Thursday, June 29, 2006

Commodities Market News

Goldman May Buy Stake in India's Commodity Exchange

June 29 (Bloomberg) -- Goldman Sachs Group Inc., the world's biggest securities firm, plans to buy a stake in India's National Commodity & Derivatives Exchange Ltd. to gain from a surge in trading in Asia's second-fastest growing major economy.

Goldman will buy the stake from ICICI Bank Ltd., India's second-largest lender, two people familiar with the matter said, asking not be identified before an official announcement. Edward Naylor, a Goldman spokesman in Hong Kong, and Vishakha Mulye, chief financial officer of ICICI Bank, declined to comment.

Trading on India's commodity exchanges totaled $460 billion in the year ended March 31, a fourfold jump from the year before, as economic growth boosted disposable incomes and fueled investments in commodities. That spurred Fidelity International Ltd., a unit of the world's biggest money manager, in February to pay $49 million for 9 percent of the Multi Commodity Exchange of India Ltd., the world's third-biggest bullion bourse.

``It's a good move as commodity exchanges in India are just taking off and are in a growth phase,'' said Sanjay Dongre, a fund manager at UTI Mutual Fund, which oversees about $6.6 billion in investments. ``One could expect turnover at commodity exchanges to rise and an investor could reap benefit.''

Goldman may buy 10 percent of the National Commodity Exchange, India's Economic Times and Financial Express newspapers reported today, citing unidentified people. The investment may be Goldman's biggest in India since the company ended a 10-year venture with Kotak Mahindra Bank Ltd., an Indian lender, in March.

Goldman would invest in private equity, fund-to-fund and real estate businesses in India, Brooks Entwistle, head of the company's Indian operations, said in March.

India, the world's biggest consumer of gold and second- biggest producer of sugar and rice, trades futures contracts in more than 80 commodities in 500 locations.

Local traders and producing and consuming companies are the main participants on the bourses. S. Sundareshan, chairman of the Forward Markets Commission, said last month the regulator may permit overseas investors to trade in oil and bullion futures before expanding the list to include some farm products.

Buying a stake in the exchange will allow Goldman to ``capture the volume growth in the commodity derivatives business,'' Vineet Bhatnagar, managing director at Man Financial Commodities India Ltd., a Mumbai-based brokerage, said by telephone from Singapore.

Volume on the National Commodity Exchange, which trades futures contracts in 48 commodities, reached $226 billion in the year ended March 31, according to the Forward Markets Commission. That's more than the $184 billion of shares traded on the Mumbai stock exchange, Asia's oldest, in the same period. -source



Nymex looking to start gold futures trade in China

BEIJING (XFN-ASIA) - The New York Mercantile Exchange (Nymex) is hoping to begin the trading of gold futures contracts in China, the Wall Street Journal said, citing a senior exchange official

John Hanemann, vice chairman of the governors committee of Nymex's Comex Division, was quoted by the newspaper as saying the exchange has been in talks about launching its gold futures contracts with Chinese exchanges

China, meanwhile, has been looking to further develop its local derivatives markets, the report said

"We have been seeking opportunities to cooperate with Shanghai Gold Exchange to launch gold futures, perhaps as a joint product," Hanemann said

The plan, if it goes through, will not only see the first gold futures contracts being traded in China, but would also be the first joint derivatives product between a Chinese bourse and an overseas exchange, the newspaper reported

Currently, the trading of gold bullion, gold bars and platinum on the Shanghai Gold Exchange is limited to spot transactions. Chinese investors are not allowed to trade futures on overseas exchanges, the newspaper said

This also applies to state-controlled institutions, except those that have special licenses from the government. China's futures markets are also off-limits to foreign investors, the report said

Hanemann did not provide a timeframe for the launch of such a product, which is still being deliberated by the China Securities Regulatory Commission. The regulators are likely concerned about the risks of derivatives trading, the newspaper said

China is the world's fourth-largest gold producer and consumer

Last week, the China's central bank suggested the country can convert part of its foreign exchange reserves to gold holdings to head off risks from the depreciation of the US dollar, state media reported

Converting part of foreign exchange reserves to gold can protect and increase the reserve assets, the official Shanghai Securities News reported - source

Tuesday, June 27, 2006

Lehman Brothers Commodity Index (LBCI)

NEW YORK, June 27 (Reuters) - U.S. investment banking group Lehman Brothers said on Tuesday it has launched a new commodity index of 20 products covering energy, metals, agriculture and livestock -- the four main segments of the raw materials market.

Initial returns on the Lehman Brothers Commodity Index - which tracks dollar-denominated commodities futures for a start -- would be available from the close of business on July 3.

Individual commodity indices would be published as well, the group said in a statement.

"We feel we have designed a commodity benchmark that is truly transparent and representative of the commodity market while providing a weighting scheme that will appeal to investors," Nicholas Gendron, Lehman Brothers' global head of Indices, said in the statement.

Lehman said it planned to re-set the weights of the individual commodities on the index annually. Weightings will fluctuate throughout the year based on price movements.

The weights of the major components of the index as of the beginning of 2006 were: 56.2 percent for energy; 22.8 percent for metals; 18.2 percent for agriculture, and 2.8 percent for livestock.

Based on price movements since, the weights -- as of June 23 -- were: 52.9 percent for energy; 27.2 percent for metals; 17.4 percent for agriculture, and 2.5 percent for livestock.

Lehman Brothers said it also plans to release future versions of the index that would include commodities from other non-U.S. exchanges and denominated in non-U.S. currencies.

"It is clear the commodities market has evolved to the point where we believe there is demand for both global and regionalized versions" of the index, said Neil Wardley, senior vice president for Lehman Brothers' index strategy group. -source

Sunday, June 25, 2006

Molybdenum (Moly) Chart

Molybdenum is a silver white metal - basic material, chemical element in the periodic table. Molybdenum symbol is Mo and its atomic number 42.
Molybdenum is very hard metal and has one of the highest melting points(2623 °C) of all pure elements. Molybdenum is mostly used in alloys like steel.

Molybdenum price chart

Tuesday, June 20, 2006

Crude Oil (WTI) Charts

Crude Oil is not only the most important commodity but also a major component in any commodity index (CRB, RICI, DBLCI - DBC etc.).

Short term (daily chart) crude oil is consolidating in a relatively tight trading range of 7$ (75$ - 68$) ,Resistance at the 50 DMA , downward diagonal line and the top of the trading range(~75$). Support at the bottom of the trading range (~68$) and the 200 DMA.

Long term (weekly chart) sustained uptrend but a bit of deceleration. Support at long term uptrend line (~67$), the 50 WMA, strong support at 56$.

Investors and traders can get direct exposure to the price of crude oil with crude oil futures and derivatives and the USO ETF. Diversified exposure to crude oil related equity can be achieved with ETFs like the XLE (Energy Select Sector SPDR) and the OIH (Oil Services Holders).


Crude Oil (WTI) daily Chart

Crude Oil (WTI) weekly Chart

Monday, June 19, 2006

Resource nationalism may impact mining - World Bank

A fresh rise in resource nationalism seen in some parts of the world could have an unfavourable impact on the mining industry, a World Bank official said on Thursday.

Peter van der Veen, manager of the World Bank's mining policy division, said that while there had been successful examples of state ownership there were also cases where nationalisation had not worked.

Speaking at a seminar in Tokyo, van der Veen said: "Overall, especially in mining, I would say governments have not proven to be very responsible and good ... owners and operators of mines."

Van der Veen said that Chile's Codelco, the world's top copper producer, was one of the cases where state-ownership had proved successful.

But, he noted that Zambia's efforts to nationalise its copper operation had led to a steep decline in production. Annual copper output at one point fell below 300 000 tons from a peak at 700 000 tons in the 1970s.

Zambia sold the country's key copper mines to the private sector in 2000. Copper production has now recovered to about 500 000 tons, van der Veen said.

Some South American countries have recently moved to nationalise their resources spurred by the recent rise in global commodities prices and the wish for a greater share in the profits.

"Governments feel there is an opportunity, to indeed get a better share of the cake," van der Veen said. -source

Sunday, June 18, 2006

Venezuela to take over inactive mines

CARACAS, Venezuela, June 16 (Reuters) - Venezuela plans to take over all inactive mining areas to form new joint ventures with a state majority stake and state-backed small mining groups foreseen under a mine law reform, Mining Minister Victor Alvarez said on Friday.

The mine reforms follow measures by Venezuelan President Hugo Chavez to increase state control over the energy industry of the world's No. 5 crude exporter, where foreign and local companies were this year forced to accept new joint ventures giving the state oil firm PDVSA majority control.

"The areas that are inactive are going to be recuperated and rescued by the Venezuelan state," Alvarez told reporters outside the Congress where he handed over the proposed reforms to lawmakers.

Chavez, an ally of Cuba who says he is constructing a socialist revolution for the poor, has attacked oil contracts signed before his 1998 election for "robbing" Venezuela's resources by giving preferential terms to foreign operators.

Alvarez refused to comment directly when asked whether the reforms would affect Canadian gold miner Crystallex International (KRY.TO), which is waiting for the government to approve a final environmental permit to start proper mining.

Crystallex has said its operating contract for the huge Las Cristinas gold mine will not be affected by the mine law reforms. But one lawmaker in the congressional mining commission said he believes the Canadian miner would be included, without giving more details.

"Sometimes the process of getting permits is used as an excuse and a pretext to justify inactivity," Alvarez said, without naming any mine operations.

He said miners in production and with their affairs in order would not be included in the changes.

Earlier this year, former paratrooper Chavez said his government would no longer authorize new mining concessions and ordered a review of the industry, sparking market jitters as investors fretted over foreign gold miners such as Crystallex.

Mining will be carried out through operating contracts with the state mining company, though joint ventures where the state has majority control and through small mine operations such as cooperatives, according to a draft of the law reforms.

The proposal says current contracts can continue working unless they break the law or their production halts for more than a year or they fail to pay taxes or do not comply with social spending requirements demanded by the government.

Lawmakers loyal to Chavez control all 167 seats in the congress after opposition parties boycotted a December legislative ballot to protest what they said was bias by election officials - source

Wednesday, June 14, 2006

Russian mineral resources to remain open to foreigners - Putin

ST. PETERSBURG, June 13 (RIA Novosti) - President Vladimir Putin said Tuesday that Russia planned to impose restrictions on access to large deposits of mineral resources, but did not mean to deny foreign companies access to them.

Meeting with foreign business leaders at an economic forum in St. Petersburg, Putin said: "We have been discussing ways to ensure Russia's national interests related to its largest deposits of mineral resources ... and here we plan special regulations."

He said restrictions did not mean foreign companies would have no access to deposits that could be classified as "strategic," but that the state should have greater control over them.

Foreign companies are currently allowed to hold no more than 49.5% in projects involving "strategic" deposits - primarily in the energy sphere, but also including metals such as gold and copper. -source

Friday, June 09, 2006

Platinum & Palladium Futures

Platinum (PL) and Palladium (PA) futures contracts and options on futures contracts are trading at the New York Mercantile Exchange (NYMEX.)

Like Gold and Silver, Platinum and Palladium are at an ongoing correction, Palladium has lost around 38% of the last up leg, platinum have held better. Platinum recent up leg was longer then the up leg in the price of palladium or gold, Palladium is usually more volatile then Platinum.

Platinum futures (PL) chart

Palladium futures (PA) chart

Wednesday, June 07, 2006

NYMEX and Multi Commodity Exchange of India Sign Licensing Agreement

Global energy contracts now available on Indian platform

NEW YORK and MUMBAI, India, June 6 /PRNewswire/ -- The New York
Mercantile Exchange, Inc. (NYMEX), and the Multi Commodity Exchange of
India Limited (MCX) announced today that they have signed a five-year
licensing agreement for the use of NYMEX energy futures settlement prices.
In addition to the current MCX rupee-denominated, financially settled
light sweet crude oil futures contract, which is one-tenth of the size of
the NYMEX light sweet crude oil futures contract, the new licensing
agreement includes rupee-denominated natural gas, heating oil, and gasoline
futures contracts that MCX plans to launch. These new contracts will be
financially settled by MCX based on the settlement prices for the
corresponding physically settled NYMEX futures contracts and one-tenth of
the size of the NYMEX contracts. The agreement also anticipates the launch
of additional rupee-denominated contracts in RBOB gasoline and propane
futures.
Celebrating the agreement, India's Union Minister of Agriculture,
Consumer Affairs, Food & Public Distribution, Sharad Pawar, marked the
commencement of trading with the traditional ringing of the opening bell at
NYMEX in New York.
In October 2005, NYMEX and MCX signed a memorandum of understanding
that allows MCX to use NYMEX settlement prices for its light sweet crude
futures contract.
James E. Newsome, NYMEX President and Chief Executive Officer, said,
"This agreement with MCX will provide a benchmark price reference for risk
management to the Indian energy sector, a significant user of such products
from the global standpoint, while also optimizing the cost of such risk
management."
Venkat Chary, Chairman of the MCX, added, "Producers, users and
investors in India can take benefit from access to globally aligned prices
and trading practices in such energy products. We proudly bring these
products to the Indian industry."
Jignesh Shah, Managing Director and Chief Executive Officer of MCX
said, "MCX will leverage its pan-India presence, and its member and client
network spread across the country, to offer mini-NYMEX energy contracts to
a range of stakeholders in the industry. It will also facilitate the price
discovery of these products in the Indian time zone based on local
fundamentals."
About the New York Mercantile Exchange:
The New York Mercantile Exchange is the largest physical commodity
exchange in the world, offering futures and options trading in energy and
metals contracts and clearing services for off-exchange energy
transactions. Through a combination of open outcry floor trading and
electronic trading, a wide range of crude oil, petroleum product, natural
gas, coal, electricity, gold, silver, copper, aluminum, and platinum group
metals markets are available virtually 24 hours each day.
About Multi Commodity Exchange:
MCX is an independent and de-mutualised exchange with permanent
recognition from the Government of India to facilitate nationwide online
trading, clearing and settlement operations for the commodities futures
market. MCX is the world's second largest silver exchange and third largest
gold exchange in terms of trading volume among the top ten commodities
derivatives exchanges in the world. MCX offers futures trading across a
range of market segments including bullion, energy, ferrous and non-ferrous
metals, agricultural and industrial products. Promoted by Financial
Technologies (India) Ltd. a provider of transaction automation
technologies, the key shareholders of MCX include State Bank of India
(India's largest commercial bank) and its subsidiaries, National Stock
Exchange (NSE), National Bank for Agriculture and Rural Development
(NABARD), and several other Indian banks.
Forward Looking and Cautionary Statements
This press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act, with respect to
our future performance, operating results, strategy, and other future
events. Such statements generally include words such as could, can,
anticipate, believe, expect, seek, pursue, and similar words and terms, in
connection with any discussion of future results. Forward-looking
statements involve a number of assumptions, risks, and uncertainties, any
of which may cause actual results to differ materially from the
anticipated, estimated, or projected results referenced in forward-looking
statements. In particular, the forward-looking statements of NYMEX
Holdings, Inc., and its subsidiaries are subject to the following risks and
uncertainties: the success and timing of new futures contracts and
products; changes in political, economic, or industry conditions; the
unfavorable resolution of material legal proceedings; the impact and timing
of technological changes and the adequacy of intellectual property
protection; the impact of legislative and regulatory actions, including
without limitation, actions by the Commodity Futures Trading Commission;
and terrorist activities and international hostilities, which may affect
the general economy as well as oil and other commodity markets. We assume
no obligation to update or supplement our forward-looking statements.

source

Monday, June 05, 2006

Does keeping the penny still make sense?

It's all about the price of Zinc and Copper

By J. Scott Orr

Newhouse News Service

WASHINGTON — They accumulate everywhere, multiplying faster than bunnies, it seems, in pockets, purses and dresser-top jars. And you can't buy much with them.

So why doesn't the United States get rid of the penny, especially now, when, for the first time, the copper-coated coins cost the government more than 1 cent each to make?

At least one bill has been introduced in Congress to retire the coin, but it never gained traction. And the bottom line may be that when it comes to the penny, Americans don't want change.

"Americans want to keep the penny, it's that simple," said Matthew Eggers, policy director of Americans for Common Cents, which is fighting to keep the coin in circulation.

The most recent survey — conducted last year by Coinstar, a Bellevue company that puts coin-counting machines in supermarkets and other locations — found 66 percent of Americans want to keep the penny. It also found 79 percent will stop to pick up a penny.

But the penny's detractors have been buoyed by new figures from the U.S. Mint that show the skyrocketing prices of the two metals used to make the penny — zinc and copper — have pushed the cost of making the coin across the 1-cent threshold for the first time, to 1.23 cents. The penny is 97.5 percent zinc and 2.5 percent copper, according to the mint... -source

Deutsche Bank Liquid Commodities Indices Optimum Yield (DBLCI-OY)

Interesting development for commodity Investors and traders:

Deutsche issues flexible commodity index products

LONDON (Reuters) - Deutsche Bank said on Friday it was launching a new set of commodity index products, which will improve yields in passive, long-only instruments.

The Deutsche Bank Liquid Commodities Yield Indices Optimum Yield (DBLCI-OY) would improve on the traditional method of commodity indices where futures contracts roll on a pre-defined schedule, the bank said in its weekly report.

"The DBCLI-OY indices are designed so that rather than selecting the futures contract on a pre-defined schedule they roll into the futures contract that either maximises the positive yield roll in backwardated term structures or minimises the negative roll yield in contangoed markets," it said.

The Dow Jones-AIG, the Goldman Sachs Commodity Index and its own Deutsche Bank Liquid Commodity Index (DBLCI) have contracts which are rolled monthly, but the shifting pattern in commodity structures over the past few years has led to the creation of the new index, it added.

In a contango market, cash prices are cheaper than forward values, reflecting storage and insurance costs for future delivery. A backwardation is the opposite -- cash is dearer than the forward position, reflecting nearby shortages.

Metals, such as copper and zinc, recently at record highs, have established backwardation price structures stretching out five years in some instances. -source

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