Commodities Research
31 May 2013
Commodities Weekly
Which trend is your friend?
Overview
2
Energy
Market Outlook: Mixed fundamentals emerge
across crude markets; gas experiences
summer volatility
8
Oil: China fuel stocks lower as harvest begins 12
Metals
Market Outlook: Chinese demand data reveal
April upswing for base metals, while gold ETP
outflows show signs of slowing
14
• We highlight three overarching and three fundamental trends in commodities
this year and discuss how long these trends can last. Commodities have
continued to underperform other asset classes; a trend of dollar strength has
endured as has a sustained trend of investor disenchantment with commodities.
From a fundamental viewpoint, there has been a trend of overall positive supply
surprises, a trend of lacklustre demand growth and of muted Chinese imports.
• The latest CNIA data show across-the-board strength in China’s refined metal
production in April and also indicate stronger apparent consumption given the
corresponding drawdown in metal stocks. While we expect the apparent
consumption data to stay positive in May-June given the draws in bonded stocks
and end-use activity, seasonal strength could fade, especially given weaker
forward-looking economic data such as manufacturing PMI.
Precious Metals: Gold - South African cash
costs climb
20
Commodity Price Forecasts
22
Commodity Price Comparisons
23
Trade Recommendations
24
Key Data Releases
25
FX Forecasts
26
• Gold remains stuck between unabated ETP outflows and strong physical demand,
and we believe there is greater scope for physical demand to slow before ETP
outflows ease. We maintain the view that ETP holdings are likely to face reduced
strain should prices recover above $1500/oz or should equity markets come
under pressure, along with worsening macro data.
Energy
Oil: China fuel stocks lower as harvest begins
12
China’s refinery runs are likely to pick up incrementally at the onset of the harvest
season as product stocks have receded to seasonal levels.
Metals
Precious Metals: Gold - South African cash costs climb
20
In Q1 13, South Africa was once again the highest-cost gold mining region in our
database. Average cash costs rose by 10% q/q, while marginal costs were nearly flat.
Besides cost base increases, we see scope for rising cash costs in 2013, largely stemming
from labour-related supply disruptions given upcoming wage negotiations.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 27
Editors:
Suki Cooper
suki.cooper@barclays.com
Sudakshina Unnikrishnan
sudakshina.unnikrishnan@barclays.com
www.barclays.com
Barclays | Commodities Weekly
OVERVIEW
Which trend is your friend?
Analysing trends in commodity markets in 2013 so far yields interesting results. This week
we highlight three overarching and three fundamental trends in commodities this year and
discuss how long these trends can last. In terms of broader trends, commodities have
continued to underperform other asset classes; a trend of dollar strength has endured as
has a sustained trend of investor disenchantment with commodities. Meanwhile, from a
fundamental viewpoint, noteworthy trends include a trend of overall positive supply
surprises, a trend of lacklustre demand growth and of muted Chinese imports. We briefly
look at each of these in turn and discuss whether these trends are like to stay static and
hence work more as an encapsulation of patterns past and are a backward looking exercise,
or if these trends are dynamic in that some are likely to change and offer market
participants indications on where commodity markets are likely to head in the future.
Sudakshina Unnikrishnan
+44 (0)20 7773 3797
sudakshina.unnikrishnan@
barclays.com
Continued underperformance
plagues commodity markets
while a firm dollar weighs
A defining feature of commodity markets this year has been their continued
underperformance, especially in relation to equity markets. For much of this year equities
have outperformed commodities with just the Euro Stoxx Basic Resources Index has
performed poorer than commodities, but since late April a broad equity rally has meant
even it has outperformed the Dow Jones UBS commodity index (see Figure 1). With
commodity fundamentals looking rather balanced in the near term we do not expect
anything more than a modest move up in commodity markets which implies limited gains
ahead. A second trend of dollar strength (bar weakness in recent days) has stayed intact as
well and is likely to intensify over the coming months, according to our FX strategists who
forecast a USD rally in H2 and hold a one-year EUR/USD forecast of 1.23. Episodes of a
broad based rally in commodity markets amid a strong dollar are few and far between.
Investors remain disenchanted
with commodities and in
particular gold
Investors unsurprisingly have been disenchanted with commodities after a period of failing
returns, and the lack of investor interest is exhibited in various forms. Non-commercial CFTC
data show a big decline in investor positioning compared to the start of 2013. Net long
positions across US commodity futures markets now stand at 7.6% of open interest, having
fallen as low as 6.6% of open interest in April, the lowest since December 2011. Notably, a
net short position in Comex copper remains although weeks of short covering have meant
that at -13.5K lots it has more than halved from April’s record -27.8K lots.
FIGURE 1
Commodity underperformance extends through May
119
FIGURE 2
Dollar firmness has been a persistent hurdle to price gains
320
Asset class performance in the year-to-date
114
310
109
300
104
290
99
280
85
84
83
82
81
80
94
89
84
Jan 13
Source: Ecowin, Barclays Research
31 May 2013
Mar 13
78
270
S&P500
BRIC 40 equities
DJUBS
EuroStoxx basic mat.
Feb 13
79
260
Apr 13
May 13
250
Jan-12
DJ-UBS (LHS)
77
USD TWI (RHS)
76
75
May-12
Sep-12
Jan-13
May-13
Source: Ecowin, Barclays Research
2
Barclays | Commodities Weekly
However, across commodities it is gold that best reflects the lack of investor interest. Non
commercial net fund length in Comex gold has declined steadily through 2013 and at 80.3K
lots it is at its lowest level since November 2008. Gold ETP outflows have continued through
May after the exodus in April. Total holdings across the 55 physically backed products we
track are at their lowest level since July 2011, with net redemptions reaching 454 tonnes for
the year to date and 111 tonnes in May so far. Will the trend of gold outflows continue? We
do expect gold ETP outflows to continue through June, albeit at a gentler pace than in May
which in turn saw more modest outflows compared to April.
Is the environment of
comfortable supplies going
to persist?
Positive supply surprises have been a broad theme across many commodities this year and
in particular in markets like copper and crude oil which have exemplified supply constraints
in commodities. In both these markets, after a period of more comfortable supplies (copper
mine production has been surprising to the upside through 2012 and into this year while
non-OPEC supply disruptions are almost half of what they were at the start of 2013) recent
indications suggest the positive momentum in supplies may not persist. The latest Chile
monthly copper production data for April posted a fall of 1.2% y/y and 9% m/m, the first
decline this year after output growth of 7% y/y in Q1. For platinum, upcoming mine worker
wage renegotiation talks in South Africa at the end of June will be closely watched given the
AMCU will be attending these talks for the first time, and protracted talks and any potential
labour action stemming from that could lead to supply disruptions. South African producers
have already been facing cost and wage pressures with current platinum prices eating into
the cost curve.
In the crude oil market, while Sudanese exports are resuming slowly and Yemen’s Marib
pipeline has been repaired, we note that both supply centres remain vulnerable to further
disruptions. This week the Sudanese president threatened to once again close down an
essential pipeline that allows oil to flow from the South, accusing the neighbouring nation
of supporting rebels, a claim denied by the South, while the frequency of pipeline attacks in
Yemen have not faded and risk remains for a relapse. Across OPEC producers, output from
Iraq, Libya and Nigeria remain vulnerable to domestic conflict and geopolitical factors, going
into H2 and could contribute to further pressure on the supply side. In the grains markets,
delays to US spring plantings of corn and especially soybeans (where USDA data show
plantings at a 17-year low) from rain and wet weather may lead to production estimates
being pared back with concerns about yields and acreage.
FIGURE 3
Investor exodus from gold ETPs continues through May
30
20
Daily gold ETP purchases and sales (tonnes)
FIGURE 4
CFTC data shows a light level of positioning
19%
Net positions as a percentage of open interest
17%
Purchases
15%
10
13%
0
11%
-10
9%
-20
-30
May-12
Aug-12
Nov-12
Feb-13
Source: ETP issuer websites, Bloomberg, Barclays Research
31 May 2013
7%
Sales
May-13
5%
May-09
May-10
May-11
May-12
May-13
Source: CFTC, Barclays Research
3
Barclays | Commodities Weekly
China and physical demand room for improvement?
What about demand? Will the current trend of muted physical demand continue? Will
Chinese import trends change? We anticipate crude oil demand to pick up through end-Q2
as refineries return from an extended maintenance period. For China, we maintain our view
that oil demand will grow by 5% this year. While May trade data are likely to see an
extension of recent lacklustre growth rates, June is expected to see a pick-up in throughput
as refineries return from maintenance. However, a fair degree of tentativeness will be
exercised in boosting utilisation rates if they continue to face weak margins. Once the end
consumption side for petrochemicals shows an improvement, demand for light crude
grades at the prompt will receive healthier bids.
In base metals, April CNIA data showed that refined metal production was strong across the
board and also indicated stronger apparent consumption given the corresponding
drawdown in metal stocks. Copper cathode production rose to 557Kt in April, taking yearto-date growth to 11% y/y. Although net imports were down 44% during the period,
apparent consumption was up 6% following draws in bonded and SHFE stocks. Indeed,
including our estimate of a 100Kt draw in bonded stocks in April, apparent consumption hit
a record high in absolute terms of 845Kt, which we believe was also boosted by the
tightness in scrap supply. This improving consumption also fits with end-demand
indicators, many of which have been strengthening. Power and grid-related indicators have
been particularly positive. While we expect the apparent copper consumption data to stay
positive in May-June given the draws in bonded stocks and end-use activity, seasonal
strength could fade, especially given weaker forward-looking economic data such as
manufacturing PMI.
The trend is your friend… till
it ends
31 May 2013
To conclude, the relative underperformance of commodities vis-à-vis other risky assets and
equities in particular is glaring. A period of positive supply surprises and muted demand has
meant commodities have not partaken in risk-on rallies this year. We do not expect any strong
broad-based gains across commodities this year as fundamentals vary across markets and
even within sub-sectors. An enduring period of dollar strength is also likely to weigh in tandem
with a rather subdued global growth environment. Instead commodity price performance will
be driven by differing individual commodity supply and demand fundamentals. Across recent
trends, the one we would watch most carefully is that of supply. A period of positive supply
surprises is now giving way to potential supply losses and will be key in determining where
markets head next.
4
Barclays | Commodities Weekly
WEEK IN REVIEW
Commodities publications released this week:
Metals
Gold Delta: Gross short Comex gold positions hit another record high
The timing of Fed asset tapering, dollar movements, and equity market performance have
set the tone of trading for the gold market. While our economists’ view that the Fed will
begin tapering purchases in Q1 14 provides a positive backdrop for gold, our asset
allocation team remains overweight developed market equities, and our FX strategists
believe USD strength is likely to emerge as we head into H2 13; thus, headwinds for gold
look set to persist.
Swiss PGM trade data: Russian palladium shipments revert to trend
The latest Swiss trade data for palladium revealed a reversion to the trend seen over the
past year. Following the 295koz shipment in March, the largest since January 2010,
palladium shipments from Russia in April were just 2% of the previous month’s release at
6.495koz, in keeping with the average release over the past 12 months at 6.8koz.
31 May 2013
5
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31 May 2013
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Barclays | Commodities Weekly
Energy
31 May 2013
7
Barclays | Commodities Weekly
ENERGY MARKET OUTLOOK
Mixed fundamentals emerge across crude
markets; gas experiences summer volatility
• Brent continues to hover around the relatively weak level just above $100/bbl, amid a
mixed fundamental picture that has yet to deliver an upward impetus, though we expect
the situation to improve as the end of the quarter nears.
• Gas prices dropped across the curve on the week with the front falling by 2.7% to
$4.15/MMBtu. Our summer weather sensitivity analysis indicates that a 10% deviation
from normal weather could sway natural gas prices roughly about 50 cents on average
below or above the expected $4/MMBtu level.
Crude oil
Miswin Mahesh
+44 (0)20 7773 4291
miswin.mahesh@barclays.com
Afonso Campos
+44 (0)20 3555 4444
afonso.campos@barclays.com
The OPEC meeting concluded with the group maintaining its output quota at 30 mb/d, with
members largely comfortable with current price levels. We expect OPEC to produce close to
its target of 30 mb/d up to July, and to slowly ramp up to meet a higher call on its crude
over Q3 and Q4.
On fundamentals this week, the ongoing weakness in the sweet crude complex has engulfed
some sour grades as well, with the front-month spread between the July-August cash Dubai
contract flipping into contango. Drivers of this weakness remain the same, with weak refining
margins limiting buying activity at the prompt, while improved supply availability (in this case,
extra sour barrels from Oman) has created a marginal surplus at the prompt.
However, this marginal surplus is not uniform and global, but found in geographical pockets
and, moreover, is restricted to specific grades.
Urals performing relatively well
as internal demand curtails
Russian exports, supporting
the Urals – Brent differential
In the Mediterranean, for instance, Azeri light crude differentials have fallen given the weak
demand for distillate-rich grades, while the sour Russian Urals crude has performed
relatively well in the same region as refiners switch for yields, as well as because Russian
exports of the grade are expected to be down significantly in June when compared to May.
Much of this decline can be attributed to internal demand dynamics. National consumption
has begun eating into export barrels, a trend that is further exacerbated by refineries in the
region returning from turnarounds. The latest numbers suggest that Urals out of Primorsk
will be down to 953 thousand b/d, from 1.1 mb/d in May. Urals from the Novorossiysk Port,
however, are expected to be slightly up in June to 730 thousand b/d from about 696
thousand b/d this month, though this can be attributed to month length differences. The
Siberian Light grade will take a particularly intensified hit, with June exports pegged at a
surprisingly low 20 thousand b/d versus 76 thousand b/d in May. We expect the UralsBrent crude differential to be well supported given the supply deficiency.
Medium-sweet Angolan crude
remains well bid, though the
light-sweet Nigerian grades
become further pressurised
The West African crude market has also seen a similar cocktail of positive and negative
fragments across grades. The July loading programme for Angola, for instance, is mostly
sold out (with several buyers emerging for the medium-sweet Dalia crude), whereas
Nigerian light-sweet grades, such as Quo Iboe, have several offers with limited bids. This is
largely a factor of poor refinery margin economics for the grade, with refinery slates being
more sensitive to product yields that would help them fade the tide. Nigerian grades have
been seeing extra pressure also because of the displacement of import barrels from the US.
We expect Nigerian differentials to come under more pressure over the coming weeks as
these barrels adjust to buyer preferences influenced by margins.
31 May 2013
8
Barclays | Commodities Weekly
We still expect demand
globally to pick up towards the
end of June
Overall, the fact that the marginal surplus is restricted to geographic pockets and in specific
grades provides colour to our view that the current weakness in the market is transient, and
has the potential to fade quickly once demand picks up going into the tail-end of Q2.
In addition to the indicators we mentioned to watch for in Energy Market Outlook, 17 May
2013, we also recommend keeping the following factors on the radar:
South Korean demand could
pick up as more nuclear plants
are closed
Demand: In the Pacific, despite the rather lacklustre trajectory, South Korean oil demand is
likely to get a positive surprise going into the summer, given more nuclear plants in the
country have been shut down. This brings the tally to 10 out of the 23 nuclear plants and
with the oncoming summer, fossil fuels such as LNG, coal and fuel oil will be used to avert
electricity shortages, in our view. Currently, coal and LNG meet 40% and 25% of power
generation requirements, while oil accounts for only 3%.
The supply situation outside
the OECD remains volatile and
prone to disruptions, which
could tighten balances
Supply: While crude oil exports from Sudan are resuming slowly (130 thousand b/d) and the
repair of the Marib pipeline (120 thousand b/d) in Yemen has helped pare back non-OPEC
shortfalls from the close to 1 mb/d level at the start of the year. These two supply centres
continue to be vulnerable for further disruptions. This week, for instance, the Sudanese president
threatened to once again close down an essential pipeline that allows oil to flow from the South
as he accuses the neighbouring nation of supporting rebels, a claim denied by the South. While
statements have been reverted for now, the recovery remains fragile. In Yemen, the frequency of
pipeline attacks have not faded and risk remains for a relapse, and the combined outage of these
two supply centres could once again stress the supply system, helping to tighten balances in the
second half of the year. Among OPEC producers, output from Iraq, Libya and Nigeria also
warrant close inspection going into the second half of the year as sources which could
contribute to further pressure on the supply side of the equation.
Natural gas: prices drop on the back of bearish weather and
storage injection
Shiyang Wang
+1 212 526 7464
shiyang.wang@barclays.com
Gas prices dropped across the curve during the week with the front falling by 2.7% to
$4.15/MMBtu, while calendar 2014 and calendar 2015 edged lower by six cents and four
cents w/w, respectively. The front of the curve fell the most as the current hotter-thannormal weather is forecast to subside in the next couple of weeks. Furthermore, the higherthan-consensus storage injection added pressure to the front of the forward curve. Given
our expectations for supply and demand factors unrelated to weather, we expect the market
to balance with prices of approximately $4.00/MMBtu if temperatures average in line with
historical norms during the summer months. Our summer weather sensitivity analysis
indicates that a 10% deviation from normal weather could sway natural gas prices by about
50 cents on average below or above the expected $4/MMBtu level.
This week featured another storage injection that is higher than consensus. Inventories grew
by 88 Bcf, exceeding consensus estimates by 2 Bcf. With that, the deficit to last year’s storage
level fell by 16 Bcf, while the storage deficit to the five-year average gained 4 Bcf. The injection
for this week would have been even higher if it were not for the hotter-than-normal weather
during the week.
On the supply side, pipeline flow estimates indicate that natural gas production growth has
slowed down in May. May production estimates have been running on average about 95
mmcf/d above April levels and roughly flat to the average production level of December
2012. Regionally, Marcellus production remains strong: YTD production growth has
averaged above 3 Bcf/d y/y and 1.6 Bcf/d above December 2012 levels. In our view, overall
production should dip into declines in the second half of this year and feel the full effect of
the slowdown in gas drilling activities. Indeed, the natural gas-directed rig count has dropped
to 350 recently, the lowest level since 1995. Although some recovery of rig count should
occur later this year, we do not anticipate that to push production significantly higher.
31 May 2013
9
Barclays | Commodities Weekly
Meanwhile, Cheniere Energy Partners announced on Thursday that its Board of Directors
has made a positive final investment decision for the development and construction of
Trains 3 and 4 of the Sabine Pass liquefaction project. With this decision, all four trains have
now completed financing. Construction is 30% complete on trains 1 and 2, and trains 3 and
4 are expected to start construction immediately. The four trains of the Sabine Pass
liquefaction terminal have total export capacity of 2.4 Bcf/d, with 90% fully contracted with
off takers. Train 1 is due to start operation in 2H 2015, the remaining three trains will come
online by 2018 in a staggered fashion. At the moment, there are about 7 Bcf/d of
liquefaction capacity contracted in the US. Although the DOE has approved only 3.8 Bcf/d
of LNG exports to non-FTA countries so far, about 6 Bcf/d of LNG liquefaction projects are
likely to be built in the US by the end of this decade, in our view.
31 May 2013
10
Barclays | Commodities Weekly
Key price charts
FIGURE 1
Oil: Front-month Brent and WTI ($/bbl)
FIGURE 2
Oil: Brent forward curve ($/bbl)
130
130
125
WTI
Brent
Range in 2012
120
119
108
Two months ago
115
One month ago
110
30-May-13
105
100
97
95
90
86
85
Years to expiry
80
1
75
2
3
4
6
Source: Reuters, Barclays Research
Source: Barclays Research
FIGURE 3
Oil: Front-month Brent (€/bbl) and ICE Gasoil (€/ton)
FIGURE 4
Oil: Front-month ICE Gasoil crack ($/bbl)
800
97
94
7
8
24
22
760
91
20
88
720
85
82
680
79
18
16
14
76
640
12
73
Brent (LHS)
Gasoil (RHS)
70
600
10
Source: Reuters, Barclays Research
Source: Bloomberg, Barclays Research
FIGURE 5
US natural gas: Henry hub ($/MMbtu)
FIGURE 6
US natural gas: Forward curve ($/MMbtu)
4.50
4.90
4.25
4.70
4.00
4.50
3.75
4.30
3.50
4.10
3.25
5/29/2013
Prompt
3.00
Dec-12
Jan-13
Feb-13
Source: Reuters, Barclays Research
31 May 2013
Mar-13
5/23/2013
Cash
Apr-13
May-13
3.90
Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15
Source: Reuters, Barclays Research
11
Barclays | Commodities Weekly
FOCUS: OIL
China fuel stocks lower as harvest begins
China’s refinery runs are likely to pick up incrementally at the onset of the harvest
season as product stocks have receded to seasonal levels.
Sijin Cheng
+65 6308 6320
sijin.cheng@barclays.com
China’s product inventories have receded to seasonal levels in May, suggesting that
destocking efforts have worked to reduce inventory overhang, a key concern for Chinese oil
demand this year. By the end of May, total product stocks in China’s nine wheat-producing
provinces, covering wide swaths of northern and eastern China, have fallen to 3.56Mt, 18%
lower than this time in 2012, now closer to the levels seen in 2010 and 2011. Diesel
accounts for 2.05Mt (15.6mb) of the total, 26% lower y/y. Two months ago, product stocks
were still 10% higher than the already high base of 2012. At the same time, China
maintained diesel exports that averaged 90 Kb/d from November 2012 through April 2013,
the most since 2010. High stocks raised concerns about Chinese demand as manufacturing
continued to expand at a modest pace.
The latest data suggest that destocking efforts by Chinese refiners have worked to reduce
inventories back to seasonal levels. Refineries including the 100 kb/d Shijiazhuang, 210
kb/d Qilu (80 kb/d CDU unit affected), 150 kb/d Jinzhou, and 100 kb/d Jinan all scheduled
maintenance from mid-April to mid-May. Refiners have also been cutting diesel yield to the
lowest level in ten years in order to meet robust gasoline demand without exacerbating the
diesel glut. At the same time, demand continued to grow at a moderate speed, with truck
traffic on select toll roads registering 14% growth y/y in April.
Runs could begin to creep up as the turnaround season comes to an end, though some
refineries, including a 160 kb/d CDU unit at Guangzhou and another 160 kb/d unit at
Fushun, will not complete maintenance until mid to late June. Agricultural demand for diesel
will see a boost from wheat harvesting, which began in late May and will peak in mid to late
June. A much colder-than-usual spring in China’s corn belt has also delayed ploughing,
which now coincides with harvesting in warmer regions of the country. Runs are likely to
ramp up incrementally as refiners work to meet agricultural demand.
FIGURE 1
Total product stocks in key agricultural provinces have fallen
FIGURE 2
Diesel stocks now at 2011 levels
Diesel stocks in major ag provinces (Mt)
Total product stocks in major ag provinces (Mt)
2011
6.5
2012
2013
Smaller
reporting pool
in May-June
6.0
5.5
2011
4.5
2012
2013
Smaller reporting
pool in May-June
4.0
3.5
5.0
3.0
4.5
2.5
4.0
2.0
3.5
1.5
Weeks
3.0
52
6
12
18
24
30
36
42
48
Note: In May-June the NDRC narrows the reporting size from 13 major
agricultural provinces to 9, hence the sharp fall and increase before and after.
Source: NDRC, Barclays Research
31 May 2013
Weeks
1.0
52
6
12
18
24
30
36
42
48
Source: NDRC, Barclays Research
12
Barclays | Commodities Weekly
Metals
31 May 2013
13
Barclays | Commodities Weekly
METALS MARKET OUTLOOK
Chinese demand data reveal April upswing for
base metals, while gold ETP outflows show
signs of slowing
• Stock-adjusted Chinese apparent consumption data for April point towards a strong
y/y growth trend in base metals, supporting the perception of a Q2 demand uptick.
Lead prices continue to outperform to the upside, with continued inventory draws
indicating that fundamentals remain tight in Q2.
• Gold is set to remain under pressure given that around 100 tonnes of physical ETP
holdings are still cash-negative.
Base metals: Chinese demand data increasingly positive
Gayle Berry
+44 (0)20 3134 1596
gayle.berry@barclays.com
Nicholas Snowdon
+1 212 526 7279
nicholas.snowdon@barclays.com
LME price performance has been relatively mixed across the base metals complex over the
past week. Copper, nickel and tin have remained largely unchanged versus some positive
moves in the rest of the complex. Lead was the standout in that respect, with the LME 3month contract having risen close to 10% from its mid-May low and now is at its highest
level since Q1. This outperformance can largely be tied at a fundamental level to the most
recent ILZSG report, which showed a 17Kt global refined lead market deficit in Q1, a bullish
surprise given our 22Kt surplus projection for the period. A significant 154Kt deficit in the US
lead market was the key support, driven by very strong 20% y/y growth in regional refined
demand. To the extent that lead LME and SHFE stocks have continued to decline so far in
Q2, combined with particularly robust battery and E-bike production levels in China, further
support to prices from current levels cannot be ruled out.
In terms of key fundamental data releases, the refined metal production for April has been
released by the Chinese Nonferrous Industry Association (CNIA) and showed that
production was strong across the board. This also indicates stronger strong apparent
consumption given the corresponding drawdown in metal stocks. Copper cathode
production rose to 557Kt in April, taking year-to-date growth to 11% y/y. Although net
imports were down 44% during the period, apparent consumption was up 6% following
FIGURE 1
Latest stock-adjusted China apparent consumption figures
show a firm uptick across base metals in April 2013
100%
Chinese base metals apparent consumption (%
change y/y)
FIGURE 2
Chilean copper production fell 1.2% y/y in April after firm
growth in Q1
Chilean copper production (Kt)
550
80%
60%
Aluminium
Zinc
Nickel
Y/Y change in Chilean copper production
15%
Copper
Lead
510
40%
10%
5%
470
0%
20%
430
-5%
0%
-10%
390
-15%
-20%
-40%
Apr-12
Aug-12
Dec-12
Source: CNIA, China Trade, SHFE, Barclays Research
31 May 2013
20%
Apr-13
350
Apr-11
Oct-11
Apr-12
Oct-12
-20%
Apr-13
Source: INE, Barclays Research
14
Barclays | Commodities Weekly
draws in bonded and SHFE stocks. Indeed, including our estimate of a 100Kt draw in
bonded stocks in April, apparent consumption hit a record high in absolute terms of 845Kt,
which we believe was also boosted by the tightness in scrap supply. This improving
consumption also fits with end-demand indicators, many of which have been
strengthening. Power and grid-related indicators have been particularly positive. While we
expect the apparent consumption data to stay positive in May-June given the draws in
bonded stocks and end-use activity, seasonal strength could fade, especially given weaker
forward-looking economic data such as manufacturing PMI. Potentially less positive for the
demand outlook was news this week that the Ministry of Finance would end the subsidy on
energy-saving home appliances by the end of May, which could be a risk to growth in
sector demand in H2.
The other base metals also displayed firmly positive stock-adjusted apparent consumption
growth in April. Aluminium (+10% y/y), lead (+16% y/y), nickel (+15% y/y), tin (+19% y/y)
and zinc (+9% y/y) all offered positive trends during the month. As with copper, this was
driven predominantly by robust domestic production trends. Aluminium production rose to
1.7Mt, which is a further 2% m/m increase in daily production. Lead production pulled back
to 396Kt in April, down from 422Kt in March, though year-to-date production was up 17%
y/y. Zinc output reached 447Kt, 16% higher y/y, taking the year-to-date increase to 8.6%
y/y, with production beginning to normalise after cuts in 2012. Ultimately, these data points
support the view that end-demand conditions have picked up in Q2 versus Q1, leading to
the necessary pace of raw material destocking in all of these base metals to retighten
Chinese market fundamentals.
In terms of supply dynamics, the copper market has led in terms of developments this week.
Chilean monthly production data for April showed 441.7Kt, which represented a 1.2% y/y
contraction (and -9% m/m), the first decline this year after output growth of 7% y/y in Q1.
In terms of disruptions that contributed to this, there was a 24-hour worker strike at all of
Codelco’s operations in Chile on 9 April, which came in response to concerns about job
security and safety improvements. We project only 5Kt of lost tonnage from that strike.
Codelco contract workers also staged protests on 23 April to block access to the company’s
mines, although any effect on production was downplayed. This appears to indicate
underperformance at other mines, which will become clearer when Cochilo releases its
mine-by-mine performance (in Chile) for the month. In terms of the Grasberg mine in
Papua (second-largest copper mine in the world), it was reported on 30 May that some
operations had restarted, though this did not include the underground section of the mine
where safety inspections are ongoing. It was also stated that the company has continued to
run-down inventories and ship for processing during this closure window, limiting any
immediate effect on the refined copper market.
Precious metals: Gold ETP outflows show signs of slowing,
but physical demand has slowed, too
Suki Cooper
+1 212 526 7896
suki.cooper@barclays.com
31 May 2013
With the exception of palladium, the complex had been caught within range-bound trading
until Thursday. Gold managed to breach $1400/oz, aided by a weaker dollar, weaker-thanexpected US macro data and the continued strength of physical demand support. However,
in our view, as gold remains stuck between unabated ETP outflows and strong physical
demand, we believe there is greater scope for physical demand to slow before ETP outflows
ease. There have been some signs of ETP net redemptions slowing, with GLD recording its
first inflow of a modest 0.9 tonnes (on Wednesday 29 May) since mid-May, after metal held
in trust tumbled to its lowest level since February 2009. Total holdings across the 55
physically backed products we track are at their lowest level since July 2011, with net
redemptions reaching 454 tonnes for the year to date and 111 tonnes in May thus far.
Although less than the record 183 tonnes of net redemptions last month, outflows are still
15
Barclays | Commodities Weekly
sizeable; however, the minimum holdings that are currently cash-negative has fallen to 92
tonnes. We maintain the view that ETP holdings are likely to face reduced strain should
prices recover above $1500/oz or should equity markets come under pressure along with
worsening macro data.
The physical market has shown greater signs of slowing, although bar premiums continue
to scale record levels across select regions. Bar premiums hit $7/oz in Singapore due to
local metal shortages, yet premiums have eased in Hong Kong and India to below $5/oz
(Reuters). Local dealers in India were quoted by Reuters as stating that retail demand was
soft amid the usual slow season, jewellers had already re-stocked and investment demand
had weakened as lower prices were expected. Volume traded on the Shanghai Gold
Exchange started to pick up again at the end of the week, remaining strong yet below the
record set in April. Reuters cited the World Gold Council (WGC) estimate of Asian gold
demand hitting a record high in Q2 13 and absorbing ETP outflows. The WGC believes
China’s gold imports could exceed its previous forecast of 780-880 tonnes for the full year
following net imports of 160-170 tonnes in April. It also expects India’s gold imports to hit
350-400 tonnes, compared with 215 tonnes in Q1 13 (demand: 256 tonnes in Q1 13), and
expect full-year imports at the higher end of its 865-965 tonne forecast. Quarterly supply
from mine output and gold scrap exceeds 1000 tonnes, and additional supply from ETPs
has added 294 tonnes in Q2 13.
Meanwhile, across the PGMs, the latest Swiss trade data revealed a reversion in the
palladium shipment trend seen over the past year. Following the 295koz shipment in March,
the largest since January 2010, palladium shipments from Russia in April were just 2% of
the previous month’s release at 6.495koz, in line with the average release over the past 12
months at 6.8koz. Although March data highlighted that an element of surprise still exists,
consecutive months of elevated shipments would have weakened our constructive view on
palladium. Russian shipments to other major ports have not revealed a surge in imports. For
now, the increase in March appears consistent with the view that the metal was shipped
previously and priced in March. The decline in April supports our view that metal from state
stock releases is likely to fall this year. Our balance assumes 200koz is released from Russian
state stockpiles this year; Johnson Matthey (JM) estimates shipments for 2013 at about half
of last year’s 250koz, closer to 100koz. In line with our own view, JM notes in its Platinum
2013 review, Russian stock sales are unlikely to be of significance to overall palladium
supplies in the foreseeable future. Palladium remains our preferred pick longer term. In the
FIGURE 3
Bar premiums hit another record in Singapore but have
eased elsewhere
800
Gold bar premiums (cents/oz)
700
Singapore
Hong Kong
600
FIGURE 4
Element of surprise still exists for Russian palladium
shipments
3,000
Palladium shipments from Russia to Switzerland (koz)
2,500
Tokyo
500
2,000
400
300
1,500
200
1,000
100
0
500
-100
-200
Feb-12
0
May-12
Aug-12
Source: Reuters, Barclays Research
31 May 2013
Nov-12
Feb-13
May-13
1988
1992
1996
2000
2004
2008
2012
Source: Swiss FCA, Barclays Research
16
Barclays | Commodities Weekly
near term, we believe platinum possesses the most upside potential given the upcoming
wage negotiations in South Africa. Although demands have yet to be made across the PGM
sector, Lonmin has said it has been involved in lengthy discussions with the Association of
Mineworkers and Construction Union (AMCU) to reach a new recognition agreement, but
the incumbent union, National Union of Mineworkers (NUM), has issued a legal challenge
regarding the timing of the notice period served to remove majority union privileges.
31 May 2013
17
Barclays | Commodities Weekly
Base metals LME cash prices
FIGURE 5
Aluminium ($/t)
FIGURE 6
Copper ($/t)
2,200
8,500
2,100
8,100
2,000
7,700
1,900
7,300
1,800
6,900
1,700
May-12
Aug-12
Nov-12
Feb-13
May-13
6,500
May-12
Aug-12
Source: EcoWin, Barclays Research
Source: EcoWin, Barclays Research
FIGURE 7
Lead ($/t)
FIGURE 8
Nickel ($/t)
Nov-12
Feb-13
May-13
Nov-12
Feb-13
May-13
20,000
2,600
2,400
18,500
2,200
17,000
2,000
15,500
1,800
1,600
May-12
Aug-12
Nov-12
Feb-13
May-13
14,000
May-12
Aug-12
Source: EcoWin, Barclays Research
Source: EcoWin, Barclays Research
FIGURE 9
Tin ($/t)
FIGURE 10
Zinc ($/t)
26,000
2,300
24,000
2,150
22,000
2,000
20,000
1,850
18,000
16,000
May-12
Aug-12
Source: EcoWin, Barclays Research
31 May 2013
Nov-12
Feb-13
May-13
1,700
May-12
Aug-12
Nov-12
Feb-13
May-13
Source: EcoWin, Barclays Research
18
Barclays | Commodities Weekly
Precious metals prices and ETP holdings
FIGURE 11
Gold ($/oz)
FIGURE 12
Silver ($/oz)
37
1,800
34
1,700
31
1,600
28
1,500
25
1,400
1,300
May-12
22
Aug-12
Nov-12
Feb-13
19
May-12
May-13
Nov-12
Feb-13
May-13
Nov-12
Feb-13
May-13
Aug-12
Source: EcoWin, Barclays Research
Source: EcoWin, Barclays Research
FIGURE 13
Platinum ($/oz)
FIGURE 14
Palladium ($/oz)
800
1,800
1,700
725
1,600
650
1,500
575
1,400
1,300
May-12
Aug-12
Nov-12
Feb-13
Source: EcoWin, Barclays Research
May-13
500
May-12
Aug-12
Source: EcoWin, Barclays Research
FIGURE 15
ETP holdings (29 May 2013)
Physical ETPs
Weekly change
Month-to-date change
Year-to-date change
Total holdings
Gold (tonnes)
-12.8
-111.0
-453.5
2,307
Open-end funds
-12.8
-111.0
-471.5
2,182
SPDR (GLD)
-6.9
-65.4
-337.7
1,013
Silver (tonnes)
-5.8
-484.8
101.6
19,576
Open-end funds
-5.8
-484.8
101.6
15,551
iShares US
0.0
-429.6
-62.0
10,023
Platinum (ounces)
38,435
282,583
362,562
2,158,858
Open-end funds
38,435
282,583
347,775
2,076,571
43,959
359,864
363,864
363,864
Palladium (ounces)
ABSA NewPlat
-23,295
-28,948
202,457
2,386,989
Open-end funds
-23,295
-28,948
162,013
2,199,045
US ETF Securities
-24,410
4,556
76,693
789,056
Source: Various issuer websites, Bloomberg, Barclays Research
31 May 2013
19
Barclays | Commodities Weekly
FOCUS: PRECIOUS METALS
Gold: South African cash costs climb
In Q1 13, South Africa was once again the highest-cost gold mining region in our
database. Average cash costs rose by 10% q/q, while marginal costs were nearly flat.
Besides cost base increases, we see scope for rising cash costs in 2013, largely stemming
from labour-related supply disruptions given upcoming wage negotiations.
Christopher Louney
+1 212 526 6721
christopher.louney@barclays.com
Gold cash costs (production costs per mined ounce, excluding capital expenditure) continued
their year-long upward trend in Q1. The Barclays gold cash cost database covers hundreds of
individual mines, or around 35% of global mine output, with China the main omission. Average
cash costs rose by 10.2% q/q to $758/oz while marginal cash costs rose by less than 1% q/q to
$1,070/oz. The larger rise in average costs relative to marginal costs suggests that overall cost
base increases are likely to blame for the broad increases across the curve; however, labourrelated supply disruptions are poised to push the curve higher in 2013, especially on the margin.
South Africa remained the highest-cost region in Q1 13, with the cash costs of the vast
majority of its production well above the average (50%) cash costs, and largely concentrated
around marginal (90%) cash costs (Figure 1). Although we expect much of any future upward
pressure on cash costs to come from labour-related supply disruptions in 2013, the overall
cost base is also likely to rise. South Africa’s power utility is set to boost power tariffs by as
much as 9.6% for miners like Gold Fields. In 2012, Gold Fields attributed higher cash costs to
both labour and power expenses, which make up 49% and 15% of its cash costs, respectively
– similar to overall industry levels. Any rise in labour costs is likely to be highly correlated with
labour-related supply disruptions, an issue experienced by many South African miners last
year. Such disruptions are not specific to the gold industry and the collectivised bargaining
model used by gold producers could insulate them from some of the possible labour-related
woes. However, with wage negotiations set for June, labour costs are poised to rise in our
view, and likely by more than the 8% y/y rise agreed in the 2011-13 wage agreement.
After adding in sustaining capital expenditure, which we estimate at more than $200/oz for the
industry, little headroom remains on the margin, given the current low-price environment for
gold, in which the wider industry move toward controlling cash costs versus chasing ounces
should provide some cushion. That said, we believe that the base of gold cash costs is set to rise
and that scope for greater upside risk in the coming quarters lies in potential labour-related
supply disruptions in South Africa.
FIGURE 1
Q1 2013 average cost curve shows minimal South African
production below average cash costs
2,000
Country
Q1 2013
South Africa
1,800
FIGURE 2
Average cash cost by region showing percent of production
on the cost curve (Barclays database)
1,600
1,400
cash cost (USD/oz)
% of production tracked
South Africa
1,232.92
9.1%
Australia & NZ
926.40
6.6%
Ghana
904.00
6.5%
864.15
12.3%
1,000
Australia
Papua New
844.00
4.7%
800
Brazil
773.46
3.7%
600
Canada
695.46
4.9%
400
Mexico
671.84
3.3%
200
US
579.55
21.0%
9.6%
1,200
0
0%
20%
Min: 102
40%
Source: Company reports, Barclays Research
31 May 2013
60%
80%
100%
Max: 22,891
Peru
548.99
Indonesia
260.63
3.3%
Other
605.10
15.1%
Source: Company reports, Barclays Research
20
Barclays | Commodities Weekly
Forecasts and Data
31 May 2013
21
Barclays | Commodities Weekly
COMMODITY PRICE FORECASTS
Barclays Research quarterly average commodity price forecasts
Base Metals (LME cash)
Aluminium
US$/t
Copper
US$/t
Lead
US$/t
Nickel
US$/t
Tin
US$/t
Zinc
US$/t
Base Metal Index^
Precious metals
Gold
US$/oz
Silver
US$/oz
Platinum
US$/oz
Palladium
US$/oz
Energy
WTI
US$/bbl
Brent
US$/bbl
US Natural Gas US$/mmbtu
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13F
Q3 13F
Q4 13F
2,176
8,310
2,093
19,651
22,941
2,025
218
1,975
7,869
1,974
17,146
20,565
1,928
201
1,921
7,706
1,975
16,317
19,275
1,885
195
1,996
7,909
2,199
16,967
21,560
1,947
203
2,003
7,931
2,301
17,314
24,125
2,033
209
1,950
8,100
2,300
16,500
23,500
2,050
207
2,000
8,000
2,400
16,250
25,000
1,950
208
2,100
7,650
2,450
17,000
26,000
2,200
210
1690
32.6
1604
680
1611
29.4
1495
625
1653
29.9
1493
609
1717
32.5
1593
650
1631
30.1
1628
738
1350
23.0
1660
725
1450
25.0
1710
750
1500
26.0
1750
780
103
118
2.5
94
109
2.4
92
109
2.9
88
110
3.5
94
113
3.5
95
110
4.0
93
111
4.0
99
114
4.1
Note: ^Economist Intelligence Unit weight. Base metals prices are LME cash. Precious metals spot prices. WTI: front month NYMEX close. Brent: front month IPE close.
US natural gas: NYMEX front month close.
Source: Barclays Research
Barclays Research annual average commodity price forecasts
Base Metals
Aluminium
Copper
Lead
Nickel
Tin
Zinc
Base Metal Index^
Precious Metals
Gold
Silver
Platinum
Palladium
Energy
WTI
Brent
US Natural Gas
US$/t
US$/t
US$/t
US$/t
US$/t
US$/t
US$/oz
US$/oz
US$/oz
US$/oz
US$/bbl
US$/bbl
US$/mmbtu
2008
2009
2010
2011
2012
2013F
2014F
2015F
2,573
6,961
2,093
21,115
18,500
1,876
204.3
1,664
5,148
1,721
14,604
13,579
1,654
146.2
2,172
7,533
2,146
21,809
20,407
2,158
210
2,398
8,813
2,399
22,853
26,063
2,191
240
2,017
7,948
2,060
17,520
21,085
1,946
204
2,013
7,920
2,363
16,766
24,656
2,058
209
2,100
7,500
2,450
18,000
26,000
2,700
212
2,250
9,500
2,600
20,000
26,000
2,800
243
872
15.0
1,569
348
972
14.6
1,205
262
1,226
20.2
1,610
526
1,571
35.2
1,716
729
1,668
31.1
1,547
641
1,483
26.0
1,687
748
1,450
24.0
1,750
795
1,375
21
1,875
900
99.7
98.4
8.90
62
63
4.16
80
80
4.39
95
111
4.03
94
112
2.82
95
112
3.90
117
130
4.10
120
135
N/A
Note: ^Economist Intelligence Unit weight. Base metals prices are LME cash. Precious metals spot prices. WTI: front month NYMEX close. Brent: front month IPE close.
US natural gas: NYMEX front month close.
Source: Thomson Datastream, Barclays Research
31 May 2013
22
Barclays | Commodities Weekly
Price forecast comparisons
Price Change
Week Ago Price Change Month Ago Price Change
30-May-13
(%,Thurs/Thurs)
Price
(%, M/M)
Price
(%, Y/Y)
Commodity
Carbon EUA
Feeder Cattle
Lead
Zinc
Palladium
Aluminium
Azuki Beans
Platinum
Gold
Aluminium Alloy
Lean Hogs
Live Cattle
Silver
Tin
Gas Oil
Copper
Barley
Freight Capesize
Coal API2
Carbon CER
Coal API4
Crude Oil
Soybeans
Gasoline
Heating Oil
Oats
Wheat
Crude Oil
Sugar
Nickel
Wheat
Corn
UK Natural Gas
Cotton
Rough Rice
UK Power
German Power
Cocoa
Coffee
Lumber
US Natural Gas
Rubber
ECX
CME
LME
LME
NYMEX
LME
TGE
NYMEX
OTC
LME
CME
CME
OTC
LME
ICE
LME
WCE
OTC
ICE
ECX
ICE
ICE
CBOT
NYMEX
NYMEX
CBOT
CBOT
NYMEX
ICE
LME
KBOT
CBOT
ICE
ICE
CBOT
APX
EEX
ICE
ICE
CME
NYMEX
TOCOM
Euro/tonne
$/lb
$/tonne
$/tonne
$/oz
$/tonne
JPY/30kg
$/oz
$/oz
$/tonne
$/lb
$/lb
$/oz
$/tonne
$/tonne
$/tonne
C$/tonne
$/tonne
$/tonne
Euro/tonne
$/tonne
$/barrel
$/bushel
$/gallon
$/gallon
$/bushel
$/bushel
$/barrel
$/lb
$/tonne
$/bushel
$/bushel
£/therm
$/lb
$/bushel
Euro/MWh
Euro/MWh
$/tonne
$/lb
$/1000 ft
$/mmbtu
Y/kg
12.5%
9.5%
6.4%
3.2%
3.0%
2.9%
2.4%
1.8%
1.4%
1.3%
1.2%
1.0%
0.8%
0.5%
0.2%
0.2%
0.0%
0.0%
0.0%
0.0%
-0.1%
-0.2%
-0.3%
-0.4%
-0.5%
-0.6%
-0.6%
-0.6%
-0.7%
-1.0%
-1.1%
-1.2%
-1.7%
-2.0%
-2.5%
-2.6%
-2.9%
-3.2%
-3.2%
-3.8%
-5.5%
-6.3%
3.77
1.44
2,175
1,915
760.9
1,904
12,670
1,483
1,412.5
1,817
0.95
1.20
22.75
21,100
858.5
7,317
274.00
6.75
82.10
0.01
81.75
102.22
14.96
2.81
2.84
3.68
6.99
93.58
0.17
14,793
7.46
6.54
0.76
0.80
15.17
48.70
30.84
2,211
1.26
291.90
4.02
247.4
3.35
1.32
2,044
1,856
739.0
1,849
12,370
1,457
1,393.3
1,795
0.94
1.19
22.57
21,000
856.5
7,300
274.00
6.75
82.10
0.01
81.85
102.41
15.00
2.82
2.86
3.70
7.03
94.19
0.17
14,941
7.55
6.62
0.77
0.82
15.56
50.00
31.75
2,283
1.30
303.30
4.26
264.10
23.2%
3.3%
7.4%
2.5%
9.1%
2.1%
2.6%
-1.6%
-4.1%
1.7%
5.8%
35.2%
-6.0%
3.6%
1.6%
3.7%
0.2%
8.0%
-2.0%
-94.1%
1.2%
0.0%
1.9%
0.5%
-1.1%
-11.4%
-3.2%
0.2%
-5.8%
-3.8%
-6.5%
-4.2%
1.0%
-6.3%
2.1%
0.9%
-1.2%
-6.6%
-6.7%
-15.5%
-7.4%
-1.6%
3.1
1.40
2,025
1,868
697.5
1,865
12,350
1,507
1,472.8
1,787
0.90
0.89
24.21
20,370
845.0
7,055
273.5
6.3
83.8
0.2
80.8
102.26
14.68
2.80
2.87
4.2
7.22
93.42
0.18
15,380
7.98
6.83
0.8
0.86
14.9
48.2
31.2
2,368
1.35
345.5
4.34
251.3
-41.1%
-7.6%
13.3%
1.1%
25.7%
-4.9%
-4.7%
5.8%
-9.7%
-5.5%
9.3%
3.3%
-18.8%
6.7%
-2.7%
-2.1%
15.6%
-32.5%
-8.0%
-99.7%
-8.4%
-1.2%
8.9%
-1.5%
3.8%
35.9%
6.9%
6.5%
-14.5%
-9.2%
9.9%
16.9%
15.7%
13.0%
6.3%
16.8%
-23.2%
6.8%
-23.4%
3.1%
65.8%
-9.2%
Year Ago
Price
6.4
1.56
1,920
1,894
605.5
2,001
13,300
1,401
1,564.4
1,924
0.87
1.16
28.03
19,770
882.4
7,478
237.0
10.0
89.3
3.3
89.3
103.49
13.73
2.86
2.74
2.7
6.54
87.85
0.19
16,288
6.79
5.60
0.7
0.71
14.3
41.7
40.2
2,070
1.64
283.0
2.43
272.5
Source: Thomson Datastream, Barclays Research
31 May 2013
23
Barclays | Commodities Weekly
TRADE RECOMMENDATIONS
FIGURE 1
Key recommendations
Contract
Entry Date
Entry price
Current price
(28-May-2013)
Gain/Loss
Unit
$
%
Open trades
Long NYMEX platinum
Jan-14
30/04/2013
1511.40
1467.60
$/oz
-43.80
-2.9%
Rationale: We continue to forecast the platinum market to remain in deficit this year and the rising workforce representation of AMCU is likely to
lead to greater scope for industrial unrest during the biennial wage negotiations.
Short 3.5% fuel oil Rotterdam-Brent crack
May-13
30/04/2013
-10.79
-11.82
$/bbl
1.03
9.5%
spread
Rationale: We recommend shorting high sulphur fuel oil in the OTC market on persistent oversupply meeting waning demand, as the world moves
to burn less fuel oil for power generation and where bunker sales remain low amid relatively high inventories.
Long NYMEX palladium
Dec-13
18/01/2013
724.80
760.75
$/oz
35.95
5.0%
Rationale: We see much better prospects in PGM markets, predicated on a rebound in Chinese palladium imports against the backdrop of a
second successive year in deficit for the palladium market.
-3.3%
Long Brent crude oil
Dec-15
27/01/2011
98.15
94.89
$/bbl
-3.26
Rationale: We see the medium-term crude oil price risks as being to the upside mainly due to strong EM demand growth, lack of spare capacity
and constraints on non-OPEC supply. We expect far-forward prices to benefit, with our 2015 price forecast for Brent pegged at $135/bbl.
Note: From January 2013, a stop loss of -7.5% and a profit target of 15% will be applied to all trades. Trades will automatically be shut if either of these thresholds is
breached, unless there are exceptional circumstances that suggest the trade should be kept open. Source: Reuters, Barclays Research
FIGURE 2
Closed trades
Closed Trades
Contract
Directional trades
Short LME nickel
May-13
Short LME aluminium
Mar-13
Long COMEX gold
Feb-13
Long NYMEX palladium
Dec-12
Long LME copper
Dec-12
Long LME aluminium
Dec-15
Short US nat gas Henry Hub
Oct-13
Long COMEX gold**
Dec-12
Long Carbon EUA
Dec-11
Long UK natural gas
Q3-11
Long LME nickel
Jun-11
Long European delivered coal (API2)**
Apr-11
Short Comex silver
Dec-11
Long LME copper
Jun-11
Short UK natural gas
Summer 2011
Long NYMEX crude oil**
Dec-11
Short US natural gas
Dec-11
Long LME lead
Dec-10
Long LME copper**
Sep-10
Long NYMEX palladium
Jun-10
Long LME nickel
Jun-10
Long NYMEX crude oil
May-10
Spread trades
US natural gas spread widening
Short front month Brent time spread
Short US gasoline crack spread
UK nat gas spread widening
Fuel oil versus gasoil differentials
Short European gasoil crack spreads
US gasoline (RBOB) spread tightening
Copper spreads tightening
WTI contango widening
Natural gas spread widening
Crude oil spread tightening**
Gasoil spread tightening
US Henry Hub nat gas
Exit Date
Entry price
Exit price
15/02/2013
01/10/2012
01/10/2012
29/02/2012
17/05/2012
29/03/2011
21/11/2011
21/11/2011
24/02/2011
29/03/2011
24/02/2011
27/01/2011
27/01/2011
22/09/2010
19/10/2010
19/10/2010
13/08/2010
21/06/2010
10/12/2009
22/02/2010
10/12/2009
10/12/2009
21/03/2013
18/03/2013
22/01/2013
31/12/2012
24/08/2012
20/07/2012
20/12/2011
20/12/2011
30/06/2011
26/05/2011
26/05/2011
29/03/2011
24/02/2011
24/02/2011
27/01/2011
27/01/2011
26/11/2010
13/08/2010
13/08/2010
11/05/2010
18/03/2010
18/02/2010
18380.00
2144.3
1785.5
710
7639
2884
4.4
1694
15.4
63.9
27501
114.5
27.1
7833.0
47.2
84.8
5.54
1851
7062
444
16331
75.4
16872.00
$/t
1508.00
1893.5
$/oz
250.8
1693.2
$/oz
-92.3
703
$/oz
-7
7642
$/t
-1373
2193
$/t
-690.8
4.1
$/mmbtu
0.3
1628
$/oz
-66
€ /t
13.5
-1.9
58.5
p/therm
-5.4
22821
$/t
-4680
125.7
$/t
16
33.1
$/oz
-6
9505
$/t
1672
52.5
p/therm
-5
99.3
c/bbl
12.1
5.12
$/mmbtu
0.43
2065
$/t
214
7143
$/t
345
532
$/oz
88
22760
$/t
6429
79.1
$/b
3.7
21/03/2013
15/02/2013
18/01/2013
24/08/2012
29/02/2012
25/06/2012
20/12/2011
21/11/2011
19/07/2011
15/12/2010
20/04/2011
22/09/2010
21/06/2010
26/03/2013
08/03/2013
24/01/2013
29/11/2012
01/10/2012
20/07/2012
17/05/2012
21/03/2012
29/02/2012
30/06/2011
26/05/2011
19/10/2010
13/08/2010
0.095
90.0
27.8
0.01
-30.54
0.50
3.0
-17.3
0.38
0.63
-0.36
-16.8
0.66
0.086
76.0
30.0
0.58
-30.01
-0.41
3.8
14.5
0.41
0.41
-0.37
-15.3
0.65
Unit
Gain/Loss
Entry Date
$/mmbtu
c/b
$/b
p/therm
$/b
$/b
$/b
$/t
$/b
$/mmbtu
$/b
$/t
$/mmbtu
$
%
8.2%
11.7%
-5.2%
-0.9%
-14.3%
-24.0%
6.6%
29.3%
-12.1%
-8.5%
-17.0%
14.4%
-22.4%
21.3%
-11.3%
14.2%
7.7%
11.6%
5.0%
19.8%
39.4%
4.9%
-0.01
14.0
-2.2
0.57
0.54
0.91
0.9
14.0
0.03
-0.22
0.34
1.50
0.01
-
Note: Entry and exit prices reference closing prices on the day of publication;**these trades include gains/losses from previous trades. Source: Reuters, Barclays Research
31 May 2013
24
Barclays | Commodities Weekly
KEY DATA RELEASES
• US real GDP growth in Q1 13 was revised to 2.4% saar in the second estimate, down from the advance estimate of 2.5% and
below our economists’ expectations (2.6%) and consensus expectations (2.5%). The main surprises relative to our
economists’ forecast were larger-than-expected downward revisions to estimates of inventory growth and government
spending (for more details, see US real GDP growth revised down modestly in Q1 13).
• According to the Eurostat “flash” HICP estimate, inflation for the euro area increased two tenths to 1.4% y/y in May, in line
with our economists’ and market expectations. This confirms our economists’ view that April’s large fall to 1.2% y/y would
not be a sustained level. In addition, our economists look for a further inflation rate increase next month, from another
positive energy base effect, and a decline by the year-end (for more details, see Euro area inflation up 2 tenths to 1.4% y/y in
May, in line with expectations).
Monday
Tuesday
Wednesday
Thursday
Friday
27 May
28 May
29 May
30 May
31 May
UK & US Public Holiday
EIA Monthly Energy
Review
Dept of Energy Weekly Oil EIA Weekly Natural Gas
Data
Storage
US GDP
CFTC Data
SHFE Aluminium, Copper
and Zinc Inventory Data
US Chicago PMI
US Consumer Sentiment
Euro Area HICP Flash
03 Jun
04 Jun
05 Jun
06 Jun
07 Jun
US Construction Spending Euro Area PPI
US ISM Mfg Index
US Auto Sales
Euro Area PMI
Manufacturing Index
Dept of Energy Weekly Oil
Data
US ISM Non-Mfg Index
US Factory Orders
Euro Area GDP
Euro Area PMI Composite
EIA Weekly Natural Gas
Storage
ECB Announcement
German Manufacturers'
Orders
CFTC Data
SHFE Aluminium, Copper
and Zinc Inventory Data
US Nonfarm Payrolls
German Industrial
Production
10 Jun
11 Jun
12 Jun
13 Jun
14 Jun
Preliminary (May) China
Commodity Data out this
week (National Bureau of
Statistics)
OECD Main Economic
Indicators
OPEC Monthly Oil Market
Report
EIA Short-Term Energy
Outlook
Dept of Energy Weekly Oil EIA Weekly Natural Gas
Storage
Data
USDA WASDE Report
Euro Area Industrial
Production
CFTC Data
SHFE Aluminium, Copper
and Zinc Inventory Data
US PPI
US IP
US Consumer Sentiment
Euro Area HICP
17 Jun
18 Jun
19 Jun
20 Jun
21 Jun
Dept of Energy Weekly Oil
Data
FOMC Meeting
Announcement
CFTC Data
EIA Weekly Natural Gas
SHFE Aluminium, Copper
Storage
and Zinc Inventory Data
US Existing Home Sales
US Philly Fed Mfg Index
US Leading Indicators
Euro Area PMI Composite
Flash
US CPI
Detailed (May) China
Commodity Data out this FOMC Meeting Begins
week (National Bureau of German ZEW Survey
Statistics)
US Empire State Mfg Index
31 May 2013
25
Barclays | Commodities Weekly
FX FORECASTS
FX forecasts
Spot
1m
3m
Forecast vs outright forward
6m
1y
1m
3m
6m
1y
G7 countries
EUR/USD
1.29
1.29
1.28
1.25
1.23
-0.4%
-1.2%
-3.6%
-5.3%
USD/JPY
101.3
103.0
103.0
103.0
98.0
1.7%
1.8%
1.8%
-2.9%
GBP/USD
1.51
1.53
1.50
1.47
1.47
1.4%
-0.5%
-2.5%
-2.4%
USD/CHF
0.96
0.95
0.97
1.00
1.03
-1.5%
0.7%
3.9%
7.3%
USD/CAD
1.04
1.02
1.01
1.00
0.99
-1.8%
-2.9%
-4.1%
-5.4%
AUD/USD
0.96
1.00
0.98
0.96
0.93
4.1%
2.4%
0.9%
-1.1%
NZD/USD
0.81
0.82
0.82
0.81
0.79
1.1%
1.5%
0.9%
-0.3%
USD/CNY
6.13
6.18
6.16
6.14
6.08
-0.1%
-0.5%
-1.0%
-2.6%
USD/HKD
7.76
7.76
7.76
7.76
7.76
0.0%
0.0%
0.0%
0.1%
USD/INR
56.17
53.50
53.50
54.00
55.00
-5.3%
-6.3%
-6.8%
-7.7%
USD/IDR
9,805
9,750
9,850
9,900
10,000
-1.5%
-1.6%
-2.4%
-3.8%
USD/KRW
1,133
1,105
1,095
1,090
1,080
-2.7%
-3.8%
-4.5%
-5.8%
USD/LKR
126.50
126.50
127.00
128.00
128.00
-0.8%
-1.9%
-3.4%
1.3%
Emerging Asia
USD/MYR
3.08
2.98
2.96
2.94
2.90
-3.3%
-4.3%
-5.4%
-7.5%
USD/PHP
42.49
40.50
40.00
39.50
39.00
-5.0%
-6.4%
-7.6%
-9.1%
USD/SGD
1.268
1.250
1.250
1.240
1.230
-1.4%
-1.4%
-2.2%
-2.9%
USD/THB
30.19
29.50
29.25
29.00
29.00
-2.5%
-3.7%
-4.9%
-5.6%
USD/TWD
29.99
29.60
29.40
29.00
28.75
-1.6%
-1.9%
-1.9%
-3.7%
USD/VND
21,013
20,950
20,950
20,900
20,900
-0.6%
-2.2%
-3.6%
-5.1%
USD/ARS
5.27
5.26
5.41
5.63
6.28
-2.6%
-5.7%
-11.7%
-21.5%
USD/BRL
2.07
1.95
1.95
2.00
2.00
-5.2%
-6.1%
-5.2%
-7.9%
Latin America
USD/CLP
492
482
480
480
480
-3.1%
-3.8%
-4.5%
-5.7%
USD/MXN
12.67
12.15
12.01
11.77
11.50
-2.9%
-4.4%
-7.0%
-10.5%
USD/COP
1,898
1,875
1,860
1,835
1,820
-1.6%
-2.2%
-4.4%
-6.8%
USD/PEN
2.68
2.63
2.60
2.58
2.56
-2.1%
-2.8%
-3.7%
-5.5%
25.92
26.00
26.00
26.25
26.25
-0.6%
-0.6%
0.4%
0.4%
EEMEA
EUR/CZK
EUR/HUF
289
290
290
293
295
4.5%
4.5%
6.4%
6.7%
EUR/PLN
4.23
4.15
4.13
4.13
4.13
-1.4%
-2.3%
-2.8%
-3.7%
EUR/RON
4.35
4.33
4.32
4.30
4.25
-0.9%
-2.1%
-3.2%
-5.8%
USD/RUB
31.54
31.00
31.00
31.00
31.00
-1.8%
-2.8%
-4.2%
-6.8%
BSK/RUB
35.72
35.05
34.91
34.49
34.21
-1.9%
-3.4%
-5.9%
-9.3%
USD/TRY
1.86
1.85
1.85
1.85
1.85
0.0%
-0.7%
-1.7%
-3.7%
USD/ZAR
9.79
9.55
9.60
9.50
9.20
-0.4%
-0.7%
-2.9%
-8.1%
USD/ILS
3.69
3.70
3.73
3.71
3.69
-1.4%
-1.6%
-1.2%
-0.7%
USD/EGP
6.98
7.00
7.20
7.50
7.70
-1.3%
-2.3%
-3.8%
-9.2%
USD/UAH
8.14
8.20
8.20
9.60
9.60
0.4%
-0.9%
12.7%
3.2%
Source: Barclays Research
31 May 2013
26
Barclays | Commodities Weekly
COMMODITIES RESEARCH ANALYSTS
Barclays
5 The North Colonnade
London E14 4BB
Gayle Berry
Commodities Research
+44 (0)20 3134 1596
gayle.berry@barclays.com
Afonso Campos
Commodities Research
+44 (0)20 3555 4444
afonso.campos@barclays.com
Sijin Cheng
Commodities Research
+65 6308 6320
sijin.cheng@barclays.com
Suki Cooper
Commodities Research
+1 212 526 7896
suki.cooper@barclays.com
Helima Croft
Commodities Research
+1 212 526 0764
helima.croft@barclays.com
Christopher Louney
Commodities Research
+1 212 526 6721
christopher.louney@barclays.com
Sha Luo
Commodities Research
+44 (0)20 7773 3994
sha.luo@barclays.com
Miswin Mahesh
Commodities Research
+44 (0)20 7773 4291
miswin.mahesh@barclays.com
Kevin Norrish
Commodities Research
+44 (0)20 7773 0369
kevin.norrish@barclays.com
Biliana Pehlivanova
Commodities Research
+1 212 526 2492
biliana.pehlivanova@barclays.com
Nicholas Snowdon
Commodities Research
+1 212 526 7279
nicholas.snowdon@barclays.com
Kate Tang
Commodities Research
+44 (0)20 7773 0930
kate.tang@barclays.com
Sudakshina Unnikrishnan
Commodities Research
+44 (0)20 7773 3797
sudakshina.unnikrishnan@barclays.com
Shiyang Wang
Commodities Research
+1 212 526 7464
shiyang.wang@barclays.com
31 May 2013
27
Analyst Certification
We, Suki Cooper, Sudakshina Unnikrishnan, BR Barclays Research, Afonso Campos, Miswin Mahesh, Shiyang Wang, Sijin Cheng, Gayle Berry, Nicholas
Snowdon, Christopher Louney and Kate Tang, hereby certify (1) that the views expressed in this research report accurately reflect our personal views
about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or
indirectly related to the specific recommendations or views expressed in this research report.
Each research report excerpted herein was certified under Reg AC by the analyst primarily responsible for such report as follows: I hereby certify that: 1)
the views expressed in this research report accurately reflect my personal views about any or all of the subject securities referred to in this report and; 2)
no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
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