Category: Uncategorized

Copper price to a 7-month high:

Low stocks and Chinese demand in the second quarter boost the prices of copper to a 7-month high. Indeed, last week, the LME copper price ended at $6,405 its highest since July 2018. This is due to the low inventories, the LME warehouses reached 139,500 tonnes, close to the 10-year low of 122,500 tonnes in December 2018.
The reason the depleting inventory is the seasonally strong demand of China as well as the resolution of the trade dispute. Demand is typically high in the second quarter as the third quarter is the period in where construction activity rises in China.
The global demand is estimated at 24 million tonnes and nearly half of it will be consumed in China. The country is also expected to stimulate its economy using new monetary and fiscal policies. An indicator of the future economic activity in China is the new loans. Loans hit a record of 3.23 trillion yuan ($481 billion) in January as policymakers tried to boost the decreasing investment in the country and prevent the economic slowdown.
Concerning the trade dispute, President Trump said on Tuesday last week that talks with China were doing well and even suggested to extend the deadline of March 1 to complete the negotiation.
Citi is expecting the price to rise to $6,700 a ton over the next 3 to 6 months.
The premium for cash over three-month contracts hit $58 a tonne on Monday which is the highest since October as the market worried about the short-term availability of the commodity, however it now stands around $23.15 a tonne.

https://uk.reuters.com/article/global-metals/metals-low-stocks-propel-copper-prices-to-7-month-high-idUKL3N20F366Inventory:

Copper’s inventory level at the LME’s warehouses almost reached the historical low end of December. As demand is increasing, the price do so and therefore it is a usual phenomenon that these inventory decrease. Nevertheless, the very low level brings insecurity regarding the supply side, as constructions in China are going to start again in the 3 quarter and big lots are to be order soon.
Indian rise in demand:
The rise of price of copper is also supported (in a smaller extent than China) by the rise of demand in india. Indeed, the Indian’s consumption has been rising significantly over the past decade. In 2018, the annual indian copper consumption was 650’000 tonnes. According to the asian copper conference in Shanghai, the copper demand in india will double by 2026. The Indian’s consumption is expected to rise to 1.433 million tonnes by 2026. India has forecasted its nation refined consumption to hit 843’000 for 2019. This is 200’000 tonnes more than in 2018.
Even more interesting, this assumption is not taking into account the fact that electrical vehicles will become more copper intensive into the future.
To conclude, it seems that nothing suggest that the price of copper will decrease anytime soon. The Chinese continues to increase its demand for copper, especially for this third quarter. Inventories are historically low and no change are forecasted into a near future. India’s copper demand is rising at a rapid paste.

https://www.reuters.com/article/china-copper-birla-copper/birla-copper-sees-indian-copper-demand-doubling-by-2026-idUSL4N1XQ1DS

Forward curve
Backwardation: In February, the trend in the 3-month future price shows that there is shortage on the supply side as the spot price is higher than the future price. It is quite a logical fact as the market is bullish (hot). As we can see on the table below (data the 28.02.19), the current cash price was increasing until 6545$ (01.01.19 – 25.02.19) before decreasing a bit to 6470$, and then increase again until 6532$.

Henry Hub Natural gas Spot price

Million Btu stand for million British Thermal Units.

We can observe above the Henry Hub Natural Gas Spot Price from 16 Jan to 11 Feb. A small reminder for ones coming back from holidays, Henry Hub is the US benchmark for natural gas and considered as the biggest natural gas hub.

On 4 Feb, the price went down to 2.54 (2540) USD per Million Btu which is quite impressing as the price didn’t fall at that stage since almost 1 year ago on 16Feb 2018. Since 3 years, the lowest price of LNG ca be found in the month of February. Therefore we can explain this fall to a seasonality trend. 

What represent British Thermal Units. 

First of all, below some acronyms to understand better their meaning. (US Energy Information Administration)

Btu—British thermal unit(s)
Ccf—the volume of 100 cubic feet (cf)
M—one thousand (1,000)
MM—one million (1,000,000)
Mcf—the volume of 1,000 cubic feet
MMBtu—1,000,000 British thermal units
Therm—One therm equals 100,000 Btu, or 0.10 MMBtu

Used as a unit of measurement for natural gas prices, Btu is the Amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit in practical terms, the amount of heat generated by one lighted stick of match. So we understand that it’s a representation of energy.

The heat content of natural gas may vary by location and by type of natural gas consumer, and it may vary over time. We can see the similarity with oil where the quality will change in function of the location. Therefore it’s important for Consumers/buyers to inform themselves about the natural gas distribution companies or natural gas suppliers for information on the heat content of the natural gas they are supplying. Some natural gas distribution companies or utilities may provide this information on customers’ bills.

Forward curve

According to the natural gas’ historical prices from the website “Market Insider”, we could see that the spot price dated 15^thFebruary 2019 amounts to USD 2.63per mmbtu (one million British Thermal Units available at https://markets.businessinsider.com/commodities/historical-prices/natural-gas-price/usd). 

As seen in the prior bulletins, the worldwide demand for natural gas and liquefied natural gas raises during the winter season. Being close to the end of the winter period, we could assume that the worldwide demand for natural gas and liquefied natural gas will decrease, mainly for the production of heat. A progressive decrease of the demand could be demonstrated by looking at the historical closing prices from 25^thJanuary 2019 that amounted to USD 3.18per mmbtu to the closing price of USD 2.63per mmbtu dated on 15^thFebruary 2019. 

By referring to the below natural gas’ forward curve which shows the 25 natural gas back-month contracts, we could determine that the natural gas market is currently in contango since the forward curve is upward sloping. Having the natural gas’ forward price higher than the spot price, this means that currently the natural gas and liquefied natural gas’ market is a bearish market.

Some significant definitions to know in futures trading are “the front month contract” and the “back-month contract”. 

A front month contract is a future month contract with an expiration date closest to the current date. Most of the time, this is in the same month as the current date and is the most actively traded month (Chen, Front Month, 2018). The front month is also called the spot month.

The back-month contract is a type of future contract that expires in any month past the front month futures contract(Chen, Back Month Contract, 2009). You will find below the forward contract expiration dates of natural gas. These expiration dates are necessary to notice the convergence point of each forward contract. The convergence point is when a future/forward contract becomes a physical contract.

As seen in the bulletin no. 3 “LNG and NG, the best performing commodities in November 2018”, the factor that appreciates the future price is the change of season that will pass from the winter to the spring. As a conclusion, we recommend natural gas and liquefied natural gas’ producers to store their commodity and to sell with future/forward contracts.

LNG news

The Commonwealth project is one of more than 10 LNG export terminals under development and construction in the United States along the coast of the Gulf of Mexico (in Louisiana, where the Henry Hub is) to take advantage of demand for the gas production in the US, thanks to the shale gas.

Commonwealth LNG has received commitments from European buyers to take almost half of the liquefied natural gas (LNG) from the planned 8.4-million-tonnes-per-year export terminal in Louisiana. First shipments are planned for the beginning of 2024. 

The project was also aiming Japan, the largest LNG importer in the world for many years. Surprisingly, Japanese companies were not so keen on signing long term deals with the American project: reasons mentioned were that the country is reopening slowly tis nuclear power plants, 8 years after the tsunami in 2011 and are focusing on renewable energies such as the offshore Wind Turbines, expected to bring more and more electricity in the future years. Will it be enough and how is the Japanese population going to react towards the reopening of these nuclear plants? Some reports are saying that Japanese are investing in Russian LNG projects near the Asian sea coasts.

Some suppositions:

We have seen that China and Russia are working together to put in place pipelines going through China. This is creating a second major gas buyer for Russia who has been ‘’stuck’’ with Europe as its only main buyer until now. Russia will be able to have better price bargaining power. On the other hand, US has begun to be a shale exporter thanks to its shale gas production. Europe is starting to buy from them expecting Russia to bargain more about its gas?

Could the Japanese also be thinking about negotiating with Russia now that they are expending their pipelines towards the sea?

References

Chen, J. (2009, February 15th). Back Month Contract. Retrieved February 19th, 2009, from Investopedia: https://www.investopedia.com/terms/b/backmonthcontract.asp

Chen, J. (2018, March 8th). Front Month. Retrieved February 19th, 2019, from Investopedia: https://www.investopedia.com/terms/f/front-month-contract.asp

https://ycharts.com/indicators/natural_gas_spot_price

https://www.eia.gov/tools/faqs/faq.php?id=45&t=8

http://www.businessdictionary.com/definition/British-thermal-unit-Btu.html

https://asia.nikkei.com/Politics/International-Relations/Japan-eyes-support-for-Russia-LNG-project-amid-territorial-talks

https://www.reuters.com/article/global-lng-commonwealth/commonwealth-lng-finds-european-demand-for-gas-from-louisiana-terminal-ceo-idUSL3N20F1PU

Above we can see the composite price for coffee done by the International Coffee Organization. What’s visible here is that the price of coffee is on a downward curve.

If we look at the last graph we did in our bulletin, back in November, we had a decrease in price going from 114 to 106 US cents/lb. During December it continued its bearish run until it stabilized at around 100. Then, in January, it stayed stable during the whole month around 99 and 103. Now, as we saw earlier, it’s continuing its bearish run after a brief halt in January.

Brazilian Real:

Price movement in general:

Generally, if anyone wants to know why the coffee price is either bearish or bullish, they should just look at the Brazilian currency and see which way it is going. They will often find both going in opposite directions. Both are extremely correlated. If one is up, the other is down and vice versa.

Following the last bulletin, we can see the same behaviour of the price which keeps in decline. For example: Arabica – drop to 1.10 USD per pound which is well below 1.2 USD from the required level to make a profit for Latin American farmers.

This decrease is continuing mainly because of the weakening of the Brazilian Real against the US Dollar and the over supply of coffee beans especially from Brazil.

As we mentioned in the last bulletin, the main reason for the weakening of the Brazilian Real is the new Brazilian President Bolsonaro’s policies that have not been implemented yet which create uncertainty, and this creates economical and political unstability (for example for investors).

The over production of Brazil is due to the historical trend of coffee production following a cycle.

Forward curves: US coffee C futures (Arabica):

Robusta Coffee Futures

In terms of the forward curves, we now already know that it is generally always in carry. There is constant supply from all around the southern part of the globe thus keeping the curve in this position.

What we can notice however is that the Arabica price has stayed the same to the graph in our last bulletin, but the Robusta has decreased slightly

Potential usage of Blockchain technology in the future in the Coffee Commodity in order to boost business:

According to an article in Forbes, The Moyee Coffee brand (Ethiopia) is using blockchain to differentiate between 350 farmers in order to provide buyers with full transparency in the supply chain and full price discovery.
This transparency allows the buyer (the roasting companies) to keep the price balanced and not go too low in order to keep the farmers motivation to produce the coffee beans.
In the Moyee case it allowed the increase the price by 20% above market rate.
The article also states that the UN food and agriculture organization believe that the blockchain has huge potential to solve challenges of small coffee holders regarding uncertainty (for example: fluctuation in supply) and trust among market players.

References :

https://seekingalpha.com/article/4241934-coffee-goes-lows

https://www.nasdaq.com/markets/coffee.aspx?timeframe=1m
https://www.forbesafrica.com/entrepreneurs/2019/02/19/the-coffee-farmers-betting-on-blockchain-to-boost-business/
https://www.dailyfx.com/forex/market_alert/2019/01/29/Brazilian-Real-May-Fall-on-Inflation-Data–Will-Conditions-Improve.html
https://warriortradingnews.com/2019/01/29/oversupply-of-brazilian-coffee-drives-down-global-prices-as-farmers-struggle/

http://www.ico.org/prices/pr-prices.pdf

https://tradingeconomics.com/brazil/currency

Chinese refiners are looking for new opportunities:

Shale oil boom has made it difficult to predict global supplies. Shale oil producers are much more responsive to oil prices movements than classic producers and it’s really difficult to understand how numerous individual drillers decisions will impact global oil supply. Before shale oil it was easier to predict what could be the future supply without taking in consideration outside political events.
Nevertheless, with WTI price around USD 50, it affects shale oil production as well as it is likely to boost the demand.
China is likely to take advantage of the cheap oil and following the recent 90 days trade-war truce agreed between the USA and China, some Chinese refiners are looking for opportunities in the US. However, the long-distance voyage between the US Gulf Coast and China makes it difficult for refiners who buy shale oil until the 1st march, date on which the truce ends. Chinese refiners demand the more assurances from the government, asking that cargo wouldn’t be affected with possible tariffs if shipment arrives after the 1st March.

America’s top oil producing region (Permian basin) has a new problem:

Shale crude oil is trading at 40$ a barrel in the Western Texas region. At this price, the oil is sell for less than the cost of developing new wells. That is a rude prospect for a region where oil production is booming and because Permian has permit to the United States to reach his highs production of barrels per day, making them the world’s top crude oil producer. So it will be better if the US government could find a solution in order to avoid a potential recession in this sector due to a production decrease and falling prices. During this time, we can see that West Texas Intermediate for January delivery fell $1.32 to settle at $49.88 a barrel on the New York Mercantile Exchange. Bears gained steam after the official close, with oil falling to $49.01, the lowest level since September 2017. The WTI February contract fell to $49.47. Brent for February settlement closed down 67 cents to $59.61 on London’s ICE Futures Europe exchange. The global benchmark traded at a premium of $9.41 a barrel to same-month WTI.

Spread between Brent and curve spot price:

This graph shows the spread between the brent spot price and WTI spot price from 2nd January 2007 to 14th December 2018. In grey at the bottom of the graph, there is a glimpse of the variations in the spreads.
From 2007 to the end of 2010, it was not surprising to see the spread in favor of the WTI. Several times the spot price WTI was higher than the Brent.
From January 2011 to today, the trends have reversed. The reason was the oversupply of WTI crude in USA from 2011. The spread value decreases from the begin of the year 2015 to the end of 2017 because Barack Obama try to take some government restrictions on the extraction of shale oil and gas.
A lot of people after the government restriction thought that the problem was solve. But as we can see in the graph it was not the case due to the lobby of US crude company who member/ have link with the US congress. As the Republicans have the congress majority and that some judges invalidated government measures to regulate shale oil’s extraction. The hopping spread trend didn’t follow Obama’s expectation.
One month before his departure, Barack Obama banned the creation of news crude oil’s extraction in the Arctic Ocean. But when Donald Trump became president in 2017, he began to facilitate the extraction of shale oil. It why we can see an increase in the spread during the year 2017.
Currently his team is working on a presidential decree in order to allow the extraction in Arctic. Since Donald Trump arrival, we can see that the crude production increase due to easing regarding the extraction process (reducing or eliminating restriction).

Future WTI curve

For the future curve, we have for the two last contracts (November and December) a contango situation. The future curve from June and September are in a situation of backwardation. The latest decisions from Donald Trump administration creates uncertainties about the price.

Appendix

https://www.erce.energy/graph/wti-futures-curve https://www.erce.energy/graph/brent-and-wti-spot https://www.letemps.ch/monde/barack-obama-bloque-forages-arctique https://www.lemonde.fr/planete/article/2016/06/22/la-justice-americaine-invalide-la-reglementation-de-la-fracturation-hydraulique-edictee-par-obama_4956113_3244.html https://www.theverge.com/2017/4/28/15451652/donald-trump-executive-order-offshore-oil-gas-drilling-climate-change https://www.bloomberg.com/news/articles/2018-12-13/saudi-arabia-is-said-to-target-u-s-with-sharp-oil-export-cut https://www.bloomberg.com/news/articles/2018-12-17/oil-halts-slide-near-51-on-signs-of-u-s-production-slowdown

Price Movement

As we can remark on this graph, after the previous falling price to 62,99 USD per Metric tonne on the 27^th of November, we see an upward trend earlier this month. However, the slight drop on the start of this week indicates a current price at 66,82 USD /metric tonne especially due to the weakness in Chinese steel Futures Contracts.

Small decreases are present for the Lower and Higer grades of Iron Ore. The price of the iron ore fines 58% is fix at 42 USD/Mt and the 65% fines at 82,80 USD/Mt.

Supply and demand

Chinese steel production is still slowing due to the trade war with the US and also because China took measures to reduce air pollution. For instance, the city of Tangshan – China’s top steel production hub – announced on the December 8th, second-levels smog alerts which has led to an even more severe decline in steel production.

Therefore, 86.25million tonnes of iron ore was imported in December, down 2.4% from October and 8.8% from the same month a year earlier.

So far this year, China has imported 977.89 million tonnes of iron ore, down slightly from 991.26 million tonnes in the same period the previous year, according to calculations from Reuters (global news agency in London).

As a consequence, steel mills in the smog-prone city have to shut their sintering capacity by 30-60% or even shut down based on their emission level.

Deep future curve

The reason is the weakness in Chinese steel futures contract leading a decrease in futures contract number of iron ore.

Moreover, it is predicted that the iron ore supply will increase thanks to new investment in Brazil for the iron ore exploitation and cost decreasing by 5 %.

The Singapore Exchange (SGX) launched on the 3rd December the world’s first high-grade iron ore derivatives in order to answer the Chinese demand and to be in line with the new context of China’s environmental policy. Indeed, the new swaps and futures reference the 65% Fe Brazilian fines index, CFR Qingdao to manage high-grade segment exposure, with grade differentials in iron ore more volatile amid strong mills’ margins and the Chinese government’s targets to reduce emissions.

For instance, the top larger iron ore producers Vale is negotiating changes in its iron ore pellet contracts for 2019 from its current 62% Fe to the 65% Fe.

Recommendation

We should go long, we are expecting to see the price decline due to the rise of iron ore production.

As we can see in this graph that spans over the last week, the price of the soybean has risen quite a bit. Going from $9.10 and reach $9.20, all while experiencing a sharp dip early in the week. It was resolved almost immediately after.

Additionally, the last two days represented the highest the price has reached with this week’s peeking happening on the 12th and surpassing $9.20.

The fact that the price has gone past the 9 dollar mark displays that the market is slowly recovering from the slump it has been stuck in. If it continues to follow this trend, the effects of the Trade War will be considerably lessen.

However, we had the news that China has made his first major purchase of U.S soybean this last Wednesday 1.5 to 2.0 millions metric tons, providing some relief to U.S farmer who have struggled to sell their record-large harvest. The fact that a trade between the Chinese and the Americans happened not only brought hope for this market after months of trade war, but also has made the value of the soybean rise. Since it means that there is future with these nations trading in soybean, the price naturally went up to reflect the fact that these actors will finally make a decent margin.

Almost two weeks before the end of the year we can see always the same pattern regarding the forward curve of the soybean. However, we can see that there is a slight inverse position beginning at the end of July 2020. This inverse refers to the phenomena that we already describe a few weeks ago (seasonal pattern). Same pattern forecasting for July 2019.

In this graph we can clearly see the impact of the trade war on the Brazilian soybean exports, where, the previous years we can see that the curve is following the same pattern (again due to the seasonal pattern), so it is decreasing in November but with the trade war and China who was asking always for more soybean, Brazilian keep supplying ,for a longer period, China in order to respond to this huge demand.

https://www.cnbc.com/2018/12/12/reuters-america-grains-soybean-prices-ease-after-2-days-of-gains-chinese-buying-curbs-losses.html

https://www.farmfutures.com/story-weekly-soybean-review-0-30767

http://marketqview.com/forwardcurvechart.php?ID=74&TYPE=Price

https://www.ig.com/en-ch/news-and-trade-ideas/commodities-news/us-soybean-farmers-win-big-from-us-china-trade-war-truce-181213

https://markets.businessinsider.com/commodities/soybeans-price

Spot price

We can see on the graph below that the US NG Henry Hub spot price was traded at USD 4.423($ per Million Btu) the 2018-12-06 at 09:01:11. As we can observe here, the price has risen since the beginning of November. As seen last time, we know that NG is a very seasonal commodity. Since winter has hit the US, it is normal to see these higher prices: demand is high. We can also compare with the weather temperature from September to see the correlation (see weather 2^ndgraph below).

Beginning of October, spot price was at closing time 3,110$/BTu.

Beginning of November, spot price was at closing time 3,293, meaning a +5,88% increase. If we compare to now (4,423), it is an increase of +34,3% from 1^stof November + 42,22% since 1^stof October!

We can observe a sudden ‘’Wile.E coyote’’ moment the 15^thof November, the actual highest November pick in the US, where it was reported to be at 65F (18C) a sudden hot day. It shows how volatile this commodity can be looking at the weather.

Fahrenheit to celsius calculation : (32 °F − 32) × 5/9 = 0 °C

Or here directly: https://www.rapidtables.com/convert/temperature/fahrenheit-to-celsius.html

AVG US :

October : Orange : 11c/ blue : -5c/ braun : 26c /  gray : – 25c

November :Orange : 3c / blue : -10c / braun : 18c / gray : -37c

Left to right: September and October heat map US 2018.

For today’s weather, available here: https://www.weathercentral.com/weather/us/maps/current_temperatures.html

What about other NG markets?

We can observe than the US gas is lower than European and Asia gas: not surprising since we know that US benefits from its large Shell gas supply since 2009. Asian gas LNG is the highest since most of its cost is due to the LNG transformation and freight costs. If we take Henry Hub as the benchmark, both EU and Asian gas are traded at a premium: 4.13$/BTu and 7.52$/BTu respectively. We can observe an abnormal rise in September in Europe: this was due to Outages in the North Sea that lasted 4 weeks, decreasing supply, now it has come back to normal. Something that we can also observe is both Asian and European gas seem to be in a constant positive slope compare to US, which seems to react more to seasonality (high in Oct-nov-dec-jan, lower the rest of the year).

Forward curve

The natural gas forward curve below shows the latest closing prices for the 24 future natural gas contracts. For the month of December 2018, the spot price equals to USD 4.46 per mmbtu (closing price on December 4^th, 2018, available at: https://markets.businessinsider.com/commodities/historical-prices/natural-gas-price/usd) and is lower than the current forward price which is equal to USD 4.602 per mmbtu (forward contract January 2019. Contract expiration date: December 27^th, 2018. Available at: https://bluegoldresearch.com/forward-curve).

Currently, natural gas market is in contango and the forward curve is upward sloping. This means that the forward price might increase over the cold months.

From the beginning of the spring months (March 2019), the natural gas and liquefied natural gas market will be in backwardation because of the decrease of the forward price. The factor that makes the depreciation of the forward curve is the weather data which shows some future warm temperatures above the normal level in the US for example.

If we compare the current forward price (January 2019) with the one presented in the previous bulletin (USD 4.53, bulletin no. 2 – “The rally of LNG and NG”), we notice that the current forward price is higher, and still higher than the spot price.

We might conclude and recommend selling natural gas and liquefied natural gas during the backwardation period which should arrive very soon.

https://bluegoldresearch.com/forward-curve

The winner of November 2018

Natural gas was considered as the best performing commodity in terms of forward price. Indeed, the future price of this commodity climbed at 41.1% for November 2018. The highest future price recorded in November had amounted to USD 4.837 per mmbtu. This commodity has not recorded a high future price such this one since February 26^th, 2014.

The factors that pushed up the future price were the low storage of NG and LNG, the cold weather forecasts and the record exports of NG and LNG.

(Available at: https://www.marketwatch.com/story/natural-gas-leads-commodity-gainers-in-november-but-oil-prices-suffer-the-biggest-losses-2018-11-30?siteid=rss&rss=1)

Inventory levels

As we can see on the inventory level’s graph, on November 21^st, the actual inventory level was lower than the forecasted level. The effect on the price was a bullish effect because of the high demand. Most of the time, this deficit of the inventory level might occur because of a non-linear demand, which increases during the cold weather periods.

The difference between the last two reported inventory levels (Nov 21^st, 2018 and Nov 29^th, 2018) was that the actual deficit is lower than forecasted, which pushed up the spot price of NG.

The unit used in this graph is in “the number of cubic feet of natural gas”.

https://www.investing.com/economic-calendar/natural-gas-storage-386

Creation of a new hub in Asia

Since more than one year, there is a rumour about the future creation of a hub in Asia. Actually, it is kind of a non-sense that in Europe work two gas hubs, the TTF and NBP and in United States the Henry hub so why not establish one or more in Asia?
The most advanced hub initiatives are in Singapore, Japan, and China. A number of institutional and structural requirements needed to create a competitive wholesale natural gas market. Six requirements put forward by the IEA “International Energy Agency” were settle.

The institutional requirements were as follows:

1. A hands‐off government approach to natural gas markets. An independent antitrust agency who will regulate the hub.
2. Separation of transport and commercial activities.
3. Wholesale price deregulation. Letting the market fix by itself the price and not the government.

The structural requirements were as follows:

1. Sufficient network capacity and non-discriminatory access to networks.
2. Competitive number of market participants Gas market requires a number of gas suppliers and traders with competitive market shares along with multiple producers and buyers of gas.
3. Involvement of financial institutions.

Hence, by referring to the requirements above, which of the three following countries would be the best to host the Asian hub, Singapore, Japan or China?

Sources

Natural Gas Forward Curve, 2018. “Henry Hub Natural Gas Futures Price”. Bluegold Research (online). Consulted on December 5th, 2018. Available to the following URL: https://bluegoldresearch.com/forward-curve

SAEFOND, Myra P, 2018. “Natural gas leads commodity gainers in November, but oil prices suffer the biggest losses”. Market Watch (online). December 1^st, 2018. Consulted on December 5^th, 2018. Available to the following URL: https://www.marketwatch.com/story/natural-gas-leads-commodity-gainers-in-november-but-oil-prices-suffer-the-biggest-losses-2018-11-30?siteid=rss&rss=1

GONZALES, Leticia, 2018. “January Natural gas Plunges as Warming Trends Traders’ Attention”. NGI’s daily gas price index (online). December 3^rd, 2018. Consulted on December 5^th, 2018. Available to the following URL: https://www.naturalgasintel.com/articles/116659-january-natural-gas-plunges-as-warming-trends-finally-catch-traders-attention

U.S. Natural Gas Storage. Investing.com (online). Consulted on December 5th, 2018. Available to the following URL: https://www.investing.com/economic-calendar/natural-gas-storage-386

UK GAS-Prices rise on Norwegian supply disruptions https://af.reuters.com/article/energyOilNews/idAFL1N1V7057, consulted December 2018

averagetemp-monthly-cmb for 2018-10-00 | NOAA Climate.gov https://www.climate.gov/maps-data/data-snapshots/averagetemp-monthly-cmb-2018-10-00?theme=Temperature, consulted December 2018

Pubdocs.worldbank.org

http://pubdocs.worldbank.org/en/451911543968504757/CMO-Pink-Sheet-December-2018.pdf, consulted December 2018

Calendar Monthly Weather Forecast – weather.com

https://weather.com/weather/monthly/l/Calendar+USID0448:27:US, consulted December 2018

Plus500 WebTrader

https://app.plus500.com/trade/usa–g, consulted December 2018

During last weekend’s G20 summit, the US President, Mr Trump and the Chinese President Xi Jinping agreed on a 90-day ceasefire in their damaging trade dispute. Trump decided not to increase its tariffs to 25% starting on January 1st and but to keep them at 10% till March 1st.
On Monday and thanks to to this agreement, the copper cash price first rose from 6,237$ to 6,306$ but decreased significantly the next to days to reach 6,161$, its lowest in a week, following Mr Trump’s comments that he will revert to tariffs if the two side cannot resolve their problems before the 90-days truce ends as well as its comment on twitter that he is a “Tariff Man”.

If you want to know more about tariff man, please press play :

Therefore, what was supposed to be a good news was received by a significant amount of worries by the market which still doubts about a the possibility to see a trade resolution soon. Moreover, in order to secure the 90-day ceasefire between the two countries China agreed to a number of additional commitments.

China agreed to purchase a “very substantial” amount of agricultural, energy, industrial and other products to reduce the bilateral trade imbalance. However, the exact amount has not yet been agreed.
Nevertheless, the cease-fire helped to reestablish the usual relation between the cash and the 3-month prices. Historically, a higher 3-month price compared to cash price has always been observed as copper is generally traded using 3-month contracts and also for carriage reasons. However, these last weeks, the trend switched and the cash price was traded with a premium relative to the 3-month prices. This situation was due to the unpredictable decisions President Trump could have made, consequently, people were rushing and settled price for direct delivery. With the 3 months truce, we believe that the market will experience a “temporary stability”.

To secure the 90-day ceasefire between the 2 countries and the of Mister Trump, China agreed to a number of additional commitments.
China agreed to purchase a “very substantial” amount of agricultural, energy, industrial and other products to reduce the bilateral trade imbalance. However, the exact amount has not yet been agreed.

Regarding the inventory, the LME warehouse level remain low (As shown in the graph). No big change since beginning of November. The offer and the demand are therefore meeting quite well. The price did not experience any big variation due to the inventory.

http://www.china-briefing.com/news/us-china-trade-truce-90-days-g20-summit/
https://finance.nine.com.au/2018/11/30/07/46/copper-gains-but-trade-thin-ahead-of-g20
https://www.cnbc.com/2018/12/02/dow-futures-surge-after-trump-and-xi-agree-to-pause-the-trade-war.html
https://www.cnbc.com/2018/11/30/reuters-america-metals-copper-steady-as-all-eyes-turn-to-g20-meeting.html
https://uk.reuters.com/article/global-metals/corrected-metals-copper-eases-on-soft-china-data-ahead-of-g20-meeting-idUKL4N1Y53KI
http://www.infomine.com/investment/warehouse-levels/copper/1-month/

According to the composite and the future prices for both types of coffee beans, we can notice a significant decrease which continues the downward trend in the price that was seen in previous bulletins.

One reason for the price decrease in the composite graph, is the same as for the first two bulletins, it is that the Brazilian currency has been rising as we can see in the graph, we know that both are negatively correlated so when one goes up, the other generally goes down.

In terms of the futures prices, this decrease is due to a high supply of coffee beans on the  market. We will explain more on what happened below.

Following an article on CNBC, we understood that the November Robusta Future Contracts were traded at a discount of 11-33 dollars. Therefore, Louis Dreyfus, one of the leading agriculture trading company, bought the majority of stock of Robusta beans because of the attractive price which is also used to reduce significantly the carrying costs it has because Dreyfus owns a number of certified warehouses across Europe including Belgium(4stox and Molenbergnatie). This allowed them to stock the beans in their warehouses without it costing them as much as it normally would’ve thanks to the low price of the Robusta.

We believe that this was a strategic move by Dreyfus, as this purchase along with the purchase of 33,360 tonnes of Brazilian Robusta beans was done to have the majority of stocks. Having this important part of inventory allowed the trading company to have the control as well as the power, compared to its competitors, on the physical supplies of Robusta beans.

We have discovered that the high production and supply of Brazilian Robusta beans bought by the European Market made the Vietnamese Robusta beans drop in price as they have also a big supply but no many buyers because most have bought from Brazil which had cheaper prices.

Overall, the price of coffee has been dipping because of the fact that there is too much supply in the market.

We can highlight that this over supply and sharp decrease in price is like in the oil market at the moment.

 

https://www.nasdaq.com/markets/coffee.aspx?timeframe=1m

https://www.cnbc.com/2018/11/20/reuters-america-louis-dreyfus-poised-to-take-back-strategic-robusta-stocks–sources.html

https://fp.brecorder.com/2018/12/20181204428466/

https://www.theice.com/products/15/Coffee-C-Futures/data?marketId=5352189

https://www.theice.com/products/37089079/Robusta-Coffee-Futures/data?marketId=5545668

http://www.ico.org/prices/p1-November2018.pdf

https://www.xe.com/currencycharts/?from=BRL&to=USD