What to Watch in Commodities: Virus, Oil, Glencore, Arcelor, Ags

LAGOS (Capital Markets in Africa) – Commodities took a heavy beating in January as the virus outbreak spurred across-the-board concerns about demand, and that focus will persist right through this week. Markets in China reopened on Monday, with most raw materials posting steep losses. For global prices, Citigroup Inc. now reckons Brent could soon go sub-$50 a barrel. For the latest, click here.

On top of the health emergency, there’s a crowded corporate docket. In Europe, top steelmaker ArcelorMittal reports earnings on Thursday, while a couple of days before that, Glencore Plc, the world’s largest commodity trader, presents production numbers. In both Asia and the U.S., leading automakers may comment on palladium’s surge as they turn in figures. And in South Africa, the continent’s mining industry heads to Cape Town for an annual gathering.

Rounding out the high points, oil heavyweights address the Argus Crude Summit in Houston, including former Secretary of State and Exxon Mobil Corp. Chief Executive Officer Rex Tillerson. Also Stateside, there’ll be insights into the agricultural economy with a key gauge of sentiment. And last but not least, President Donald Trump delivers the State of the Union address.

Measuring the Hit
Commodity investors will keep their attention on virus-hit China this week as local markets reopened following the prolonged Lunar New Year break. The spread of the disease and rising death toll in Asia’s top economy has pitched raw material markets into turmoil, with steep losses in everything from crude and copper to iron ore and soy. Local prices are now catching up, even as a large chunk of the country’s commodity-related industries remains offline.

Chinese oil demand is said to have dropped about 20%, something that’ll likely increase pressure for an early OPEC meeting before March’s scheduled session, possibly as soon as next week. And while Citigroup Inc. did flag up prospects for a second-half rebound, the bank now sees Brent below $50 a barrel within three months, iron ore at $70 a ton, and copper at $5,300 a ton.

Crude Confab
Some big names in the energy world will gather in Houston as this year’s Argus Crude Summit kicks off Monday. Rex Tillerson speaks Tuesday morning, followed by CEOs from independent oil producer Hess Corp., refining giant Valero, and pipeline behemoth Energy Transfer LP.

Meanwhile, ConocoPhillips reports earnings for the fourth quarter, with an early morning release Tuesday and call later that day. All eyes will be on whether America’s biggest independent oil producer will fare better than the U.S. supermajors, which posted disappointing results on Friday.

Mining Party
The African Mining Indaba, one of the industry’s largest annual gatherings, runs from Monday to Thursday in Cape Town. This year’s event takes place against a backdrop of higher platinum-group metal and gold prices, which are boosting producers’ bottom lines and freeing up cash for potential dividends.

With chief executives of mining companies from Barrick Gold Corp. to Anglo American Plc attending, keep an eye out for the industry’s views on climate change as pressure from investors grows. The conference may also offer up clues about more mining deals.

Steel Giant
ArcelorMittal will report full-year earnings on Thursday, and the focus will be on any signs of improvement in a European steel market that’s been hurt by cheap imports and weaker demand from the car industry. While the region’s steelmakers are starting to raise prices, the market faces a slow recovery as consumption remains sluggish, Morgan Stanley said in mid-January.

In addition to Arcelor, investors will also scrutinize earnings from Austria’s Voestalpine AG on Thursday, and Japan’s Nippon Steel Corp. the following day. Away from steel, investors — and copper traders — will keep an eye on Glencore’s production report on Tuesday.

Angst in Ag
On Tuesday, agriculture traders will monitor the monthly Purdue University-CME Group report for a barometer of U.S. sentiment following a trade accord with China. A day later, the U.S. Department of Agriculture issues an update on farm income after previous estimates showed an increase thanks to government aid during the dispute with Beijing.

Dire signals for U.S. farmers emerged in January following the coronavirus outbreak in China. Hog futures had the worst to start a year in three decades, and soybeans also took a tumble. The Asian giant is the top importer of oilseeds and pork. Turmoil from trade disputes, a disease that ravaged the swineherd and the virus outbreak in Hubei have rattled global farming.

Clearing the Air
Palladium’s extraordinary rally has been one of the standout features of the opening month of 2020, with prices hitting a series of records in a scramble for supplies. This week, investors may get valuable intelligence into the ramifications of the surge for users as leading automakers start to report. Toyota Motor Corp., Ford Motor Co., and General Motors Co. all turn in earnings, and executives may comment on the implications.

Carmakers “may spook the sensitive palladium market” by discussing raw-material cost pressures and potential mitigation measures, according to Citigroup Inc., which estimates the upswing has cost the industry about $18 billion over the past year. While MMC Norilsk Nickel PJSC, the top producer of the metal, reckons speculators have created a bubble, Bank of America Corp. has said prices could jump to $3,500 an ounce by the end of the year.

Bulls & Bears
Gold futures rose for a sixth straight week amid speculation the coronavirus could slacken short-term global growth. Federal Reserve Chairman Jerome Powell said the U.S. central bank is “very carefully” monitoring the virus’s spread and its impact. That’s driving traders and analysts surveyed by Bloomberg to lean bullish on the metal for the first week in five.

Wheat plantings in Russia, the largest exporter, are pointing to a bumper harvest this season, with the most winter wheat seeded on record. Traders and analysts were the more bearish on prices than at any time since June 2018, while bulls fell to the smallest share of those surveyed in over two years. Terminal subscribers can see commodity surveys here.

Source: Bloomberg Business News