil and mainly the palm oil prices.

The FAO (food and agriculture organisation) make an index every month to measure the changement in prices of a basket food commodities. Indeed, the highest increase came from vegetable oil. ( an increase of 0.8 % from last month and 4.3 % from last year, September 2016)

1) Palm oil: Low production output in Southeast Asia and demand remaining high. Because of that, inventories in importing countries such as India and China were low.

2) Soybean: Prises roses because of a slow start to the planty season in South America. Price are higher than the expected soybean harvest.

3) Rapeseed and Sunflower: small contribution about the index of FAO but prices remain more or less the same.

4. Weather patterns

About the weather, there is a meteorological phenomenon called “la Nina” who started in September, it’s brings heavy rain in equatorial countries so it will affect strongly the production and the price of the oil of palm. If “la Nina” sets in as the Palm Oil Price will increase without doubts.