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Bank Of America & Morgan Stanley Comment On Commodities

CalibratedConfidence's picture




 

Aluminum production fell 15.6 percent YoY in July. The Aluminum Association said on August 8 that combined primary production from the U.S. and Canada fell 9.1 percent YoY. The U.S production fell 15.6 percent YoY and Canada fell 4.7 percent YoY. A drop in Aluminum prices may cause a firm like Alcoa to scale back equipment use and use lower cost reserves which may driving up margins as supplies are cut in an effort to balance the marketplace against strong Q2 performance.

Coal supplies continue to outpace demand in the face of a more fragmented suppliers market leaving BOA/ML forecasts for price increases fairly flat.  Benchmark Low-vol met PCI is expected to trade $105/mt by year-end 2014 and $107 by year-end 2015.  Coal production in the U.S YoY is down 0.3 percent and continued production slowdowns could continue to hurt firms like Peabody Energy which is down almost 19 percent YTD.

Iron Ore is seeing a slight rebound in China with demand improving and mills “restocking to 30-days at the end of July” according to BOA/ML Australia metals & mining analyst Duncan Simmonds.  Strength in Iron Ore is evident after BC Iron in West Australia made a $250M offer (10 cents in cash and 0.44 BC Iron shares for each IOH share) for rival Iron Ore Holdings.  The deal has conditions attached that (a) iron ore prices must remain above $90 a tonne for 20 straight days and (b) the S&P.ASX 200 must not close more than 10 percent below Monday’s level for five consecutive days.  Morgan Stanley expects FY2014/2015 prices to average between $90 and $100 per tonne.  

 

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Wed, 08/13/2014 - 03:01 | 5086022 Ms No
Ms No's picture

Maybe more sanctions on Russia could fix this.  This is the real red flag.

Wed, 08/13/2014 - 00:06 | 5085719 OldPhart
OldPhart's picture

Our company lies along the BNSF line from Barstow, down the Cajon Pass, to LA.  For the first time I saw a mile and a half long train of fully loaded coal cars headed south. 

I've lived in this area for forty years and up until then had never seen coal, let alone a whole train load of it.

Wed, 08/13/2014 - 02:01 | 5085960 OneTinTrooper
OneTinTrooper's picture

Must be the summer bbq season.

Tue, 08/12/2014 - 20:18 | 5084805 disabledvet
disabledvet's picture

So much for the theory that Bernanke was fighting a "ghost of deflation."

I am very uncertain as to how the American People will respond to President Obama as Commander in Chief. It is interesting to note however that equities are not crumbling here.

From whence the confidence?

Tue, 08/12/2014 - 20:04 | 5084734 Thorny Xi
Thorny Xi's picture

It's getting harder to supplement my social security picking up these damn cans.

Tue, 08/12/2014 - 20:06 | 5084746 Stuck on Zero
Stuck on Zero's picture

Stop dropping the beer cans after you've emptied them.

 

Tue, 08/12/2014 - 20:33 | 5084874 themadelksta
themadelksta's picture

if you buy more beer you'll make more money returning the cans than it costs to buy them! Keynseian miracles abound all around us every day if we would just open our eyes.

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