GUIDE TO TRACKING PALLADIUM SHOCKS QEON MEASURING COLLAPSE METALS ETS THE OUTLOOK FOR GOLD IN 2015Our team of 10 dedicated analysts digs deeper, covering more than 150 metals, mining and fertilizer companies, one of the BMO cy Capital Markets- largest coverage universes in the world. Tc Rod [ad TYPE BMO OU Oe ce UL EC Ua UL er ree used by r 2 Metres 8N0 n i otc Ft Fen na Teen ene erySTRATEGIES Palladium’s Wild Ride BY IAN WADDELL THE STORY OF palladium in 2014 was one of two supply shocks hap- pening at the same time, leading to a surge in the precious metal’s price to the highest level in 13 years. ‘The gyrations in the value of pal- ladium illustrate what can hap- pen when an unusual confluence of events impact a commodity’s supply or demand. Tools on the Bloom- berg Professional Palladium prices peaked in 2014 after supply shocks. METALS & MINING service can uncover major factors in the production and use of commodi- ties that help you prepare for market surprises. LET'S TAKE A look at what hap- pened. Palladium is one of six el- ements classified as the platinum group metals, or PGM, which are typ- ically found inthe same ore deposits. Although palladium is sometimes used in jewelry and for industrial arch 2015 1slo is Ma (PstRAEGIES © METALS/#/Mininc processes, more than 50 per- centofthe world’s supply goes into the manufacture of cata- lytic converters for car exhausts. Auto sales have been steadily ris- ing in major markets such as China, India and the US., sustaining demand for the metal. An additional source of demand has come from the increased popularity of ex- change-traded funds focused on precious metals. Investors who want exposure to these commodities can buy ETFs that hold physical stores of the metals. Invest- ment flows and prices for these funds closely track the price of the metals as was shown by the sharp decline in gold ETFs when the value of the metal itself fell in 2013, More than 75 percent of palla- dium is mined in Russia and South Africa. Tosee data on production, type BI PMET for the Precious Metal Mining Dashboard maintained by analysts at Bloomberg Intelligence. Click on Industry in the left-hand column and on the next screen click ‘on the Supply/Demand tab. From there, click on the PGM subtab and scroll down until you see Palladium YTD Supply/Demand (02). Click on the plus sign to the left of Total Palla- dium Supply (GFMS) and then on the 2 wascn2019 The ETF Holdings View charts the relative demand for metals. plus sign to the left of Mine Produc- tion. In 2013, the latest year for which data are available, palladium mine output was 6.442 million troy ounces (2004 metric tons), with 4.933 mil- lion troy ounces coming from Russia and South Africa. The Commodity Unit Conversion function, available by typing UNTG , is handy if you need to switch between weight measurements. = DISRUPTIONS TO PALLADIUM supply in either Russia or South Africa havea sizable impact on global prices. Tosee values for palladium and other metals quoted in multiple currencies, type MTL for the Precious Met- als Prices and Rates function. Click on the Palladium tab and on USD in the table to load the metal’s price inTIP BOX US. dollars. Type @PG <@o> at $912.26 on Sept. 1, 31 per- tosee it displayed asacandle op cent higher than the trough chart that shows open, close. MET<@e> sin February. and intraday levels. You can toe0alist On top of this geopoliti- also directly enter palladi- "PP" | cal drama, demand for the um’s ticker and see its price _heaslines metal increased with the graph by typing XPD on pametalt launch of two palladium- GPC. _maitels” | focused ETEs in South Palladium traded at Africa. Holdings of the pre- $714.20 atroy ounce on the first trad- ing day of 2014, Jan. 2, and then slid to $696.40 on Feb. 4, its lowest level of the year. From there, prices be- gan to climb as 70,000 mineworkers in South Africa walked off the job in a dispute over wages. Production was crippled until the strike ended in late June. Meanwhile, Russia was hit with trade sanctions from the US. and Eu- rope over its escalating conflict with Ukraine. Pal- ladium prices kept climbing till they peaked ‘Type ETF to search for funds based on their asset and geographic focus cious metal by exchange-traded prod- ucts reached a record in early August. To see demand among these funds, type MTL . Click on the arrow to the right of Asset Class and select Commodity. In the EXCHANGE field, enter SOUTH AFRICA and select the country’s name from the list that appears. If there are any other listed factors un- der Selected Criteria in the middle of aRcn 2019 3| Bloomberg Markets STRATEGIES METALS & MINING Cee Day Eee en re re Ce Es ‘Type BI PMET for data on precious metals the screen, click on the Xs to remove them, Click on Settings and tick the boxes to exclude ETNs, leveraged funds and cross listings. Then click on the Apply button. — AS OF JAN. 2, there were five com- modity ETFs on South Afri- By October, the metal was trading near where it began the year. The decline may be just arespite, however. Analysts predict the price of palladium will rise to $856 by the end of 2015. To see that and other price estimates, type CPFC for the Commodity Price Fore- casts function. can exchanges. Right click | TIP BOX Palladium isn’t the only on the Name heading to dis ‘Type GLCO commodity that’s suscepti- playthe funds’ namesifthey | <@o> fora ble to supply crunches when aren't already visible. Click ‘macro view far-flung crises coincide. on Assets to rank the funds | °°, | Cocoa supplies are concen- by size. The Africa Palla- agricultural trated in the Ivory Coast and dium Debentures fund and the NewPalladium ETF, both started in late March 2014, were the second and third largest, respec- tively, in the market. Prices for palladium began to drop last year as miningresumed in South Africa and tensions eased between Ukraine and Russia with the an, nouncement of a cease-fire on Sépt. 5. 4 manen 2015 commodities. Ghana, while most palm oil is produced in Indonesia and Malaysia, for example. Bloom- berg’s suite of tools, news and data can help you anticipate future bot- tlenecks in commodities production and demand. i Der votes cemodies pte speci at Suonbogl aay tselSgueonbon metSTRATEGIES WHAT’S NEW ™® How can! find news related to © metals markets? . A = The Suggested News Filters (STNI) function was recently enhanced to make it easier to find news re- lated to metals and mining companies. Type STNI and click on the yel- low Cmdty key. In the Commodities Fil- ters window that ap- pears, click on the box to the left of Met- als so that a check mark appears. Click on the Done button. A preview showing the type of news sto- ries that will be sent to you by the filter is displayed at the bottom of the screen. Use the options to the right of News Flow to select your sources. For example, click on the cir- cle to the left of Bloomberg & All Other Sources and the pre- view will give you an estimate of the number of articles gleaned from your sources. On a typical day, that might be an average of 1.9 stories per minute. Once you've set up your filter, click on the Open in Launchpad button to open a monitor that displays the headlines of news stories as they appear. JON ASMUNDSSON ARCH 2019, 5| Bloomberg Markets MM | STRATEGIES METALS & MINING Digging Into Iron Ore’s Collapse BY TODD SIBILLA ‘THE BIG NEWS of 2014 was the pre- cipitous drop in the price of oil, with Brent crude falling 48 percent through Dec. 31. That made it the second- worst-performing futures contract (gasoline beat it by a hair), according to data compiled by Bloomberg. Yet there was another basic material that fared just about as badly: iron ore. Ore with 62 percent iron content delivered to the Chinese port city of Qingdao plummeted 47 percent for the year to trade at $71.26 a dry ton on Dec. 31. Overcapacity and lack of Iron ore delivered to Qingdao dropped 47 percent in 2014, © marcnzo19 demand, particularly in China, drove the price to levels last seen in 2009. Analysts have struggled to keep up with the metal’s plunge. As of Dec. 15, iron ore traded at a lower level than that of any predicted price compiled by Bloomberg. The median expecta- tion for2015—$87.47 a dry ton—was 25 percent higher than the market price. YOU CAN USE a number of tools on the Bloomberg Professional service to stay on top of developments in the iron ore market, see how market drivers are evolving and analyze tradingin swaps and other contracts. ‘The main story in the steel mar- ket for the past 10 years has been China, which con- sumes more than 70 percent of sea- borne iron ore,according to Bloomberg Intelligence. (Steel is an alloy of iron.) ‘To track a benchmark cost for the most common grade of ore delivered to Qingdao, type CHINA IRON ORE on the command line ofa Bloomberg screen and click on the MBIO62DA Index item in the list of matches. For a description, Inventories at Chinese ports such as Qingdao surpassed 100 milion tons in March 2014 screen and then on Steel/Iron on the rightside. Inthe list of results, click on China Weekly Iron Ore Inventory To- tal for a description of the data series. Inventories climbed above 100 million tons in March 2014 and reached a re- cord high of 107 million tons in June, according to Beijing Antaike Information Development type DES. TIP BOX Co., a Beijing-based provider — Type of metals data. As of Dec. 26, YOUCAN USE the Commod- — MAFERRO they had dropped to 95 mil- ity Fundamentals (FDM) __ headlinesof lion tons. function to dig into related news stories To track analysts’ fore- enionore datasets. Type FDM . To assess inventories of iron ore stored at Chinese ports, tab in to the field, enter CHINA IRON OREINVEN- TORIES and press . Click on Met- als & Minerals on the left side of the casts for the raw material, you can use the Commod- ity Price Forecasts (CPFC) function. ‘Type CPFC , click on the arrow to the right of Category and select Metals. Press . Let’s take a look at some click on the Histogram but- TH? BOX of the drivers of the market. ton on the red tool bar. To Type METL. Under Data Library on the chart 2015 forecasts, click | <@o>touse __ left side of the screen, click on 2015. As of Dee. 15, the felaal on Demand Analysis. To ex- median prediction for 2015 function to amine data from the past de- monitor base was $87.47. The lowest fore- cast was $70 a ton, while the highest was $155. For data and analysis on the market, you can use the Bloom- berg Intelligence (BI) dashboard for the companies that supply the raw materials for steel. Type Bl and click on BI: All Research. In the menu of 10 items displayed under Sectors on the metals pri Type CPFC . To see how demand dropped in 2014 from the previous year’s peak, click on the spark line to the right of Global Iron Ore Demand YTD. As of Dec. 31, China accounted for most of the global drop in demand. The coun- try’s 171 million metric ton reduction was 62 percent of the global 275 mil- lion ton decline. ices.Type BIRMSUG for the BI dashboard on steel raw materials suppiers. For more details on iron ore output and inventories, click on Industry un- der Data Library on the left side of the screen. Click on the Iron Ore tab and then on the Production/Shipment subtab, For 10 years of data, again enter 10 in the field to the right of View and then select Annuals. CLICK ON THE spark line to the right of Global Iron Ore Production for a chart. As you cansee, production rose more than 150 percent duringthe past decade. To see how stockpiles of iron ore have been building, click on the Pricing/Inventories subtab. To display price data for iron ore swap and forward contracts, type lOTC for the Iron Ore Forwards func- tion. To analyze iron ore contracts that trade on the Singapore Exchange, type SCOA GCRV for PTE the Commodity Curve Analysis func- tion. To compare the curve from six monthsago, clickon Curvesinthe up- per-right corner of the screen. Click on the arrow to the right of Add New Date and select 6 Months Ago. Finally, you can use the Bloomberg Commodity Maps (BMAP) function to track ships carrying ore to Qingdao. ‘Type BMAP and click on Vessels & Ports. In the Vessel and Port Wizard window, click on the circle to the left of Port Name to select it, if it’s not al- ready selected. Click on None to the right of Port Name. Enter QINGDAO in the field and click on the matching item in the list of Port Names. Click on the Update button and then on Search to display the map. Todd Stila is a commodities application specialist at Bloomberg in New Yor. siila@bloomberg.net aren 2019 9$MM | STRATEGIES METALS & MINING The Outlook for Gold Miners BY KENNETH HOFFMAN AND ZHUO ZHANG SHARES OF GOLD-MINING companies fell more than 13 per- cent in 2014, with the companies trading at an eight-year low on an enterprise-value-to-reserve- and-resource basis, according to data compiled by Bloomberg Intelligence. Declining metals prices, rising costs, shifts to alter- native metals proxies such as exchange-traded funds and lower overall grades have hurt valuations. Min- ing-company valuations are often assessed by di- viding equity plus net debt, or enterprise value, by a company’s reserves and resources. = MINING COMPANIES are tightening their belts. They are | thanthe price of the precious metal. closing exploration groups, reducing Global gold production started spending on newmines and focusing )) dropping in March 2014, and addi- on keeping their costs falling faster tional declines could occur in 2015. ‘Type BIPMET for supply and demand data for gold 10. ware 2013To track production, type BI PMET for the Bloomberg Intelligence dashboard for precious metals min- ing. Click on Industry under Data Library. Click on the Supply/Demand tab and then on the Gold subtab. ONE KEY TO the industry's recovery: Chinese demand. ‘The opening of the Shanghai Certo cr inese Gold Imports from Hong Kong At 7-Month High mining compa- nies have taken advantage of the price slump to snap up mines from producers that Type G BI2 732 fora chart of Chinese gold imports. are either restructuring or suffer- ing financial difficulties. The push also reflects Chinese gold demand China's imports set a re- gold market to the rest of the ue a cord in 2013 as the nation world through the Shanghai | PU Deane passed India as the world’s free-trade zone in Septem- __ Inteligence largest gold market, with ber 2014 may lead to growth in demand for gold inside China. Chinese gold companies, which spent more than $2 billion to buy pieces. domestic and overseas mines in the 18 months through November, may step up acquisitions in 2015 if gold prices continue falling. The Chinese 2015 outlook one-third of global demand. Fora chart showing Chinese gold imports from Hong Kong, type @ BI2732 . Kenneth Hoffman sa senior industry analyst andZhuo Zhang is anindustyy associate at Bloomberg lnteligence in Princeton. khoffman!2@bleomberg.net, zhzhang@bloomberg.netSTRATEGIES METALS & MINING Tracking Fund Flows for Gold ETFs BY DEBBIE MASSIELLO INVESTORS CONTINUED to with- | end of 2014 from their 2012 peak draw money from gold-focused ex- | while holdings of other precious change-traded funds in 2014 as prices | metals increased. Tear SATA To drill down fur- POM 1 God EF rect Pcruasr ther, click on the Gold ETF Holdings tab. The %Chg 1Y column at the far right of the screen shows the one-year Gold ETF holdings declined more than 9 percent in 2014. change in holdings. In 2014, they de- for the precious metal hit a four-year | clined by morethan 9 percent. low and volatility surged. Toolson | = the Bloomberg Professional service | TO ANALYZE THE ETF flow data can pinpoint flows for indi- in Excel, type XLTP XETFM vidual funds and compare | TIP BOX and click on the Open demand forgoldversus other | 5). button. The table and graph asset classes. BMAP | on the first tab show cre- Type MTL for an | for mops of ations (shares made to ac- overview of the precious | 8°)... commodate new money metals markets. Click on | production. coming in) and redemptions View on the red tool bar for different asset classes. and select ETF Holdings. You can | Currency and commodity ETFs were see that fund investments in gold | the only ones to have seen a net out- dropped almost 40 percent by the | flow last year. 12 wanton 2019mney Click on the Commodity tab for flows of those assets. imodity Fund Flows for US Click on the Commodity tab at the bottom of the sheet. The chart and table at the top show that precious metals ETFs had the biggest outflows in 2014 by far. Scroll down for details on flows | NAV . Clickon the arrow for individual ETFs. In the Top 10 Re- | to the right of Period, select Monthly demptions section, you can see that | and press . The bottom panel the SPDR Gold Shares fund had the | shows the fund had net outflows in biggest net outflows, at $3.3 billion. the last five months of the year. FOR A CLOSER look at the price and flows of that ETF, type GLD US Debbie Massielio isan equities application specialist at Bloomberg n San Francisco. massielo@bloombergnet Type NAV to see price and flow data fora selected ETF. MARCH 2019. 13““ Helping you unearth new opportunities. 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