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Accelerating out of oil — The birth and death of commodities in an EV world

• In our scenario, 5 percent of the global car fleet will be electrified by 2027
• Nickel, cobalt and lithium are winners in the battery equation
• Oil as fuel to peak by 2027

Martin Jansson, Strategist |

Commodity Strategy Comment — LME week in three minutes

At the annual LME Week, miners and metal traders gathered in London to discuss markets, the outlook and price contracts for next year. This year's event was an exercise in sharing successful trading stories after one of the recovery's best trading years. Year-to-date, copper is up by 24%, zinc by 24% and aluminum by 27%. Nickel, the only laggard, is up 16%. There was no lack of topics, with the Chinese supply reform starting to bite; China was also seen as the major downside risk, as the sugar hit fades in the property and fixed-asset investment segments of the economy.

Martin Jansson, Strategist |

Commodity Strategy Comment — China Trip 2017: Healthy growth leaves room to tackle overcapacity

• Our travel notes: we left China more positive than we arrived
• Party congress will consolidate President Xi's power
• Cutbacks in China finally rebalance commodity markets

Martin Jansson, Strategist |

Råvaruplanket — Utbudssidan balanserar marknaden

Kinas reformer stärker priserna
Råvarupriserna har stigit markant, den här gången är det utbudssidan av prisekvationen som driver åter-hämtningen snarare än efterfrågan. Oljemarknaden har just nu medvind från stark efterfrågan, lagernivåer som faller och produktion som fortfarande är hög men inte längre stiger. Industrimetaller stiger i pris efter att Kina börjat skära ner på produktionen för att förbättra luftkvalitén.

Förväntningar på starkare utveckling i Kina inför den kommande partikongressen den 18:e oktober gör att vissa råvarupriser kan ha stigit lite extra, men vi tror att produktionsreformen i Kina är en långvarig faktor som motiverar högre  jämviktspris för flera råvaror.

Neddragningarna här för att stanna
Genom att minska på överproduktionen av vissa råva-ror kan Kina slå två flugor i en smäll: lönsamheten stiger för de producenter som får vara kvar och luften blir bättre vilket gynnar alla.

Järnmalm och kol har stigit mest och är också de rå-varor där Kina minskat produktionen mest. Även stål och aluminium stiger drivet av samma fenomen. Ned-stängningar av aluminium har tagit ut sin rätt och nu är tillväxten av aluminiumproduktion i Kina negativ.

Martin Jansson, Strategist |

Commodity Bulletin — The supply side is balancing the market

China's reforms are strengthening prices
Commodity prices have risen significantly. This time it is the supply side of the price equation which is driving the recovery, rather than demand. At present, the oil market is benefiting from strong demand, falling inventory levels and production which is still high, but no longer increasing. Industrial metal prices are rising now that China has started to reduce production levels to improve air quality.

Expectations of stronger performance in China ahead of the Party Congress on 18 October mean that some commodity prices might have risen a little more, but we believe that the production reforms being seen in China are a long-term factor which justifies higher equilibrium prices for several commodities.

The reductions are here to stay
By reducing over-production of some commodities, China can kill two birds with one stone: profitability increases for producers who remain and air quality improves, which benefits everyone.

Iron ore and coal are the commodities which have increased most; they are also the ones where China has cut production the most. Steel and aluminium have also been driven by the same phenomenon. The production cuts in aluminium have had their effect, and the growth rate in aluminium production in China is now negative.

Martin Jansson, Strategist |

Commodity Strategy Comment — A remarkable rebound after an early summer lull

The commodity market has witnessed a remarkable rebound since June. The Handelsbanken commodity index, including futures from all sectors, gained 10 %, which is due to a combination of various risk premiums, a lower USD and further cutbacks in Chinese supply reform. All told, there is a fragile trend of rising prices.

Martin Jansson, Strategist |