What to Watch in Commodities: Iron, Data Returns, Deals, Arcelor

LAGOS (Capital Markets in Africa) – Commodities burst out of the blocks in the new year, surging more than 5 percent in January as oil posted a record advance. In the first full week of February, investors have a crowded agenda, with events and commentary due from market leaders in metals, energy and agriculture.

In iron ore, Cleveland-Cliffs Inc., the largest U.S. producer, reports earnings this week and boss Lourenco Goncalves may offer insights into the state of the global market after Vale SA’s tragic dam burst, while in Europe, steel giant ArcelorMittal also turns in its financial results. Separately, there will be quarterly numbers from BP Plc, Total SA, and Archer-Daniels-Midland Co.

Elsewhere, Barrick Gold Corp.’s new Chief Executive Officer Mark Bristow and Anglo American Plc’s Mark Cutifani head to Cape Town for Africa’s top mining conference as mega-deals reshape the industry. Other notable gatherings include the E-World Conference in Essen, a major power and gas huddle, plus in India, the outlook for palm oil will go under the microscope.

In the U.S., President Donald Trump delivers his State of the Union address on Tuesday. The speech was delayed by the partial government shutdown, which has also scrambled the release of key data for the commodities industry. China, meanwhile, will be offline all this week for Lunar New Year celebrations.

Jolting the Market
Vale’s fatal dam disaster jolted the iron ore market after the world’s largest producer of the steelmaking ingredient flagged a 40 million-metric-ton loss in output as it seeks to improve safety standards. Now, analysts are guessing whether it can make up all that lost production from its operations elsewhere.

Cleveland-based producer Cliffs may offer some clues on the state of the market when its executives address analysts after the company’s earnings call on Friday. The miner is expected to benefit as Vale’s supply curbs push iron ore higher. Last week, benchmark spot prices soared 15 percent.

End of Guessing Game?
The end of the U.S. government shutdown may offer some relief to traders and investors seeking clues on the prospects for soybeans and grains. The U.S. Department of Agriculture will resume its release of the closely-watched World Agricultural Supply and Demand Estimates report on Friday.

Grain handlers, traders and investors are trying to figure out the size of Brazil’s soybean harvest and whether African swine fever will hit feed demand for these products. The market is also looking for signs of whether the U.S. government is adjusting its forecast for Chinese soybean purchases after trade talks between Beijing and Washington resumed. The U.S. Commodity Futures Trading Commission starts releasing delayed data on money managers’ position on raw materials twice a week until it has caught up with the latest filings.

Steeling Themselves
ArcelorMittal, the world’s largest steelmaker, releases earnings Thursday amid gathering storm clouds for the industry. Producers are facing slowing economic expansion, constrained demand growth from carmakers, and higher raw material costs, made worse by the disaster at Vale’s iron ore operation.

ArcelorMittal benefits from solid exposure in iron ore and is expected to enjoy protectionist measures in both the U.S. and European Union, where it has plants that don’t rely on imports. Yet concerns over demand remain, with other majors such as U.S. Steel Corp. and Voestalpine AG already signaling weaker 2019 forecasts. Producers including Nippon Steel & Sumitomo Metal Corp. and Finnish giant Outokumpu Oyj also report this week.

Golden Opportunity
Deals are likely to be the focus of the African Mining Indaba, one of the industry’s biggest annual gatherings. A flurry of gold M&A activity — along with a surge in bullion prices — have reignited interest in the precious metal, fueling speculation about who might be next.

Investors will also be wondering if producers can help supply enough palladium to help plug a growing deficit amid soaring prices, which have thrown a lifeline to South Africa’s beleaguered platinum miners. Guests at the four-day event include South African President Cyril Ramaphosa and Ghanaian President Nana Akufo-Addo, along with Sibanye Gold Ltd.’s Neal Froneman and AngloGold Ashanti Ltd.’s Kelvin Dushnisky.

Clean Break
Europe’s shift away from fossil fuels is picking up momentum, and executives along with natural gas and power traders will debate the impact at the E-World conference starting Monday in Essen. The industrial town in the heart of the Ruhr River valley is at the center of Germany’s effort to close all its coal plants within two decades. Prices are already feeling the impact of the country’s efforts to rein in nuclear power.

Government ministers present include Thomas Bareiss, who speaks for Chancellor Angela Merkel on the energy transition, along with industry chiefs such as RWE AG’s Chief Executive Officer Rolf Martin Schmitz.

Palm Reading
Palm oil producers and investors just endured another tough year in 2018 as prices of the commodity found in everything from shampoo to confectionery sank every quarter on too much supply and bulging stockpiles. To find out what’s in store in the coming months, the industry will convene this week for the Globoil conference in India’s Gurugram, southwest of New Delhi.

Over Tuesday and Wednesday, key speakers including veteran analyst Dorab Mistry, as well as executives from Cargill Inc., Olam International Ltd. and Bunge Ltd., will assess whether modest gains so far in 2019 will endure. Participants will also want analysis on how demand in India, the largest importer of palm, will fare amid hopes the biggest customer will buy more and reduce those ballooning stockpiles in top growers Indonesia and Malaysia.

Bulls Versus Bears
Signs of sliding OPEC crude output is boosting optimism that prices will gain. Traders and analysts surveyed by Bloomberg are the most bullish since late September, with about 58 percent of respondents predicting a rally. U.S. sanctions against Venezuela are also expected to pull some output from the market, while easing tensions between Washington and Beijing also improve demand prospects.

In the agricultural markets, sentiment improved markedly for sugar as a stronger Brazilian real eroded the incentive for the world’s second-largest producer to export the commodity. Traders were also bullish on corn. Terminal subscribers can see the other commodity surveys here.

Source: Bloomberg Business News