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Low commodity prices overshadow earnings

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ETF Securities reports that the second quarter has seen low commodity prices dominate.

Commodities extended their declines this week, the firm writes, and their impact was clearly resonated as the world’s leading energy and mining stocks across the globe posted losses in their second quarter earnings release.
 
“As these companies trim future revenue outlooks and cut capex and therefore reduce production, their impact should work their way back in the form of higher commodity prices” the firm writes.
 
It is weak Chinese demand that weighs on commodity prices while copper stockpiles are at their highest in 18 months as reported by the LME. Amidst the backdrop of copper price trading at a six year low, ETF Securities reports that the world’s largest producers, namely Freeport McMoRan, First Quantum and Antofagasta planned to cut back on production as they struggle to remain profitable.
 
Power restrictions, delayed projects and cost cutting threaten to curtail supply, which we believe will be supportive for copper prices. Despite the unexpected decline in stockpiles of 4.2 million barrels to 459.7 million against the market forecast
for 850,000 barrel increase, oil continued to tread in bear market territory as negative
sentiment on China’s growth prospects weighed on prices.
 
Corn fell by 7.4 per cent after the International Grains Council raised its estimate for Chinese corn production by five million metric tonnes to an all-time high of 225 million tonnes, allaying concerns of bad weather damaging corn fields in the US and Europe. Tin rose 8.6 per cent last week on the back of lower exports from Indonesia, the world’s largest supplier.
 

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