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Energy & Commodities, 2010 03 12, pdf

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Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to …

Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.

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  • 1. Energy & Commodities Monthly newsletter from Swedbank’s Economic Research Department by Jörgen Kennemar No. 3 • 12 March 2010 Price drop in the commodity market • Swedbank’s total commodity price index fell by 3.6% in US dollars in February. Metal prices posted the largest decline, followed by food and energy. • Growing uncertainty about the strength of the global economy and the effects of China’s austerity package have led to volatile commodity prices. • Metal inventories continue to grow. The largest imbalances are in aluminium and nickel, where stocks are at historically high levels. Copper inventories have also risen, but the earthquake in Chile in late February has increased the risk of lower copper supplies. Swedbanks Commodity price index, USD 500 2000=100 450 400 350 300 Index Energy raw materials 250 Total index 200 Total index exclusive energy commodities 150 100 Food 50 00 01 02 03 04 05 06 07 08 09 10 Source: Swedbank Global commodity prices fell on a broad front in strikes at the largest mines in Brazil. At the same February, which contributed to a 3.6% decline time there are expectations that nickel consumption Swedbank’s total commodity price index in USD will increase due to strong steel production in compared with the previous month. In SEK prices China. dropped nearly 2%. Measured in euro, commodity prices rose by 0.6% due to the decline in the euro Prices of energy resources (oil and coal) dropped in against the dollar. February after posting a strong gain in January. Prices fell by an average of 3.5% in USD and have Industrial metals posted the weakest trend, with returned to the levels from December last year. The prices falling by an average of 7.3% in USD. This price of oil and coal also declined measured in was the first time since September 2009 that the SEK. From a 12-month perspective, however, price index for metals fell. The largest declines were Sweden's oil bill has grown considerably more for zinc and lead, by 11.5% and 10%, respectively, expensive, climbing nearly 50%. As a result, compared with January. A long period of price gains transport costs have risen significantly in the for copper came to an end, as was the case with Swedish economy in recent months after previously aluminium as well. The price of nickel rose, partly contributing negatively to the inflation rate. In due to production disruptions in connection with Economic Research Department. Swedbank AB. SE-105 34 Stockholm. Phone +46-8-5859 1000. E-mail: ek.sekr@swedbank.se www.swedbank.se Legally responsible publisher: Cecilia Hermansson. +46-8-5859 1588. Magnus Alvesson. +46-8-5859 3341. Jörgen Kennemar. +46-8-5859 1478.
  • 2. Energy & Commodities Monthly newsletter from Swedbank’s Economic Research Department, continued No. 3 • 12 March 2010 January and February transport prices rose by an materials for countries that buy them in other average of 7% on an annual basis. currencies. This means less consumption and lower prices. There is a co-variation between certain raw The improved global economy has not had as clear materials such as gold and the dollar. A further an impact on food prices. Since February of last appreciation in the dollar would therefore pressure year food prices have risen by 17% in Swedbank’s gold prices downward from today's high levels. In commodity price index. This is significantly weaker 2010 this co-variation has been less evident. than economically sensitive metal prices, which Increased uncertainty about the fiscal strength of have more than doubled in the last year. the EMU zone is certainly a factor why the price of gold remains high despite a stronger dollar. Food prices have been bifurcated. Grain prices are still under pressure from large inventories after last Increased supply of metals year's record harvests, and in February fell by 5% in USD. In SEK the price trend has been even more Metal inventories continue to rise, which could unfavourable for Swedish grain producers. Other eventually lead to lower prices, provided the global foods such as sugar, tea and cocoa prices have economy doesn't grow more than expected. trended in the opposite direction. Unfavourable Though global conditions have improved in recent weather conditions have led to lower production, months, it was from low levels. At the same time which has pushed prices to historically high levels. investment needs are limited, primarily in OECD Because of expectations that production will countries. The largest imbalances are in aluminium. increase this spring in several major food-producing Still, aluminium prices have risen by slightly over countries, including Brazil, sugar prices have 50% since February 2009. Copper inventories are dropped this month. also rising, and reached their highest level since February 2009, before China began building up its Increased volatility in commodity markets metal inventories. Although commodity prices fell on average in Aluminium price and stock level February, the market reported relatively large 5.0 3250 Stock level aluminium, left scale fluctuations. This is particularly true of metals and 4.5 3000 4.0 2750 oil, where prices have been volatile. This may be 3.5 Aluminium price, right scale 2500 Ton (metric) (millions) partly due to increased uncertainty about the global 3.0 2250 economy, especially how China's austerity USD 2.5 2000 measures will affect demand for raw materials and 2.0 1750 1500 input goods. The diminishing impact from the 1.5 1.0 1250 infrastructure investments China introduced on a 0.5 1000 wide scale in 2009 could lead to weaker raw 0.0 750 00 01 02 03 04 05 06 07 08 09 10 material demand in 2010. Since the Chinese Source: Reuters EcoWin economy accounts for a significant share of global commodity consumption, notably metals, there Chile is the world's largest copper producer, would be a sizable impact on the market if its accounting for over one third of global production. demand for raw materials were to grow slower than The devastating earthquake on February 27 has expected. Economic data from China will be increased uncertainty about future supplies. The especially important to monitor in the months ahead earthquake has not devastated the country's mining to see how effective austerity measures are. There industry as feared, however. Instead, disruptions to are as yet no clear signs from trade data that electricity distribution and damaged infrastructure China's growth rate has slowed. Its exports and (roads, railroads and ports) are what could lead to a imports both rose by slightly over 40% in February lower supply of copper, thereby affecting prices. compared with a year earlier. This has eased the Fears of limited copper supplies would presumably financial market’s concerns about lower Chinese mean higher copper prices. Strong trade numbers commodity demand, and instead prices turned from China further support the assumption that higher in the second half of February and early copper demand will remain strong. March. Strong oil consumption growth in Asia Currency fluctuations are another reason for price swings in commodity markets. Growing concern The fundamentals in the oil market have improved about the euro, in no small part due to the situation in recent quarters, but there is still a bifurcated in Greece and weak European economy, has driven picture: steadily growing oil consumption in the US dollar higher since December 2009. A emerging economies and continued weakness in stronger dollar means more expensive raw OECD countries. US oil inventories remain at 2 (4)
  • 3. Energy & Commodities Monthly newsletter from Swedbank’s Economic Research Department, continued No. 3 • 12 March 2010 historically high levels. Besides the fragile recovery and production rates that exceed oil consumption in the US and Europe, oil consumption is being held are holding down the price of oil. The OPEC in check by energy efficiency improvements and meeting on March 17 could provide guidance on advances in alternative energy sources. In production volumes. OPEC countries are struggling emerging economies, consumption of oil and oil with production levels above their targets, so we products will continue to steadily rose, and oil can expect pressure on members to turn down the consumption per capita remains far from current taps. At the same time the global economy rests on levels in OECD countries. shaky ground, so higher oil prices could jeopardise the recovery. Domestic political goals could also Global oil consumption growth, 2000=100 thwart production cutbacks, especially among oil 200 190 2000=100 producers that have been hard hit by the global 180 slowdown. The dollar is yet another uncertainty, at 170 least partly due to the fiscal challenges in the US 160 150 and EMU countries. A further increase in the dollar Index 140 would limit the rise in oil prices. To date the 130 120 stronger dollar has had limited impact on the price 110 of oil. This is an indication that global demand has 100 grown, especially in Asia. 90 00 01 02 03 04 05 06 07 08 09 10 11 China OECD World Source: IEA What will happen to the price of oil in the short Jörgen Kennemar term? The sluggish recovery in OECD countries 3 (4)
  • 4. Energy & Commodities Monthly newsletter from Swedbank’s Economic Research Department, continued No. 3 • 12 March 2010 Swedbank Commodity Index - US$ - Swedbank Commodity Index - SKr - Basis 2000 = 1oo 12-03-10 Basis 2000 = 1oo 12-03-10 12.2009 1.2010 2.2010 12.2009 1.2010 2.2010 Total index 251,5 260,6 251,3 Total index 195,2 202,2 198,3 Per cent change month ago -1,4 3,6 -3,6 Per cent change month ago 1,7 3,6 -1,9 Per cent change year ago 60,4 63,3 62,7 Per cent change year ago 43,5 44,3 38,4 Total index exclusive energy 219,7 224,6 216,1 Total index exclusive energy 170,5 174,3 170,5 Per cent change month ago 3,9 2,2 -3,8 Per cent change month ago 7,2 2,2 -2,2 Per cent change year ago 33,2 41,3 38,8 Per cent change year ago 19,1 24,9 18,2 Food, tropical beverages 227,0 228,8 218,2 Food, tropical beverages 176,2 177,6 172,2 Per cent change month ago 3,7 0,8 -4,7 Per cent change month ago 7,0 0,8 -3,1 Per cent change year ago 30,6 20,8 17,2 Per cent change year ago 16,9 6,7 -0,3 Cereals 204,7 197,3 187,7 Cereals 158,9 153,1 148,1 Per cent change month ago 3,2 -3,6 -4,9 Per cent change month ago 6,5 -3,6 -3,3 Per cent change year ago 7,2 -4,4 -4,4 Per cent change year ago -4,1 -15,5 -18,6 Tropical beverages and tobacco 246,1 255,7 243,3 Tropical beverages and tobacco 191,0 198,4 192,0 Per cent change month ago 4,5 3,9 -4,8 Per cent change month ago 7,8 3,9 -3,3 Per cent change year ago 42,7 39,3 31,2 Per cent change year ago 27,6 23,1 11,7 Coffee 125,0 126,9 123,4 Coffee 97,0 98,5 97,4 Per cent change month ago 4,4 1,5 -2,8 Per cent change month ago 7,7 1,5 -1,1 Per cent change year ago 21,2 17,1 14,7 Per cent change year ago 8,5 3,4 -2,4 Oilseeds and oil 200,5 191,4 183,8 Oilseeds and oil 155,6 148,5 145,0 Per cent change month ago 2,0 -4,5 -4,0 Per cent change month ago 5,3 -4,5 -2,4 Per cent change year ago 21,2 0,2 1,5 Per cent change year ago 8,5 -11,5 -13,6 Industrial raw materials 217,6 223,4 215,5 Industrial raw materials 168,9 173,3 170,1 Per cent change month ago 4,0 2,7 -3,5 Per cent change month ago 7,3 2,7 -1,9 Per cent change year ago 33,9 48,8 46,7 Per cent change year ago 19,8 31,5 24,9 Agricultural raw materials 156,9 158,7 157,7 Agricultural raw materials 121,8 123,2 124,4 Per cent change month ago 2,7 1,1 -0,6 Per cent change month ago 5,9 1,1 1,0 Per cent change year ago 42,2 44,5 50,8 Per cent change year ago 27,3 27,7 28,3 Cotton 74,7 71,9 74,5 Cotton 58,0 55,8 58,8 Per cent change month ago 8,7 -3,7 3,6 Per cent change month ago 12,2 -3,7 5,4 Per cent change year ago 66,0 46,4 63,0 Per cent change year ago 48,5 29,4 38,7 Softwood 139,8 138,6 136,4 Softwood 108,5 107,6 107,6 Per cent change month ago -0,3 -0,9 -1,6 Per cent change month ago 2,9 -0,9 0,1 Per cent change year ago 24,3 28,3 33,2 Per cent change year ago 11,2 13,4 13,4 Woodpulp 796,1 814,4 840,2 Woodpulp 617,8 632,0 663,0 Per cent change month ago 3,0 2,3 3,2 Per cent change month ago 6,3 2,3 4,9 Per cent change year ago 18,6 31,7 42,3 Per cent change year ago 6,1 16,4 21,1 Non-ferrous metals 225,6 237,0 219,7 Non-ferrous metals 175,1 183,9 173,4 Per cent change month ago 6,3 5,1 -7,3 Per cent change month ago 9,6 5,1 -5,7 Per cent change year ago 83,9 89,8 80,7 Per cent change year ago 64,5 67,7 53,8 Copper 6962,6 7385,6 6835,4 Copper 5403,6 5731,9 5394,0 Per cent change month ago 4,3 6,1 -7,4 Per cent change month ago 7,6 6,1 -5,9 Per cent change year ago 124,9 129,3 106,3 Per cent change year ago 101,2 102,7 75,5 Aluminium 2178,4 2236,2 2043,9 Aluminium 1690,6 1735,5 1612,9 Per cent change month ago 11,8 2,7 -8,6 Per cent change month ago 15,3 2,7 -7,1 Per cent change year ago 46,2 57,6 54,1 Per cent change year ago 30,8 39,2 31,2 Lead 2324,5 2367,7 2131,4 Lead 1804,0 1837,5 1682,0 Per cent change month ago 0,7 1,9 -10,0 Per cent change month ago 3,9 1,9 -8,5 Per cent change year ago 140,7 109,2 92,2 Per cent change year ago 115,3 84,9 63,6 Zinc 2366,0 2434,1 2155,2 Zinc 1836,2 1889,1 1700,7 Per cent change month ago 7,9 2,9 -11,5 Per cent change month ago 11,3 2,9 -10,0 Per cent change year ago 115,3 105,0 93,9 Per cent change year ago 92,6 81,2 65,0 Nickel 16989,9 18434,6 18872,4 Nickel 13185,6 14306,9 14892,8 Per cent change month ago 0,0 8,5 2,4 Per cent change month ago 3,2 8,5 4,1 Per cent change year ago 76,4 63,1 81,4 Per cent change year ago 57,8 44,1 54,4 Iron ore, steel scrap 350,0 350,1 351,5 Iron ore, steel scrap 271,6 271,7 277,4 Per cent change month ago 1,6 0,0 0,4 Per cent change month ago 4,8 0,0 2,1 Per cent change year ago -14,2 8,1 7,8 Per cent change year ago -23,2 -4,5 -8,3 Energy raw materials 265,6 276,6 266,9 Energy raw materials 206,1 214,6 210,6 Per cent change month ago -3,3 4,1 -3,5 Per cent change month ago -0,2 4,1 -1,9 Per cent change year ago 73,4 72,9 73,4 Per cent change year ago 55,1 52,8 47,5 Coking coal 306,1 365,4 347,9 Coking coal 237,6 283,6 274,5 Per cent change month ago 4,3 19,4 -4,8 Per cent change month ago 7,6 19,4 -3,2 Per cent change year ago 2,4 16,5 23,3 Per cent change year ago -8,3 2,9 5,0 Crude oil 263,7 272,5 263,2 Crude oil 204,7 211,5 207,7 Per cent change month ago -3,7 3,3 -3,4 Per cent change month ago -0,6 3,3 -1,8 Per cent change year ago 80,0 78,2 77,7 Per cent change year ago 61,1 57,5 51,3 Swedbank Economic Research Department Swedbank’s monthly Energy & Commodities newsletter is published as a service to our customers. We believe that we have used reliable sources and methods in the preparation SE-105 34 Stockholm, Sweden of the analyses reported in this publication. However, we cannot guarantee the accuracy or Phone +46-8-5859 1028 completeness of the report and cannot be held responsible for any error or omission in the ek.sekr@swedbank.se underlying material or its use. Readers are encouraged to base any (investment) decisions www.swedbank.se on other material as well. Neither Swedbank nor its employees may be held responsible for Legally responsible publisher losses or damages, direct or indirect, owing to any errors or omissions in Swedbank’s Cecilia Hermansson, +46-88-5859 1588 monthly Energy & Commodities newsletter. Magnus Alvesson, +46-8-5859 3341 Jörgen Kennemar, +46-8-5859 1478 4 (4)