Commodities Monthly

Stimulus measures drive prices – but will physical demand follow?
18 SEPTEMBER 2012

Commodities Monthly

Stimulus measures drive prices – but will physical demand follow?
GENERAL

0-3 M  4-6 M  7-12 M 

UBS Bloomberg CMCI Sector Indices
(price indices, weekly closing, January 2010 = 100)
10 8 10 7 10 6 10 5 10 4 10 3 10 2 10 1 10 0 9 0 ja -1 n 0 fe -1 b 0 m r-1 a 0 a r-1 p 0 m j-1 a 0 ju -1 n 0 ju 0 l-1 ag 0 u -1 se -1 p 0 o 0 kt-1 n v-1 o 0 d c-1 e 0 ja -1 n 1 fe -1 b 1 m r-1 a 1 a r-1 p 1 m j-1 a 1 ju -1 n 1 ju 1 l-1 ag 1 u -1 se -1 p 1 o 1 kt-1 n v-1 o 1 d c-1 e 1 ja -1 n 2 fe -1 b 2 m r-1 a 2 a r-1 p 2 m j-1 a 2 ju -1 n 2 ju 2 l-1 ag 2 u -1 se -1 p 2
YT (% D ) M (% /M )

Both commodities and equities have rallied due to the ECB’s bond buying plan, which reduces Euro-zone break-up risk, and open ended Fed bond buying, which softens the impact of political stalemate regarding fiscal stimulus measures. However, sentiment has run ahead of commodity fundamentals as macro indicators remain weak, leaving us sceptical whether the rally is sustainable.

In u d stria M ta l e ls Pre u M ls cio s eta En rg e y Ag lture ricu

ENERGY
   

0-3 M  4-6 M  7-12 M 

Crude oil prices are high but well supported by resilient demand, geopolitical risk and global stimulus programmes. We expect prices to remain between $110-125/b during Q3 after which headwinds could increase slightly. Both upside and downside event risks are present, e.g. politically motivated SPR releases and geopolitical outbreaks. So far, the Chinese economic slowdown has not hurt oil prices despite some signs of easing demand.

8 0

INDUSTRIAL METALS
  

0-3 M  4-6 M  7-12 M 

Chinese infrastructure investments of RMB 1tn is largely old news in new clothes although the political power transition later this year could be followed by fresh stimulus packages. The Chinese growth model is at a crossroads with investments near 50% of GDP. Greater emphasis on consumption going forward could favour non-ferrous metals. Chinese stimulus measures are essential to support metals prices after the latest rally as fundamentals are weak in an economy suffering overcapacity in many sectors.

Sector performance
(MSCI World, UBS Bloomberg CMCI price indices)
1 6 1 4 1 2 1 0 8 6 4 2 C m o itie o md s Ag ltu ricu re In u d stria l m ta e ls En rg e y Pre u cio s m ta e ls Eq itie u s 0

PRECIOUS METALS
  

0-3 M  4-6 M  7-12 M 

Following 12 months consolidation, another round of QE has triggered a liquidity rally in precious metals. We believe gold may hit new nominal highs while a failure to do so would increase the probability that the long-term bull market is nearly over. Platinum and palladium prices have increased due to South African labour conflict, which may also further impact the long-term supply outlook. Grain prices rallied once again this summer, stabilizing well above 2007/2008 and 2010/2011 highs. Demand destructive forces were already strong before the latest rally, limiting further upside risk. Despite several short- to medium-term bullish threats which should support high prices, our long term view is extremely bearish.

Winners & Losers over the last month
(%)
2 5 2 1 1 7 1 3 9 5 1 -3

AGRICULTURE
  

0-3 M  4-6 M  7-12 M 

Arrows indicate the expected price action during the period in question.

-7 Ste b ts el ille Pw o er P er (C nt.) ow o C 2 (EU O A) Sgr ua C rn o G so a line (U S) Bre nt So an ybe s N g (U at. as S) C n otto W TI H at. oil (U e S) W ea h t C ocoa (U S) G old C ffe (Ar.) o C pp o er N icke l Zinc A m iu lu in m Tin P allad m iu L d ea P tinu la m Silver -1 1

Chart Sources: Bloomberg, SEB Commodity Research

2

Commodities Monthly

General
The announced additional rounds of QE are creating confidence in a continued US recovery and survival of the euro-zone. Chinese politicians have already signalled increasing support for infrastructure investments, although they have also stated even more emphatically that the current growth model has ended with investments at close to 50% of GDP. Still, they are likely to embark on a spending spree of sorts following this autumn’s key power transition, at least if previous experience is anything to go by. This time however the focus must and will change. Current capacity utilization within the Chinese economy is only 60% (IMF) with many sectors suffering from overcapacity. Its government must therefore stimulate growth in consumption rather than investment, favouring metals such as nickel, tin, aluminium and copper rather than the ferrous metals complex. Commodities have rallied alongside equity markets on expected and announced monetary stimulus and further market support. The ECB’s latest bond purchasing program (OMT) has greatly reduced the risk of the eurozone breaking up while US Fed QE3 is already improving prospects for a US recovery, one which has so far proved weak and vulnerable to a political stalemate concerning fiscal budgets. In addition, stronger political signals from China indicating increased infrastructure investments have further strengthened the base metals segment. Of course, government stimulus and support measures are a result of weak macroeconomic data. The US economy is growing very slowly with continued high unemployment while total European GDP is expected to decrease by 0.4% in 2012 largely due to austerity measures in southern Europe. In China August PMI manufacturing data were the worst since March 2009. Since the beginning of June, the composite CMCI commodity price index has gained 18% compared with a 17% rise in global equities. The agricultural sub index performed best (+27%) due to severe drought in the US. It was followed by the energy sector which gained 18%. The crude oil price rose due to the full onset of the Iranian embargo and seasonally higher demand. The base metals segment was the third strongest performer, gaining 13% supported by promised infrastructure investments by Chinese politicians. The precious metals index increased least while still ending 12% higher, buoyed by promises of unlimited euro support by Mario Draghi and new and aggressive open ended QE3 from Bernanke.

UBS Bloomberg CMCI
(price index, weekly closing)

10 80 10 70 10 60 10 50 10 40 10 30 10 20 10 10 10 00 90 0 80 0 70 0 60 0 50 0 40 0 30 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01
21 01

JPM global manufacturing PMI
(monthly, PMIs >50 expansive)
6 5 6 0 5 5 5 0 4 5 4 0 3 5 3 0 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02
21 02

OECD composite leading indicators
(monthly, 100 corresponds to long term trend growth in industrial production)
14 0 13 0 12 0 11 0 10 0 9 9 9 8 9 7 9 6 9 5 9 4 9 3 20 05 20 06 20 07 20 08 20 09 21 00 C in h a Eu zo e ro n O D EC U SA R fe n e re ce

Chart Sources: Bloomberg, SEB Commodity Research

21 02

3

Commodities Monthly

Crude oil
Currently, Brent crude trades only $10/b below post2008 highs and $20/b below the all time high. However, due to both strong and volatile, bullish and bearish factors at play price stability appears elusive. The fact that most players have been unsure whether to react positively or negatively to strong/weak data (as it implies a greater or lesser likelihood/extent of stimulus) has not improved the situation. For now bullish influences predominate while most tangible indicators suggest softer prices from October, e.g. as North Sea production ramps up after maintenance, the hurricane season peak passes, and the Chinese economic slowdown is potentially reflected in lower crude oil demand expectations. There is also an event risk that President Obama may be tempted to release SPRs to combat high domestic gasoline prices. Consistent with normal seasonal patterns the oil market has tightened significantly in Q3 compared to H1. We expect it to remain more balanced for the rest of the year. Mainly due to preparations ahead of the Iranian embargo, oil markets reported overproduction of around 2 mb/d in H1 2012. If OPEC production continues unchanged oversupply will only be around 1mb/d for the rest of the year, implying relatively soft crude oil prices, contrary to what we see presently. This is largely due to three factors. Firstly, crude oil demand remains strong, despite OECD’s being almost 4 mb/d below pre-crisis levels, and is continuing to increase y/y. A faster than expected economic recovery could therefore rapidly close the oversupply gap and begin eroding reserve capacity. Secondly, geopolitical risk in MENA, still the principal global oil producing region, remains extremely high meaning prices could spike on supply concerns with little or no warning. Thirdly, announced and expected fiscal and monetary stimulus measures are fuelling bullish market sentiment. Bearishly however, the Chinese economy continues to show signs of slowing. As the main demand growth driver recently, China saw consumption double from 5 mb/d to 10 mb/d over the past decade. Consequently, its importance for the market balance cannot be overestimated. However, both underlying demand and stock-building plans are extremely unclear currently. Still, Chinese customs sources suggest August crude oil imports fell sharply, by 12.5% m/m and 15.7% y/y, to their lowest level since October 2010 (4.35 mb/d) even though imports YTD still are 7.4% higher than in 2011. Drawing parallels between the oil and the industrial metals market the impact of the economic slowdown in China has until now been very limited. For this reason, and also in view of the bullish factors already discussed, excess supply of 1 mb/d could easily double or disappear very quickly.

Crude oil price
(NYMEX/ICE, $/b, front month, weekly closing)
10 5 10 4 10 3 10 2 10 1 10 0 9 0 8 0 7 0 6 0 5 0 4 0 3 0 2 0 1 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01
o n

N E WI YM X T IC Bre t E n

US crude oil inventories
(DOE, mb, weekly data)
3 90 3 85 3 80 3 75 3 70 3 65 3 60 3 55 3 50 3 45 3 40 3 35 3 30 3 25 3 20 3 15 j f m a m

20 -20 a g 07 11 v . 20 11 20 12 j j a s d

Chart Sources: Bloomberg, SEB Commodity Research

Current global crude oil demand estimates
2012 (mb/d) 89.8 89.09 88.74 Revision (kb/d) +130 +260 +30 2013 (mb/d) 90.6 90.10 89.55 Revision (kb/d) +90 +400 +30

IEA EIA OPEC

SEB average Brent crude oil price forecast
($/b) 2012 2013 Q1 105 Q2 105 Q3 110 115 Q4 110 115 Full Year 112 110

21 02

4

Commodities Monthly

Energy
WTI futures curve
(NYMEX, $/b)
11 0 10 0 9 9 9 8 9 7 9 6 9 5 9 4 9 3 9 2 9 1 9 0 8 9 8 8 8 7 8 6 8 5 o 2 kt-1 ja -1 n 3 a r-1 p 3 o 3 kt-1 ja -1 n 4 a r-1 p 4 o 4 kt-1 ja -1 n 5 a r-1 p 5 ju 3 l-1 ju 4 l-1 ju 5 l-1 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Brent futures curve
(ICE, $/b)
18 1 16 1 14 1 12 1 10 1 18 0 16 0 14 0 12 0 10 0 9 8 9 6 9 4 9 2 9 0 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

n v-1 o 2

n v-1 o 3

n v-1 o 4

n v-1 o 5

m j-1 a 3

ag 3 u -1

m j-1 a 4

ag 4 u -1

m j-1 a 5

ag 5 u -1

m j-1 a 6

Gasoline and heating oil prices
(NYMEX, ¢/gal, front month, weekly closing)
40 5 40 0 30 5 30 0 20 5 20 0 10 5 10 0 5 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 N EXG so e YM a lin N EXH a g o YM e tin il

Gasoline and distillate inventories
(DOE, mb, weekly data)
20 5 20 4 20 3 20 2 20 1 20 0 10 9 10 8 10 7 10 6 10 5 10 4 10 3 10 2 10 1 j f m a m j j a s o n d G so e 2 0 -2 1 a g a lin 0 7 0 1 v . G so e 2 1 a lin 0 2 D istilla fu l o 2 0 -2 1 a g te e il 0 7 0 1 v . D istilla fu l o 2 1 te e il 0 2

US natural gas prices
(NYMEX, $/MMBtu, front month, weekly closing)
1 5 1 4 1 3 1 2 1 1 1 0 9 8 7 6 5 4 3 2 1 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02

US natural gas futures curve
(NYMEX, $/MMBtu)
4 5 ,7 1 -0 -1 2 7 3 4 0 ,5 4 5 ,2 4 0 ,0 3 5 ,7 3 0 ,5 3 5 ,2 3 0 ,0 2 5 ,7 m j-1 a 3 m j-1 a 4 m j-1 a 5 m j-1 a 6 se -1 p 2 ja -1 n 3 se -1 p 3 ja -1 n 4 se -1 p 4 ja -1 n 5 se -1 p 5 ja -1 n 6 se -1 p 6 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Chart Sources: Bloomberg, SEB Commodity Research

5

ag 6 u -1

n v-1 o 6

fe -1 b 3

fe -1 b 4

fe -1 b 5

o 5 kt-1

ja -1 n 6

a r-1 p 6

o 6 kt-1

fe -1 b 6

ju 6 l-1

Commodities Monthly

Nordic power
Nordic power price
This summer, the Nordic power market has been dominated by wet weather and extremely weak spot prices. In addition to a weak EURSEK, power consumers faced record low power prices in Sweden. In July, as consumption hit a seasonal low, spot prices averaged €13.70/MWh, their weakest level since 2000. The August spot averaged €23.57/MWh, a level around which it has remained so far this month. The hydrological balance has shown a surplus of between 10-20 TWh since the beginning of this year. For now, we expect continued unstable weather conditions to maintain a solid surplus of around 10 TWh. Further, reservoir levels are also extremely high, exerting pressure on hydro producers going forward. The forward curve has been less volatile this summer. While the prompt contract has of course been under pressure due to low spot prices, the curve has held up surprisingly well. Cal-13 hit a mid-June low of €36.10/MWh and currently trades at €37.50/MWh. Meanwhile, Q4-12 is at €36.25/MWh, only €0.50/MWh off its all-time low. With prices for coal, CO2 and continental power having not changed significantly over the summer, the market has tended to focus largely on the weather and Nordic fundamentals. Looking ahead we reiterate the bearish recommendation we made earlier this summer, largely due to Nordic fundamentals including a strong hydro balance and extremely high reservoir levels. In addition we expect no bullish influences from CO2 or coal prices in the near future given current weak global macroeconomic sentiment. However, we believe forward prices will soon bottom.
(by Mats Forsell and Mats Hedberg, Commodities Trading) (Nord Pool, €/MWh, front quarter, weekly closing)
8 0 7 5 7 0 6 5 6 0 5 5 5 0 4 5 4 0 3 5 3 0 2 5 2 0 20 06 20 07 20 08 20 09 21 00 21 01 21 02

Continental power price
(EEX, €/MWh, front quarter, weekly closing)
9 5 9 0 8 5 8 0 7 5 7 0 6 5 6 0 5 5 5 0 4 5 4 0 3 5 3 0 2 5 2 0 20 06 20 07 20 08 20 09 21 00 21 01 21 02 21 02

EUA price
(ECX ICE, €/t, Dec. 12, weekly closing)
3 5

3 0

2 5

2 0

1 5

1 0

5 20 06 20 07 20 08 20 09 21 00 21 01

Chart Sources: Bloomberg, SEB Commodity Research

6

Commodities Monthly

Industrial metals
US and European stimulus measures as well as increased political profiling of Chinese infrastructure investments have caused base metals prices to rise rapidly in September. They did so from very low levels with many well below fair mediumterm marginal cost levels. The improvement is however based on expectations rather than current demand given the current poor underlying economic environment. In August, the deterioration in Chinese manufacturing conditions accelerated, deteriorating even more rapidly than at any time in the past 41 months, according to Markit’s manufacturing PMI. Stocks of finished goods hit record highs while new export orders fell faster than since March 2009. The situation is consistent with the wide range of fundamental data posted in China in recent weeks. Industrial production rose only 8.9% y/y in August, its slowest rate since May 2009. Producer prices declined 3.5% as a result of deflationary pressure within the Chinese manufacturing sector. During the first seven months of this year, Chinese steel production increased by only 1.4% y/y while power output rose by a mere 1% y/y in August. Lacklustre Chinese economic data for the past 6-9 months reflects many factors, though it remains largely attributable to the aftermath of the huge $586bn stimulus package that superheated the Chinese economy following the Lehman Brother’s bankruptcy. Currently, its effects are dissipating leaving considerable overcapacity in many sectors of the economy at a time when export growth has slowed sharply (+2.7% y/y in August vs. +21% y/y in 2011 and +22% y/y on average 2001-2011) and housing construction is also decelerating. Weak Chinese macroeconomic data have prompted the government to unveil infrastructure projects worth RMB1 trillion (equal to 2% of GDP). The National Development and Reform Commission (NDRC) announced 25 urban rail transit and 13 highway projects (entailing the construction of over 2000 km of road) on its website. Most however form part of China’s 12th five year plan. In addition many projects were already approved as early as April and May, but were only recently (suddenly) released on the NDRC web page. In addition to the fact that spending on these initiatives will last several years, their financing remains uncertain. Local governments are expected to fund 40% leaving private investors to find 60%. However, with both private investors and local governments already being left holding increasing quantities of non-performing assets, their willingness to invest in such projects cannot be taken for granted.

LME index
(weekly closing)
40 70 40 50 40 30 40 10 30 90 30 70 30 50 30 30 30 10 20 90 20 70 20 50 20 30 20 10 10 90 10 70 10 50 10 30 10 10 90 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01
Tin

Industrial metal prices
(LME, indexed, weekly closing, January 2010 = 100)
20 0 10 9 10 8 10 7 10 6 10 5 10 4 10 3 10 2 10 1 10 0 9 0 8 0 7 0 6 0 Cpe opr N icke l Alu in m m iu Z c in L ad e T in

Price and inventory changes over the last month
(LME)
2 4 2 2 2 0 1 8 1 6 1 4 1 2 1 0 8 6 4 2 0 -2 -4 -6 -8 -1 0 -1 2 P rice (% ) In e to s (% v n rie )

A m iu lu in m

Cpe opr

N icke l

La ed

Zinc

Chart Sources: Bloomberg, SEB Commodity Research

7

Ste l e

ja -1 n 0 fe -1 b 0 m r-1 a 0 a r-1 p 0 m j-1 a 0 ju -1 n 0 ju 0 l-1 ag 0 u -1 se -1 p 0 o 0 kt-1 n v-1 o 0 d c-1 e 0 ja -1 n 1 fe -1 b 1 m r-1 a 1 a r-1 p 1 m j-1 a 1 ju -1 n 1 ju 1 l-1 ag 1 u -1 se -1 p 1 o 1 kt-1 n v-1 o 1 d c-1 e 1 ja -1 n 2 fe -1 b 2 m r-1 a 2 a r-1 p 2 m j-1 a 2 ju -1 n 2 ju 2 l-1 ag 2 u -1 se -1 p 2

21 02

Commodities Monthly

Industrial metals
Aluminium
 Aluminium prices have increased above $2000/t after bouncing at $1800/t in August. However, the move was not driven by demand fundamentals, but by promised and expected stimulus measures worldwide triggering a rebound from an oversold position. The recovery was hardly surprising given the substantial decrease in prices reported over the summer, in connection with which downside was limited by production costs. With global production remaining near record highs, stocks drifting higher and the market surplus likely to increase next year, we find it hard to be bullish on aluminium without an improvement in growth or further production cuts taking place.

LME aluminium price and inventories
(weekly data)
5000 500 5000 000 4000 500 4000 000 3000 500 3000 000 2000 500 2000 000 1000 500 1000 000 500 000 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02
100 10 100 00 90 00 80 00 70 00 60 00 50 00 40 00 30 00 20 00 10 00 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 600 00 500 50 500 00 100 400 100 200 100 000 800 00 600 00 400 00 200 00 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 400 50 400 00 300 50 300 00 200 50 200 00 100 50 100 00 50 00 0

L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis)

30 50 35 20 30 00 25 70 20 50 25 20 20 00 15 70 10 50 15 20 10 00

Copper
  Copper has rebounded above $8000/t with little effort, despite a lack of support from marginal production costs. Instead it remains fundamentally well supported by now very familiar production disturbances, weather disruptions and falling ore grades. While mine supply increased 2.4% y/y during the first five months of this year, the market balance switched from +20 kt to -291 kt, according to the ICSG. Mine supply developments remain very weak given the substantial incentives provided to increase production and large-scale investments already made. Falling Chinese demand and little sign of improving local economic conditions may seriously curtail the rebound.

LME copper price and inventories
(weekly data)
1000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis)

 

Nickel
 Like aluminium nickel recovered effortlessly after trading deep in the marginal production cost curve before euphoria over possible stimulus measures swept the industrial metals sector. Meanwhile, demand fundamentals remain bleak with the slowdown in China the biggest problem. On the other hand, the supply outlook has been clouded by uncertainty including disruptions and delays. The market therefore looks even more likely to tighten in H2, further limiting downside risks from summer lows. However, we do not expect an extended rally in nickel. If prices increase slightly and consolidate awhile, Chinese NPI production is likely to increase once again, boosting supply.

LME nickel price and inventories
(weekly data)
100 800 100 600 L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis)

Chart Sources: Bloomberg, SEB Commodity Research

8

Commodities Monthly

Industrial metals
Zinc
 Even zinc joined in the late summer stimulus rally. It therefore remains an attractive candidate for the short leg in spread trades within the sector; clearly the best way to trade it at present. Currently, higher zinc prices are hardly welcome as they ensure continued overproduction. Prices must remain low for a sustained period to eliminate excess capacity once and for all. While China continues to eliminate inefficient production, we still expect substantial overcapacity even after plans have been finalized. According to the ILZSG, there was a market surplus of 152 kt in H1 2012. During the same period, consumption was relatively stable, refined production decreased slightly, and mine output continued to rise (y/y).

LME zinc price and inventories
(weekly data)
1000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 10 30 10 20 10 10 10 00 600 00 500 00 400 00 300 00 200 00 100 00 n v-0 o 8 n v-0 o 9 n v-1 o 0 m r-0 a 9 m r-1 a 0 m r-1 a 1 n v-1 o 1 0 ju 8 l-0 m r-1 a 2 ju 9 l-0 ju 0 l-1 ju 1 l-1 ju 2 l-1 300 60 300 30 300 00 30 00 20 50 20 00 10 50 10 00 50 0 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 300 00 200 50 200 00 100 50 100 00 50 00 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 200 70 200 40 200 10 100 80 100 50 100 20 90 00 60 00 30 00 90 0 80 0 70 0 60 0 50 0 40 0 30 0 20 0 20 50 20 00 10 50 10 00 50 0 L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis) 50 00 40 50 40 00 30 50 30 00

 

Ferrous metals (by Maximilian Brodin, Commodities Sales)
 At current prices Chinese mills could still enjoy positive margins. However, with excess capacity and weaker demand there is no domestic market for their potential output, leaving companies to seek new countries to which they can export. In the longer term supply must adjust. Indeed, so far around half the $240 bn planned mining investments in Australia have been cut in anticipation. Scrap is trading at a high multiple vs. iron ore and thus probably has more room to fall. With excess capacity in steel and weak macroeconomic conditions in Europe, China and to some extent the US we doubt demand will pick up in the short term. Consequently, we are neutral to bearish towards the ferrous metals market.

LME steel billet price and inventories
(weekly data)
900 00 800 00 700 00 L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis)

  

LME lead price and inventories
(weekly data)
400 000 350 700 300 500 350 200 300 000 250 700 200 500 250 200 200 000 150 700 100 500 150 200 100 000 700 50 500 00 200 50 0 L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis) 40 00 30 50

LME tin price and inventories
(weekly data)
400 00 300 50 L E in e to (t, le a M v n ris ft xis) L Ep M rice ($ rig t a /t, h xis)

Chart Sources: Bloomberg, SEB Commodity Research

9

Commodities Monthly

Industrial metals
Aluminium futures curve
(LME, $/t)
20 60 25 50 20 50 25 40 20 40 25 30 20 30 25 20 20 20 25 10 20 10 25 00 20 00 15 90 10 90 15 80 10 80 se -1 p 2 d c-1 e 2 ju -1 n 3 se -1 p 3 d c-1 e 3 ju -1 n 4 se -1 p 4 d c-1 e 4 ju -1 n 5 se -1 p 5 m r-1 a 3 m r-1 a 4 m r-1 a 5

Copper futures curve
(LME, $/t)
80 50 80 40 80 30 80 20 80 10 80 00 70 90 70 80 70 70 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4 70 60 70 50 70 40 70 30 m r-1 a 3 m r-1 a 4 m r-1 a 5 m r-1 a 6 se -1 p 2 d c-1 e 2 ju -1 n 3 se -1 p 3 d c-1 e 3 ju -1 n 4 se -1 p 4 d c-1 e 4 ju -1 n 5 se -1 p 5 d c-1 e 5 ju -1 n 6 ju -1 n 6 o 3 kt-1 d c-1 e 5 m r-1 a 6 se -1 p 6 se -1 p 6 n v-1 o 3 se -1 p 6 ju -1 n 6 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Nickel futures curve
(LME, $/t)
140 80 120 80 100 80 180 70 160 70 140 70 120 70 100 70 180 60 160 60 140 60 120 60 100 60 180 50 160 50 140 50 m r-1 a 3 m r-1 a 4 se -1 p 2 d c-1 e 2 ju -1 n 3 se -1 p 3 d c-1 e 3 ju -1 n 4 se -1 p 4 d c-1 e 4

Zinc futures curve
(LME, $/t)
20 30 25 20 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4 20 20 25 10 20 10 25 00 20 00 15 90 10 90 15 80 10 80 m r-1 a 5 m r-1 a 6 m r-1 a 3 m r-1 a 4 m r-1 a 5 m r-1 a 6 se -1 p 3 ju -1 n 5 se -1 p 5 d c-1 e 5 ju -1 n 6 se -1 p 6 se -1 p 2 d c-1 e 2 ju -1 n 3 se -1 p 3 d c-1 e 3 ju -1 n 4 se -1 p 4 d c-1 e 4 ju -1 n 5 se -1 p 5 ag 3 u -1 d c-1 e 5 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Lead futures curve
(LME, $/t)
25 30 20 30 25 20 20 20 25 10 20 10 25 00 20 00 15 90 10 90 15 80 10 80 m r-1 a 3 m r-1 a 4 m r-1 a 5 m r-1 a 6 se -1 p 2 d c-1 e 2 ju -1 n 3 se -1 p 3 d c-1 e 3 ju -1 n 4 se -1 p 4 d c-1 e 4 ju -1 n 5 se -1 p 5 d c-1 e 5 ju -1 n 6 se -1 p 6 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Tin futures curve
(LME, $/t)
200 20 250 10 200 10 250 00 200 00 150 90 100 90 150 80 n v-1 o 2 100 80 o 2 kt-1 se -1 p 2 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

fe -1 b 3

m r-1 a 3

m j-1 a 3

d c-1 e 2

ja -1 n 3

a r-1 p 3

ju -1 n 3

Chart Sources: Bloomberg, SEB Commodity Research

ju 3 l-1

10

Commodities Monthly

Precious metals
“It’s now or never” may be something of an exaggeration but after a year-long consolidation this is definitely what the gold market has been waiting for. Speculative net longs have increased sharply while physical ETF holdings have printed new highs as a new wave of QE euphoria drives the expectations higher. Both the ECB and Fed have now launched further rounds of substantial monetary easing. With markets already quite saturated by liquidity this is likely to be supportive for gold and the rest of the precious metals complex. In the short- to medium-term gold may potentially hit new highs. However, on a one-year horizon we hold a more bearish view on gold. According to SEB’s main macroeconomic scenario growth is expected to improve over the next 12 months while liquidity settings are likely to stabilize and later contract. In such an environment gold is unlikely to prosper. To avoid a major sell-off as investors switch into growth assets inflation expectations must increase. This is not impossible given the fact that central banks worldwide are trying to achieve just that. However, it could take several years for them to succeed, leaving gold in a soft spot. Further potential support could come from disappointing mine production growth, which would be surprising considering the exceptionally strong incentives available. Evident cracks in the Chinese economic façade leave us increasingly sceptical that the country will drive demand to the same extraordinary extent as in recent years though. Both platinum (in particular) and palladium have been driven higher by a further factor in addition to liquidity, namely the escalation of the South African labour conflict. In the short-term, a resolution appears unlikely following the deaths of several workers. Indeed, there is a risk it may escalate and possibly spread to other mining operations. While the platinum market remains in surplus this year, as long as the conflict lasts it may become tighter. As above-ground buffer stocks are fairly small the impact on prices could be substantial. A return to post-2008 highs around $1900/ozt is a real possibility for platinum. However, for such a level to be sustainable would require improved demand expectations. The current situation also boosts long-term price expectations for platinum as additional losses of income by mining companies will probably have a negative effect on already insufficient investments in future production. Expenses in the strong South African rand and income in weak US dollars have already hurt profitability for a decade.

Precious metal prices
(COMEX/NYMEX, indexed, weekly closing, January 2010 = 100)
20 9 20 8 20 7 20 6 20 5 20 4 20 3 20 2 20 1 20 0 10 9 10 8 10 7 10 6 10 5 10 4 10 3 10 2 10 1 10 0 9 0 8 0 Silv r e Pla u tin m G ld o Pa d m lla iu

Gold to silver ratio
(front month, weekly closing)
8 6 8 2 7 8 7 4 7 0 6 6 6 2 5 8 5 4 5 0 4 6 4 2 3 8 3 4 3 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02

Gold and currencies vs. USD
1 4 1 3 1 2 1 1 1 0 9 8 7 6 5 4 3 2 1 0 -1 -2 G L OD E R U J PY

Chart Sources: Bloomberg, SEB Commodity Research

ja -10 n fe -1 b 0 m r-1 a 0 a r-1 p 0 m j-1 a 0 ju -10 n ju l-10 ag 0 u -1 se -1 p 0 o 0 kt-1 n v-1 o 0 d c-1 e 0 ja -11 n fe -1 b 1 m r-1 a 1 a r-1 p 1 m j-1 a 1 ju -11 n ju l-11 ag 1 u -1 se -1 p 1 o 1 kt-1 n v-1 o 1 d c-1 e 1 ja -12 n fe -1 b 2 m r-1 a 2 a r-1 p 2 m j-1 a 2 ju -12 n ju l-12 ag 2 u -1 YT (% D ) M M (% o ) G BP SE K R B U N K O C F H

11

Commodities Monthly

Precious metals
Gold
 Speculative net long positions in COMEX gold have started to recover from their lowest level since 2008. Short positions have normalized while longs are relatively high. Physical ETF holdings have frequently hit new highs since mid-August (2504 tonnes at the time of writing) after remaining very stable since the end of last year. US gold coin sales fell 65% in August y/y to 39 kozt, probably reflecting limited inflation worries in the retail segment. According to Q2 data published by the World Gold Council, gold demand declined 7% y/y and 10% q/q to 990 tonnes, largely due to decreasing investment and jewellery demand, though stronger central bank buying partly compensated.

Gold price
(COMEX, $/ozt, front month, weekly closing)
20 00 10 90 10 80 10 70 10 60 10 50 10 40 10 30 10 20 10 10 10 00 90 0 80 0 70 0 60 0 50 0 40 0 30 0 20 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 01 21 02

  

Silver
   Speculative net long positions in COMEX silver have rebounded sharply to multi-year highs driven both by increasing long- and decreasing short positions. Once again, silver appears to be acting as gold’s more volatile cousin, driving the gold to silver ratio from 59 down to 51. Physical ETF holdings have continued to trend higher, albeit slowly but surely, over the summer to stand currently less than 300 tonnes below their early-2011 record high of 18,639 tonnes. However, US Mint coin sales continued to fall in August to only 2,870 kozt, a decrease of 22% vs. the same period last year.

Silver price
(COMEX, $/ozt, front month, weekly closing)
5 0 4 8 4 6 4 4 4 2 4 0 3 8 3 6 3 4 3 2 3 0 2 8 2 6 2 4 2 2 2 0 1 8 1 6 1 4 1 2 1 0 8 6 4 2 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 02
20 30 25 00 10 80 80 0 70 0 60 0 50 0 40 0 80 0 30 0 20 0 10 0 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01 21 02 50 5 30 0 15 50 10 30 15 00

Platinum & Palladium
   NYMEX palladium and platinum speculators have turned around sharply sending net longs from multi-year lows to relative highs. Both the protracted South African labour dispute and bullish liquidity fuelled precious metal market sentiment are driving the rally. Vehicle sales in all regions, the predominant source of demand, remain extremely resilient to macroeconomic headwinds and therefore price supportive. While physical palladium ETF holdings have remained stable at around 60 tonnes (compared with a record 73 tonnes in early 2011), platinum holdings have just hit a new high of 46 tonnes. Overall, holdings are almost unchanged compared with two years ago after having increased from zero to current levels between 2007 and 2010.

Platinum and palladium prices
(NYMEX, $/ozt, front month, weekly closing)
10 10 10 00 90 0 Pa d m (le a lla iu ft xis) Pla u (rig t a tin m h xis)

Chart Sources: Bloomberg, SEB Commodity Research

12

Commodities Monthly

Precious metals
Gold futures curve
(COMEX, $/ozt)
10 90 17 85 15 80 12 85 10 80 17 75 15 70 12 75 10 70 17 65 15 60 12 65 10 60 17 55 o 2 kt-1 ja -1 n 3 a r-1 p 3 ju 3 l-1 o 3 kt-1 ja -1 n 4 a r-1 p 4 ju 4 l-1 o 4 kt-1 ja -1 n 5 a r-1 p 5 ju 5 l-1 o 5 kt-1 ja -1 n 6 a r-1 p 6 ju 6 l-1 o 6 kt-1 ja -1 n 7 a r-1 p 7 ju 7 l-1 o 7 kt-1 ja -1 n 8 a r-1 p 8 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Silver futures curve
(COMEX, $/ozt)
3 ,0 5 3 ,5 4 3 ,0 4 3 ,5 3 3 ,0 3 3 ,5 2 3 ,0 2 3 ,5 1 3 ,0 1 3 ,5 0 3 ,0 0 2 ,5 9 2 ,0 9 2 ,5 8 2 ,0 8 2 ,5 7 2 ,0 7 2 ,5 6 ju -13 n ju -14 n se -1 p 2 d c-1 e 2 se -1 p 3 d c-1 e 3 m r-1 a 3 m r-1 a 4

1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

ju -15 n

se -1 p 4

d c-1 e 4

se -1 p 5

d c-1 e 5

ju -16 n

se -1 p 6

m r-1 a 5

Palladium futures curve
(NYMEX, $/ozt)
75 2 70 0 65 7 1 -0 -1 2 7 3 60 5 65 2 60 0 55 7 50 5 se -1 p 2 d c-1 e 2 ju -13 n m r-1 a 3 se -1 p 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Platinum futures curve
(NYMEX, $/ozt)
14 70 12 70 10 70 18 60 16 60 14 60 12 60 10 60 18 50 16 50 14 50 12 50 10 50 18 40 16 40 14 40 12 40 10 40 18 30 o 2 kt-1 ja -1 n 3

1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

a r-1 p 3

m r-1 a 6

Physical silver and gold ETP holdings
(weekly data, tonnes)
20 50 20 40 20 30 20 20 20 10 20 00 10 90 10 80 10 70 10 60 10 50 ja -1 n 0 fe -1 b 0 m r-1 a 0 a r-1 p 0 m j-1 a 0 ju -1 n 0 ju 0 l-1 ag 0 u -1 se -1 p 0 o 0 kt-1 n v-1 o 0 d c-1 e 0 ja -1 n 1 fe -1 b 1 m r-1 a 1 a r-1 p 1 m j-1 a 1 ju -1 n 1 ju 1 l-1 ag 1 u -1 se -1 p 1 o 1 kt-1 n v-1 o 1 d c-1 e 1 ja -1 n 2 fe -1 b 2 m r-1 a 2 a r-1 p 2 m j-1 a 2 ju -1 n 2 ju 2 l-1 ag 2 u -1 10 40 Silv r h ld g / 1 e o in s 0 G h ld g old o in s

Physical palladium and platinum ETP holdings
(weekly data, tonnes)
75 70 65 60 55 50 45 40 35 30 25 ja -1 n 0 fe -1 b 0 m r-10 a ap 0 r-1 m 0 aj-1 ju -1 n 0 jul-1 0 au -1 g 0 se -1 p 0 okt-1 0 no 0 v-1 de 0 c-1 ja -1 n 1 fe -1 b 1 m r-11 a ap 1 r-1 m 1 aj-1 ju -1 n 1 jul-1 1 au -1 g 1 se -1 p 1 okt-1 1 no 1 v-1 de 1 c-1 ja -1 n 2 fe -1 b 2 m r-12 a ap 2 r-1 m 2 aj-1 ju -1 n 2 jul-1 2 au -1 g 2 20 Pa d m h in s lla iu old g Platinu h ld s m o ing

Chart Sources: Bloomberg, SEB Commodity Research

13

o 3 kt-1

ju 3 l-1

d c-1 e 6

Commodities Monthly

Agriculture
Grains have traded sideways over the past two months although at a level well above last year’s highs. We did not expect this to happen due to strong demand destruction forces already apparent before this summers move higher. However, this development has not altered our extremely bearish long-term sector view. Nevertheless, it is probably too early to adopt an outright short exposure. Instead, it should wait until the current knot in the grain market shows signs of being untied. Before then, there are several potential additional pitfalls imminent; in Australia conditions are uncomfortably dry during current late crop development; the USDA could further downgrade its grain production estimates in its October report; export restrictions or hoarding could occur in one form or another; and local stocks could be squeezed temporarily. However, rallies from this level will cause demand to fall sharply and are therefore unlikely to last long. Following the unfortunate, counter-productive effects of FSU grain export restrictions in 2010 other more subtle methods are likely to be applied to restrict grain exports if required. There are justified concerns that Russia may be forced in this direction towards the end of the year, although this risk is well known to the market and should come as no major surprise if it occurs. Weather conditions worldwide remain abnormal, consistent with forecasting models which almost unanimously indicate a new El Niño episode starting in September and running through to the end of the year. Fortunately, only a weak to moderate event is expected, though it is still likely to result in continued substantial deviations from normal conditions, which could have both negative and positive effects on crop production. Meanwhile the US drought remains severe with recent lower temperatures and rain coming too late to significantly impact yields. Similar conditions continue to affect Europe and the FSU locally with concerns over the situation in Australia most recently increasing. Asia remains relatively normal, particularly after the Indian monsoon recovered once again. Currently, South America is the wettest region worldwide, which is positive for soil moisture levels prior to corn and soybean planning. During the past three years adverse weather conditions have been the rule rather than the exception. Two La Niña episodes and now most likely a second El Niño occurrence in close sequence, while not common, does not guarantee that conditions will normalize in coming years. Concerning the weather no one can predict the future. However, one thing is certain. Historically, rallies based on changes in meteorological conditions always end, and due to technical progress affecting agricultural commodity production the long term real price trend is negative.

Grains prices
(CBOT, indexed, weekly closing, January 2010 = 100)
20 0 10 9 10 8 10 7 10 6 10 5 10 4 10 3 10 2 10 1 10 0 9 0 8 0 ja -10 n fe -1 b 0 m r-1 a 0 a r-1 p 0 m j-1 a 0 ju -10 n ju l-10 ag 0 u -1 se -1 p 0 o 0 kt-1 n v-1 o 0 d c-1 e 0 ja -11 n fe -1 b 1 m r-1 a 1 a r-1 p 1 m j-1 a 1 ju -11 n ju l-11 ag 1 u -1 se -1 p 1 o 1 kt-1 n v-1 o 1 d c-1 e 1 ja -12 n fe -1 b 2 m r-1 a 2 a r-1 p 2 m j-1 a 2 ju -12 n ju l-12 ag 2 u -1 se -1 p 2 Wet ha So e n yb a s C rn o 0 /0 0 1 0 /0 1 2 0 /0 2 3 0 /0 3 4 0 /0 4 5 0 /0 5 6 0 /0 6 7 0 /0 7 8 0 /0 8 9 0 /1 9 0 1 /1 0 1 1 /1 1 2 7 0 Wet ha So e n yb a s C rn o

Year end grain inventories (days of supply)
(WASDE, yearly data updated monthly)
15 3 15 2 15 1 15 0 9 5 8 5 7 5 6 5 5 5 4 5 1 /1 2 3

Production and inventory estimate revisions
(WASDE, monthly data, %, 2012/2013)
3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -1 0 -1 1 -1 2 -1 3 -1 4

C rn p d ctio o ro u n C rn sto o cks W e t p d ctio h a ro u n W e t sto ha cks So e n p d ctio yb a ro u n So e n sto yb a cks

ju -1 n 2

ag 2 u -1

Chart Sources: Bloomberg, USDA, SEB Commodity Research

se -1 p 2

jul-1 2

14

Commodities Monthly

Agriculture
Corn
 Net speculative longs in corn at CBOT are not far below 2010 highs, indicating bullish positioning is close to peaking and that short covering could be substantial on bearish news. US ethanol production is still stable as high gasoline prices ensure blending demand remains strong and production economics reasonably satisfactory despite high corn prices. As the harvest progresses over the coming months, precise details will emerge concerning the quality of this year’s corn production. The USDA October WASDE report will be closely watched. At least crop conditions are apparently no longer deteriorating. The Northern hemisphere harvest will continue into November alongside South American planting.

Corn price
(CBOT, ¢/bu, front month, weekly closing)
80 5 80 0 70 5 70 0 60 5 60 0 50 5 50 0 40 5 40 0 30 5 30 0 20 5 20 0 10 5 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 21 00 21 01
2 1 01
2 1 01

Wheat
 Having acted as a moderator in the grains complex due to more comfortable inventory levels, the potentially sticky Australian drought is now a key market concern and must be monitored very closely going forward. Following developments this summer, CBOT positioning has reversed sharply. For the first time since mid-2011 speculators are now net long wheat. The Northern hemisphere spring wheat harvest has now ended while winter wheat planting has begun under varying soil moisture conditions.

Wheat price
(CBOT, ¢/bu, front month, weekly closing)
10 20 10 10 10 00 90 0 80 0 70 0 60 0 50 0 40 0 30 0 20 0
2 2 00 2 3 00 2 4 00 2 5 00 2 6 00 2 7 00 2 8 00 2 9 00 2 0 01 2 2 01

 

Soybeans
 The US soybean harvest has started with estimated crop conditions remaining fairly stable. Colder and slightly wetter weather could have a limited positive effect on late-planted crops. Plentiful rain, even with some locally excessive, is currently welcome as planting starts in South America. Last year, drought conditions substantially reduced production compared with initial estimates. Incentives to plant soybeans in South America remain exceptionally strong. Local testimony suggests all suitable areas of farmland are being prepared for soybean planting, a typical development when the price of an agricultural commodity rallies as strongly as it has for this particular commodity. Net speculative longs in CBOT soybeans remain near record highs.

Soybean price
(CBOT, ¢/bu, front month, weekly closing)
1 0 80 1 0 60 1 0 40 1 0 20 1 0 00 80 0 60 0 40 0 2 2 00 2 3 00 2 4 00 2 5 00 2 6 00 2 7 00 2 8 00 2 9 00 2 0 01 2 2 01

Chart Sources: Bloomberg, SEB Commodity Research

15

21 02

Commodities Monthly

Agriculture
Corn futures curve
(CBOT, ¢/bu)
8 00 7 80 7 60 7 40 7 20 7 00 6 80 6 60 6 40 6 20 6 00 5 80 5 60 m ar-13 m ar-14 m ar-15 de c-12 ju n-13 se p-13 de c-13 ju n-14 se p-14 de c-14 ju n-15 se p-15 de c-15 81 0 79 0 d ec-12 d ec-13 jun-13 sep-13 jun-14 m ar-13 m ar-14 sep-14 85 0 83 0 89 0 87 0 1 2-07 -13 1 2-08 -14 1 2-09 -14 91 0

Wheat futures curve
(CBOT, ¢/bu)
95 0 93 0 12 7-1 -0 3 12 8-1 -0 4 12 9-1 -0 4

Soybean futures curve
(CBOT, ¢/bu)
15 70 10 70 15 60 10 60 15 50 10 50 15 40 10 40 15 30 10 30 n v-1 o 2 n v-1 o 3 n v-1 o 4 fe -1 b 3 fe -1 b 4 m j-1 a 3 m j-1 a 4 fe -1 b 5 15 20 m j-1 a 5 ag 3 u -1 ag 4 u -1 1 -0 -1 2 7 3 1 -0 -1 2 8 4 1 -0 -1 2 9 4

Sugar
(NYBOT, ¢/lb)
36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 0 20 9 0 20 0 1 20 1 1 20 2 1

Cotton
(NYBOT, ¢/lb)
22 0 20 0 18 0 16 0 14 0 12 0 10 0 8 0 6 0 4 0 2 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 0 20 9 0 20 0 1 20 1 1 20 2 1

Cocoa
(NYBOT, $/t)
38 00 36 00 34 00 32 00 30 00 28 00 26 00 24 00 22 00 20 00 18 00 16 00 14 00 12 00 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 0 20 9 0 20 0 1 20 1 1 20 2 1

Chart Sources: Bloomberg, SEB Commodity Research

16

Commodities Monthly

Commodity related economic indicators
EUROZONE Industrial production (%, YoY) Industrial production (%, MoM) Capacity utilization (%, sa) Manufacturing PMI Real GDP (%, YoY) Real GDP (%, QoQ, sa) CPI (%, YoY) CPI (%, MoM) Consumer confidence USA Industrial production (%, YoY) Industrial production (%, MoM) Capacity utilization (%) Manufacturing PMI Real GDP (%, YoY) Real GDP (%, QoQ, saar) CPI (%, MoM) CPI (%, MoM, sa) OECD Composite Leading Indicator Consumer confidence (Michigan) Nonfarm payrolls (net change, sa, ‘000) JAPAN Industrial production (%, YoY, nsa) Industrial production (%, MoM, sa) Capacity utilization (%, sa) Manufacturing PMI Real GDP (%, YoY) Real GDP (%, QoQ, sa) CPI (%, YoY) CPI (%, MoM) OECD Composite Leading Indicator Consumer confidence CHINA Industrial production (%, YoY) Manufacturing PMI Real GDP (%, YoY) CPI (%, YoY) OECD Composite Leading Indicator Consumer confidence Bank lending (%, YoY) Fixed asset investment (%, YoY) OTHER OECD Area Comp. Leading Indicator Global manufacturing PMI
Sources: Bloomberg, SEB Commodity Research

Current
-2,3 0,6 77,8 45,1 -0,5 -0,2 2,6 0,4 -24,6 2,8 -1,2 78,2 49,6 2,3 1,7 1,7 0,6 103,4 79,2 96 -0,8 -1,0 88,1 47,7 3,2 0,2 -0,7 -0,3 104,9 40,6 8,9 49,2 7,6 2,0 102,3 98,2 16,1 20,4 103,2 48,1

Date
2012-07-31 2012-07-31 2012-09-30 2012-08-31 2012-06-30 2012-06-30 2012-08-31 2012-08-31 2012-08-31 2012-08-31 2012-08-31 2012-08-31 2012-08-31 2012-06-30 2012-06-30 2012-08-31 2012-08-31 2011-03-31 2012-09-30 2012-08-31 2012-07-31 2012-07-31 2012-07-31 2012-08-31 2012-06-30 2012-06-30 2012-08-31 2012-07-31 2011-02-28 2012-08-31 2012-08-31 2012-08-31 2012-06-30 2012-08-31 2011-03-31 2012-07-31 2012-08-31 2012-06-30 2011-03-31 2012-08-31

Previous
-2,1 -0,6 79,7 44,0

Date
2012-06-30 2012-06-30 2012-06-30 2012-07-31

Next
2012-10-12 2012-10-12 2012-09-20 2012-11-15 2012-11-15 2012-10-16 2012-10-16 2012-09-20

2,4 -0,5 -21,5 4,3 0,5 79,2 49,8 2,4 2,0 1,4 0,0 103,1 74,3 141 -1,5 0,4 87,7 47,9 2,9 1,3 -0,8 -0,5 104,2 40,6 9,2 50,1 8,1 1,8 102,1 99,3 16,0 20,9 103,0 48,4

2012-07-31 2012-07-31 2012-07-31 2012-07-31 2012-07-31 2012-07-31 2012-07-31 2012-03-31 2012-03-31 2012-07-31 2012-07-31 2011-02-28 2012-08-31 2012-07-31 2012-06-30 2012-06-30 2012-06-30 2012-07-31 2012-03-31 2012-03-31 2012-07-31 2012-06-30 2011-01-31 2012-07-31 2012-07-31 2012-07-31 2012-03-31 2012-07-31 2011-02-28 2012-06-30 2012-07-31 2012-03-31 2011-02-28 2012-07-31

2012-10-16 2012-10-16 2012-10-01 2012-09-27 2012-10-16 2012-10-16 2012-09-28 2012-10-05 2012-09-28 2012-09-28 2012-09-28 2012-11-12 2012-09-28

2012-10-18 2012-10-01 2012-10-18 2012-10-15

17

Commodities Monthly

Performance
Closing last week
UBS Bloomberg CMCI Index (TR) UBS Bloomberg CMCI Index (ER) UBS Bloomberg CMCI Index (PI) UBS B. CMCI Energy Index (PI) UBS B. CMCI Industrial Metals Index (PI) UBS B. CMCI Precious Metals Index (PI) UBS B. CMCI Agriculture Index (PI) Baltic Dry Index Crude Oil (NYMEX, WTI, $/b) Crude Oil (ICE, Brent, $/b) Aluminum (LME, $/t) Copper (LME, $/t) Nickel (LME, $/t) Zinc (LME, $/t) Steel (LME, Mediterranean, $/t) Gold (COMEX, $/ozt) Corn (CBOT, ¢/bu) Wheat (CBOT, ¢/bu) Soybeans (CBOT, ¢/bu)
Sources: Bloomberg, SEB Commodity Research

YTD (%)
9,7 9,6 10,1 5,8 9,2 15,0 15,1 -63,1 0,2 8,6 8,9 10,3 -5,0 14,7 -34,2 13,0 20,3 37,5 44,9

1m (%)
7,4 7,4 7,5 4,5 15,0 13,5 4,5 -11,7 6,0 2,3 18,5 13,0 14,9 16,3 -10,5 10,7 -0,3 6,9 3,4

1q (%)
17,2 17,1 17,4 17,5 12,1 11,9 24,7 -27,4 18,0 20,2 12,6 12,9 6,9 11,8 -11,6 9,4 29,3 43,9 25,3

1y (%)
0,0 0,0 1,0 4,5 -4,6 -4,3 0,3 -65,6 11,3 3,8 -6,7 -2,9 -16,8 -2,1 -40,3 -3,0 9,0 27,9 26,4

5y (%)
18,7 15,2 44,6 26,5 2,0 147,2 80,1 -92,0 25,2 53,1 -9,5 11,0 -37,8 -25,8 N/A 148,9 131,1 7,1 84,5

1390,72 1307,29 1674,40 1578,84 1141,19 2657,80 2010,83 662,00 99,00 116,66 2200,00 8380,00 17775,00 2116,00 349,00 1770,10 777,50 897,50 1736,50

Major upcoming commodity events
Date
Department of Energy, US inventory data American Petroleum Institute, US inventory data CFTC, Commitment of Traders US Department of Agriculture, Crop Progress International Energy Agency, Oil Market Report OPEC, Oil Market Report Department of Energy, Short Term Energy Outlook US Department of Agriculture, WASDE International Grains Council, Grain Market Report OPEC ordinary meeting, Vienna, Austria
Sources: Bloomberg, SEB Commodity Research

Source
www.eia.doe.gov www.api.org www.cftc.gov www.usda.gov www.oilmarketreport.com www.opec.org www.eia.doe.gov www.usda.gov www.igc.org.uk www.opec.org

Wednesdays, 16:30 CET Tuesdays, 22:30 CET Fridays, ~21:30 CET Mondays, ~22.30 CET (season) October 12 October 10 October 10 October 11 September 27 December 12

Contact list
COMMODITIES
Torbjörn Iwarson RESEARCH Bjarne Schieldrop Filip Petersson SALES SWEDEN Pär Melander Karin Almgren SALES NORWAY Maximilian Brodin SALES FINLAND Jussi Lepistö SALES DENMARK Peter Lauridsen TRADING Niclas Egmar

Position
Head of Commodities, Sweden Chief analyst Strategist Corporate Institutional Corporate/Institutional Corporate/Institutional Corporate/Institutional Corporate/Institutional

E-mail
torbjorn.iwarson@seb.se

Phone
+46 8 506 234 01

Mobile

bjarne.schieldrop@seb.no filip.petersson@seb.se par.melander@seb.se karin.almgren@seb.se maximilian.brodin@seb.no Jussi.lepisto@seb.fi peter.lauridsen@seb.dk niclas.egmar@seb.se

+47 22 82 72 53 +46 8 506 230 47 +46 8 506 234 75 +46 8 506 230 51 +47 22 82 72 73 +358 9 616 285 21 +45 331 777 34 +46 8 506 234 55

+47 92 48 92 30 +46 70 996 08 84 +46 70 714 90 79 +46 73 642 31 76 +47 92 45 67 27 +358 40 844 187 7 +45 616 211 59 +46 70-618 560 4

18

Commodities Monthly

COMMODITY RESEARCH DISCLAIMER
This statement affects your rights
This report has been compiled by SEB’s Commodity Research, a division within Skandinaviska Enskilda Banken AB (publ) (“SEB”), to provide background information only. It is confidential to the recipient, any dissemination, distribution, copying, or other use of this communication is strictly prohibited.

Good faith & limitations
Opinions, projections and estimates contained in this report represent the author’s present opinion and are subject to change without notice. Although information contained in this report has been compiled in good faith from sources believed to be reliable, no representation or warranty, expressed or implied, is made with respect to its correctness, completeness or accuracy of the contents, and the information is not to be relied upon as authoritative. To the extent permitted by law, SEB accepts no liability whatsoever for any direct or consequential loss arising from use of this document or its contents.

Disclosures
The analysis and valuations, projections and forecasts contained in this report are based on a number of assumptions and estimates and are subject to contingencies and uncertainties; different assumptions could result in materially different results. The inclusion of any such valuations, projections and forecasts in this report should not be regarded as a representation or warranty by or on behalf of the SEB Group or any person or entity within the SEB Group that such valuations, projections and forecasts or their underlying assumptions and estimates will be met or realized. Past performance is not a reliable indicator of future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. This document does not constitute investment advice and is being provided to you without regard to your investment objectives or circumstances. Anyone considering taking actions based upon the content of this document is urged to base investment decisions upon such investigations as they deem necessary. This document does not constitute an offer or an invitation to make an offer, or solicitation of, any offer to subscribe for any securities or other financial instruments.

Conflicts of Interest
SEB has in place a Conflicts of Interest Policy designed, amongst other things, to promote the independence and objectivity of reports produced by its Research departments, which are separated from the rest of SEB business areas by information barriers; as such, research reports are independent and based solely on publicly available information. Your attention is drawn to the fact that a member of, or an entity associated with, SEB or its affiliates, officers, directors, employees or shareholders of such members (a) may be represented on the board of directors or similar supervisory entity of the companies mentioned herein (b) may, to the extent permitted by law, have a position in the securities of (or options, warrants or rights with respect to, or interest in the securities of the companies mentioned herein or may make a market or act as principal in any transactions in such securities (c) may, acting as principal or as agent, deal in investments in or with companies mentioned herein, and (d) may from time to time provide investment banking, underwriting or other services to, or solicit investment banking, underwriting or other business from the companies mentioned herein.

Recipients
In the UK, this report is directed at and is for distribution only to (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (The ‘‘Order’’) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as ‘‘relevant persons’’. This report must not be acted on or relied upon by persons in the UK who are not relevant persons. In the US, this report is distributed solely to persons who qualify as ‘‘major U.S. institutional investors’’ as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. U.S. persons wishing to effect transactions in any security discussed herein should do so by contacting Skandinaviska Enskilda Banken AB (publ) (‘SEBAB’). SEBAB accepts responsibility for the content of this report in connection with its distribution in the US. The distribution of this document may be restricted in certain jurisdictions by law, and persons into whose possession this documents comes should inform themselves about, and observe, any such restrictions.

The SEB Group: members, memberships and regulators Skandinaviska Enskilda Banken AB (publ) is incorporated in Sweden, as a Limited Liability Company. It is regulated by Finansinspektionen, and by the local financial regulators in each of the jurisdictions in which it has branches or subsidiaries, including in the UK, by the Financial Services Authority; Denmark by Finanstilsynet; Finland by Finanssivalvonta; Germany by Bundesanstalt für Finanzdienstleistungsaufsicht and Norway by Finanstilsynet. In the US, SEBAB is a U.S. broker-dealer, registered with the Financial Industry Regulatory Authority (FINRA). SEBAB is a direct subsidiary of SEB. SEB is active on major Nordic and other European Regulated Markets and Multilateral Trading Facilities, in as well as other non-European equivalent markets, for trading in financial instruments. For a list of execution venues of which SEB is a member or participant, visit http://www.seb.se.

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SEB Commodity Research
Bjarne Schieldrop, Chief Commodity Analyst bjarne.schieldrop@seb.no +47 9248 9230 Filip Petersson, Commodity Strategist filip.petersson@seb.se +46 8 506 230 47

www.seb.se

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