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General news

  • The US has called for calm following the seizing of Kirkuk and key installations by Iraqi forces from Kurdish control.
  • Theresa May has refused to increase her offer of EU net budget contributions from 2019 and 2020. Although Britain has agreed to pay €20bn, Brussels has hinted that the figure should be nearer €60bn.
  • The Euro was down as traders and investors awaited developments in Spain where Catalan is planning its response to Spanish Prime Minister Mariano Rajoy’s move to impose his authority on the region. The suspense follows Spain’s announcement that it is to suspend Catalonia’s autonomy.
  • Trump’s latest attempt to impose travel restrictions on citizens from eight countries entering the US has been blocked by a federal judge. The restrictions applied to Iran, Syria, Yemen, Somalia, Chad and North Korea.
  • Japanese Prime Minister Shinzo Abe has retained its two-thirds majority in yesterday’s snap election. The outcome is likely to be good news for the nuclear and defence sectors.

Agriculture

  • Chinese soybean prices  have dropped rapidly since the start of the September harvest  threatening China’s efforts to promote the growth of corn as opposed to soybeans. Prices  remain subdued due to higher domestic output and large import volumes. It was reported at the end of September when the harvest hit the market that Harbin soybeans, the capital of China’s top soybean producing province Heilongjiang, fell almost 3% to Y3,950 a tonne.
  • Some edible oil analysts believe that palm oil prices may rise as a result of weak output recovery from Malaysia and Indonesia, where 90% of palm oil is produced and tight stock levels remain. Analyst Dorab Mistry believes that unless output increases or rival oilseeds such as American soybean, European rapeseed, Ukrainian sunseed and Russian sunseed yield bumper crops, benchmark palm oil prices could rise to as much as $850 a tonne CIF Rotterdam.
  • Both Arabica and Robusta coffee prices have gained on the back of concerns of restricted output.
    • Arabica coffee has recovered from a 3.5 month low as traders tracked the weather in Brazil where forecasts for below normal rain in some regions raised concerns about crop pollination. Coffee C, the world benchmark for Arabica coffee, for December delivery settled up at $1.2525.
    • Robusta coffee prices have risen to a 4-week high as rain in Vietnam, the world’s top producer, looked set to delay the harvest. ICE Robusta contract for November delivery settled last week at $2,020 a tonne yesterday.
  • EU exports of soft wheat for 2017/18 are running nearly one-third behind last season’s pace. The drop off in production has been mainly due to heavy exports from Russia. There is also looming competition on the horizon in the form of the upcoming Argentine harvest. Front month ICE European wheat closed last week at €156.27 a tonne.

Metals

  • Recyclers in China are gearing up to maximise on the opportunity of spent electric vehicle (EV) batteries. Recycling plants are being upgraded from recycling televisions and laptops  and securing licenses to handle EV battery waste.
  • Palladium, which is largely mined in South Africa and Russia and  used in catalytic converters to curb harmful emissions from diesel-run vehicles, has hit $1,000  last week for the first time in 16 years.
    • The gains have been driven by a backlash against diesel cars in Europe following the emissions scandal centred around Volkswagen.
    • The rally was sustained by consumers continuing to replace their vehicles which were either lost or damaged by the series of hurricanes which struck the US, and as car sales in China increase.
    • Prices however eased towards the end of the week, having peaked last Monday.
  • The failure of Volkswagen to secure long-term supplies of cobalt is viewed by many analysts as further evidence that the fragility of the cobalt supply chain could tangibly impact the EV revolution.
  • According to the World Steel Association (WSA), growth in global demand for steel is likely to slow in 2018 as the Chinese economy matures and moves its focus from manufacturing to services. The WSA forecasts that overall demand for steel will increase 1.6% to 1.65bn tonnes next year compared to this year’s underlying growth rate of 2.8% in 2017.
  • According to Reuters, China’s steel output for September dropped to the lowest levels since February from August’s record high as Beijing’s campaign to “clear the skies” came into play. Crude steel output hit 71.83m tonnes in September, compared to 74.59m tonnes in August.
  • According to the National Bureau of Statistics (NBS), refined copper output from China in September rose by 6.8% from a year ago to its highest level since December 2014. According to the NBS Chinese copper production was 774,000 tonnes last month, 3.3% up from August levels.
  • LME copper eased towards the end of the week but prices remained supported by solid demand-growth expectations and underlying Chinese demand remaining stable, in particular from the automotive and electronic sector. Demand from these sectors has helped offset a slowdown in construction and weaker demand from the home appliance sector. LME copper for 3-month delivery closed last week at $7,008, having started the week at $7,061.
  • Gold has hit a 2-week low following Japanese Prime Minister’s landslide victory which indicated that Japan’s ultra-loose monetary policy would remain in place. Shinzo Abe’s victory lifted the USD to a 3-month high versus the Japanese Yen. LME gold for 1-month delivery is currently at $1,280.12 per fine troy ounce.

Energy - UK 

  • The world’s first floating windfarm off the coast of Scotland has started to generate power. The 30MW farm which consists of 5 giant turbines, is now delivering electricity to the Scottish grid and is expected to generate enough electricity to power 20,000 homes a year.
  • The UK has launched a consultation to find new ways of maintaining and improving the UK’s security of energy supply and protect the country’s critical energy infrastructure and systems.
  • Ofgem’s CEO has indicated that legal backing in the form of a bill is likely to be needed before it introduces an energy price cap. The need for legal backing comes from opposition from the Big Six who do not agree with the government that price caps are a good idea. The Managing Director of one of the Big Six, Centrica’s Sarwjit Sambdhi, argues that a price cap on energy bills would hinder innovation and competition in the market.

Energy - International

Oil

  • The Chief Executive of the world’s largest independent oil trader, Ian Taylor of Vitol, has warned that oil prices are being supported by geopolitical risks which have risen to the highest level in years. BP’s Chief executive Bob Dudley also supports the belief that having put aside geopolitical risk for a few years, these risks are now again effective in the price.
  • Although Iraq is OPEC’s second largest producer, the conflict in the Iraqi region of Kurdistan has done little to the markets this week. So far crude from Kurdistan has been flowing at expectations and is unlikely to stop as both the Iraqi Government and Kurdish Regional Government depend on oil revenues. The other reason for this appears to be the fact that the oil markets remain cautious of testing the upper bounds of the “shale band”, the price range in which US shale drillers can operate without flooding the market or going bust.
  • OPEC secretary Mohammad Barkindo has stated that there is no doubt that the oil market is rebalancing at an increasing pace thanks to the efforts made by both OPEC and non-OPEC countries to reduce their exports. Barkindo also indicated that further tightening was on the horizon with production cuts being extended until March of next year.

Other

  • European week-ahead power prices are mixed with French prices firming on the back of delayed nuclear reactor restarts and German prices dipping on expectations of reduced demand with next Tuesday being a German public holiday.
  • A $500m loan has been granted for a project to bring new gas supplies to Europe from the Caspian Sea along the Southern Gas Corridor (SGC). The SGC is expected to bring around 16bn cubic meters of gas from Azerbaijan by 2020, a volume of gas equivalent to that needed to power more than 10m homes for a year.
  • The surcharge levied on German power bills to support renewable energy under the renewable energy act (EEG) is to be lowered next year by 1.3% to just under €0.068 per kWh. The reduction has been made possible thanks to the reserve funds collected by government to support the expansion of green energy having exceeded anticipated pay outs.
  • France’s Secretary of State for Ecology, Sebastien Lecronu, has indicated that France are to propose changes within the next 6 months which would speed up the development of onshore wind power projects. France depends on nuclear for 75% of its electricity needs and aims to drastically reduce its dependence on this form of power by ramping up the development of renewable.