Commodity Wrap - Corn, Nickel, Copper, Oil

Corn

• Corn price reacted to the technical level - 400 cents per bushel

• The latest WASDE report showed ending stocks declining below 2 billion bushels. However, the reading was above market estimates

• Snow in the United States makes corn harvest harder. Harvest progress in the North Dakota looks the most downbeat

• As much as 30% of corn has been harvested already while 5-year average sits at 45%. This year’s harvest progress seems to be in-line with 5-year minimum

• Number of long positions plummeted to 5-year low. At the same time, we can see the number of shorts was reduced slightly

Estimates of corn ending stocks were reduced. However, lacklustre weather conditions could lead to further reductions. Source: Bloomberg

This year’s corn harvest progresses more or less in line with the 5-year minimum. 5-year average hints that as much as 45-50% should have been harvested already. Source: Bloomberg

Speculative positioning on corn is somewhat mixed. On one hand, the number of long positions dropped to the lowest level since 2015. On the other, the number of short positions was reduced as well. Source: Bloomberg

Nickel

• Investors try to compare current situation on nickel market to the one on the copper market in 1995, when priced plummeted due to attempted market manipulation

• Nickel stockpiles continue to decline significantly. Stockpiles on LME dropped from 160k tonnes to 88k tones over the course of a month. Current stockpiles could satisfy demand for just one week therefore risk of abrupt price jumps increases

• Situation in China hints that speculators may be building nickel stockpiles. Usually, China paid a $250/tonne premium but this premium was reduced by $50/tonne in the previous week

• Nickel price increased in the previous months as the market was expecting significant demand from EV sector. Moreover, export ban in Indonesia also played its toll

• Currently just 3% of nickel demand comes from the EV sector. Estimates hint that this figure should increase to 10% by 2022. Over 80% of demand for nickel comes from stainless steel and household goods sectors

Nickel stockpiles on LME declined almost 45% in the previous week. The accompanying price drop is said to be a response to demand concerns. Source: Bloomberg

Copper

• Weak economic data from China and the US have put downward pressure on copper prices

• The end of the past week was positive for copper prices which may have had something to do with the weakening dollar 

• A net speculative position remains close to the record lows giving room for a possible rebound once the US and China strike a trade deal

• BMO Capital Markets expects prices at $6460 in the following year (a 10% cut compared to their previous forecast)

• One needs to keep in mind that copper is extracted along with other metals like gold and silver, hence their higher prices may keep copper afloat 

Nickel, iron ore and gold producers are in the best position in terms of costs. Roughly 10% of copper producers fail to break even. Source: BMO

A net speculative position remains close to the record lows. Source: Bloomberg

Oil

• Oil prices keep moving within a consolidation between $51 and $55 (WTI)

• Bloomberg breaks down the current oil price change pointing to what extent demand and supply affect (the chart below)

• IEA expects global oil supply to rise 2.2 mbpd next year, global demand is to rise 1.2 mbpd at the same time

Oil prices are lower by $15 due to some supply/demand disruptions compared to the equilibrium price. Source: Bloomberg

Oil prices keep moving within the consolidation. Source: xStation5