What to Watch in Commodities: Glasenberg, BHP, M&A, Brexit, Oil

LAGOS (Capital Markets in Africa) – For commodity investors, this week will be dominated by metals and menus. The schedule is crowded with earnings from the mining industry’s titans, including Ivan Glasenberg’s Glencore Plc, BHP Group, Anglo American Plc and Newmont Mining Corp. The companies will offer insight into the global outlook, the industry’s response to Vale SA’s dam burst tragedy, and in the case of Newmont, how it might fare after it swallows Goldcorp Inc.

On the menu are conferences on both sides of the Atlantic as farmers deal with extraordinary levels of uncertainty. On Thursday and Friday, the USDA holds its Agricultural Outlook Forum in Arlington that will try to scope out 2019 even as the U.S.-China trade war rumbles on. In the U.K., the National Farmers Unionholds its annual conference with Brexit set to be the key topic.

Lastly, there’ll be elections and diplomacy. After a delay, Nigerians vote on Saturday to select a president in a contest that pits incumbent Muhammadu Buhari against Atiku Abubakar, a former vice president. On the diplomatic front, Saudi Arabia’s Crown Prince Mohammed bin Salman is touring Asia, including stops in India and China, and crucially, Washington and Beijing hold more talks, this time in the U.S., to push for a trade deal before tariffs rise.

Turbulent Year
Glencore reports earnings on Wednesday after a turbulent year for the world’s biggest commodity trader. The company is facing a series of problems in the Democratic Republic of Congo, including a tough a new mining code, a U.S. corruption probe and tumbling prices for cobalt. Meanwhile, it’s raking in profit elsewhere from coal.

Investors will be anticipating a possible new share buyback after Glasenberg said in December the company will maintain its focus on returning money to shareholders. They will also be looking for any news on the U.S. probe into the company’s activities in Congo, Venezuela and Nigeria as well as a wide-ranging Brazilian investigation into corruption in oil trading.

Testing Times
In addition to Glencore, a procession of top miners will deliver results this week, with figures due on Tuesday from BHP followed by Anglo American two days after that. The releases, as well as the comments from CEOs Andrew Mackenzie and Mark Cutifani, come at a time when the industry is still absorbing the repercussions of Vale SA’s dam burst. The tragedy has called into question some practices, as well as miners’ roles in the communities where they operate. It’s also thrown the global iron ore market into turmoil.

BHP is one of the seaborne iron ore market’s biggest suppliers, while Anglo American has a mine in Brazil at Minas Rio, where operations were suspended last year for lengthy pipeline repairs. Anglo also controls Kumba Iron Ore Ltd., Africa’s top miner of the raw material. Kumba is slated to present earnings on Tuesday. And building out what’s a crowded agenda, Australia’s Fortescue Metals Group Ltd. delivers figures and its view on the market on Wednesday.

Next Gold King
Newmont’s earnings report card due on Thursday is attracting more attention from investors and analysts after the company said it’s buying rival Vancouver-based Goldcorp. The acquirer’s shares have underperformed its competitors in North America since announcing the $10 billion deal.

The results will likely show Newmont unseated Toronto-based Barrick Gold Corp. as the world’s largest producer of the metal in 2018. Assuming Newmont’s takeover of Goldcorp goes ahead, the Greenwood Village, Colorado-based miner would extend that lead significantly in 2019.

Planting Decisions
China’s imports of American soybeans have tumbled. The Asian nation imposed levies on shipments from the U.S. in retaliation to President Donald Trump’s tariffs on Chinese goods. U.S. Department of Agriculture Chief Economist Robert Johansson’s presentation at the agency’s forum Thursday may signal whether that has affected domestic farmers’ planting decisions. The acreage estimate will be the basis for the USDA’s outlook on supply for the year.

The two-day forum in Arlington, Virginia will also feature a session with U.S. Agriculture Secretary Sonny Perdue and his counterparts from Canada and Mexico, Lawrence MacAulay and Victor Villalobos Arambula. The U.S.-Mexico-Canada Agreement that’s supposed to replace the 25-year-old North American Free Trade Agreement between the three countries hasn’t been ratified yet. So let’s hear what this trio has to say.

When Push Comes to Gove
Britain’s National Farmers Union holds its annual meeting Tuesday and Wednesday, and with the U.K. due to exit the European Union in just over a month, there will be plenty to talk about. The union says that crashing out of the bloc without a deal will be “catastrophic,” denying farmers duty-free access to their main market for everything from milk to spring lamb. They also fear a shortage of seasonal workers needed to bring in the harvest.

Those issues and more are likely to be high on people’s minds when Michael Gove, the Secretary of State for Environment, Food and Rural Affairs and one of the nation’s most ardent Brexit boosters, addresses the meeting on Tuesday.

Nigeria Votes
After a one-week delay, Nigerians will go to the polls on Saturday and voters face a choice between two main presidential candidates with starkly different plans for reforming the oil industry in Africa’s largest producer. Incumbent Muhammadu Buhari pledges to boost state infrastructure spending while challenger, Atiku Abubakar, plans to sell off refineries as part of a privatization push. Both candidates vow to diversify the oil-dependent economy and fight endemic corruption.

One thing the election is unlikely to reverse is the country’s flagging crude output amid perennial violence in the oil-rich Niger Delta. In January Nigeria produced just 1.7 million barrels of oil per day — far below the government’s budget target of 2.3 million barrels. The elections may in fact be a catalyst for more tensions, whatever the outcome, according to Bloomberg Intelligence analyst Will Hares.

Bulls Versus Bears
Concerns that the political turmoil in Venezuela will disrupt global flows of heavy crude are adding to supply worries and boosting oil’s price prospects. About 63 percent of respondents surveyed by Bloomberg expect the price will rise, the most bullish reading since July. The optimistic outlook comes just as Saudi Arabia plans cuts, helping to mask a U.S. Energy Department report showing higher-than-expected domestic inventories.

In agricultural market, traders remained bullish on corn, with 57 percent expecting higher prices amid optimism China will increase purchases of the grain as trade talks with the U.S. progress. In metals, gold bulls outnumbered bears, while sentiment for copper was mixed. Terminal subscribers can see other commodity surveys here.

Source: Bloomberg Business News