Data-Driven Commodity Research, The Commodity Report

The Commodity Report

Data-Driven Commodity Research

A unique newsletter about commodities and macro analysis in a weekly format.

Commodities

<ul><li>The benchmark, CRB Commodity Index, ended the week -0,5% lower EU CO2 Price to the moon The price of carbon in the EU’s emissions trading system hit a new all-time high on Friday.</li><li>The key reason for the rise was the surge in gas contracts for delivery next year.</li><li>That is making it more likely that increased burning of coal for power generation as an alternative to gas is more than a short-term blip to get the EU through a difficult winter.</li></ul>

The benchmark, CRB Commodity Index, ended the week -0,5% lower EU CO2 Price to the moon The price of carbon in the EU’s emissions trading system hit a new all-time high on Friday.The key reason for the rise was the surge in gas contracts for delivery next year.That is making it more likely that increased burning of coal for power generation as an alternative to gas is more than a short-term blip to get the EU through a difficult winter.

<ul><li>Here is what is structurally wrong in the way leaders/politicians and people in general talk about the green transition, about fossil fuels, oil, gas and metals. A cyclical commodity bull market.</li><li>I'm in favor of combating man-made climate change and replacing most fossil fuels with renewables in the long term, but the way we are currently going about it is not realistic and will end badly for society and also in high commodity prices and much higher cost of living.</li><li>Why is that the case? Everyone wants renewable energy but no one wants to invest in the raw materials needed to build the EVs, the power lines, or the battery capacity. Due to political pressure, the financial world has had to jump on the #ESG bandwagon.</li></ul>

Here is what is structurally wrong in the way leaders/politicians and people in general talk about the green transition, about fossil fuels, oil, gas and metals. A cyclical commodity bull market.I'm in favor of combating man-made climate change and replacing most fossil fuels with renewables in the long term, but the way we are currently going about it is not realistic and will end badly for society and also in high commodity prices and much higher cost of living.Why is that the case? Everyone wants renewable energy but no one wants to invest in the raw materials needed to build the EVs, the power lines, or the battery capacity. Due to political pressure, the financial world has had to jump on the #ESG bandwagon.

<ul><li>The war premium for energy components disappears</li><li>High prices combined with slowing economic growth lead indeed to now visible demand destruction (see analysis by Pro Vision Macro below)</li><li>Lots of speculative positioning is getting washed out of the market </li></ul>

The war premium for energy components disappearsHigh prices combined with slowing economic growth lead indeed to now visible demand destruction (see analysis by Pro Vision Macro below)Lots of speculative positioning is getting washed out of the market 

Founder, Market Thinker

Mark Tinker

Founder

Market Thinker

Mark Tinker has over 35 years experience as an investor, market strategist and economist. Having spent more than 20 years as a sell side strategist and being top rated on numerous occasions and surveys he moved to investment management in 2006 to run global equity portfolios in London and subsequently moved to Hong Kong in 2013 to help establish an Investment Management business for a top 20 international asset manager. He first started writing investment weeklies for his employers in 1989, developing a style characterised under the title Market Thinking and has been a regular commentator and presenter on CNBC, Bloomberg and other business channels, where his approach of rationalising market behaviour rather than making short term predictions on high frequency market data provides a welcome balance to his client audience.

Making Sense of the Narrative

Macroeconomics

<ul><li>The rally in the 10 year bond and the selloff in Commodity prices have been taken by many pundits as ‘Predictions’ of future economic activity, i.e a collapse in demand, a recession and a reduction in the threat of inflation. </li><li>There is the usual talk of ‘Dr Copper, the metal with a PhD in Economics and the (tedious) refrain that equity markets are full of economic naïfs, while bond markets are full of wise old economists</li><li>Except of course, markets don’t actually work like that and, while the market is usually a much better indicator of the real world than any of the models employed by experts, we need to understand <em>what</em> it is telling us at any given time</li></ul>

The rally in the 10 year bond and the selloff in Commodity prices have been taken by many pundits as ‘Predictions’ of future economic activity, i.e a collapse in demand, a recession and a reduction in the threat of inflation. There is the usual talk of ‘Dr Copper, the metal with a PhD in Economics and the (tedious) refrain that equity markets are full of economic naïfs, while bond markets are full of wise old economistsExcept of course, markets don’t actually work like that and, while the market is usually a much better indicator of the real world than any of the models employed by experts, we need to understand what it is telling us at any given time

<ul>
<li>The benchmark, CRB Commodity Index, ended the week 1,4% lower.</li>
<li>What bottoms usually first? Bonds! While we may be some weeks off the low in the treasury markets, I think it’s important to remember the typical cycle of asset classes.</li>
<li>Usually, treasuries bottom first, then follow stocks and at the end commodities. We saw the same cycle peaking in 2020 with bonds peaking first, followed by stocks and now commodities.</li>
</ul>


The benchmark, CRB Commodity Index, ended the week 1,4% lower.
What bottoms usually first? Bonds! While we may be some weeks off the low in the treasury markets, I think it’s important to remember the typical cycle of asset classes.
Usually, treasuries bottom first, then follow stocks and at the end commodities. We saw the same cycle peaking in 2020 with bonds peaking first, followed by stocks and now commodities.


United States

Copper is a chemical element with symbol Cu (from Latin: cuprum) and atomic number 29. It is a soft, malleable and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a reddish-orange color. It is used as a conductor of heat and electricity, as a building material and as a constituent of various metal alloys, such as Sterling silver used in jewelry, cupronickel used to make marine hardware and coins and constantan used in strain gauges and thermocouples for temperature measurement.

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Copper (COPPER COMDTY)

The Commodity Report #65

The benchmark, CRB Commodity Index, ended the week -0,5% lower EU CO2 Price to the moon The price of carbon in the EU’s emissions trading system...

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The Commodity Report #64

Here is what is structurally wrong in the way leaders/politicians and people in general talk about the green transition, about fossil fuels, oil,...

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The Commodity Report #61

But that’s IMO only a short-term development. My takeaway is don’t trust trends in the commodity world that emerge over the summer months!

The Commodity Report

Prices, Probabilities and Predictions

The rally in the 10 year bond and the selloff in Commodity prices have been taken by many pundits as ‘Predictions’ of future economic activity

Mark Tinker

The Commodity Report #59

The benchmark, CRB Commodity Index, ended the week 1,4% lower. What bottoms usually first? Bonds! While we may be some weeks off the low in the...

The Commodity Report

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