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février 2017
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  1. Aluminum price :

First of all, we can see on this graph the price of the aluminum. If we focus between the 6th and the 14th December, we notice that the price increase due to the fact that the inventories decrease. Indeed, if we look at the inventories, the aluminum already produced is sold to be able to fill all the demand of the market.

Another explanation of this increase of the price can be the raise of the cost of production. The producers have to sell the aluminum at a higher price because it is higher to produce it.

2. Inventories level :

As we can see, The inventories follow the slope of the aluminum price for the first half of December, which indicate us, that in short term, there was not enough supply to satisfy the increasing demand (or the supply was decreasing) and so the market had to tap in the inventories. This market in functioning well regarding to the basic economic principles.

3. Forward curve :

As we are in an oversupplied market, we are not surprised to see the same forward curve then is the previous bulletin, contango. The Slope is pretty flat in the 6 firsts month, that is always the same logistical problem.*0/all-futures#/

4. Recommandation

As we exposed on the previous newsletter, we have two majors’ components for the future in term of demand. In one hand we have Chine who keep it’s inside demand grow thing with a discount on car taxes. On the other hand we have the Trump who says that he will invest massively (500 billion USD) in infrastructure in order to make America competitive against China. So demand for aluminum will probably keep going up. Our recommendation is to stay long.

Bess, Adrian and David

Sources :

“OPEC, U.S. begin ‘cat and mouse’ oil game”


The month of december started with an increasing production as of the 16th of december, reaching 8’786 mbbl/day. It is an increase of 87 mbbl/day compared to the end of November, but smaller compared to last year and two years ago.

Supply & Exports

U.S refiners net input of crude oil helps use approximate the consumption of petroleum. December highlight an increase in consumption of 375 mbbl/day compared to the end of november. The consumption is also relatively low compared to the last two years.

The exports remain quite similar to november’s, with an amout of 557 mbbl/day as of december 16th. This number remains quite small compared to the U.S stocks and production, but data shows that the U.S is a greater exporter of Petroleum products, with 4’874 mbbl/day exported as of december 9th.

Ending stocks

We observe no great relative fluctuation in the stocks, which decreased to 1’178’277 mbbl from 1’183’230 mbbl at the end of november.

WTI Crude Oil prices (NYMEX) in USD/Bbl From Dec 5th 2016 – Dec 22nd 2016

Source: Bloomberg

Oil prices at their maximum since last 2 years because of OPEC’s agreement. Price decrease at the end of 1st week of December as OPEC’s oil output hit another record high in November, rising to 34.19 million bpd from 33.82 MMBbl/d in October. Russia’s daily oil production averaged 11.21 MMBbl/d in November, the highest in nearly 30 years. December 7th prices went up because of investors’ hope on week-end meeting b/w Opec & Non-opec & oil finally reached 53.70 $ as agreed output cut of 558’000 Bbls from Non-opec. Prices drop on December 13th because of a stronger $ after the Federal Reserve raised interest rates for the first time in a year. Prices rose again on December 15 because of 2.5 MMBbl drop in US crude inventories. U.S. crude stocks unexpectedly rose by 2.2 MMBbl this wednesday according to EIA but market didn’t react yet.

Forward Curves’ from 1st to last bulletin:

Forward curve is Contango. Slope is quite same as last 2 bulletins except during January – February is getting flatter. For the following months slope is slightly steepened corresponds to incentive to store. We notice that curve is not reacting as much as prices, as additional supply cut of 558’000 Bbl should be compensating by other countries such as US & Libya.

Forecast :

Worldwide consumption in 2017 is still expected to increase from 95.33 MMBbl/day to 96.67 MMBbl/day.

However for the second quarter of 2017 price forecast raised to $57.50 barrel from $55 a barrel for U.S. WTI and also for the Brent to $59 from a barrel from $56.50 a barrel. Due to a potential increase in oil production from Libya and a strong dollar future remains around $52 a barrel for January. We expect 84% of compliance to the OPEC and Non-OPEC cut output agreement  of 1.6 MMBbl/day meaning a balance beyond the first half of 2017.

Canada’s Prime Minister said on Wednesday at the Calgary Chamber of Commerce that he confirmed that Donald Trump was “very supportive” of TransCanada Corp’s proposed Keystone XL crude oil pipeline. The 830,000 barrel/day pipeline would carry oil sands crude from Alberta to the U.S. Midwest.



Since our last bulletin the price of the iron reached 83 $ per metric tons then it has decrease and now sit around 80$ and 79$ and it will maybe slowly decrease again because of the winter (there is less construction done because of the weather).

Iron ore:

The Brazilian producer vale has open a new mine considered the biggest mine in the iron industry. For the producer it will add another 90 million tonnes per year to push his capacity to 400-450 million tonnes per year. This new is not really a good one because the market of iron ore is already well supply (more supply than demand) so adding more product one the market will most likely make the price decrease.

Steel: the world against China’s Steel

Steel exportation might be in difficulties for China because of some anti-dumping investigation in progress to see if the biggest producers of steel had sold his product at an unfairly low price in Europe. The US Department of commerce is now investigating transhipments of Chinese steel products from Vietnam

In India they have extended the minimum price for the importation to fend off against the low steel price of China.

In the US the fall of Chinese exportation and the increasing price of the raw material plus the election of Trump made the local steel (US) price increase.

China’s production:

As you can see, the forecast of cars production is bullish, that’s mean that the demand of steel will increase and the price of the material too.

As we said in the previous bulletin China has plan to reduce his production in order to reduce the pollution and make the price of the commodity increase and also make the local steel mill more competitive again (Hebei for example main province of steel and iron production plan to cut 18 million tons of iron and 19 million tons of steel).

To make sure that the steel mill are respecting the quota, the government sent several inspectors because they have notice that some mills where cheating and tried to profit from the rising price.

China’s goal for 2016 was to reduce the steel production by 45 million but instead it has been reduced by 88 million.


Seeing what is happening to price and because of the winter season beginning we recommend to be on a Short position for the iron ore.

Concerning the Steel it is the opposite because of China’s cut plan, the price will still increase and so we can still be on a long position.

Sources :


To suspend or not to suspend


One month Nickel price
The Philippine government announced on December 15 that it had cancelled the environmental compliance certificates (ECC) of two nickel mines that did not respect the international standards. Ten mines (not all nickel) have been halted and about 20 face suspension. Decisions are going to be announced in January for them.  After the Philippine’s decision, the ton of nickel fell to 10’300$ per ton. But, if you look at a graph  over the past 60 days it is obvious that traders are uncertain whether to bid the metal higher, or push it lower, while politicians in the Philippines (and Indonesia) decide whether to encourage or discourage nickel exports to China.

Inventory Levels

Since october Nickel stock level has increased, nevertherless global deficit will reach 67’000 tonnes and is expect to rise up 93’000 in 2017. According to UBS this deficit will increase the price over the to  $11’200/ton in 2017 and $12’0007ton in 2018. On the other hand the LME expects the price to decrease due to a lot of inventory (holding 23% of of the global annual consumption along with Shangai future exchange. All in all, no one really seems  know how the market will behave but one thing reamins certain : shortage will intensify.

Restocking in nickel has taken place because of improved demand while supply were facing disruption from the Philippines since October. On the 19th December, stocks reached a 371’286 tonnes 6 months high.


V- axis : USD/MT



Overall base metal prices weakened during the last week. Zinc faced the bigger drop.

December 14 Zinc price : 2738 USD/Mt

December 19 Zinc price : 2632.10 USD/Mt

Since 2016 is gently coming to an end, lets have a look at the behaviour of Zinc this year. Generally, Zinc has not seen such bullish prices since 2007 where the price was just a little over $1000/MT. Today it is arround 2.5 times more than what it used to be.

The main drivers that allowed such price increase is the strong chinese buying and the supply tightness due to mine shutdowns.

Inventory level

Thus, the current price is a good incentive for producers to increases production. For instance Glencore plans to relaunch the production of 500’000 tpy of capacity mines that it had to close in 2015 when prices where below $1700/tonne, but not until 2018.

Actually, Chinese authorities in charge of the environment are investigating in zinc producers in several majors provinces in order to take a decision which refineries are going to continue producing or not. Some of them were closed.


V-axis: USD/MT

Corn Ending stocks


In this table, there is no difference between the ending stocks of November and December. Indeed, this month ending stocks was at 2,403 Bushels above the 2,414 expected by the USDA but in the same level than November. The situation for the stock to use is similar 16.4% for the two last months.


In a global perspective, there is an increase in Ending stocks in December from 218.19 to 222.25 and It is mainly due to an increase in production. Then the level of the stock to use ratio has increased from 0.3%.

Corn price

As we said in our precedent bulletin, the corn market price is low comparing to the previous year. The reason is that the high record corn production this year and the strong dollars put pressure on the price. In December the price has slightly increased and it is due to the high demand. Indeed, a strong usage and exports are supporting this increase despite the large harvest.

Sources :


The graph above show that the corn forward curve is in carry until mid 2018. The price has risen since August from around 3$ per bushel to 3.6$ today, added to the forward curve, our recommendation is to be long because we are expecting that the price will increase at least for the next year.

China corn exports

China is keen to resume corn exports for the first time in around a decade as farmers turn to cheaper sorghum for animal feed and stock corn stockpiles grow at home. Indeed, the amount of corn grew and the price increase under government price support for farmers. Since the program was abandoned in October, the surplus is between 150 million tons to 240 million tons. China exports can have a big impact on the market price and some country like Japan can change the rule in the global corn markets imports. Most of the corn imported in Japan come from USA, so an entrance of China in the global market could cause some problem to an other big producer United States of America.,103.5176745,4z/data=!4m5!3m4!1s 0x31508e64e5c642c1:0x951daa7c349f366f!8m2!3d35.86166!4d104.195397?hl=fr

Sources: inventory-swells price/ report-december-8-2016 forecast


Since our last bulletin, the price of cocoa kept falling. On December 9 2016 it reached £1698, the lowest since September 2013.

There is an abundant supply of cocoa and better logistics to port which leads to the biggest surplus in 6 years. Cocoa port arrivals in Ivory Coast are gradually catching up with those of last year. They were down by 7% since the starting of the main crop, from 506’000 tonnes last year to 470’000 tonnes in November 27 2016. However, between November 21 2016 and November 27 2016, arrivals outnumbered those of last year by 43’000 tonnes.

It rained in most of the cocoa growing region of Ivory Coast last week which will boost next year harvest. Ivory Coast is entering its dry season but Harmattan has not appeared yet, which is a good thing for cocoa growing.

Demand, on the contrary, has decreased. The two biggest consumers of the snack food industry, the US and Europe, are turning toward healthier alternatives with less sugar. Moreover, manufactures were also seeking alternatives to cocoa to counter 2015 high prices.

Forward curves

In terms of slope, the shape of the forward curves did not change much. It is still more or less neutral when considering the 3 first months, as the market still does not know if supply will be totally sufficient. However the spot price went down from $ 2’440 to approximately $ 2’230. Over July 2017 the market is in carry, which indicates good supply levels. The slope of this new forward curve is very good as it gets sufficiently steep to cover storage and interest costs. The market gets an indicator to store but later only, because until July the differential does not cover the cost of storage.

Our recommendation is to keep going short for the upcoming weeks, until the slope of the forward curve improves (gets steeper).

Cocoa futures characteristics

Key events to follow

  • During the week of November 28, Brazil government and farmer’s associations discussed a plan to increase their production to 300’000 tonnes in five years and to 400’000 tonnes in 10 years.
  • Whether the Harmattan will be strong or not. If the harmattan becomes strong, it will destroy the small pods and dries out the soil which will leads to low bean quality and lower cocoa output.


Gold (precious metal)

Bulletin 16.12.2016

Week 26th November to 16th December 2016

Starting up where we were three weeks ago, the trend started last month continued, with a falling gold price. The price broke its 1’200USD/oz last month and sits today at around 1’160USD/oz. We were therefore right to recommend being short on gold until the FOMC meeting on Wednesday 14th of December. Everybody is still waiting for Janet Yellen (US FED Chair) to raise interest of 0.25%. The strong economic indicators show that the US economy might be ready for an increase of the rates:

- The Unemployment falls to 4.6%, the lowest since the financial crisis of 2007-2008.

- The annualized growth rate of the US economy for the third quarter of 2016 increased to 3.2, higher than expected

If the Fed decides to raise the interest rate, this could help the price of gold to inverse the tendency. The new support to look carefully is 1154.75USD/oz. Although we do believe that the FOMC will raise the interest rate, we do not believe in the hypothesis that it will support the price of gold:
- The rate increase is expected to be “only” 0.25%, not really a big deal
- The US economy grows vigorously, and we will normally see an increase of the inflation that will pressure the price of gold, as it is traded in USD

For all these reasons, we do not think that the price of gold will rebound, and expect it to continue to decrease slowly until at least the end of the Christmas rally.

Breaking news (15.12.2016):

As we expected, the Fed increased the interest rate by 0.25% up to 0.75%.

This has resulted in the fall of the price of gold. We then will keep our recommendation on being short gold until new year.

However, the dollars went up after the announcement of the Fed, which is in our opinion due to the fact that the market had already integrated the news, as everybody was talking about this meeting and the increase since many months.

The above chart is the price of physical gold in American dollar ($) for a troy ounce (oz: 31,1034768 grams) that takes place in London twice a day.

As we can see the forward curve remains a contango. According to the current trend, the price of gold is still dropping and went down by approximately 40$ from January to December 2017, 23$ for February 2018 and 22 for June 2018. This decrease is due according to us to an oversupply coming from important sales which have made the price drop.


Overview of World’s Cotton supply, production and stocks.


The largest revision in this month’s USDA report is related to production. The figure for the global cotton harvest was lifted about one million bales, from 22,486 to 22,695 million. At the country-level, the biggest changes were for Australia (+500,000 bales) and the U.S. (+362,000 bales). The production of the main producer India is still at the same level than when we did our last bulletin, the cash crunch is partially resorbed but not enough to have a real impact.


The consumption is still stable even if we have a small decrease compare to our last bulletin. Like we said before the consumption is higher than the production and can lead to a increase of the price.

Ending stock:

There is an increase on the ending stock due to the rise of the production like we saw just above.


12 December 2016 Monsanto Company announced at the Deltapine New Product Evaluator (NPE) Summit the commercialization of its new Bollgard 3® XtendFlex® Cotton, the first commercial cotton product ever with full federal approvals for the trait and in-crop herbicide system to combine three modes of action for both lepidopteran insect control and herbicide tolerance. This new kind of cotton can greatly increase the production of cotton in the coming years.

Price movements

Since our last bulletin, and with the supply issue in India related to the cash crunch and late harvesting in some regions that affected the price, the India cash crunch is partially resorbed as at 12 Dec 2016. However, it is still on a higher level than before this event, around +2% from 15 Nov to 12 Dec 2016. The OPEC meeting on 30 Nov 2016 may have affected the cotton price as well.

Forward curve (Cotton No. 2 Futures Specifications)


    Comparison period: 18.11.2016 – 09.12.2016

The forward curve is in carry from March 2017 to May 2017, which may be explained by a well-supplied situation and an incentive to store however after May 2017 we are in situation of inverse where there is an incentive to deliver the cotton. For example for July 2017, the contract has become less expensive since the last bulletin, around -4.3% which may mean that delivery and production deadlines have been positively reviewed and that the cotton in July 2017 may be better delivered than what it was since the last bulletin (i.e. 3 weeks ago).

Key point(s):

- According to Agrimoney (2016), synthetic fibre competition has to be taken into consideration for cotton. We therefore have to look at the cotton prices in the future if they are impacted for example by the prices of oil.
- Future oil prices following the agreed cut in production of OPEC, as synthetic fibre is composed of oil.
To conclude, as we have seen above the production and ending stocks are a little bit higher than the previous period while the consumption has no particular change, so we assume that cotton prices may decrease slightly in the next couple of weeks, with the hope that there are no any major event that could affect the prices, and therefore recommend to be short.
Stefan Zgraggen, Agron Etemi, Justin Nangmo


    Agrimoney (2016) [Online] Available from:–10242.html

    [Accessed: 12 December 2016] (2016) Cotton CT#2 @NYSE Quotation [Online] Available from:
    [Accessed: 12 December 2016]

    Cotton Inc. (2016) Cotton monthly Economical Letter [Online] Available from:
    [Accessed: 12 December 2016]

    ICE. (2016) Cotton No. 2 Futures | ICE. [Online] Available from:

    [Accessed: 12 December 2016]

    IndexMundi. (2016) Coton – Prix par jour – Prix des matières premières. [Online] Available from:

    [Accessed: 12 December 2016] (2016) Futures Forward Curve [Online] Available from:
    [Accessed: 12 December 2016]

    USDA/FAS (2016) Cotton: World Markets and Trade – USDA Foreign Agricultural Service
    [Online] Available from:
    [Accessed: 12 December 2016]


The end of the year is approaching and the coffee futures price has fallen sharply since mid-November and remain in a bearish trend. Several factors can explain this move:

(1st) Hedge Funds cut their net long position in Arabica coffee by more than 13’980 contracts from Nov 29 vs Dec 6 (biggest move in 15 months) in order to take some profit (and improve their yearly profitability). According to Barclay, the average return of all hedge funds in their database has reach 5.24% by the end of November 2016.

(2nd) The weather has been excellent this year in the main producer countries. Brazil has had favorable weather to grow the Arabica (2.91m bags of 60kg); Columbia has had excellent condition as well and announced this week the largest monthly production number since 1998 (1.65m bags of 60kg). Vietnam has recovered from a difficult dry period and rain was adequate in August, this helped the coffee to recover (2.41m bags of 60 kg).

(3rd) The Real currency. The latest decline in the USD/BRL (5%) is mainly due to the Donald Trump election. However, the Trumps policies are willing to increase three times the US interest rates in 2017 which could draw capital away from others countries.

The accumulation of all these three factors in the market has led to a bearish situation for ending the year 2016.


Price forward: November 2016 vs December 2016

-        Forward curves are carry, coffee is not so affected by seasonality, only a slight increase in price after September, probably due to the end of the harvest season in Brazil (April-September). However, we can see that the price ranges have decreased (from 160-185 to 135-165).

Volume forward curve: November 2016 vs December 2016

-        December’s contracts are out of deal as they are in the delivery process right now, eyes moved on March where all the contracts demand stands. Then, the slope represents the number of contract which are smaller. Investors are not yet focused on these contracts.


Prices of both Arabica and Robusta are following the global bearish trends, especially due to a good production in the main producer’s countries, but also because of the global market situation (hedge fund, currency impacts).


Regarding the currencies, BRL/USD has gained few pips after the Trump’s election where the currency had lost 5%. However, the background trend is bearish. USD is going to be stronger in the upcoming months.


As expected, the surprising US elections has weakened Latin American currencies, like the Real, creating a bearish sentiment in the market. Interest rate (as expected) rose in the US and they want to rise it 3x in 2017. Money could draw capital away from others countries, such as Brazil.

Nonetheless, due to the currencies situation in producers markets, the weather and the behavior of the major players in this market, we recommend to sell coffee for 2017.

By: Nghia Bui, Nicolas Sliwowski, Fabien Tassy


Price movements :

The fall in sugar’s price from November 30 is mainly due to the fact that investors are liquidating their positions in a commodity, which doesn’t show anymore a bullish performance. The net variation over the last week was -41’000 contracts in the New-York future market. Moreover, it is predicted that supply will continue to grow next year but on the other hand demand is going to be lackluster.

From the 1st of October the EU removed all quotas on sugar production, which will probably lead to an increase supply since it’s a pretty easy and profitable commodity for farmers. In France the production is expected to rise by 20%.

The decrease in value of Brazilian real against the American dollar continues making exports from Brazil cheaper. Brazil exported 2.628 mln tones of sugar in November representing an increase of 421 mln tones compared to October.

Nestlé announced that by next year they are going to start implementing a new technology allowing them to reduce by 40% sugar in all their food-beverage products.

Switzerland :

In Switzerland 14% of the farmers producing sugar beets will quit this culture since the price are falling because of a world over production and the abandon of the quotas from the EU. This year the harvest is not sufficient and the country will have to import either beets or refined sugar.

Brazil :

Brazil’s production is forecast to rise 3.1 million tons to 37.8 million on favorable weather and a higher percentage of sugarcane (forecast at 45% compared to 43% the year before) being diverted toward sugar production instead of ethanol. Exports are projected up 2.8 million tons to 27.1 million on greater exportable supplies and higher demand from markets such as India and Indonesia. Consumption is down slightly on lower consumer purchases of processed foods.

India :

India’s production is forecast to drop 3.6 million tons to 23.9 million due to lower area and yield. India is the world’s largest consumer with consumption forecast to rise marginally to a record 27.2 million tons.

China :

The market had depended on China to be a large importer and continue to take sizeable quantities. This season, the situation has turned upside down with Chinese sugar production faring better than expected while at the same time China is choosing to start to auction off reserve holdings. China’s production is forecast up 700,000 tons to 9.5 million on higher area and yields. Consumption is forecast flat.

Forward curves :

The curve is inverse and prices decline over time. Future supply is expected to be abundant.

The actual forward curve is still inverse but with two flatter periods around October 2017 and October 2018.

This graph shows us that 50% of the sugar is traded in Switzerland whereas New York, Chicago, London are the major hubs for derivative products. However, the commodity does not come physically on our national territory.

This graph represent seasonality of the sugar n°11 future curve either on a period of 15 years or on 5 years. It shows the average variation to the price through the year with a base 100 at 1st January. The main harvest in Brazil takes place between April and July explaining the price fall during this period.

Sources :—sugar-exports-surged-to-2.6-mln-in-november-2016–1.htm—beet-sugar-output-to-rise-20-in-201718–1.htm—nestle-s-new-technology-to-cuts-sugar-content-by-40-534497.htm—but-sugar-output-to-rise–10191.html—but-will-it-last–10211.html–10183.html