Materials Risk

Arjun Murti became one of the most famous oil analysts of the last commodity supercycle. In 2005, while working alongside Jeff Currie at Goldman Sachs he made the call that oil could go above $100 per barrel, later predicting it would reach as high as $150-$200 per barrel.

Now working as an adviser at Warburg Pincus and a ConocoPhillips board member, Arjun is still keen to give is views on the oil market. In a series of threads on Twitter this past weekend he outlined his concerns that technology investors are not learning the lessons from the early 2000’s, the return of value stocks, a rebound in oil and gas company valuations and that energy companies can compete on ESG metrics. read more

According to data from the UN Food & Agriculture Organisation (FAO) global food prices have now risen for 9 consecutive months and are now at their highest level since 2014. The recent surge supported by a sharply higher prices for sugar, soy and palm oil as well as smaller increases in cereal, dairy and meat prices.

Strong demand from China is one of the main factors supporting the rise as it imports huge quantities of corn in order to rebuild hog herds decimated by disease. The pandemic has increased the vulnerability of agricultural supply chains as logistical bottlenecks and political decisions prevent become a barrier to trade. Adverse weather has also been a factor; cold weather in Northern Hemisphere cereal growing regions and rains in South America have cut into harvests and delayed planting. read more

China’s credit impulse, arguably one of the most important drivers of commodity prices, has turned down sharply over the past few months. This could present a significant headwind to further price gains for metals such as copper which have had a strong run over the past twelve months.

Remember, the credit impulse is defined as the change in new credit issued (the flow of credit) as a percentage of GDP. The indicator was developed by Deutsche Bank economist Michael Biggs who argued that the most important credit variable in terms of forecasting GDP growth is the change in the flow of credit, not the change in the stock of credit. read more

Known as “Mr Copper”, “Hammer”, or most famously “Mr Five Percent”, Yasuo Hamanaka was one of the most feared and respected copper traders. His nicknames indicative of the power he was thought to wield over the global copper market.

During the early 1990’s his employer, the Japanese trading company Sumitomo Corporation adorned its head copper trader with a double page spread in its glossy annual report. Hamanaka was quoted as saying that their control over the copper market was due to his “expertise in risk management”. read more

In early 2016 the price of WTI crude oil had hit lows not seen for 13 years. Over the previous 18-24 months oil prices had been falling relentlessly; from over $110 per barrel in August 2013 the price had dropped by almost 75% to around $30 per barrel.

With oil prices so low, pundit Dennis Gartman, appeared on TV stating that: “We won’t see crude above $44 again in my lifetime.” Gartman is an omnipresent voice on the 24 hour business news coverage. He is the publisher of the Gartman Letter, a daily markets newsletter, which is, according to his website, read by “leading banks, brokerage firms, hedge funds, mutual funds and energy and grain trading firms around the world.” read more

“There is oil in the Middle East; there is rare earth in China.”

Deng Xiaoping

Published in October 2015, David S. Abraham’s book, The Elements of Power “tracks the trail of rare earth metals from mine to gadget”. Working in the Japanese Ministry of Economy, Trade and Industry he had a ring-side seat to watch how the escalation of a territorial dispute between Japan and China evolved to a situation where China cut off its rare earth metal exports to Japan. As Abraham’s outlines, China was now using a new geopolitical trump card with its competitors, “The battle over resources, which started when the first person learned how to coax metal from stone, had expanded into a larger battle-a war over the periodic table.” read more