commodities monthly: little change short term, up long term

7/30/2019 Commodities Monthly: Little change short term, up long term

1/20

Commodities MonthlyGlobal Economy Cold Middle East Hot 20 NOVEMBER 2012


2/20

2

Commodities Monthly

Global Economy Cold Middle East Hot

GENERAL 0-3 M 4-6 M 7-12 M The global economy looks set to muddle through 2013 with

limited growth potential but decreasing downside risks.

Despite continuing positive US trends a probable soft fiscalcliff will limit growth potential.

The Chinese development has been on the positive side latelybut we expect only careful stimulus measures to support it.

Most likely Euro-zone growth will remain around zero with stillrestricted credit flows. Austerity measures will continue but bemore moderate.

ENERGY 0-3 M 4-6 M7-12 M The IEA World Energy Outlook 2012 was clearly bullish on

future US supply from tight oil deposits.

Despite several downgrades, the IEA still expects persistentstrong global oil demand and continued substantial growth

going forward, ensuring a relatively tight market balance. Meanwhile the geopolitical temperature in the Middle East

continues to rise, with the current Israeli-Palestinian conflictthe latest example. Geopolitical upside risk remains high.

INDUSTRIAL METALS 0-3 M4-6 M7-12 M As expected, the post-summer rally in industrial metals prices

was short-lived, with Chinese economic headwinds andpolitical uncertainty hardly supportive.

Our opportunistic tactical recommendation to sell on ralliesand buy near the bottom of the range (to some extent set bymarginal production costs) remains.

Our strategic view is mildly bullish as a modest acceleration in

global growth still appears the most probable scenario for nextyear, with Chinas new political leaders likely to promotestability.

PRECIOUS METALS 0-3 M4-6 M7-12 M Positive factors still dominate the gold market. However, due

to the metals surprisingly poor performance following theQE3 announcement we revise our Q4-12 average priceforecast down $50/ozt to $1750/ozt.

Gold and silver coin sales are showing signs of recovery, whilephysical ETF sales remain strong, suggesting the retail marketis becoming increasingly concerned at the rate at whichmoney is being printed.

Johnson Matthey currently forecasts significant platinum andpalladium deficits in 2012 and expects tight markets next year.

AGRICULTURE 0-3 M4-6 M7-12 M El Nio risk this winter has decreased further with neutral

conditions currently the most likely scenario according to theNOAA, reducing meteorological risks going forward.

The knot in the grain market is slowly beginning to unravelthough potential FSU protectionism, low inventories duringthe intercrop season and local drought conditions remain atleast short-term supportive. Still, risk is skewed to thedownside and our long term forecast outright bearish.

US winter precipitation will be very important given current dry

conditions in the Midwest and Great Plains.

Arrows indicate the expected price action during the period in question.

THE NEXT COMMODITIES MONTHLY WILL BE PUBLISHED IN MID-JANUARY

(price indices, weekly closing, January 2010 = 100)

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jan-10

feb-10

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m

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m

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aug-11

sep-11

okt-11

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jan-12

feb-12

mar-12

apr-12

m

aj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

Industrial Metals

Precious MetalsEnergy

Agriculture

(MSCI World, UBS Bloomberg CMCI price indices)

-6

-4

-2

0

2

4

6

8

10

12

Equities

Commodities

Energy

Industrial

metals

Precious

metals

Agriculture

YTD (%) M/M (%)

(%)

-14

-12

-10

-8

-6

-4

-2

0

2

46

8

10

12

CO2(EUA)

Coffe(Ar.)

Soybeans

Heat.oil(US)

CopperWTI

Nickel

BrentTin

Sugar

Platinum

Gasoline(US)

Steelbillets

Cotton

PalladiumSilver

GoldCorn

Power(Nordic)

Wheat

Power(Cont.)

AluminiumZinc

Cocoa(US)

Lead

Nat.gas(US)

Chart Sources: Bloomberg, SEB Commodity Research


3/20

3

Commodities Monthly

General

While increased tension in the Middle East couldadversely affect the oil market sending priceshigher, commodities are currently depressed by

weak global macroeconomic conditions.Consequently, barring disruption of the oil marketwe expect no major upturn in commodities pricesnear-term. While China may announce unexpectedstimulus measures, its politicians have so faravoided aggressive stimulus, opting instead toprovide a substantial liquidity boost in a formateasily reversible if inflation moves higher or thelocal housing market turns upward.

It is becoming increasingly clear that the generaleconomic outlook for 2013 suggests a global economymuddling through. Despite encouraging signs in both

the US and China, we forecast little growth in Europeoverall. Moreover, we expect the upcoming US fiscal cliffto impact, albeit much less than it might have done. Webelieve further austerity measures will continue torestrict European growth, also to a smaller extent thanmany might have feared, with the ECB policy mandatingwhatever it takes enabling European policymakers toease the squeeze in 2013, compared to 2012.

Over the past month, global markets have found little tocelebrate despite the end to uncertainties surround boththe US elections and Chinas political transition. Instead,

concerns regarding the potential threat posed by theimpending US fiscal cliff have hit markets with fullforce with the current indeterminate outcome to talksintended to resolve the crisis likely to depress Q4-12 USbusiness investments. Clearly, the issue createsenormous uncertainty regarding US macroeconomicprospects for next year. Since our last report both US andChinese equities have fallen almost 5% whilecommodities have decreased by only less than 2%,largely in line with the gain in the US dollar index.Hurricane Sandy created considerable volatility forenergy markets with oil and oil product prices movingboth higher and lower during the period to end largelyunchanged. Further, precious metals have remainedrange-bound over the past month, eventually edgingonly slightly higher. Significantly, industrial metals pricesdeclined only 1.3% during the same period taking littlenotice of the more substantial 4.5% fall in Chineseequities. Concurrently, the worst performer overall wasthe Agricultural sector which dropped 5.6% on easingmarket fundamentals.

(price index, weekly closing)

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

15001600

1700

1800

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(monthly, PMIs >50 expansive)

30

35

40

45

50

55

60

65

2005

2006

2007

2008

2009

2010

2011

2012

(monthly, 100 corresponds to long term trend growth in industrial production)

93

94

95

96

97

98

99

100

101

102

103

104

2005

2006

2007

2008

2009

2010

2011

2012

China

Eurozone

OECD

USAReference



4/20

4

Commodities Monthly

Crude oil

Since being first announced in July 2011, the IEAs 2012global oil demand estimate has been successivelyrevised 1.4 mb/d lower. Given current high

macroeconomic headwinds and/or uncertaintiesaffecting all major regional markets, it is hard toimagine the situation changing any time soon. Inaddition, expected long-term supply continues toincrease as tight US oil production still exceedsexpectations. Taking mainly these factors into accountwe recently lowered our Brent crude oil price forecastwith risk skewed to the downside. Still, we continue toanticipate record high global oil consumption in 2012while marginal unconventional barrels remainexpensive to produce, middle distillate marketscontinue tight, geopolitical risk is extraordinarily high,and oil producers retain strong incentives to defend

prices. Given all these factors, a deep, prolongeddownturn in the oil market appears neither imminentnor likely in the medium-term unless the risk of aglobal recession increases significantly.

While most recent data suggest the oil market was relativelybalanced in Q3-12 there appears to be an oversupply of

around 1 mb/d in this quarter, partly due to lowerconsumption as a result of Hurricane Sandy and

reactivation of North Sea production followingmaintenance. Overall, current OECD industry oil stocks arewell above their five year average due to high North

American and Asian crude oil stocks. Conversely, global oil

product stocks are below normal.

The International Energy Agencys (IEA) World EnergyOutlook for 2012 appeared optimistic regarding tight US oil

production, which it now expects to increase fromapproximately 1 mb/d in 2011 to above 4 mb/d by the mid-

2020s. As a result, the US may replace Saudi Arabia as theworlds largest oil producer by around 2020 and become

virtually energy self-sufficient by the mid-2030s.Furthermore, North America could become a net exporteraround 2030. However, considering the novelty of tight oil

production considerable uncertainty still surrounds theseprojections, e.g. regarding non-US potential and the life

span of such resources.

Geopolitical conditions in the MENA region continue to

deteriorate, Gaza being the latest example. The civil war inSyria is increasingly impacting surrounding countries, e.g.

with grenades being exchanged between Turkey and Israeland significant public unrest in Lebanon. Iran haschallenged both the US and Saudi Arabia by firing at a US

UAV, harassing Saudi tanker traffic and potentially violatingSaudi airspace. Other conflicts remain unresolved and could

revive at any time even though attention is currentlyfocused elsewhere, e.g. Egypt and Bahrain. In addition,Yemens export pipeline (110 kb/d) has once again been

blown up after several months of repairs, eliminating muchneeded funding for the countrys transitional government.

(NYMEX/ICE, $/b, front month, weekly closing)

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

NYMEXWTI

ICE Brent

(DOE, mb, weekly data)

315

320

325

330

335

340345

350

355

360

365

370

375

380

385

390

j f m a m j j a s o n d

2007-2011 avg.

2011

2012


2012

(mb/d)

Revision

(kb/d)

2013

(mb/d)

Revision

(kb/d)IEA 89.6 -80 90.4 -70EIA 89.05 -40 89.94 -70

OPEC 88.80 -10 89.57 -20

($/b) Q1 Q2 Q3 Q4 FullYear

2012 - - - 110 111.72013 105 105 110 110 107.52014 - - - - 110.02015 - - - - 115.0


5/20

5

Commodities Monthly

Energy

(NYMEX, $/b) (ICE, $/b)

85

8687

88

89

9091

92

93

9495

96

9798

99

100

101

jan-13

apr-13

jul-13

okt-13

jan-14

apr-14

jul-14

okt-14

jan-15

apr-15

jul-15

okt-15

jan-16

apr-16

jul-16

okt-16

jan-17

12-09-14

12-10-16

12-11-16

919293949596979899

100101102103104105106107108109110111112113114115116117118

jan-13

apr-13

jul-13

okt-13

jan-14

apr-14

jul-14

okt-14

jan-15

apr-15

jul-15

okt-15

jan-16

apr-16

jul-16

okt-16

jan-17

apr-17

12-09-14

12-10-16

12-11-16

(NYMEX, /gal, front month, weekly closing) (DOE, mb, weekly data)

50

100

150

200

250

300

350

400

450

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

NYMEXGasoline

NYMEXHeating oil

110

120

130

140

150

160

170

180

190

200

210

220

230

240

250

j f m a m j j a s o n d

Gasoline 2007-2011 avg.

Gasoline 2012

Distillate fuel oil 2007-2011 avg.

Distillate fuel oil 2012

(NYMEX, $/MMBtu, front month, weekly closing) (NYMEX, $/MMBtu)

1

2

3

4

5

6

7

8

9

10

11

1213

14

15

2

002

2

003

2

004

2

005

2

006

2

007

2

008

2

009

2

010

2

011

2

012

2,75

3,00

3,25

3,50

3,75

4,00

4,25

4,50

4,75

5,00

nov-12

m

ar-13

jul-13

nov-13

m

ar-14

jul-14

nov-14

m

ar-15

jul-15

nov-15

m

ar-16

jul-16

nov-16

12-09-14

12-10-16

12-11-16



6/20

6

Commodities Monthly

Nordic power

The Nordic Power market remains largely unchangedcompared to last month with wet and unsettled weather,a large hydro balance surplus, reservoir levels well above

normal and no major disturbances either in transmissionor production systems. Regional nuclear power plantsare operating with 95% availability while spot pricesremain very stable. The system spot price has increasedsignificantly compared to September, mainly due to theseasonal effect of falling temperatures. The spotaveraged EUR 34.75/MWh in October, up EUR 9.37/MWhfrom September.

On the forward curve only minor changes have occurredin recent months. Cal-13 has traded between EUR 36.5-38.5/MWh since the beginning of September while Q1-13has remained between EUR 40-44/MWh since April totrade currently near the bottom of its range. Givencurrent fundamentals, we see a probable high winterpremium in the Q1-13 contract. We expect the spot priceto deliver well below EUR 40/MWh. However, based onrecent winters, we see little downside until the contractgoes into delivery.

Coal, CO2 and continental power prices provide littlesupport for the Nordic power market. The front yearGerman power contract hit a new record low at thebeginning of November following the same pattern asEuropean coal prices. Those for CO2 were also trading at

a three month low at the time of writing with the Dec-12contract at EUR 7/ton. Weak macroeconomic sentimentand the on-going transition of the German power marketare exerting pressure on coal, CO2 and power prices.Germany continues to expand renewable powerproduction massively through the installation of windand solar plants.

Going forward we see no signs of a trend in anydirection from current low levels. With winterapproaching, the overall situation appears sounderthan in recent years. The only upside price risk is the

possibility of a longer cold spell potentially causingprice spikes in the spot market.

(by Mats Forsell and Mats Hedberg, Commodities Trading)

(Nord Pool, /MWh, front quarter, weekly closing)

20

25

30

35

40

45

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55

60

65

70

75

80

2006

2007

2008

2009

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2011

2012

(EEX, /MWh, front quarter, weekly closing)

20

25

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35

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45

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55

60

65

70

75

80

85

90

95

2006

2007

2008

2009

2010

2011

2012

(ECX ICE, /t, Dec. 12, weekly closing)

5

10

15

20

25

30

35

2006

2007

2008

2009

2010

2011

2012



7/20

7

Commodities Monthly

Industrial metals

We have been rightly sceptical of both industrial metalrallies in 2012 and continue to recommend sellers takeadvantage of recoveries and buyers exploit

corrections. Since the Chinese economy shows fewconvincing signs of having been brought under control,it is difficult to be outright bullish towards industrialmetals, particularly given the lack of support fromother demand sources. Most of this autumnscorrection is, however, probably over. While ourtactical recommendation is still opportunistic ourstrategic view remains slightly bullish with the maineconomic scenario for 2013 a slight acceleration inglobal growth. Currently, however, forecast riskappears skewed to the downside. Taking into accountthe cushioning effect of marginal production costs, theindustrial metal sector still appears relatively attractive

within the commodities complex.

Chinese macroeconomic data have proved surprisinglystrong in recent weeks, suggesting conditions are

stabilizing, at least temporarily. However, given theextraordinary challenges facing the country in switchingfrom an investment- to domestic consumption driven

growth model, it is far too early to say whether the currenteconomic downturn has finally bottomed. As Chinas flawed

growth model was discussed openly during the nationalcongress it will be interesting to learn how the newleadership will approach it and whether it intends to start

out positively by announcing directed stimulus measures in

one form or another. The Chinese are however painfullyaware of the fact that there is no quick fix to currentproblems and that pumping more money into investmentswill only result in even higher excess capacity and more bad

debt. Recent data show export growth trending higher onceagain while import growth continues to slow, possibly

negative developments from a domestic consumptionperspective. Meanwhile, with the countrys infrastructure

project pipeline solid for several years, Chinese demand formetals is unlikely to collapse in the foreseeable future.

Regionally, the outlook for other consumer markets issimilar to China. Despite stronger than expected US

macroeconomic data since early September the so-calledfiscal cliff is fast approaching. Automatically or otherwise,spending has to be cut and/or revenues increased, a

scenario set to depress US growth prospects. In Europe,while markets have been less focused on the regions

sovereign debt crisis, an end to its recession still seems faroff particularly with signs suggesting even the Germaneconomy is decelerating. In other words, a significant

recovery in metal demand still seems a long way off in allmajor regional markets. On the other hand, new capacity

investment plans are also being scaled back, resulting in abetter market balance than would otherwise have been thecase.

(weekly closing)

900110013001500170019002100230025002700290031003300350037003900

4100430045004700

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(LME, indexed, weekly closing, January 2010 = 100)

60

70

80

90100

110

120

130

140

150

160

170

180

190

200

jan-10

feb-10

mar-10

apr-10

maj-10

jun-10

jul-10

aug-10

sep-10

okt-10

nov-10

dec-10

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

Copper

Nickel

AluminiumZinc

LeadTin

(LME)

-27.3-10

-8-6-4-202

46

81012

1416

182022

Aluminium

Copper

Nickel

Zinc

Lead Ti

n

Steel

Price (%)

Inventories (%)



8/20

8

Commodities Monthly

Industrial metals

(weekly data)

LME aluminium inventories are near record highs whiletheir SHFE counterparts continue to rise. Anecdotal

evidence also suggests Chinese producer stocks have hitall-time highs.

These developments reflect the combination of nearrecord high end-Q3 global and Chinese production andcontinued weak worldwide growth.

Meanwhile, physical premiums remain strong with stillvery long queues to remove aluminium fromwarehouses. Cancelled warrants total 36%.

Despite oversupply looking likely to continue for severalyears, current prices are supported by presentproduction costs and an optimistic consensus viewregarding the potential for demand growth.

0

500000

1000000

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2750

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3250

3500LME inventoris (t, left axis)

LME price ($/t, right axis)

(weekly data)

The ICSG reported a seasonally adjusted copper marketdeficit of 333 kt during the first seven months of thisyear. Mine supply increased 2.5% to 9,339 kt, refinedproduction 2.2% to 11,448 kt and refined consumption6.2% to 11,971 kt.

In late October, COMEX speculators became bearishonce again with long positions decreasing sharply.

Chinese copper import demand remains strong though

well below record highs posted earlier this year. Currently, both LME and SHFE copper stocks are tending

to increase with anecdotal evidence still suggesting veryhigh Chinese bonded warehouse inventories.

Although the copper market may turn bullish very quicklyif demand picks up, with prices well above marginalproduction costs we see substantial downside ifheadwinds intensify substantially.

0

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(weekly data)

With the Indonesian government taking a softer line onnickel ore exports, shipments to China may recover,boosting local production and further exacerbatingcurrent oversupply.

Meanwhile, LME nickel inventories continue to increase,as they have since late 2011 with a new post-2010 highfast approaching. This is hardly surprising with recordstrong global and Chinese production reported duringlate Q3-12.

The latest indications suggest HPAL projects continue tounderperform, confusing the future supply situation.This together with high marginal production costsrelative to prices so far limits downside risk.

0

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5000055000





9/20

9

Commodities Monthly

Industrial metals

(weekly data)

After tending to decrease slightly during late summer,zinc inventories rose sharply throughout October and are

now not far from the mid-1990s all time high. However, after correcting in October, prices appear well

supported having dug into the marginal production costcurve. So far, zinc is the only major industrial metal tohave rebound substantially after the latest slump.

Further, zinc prices are supported both by currentproduction costs, future supply uncertainties, and fairlysolid Chinese zinc demand. However, if prices rise wewould expect present substantial idle smelting capacityto be brought back online, limiting upside potential.

0

100000

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500

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(by Maximilian Brodin, Commodities Sales)

(weekly data)

Since bottoming in early September the Chinese iron oreprice has increased by over 40% due to mills restockingahead of the winter and strong steel production tosupply the construction sector.

Over the last five weeks Chinese steel prices have fallenback with industry sources reporting mills buying smallervolumes from port stocks below deep sea market prices.

Turkish scrap prices have been pushed higher followingsolid buying and limited US East Coast supplies due to

Hurricane Sandy. However, since the recent US hurricane-related

disruption, Turkish mills report decreasing margins andadditional scrap supplies. Consequently, we forecast thatTurkish scrap prices will fall back below $400/t. Colderweather will halt construction in China and slow demandfor steel and iron ore, weighing on prices short term.

0

10000

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nov-08

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mar-11

jul-11

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mar-12

jul-12

200

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(weekly data) (weekly data)

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33000





10/20

10

Commodities Monthly

Industrial metals

(LME, $/t) (LME, $/t)

1900

1950

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

nov-12

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

12-09-14

12-10-16

12-11-16

7500

7600

7700

7800

7900

8000

8100

8200

8300

8400

nov-12

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

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feb-15

maj-15

aug-15

nov-15

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maj-16

aug-16

nov-16

12-09-14

12-10-16

12-11-16

(LME, $/t) (LME, $/t)

15800

16000

1620016400

16600

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17000

17200

17400

17600

17800

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18200

nov-12

feb-13

maj-13

aug-13

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maj-14

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maj-15

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maj-16

aug-16

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12-09-14

12-10-16

12-11-16

1850

1900

1950

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nov-12

feb-13

maj-13

aug-13

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maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

12-09-14

12-10-1612-11-16

(LME, $/t) (LME, $/t)

2100

2125

2150

2175

2200

2225

2250

2275

2300

2325

2350

nov-12

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

12-09-1412-10-16

12-11-16

20250

20500

20750

21000

21250

21500

21750

22000

nov-12

dec-12

jan-13

feb-13

mar-13

apr-13

maj-13

jun-13

jul-13

aug-13

sep-13

okt-13

nov-13

dec-13

jan-14

12-09-14

12-10-16

12-11-16



11/20

11

Commodities Monthly

Precious metals

Given current circumstances, gold continues toperform poorly. The present year-long consolidationhas been the longest since its bull market began in theearly 2000s. However, price bullish factors stillsignificantly outnumber bearish. Further, gold is alsotactically attractive compared to many othercommodities. Provided liquidity settings remaingenerous, growth expectations muted and systemicrisks present, we expect prices to remain high. Fornow, strong risk aversion poses the biggest threat withgold unlikely to perform resiliently. Potentialheadwinds also include possible USD appreciation ifUS politicians find a sensible debt solution whichavoids the worst fiscal cliff scenarios. Conversely,this particular factor may also prove a supportivefactor if they fail to do so. Increasing inflationexpectations, the most obvious major potential bullishcatalyst, are hardly likely at present but may becomean issue next year. Due to the surprisingly mutedreaction to the launch of the open-ended QE3 programwe lower our Q4-12 average gold price forecast from$1800/ozt to $1750/ozt while reiterating our 2013projections (Q1: $1800/ozt, Q2: $1750/ozt, H2:$1700/ozt).

After showing signs of weakness in Q2-12 gold demandappears to have picked up once again in Q3-12 according todata compiled by the World Gold Council (WGC). With

jewellery demand remaining muted due to high prices, thepopularity of physical gold ETFs and central bank buying

provides overall support. Meanwhile, speculative longpositions remain high and short low, suggesting speculatorsgenerally share our view that risk is skewed to the upside in

the current market environment. Lately, US Mint gold (andsilver) coin sales (a good indicator of retail interest) have

recently recovered slightly, possibly indicating morewidespread concerns regarding the rate at which the Fed is

once again printing new money. We note that from a purelytechnical perspective, the gold price has moved in textbookmania fashion over the past decade suggesting the biggest

price downside lies just ahead of us.

Johnson Matthey, the leading authority on platinum groupmetals, has published a new interim review which includesbullish forecasts for both platinum and palladium. Currently,

the company projects major platinum and palladium marketdeficits this year, largely due to the strike in South Africa but

also other factors. The supply outlook for 2013 appearsgloomy which may prove problematic if the global recoverywere to gather momentum. Overall, from a fundamental

perspective, we recommend palladium and platinum aheadof gold and silver next year, though we recall both markets

are very small and unpredictable compared to gold.

(COMEX/NYMEX, indexed, weekly closing, January 2010 = 100)

8090

100110120130140150160170180190200210220230240250260270280290

jan-10

feb-10

mar-10

apr-10

maj-10

jun-10

jul-10

aug-10

sep-10

okt-10

nov-10

dec-10

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

SilverPlatinum

Gold

Palladium

(front month, weekly closing)

30

34

38

42

46

50

54

58

62

66

70

74

78

82

86

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

GOLD EUR JPY GBP SEK RUB NOK CHF

YTD (%) MoM (%)



12/20

12

Commodities Monthly

Precious metals

(COMEX, $/ozt, front month, weekly closing)

Physical gold ETF holdings have continued to print newrecord highs, recently passing above 2,600 tonnes.

Speculative net long positions in COMEX gold relative toopen interest remain at the upper end of their 10-yearhistoric range with very few speculators holding shortpositions.

After trailing 2011 during the first nine months of thisyear, US Mint gold coin sales rose 18% y/y in October.Moreover, by the middle of this month, they had alreadyexceeded those for the whole of November last year.

During both Q3 and 9M, gold mine supply was slightlybelow the same period last year at 731.6 tonnes vs. 739.5tonnes, and 2100.9 tonnes vs. 2107.7 tonnes,respectively, according to WGC data.

200

300400

500600

700800900

10001100

1200130014001500

16001700

180019002000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(COMEX, $/ozt, front month, weekly closing)

For the first time since April last year, physical silver ETFholdings hit a new all-time high of 18854 tonnes in mid-November.

Relative to open interest, net speculative long positionsin COMEX silver are high but not extreme compared totheir 10-year historic range.

After trailing 2011 during the first nine months of thisyear, US Mint silver coin sales increased 3% in October.

Furthermore, by the middle of this month, they hadalready exceeded those for the whole of November lastyear.

The current gold-to-silver ratio of 52.8 is largelyunchanged compared to a year ago with only relativelysmall fluctuations during the intervening period.

2468

101214161820

222426283032343638404244464850

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(NYMEX, $/ozt, front month, weekly closing)

In their latest review, Johnson Matthey forecast a 2012platinum market deficit of 400 kozt (total supply: 7,670

kozt), largely due to the South African labour conflict butalso weak recycling.

The company projects an even larger palladium deficit of915 kozt (total supply: 8,810 kozt), mainly due to lower thanexpected Russian supply but also the South African labour

dispute and weak recycling.

It shares our view that both platinum and palladiumbalances will remain strained in 2013, particularly if the

recovery gains momentum. Serious underinvestment inSouth African mining due to poor profitability has adversely

affected both metals while Russian supply is a majorconcern for palladium. 100

200

300

400

500

600

700

800

900

1000

1100

2

002

2

003

2

004

2

005

2

006

2

007

2

008

2

009

2

010

2

011

2

012

300

550

800

1050

1300

1550

1800

2050

2300Palladium (left axis)

Platinum (right axis)



13/20

13

Commodities Monthly

Precious metals

(COMEX, $/ozt) (COMEX, $/ozt)

1700

1725

1750

1775

1800

1825

1850

1875

1900

dec-12

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

mar-15

jun-15

sep-15

dec-15

mar-16

jun-16

sep-16

dec-16

mar-17

jun-17

sep-17

dec-17

mar-18

jun-18

12-09-14

12-10-16

12-11-16

32,0

32,5

33,0

33,5

34,0

34,5

35,0

dec-12

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

mar-15

jun-15

sep-15

dec-15

mar-16

jun-16

sep-16

dec-16

12-09-14

12-10-16

12-11-16

(NYMEX, $/ozt) (NYMEX, $/ozt)

620

630

640

650

660

670

680

690

700

710

dec-12

mar-13

jun-13

sep-13

dec-13

12-09-14

12-10-16

12-11-16

1540

1560

1580

1600

1620

1640

1660

1680

1700

1720

1740

jan-13

apr-13

jul-13

okt-13

jan-14

12-09-14

12-10-1612-11-16

(weekly data, tonnes) (weekly data, tonnes)

1400

1500

1600

1700

1800

1900

2000

2100

2200

2300

2400

2500

2600

jan-10

feb-10

mar-10

apr-10

maj-10

jun-10

jul-10

aug-10

sep-10

okt-10

nov-10

dec-10

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

Silver holdings / 10

Gold holdings

20

25

30

35

40

45

50

55

60

65

70

75

jan-10

feb-10

m

ar-10

apr-10

m

aj-10

jun-10

jul-10

a

ug-10

s

ep-10

okt-10

nov-10

d

ec-10

jan-11

feb-11

m

ar-11

apr-11

m

aj-11

jun-11

jul-11

a

ug-11

s

ep-11

okt-11

nov-11

d

ec-11

jan-12

feb-12

m

ar-12

apr-12

m

aj-12

jun-12

jul-12

a

ug-12

s

ep-12

okt-12

nov-12

Palladium holdings

Platinum holdings



14/20

14

Commodities Monthly

Agriculture

As expected, agricultural sector sentiment generallyhas been mainly bearish, particularly for grains. Onaverage grain prices have fallen to 2011 highs, whileremaining exceptionally strong. Most likely, sentimentwill continue largely negative. Though tacticallycautious due to some remaining weather related risksand protectionist event risk, strategically we areoutright bearish. With strong incentives to plant andprobably more normal weather conditions goingforward prices appear unlikely to remain high in themedium- to long term, a view supported by the factthat net speculative CBOT positions have rolled overwith speculators now decreasing long and increasingshort bets. With northern hemisphere crops enteringtheir dormant period, the biggest concern is that lowsoil moisture levels, particularly in the US, could leavethem more vulnerable to dry spells during the springand summer. Consequently, it will be important tomonitor winter precipitation.

The northern hemisphere autumn harvest is nearly overwith production estimates now facts. Following significantdownward revisions over the summer the pendulum has

swung backward in recent months. Consequently, the grainmarket knot has loosened slightly. Meanwhile, the soybean

situation, particularly, has changed significantly with theinter-crop period now apparently manageable followingconsecutive upward inventory revisions. Meanwhile the

northern hemisphere corn and soybean harvests havealmost finished while South American planting progresses.

Corn inventories are very tight heading into the inter-cropperiod. However, cheaper sugar cane ethanol imports to theUS should relieve some pressure from ethanol use. Locally

dry crop conditions and pending FSU export restrictionssupport wheat prices relative to those of other grains.

Ukrainian exports will almost certainly be restricted thiswinter, formally or otherwise, while Russia may follow suit

with little warning. Considering these risks are alreadylargely discounted and given relatively comfortableinventory levels, we expect rallies triggered by export

restrictions to be relatively short lived.

According to the NOAA there is currently only a small riskthat a full-blown El Nio event will develop going forward.ENSO (El Nio Southern Oscillation) indicators have been

neutral or indicated weak El Nio conditions this autumnalthough it now appears more likely they will be neutral

throughout the northern hemisphere winter. We regard thisas a very welcome development as it reduces the risk ofdisturbances in global weather patterns. While the inner

workings of ENSO are far from being fully understood,deviations from normal conditions are more likely to

negative impact global crop production despite beinglocally beneficial from time to time.

(CBOT, indexed, weekly closing, January 2010 = 100)

70

80

90

100

110

120

130

140

150

160

170

180

190

200

jan-10

feb-10

mar-10

apr-10

maj-10

jun-10

jul-10

aug-10

sep-10

okt-10

nov-10

dec-10

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

Wheat

Soybeans

Corn

(WASDE, yearly data updated monthly)

45

55

65

75

85

95

105

115

125

135

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

Wheat

Soybeans

Corn

(WASDE, monthly data, %, 2012/2013)

-14-13-12-11-10-9-8-7-6-5-4-3-2-10123456789

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

Corn productionCorn stocksWheat production

Wheat stocksSoybean productionSoybean stocks

Chart Sources: Bloomberg, USDA, SEB Commodity Research


15/20

15

Commodities Monthly

Agriculture

(CBOT, /bu, front month, weekly closing)

Net speculative long positions in CBOT corn havetrended lower for the past three months, driven mainly

by decreasing numbers of longs but also by an increasingnumbers of shorts.

US ethanol producers remain profitable (albeit only just)due to high fuel prices. Domestic production continuesto fall back while imports of cheaper sugar cane ethanolare sky-rocketing to post-2008 highs as Brazilianproduction reaches its seasonal high.

Northern hemisphere planting is largely over whilesouthern hemisphere planting progresses well undersatisfactory conditions.

As expected, the EPA rejected the request to temporarilysuspend the US ethanol mandate to ease pressure on thecorn market.

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012


CBOT net long speculative positions in wheat continueto decrease, mainly as the result of a decline in longpositions. Short positions remain stable at the lower endof the five year range.

While winter wheat planting in the northern hemisphereends and crops become dormant, the Australian harvestis about to pick up speed. So far worries about a furtherdeterioration in weather conditions have proved

unjustified. US winter wheat crops have been planted. However,

early shoots face tough growing conditions leaving thecrops overall state so far worse than last year. However,plenty of time remains for improvement.

200

300

400

500

600

700

800

900

1000

1100

1200

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012


Unlike corn and wheat, net speculative longs in CBOTsoybeans have rebounded slightly, probably due to

sharply lower prices opening up for temporary rebounds. While the US soybean harvest is finishing South

American planting is progressing well.

Chinese customs authorities report soybean importsremain sound despite adverse local economicconditions.

The oil-to-bean ratio appears to be rebounding slightlyfrom or at least stabilizing at an exceptionally low levelafter soybean oil prices were depressed by collapsingpalm oil prices.

Meal prices have begun to stabilize after rallying onstrong feed demand during H1-12.

400

600

800

1000

1200

1400

1600

1800

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012



16/20

16

Commodities Monthly

Agriculture

(CBOT, /bu) (CBOT, /bu)

560

580

600

620

640

660

680

700

720

740760

780

800

dec-12

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

mar-15

jun-15

sep-15

dec-15

12-09-14

12-10-16

12-11-16

790

800

810

820

830

840

850

860

870

880

890

900

910

920

930

940

dec-12

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

12-09-14

12-10-16

12-11-16

(CBOT, /bu) (NYBOT, /lb)

1200

1250

1300

1350

1400

1450

1500

1550

1600

1650

1700

1750

jan-13

apr-13

jul-13

okt-13

jan-14

apr-14

jul-14

okt-14

jan-15

apr-15

jul-15

okt-15

12-09-14

12-10-16

12-11-16

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

34

36

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(NYBOT, /lb) (NYBOT, $/t)

20

40

60

80

100

120

140

160

180

200

220

2

002

2

003

2

004

2

005

2

006

2

007

2

008

2

009

2

010

2

011

2

012

1200

1400

1600

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

3800

2

002

2

003

2

004

2

005

2

006

2

007

2

008

2

009

2

010

2

011

2

012



17/20

17

Commodities Monthly

Commodity related economic indicatorsEUROZONE Current Date Previous Date NextIndustrial production (%, YoY) -2,3 2012-09-30 -1,3 2012-08-31 2012-12-12

Industrial production (%, MoM) -2,5 2012-09-30 0,9 2012-08-31 2012-12-12

Capacity utilization (%, sa) 76,8 2012-12-31 77,9 2012-09-30

Manufacturing PMI 45,4 2012-10-31 46,1 2012-09-30 2012-11-22

Real GDP (%, YoY) -0,6 2012-09-30 -0,4 2012-06-30 2012-12-06

Real GDP (%, QoQ, sa) -0,1 2012-09-30 -0,2 2012-06-30 2012-12-06

CPI (%, YoY) 2,5 2012-10-31 2,6 2012-09-30 2012-12-14

CPI (%, MoM) 0,2 2012-10-31 0,7 2012-09-30 2012-12-14

Consumer confidence -25,7 2012-10-31 -25,9 2012-09-30 2012-11-22

USA

Industrial production (%, YoY) 1,7 2012-10-31 2,8 2012-09-30

Industrial production (%, MoM) -0,4 2012-10-31 0,2 2012-09-30 2012-12-14

Capacity utilization (%) 77,8 2012-10-31 78,2 2012-09-30 2012-12-14


Real GDP (%, YoY) 2,3 2012-09-30 2,1 2012-06-30

Real GDP (%, QoQ, saar) 2,0 2012-09-30 1,3 2012-06-30 2012-11-29

CPI (%, MoM) 2,2 2012-10-31 2,0 2012-09-30 2012-12-14

CPI (%, MoM, sa) 0,1 2012-10-31 0,6 2012-09-30 2012-12-14

OECD Composite Leading Indicator 103,4 2011-03-31 103,1 2011-02-28Consumer confidence (Michigan) 84,9 2012-11-30 82,6 2012-10-31 2012-11-21

Nonfarm payrolls (net change, sa, 000) 171 2012-10-31 148 2012-09-30 2012-12-07

JAPAN

Industrial production (%, YoY, nsa) -8,1 2012-09-30 -4,6 2012-08-31 2012-11-30

Industrial production (%, MoM, sa) -4,1 2012-09-30 -1,6 2012-08-31 2012-11-30

Capacity utilization (%, sa) 81,1 2012-09-30 85,8 2012-08-31


Real GDP (%, YoY) 0,1 2012-09-30 3,3 2012-06-30

Real GDP (%, QoQ, sa) -0,9 2012-09-30 0,1 2012-06-30 2012-12-10

CPI (%, YoY) -0,8 2012-10-31 -0,7 2012-09-30 2012-11-30

CPI (%, MoM) 0,2 2012-09-30 0,1 2012-08-31

OECD Composite Leading Indicator 104,9 2011-02-28 104,2 2011-01-31

Consumer confidence 39,8 2012-10-31 40,4 2012-09-30

CHINAIndustrial production (%, YoY) 9,6 2012-10-31 9,2 2012-09-30 2012-12-09


Real GDP (%, YoY) 7,4 2012-09-30 7,6 2012-06-30 2013-01-18

CPI (%, YoY) 1,7 2012-10-31 1,9 2012-09-30 2012-12-09

OECD Composite Leading Indicator 102,3 2011-03-31 102,1 2011-02-28

Consumer confidence 106,1 2012-10-31 100,8 2012-09-30

Bank lending (%, YoY) 15,9 2012-10-31 16,3 2012-09-30

Fixed asset investment (%, YoY) 20,5 2012-09-30 20,4 2012-06-30

OTHER

OECD Area Comp. Leading Indicator 103,2 2011-03-31 103,0 2011-02-28

Global manufacturing PMI 49,2 2012-10-31 48,8 2012-09-30

Sources: Bloomberg, SEB Commodity Research


18/20

18

Commodities Monthly

PerformanceClosing

last weekYTD(%)

1 m(%)

1 q(%)

1 y(%)

5 y(%)

UBS Bloomberg CMCI Index (TR) 1284,54 1,3 -3,6 -1,6 -2,4 2,0UBS Bloomberg CMCI Index (ER) 1207,25 1,2 -3,6 -1,6 -2,5 -0,3UBS Bloomberg CMCI Index (PI) 1549,08 1,9 -3,5 -1,5 -1,5 24,7UBS B. CMCI Energy Index (PI) 1493,17 0,1 -3,9 -2,7 -4,0 3,5UBS B. CMCI Industrial Metals Index (PI) 1033,59 -1,1 -3,7 4,1 -3,9 -8,0UBS B. CMCI Precious Metals Index (PI) 2555,27 10,5 -1,7 7,8 -3,4 113,6UBS B. CMCI Agriculture Index (PI) 1782,28 2,0 -4,0 -8,2 0,5 50,6Baltic Dry Index 1036,00 -42,3 5,6 43,9 -45,0 -90,5

Crude Oil (NYMEX, WTI, $/b) 86,67 -12,3 -5,9 -9,3 -15,5 -8,9Crude Oil (ICE, Brent, $/b) 108,95 1,5 -5,3 -6,8 -2,6 18,9Aluminum (LME, $/t) 1951,00 -3,4 -0,3 5,9 -9,6 -23,5Copper (LME, $/t) 7605,00 0,1 -6,4 2,1 -1,6 8,0Nickel (LME, $/t) 15960,00 -14,7 -5,7 2,8 -12,0 -48,9Zinc (LME, $/t) 1920,00 4,1 1,2 7,6 -2,0 -24,0Steel (LME, Mediterranean, $/t) 335,00 -36,8 -2,9 -14,1 -37,4 N/AGold (COMEX, $/ozt) 1714,70 9,4 -1,7 6,1 -3,4 117,9

Corn (CBOT, /bu) 727,00 12,5 -1,5 -8,9 13,1 91,6Wheat (CBOT, /bu) 838,00 28,4 -1,2 -2,8 35,9 11,8Soybeans (CBOT, /bu) 1383,25 15,4 -7,4 -16,5 16,5 28,3

Sources: Bloomberg, SEB Commodity Research

Major upcoming commodity eventsDate Source

Department of Energy, US inventory data Wednesdays, 16:30 CET www.eia.doe.gov

American Petroleum Institute, US inventory data Tuesdays, 22:30 CET www.api.org

CFTC, Commitment of Traders Fridays, ~21:30 CET www.cftc.gov

US Department of Agriculture, Crop Progress Mondays, ~22.30 CET (season) www.usda.gov

International Energy Agency, Oil Market Report December 12 www.oilmarketreport.com

OPEC, Oil Market Report December 11 www.opec.org

Department of Energy, Short Term Energy Outlook December 11 www.eia.doe.gov

US Department of Agriculture, WASDE December 11 www.usda.gov

International Grains Council, Grain Market Report November 29 www.igc.org.uk

OPEC ordinary meeting, Vienna, Austria December 12 www.opec.orgSources: Bloomberg, SEB Commodity Research

Contact listCOMMODITIES Position E-mail Phone MobileTorbjrn Iwarson Head of Commodities [email protected] +46 8 506 234 01

RESEARCH

Bjarne Schieldrop Chief analyst [email protected] +47 22 82 72 53 +47 92 48 92 30

Filip Petersson Strategist [email protected] +46 8 506 230 47 +46 70 996 08 84

SALES SWEDEN

Pr Melander Corporate [email protected] +46 8 506 234 75 +46 70 714 90 79

Karin Almgren Institutional [email protected] +46 8 506 230 51 +46 73 642 31 76SALES NORWAY

Maximilian Brodin Corporate/Institutional [email protected] +47 22 82 72 73 +47 92 45 67 27

SALES FINLAND

Jussi Lepist Corporate/Institutional [email protected] +358 9 616 285 21 +358 40 844 187 7

SALES DENMARK

Peter Lauridsen Corporate/Institutional [email protected] +45 331 777 34 +45 616 211 59

TRADING

Niclas Egmar Corporate/Institutional [email protected] +46 8 506 234 55 +46 70-618 560 4


19/20

19

Commodities Monthly

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This statement affects your rightsThis report has been compiled by SEBs Commodity Research, a division within Skandinaviska Enskilda Banken AB (publ) (SEB),

to provide background information only. It is confidential to the recipient, any dissemination, distribution, copying, or other use ofthis communication is strictly prohibited.

Good faith & limitationsOpinions, projections and estimates contained in this report represent the authors present opinion and are subject to changewithout notice. Although information contained in this report has been compiled in good faith from sources believed to be reliable,

no representation or warranty, expressed or implied, is made with respect to its correctness, completeness or accuracy of thecontents, and the information is not to be relied upon as authoritative. To the extent permitted by law, SEB accepts no liabilitywhatsoever for any direct or consequential loss arising from use of this document or its contents.

DisclosuresThe analysis and valuations, projections and forecasts contained in this report are based on a number of assumptions andestimates and are subject to contingencies and uncertainties; different assumptions could result in materially different results.The inclusion of any such valuations, projections and forecasts in this report should not be regarded as a representation or

warranty by or on behalf of the SEB Group or any person or entity within the SEB Group that such valuations, projections and

forecasts or their underlying assumptions and estimates will be met or realized. Past performance is not a reliable indicator offuture performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or relatedinvestment mentioned in this report. This document does not constitute investment advice and is being provided to you without

regard to your investment objectives or circumstances. Anyone considering taking actions based upon the content of thisdocument is urged to base investment decisions upon such investigations as they deem necessary. This document does notconstitute an offer or an invitation to make an offer, or solicitation of, any offer to subscribe for any securities or other financial

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Conflicts of InterestSEB has in place a Conflicts of Interest Policy designed, amongst other things, to promote the independence and objectivity ofreports produced by its Research departments, which are separated from the rest of SEB business areas by information barriers; as

such, research reports are independent and based solely on publicly available information. Your attention is drawn to the fact thata member of, or an entity associated with, SEB or its affiliates, officers, directors, employees or shareholders of such members (a)

may be represented on the board of directors or similar supervisory entity of the companies mentioned herein (b) may, to theextent permitted by law, have a position in the securities of (or options, warrants or rights with respect to, or interest in thesecurities of the companies mentioned herein or may make a market or act as principal in any transactions in such securities (c)

may, acting as principal or as agent, deal in investments in or with companies mentioned herein, and (d) may from time to timeprovide investment banking, underwriting or other services to, or solicit investment banking, underwriting or other business from

the companies mentioned herein.

RecipientsIn the UK, this report is directed at and is for distribution only to (I) persons who have professional experience in matters relatingto investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (The

Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred toas relevant persons. This report must not be acted on or relied upon by persons in the UK who are not relevant persons. In the

US, this report is distributed solely to persons who qualify as major U.S. institutional investors as defined in Rule 15a-6 under the

Securities and Exchange Act of 1934. U.S. persons wishing to effect transactions in any security discussed herein should do so bycontacting Skandinaviska Enskilda Banken AB (publ) (SEBAB). SEBAB accepts responsibility for the content of this report in

connection with its distribution in the US. The distribution of this document may be restricted in certain jurisdictions by law, andpersons into whose possession this documents comes should inform themselves about, and observe, any such restrictions.

The SEB Group: members, memberships and regulators

Skandinaviska Enskilda Banken AB (publ) is incorporated in Sweden, as a Limited Liability Company. It is regulated byFinansinspektionen, and by the local financial regulators in each of the jurisdictions in which it has branches or subsidiaries,including in the UK, by the Financial Services Authority; Denmark by Finanstilsynet; Finland by Finanssivalvonta; Germanyby Bundesanstalt fr Finanzdienstleistungsaufsicht and Norway by Finanstilsynet. In the US, SEBAB is a U.S. broker-dealer,registered with the Financial Industry Regulatory Authority (FINRA). SEBAB is a direct subsidiary of SEB. SEB is active onmajor Nordic and other European Regulated Markets and Multilateral Trading Facilities, in as well as other non-Europeanequivalent markets, for trading in financial instruments. For a list of execution venues of which SEB is a member or

participant, visit http://www.seb.se.


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www.seb.se

SEB Commodity Research

Bjarne Schieldrop, Chief Commodity [email protected]

+47 9248 9230

Filip Petersson, Commodity [email protected]

+46 8 506 230 47

commodities monthly: little change short term, up long term

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