S&P 500, Nasdaq hit record closing highs; Turkey’s lira plunges

By Caroline Valetkevitch

NEW YORK (Reuters) – The S&P 500 and Nasdaq notched record closing highs on Thursday, boosted by upbeat corporate earnings news from companies including Nvidia, while Turkey’s lira weakened further after its central bank cut rates.

MSCI’s gauge of stocks across the globe was flat, and the Dow Jones industrial average ended lower. Nvidia’s stock jumped and was among the biggest supports for the S&P 500 and Nasdaq after it beat quarterly estimates and forecast strong fourth-quarter revenue. Macy’s shares shot up 21.2% after it raised its earnings outlook.

On the flip side, Cisco Systems shares fell 5.5%, a day after it forecast current-quarter revenue below expectations due to supply chain shortages and delays. It was the latest in a growing list of U.S. companies citing supply chain problems.

Investors have been concerned over further increases in price pressures. Retail giant Target warned of higher costs earlier this week.

New York Federal Reserve Bank President John Williams said Thursday that inflation is becoming more broad-based and that expectations for future price increases are rising.

The Dow Jones Industrial Average fell 60.1 points, or 0.17%, to 35,870.95, the S&P 500 gained 15.87 points, or 0.34%, to 4,704.54 and the Nasdaq Composite added 72.14 points, or 0.45%, to 15,993.71.

The pan-European STOXX 600 index lost 0.46% and MSCI’s gauge of stocks across the globe gained 0.03%.

Turkey’s lira shed another 2.83% after its central bank cut rates by 100 basis points to 15%, even in the face of inflation near 20%, sending the Turkish currency hurtling southward.

“The lira remains a punching bag, and further weakness has no end in sight,” said Edward Moya, senior market analyst at Oanda.

The lira has lost around 11.5% of its value this month amid President Tayyip Erdogan’s renewed criticism of interest rates and calls for stimulus despite the risks. It was last at 10.909, having earlier hit a record low of 11.30 per dollar.

The dollar edged back from a 16-month high as traders weighed whether the U.S. currency’s recent surge had gone too far.

The dollar index, which measures the currency against a basket of six rivals, was last down 0.3%.

In the U.S. Treasury market, yields fell after the relative success of a 20-year bond auction on Wednesday reduced fears about further rapid yield increases.

Benchmark 10-year notes were last at 1.587%. They have jumped from a low of 1.415% last week and are holding below five-month highs of 1.705% reached on Oct. 21.

Oil prices rose slightly after dropping to six-week lows.

Brent crude settled up 96 cents, or 1.2%, at $81.24 a barrel, while U.S. West Texas Intermediate crude futures closed 65 cents, or 0.8%, higher at $79.01.

U.S. gold futures settled down 0.5% at $1,861.4.

(Additional reporting by Tom Westbrook in Sydney and Marc Jones and Sujata Rao in London; Karen Brettell and John McCrank in New York; editing by Shri Navaratnam, Sam Holmes, Philippa Fletcher and Dan Grebler)

Peru’s Castillo says GDP will grow 13% in 2021

LIMA (Reuters) – Peru’s socialist President Pedro Castillo said on Thursday in a conference with business leaders that the country’s gross domestic product is expected to grow 13% and beat expectations in 2021, amid a strong economy rebound from the pandemic.

“Legal certainty and clear rules will continue to exist, and for that I call on all good business people to continue to bet on Peru and invest without fear,” Castillo said during the CADE conference, the most important annual business conference in the world’s No. 2 copper producer.

Castillo has roiled markets and investors since taking over in July with promises to redistribute mining wealth, sending the local sol currency to record lows. But in his months in office he has also slightly moderated his initial stances, appointing a moderate left cabinet in October.

“Many of you not only doubted me, some voted against me,” Castillo said, who received support from rural voters in mining communities, but very little from Lima’s elite.

“Dear business people, GDP growth is not enough if it does not come accompanied by social welfare for everybody,” he added.

Peru’s economy fell more than 11% in 2020, one of the sharpest contractions in Latin America, amid tough lockdown measures. But Castillo said the rebound this year would lead to net growth over pre-pandemic levels, echoing comments made by the independent central bank last week.

(Reporting by Marco Aquino; Editing by Aurora Ellis)

Explainer-Chile is set for its most polarized election in decades

By Fabian Cambero

SANTIAGO (Reuters) – Chile is set to vote for a new president on Sunday, with a far-right conservative battling for pole position against a young former student leader on the left, in the most polarized election since the country’s return to democracy in 1990.

The vote is the first presidential ballot since Chile was rocked in 2019 by months of angry protests against economic inequalities that eventually sparked a process – still ongoing – to redraft its decades-old constitution.

HOW WILL THE VOTE WORK?

The Nov. 21 election will see Chileans vote for a new president, members of Congress and regional councils. A presidential candidate needs over 50% of the vote to win outright, otherwise there will be a second-round head-to-head on Dec. 19.

The voting starts at 8 a.m. (1100 GMT) and ballot stations close around 6 p.m., with results expected to come in fairly quickly Sunday evening.

WHO IS RUNNING?

There are seven presidential candidates. The two front-runners are 55-year-old ultra-right former congressman Jose Antonio Kast, leading in opinion polls ahead of Gabriel Boric, 35, a former leader student running for a leftist coalition.

Behind the front two are more mainstream contenders: center-right Sebastian Sichel from the ruling coalition who is a former minister of President Sebastian Pinera, and Yasna Provoste, a senator from a mining region with the major Christian Democrat party.

Experts have cautioned that opinion polls could miss the mark with the field so fragmented, opening the door for a potential surprise. But a Kast versus Boric head-to-head in December appears the most likely outcome.

WHAT ARE THE MAIN ISSUES?

Many Chileans support the free-market policies that propelled the copper-rich country to decades of growth and made it a bastion of relative economic stability in volatile Latin America. But an increasing number want change to address the deep inequalities.

Some of the loudest demands have stemmed from anger over paltry retirement payouts blamed by critics on Chile’s highly privatized pension system, while others have criticized the high costs and sometimes dubious quality of privatized education, and gaps between public and private healthcare.

Conservative voters have raised questions about increased immigration, and there are law and order concerns sparked by the protests in the capital and violent clashes between police and Mapuche indigenous groups in the country’s south.

Whoever wins the presidency will also have to handle a referendum to approve or reject the text of a new constitution during their first year in office. An assembly, dominated by leftist and independent representatives, is leading the constitution redraft.

“With so many problems, candidates are having to offer solutions that are drastic and that is why we have two leading candidates who are rather extreme,” said Kenneth Bunker, director of political consultancy Tresquintos.

(Reporting by Fabian Cambero; Editing by Adam Jourdan and Rosalba O’Brien)

Chile was a regional role model. Now voters want change

By Natalia A. Ramos Miranda

SANTIAGO (Reuters) – Chile, stretching along the copper-rich Andean mountains down South America’s Pacific coast, has something of a reputation among its neighbors: steady and almost staid in a region embroiled in regular political upheaval and economic crises.

That identity is now at stake as the country heads for a polarized election on Sunday with candidates on the far-right and hard-left leading in the polls, driven by voters who have been demanding change since widespread protests two years ago and could now force Chile’s sharpest political shift in decades.

In the last 30 years, since returning to democracy after the military dictatorship of Augusto Pinochet, moderate political parties on the right and left have overseen Chile’s fast growth and pushed the country to become a regional role model.

Now, the favorites to be Chile’s next president are Jose Antonio Kast, an ultra-right lawyer often compared to Brazilian leader Jair Bolsonaro, and leftist lawmaker and former protest leader Gabriel Boric, who has allied with the Communist Party.

“It represents the most significant shift in the political paradigm since 1990,” said Nicholas Watson, Latin America analyst for consultancy Teneo. Pollsters expect Kast and Boric will compete in a second-round run-off in December.

Both candidates represent a new political generation outside the mainstream, pulling away from what is known as the Concertacion coalition of center-left parties who steered Chile for decades and the current moderate coalition on the center-right.

Boric wants to “bury” Chile’s neoliberal model while Kast, who has praised Pinochet’s economic legacy and once joked the former dictator would vote for him if still alive, wants to reduce the size of the state and lower taxes.

“There is a rupture going on,” said political analyst Cristobal Bellolio, adding that it stemmed from the months of angry social protests that broke out in 2019 and sparked off a process of redrafting Chile’s Pinochet-era Constitution.

“This is challenging the official story of progress that Chile told itself and told to the rest of the world.”

(GRAPHIC: Chile: strong and stable – https://graphics.reuters.com/CHILE-POLITICS/xmpjorqxnvr/chart.png)

‘URGENT CHANGE’

In Latin America, Chile stands out.

World Bank indicators of rule of law, regulation, governance and political stability, show Chile far outstripping its big regional neighbors in Brazil, Argentina, Colombia and Peru. It’s one of the region’s few OECD members and an icon of free trade.

Its economic model, rooted in the neoliberal market-friendly policies of the so-called ‘Chicago Boys’ economists under Pinochet in the 1970s-80s has been copied by others, hoping to emulate its rapid and stable economic growth story.

Critics of its model, however, say that the growth was not evenly distributed, creating a small wealthy business elite towering above normal Chileans who faced high costs of privatized healthcare and education and meager pensions.

“Chile urgently needs change today,” said Luz Vergara, 37, an assistant at an engineering company in Santiago who plans to vote for Kast. “While no candidate represents me 100%, Kast gives me some security.”

More mainstream candidates, such as Yasna Provoste on the center-left and Sebastian Sichel on the moderate right have been squeezed out by voters looking for more radical answers.

The challenges won’t be easy: lowering inequality, calming protests in capital Santiago and clashes with indigenous groups in the country’s south, contentious pension withdrawals and overseeing the process of agreeing on a new Constitution.

That document – as well as the political shifts – could radically alter how Chile is perceived, analysts say, with investors watching what happens with private property laws, the autonomy of the central bank and fiscal policy.

Romina Aliaga, a 28-year-old environmental engineer said that she was voting for leftist Boric because the country needed major social change to move beyond its conservative past.

“His program is aligned with the improvements we need as a country, to be able to move forward and not go backwards on issues such as environmental policies, gender equality, and abortion,” she said. “These are issues that interest me a lot.”

(Reporting by Natalia Ramos; Editing by Adam Jourdan and Alistair Bell)

Canadian shippers find few easy alternatives for grain, oil cut off by flood

By Rod Nickel

WINNIPEG, Manitoba (Reuters) – Canadian exporters of commodities from grain to fertilizer and oil scrambled on Wednesday to divert shipments away from Port of Vancouver, which floods have isolated, but they found few easy alternatives.

The disaster, which has killed at least one person, has caused the latest blockage in the congested global supply chain, driving up inflation fears ahead of the holiday shopping season.

A month’s worth of rain in two days caused floods and mudslides in British Columbia that wrecked highways and two critical east-west rail lines owned by Canadian National Railway Co and Canadian Pacific Railway leading to Canada’s busiest port.

The Trans Mountain oil pipeline and part of an Enbridge Inc gas line have closed as precautions.

“That western corridor is our lifeblood,” said John Brooks, CP’s chief marketing officer, at an investor conference on Tuesday. “Just about all commodities to some extent flow through that.”

Vancouver’s port moves C$550 million ($437 million) worth of cargo a day, ranging from automobiles and consumer goods to commodities.

The alternatives include diverting commodities to British Columbia’s northern port of Prince Rupert, to the U.S. Pacific Northwest or across the continent to eastern Canada.

The clock is ticking. Port of Vancouver said it expects vessels to anchor longer while they await delayed cargo, a situation that usually results in shippers paying demurrage for the extra wait.

Buyers can also charge penalties for shipments that arrive late, raising the urgency to find alternatives.

“Everyone is looking at it,” one Canadian grain trader said.

Even if the railways can carry out repairs within a few days and restore service – they have not provided estimated timelines – delays will stretch for as much as one month given the backlog of shipments to work through, said a second grain industry source.

The Prince Rupert grain terminal, owned by Richardson International, Viterra and Cargill Inc, is already busy with exports, limiting its capacity to handle more volumes, said Wade Sobkowich, executive director of the Western Grain Elevator Association.

Canola futures for January delivery fell 1.5% as traders factored in transportation problems from the floods.

Teck Resources, a copper and coal miner, said in a statement that it was diverting trains from Vancouver to a Prince Rupert terminal.

Canpotex Ltd, the potash export company owned by Nutrien Ltd and Mosaic Co, will ship more of the crop nutrient through its smaller terminals in Portland, Oregon. and Saint John, New Brunswick, spokesperson Natashia Stinka said.

Trans Mountain’s closure means some 300,000 barrels of oil and refined products each day will start filling storage tanks, or find another conduit.

The main alternatives are shipping oil east on Enbridge’s Mainline or south by train to the United States, said John Zahary, CEO of Altex Energy, which owns rail terminals in Alberta and Saskatchewan.

“(It) does seem like supply chains are so tight these days that when something happens, panic and scrambling becomes the plan,” Zahary said.

(Reporting by Rod Nickel in Winnipeg; Editing by Lisa Shumaker)

Former protest leader Boric seeks to bury Chile’s ‘neoliberal’ past

By Fabian Cambero

SANTIAGO (Reuters) – “If Chile was the cradle of neoliberalism, it will also be its grave.”

If one quote could sum up a candidate’s platform – and send shivers through the traditional elite – it might be this one from Chilean former student protest leader and lawmaker Gabriel Boric, one of the front-runners in Sunday’s presidential election.

The 35-year-old former law student, leading a leftist coalition of the broad Frente Amplio and the Communist Party, has a serious shot of becoming the copper-rich country’s next leader.

Boric, who would be Chile’s youngest ever president, is battling against 55-year-old far-right candidate Jose Antonio Kast, with opinion polls suggesting the two polar opposites could be set for a second-round run-off in December.

“Do not be afraid of the youth changing this country,” Boric said when he won the candidacy of his leftist bloc. He pledged to bury Chile’s “neoliberal” past of market-oriented policies that are widely considered to have helped drive decades of rapid economic growth but also stoked inequality.

Boric rose to prominence fighting that imbalance, leading student protests in 2011 demanding better quality and less expensive education – a process which launched the political careers of a cluster of other student leaders, too.

A native of Punta Arenas, in Chile’s far south, he led the Federation of Students at the University of Chile in Santiago.

By 2014 Boric, still in his twenties, had joined the national Congress as a lower house lawmaker representing Chile’s vast and sparsely populated southernmost region of Magallanes.

He was well-established by the time the Andean country exploded with angry social uprisings in 2019, which lit the fuse for the political rise of the progressive left and the redrafting of the Augusto Pinochet-era constitution.

With thick black hair and a trimmed beard, he is more groomed now than in his disheveled student leader days. Although a known face of the left in Chile, Boric was initially a dark horse candidate for the presidency.

He just reached the threshold of 35,000 signatures needed to be a candidate. But then he beat out the popular capital mayor Daniel Jadue – of the Communist Party – to lead the leftist alliance.

Like Kast, Boric has tempered his tone as the Nov. 21 vote has neared and he has slipped in the polls behind Kast. Pollsters are split over which of the two would win in a potential run-off on Dec. 19.

He has also looked to distance himself from some more extreme views from far-left groups in his alliance, including support from the Communist Party for the Venezuelan government of President Nicolas Maduro.

J.P. Morgan in a report highlighted the “restraint” that Boric has shown in some aspects of his speech and pointed to Peru’s socialist President Pedro Castillo, who came to power proposing radical changes but has since moderated his stance.

“What I am convinced is that to do politics one has to be willing to sit down to dialogue, to debate firmly with those who think differently from you,” Boric said in an interview with Chilean newspaper La Tercera at the end of 2019.

“Because staying in the comfort zone of speaking only with those who think the same as you can be satisfying, but it does not help make change.”

(Reporting by Fabian Cambero; Editing by Adam Jourdan and Rosalba O’Brien)

Global need for copper, nickel will multiply over next 30 years -BHP

(Reuters) – The global markets will need four times the nickel and double the copper in the next 30 years to facilitate a decarbonised world, a BHP Group executive said on Wednesday.

“Some of the modelling that we have done showed that in, let’s say a decarbonised world … the world will need almost double the copper in the next 30 years than in the past 30,” said Vandita Pant, BHP’s Chief Commercial Officer, at the FT Commodities Asia Summit.

“And for a commodity like nickel, that quadruples. So four times nickel needed for the next 30 years than the past 30 years and all to be done as sustainably as possible,” Pant added.

Both nickel and copper are poised for strong consumption as a result of the transition away from fossil fuels. Nickel is used in electric vehicle (EV) batteries while copper is needed for wiring in the EVs, their charging stations and other renewable energy infrastructure.

On Tuesday, Trafigura’s chief executive warned of possible significant deficits for copper, nickel and cobalt as global demand rises.

Traceability and sustainability will be some of the main requirements from clients from now on, BHP’s Pant said, adding that the company has done a blockchain traceability programme with Tesla to track carbon emissions of its Western Australian nickel mine asset.

BHP also recently conducted its first carbon-neutral copper cargo, from Chile to the United States, she said, adding that is “the way to go.”

(Reporting by Mai Nguyen in Hanoi; Editing by Christian Schmollinger)

Gold Buying Jumped Ahead of CPI Shocker

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The week covered the run up to but not including last Wednesday’s CPI shocker which helped send real yields lower and both gold and the dollar sharply higher. Already ahead of the data we had seen a near 0.25% tumble in US ten-year real yields as the market drove up inflation expectations.

Elsewhere it was a week where the general level of risk appetite supported higher stocks while the dollar drifted lower. In commodities the overall exposure across 24 major commodity futures held steady with net selling of energy, grains and softs being offset by demand for precious metals, not least gold, and livestock.

Energy

Speculators turned small net buyers of crude oil for the first time in five weeks with WTI buying off-setting another week of Brent selling. The latter has now seen net selling for the past five weeks, resulting in the net hitting a one-year low at 240k lots or 240 million barrels. Gasoline and distillates together with natural gas were also sold.

Crude oil update from today’s Market Quick Take:

Crude oil(OILUKJAN22 & OILUSDEC21) has once again managed to bounce with Brent finding support ahead of $80 and its 50-day moving average. Higher gas prices (TTFMZ1) in Europe after Russia’s Gazpromfailedtobookadditional pipelinecapacityvia Poland and Ukrainefor December also supported the market, as it raised the prospect of consumers switchingfrompunitivelyexpensive gastooil-based fuels. Apart from the risk of US action, potentially triggering akneejerkdownward reaction, the market will also be looking out for IEA’s monthly Oil Market Report on Tuesday and EIA’s weekly stock report on Wednesday.

Metals

Speculators rushed into gold futures as real yields dropped and the dollar softened ahead of last Wednesday’s white hot CPI print. In other words, the 48% jump in the net long to a 10-month high at 146k lots occurred before the price broke key resistance at $1835 last Wednesday.

The subsequent rally to the current level around $1870 has undoubtedly resulted in more length being added, and with the dollar still strengthening and yields showing signs of rising, the metal needs to break higher soon in order to avoid selling from recently established longs. Despite rallying by 3.5% during the week, silver buying was muted with the net long only rising by 15% to reach a two-week high at 27.5k lots.

Despite trading up on the week, rangebound copper saw its net length being cut by 31% to a seven-week low at 24.3k lots, and given the strong fundamental outlook into 2022, this is an under-owned metal which in our view is only waiting for the technical outlook to improve.

Agriculture

The strong buying seen across the grains sector during the past few weeks reversed with selling of soybeans the main driver. The soybean complex was sold ahead of last weeks WASDE report which in the end ended up supporting after the US Department of Agriculture lowered its production estimate. Overall the total grain and soybean long was cut by 8% with only minor changes seen in wheat and corn. The softs sector was mixed with coffee length being reduced by 7% before the latest price jump to a nine-year high. The biggest reduction hit cocoa where 20k lots of selling reversed the position back to a net short.

Coffee update from today’s Market Quick Take:

Arabica coffee (KCH2) reached a nine-year high on Monday at $2.2825 per pound with the supply outlook looking increasingly tight. Following an annus horribilis in Brazil where frost and drought dealt a blow, not only to the latest crop but also potentially the 2022 the on-season, and normally larger crop, the market in addition must deal with lack of shipments, surging fertilizer prices, too much rain in Columbia and recently also the threat of civil war in Ethiopia, the world’s third biggest grower of the Arabica bean. The break above $2.25, the 2014 high may signal a market running towards $3, a record level that was last seen in 2011.

Forex

Speculators, wrongly as it turned out, sold dollars for a fifth week ahead of last week’s CPI release. The net long against ten IMM currency futures and the Dollar index was reduced by 4% to $21.9 billion, a six-week low.

Heavy selling of GBP being offset by EUR, AUD, CHF and JPY buying.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

  • Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
  • Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
    Forex: A broad breakdown between commercial and non-
  • commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Up Or Down: Where Are Gold Prices Heading Next In November?

The precious metal gained more than $100 over a seven-day rally – its longest winning streak since May, as its appeal as a hedge against inflation risk was boosted by data showing U.S consumer prices in October surged at their fastest pace in 31-years.

That trend is the same around the world. Recent data showed in China and Japan, inflation is shattering records. While in many other economies, including the UK, Canada and Europe inflation is nearing its highest level in almost two decades.

Earlier this week, the Minneapolis Federal Reserve Bank’s president said he expected higher inflation over the next few months but said the U.S central bank should not over react to elevated inflation as it was likely to be temporary.

Gold prices are currently trading sideways in a tight range, which ultimately indicates a big move is on the horizon. The only question now, is which way. Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Ecuador indigenous community welcomes judges to jungle, demands role in mining decisions

By Tito Correa

SINANGOE (Reuters) – Ecuador’s constitutional court judges traveled to the heart of the Amazon to hear indigenous communities defend their right to oppose mining projects in their territories during a historic hearing in the jungle.

“We want our feelings to be heard and reflected in a document that guarantees the protection of our territories,” said Wider Guaramag, leader of the A’i Cofan community in Sinangoe.

The hearing took place on Monday, just days after the U.N. climate conference in Glasgow wrapped up with agreements to curb climate change and phase down the use of fossil fuels, such as coal.

Ecuador’s President Guillermo Lasso, a conservative ex-banker, wants to expand mining to attract private investment and has promised legal stability and respect for concessions that have already been granted.

In 2018 the community succeeded in convincing a lower court to reverse dozens of previously granted mining concessions along the Aguarico river, arguing they had not been properly consulted about the developments.

The case could set a precedent regarding rights of indigenous communities to be free and informed consultations about extractive projects, the constitutional court has said.

“A historical event happened today and it sets an important precedent for every community and nationality,” Marlon Vargas, president of the Confederation of Indigenous Nationalities of the Ecuadorian Amazon, said during a press conference.

“The constitutional court will have to work in every territory, especially where they have been drastically affected,” he said.

Ecuador expects four copper and gold mines will begin producing in 2025, and has set its sights on boosting oil production to 1 million barrels per day.

Yet while two mines currently operate in the country’s Amazon, other large projects have been held up due to conflicts with indigenous communities.

Though Lasso supports prior consultations, Cofan communities are now fighting for the right to be included in the process of granting concessions.

“Our territory is our decision – we are its only owners,” said Alexandra Narvaez, the first woman to join the Cofan people’s guard.

Another indigenous community, the Waorani, also attended the hearing to demand the same rights, after they won a lawsuit to stop the development of an oil concession in their territory.

“The Ecuadorian government must respect our decision for our home, which is the jungle,” said Nemonte Nenquimo, a Waorani community leader.

(Reporting by Tito Correa; Writing by Oliver Griffin; Editing by David Gregorio)

Trafigura warns of power outages in Europe this winter

By Mohi Narayan and Mai Nguyen

(Reuters) – Europe is at risk of power outages this winter due to insufficient gas reserves and over the long-term, oil could rise above $100 a barrel, the chief executive of commodity trading giant Trafigura said on Tuesday.

Demand for oil, coal and natural gas as well as metals such as cobalt, nickel and copper have soared as the global economy reopens from COVID-19 restrictions, triggering price spikes that threaten the nascent recovery.

European gas prices have hit record highs this year prompting some countries to respond with emergency measures such as price caps and subsidies but that may not be enough, Jeremy Weir said.

“We haven’t got enough gas at the moment quite frankly, we’re not storing for the winter period. So hence there’s a real concern that there’s a potential if we have a cold winter that we could have rolling blackouts in Europe,” Weir said at the FT Commodities Asia Summit.

Russian state gas monopoly Gazprom, a major exporter to Europe, started refilling its European storage facilities last week but on Monday it booked lower pipeline capacity for December.

Some European lawmakers have accused Moscow of restricting supply to put pressure on Germany to speed up the authorisation of the Nord Stream 2 pipeline. Russia has denied this.

The higher price of natural gas has boosted demand for oil with benchmark Brent crude up 60% since the start of the year, trading at above $80 a barrel.

“We are seeing a very, very tight oil market,” Weir said.

Climate change has put oil companies under pressure to shift away from polluting fossil fuels and the resulting drop in investment in new production is adding to the price pressure.

“I think people need to recognise it’s not a situation where you might just flick the switch and you increase production. There’s a lot of investment, it takes some time to do that,” said Weir.

“I think we have got a bit of an issue looming on oil prices on a long-term basis, I think $100 plus on oil … (is) very possible.”

Front-month prices are about $1 higher than those in the second month, a market structure known as backwardation that indicates tight prompt supplies as the Organization of the Petroleum Exporting Countries (OPEC) and their allies continue to restrict production. [O/R]

“There are some OPEC members that probably can increase supply very quickly,” Weir said.

COPPER

Privately owned Trafigura is one of the world’s biggest energy traders and in June reported record first-half profits as demand for oil and other commodities soared.

Weir warned on Tuesday about significant deficits for cobalt, nickel and copper as global demand rises for electric vehicle batteries and renewable energy.

“Some of these metals are just not going to be available due to the increase in demand,” he said.

“We’ve already seen a significant increase in demand not just from China but also from the U.S. and from Europe and we expect to see significant deficits in some commodities.”

Copper inventories in warehouses of the London Metal Exchange and the Shanghai Futures Exchange are hovering around multi-year low levels. LME cash copper premium over the three-month contract leapt to a record on Oct. 18, a few days after LME on-warrant stocks dropped to their lowest since 1998. [MET/L]

“”Once we get through possibly Chinese New Year into the end of Q1 of next year … Unless we see a major meltdown in industrial production out of China, I think we got a pretty critical situation with respect to copper prices,” the executive said.

Weir said cobalt, nickel supplies could also become problematic unless companies are able to commission mines more efficiently without compromising safety standards.

He said nickel from certain locations, like Indonesia, for example, has a very high carbon footprint compared with other sulphide-based producers.

Trafigura is investing in carbon capture and storage and Weir said carbon trading could become Trafigura’s third pillar of business after the business was launched in April.

“What’s interesting is that people shy away from decarbonisation, and I think it’s a great challenge, but also it’s a fantastic business opportunity,” he said.

(Reporting by Koustav Samanta and Florence Tan in Singapore, Mohi Narayan in New Delhi and Mai Nguyen in Hanoi; Editing by Christian Schmollinger, Simon Cameron-Moore and Carmel Crimmins)

Commodity Currencies Explained (Part I)

Let’s start by defining what could be called a commodity currency (or commodity pair).

Generally, a commodity currency represents a currency from a country or geographical zone that produces specific commodities which will account for most of its exports.

Some examples of currencies which could be considered as commodity currencies are presented in the following table:

Currencies Top Material Exports
Argentine peso (ARS) Soybean meal ($8.81B), corn ($6.19B), delivery trucks ($3.83B), soybeans ($3.47B), soybean oil ($3.38B), bran ($292M), other vegetable residues and waste ($232M), and ground nut oil ($131M)
Australian dollar (AUD) Iron ore ($67.5B), coal briquettes ($51.5B), petroleum gas ($34.1B), gold ($25.4B), aluminium oxide ($5.6B), sheep and goat meat ($3.07B), and wool ($2.26B)
Brazilian real (BRL) Soybeans ($26.1B), crude petroleum ($24.3B), iron ore ($23B), corn ($7.39B), sulfate chemical wood pulp ($7.35B), poultry meat ($6.55B), frozen bovine meat ($5.67B) and raw sugar ($5.33B)
Canadian dollar (CAD) Crude petroleum ($67.8B), cars ($40.9B), gold ($14.6B), refined Petroleum ($12.3B), vehicle parts ($10.8B), sawn wood ($6.35B), raw aluminium ($5.45B), potassic fertilizers ($5.27B), rapeseed ($3.23B), and rapeseed oil ($2.6B)
Indian rupee (INR) Refined petroleum ($39.2B), diamonds ($22.5B), packaged medicaments ($15.8B), jewellery ($14.1B), cars ($7.15B), Rice ($6.9B), Crustaceans ($4.67B), and Non-Retail Pure Cotton Yarn ($2.86B)
Indonesian rupiah (IDR) Coal briquettes ($20.3B), palm oil ($15.3B), petroleum gas ($8.32B), cars ($4.52B), gold ($4.01B), lignite ($2.91B), stearic acid ($2.76B), uncoated paper ($2.37B), and coconut oil ($1.9B)
Malaysian ringgit (MYR) Integrated circuits ($63B), refined petroleum ($17.8B), petroleum gas ($11.5B), semiconductor devices ($9.65B), palm oil ($8.91B), rubber apparel ($4.37B), other vegetable oils ($1B), copper powder ($873M), asphalt mixtures ($417M), and platinum clad metals ($127M)
Mexican peso (MXN) Cars ($53.1B), computers ($32.4B), vehicle parts ($31.2B), delivery trucks ($26.9B), crude petroleum ($26.6B), tractors ($10.7B), beer ($5.07B), tropical fruits ($3.6B), and railway freight cars ($3.57B)
New Zealand dollar (NZD) Concentrated milk ($5.73B), sheep and goat meat ($2.62B), rough wood ($2.31B), butter ($2.29B), frozen bovine meat ($2.09B), casein ($613M), and honey ($237M)
Nigerian naira (NGN) Crude Petroleum ($46B), petroleum gas ($7.78B), scrap vessels ($2.26B), flexible metal tubing ($2.1B), and cocoa beans ($715M)
Peruvian nuevo sol (PEN) Copper ore ($12.2B), gold ($6.76B), refined petroleum ($2.21B), zinc ore ($1.65B), and refined copper ($1.62B), animal meal and pellets ($1.54B), lead ore ($1.01B), fish oil ($434M), and buckwheat ($139M)
Russian ruble (RUB) Crude petroleum ($123B), refined petroleum ($66.2B), petroleum gas ($26.3B), coal briquettes ($17.6B), wheat ($8.14B), semi-finished iron ($6.99B), coal tar oil ($4.49B), raw nickel ($4.03B), and nitrogenous fertilizers ($3.05B)
South African rand (ZAR) Gold ($16.8B), platinum ($9.62B), cars ($7.61B), iron ore ($6.73B), and coal briquettes ($5.05B), manganese ore ($3.16B), chromium ore ($1.92B), titanium ore ($583M), and niobium, tantalum, vanadium, and zirconium ore ($480M)
Swiss franc (CHF) Gold ($59B), packaged medicaments ($46.2B), blood, antisera, vaccines, toxins, and cultures ($32.9B), base metal watches ($13.6B), jewellery ($10.9B), precious metal watches ($7.32B), and hydrazine or hydroxylamine derivatives ($501M)
US dollar (USD) Refined petroleum ($84.9B), crude petroleum ($61.9B), cars ($56.9B), integrated circuits ($41.4B), vehicle parts ($41.2B), medical instruments ($29.5B), gas turbines ($28.1B), aircraft parts ($16.3B), and orthopedic appliances ($12.1B)
Vietnamese dong (VND) Broadcasting equipment ($42.3B), telephones ($18.2B), integrated circuits ($15.5B), textile footwear ($10.6B), and leather footwear ($6.43B), coconuts, Brazil nuts, and cashews ($3.16B), fuel wood ($2.05B), cement ($1.39B), metal-clad products ($1.37B), and cinnamon ($175M)
West African CFA franc (XOF) Gold ($11.66B), cocoa beans ($3.84B), refined petroleum ($2.64B), rubber ($1.08B), raw cotton ($1.04B), and crude petroleum ($941M), cocoa paste ($795M), other oily seeds ($407M), Phosphoric Acid ($346M), coconuts, Brazil nuts, and cashews ($280M), ground nuts ($192M), zinc ore ($173M), raw zinc ($155M), electricity ($141M), cocoa shells ($115M), calcium phosphates ($95.7M), radioactive chemicals ($59.6M), rough wood ($59.5M), raw copper ($49.4M), Petroleum Gas ($42.5M), non-fillet frozen fish ($356.1M), other vegetable residues ($25.4M), and aluminium ore ($3.17M)

Data: The Observatory of Economic Complexity (OEC)

(Bold: products which the country/economic area was the world’s biggest exporter in 2019)

For active trading purposes, the ones highlighted in yellow would be characterised as freely floating and more liquid currencies. Thus, they would also be more accessible and less costly (with lower fees) to trade.

For hedging purposes, the others would present some advantages to the commercialisation of their associated natural resources, even though they would rather be considered more exotic currencies.

Charts

Here is a representation of some key commodity currencies presented in the above table on a weekly timeframe against the US dollar (reference currency):

Graphical user interface, chart, applicationDescription automatically generated

Each chart was represented within 2-standard deviation Bollinger Bands based on a 20-period simple moving average (in orange), a 50-period simple moving average (blue curve), a 200-period simple moving average (the black curve) and in the pane below is a 14-period relative strength index (in blue) to which was applied a 9-period simple moving average (red curve).

All those charts are displayed over a 2-year historical period.

In the next article I’ll focus on highlighting some correlations which may exist between key natural resources and the currencies in which they are usually traded.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Sebastien Bischeri
Oil & Gas Trading Strategist

* * * * *

The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Analysis-Chile copper giants seek stability in uncertain political times

By Fabian Cambero

SANTIAGO (Reuters) – Chile’s mining sector is looking for certainty amid political fog in the world’s top copper producer, which is redrafting its constitution and on Sunday is headed for a polarized vote led by outsider candidates on the far left and right.

The front-runners have kept their powder dry on copper in the campaign https://www.reuters.com/world/americas/chiles-campaign-trail-goes-virtual-all-two-candidates-forced-into-covid-lockdown-2021-11-04 so far, hinting at hikes to royalties on mining profits. There has also been vague talk from far-right poll leader José Antonio Kast to allow more private investment in state miner Codelco.

The Nov. 21 presidential vote, the first since months of angry protests over inequality https://www.reuters.com/article/us-chile-protests-explainer/explainer-chiles-inequality-challenge-what-went-wrong-and-can-it-be-fixed-idUSKBN1X22RK rocked Chile in 2019, has become a polarized battle between a leftist coalition led by 35-year-old protest leader Gabriel Boric https://www.reuters.com/world/americas/chile-leftist-presidential-candidate-boric-tests-positive-covid-19-2021-11-03 and ultraconservative Kast https://www.reuters.com/world/americas/chile-conservative-kast-maintains-lead-final-pre-election-opinion-polls-2021-11-06.

The battle will be key for the mining sector, which has increasingly come under the spotlight in the region as governments looked to bolster state coffers to drive an economic rebound after the impact of the coronavirus pandemic.

Kast and Boric are from outside Chile’s mainstream political parties, with voter anger over pensions, healthcare, education and costs driving demand for change – similar to the abrupt rise of former teacher President Pedro Castillo https://www.reuters.com/world/americas/perus-castillo-mulls-cabinet-reshuffle-under-pressure-opposition-2021-08-24 in neighboring Peru.

“There are candidacies that are at opposite extremes and there is talk of a polarization as a factor that can make any next government complex,” said Alejandra Wood, Santiago-based executive director of the Center for Copper Studies (CESCO).

“The presidential campaign adds uncertainty,” she added.

The country is already debating a new constitution https://www.reuters.com/world/americas/chile-begins-down-uncertain-road-writing-new-constitution-2021-05-17 and a controversial mining royalty bill https://www.reuters.com/article/chile-copper/royalty-bill-will-put-chiles-private-miners-out-of-business-trade-group-says-idUSL1N2PW1QR, which could sharply hike tariffs on the sector. A new glacier protection law, which could impact some key mines, also still needs to be defined.

Chile is the world’s No. 1 producer of copper and one of the biggest suppliers of electric battery metal lithium, with demand rising amid a global shift toward electric vehicles.

Kast and Boric are the favorites to make it to a second-round run-off. If no candidate gets a simple majority on Sunday, the top two will compete in a head-to-head ballot on Dec. 19. A host of legislative and regional offices are also up for grabs in Sunday’s election.

‘INVESTMENT DROUGHT’

Francisco Acuña, analyst at industry consultancy CRU, said most candidates were aligned on plans to improve sustainability and lower emissions from mining, though there was little clarity on specific measures to achieve it.

Left-wing candidates like Boric and Senator Yasna Provoste have discussed royalties while Kast has proposed vague changes to mining property law to rev up the sector, including opening up state miner Codelco to more private investment.

“The risk is the uncertainty because there is no clear idea yet of what changes would look like,” Acuña said.

Diego Hernández, president of the National Mining Society (Sonami), which represents firms in the sector, told Reuters that whoever won the presidential race would need more investment in mining to propel growth, so they would need to sit down and negotiate terms.

Hernández said Kast, Provoste and center-right Sebastián Sichel appeared to recognize the importance of mining in different forms, though they criticized Boric’s talks of a more productive role for the State as “confusing.”

“With all the needs that the country has, we know that this (large state investments) is not available. Deep down there is a lack of maturity or reality,” he said.

Hernández said the elections would spark legal uncertainty, which could lead to a period of “investment drought” that could delay the availability of new copper and lithium to meet the expected increase in demand.

The government has projected mining investments of about $70 billion through the end of the decade, most from private firms.

CESCO’s Wood said the sector needed clarity quickly to help make sure developments moved ahead.

“I think the industry is waiting for signals of greater certainty and stability to make investment decisions,” she said.

(Reporting by Fabián Andrés Cambero in Santiago; Editing by Adam Jourdan and Matthew Lewis)

Inflation and US Oil Intervention Risk Take Center Stage

The Bloomberg Commodity Index traded lower for a fourth consecutive week with loses across the energy sector more than offsetting gains across metals and agriculture. The performance of the index, which tracks 24 major futures contracts, reflected a week where the sector had to deal with the hottest US inflation print in three decades, the US government mulling ways to bring down oil prices, a tightening outlook for key crops, geopolitical uncertainties on Europe’s eastern borders, and not least the strongest dollar in more than a year.

The energy sector traded lower for a third straight week, primarily driven by weaker oil prices and a slump in US gas prices while industrial and precious metals rose. Meanwhile, the agricultural sector saw strong gains in wheat as the global supply situation continues to tighten while other key food commodities such as coffee and corn are also rising.

Precious metals

After five months of rangebound trading, gold for once stole the show after ripping through an area of resistance that had been rejected on numerous occasions since July. The market popped in response to the strongest read on US inflation in over 30 years as it helped drive US 10-year real yields to a record low at minus 1.25 percent. While the narrative had developed in the wake of the FOMC meeting last week that the Fed would look through high inflation numbers, preferring to focus mostly on the labor market, these numbers were sufficiently hot to jolt the market, raising Fed rate hike expectations for next year.

However, the prospect of an accelerated pace of US rate hikes next year combined with rising long-end bond yields helped drive the dollar to its highest level in more than a year. Gold’s newfound strength and ability to weather the strong dollar challenge helped drive gold priced in euros to a one-year high above €1625/oz. These developments all potentially signaling a change in the market’s perception of gold as they could be the first signs that reaffirm gold’s credentials as a haven from rampant price pressures.

Before starting to speculate about even higher prices, gold is likely first to seek confirmation that the recent $1830-35 area of resistance has now become support. Failure to hold could trigger long liquidation from recently established longs. Also, the focus will be on how investors respond via the exchange-traded fund market. Fund managers have increasingly been reducing their gold exposure during the past year as low stock market volatility and rising equity prices reduced the need for diversification. Whether the white-hot October US CPI print will change that remains to be seen during the coming weeks.

Source: Saxo Group
Source: Saxo Group

Crude oil was heading for a third weekly decline after once again failing to find a bid strong enough to force prices above the Brent double top at $86.70. While the short-term global outlook still points to price supportive market tightness, the market has been losing momentum due to the risk of US action to curb prices, a resurgence of Covid-19 cases in Europe and Asia, lower gas and coal prices reducing switching demand as well as OPEC in their monthly oil market report hinting current price levels are starting to hurt demand, especially in countries like India and China.

Following the recent decision by OPEC+ to maintain the current pace of monthly production increases, the US administration has become increasingly vocal in blaming the group for high prices. Very elevated domestic gasoline prices, in some states near record levels, has increased the potential for US action to curb prices, either through a one-off release of Strategic Reserves or more controversially a temporary ban on US crude oil exports.

The U.S. Energy Information Administration (EIA) in its monthly Short-term Energy Outlook (STEO) maintained their forecast of an oversupplied market by early next year, a view that was not shared by Russell Hardy, the head of Vitol Group, the world’s biggest independent oil trader. Speaking online at the Reuters Commodity Trading Conference on Tuesday he said that global oil demand is back to 2019 levels and will exceed those during the first quarter of 2022. Not ruling out $100 per barrel Brent in 2022, he said oil market tightness will continue for the next 12 months with OPEC spare capacity down to between 2 and 3 million barrels per day.

Against these mostly short-term developments the oil market will still be facing years of potential under investment with oil majors losing their appetite for big projects, partly due to an uncertain long-term outlook for oil demand but increasingly also due to lending restrictions being put on banks and investors due to ESG and the green transformation focus.

Whether the short-term trading range in Brent will be $80 to $85 or potentially a deeper correction towards $75.50 will to a high degree be determined by whether the Biden administration pushes though measures to curb prices. A 50-million-barrel release from SPR could trigger a temporary drop in prices, perhaps by as much as five dollars, but overall, we see a limited chance of it having a long-term negative impact on prices.

Global wheat prices continued higher with Paris Milling wheat futures hitting a fresh record high just below €300 per tons while prices in Chicago trade near the most expensive since 2012. A poor harvest in North America together with a decline in exports from Russia, the world’s largest shipper, has triggered increased demand for European sourced wheat, and with the prospect for another potentially challenging crop year in 2022 caused by a returning La Ninã weather phenomenon and high fertilizer costs, some of the major importers have recently been stepping up their pace of purchases.

The latest rally has been driven by the mentioned surge in inflation, the US Department of Agriculture making a further downgrade to global stock levels, and not least worries over a possible further slowdown in exports from Russia. Expectations for a strong harvest season in Australia and Argentina only providing a small amount of relief should Russia, due to continued high prices, decide to keep more of its crop at home to help contain domestic prices.

Coffee is another major food commodity currently hitting fresh multi-year highs. Driven by supply worries in Brazil and Columbia, the Arabica coffee future trading in New York has reached a seven-year high at $2.16 per pound. After averaging around $1.2 per pound between 2015 and 2020 due to an oversupplied market, the price has moved sharply higher this year.

While congestions and delays in the global container freight market has been a challenge for shippers in recent months, the main reasons for the continued rally is due to tightening supply, with plunging production in Brazil. Drought and frost damage earlier in the year has not only reduced the latest crop but also raised concerns about the size of next seasons output. In Columbia, excess rain has cut yields while raised the risk of plant diseases.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

AstraZeneca, commodity stocks drag down UK’s FTSE 100

By Bansari Mayur Kamdar

(Reuters) – UK’s FTSE 100 index fell on Friday, dragged lower by drugmaker AstraZeneca following its profit miss, while commodity-linked stocks slipped as a stronger dollar dented metal and oil prices.

The blue-chip FTSE 100 index ended 0.5% lower, weighed by AstraZeneca after the COVID-19 vaccine maker reported a smaller-than-expected quarterly profit and stuck with its overall profit forecast for the year.

“Such guidance from the leading vaccine provider, at a time when nations are already inoculating vulnerable patients with a booster dose, certainly charts a gloomy path for profitability in upcoming quarters,” said Kunal Sawhney, CEO of Kalkine group.

A 2.6% drop in mining stocks and 1.2% slide in energy stocks also dragged down the commodity-heavy FTSE 100 index as a stronger dollar weighed on commodity prices on bets of an earlier-than-expected interest rate.

However, the surge in mining stocks earlier in the week put the FTSE 100 on track for its third consecutive week of gains.

Bogged down by inflationary pressures and supply chain problems, UK blue-chip shares continue to underperform their European peers. The FTSE 100 has gained just 13.9% this year compared to the 21.7% increase in the pan-European STOXX 600 index.

According to a latest Chambers of Commerce survey, 80% of businesses are feeling the effects from price increases in the UK, adding to fears of inflation in the market, Bloomberg News reported.

In a bright spot, there were reports suggesting Britain wanted to de-escalate tensions with the European Union and renew efforts to find a solution over a Northern Ireland trade dispute.

The domestically-focussed mid-cap index ended flat with financials and consumer discretionary stocks among the worst performers.

Online trading platform IG Group slipped 1.4% after completion of a comprehensive refinancing of its debt, providing it with additional financial flexibility to grow.

Graphic: Miners have outperformed the FTSE 100 for the first week in four weeks backed by a weak pound and some relief on China https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrekbdpm/MinersFTSE.PNG

(Reporting by Bansari Mayur Kamdar and Amal S in Bengaluru; Editing by Shailesh Kuber and Krishna Chandra Eluri)

Silver Prices Surge As U.S Inflation Hits 30-Year High – What’s Next?

Inflation is now running at its highest in a generation, with data released on Wednesday showing U.S Consumer Prices in October surged 6.2% from a year ago – leading to the biggest annual gain in 31 years.

Following on from the data, President Joe Biden acknowledged that U.S consumers were paying too much for everyday goods, vowing to tackle inflation “head on” with his forthcoming $1.75 trillion social-spending bill, along with a $550 billion infrastructure spending plan.

Republicans are hammering exactly the opposite argument stating that “cash drops by the government are driving up prices even higher”.

Nearly all economists expect inflation figures could leapt into the double digits ahead, due to the ongoing global supply chain crisis caused by the COVID-19 pandemic, which shows no sign of abating anytime soon.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

China to step up strategic mineral resource exploration during 2021-2025

(Reuters) – China will step up exploration of strategic mineral resources including petroleum, natural gas, copper, chrome, tungsten, rare earths and others during 2021-2025, the top economic planner said on Friday.

The National Development and Reform Commission revealed the plan for promoting development in resource-dependent regions on its website.

(Reporting by Min Zhang in Beijing and Tom Daly; Editing by Jacqueline Wong)

Peru has yet to decide how much to hike taxes on miners -finance minister

By Marco Aquino

LIMA (Reuters) – Peru’s left-wing government has yet to decide exactly how it will hike taxes on the mining sector, Finance Minister Pedro Francke said on Thursday, adding that International Monetary Fund advisers will take weeks to issue recommendations.

“We are going to keep the same types of taxes that already exist, but we do plan to adjust some of the rates,” Francke told reporters.

Last month, Francke requested that Congress authorize the executive to reform the tax system. The government request did not specify how much taxes would be raised on miners. Mining is a key source of tax revenue in Peru, the world’s No. 2 copper producer.

Left-wing President Pedro Castillo wants to raise taxes in order to fund new social programs. Congress has yet to vote on the proposed tax package and it is unclear if they will approve it. Peru’s government summoned the IMF to advise them specifically on reforming mining taxes.

While the government has said it will hike taxes without affecting competitiveness, the National Society of Mining, Oil and Energy (SNMPE) said on Thursday that any hike in takes would hurt competitiveness.

The government “is trying to undo a tax system that already benefits the state,” said SNMPE President Raul Jacob in a statement. Jacob is also chief financial officer at Southern Copper Corp, Peru’s No. 2 producer of the red metal.

The group said the mining sector could pay 85 billion soles ($21.22 billion) in taxes between 2022 and 2026 under the current system, assuming metal prices remain high. According to their estimates, that is 2.5 times higher than what the industry has paid in previous five-year periods.

“I understand we may have differences in opinion on this subject,” Francke said, adding that the IMF advisers were “the best source we can have to make decisions on this subject.”

($1 = 4.0063 soles)

(This story refiles to correct typo in word “taxes” in headline)

(Reporting by Marcelo Rochabrun; Editing by David Gregorio)

BHP gets Australian shareholder support for climate plan

By Melanie Burton

MELBOURNE (Reuters) – BHP Group said it had won approval for its climate roadmap on Thursday, overcoming a protest vote on concerns that some of the long-term plans lacked detail, with Australia-based shareholder proxies voting 86% in favour.

The world’s biggest listed miner aims for net zero emissions by 2050 for its customers, including the heavily polluting steel industry. But BHP has stopped short of setting a target, in view of uncertainty over how technology will develop.

“BHP’s climate action transition plans are well developed and … have been strongly endorsed by our shareholders,” Chairman Ken MacKenzie said after the results of the poll were released at its annual general meeting.

“We have clear goals and targets in place.”

BHP expected to spend $2 billion to $4 billion on the initiative by 2030, he added.

Australia-based shareholders make up 58% of BHP’s register, which is split between London and Sydney.

Proxy advisers Glass Lewis, and London’s Local Authority Pension Fund Forum (LAPFF) had recommended that investors vote against the plan, with the first saying BHP was not specific enough about disclosures of customer emissions.

“Just three weeks after Rio Tinto committed to cutting its operational emissions by 50% by 2030, BHP shareholders have rubber stamped a 2030 target that is sorely lacking in ambition … and leaves BHP lagging behind nearly all of its global mining peers,” Dan Gocher, climate director for the Australasian Centre for Corporate Responsibility, said.

BHP’s climate transition plan commits it to at least a 30% cut on its direct and indirect emissions by 2030 on 2020 levels.

Raising the stakes for its peers, Fortescue Metals Group last month set a 2040 target to achieve net zero customer emissions.

About 83% of BHP Plc’s investors voted in favour of the resolution at its annual general meeting in London last month.

BHP has also been reshaping its portfolio to better match its climate targets, saying this week it would sell a stake in BHP Mitsui Coal (BMC), a metallurgical coal joint venture in the northeastern state of Queensland.

However, it has proved tougher to shift its New South Wales energy coal business, which is now halfway through a two-year sale process, MacKenzie said.

“Cards on the table it’s challenging,” he said, in response to a question whether BHP could hold on to, and responsibly wind down, the Australian unit. “All options remain on the table.”

(Reporting by Melanie Burton; Editing by Clarence Fernandez and Alexander Smith)

WHSP, Singapore’s ComfortDelGro pause Australia IPO plans for units

(Reuters) – Investment house Washington H. Soul Pattinson and Singapore transport firm ComfortDelGro have decided against pursuing an Australian listing for their units, citing adverse market conditions in the country.

Washington. H Soul said on Thursday it would not proceed with the IPO process for its copper and zinc mining unit Round Oak Metals, a day after ComfortDelGro ended its own plans to list its Australian unit.

While the Australian company cited “current market conditions” for its move, Singapore-listed ComfortDelGro said IPO conditions in Australia had become more challenging and other strategic options had come up.

The decisions made by the two firms comes just weeks after Las Vegas-based slot machine maker Scientific Games Corp chose to sell its lottery business to Canada’s Brookfield Asset Management rather than list.

Australia’s stock market is off by about 4% from the record peak hit in August, as the economy recovers and investors price in the winding down of unprecedented fiscal and monetary measures.

(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Ramakrishnan M.)