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Commodities markets continue to make the headlines, as the ‘commodities supercycle’ narrative gained further traction in recent weeks due to fundamentals, namely the weather.

A lot of the weather the planet has experienced recently can be attributed to a weakening Polar Vortex — winds high up in the stratosphere, up to 30 miles (50 km) above the earth. A weakening polar vortex usually results in a weakening jet stream, a large and powerful stream of air (wind) closer to the surface of the planet, at around 8–11km (5–7mi) altitude which flows west-to-east around the globe.

As this jet stream drops…


In last month’s commentary (The Future is Green) we highlighted that spending on green infrastructure will boost metals demand significantly over the long-term, but are we forgetting the other part of the equation, namely supply?

Spending on green infrastructure could be as significant as the BRIC investment boom of the 2000s. Stimulus packages — such as China’s new five-year plan, Europe’s Green Deal and a planned package for the US — could have a similar impact as the buildout of Chinese infrastructure did in the 2000s. Have metals prices run ahead of the fundamentals and are vulnerable to a correction…


As LME Aluminium prices break above $2,000 per tonne, trading at multiyear highs, the market is focusing its attention on perceived tightness of metal supply, as well as robust manufacturing data released from China in recent weeks.

Analysis of our proprietary datasets indicates these current price levels are unsustainable.

On a short-term time horizon our machine learning models are neutral/flat on Aluminium prices. Further out, our models become more bearish, particularly on the three and six month time horizons. The bearishness of our outlook is driven by data within the fundamental family inputs of Macro, Satellite and Inventories. …


Trading in China’s new international copper contract got off to a brisk start last week, with the new contract quickly reaching just shy of 10 percent of the volumes of the long-established domestic copper contract.

Launching new contracts is a tricky business, and even if the new International Energy Exchange (INE) bonded copper futures contract made good sense on paper, management at the INE’s parent SHFE will be pleased at the reception, domestic and international, they have garnered.

Domestic producers Jiangxi Copper, China Minmetals Corp, Wanbao Mining and Bank of China International are supporting the new contract, Reuters reported, and…


The macro backdrop for base metals remains supportive, as strong demand from China — which has just announced a net zero emission target (peak emissions by 2030, net zero by 2060) — and further US fiscal stimulus (with a focus on “green” infrastructure), together with the EU’s plans and others, has brought the green agenda to the fore. Many of the factors that had helped drive copper up from its March lows of around $4,300/t and other base metals like nickel are still intact in spite of the US election.

These included strong demand from China, where the government’s pledge…


Inventories are the most important signal for ChAI’s aluminium price predictions, accounting for more than double the weighting of other inputs. The ChAI model is less positive for prices at 1 Month and 3 Months, predicting they are more likely to fall than rise.

What do the fundamentals predict?

The V-shaped recovery in industrial metals is macro-driven. Metals markets are forward-looking while economic data/statistics reflect the past. Factors such as a weak USD, quantitative easing (QE) from global central banks and stimulus-related infrastructure spending were likely to boost prices further.

That said, aluminium prices are lagging other base metals as…


Earlier this year the LME began to publish inventory data for stocks held off warrant within LME approved warehouses. We now have records for six months (February-July) and, looking at the aluminium market, a number of points stand out.

Shadow inventories are smaller than stocks on LME warrant, although not as small as you might think. Over the six month period, they have varied between 67 and 80 percent of the average monthly tonnage on warrant.

The off-warrant stocks have risen steadily each month, as did warrants with the exception of March, when warrants fell. Both off- and on-warrant stocks…


BNP Paribas is the latest bank to withdraw from commodity trade finance with the announcement this week of the closure of its Geneva business.

The bank’s decision to quit the market follows that of ABN Amro in August and reports that other major European banks are reviewing their portfolios.

While commodities trading has been highly profitable for some banks this year, spurred in part by Covid-induced volatility, money has been lost in commodities trade finance, including two very prominent scandals in Singapore. …


As we reach the crunch point in the EU/ UK future trading negotiations, it’s a reminder that there will be big changes next year in all markets, and that includes metals.

Maybe there will ultimately be a deal, but contrary to the promises of Vote Leave’s co-convener Michael Gove at the time of the Brexit referendum, the UK does not hold all of the cards. Nowhere is this more evident than in financial services, where the EU holds a number of Aces.

Reports this week indicate that the EU is prepared to grant its banks an 18 months extension to…


A few years ago, the European Union’s focus was seemingly on shutting out hazardous metals, as it implemented its Reach regulation on material safety. How times have changed, as Brussels this month updated its Critical Raw Materials (CRM) strategy to ensure that the EU has access to enough of the “right” kind of metals.

No surprise that the list heaves with those metals crucial to modern, clean or defence technologies, such as cobalt, used for batteries in electric vehicles. Additions this year include bauxite, used to make aluminium, while nickel is now on its watch list.

The problem for the…

ChAI

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