Investors focus on commodities



Investors will be closely watching commodity markets this week following a major sell-off that threatens to smother the recent price boom.
From crude oil to cocoa, the cost of raw materials slipped last week amid concerns that a two-year price rally may be losing steam.
Worries that cash-strapped Greece may struggle to repay debts helped pull prices lower on Friday.
Despite the rout analysts say the long-term trend for commodities is still good.
"We have another 10 to 20 years of a bull market to go," said Wayne Atwell, a senior metals and mining analyst at the US investment bank Rodman & Renshaw.
Recent volatility comes as UAE investors make major strides to tap into a commodities market tipped to recover its lustre.
Mohamed Alabbar, a businessman based in Dubai, has signed deals to mine metals including gold and bauxite in Africa as his company, Africa Middle East Resources (Amer), becomes the latest company plugging into the global commodity supply chain.
It follows Abu Dhabi's Aabar Investments last week agreeing to invest up to US$1 billion (Dh3.67bn) in an initial public offering by the commodities trader Glencore International.
Such moves come on the back of global demand for goods accelerating as resource-hungry emerging markets such as China and India expand.
Sitting on 7 per cent of the world's oil reserves, the UAE has reaped the rewards of crude's recent rise to a 30-month peak this year. Goldman Sachs said on Friday - after the major commodities sell off - oil prices could still surpass their recent highs next year as global supplies keep tightening.
But as prices of commodities including coffee and cotton have also soared this year, other investments have become enticing.
Commodities outpaced stocks, bonds and the US dollar last month for the fifth straight month. Prior to Thursday's market reaction, the Standard & Poor's GSCI Total Return Index of 24 key commodities had risen almost 16 per cent since the end of last year. Even after the sell-off prices are still up 3.5 per cent.
From unrest in parts of the Mena region to declines in the US dollar - the currency in which many commodities are valued - and bad food harvests, the catalysts of the strengthening commodities market over recent months are plentiful. UAE investors seem to have their eyes on the bigger picture, however.
"The drivers of the commodity market are strong and more and more investors want to develop exposure to this," said Jarmo Kotilaine, the chief economist at National Commercial Bank in Saudi Arabia.
Aabar's investment will give it access to a company with a huge grip on the market; controlling 50 per cent of copper and almost a third of thermal coal.
Amer has its sights set on the surging appetite for raw materials in China and India as it pushes ahead with exploration work in Africa. It already has operations to mine oil and gas in Uganda and Gabon, uranium in Niger, gold and coal in Madagascar and gold, iron ore and bauxite in Guinea.
Talks are under way to mine phosphorus in Mauritania, copper in the Democratic Republic of Congo and gold in Ghana.
A desire to help feed China and India's increasing appetite for resources prompted Mr Alabbar to set up Amer in a 50-50 joint venture with Tan Sri Syed Mokhtar al Bukhary, a Malaysian businessman, in the first quarter of last year.
At a meeting of GCC finance ministers in Abu Dhabi yesterday the UAE Minister of State for Financial Affairs said the country had "no issue" with the recent fluctuations in the price of oil.
"Oil prices, they go up and they come down. We're fine," Obaid Humaid al Tayer, adding the UAE would not issue bonds this year to fund its deficit under newly approved legislation for federal bond issuances. He said that would only happen next year if needed.
 
tarnold@thenational.ae

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Name: Rain Management

Year started: 2017

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At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

 

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

 

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

 

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30 

 

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

 

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

 

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

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