Is the next commodities supercycle coming?
Is the next commodities supercycle coming?

22 March 2023 – Another financial services provider sees a possible supercycle for commodities coming due to major shifts in capital flows. LME chaos is getting more and more confusing: Does everyone have a hand in it now? What will happen tomorrow? And China’s container ports: recovery on the horizon?

Goldman Sachs expects commodities supercycle

Now Goldman Sachs has started blowing the same horn as the other big financial advisors and sees a commodity supercycle on the horizon.

A lot of capital has left the US financial market and is now being shifted into the commodities industry, Jeff Currie, global head of commodities for Goldman Sachs recently told the Financial Times.

“The deposits have already left …Cash is going into money markets not into the banks.”

Price outlook raised by up to 50%

Goldman Sachs sees significantly rising prices for copper and oil in particular. For copper, they have just raised their 2023 price outlook by 50% and expect it to rise to as much as $15,000 per tonne. This should also have an impact on other commodities such as nickel, iron ore, steel, stainless steel and aluminium.

LME Chaos: Does everyone have their fingers in it now? What will happen tomorrow?

The British commodity exchange London Metal Exchange (LME) is lurching from one crisis to the next. Since the failed short sell by the Chinese commodity trader Big Short a year ago, the incidents surrounding the coveted nickel have been stringing together.

Suspension of nickel trading after it had risen above $100,000 per tonne. Lawsuits against the LME by traders who feel cheated. Maintaining trade relations with Russia. The lowest nickel inventories since 2008 and no increase in sight.

And now, in a short space of time, further incidents that threaten to destroy the last vestige of confidence in the commodity exchange. In addition, critical questions arise here as to whether all the big players in the commodities market could have had a hand in this? And what’s coming tomorrow?

The Who’s Who of the Commodities Industry

For the current incidents seem to have affected, partly directly, partly indirectly, companies such as commodities trader Trafigura, which seems to have fallen victim most recently to a nickel scam with an estimated loss of almost 500 million USD, or financial services provider JPMorgan Chase and commodities giant Glencore, which owned Access World Group until January 2023. In Access World’s Rotterdam warehouse, the warehouse company is now part of British Virgin Islands-based Global Capital Merchants Limited, which was only established in 2022 – the parent company appears to be owned by a major Chinese commodities trader.

Who does the Chinese commodity trader belong to?

Who the Chinese commodities trader might belong to remains speculative for the time being. It is mentioned, among other things, in a document of the South African Competition Commission, which had approved the sale of Access World in October 2022.

LME chaos looks like script for movie

All these nickel incidents, the Trafigura scam by an Indian consortium of companies, the random-looking sale of Access World by Glencore to a Chinese commodities group in late 2022, early 2023, the bags of stones allegedly sold to Trafigura by JPMorgan Chase, and the nickel incident a year ago in March 2022 and at the centre of it all the LME belonging to the HKEX – All this together looks like the script to a mediocre agent thriller or economic crime film.

But this is about billions in nickel trading and the need for safety and reliability in commodity trading. And safety in particular must be restored urgently if the LME is to survive all this. Clarification is needed here, as quickly as possible.

Thorsten Gerber, CEO of Gerber Group said today: “You can always do worse. And what’s tomorrow?”

China’s container ports: recovery on the horizon?

Even though February has not yet been to the satisfaction of the Chinese container ports, which is probably related to the early Chinese New Year at the end of January/beginning of February, Deutsche Bank assumes that the increasing production of Chinese companies, as well as the recovering demand of the local households, will have a positive effect on the handling figures of the country’s container ports in the future.

Significant growth in export orders

Recent sentiment indicators for China’s manufacturing sector also show significant increases in incoming export orders. Such a development is usually a reliable indicator for an expansion of Chinese container port handling volumes in one to two months. This positive outlook is supported by the continued robust consumer sentiment in the USA, China’s largest export market.

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