Saxo Bank is predicting that commodity prices are nearing a bottom after hitting a 16-year low. That is because of signs that producers are struggling to meet rising demand as they cut back on new investment and lay off workers to pay back debt.
“There is light at the end of the tunnel, but the tunnel is quite long at the moment,” Ole Hansen, Saxo’s chief commodity strategist said last week amid a rout in the shares of Glencore, one of the world’s biggest publicly traded commodity trading companies.
“Some are not through the worse yet but it’s already in the prices,” he said. “We are not in a recession so far, but the market has responded quite forcefully to this change.”
The Danish investment bank, best known for online forex trading, joins a growing number of contrarian voices going against Goldman Sachs and other big Wall Street investment banks that are forecasting more pain ahead for raw materials.
The commodity bears contend that the plunge in prices, sparked by slowing economic growth in China and the strengthening US dollar, has further to go as supply continues to outstrip demand.
Meanwhile, the bulls, those who by and large are betting that prices will rise, maintain that global economic growth is still positive and that coupled with population growth and a finite pool of natural resources will trigger a rebound, especially as many producers struggle to make ends meet and reduce supply. At the same time, they hold, like Mr Hansen, that demand is increasing.
Speaking at the firm’s office in Dubai, Mr Hansen said there were signs that China was turning the corner economically and that producers would soon be unable to meet demand following a protracted glut.
The Danish strategist also pointed to fewer bets by big investors such as hedge funds against oil prices falling further as a sign that a rebound may be in store for crude.
Energy is by far the largest component of commodity markets and accounts for about 70 per cent of all trade.
Oil has been the hardest hit, losing nearly half of its value in the past 12 months as production from North America increased and demand for major consumers like China cooled. The slide deepened after Opec, led by Saudi Arabia, the world’s biggest oil exporter, decided last year not to reduce production to stem the drop.
The fall in commodity prices follows a decade and a half of outsized growth and seemingly inexhaustable demand that led to a boom in business for producers. Other raw materials from copper, zinc, coffee and sugar have also been hurt with the benchmark commodity measure, the Bloomberg Commodity Index, losing a quarter of its value in the past year.
Mr Hansen, who had worked for a hedge fund and has more than 25 years of experience in trading commodities, is forecasting stable oil prices for the rest of the year with an expected pick-up towards the US$60 per barrel mark at the end of next year from about $45 per barrel at the moment.
He concedes, however, that no prediction is perfect and a lot will depend on factors such as the ability of emerging markets as a whole to make a turnaround, and not just China.
“There are signs, though, that China is starting to turn the corner and I don’t think we should forget the Chinese government’s ability to step in and try and stabilise things if they need to,” he said.
“But it’s a vicious circle because growth is dependent on emerging markets and emerging markets depend on commodities.”
mkassem@thenational.ae
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Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
MATCH INFO
Quarter-finals
Saturday (all times UAE)
England v Australia, 11.15am
New Zealand v Ireland, 2.15pm
Sunday
Wales v France, 11.15am
Japan v South Africa, 2.15pm
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
THREE
%3Cp%3EDirector%3A%20Nayla%20Al%20Khaja%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Jefferson%20Hall%2C%20Faten%20Ahmed%2C%20Noura%20Alabed%2C%20Saud%20Alzarooni%3C%2Fp%3E%0A%3Cp%3ERating%3A%203.5%2F5%3C%2Fp%3E%0A
UAE currency: the story behind the money in your pockets
MATCH INFO
Azerbaijan 0
Wales 2 (Moore 10', Wilson 34')
HIJRA
Starring: Lamar Faden, Khairiah Nathmy, Nawaf Al-Dhufairy
Director: Shahad Ameen
Rating: 3/5
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Teams
India (playing XI): Virat Kohli (c), Ajinkya Rahane, Rohit Sharma, Mayank Agarwal, Cheteshwar Pujara, Hanuma Vihari, Ravichandran Ashwin, Ravindra Jadeja, Wriddhiman Saha (wk), Ishant Sharma, Mohammed Shami
South Africa (squad): Faf du Plessis (c), Temba Bavuma, Theunis de Bruyn, Quinton de Kock, Dean Elgar, Zubayr Hamza, Keshav Maharaj, Aiden Markram, Senuran Muthusamy, Lungi Ngidi, Anrich Nortje, Vernon Philander, Dane Piedt, Kagiso Rabada, Rudi Second
Specs
Engine: Duel electric motors
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Price: On request
More from Neighbourhood Watch:
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Mohammed bin Zayed Majlis
Scoreline
UAE 2-1 Saudi Arabia
UAE Mabkhout 21’, Khalil 59’
Saudi Al Abed (pen) 20’
Man of the match Ahmed Khalil (UAE)
