What to Watch in Commodities: Alcoa, OPEC, Gold, Glencore, IEA

LAGOS (Capital Markets in Africa) — Commodity investors embark on an intriguing earnings season this week amid conflicting signals. Raw materials just hit a two-year high — aided by a weaker dollar, hopes for more U.S. stimulus, and gains in food prices — but signs from around the globe suggest the pandemic is worsening.

Aluminum giant Alcoa Corp. is among companies in the vanguard, along with major oil-service player Schlumberger Ltd. Top banks including Goldman Sachs Group Inc. will also release figures, with a focus on how their trading operations fared over the third quarter and views of the challenges in 2021.

On top the earnings, there’ll be a full slate of commentary from the biggest names. The Energy Intelligence Forum features Ben van Beurden from Royal Dutch Shell Plc and Amin Nasser from state-run Saudi Aramco. Glencore Plc’s Ivan Glasenberg and peers address the FT Commodities Mining Summit. And top miners present at Australia’s Diggers and Dealers gathering.

The U.S. presidential election draws closer, with incumbent Donald Trump trailing Joe Biden by 12 points in a national poll of likely voters, according to a Washington Post/ABC News survey. After his bout with coronavirus, Trump said he’d campaign in Florida Monday.

Which Way Now?
Investors being assailed by powerful economic and geopolitical crosscurrents will look to Alcoa’s earnings on Wednesday for some guidance on where things are likely to go in metals markets and beyond. While the biggest U.S. aluminum maker suspended its closely watched global supply-and-demand forecast back in April — citing a lack of clarity due to the coronavirus pandemic — there’s still plenty that the market can glean from the report.

The Pittsburgh-based company may provide insights into a range of issues of pressing concern. These include the company’s stepped-up cost-cutting efforts, risks that the pandemic poses to supply chains after a port lockdown affecting a major aluminum depot in Malaysia, and prospects for a continued recovery in aluminum prices as smelters in China ramp up production.

In the Balance
Oil gained last week as yet another hurricane hurt output in the Gulf of Mexico, while investors weighed how strong demand will recover and whether the Organization of Petroleum Exporting Countries and allies will continue to keep a lid on supply. This week brings clues on what will follow as OPEC and the International Energy Agency release forecasts for supply and demand over the rest of this year and 2021 on Tuesday and Wednesday respectively. On Monday, Brent fell as Libya took a major step toward reopening its biggest field.

Dovetailing neatly with the reports, a slew of news-makers will give their views on the outlook at the online Energy Intelligence Forum, which runs from Tuesday to Thursday. The event, which will examine the impact of the pandemic on the energy industry and the search for new energy solutions, will hear from OPEC’s top official, energy ministers from the UAE and Nigeria, and CEOs of Shell, Saudi Aramco, and Chevron Corp.

Deal Demand
Gold miners gather for a major deal-making focused forum in Australia this week amid a warning from an industry leader that the sector needs more consolidation. Executives from producers including Northern Star Resources Ltd., which just last week agreed to acquire a smaller rival, along with Gold Fields Ltd. and AngloGold Ashanti Ltd., are scheduled to address the three-day Diggers and Dealers gathering, which began on Monday in Kalgoorlie.

The event — restricted to local attendees as a result of Covid-19 curbs — comes after Barrick Gold Corp. CEO Mark Bristow urged peers to consider more mergers to improve efficiencies and increase exploration to bolster depleting reserves. Iron ore giant Fortescue Metals Group Ltd. will also present, along with the head of BHP Group’s nickel division, a unit that’s in talks with Tesla Inc. over a supply deal. Separately, BHP holds a virtual annual meeting on Wednesday and a closed meeting in London on Thursday.

Climate Challenge
Leading executives from the biggest miners including BHP, Anglo American Plc and Rio Tinto Group are set to speak at the FT Commodities Mining Summit on Oct. 16. Key themes at the gathering will be how the industry is responding to climate change, efforts to lower emissions and whether technological advances can help make the production of raw materials more sustainable.
The event comes as investor interest in environmental, social, and corporate governance issues is on the rise, adding challenges to an industry that’s already navigating the pandemic and volatile commodity prices. But there’s also an opportunity for mining to play a key role in the shift to a low-carbon economy, the subject of a presentation set to be given by Anglo American boss Mark Cutifani and Glencore CEO Glasenberg.

Price Plunge
Cocoa markets have turned their focus to third-quarter grindings data due this week for North America, Europe, and Asia for fresh signals on how the pandemic continues to impact consumption. Global grindings for the period could drop between 5% to 12% from a year earlier, according to Marex Spectron, citing initial indications. Demand woes are continuing to weigh on prices, with futures in London falling to the lowest in more than a month last week.

The poor demand outlook comes at a time when Covid-19 cases are spiking in parts of Europe and the U.S., casting a shadow over upcoming Halloween and Christmas festivities — times when chocolate demand usually picks up. As well as being pressured by lower consumption, the market is also facing a supply onslaught in top growers such as Ivory Coast and Ghana, adding to expectations for a global surplus.

Source: Bloomberg Business News