5 commodity lessons already learnt in 2013 – Barclays

The bank looks at everything from weather and shale gas to the likelihood that gold may struggle in 2013.

We are not even halfway through January and the mining sector has already produced a number of big stories.

Anglo American has a new CEO at the expense of AngloGold Ashanti; unrest in South Africa’s mining sector continues with the stoppages at Harmony Gold’s Kusasalethu mine; debates around the  minting of a $1 trillion platinum coin have raised heart rates and, in the US a 20 uranium mining ban is being challenged.

Amid all of these stories as well as hopes that there is a nascent recovery on the cards among junior stocks, Barclays has put out a list of five things it has already learnt this year that are likely to continue to affect commodity markets:

The first of these lessons, according to Barclays, is that investors remain extremely cautious about commodity risk.

The bank explains, “Commodities have been the worst performing asset since QE3 and although the FOMC minutes crimped risk appetite across the board, commodities were hit hardest. In the year to date the DJUBSCI is down 0.5%%, whilst the Dow Jones Industrials index is up almost 3%.

The second thing to remember, for Barclays, is that gold may continue to struggle, at least in the short term.

According to Barclays, the precious metal failed to benefit from concerns about the fiscal cliff and suffered the brunt of changing sentiment that met the latest set of FOMC minutes.

According to Barclays, “With the tide likely to turn this year in terms of central bank infusions of liquidity, the debate about whether 2013 will mark the end of gold’s 12-year bull market is likely to intensify.”

Thirdly, the bank says it is important to understand that China’s recovery will differ widely in its impact on different commodities.

While early data, the bank points out, has confirmed that the Asian giant’s economy is expanding modestly, “this week’s preliminary trade data for December showed a big gap between China’s imports of copper, which fell sharply, and its imports of crude oil, iron ore and soybeans, which all rose.”

It adds, “In recent years copper has become the commodity most influenced by China’s growth cycle, but this year that link looks like loosening, primarily because copper has lagged behind the destocking process that has helped demand for many other commodities to recover.

The fourth lesson espoused by the bank is that, growth in US shale oil will continue to capture the headlines. And, finally, in fifth place, the bank writes, weather risks look like staying high.

“After last year’s heat inspired price spikes in US natural gas, grains and soybeans, early patterns suggest little respite from global weather extremes in 2013,” it says.

And, it points out, “With grains inventories, especially corn, depleted following last year’s shortfalls, agricultural commodities are far more vulnerable to supply losses than at the start of 2012.”

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