Archive for Opinions – Page 65

22 Dec

How government payments to the vulnerable can multiply to create economic growth for everyone

By Conrad Nunnenmacher, United Nations University; Franziska Gassmann, Maastricht University, and Julieta Morais, United Nations University 

The economic fallout of COVID-19 left people around the world facing a significant threat to their livelihood. As governments scrambled to mitigate the pandemic’s impact on their populations, many decided to use direct payments to support vulnerable citizens.

More than a sixth of the world’s population received some sort of cash transfer in 2020. These programmes were a key source of support for many people during the COVID-19 pandemic, with governments across the globe scaling up or introducing such payments.

Brazil, for example, introduced the Auxílio Emergencial programme, while the US implemented Economic Impact Payments. Both cash transfer programmes aimed to shield vulnerable populations. This was also not exclusive to middle- and high-income countries. Togo, for instance, implemented the Novissi cash transfer programme during the pandemic.

Using cash payments to protect people’s livelihoods and lift the poor out of poverty is not a novel strategy. It can be a simple way to provide basic social protection to people in need, helping citizens to withstand sudden shocks and also facilitating their recovery after a crisis.

Cash assistance as financial burden?

But cash transfers still attract a lot of debate. Besides typical concerns like creating dependency and reducing labour supply, these programmes are costly. This can cause concern about their sustainability and hinder the initial implementation and scale-up.

For example, the Social Assistance Grants for Empowerment programme in Uganda in 2010 became so politicised that it was challenged every step of the way to its implementation and later expansion. Even before its pilot programme, concerns regarding its financial sustainability and the potential creation of welfare dependencies were raised by politicians.

During periods of economic crisis, austerity policies can also directly influence social assistance initiatives. After the 2010 economic crisis, for example, Greece initially suspended and subsequently terminated its housing benefit programme, attributing this decision to budget constraints.

But cash transfer programmes aren’t “handouts”. The positive impacts on the people that receive them are well documented. They are powerful instruments for strengthening household resilience and fostering opportunities that can extend beyond the immediate recipients.

The multiplier effect

There is another vital element of social cash transfers that most people aren’t aware of: the economic multiplier effect. In a recent study with Ugo Gentilini, Giorgia Valleriani and Yuko Okamura of the World Bank, and Giulio Bordon of the UN’s International Labour Organization, we found the multiplier effect can greatly enhance the financial sustainability of social cash transfer programmes.

The core concept is that every dollar transferred that is spent rather than saved can increase the total income in the economy beyond its original value.

Consider a smallholder farmer who uses some of her grant to buy fertiliser at the local market. The local merchant profits from it and then spends this additional income, increasing profits for someone else and setting off a ripple effect through the economy. These taxable gains go beyond the people that get the payment, effectively “multiplying” the original grant’s worth for the economy.

Investing in the entire economy

We reviewed 23 studies of 19 cash assistance programmes across 13 countries and found substantial evidence of this multiplier effect from social cash transfers.

In Brazil, for example, Bolsa Família, the current national social welfare programme of Brazil and one of the largest cash transfer programmes in the world, was found to increase real GDP per R$1 (£0.16) spent by R$1.04. This is a small but positive spillover into the Brazilian economy.

Another noteworthy example is the GiveDirectly initiative in rural western Kenya, a pilot programme that offered a US$1,000 (£791) one-off transfer to 10,500 poor households. This programme led to a strong positive economic shock with a multiplier of 2.5 per US$1. So, every US$1 transferred generated a value of US$2.50 locally – a strong positive spillover to the local economy.

Social cash transfers have the potential to not only support the poor and vulnerable, but also to stimulate the wider economy. Rather than simply accepting the general perception of social transfers as an expense, we should start recognising their true value as an investment in a country’s entire economy.The Conversation

About the Authors:

Conrad Nunnenmacher, PhD Research Fellow in Innovation, Economics, Governance and Sustainable Development, United Nations University; Franziska Gassmann, Professor of Social Protection and Development, Maastricht University, and Julieta Morais, Researcher in Social Protection, United Nations University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
22 Dec

4 business lessons from the Boston Tea Party

By Jay L. Zagorsky, Boston University 

December 2023 marks the 250th anniversary of the Boston Tea Party, one of the most famous events leading up to the Revolutionary War. On the night of Dec. 16, 1773, Colonists marched aboard three ships and threw more than 90,000 pounds of tea into Boston Harbor. No one died, and the only things injured were the tea leaves, but this event helped precipitate a major war.

I am a business school professor who often drives by the Tea Party site while taking his wife to work. Each time, I ponder the lessons this “party” has for people in business. Many aren’t obvious. Here are four that come to mind.

1) Publicity is important

There were actually 10 “tea party” protests across the 13 Colonies in the late 1770s. However, only one ended up in the history books. The others, including a second one in Boston just four months afterward, were largely forgotten. Getting the word out fast, which in those days was done by newspaper, is key. Otherwise, you can do a lot of work that will be ignored.

2) Dramatic changes in the market can cause problems

The volume of tea imports into the Colonies rose at a very fast rate in the four years leading up to the Boston Tea Party. They went from 55 tons in 1770, which was close to the amount dumped in the harbor, to 370 tons the year the tea was dumped. This was an increase of almost seven times. The population of the Colonies was about 2 million people in 1770 and didn’t expand much in that four-year period. Basic economics tells us this dramatic increase in supply without more customers meant the price of tea had to fall a lot.

We don’t know for sure the identities of the ringleaders who convinced people to dump the tea. As a business school professor, I believe it’s clear that some protesters were protecting their commercial interests. Shopkeepers, merchants and smugglers who had stocks of tea on hand didn’t want to see 90,000 more pounds of tea flooding the market. It would make them lose money. Dumping the tea in the harbor was a way of protecting their investment.

3) Even relatively small dollar amounts make big impressions

For all the fuss about the tea that was dumped, the damages weren’t huge. The British East India Company reported 9,659 English pounds in damages. That would be about 1.2 million pounds in today’s money, according to the Bank of England’s inflation calculator. Using the current exchange rate of $1.26 to a British pound means the tea dumped cost about US$1.5 million.

To give you a rough idea of how small this is, last year the U.S. imported half a billion dollars’ worth of tea. In terms of my favorite British import, the destroyed tea was worth about the same price as three Rolls-Royce Phantoms.

4) Timing matters … but it isn’t everything

The Tea Party happened on a night when the tide was especially low, with only 2 feet of water under the ships. Because the tide was so low, much of the tea didn’t get wet. Instead, it ended up in a giant pile, mostly dry, beside the boats. This meant the partygoers had to climb out of the boats and spend hours sloshing in the mud moving the tea into the water.

Given that the tea arrived at the end of November, they could have picked a time that would have made the job less difficult. Nonetheless, the revolutionaries weren’t deterred, since hard work can often overcome the worst timing.

The Tea Act of 1773 helped set the stage for the Revolutionary War.

When it comes down to it, history is more than just stories we tell children. The past contains many lessons for adults, including businesspeople. This incident, which played a key role in inciting the Revolutionary War that freed the American Colonies from British rule, is so much more than a cartoon image of men dumping chests of tea into Boston Harbor.The Conversation

About the Author:

Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
19 Dec

Top 4 global market risks for 2024

By George Prior 

Investors are facing a myriad of uncertainties that pose substantial risks to the stability and performance of global markets – but as ever where there are risks there are also significant opportunities.
Here, Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations shares what he believes are the four most significant risks confronting global markets in 2024 and examines their potential impact on investors.
1. Middle East crisis escalation
“One of the most pressing risks facing global markets is the potential escalation of the Middle East crisis. The October 7 attack by Hamas on Israel has heightened concerns about the possibility of the conflict spreading to involve other nations and groups in the region.
“Any escalation could disrupt global oil supplies, leading to increased market volatility. Investors are closely monitoring the situation, as heightened tensions may have profound implications for energy prices and overall market stability.
“Industries tied to energy, transportation, and commodities could experience significant fluctuations. Diversification and risk management strategies will be crucial for investors to navigate potential geopolitical shocks emanating from the Middle East.”
2. Resurgent inflation
“While inflation witnessed a decline from its 2022 peaks in most major economies, including the US, UK and eurozone, the specter of resurgent inflation remains a critical risk in 2024.
“Energy prices, a major driver of inflation, are known for their volatility, and any sudden surge could lead to an increase in the headline inflation rate.
“Central banks, in response, may be compelled to raise interest rates to curb inflationary pressures, defying market expectations of rate cuts.
“For investors, a scenario of rising inflation and higher interest rates poses challenges, particularly in fixed-income investments and interest-sensitive sectors.
“Corporate earnings could be impacted, and the heightened risk of recession may lead to a reassessment of investment portfolios. Investors must remain vigilant and adjust their strategies in response to changing inflation dynamics to preserve capital and optimize returns.”
3. Elections across the globe
“2024 is marked by decisive elections in over 40 countries, representing more than 50% of the world’s GDP.
“Elections introduce an element of political uncertainty, and outcomes can shape economic policies, trade relations, and market sentiments.
“Key players, including the UK, the US, China, India, Taiwan, South Korea, Ireland, South Africa and others, are set to undergo electoral processes that could have far-reaching consequences for global markets.
“Investors are likely to face increased volatility in the lead-up to and aftermath of elections. Shifts in political landscapes typically result in policy changes that impact various sectors, prompting investors to reassess their portfolios.”
4. China’s growth crisis
“Contrary to earlier forecasts, China’s post-COVID-19 reopening has not led to the anticipated growth in 2023.
“The real estate crisis, representing a significant portion of China’s GDP, has been a key impediment to economic recovery.
“As we enter 2024, the prospect of China’s economic stagnation looms large, carrying implications for trade partners and global markets.
“Investors with exposure to China or industries heavily reliant on Chinese demand may face challenges if the economic downturn persists. Supply chain disruptions, reduced consumer spending, and market volatility could ensue, impacting the performance of multinational corporations.”
The deVere CEO concludes: “The interplay of geopolitical tensions, inflationary pressures, electoral outcomes, and China’s economic woes underscores the need for a proactive and diversified approach to investment management to protect and grow personal wealth.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions
19 Dec

Bank of Japan disappoints Yen bulls

By ForexTime 

  • Today, Bank of Japan offered zero guidance on rate hike in 2024
  • USDJPY climbs well past 200-day SMA
  • Higher-than-expected Japan CPI this Friday may see USJPY test 200-day SMA for support
  • Lower-than-expected Japan CPI may see USDJPY test 21-day SMA for resistance
  • Bloomberg model: 74% chance USDJPY will trade between 142.23-146.36 this week

Today, the BoJ maintained its benchmark rate at minus 0.1%, and made no changes to its yield curve control programme.

More disappointingly for JPY bulls (those hoping prices would move higher) …

the Japanese central bank failed to offer any hints of a rate hike in 2024.

This keeps Japan as the last economy that’s still holding on to negative interest rates (-0.1%).

 

How did the Yen react?

The absence of any “hawkish” clues prompted the Japanese Yen to weaken.

USDJPY surged above its 200-day simple moving average (SMA – a widely followed technical indicator).

The BoJ’s signal today, or lack thereof, also further fuelled the technical rebound in USDJPY, with the latter’s 14-day relative strength index (RSI) having broken below the 30 mark and into “oversold” territory.

NOTE: From the textbook perspective of technical analysis, an asset’s prices tends to rebound once its 14-day RSI breaks below 30.

 

In fact, at the time of writing, JPY is currently weaker against all of its G10 peers.

NOTE: Markets tend to boost the currency if they believe that economy’s interest rates are going to move higher, and vice versa.

 

How low could JPY go?

Perhaps not much, as long as markets can continue to hope for a BoJ rate hike in 2024.

And the earlier the better for Yen bulls.

To be clear, markets are still expecting the BoJ to exit its negative interest rates regime and finally jump on the rate-hike bandwagon in April.

Markets are still predicting an 86% chance of such an event, though those 86% odds are slightly lower compared to the 94% chance given prior to today’s BoJ policy decision.

As long as markets continue to hope for a BoJ rates liftoff, that should keep the Yen supported and limit its downside in the interim.

After all, Japan’s headline inflation (as measured by the consumer price index – CPI) has remained consistently above the BoJ’s target of 2% since April 2022.

Evidently, the BoJ wants to get further confirmation that inflation will remain sticky above 2%, before exiting its negative interest rates regime.

So with that in mind …

 

Look out for the next Japan inflation numbers due Friday (Dec 22nd)!

Economists are forecasting that Japan’s national CPI (consumer price index – which measures inflation) rose by 2.8% year-on-year (November 2023 vs. November 2022).

If so, that would be slightly lower than October’s 3.3% year-on-year CPI figure; but 2.8% is still well above the BoJ’s 2% inflation target.

 

How might JPY move before Christmas?

Bloomberg’s FX forecast model predicts a 74% chance that USDJPY will move between 142.23-146.36 this week.

  • If Japan’s national CPI this Friday comes in above the market-expected 2.8%, paving the way for a BoJ rate hike, that could see USDJPY re-testing its 200-day SMA for support.

    A daily close below the 200-day SMA may restore USDJPY to revisit the recent cycle low at 140.943 going into the new year.​​​​​​​

 

  • However, a lacklustre CPI figure this Friday that pushes back forecasts for a BoJ rate hike even further may extend USDJPY’s recovery.

    JPY bulls may be enticed into testing this FX pair’s 21-day SMA for resistance before the long Christmas weekend.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Forex and Currency News Opinions
19 Dec

Why empathy constitutes the ultimate leadership skill

By Julia Milner, EDHEC Business School 

When asked what traits constitute a good leader, you may be tempted to list traditional qualities such as rationality, cool-headedness, and overall, an ability to detach oneself from one’s emotions. However, research has shown that the ability to feel empathy toward one’s colleagues is in fact the most critical leadership skills, and much-overlooked. Empathy is on record for boosting employees’ ability to innovate, engage with the task at hand, balance work and life demands, and not least, motivate them to stay within the company.

So, what stands in the way of more of the good stuff spreading across companies’ higher echelons?

Thinking errors and empathy

For the past decade, I have devoted my career to studying how leaders learn coaching skills, working with young professionals and experienced executives as well as consulting with organisations on leadership development. Empathy was one of the nine core skills we looked into in our latest paper on effective leadership.

Managers, it turns out, rated expressing empathy as the most challenging communication skills, above asking questions and providing feedback.

The trend appears to be linked to a number of old-school thinking errors, such as:

  • All or nothing approach: “If I show a little empathy then I will have crying employees in front of me.”
  • Heavens-reward fallacy: “If I give my empathy, then I expect to be rewarded for it, so the other person owes me something and if they don’t give it back this proves I’m wasting my time.”
  • Implicit stereotype: “Leaders who show empathy are weak, so I better appear strong and tough.”

In truth, a strong leader is an empathic one. We are not weak because we care about others.

Dans un contexte d’augmentation des risques psychosociaux, ignorer les émotions au travail n’aide pas…
Melissa Hogan/Wikimedia commons, CC BY-SA

The challenge of remote working

Another perceived obstacle to empathy has been the culture of remote working. CEOs noted that virtual interactions, be them through e-meetings or e-mails, robbed them of in-person communication cues, such as body language.

However, workers on the receiving end did not appear to believe that remote working inherently privileged unsympathetic behaviour. In fact, some employees preferred e-mails on the basis that they gave them time to think and not react immediately, and sometimes impulsively.

Executives blaming remote working for their behaviour might therefore wish to reflect upon whether cognitive bias or stereotypes listed above, rather than working from home, might be impeding them from tapping into empathy.

Moreover, there are steps that can be taken to translate emotions to the virtual world. Remember: the important thing is not what you say, but how you say it. One of the things we’ve observed is that on video calls, participants often think that a screen means they can forget their own facial expressions. Conversely, some managers are so focused on how they present themselves that they stare at their own image and lose focus on listening.

It’s all about finding the right balance and getting used to showing empathy virtually. Managers should not forget their voice either, particularly during video calls, because the voice becomes very important when participants are doing several things at once, listening without necessarily looking at you all the time. In other words, signs of agitation or stress in the voice, or leaving little room for questions, will send signals of a lack of empathy.

Strengthen the empathy muscle

To get around these obstacles, here are a few tips on how to start showing empathy:

  • In every interaction, always remember to listen, ask questions and signal that show you’ve understood the messages – without falling into artificial communication. This will strengthen your empathy “muscle” through training and experience.
  • Record a video during daily interactions. Even if it’s initially strange to see ourselves on video or to analyse the “how” of our communication, these debriefing sessions can help identify certain mistakes.
  • Try to find someone who is known for their empathy. Observe and ask questions to improve.

Ignoring emotions at work doesn’t help to foster a productive environment. It’s high time we recognised empathy as the essential leadership skill that it is.The Conversation

Empathy at work: How to do it in four practical steps (Julien Milner).

About the Author:

Julia Milner, Professeure de leadership, EDHEC Business School

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Opinions Stock Market News
17 Dec

Japanese Yen Speculators reduce bearish bets to lowest since August

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday December 12th and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Changes led by the Japanese Yen & British Pound

The COT currency market speculator bets were higher this week as eight out of the eleven currency markets we cover had higher positioning while the other three markets had lower speculator contracts.

Leading the gains for the currency markets was the Japanese Yen (23,825 contracts) with the British Pound (9,916 contracts), the Australian Dollar (5,341 contracts), the Swiss Franc (3,378 contracts), the New Zealand Dollar (2,962 contracts) and the Mexican Peso (669 contracts) Bitcoin (183 contracts) and the Canadian Dollar (2,603 contracts) also showing positive weeks.

The currencies seeing declines in speculator bets on the week were the EuroFX (-5,033 contracts), the Brazilian Real (-3,580 contracts) and the US Dollar Index (-2,343 contracts).

Japanese Yen Speculators reduce bearish bets to lowest since August

Highlighting the COT currency’s data this week was a sharp boost in sentiment for the Japanese yen speculators. Large speculative yen positions rose strongly this week by over +23,000 net contracts and gained for a second straight week as well as for the third time in four weeks. Over these past four weeks, the yen speculator bets now have improved by a total of +49,118 contracts.

This turn in sentiment has taken the overall bearish net positioning for speculators down to a current level of -81,131 contracts, marking the least bearish level since August.

The yen exchange rate continued to improve as well this week versus the US Dollar. The USDJPY currency pair fell for a fifth consecutive week this week (a lower USDJPY exchange rate means USD weakness and JPY strength) and closed at the 142.13 level. The USDJPY is off it’s most recent high in November by about 7 percent.

Helping the yen’s fortunes lately has been a general speculation that the Bank of Japan will look to end its negative interest rate policy sometime in the coming new year. Also, on the US Dollar side, this is combined with the US Federal Reserve’s dovish interest rate hold last week that has lent credence to the outlook that US interest rates will be on hold or even possibly be reduced over 2024.

Data Snapshot of Forex Market Traders | Columns Legend
Dec-12-2023OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index
USD Index41,3453817,60154-18,0324743115
EUR792,14984147,32783-182,3572135,03035
GBP243,6776321,58171-20,10134-1,48055
JPY257,58180-81,1312779,527741,60457
CHF65,186100-14,4741719,31375-4,83944
CAD213,87371-55,2451361,19390-5,94810
AUD208,92764-52,3404154,86858-2,52846
NZD58,30877-13,4882013,1097537954
MXN269,0746274,12584-79,064144,93943
RUB20,93047,54331-7,15069-39324
BRL68,6465446,66495-48,95552,29156
Bitcoin21,21189-2,067351,188087933

 

Strength Scores led by Brazilian Real & Mexican Peso

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Brazilian Real (95 percent), the Mexican Peso (84 percent) and the EuroFX (83 percent) lead the currency markets this week.

On the downside, the Canadian Dollar (13 percent) and the Swiss Franc (17 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent). The next lowest strength scores are the New Zealand Dollar (20 percent) and the Japanese Yen (27 percent).

Strength Statistics:
US Dollar Index (54.3 percent) vs US Dollar Index previous week (58.2 percent)
EuroFX (83.1 percent) vs EuroFX previous week (85.2 percent)
British Pound Sterling (70.8 percent) vs British Pound Sterling previous week (63.9 percent)
Japanese Yen (27.2 percent) vs Japanese Yen previous week (14.0 percent)
Swiss Franc (17.5 percent) vs Swiss Franc previous week (7.9 percent)
Canadian Dollar (12.7 percent) vs Canadian Dollar previous week (10.5 percent)
Australian Dollar (40.8 percent) vs Australian Dollar previous week (36.0 percent)
New Zealand Dollar (20.3 percent) vs New Zealand Dollar previous week (12.6 percent)
Mexican Peso (84.4 percent) vs Mexican Peso previous week (84.0 percent)
Brazilian Real (95.0 percent) vs Brazilian Real previous week (99.7 percent)
Bitcoin (35.3 percent) vs Bitcoin previous week (32.5 percent)

 

Brazilian Real & British Pound top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Brazilian Real (48 percent) and the British Pound (29 percent) lead the past six weeks trends for the currencies. The EuroFX (26 percent), the Mexican Peso (26 percent) and the Australian Dollar (21 percent) are the next highest positive movers in the latest trends data.

The Canadian Dollar (-5 percent), Bitcoin (-5 percent), the US Dollar Index (-2 percent) and the New Zealand Dollar (-2 percent) lead the downside trend scores this week.

Strength Trend Statistics:
US Dollar Index (-2.3 percent) vs US Dollar Index previous week (0.5 percent)
EuroFX (26.4 percent) vs EuroFX previous week (28.6 percent)
British Pound Sterling (29.1 percent) vs British Pound Sterling previous week (21.0 percent)
Japanese Yen (12.6 percent) vs Japanese Yen previous week (-2.9 percent)
Swiss Franc (1.2 percent) vs Swiss Franc previous week (-7.8 percent)
Canadian Dollar (-5.0 percent) vs Canadian Dollar previous week (-7.7 percent)
Australian Dollar (20.8 percent) vs Australian Dollar previous week (23.3 percent)
New Zealand Dollar (-1.7 percent) vs New Zealand Dollar previous week (-9.4 percent)
Mexican Peso (26.1 percent) vs Mexican Peso previous week (21.7 percent)
Brazilian Real (48.4 percent) vs Brazilian Real previous week (58.5 percent)
Bitcoin (-4.8 percent) vs Bitcoin previous week (-27.0 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

US Dollar Index Forex Futures COT ChartThe US Dollar Index large speculator standing this week recorded a net position of 17,601 contracts in the data reported through Tuesday. This was a weekly fall of -2,343 contracts from the previous week which had a total of 19,944 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.3 percent. The commercials are Bearish with a score of 47.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.6 percent.

Price Trend-Following Model: Weak Uptrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

US DOLLAR INDEX StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:68.018.67.5
– Percent of Open Interest Shorts:25.462.26.5
– Net Position:17,601-18,032431
– Gross Longs:28,1007,6773,116
– Gross Shorts:10,49925,7092,685
– Long to Short Ratio:2.7 to 10.3 to 11.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):54.347.114.6
– Strength Index Reading (3 Year Range):BullishBearishBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-2.33.3-8.1

 

Euro Currency Futures:

Euro Currency Futures COT ChartThe Euro Currency large speculator standing this week recorded a net position of 147,327 contracts in the data reported through Tuesday. This was a weekly decline of -5,033 contracts from the previous week which had a total of 152,360 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 83.1 percent. The commercials are Bearish with a score of 20.9 percent and the small traders (not shown in chart) are Bearish with a score of 34.9 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

EURO Currency StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:29.354.712.7
– Percent of Open Interest Shorts:10.777.78.2
– Net Position:147,327-182,35735,030
– Gross Longs:231,837433,209100,250
– Gross Shorts:84,510615,56665,220
– Long to Short Ratio:2.7 to 10.7 to 11.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):83.120.934.9
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:26.4-27.418.2

 

British Pound Sterling Futures:

British Pound Sterling Futures COT ChartThe British Pound Sterling large speculator standing this week recorded a net position of 21,581 contracts in the data reported through Tuesday. This was a weekly increase of 9,916 contracts from the previous week which had a total of 11,665 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 70.8 percent. The commercials are Bearish with a score of 34.4 percent and the small traders (not shown in chart) are Bullish with a score of 55.1 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

BRITISH POUND StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:29.647.418.3
– Percent of Open Interest Shorts:20.755.718.9
– Net Position:21,581-20,101-1,480
– Gross Longs:72,011115,62044,638
– Gross Shorts:50,430135,72146,118
– Long to Short Ratio:1.4 to 10.9 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):70.834.455.1
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:29.1-30.424.1

 

Japanese Yen Futures:

Japanese Yen Forex Futures COT ChartThe Japanese Yen large speculator standing this week recorded a net position of -81,131 contracts in the data reported through Tuesday. This was a weekly gain of 23,825 contracts from the previous week which had a total of -104,956 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.2 percent. The commercials are Bullish with a score of 74.0 percent and the small traders (not shown in chart) are Bullish with a score of 56.7 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

JAPANESE YEN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:11.067.115.1
– Percent of Open Interest Shorts:42.536.214.4
– Net Position:-81,13179,5271,604
– Gross Longs:28,226172,75638,804
– Gross Shorts:109,35793,22937,200
– Long to Short Ratio:0.3 to 11.9 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):27.274.056.7
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:12.6-13.610.8

 

Swiss Franc Futures:

Swiss Franc Forex Futures COT ChartThe Swiss Franc large speculator standing this week recorded a net position of -14,474 contracts in the data reported through Tuesday. This was a weekly rise of 3,378 contracts from the previous week which had a total of -17,852 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 17.5 percent. The commercials are Bullish with a score of 74.5 percent and the small traders (not shown in chart) are Bearish with a score of 43.8 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SWISS FRANC StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:6.165.219.6
– Percent of Open Interest Shorts:28.335.627.0
– Net Position:-14,47419,313-4,839
– Gross Longs:3,97042,48912,788
– Gross Shorts:18,44423,17617,627
– Long to Short Ratio:0.2 to 11.8 to 10.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):17.574.543.8
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:1.2-12.122.4

 

Canadian Dollar Futures:

Canadian Dollar Forex Futures COT ChartThe Canadian Dollar large speculator standing this week recorded a net position of -55,245 contracts in the data reported through Tuesday. This was a weekly lift of 2,603 contracts from the previous week which had a total of -57,848 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 12.7 percent. The commercials are Bullish-Extreme with a score of 89.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.6 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

CANADIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:9.171.913.3
– Percent of Open Interest Shorts:34.943.216.1
– Net Position:-55,24561,193-5,948
– Gross Longs:19,457153,67828,390
– Gross Shorts:74,70292,48534,338
– Long to Short Ratio:0.3 to 11.7 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):12.789.79.6
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-5.03.21.7

 

Australian Dollar Futures:

Australian Dollar Forex Futures COT ChartThe Australian Dollar large speculator standing this week recorded a net position of -52,340 contracts in the data reported through Tuesday. This was a weekly gain of 5,341 contracts from the previous week which had a total of -57,681 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.8 percent. The commercials are Bullish with a score of 58.4 percent and the small traders (not shown in chart) are Bearish with a score of 46.3 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: New Buy – Long Position.

AUSTRALIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:14.867.110.7
– Percent of Open Interest Shorts:39.940.811.9
– Net Position:-52,34054,868-2,528
– Gross Longs:30,967140,17222,411
– Gross Shorts:83,30785,30424,939
– Long to Short Ratio:0.4 to 11.6 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):40.858.446.3
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:20.8-23.821.4

 

New Zealand Dollar Futures:

New Zealand Dollar Forex Futures COT ChartThe New Zealand Dollar large speculator standing this week recorded a net position of -13,488 contracts in the data reported through Tuesday. This was a weekly increase of 2,962 contracts from the previous week which had a total of -16,450 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 20.3 percent. The commercials are Bullish with a score of 74.6 percent and the small traders (not shown in chart) are Bullish with a score of 54.5 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: New Buy – Long Position.

NEW ZEALAND DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:22.859.37.7
– Percent of Open Interest Shorts:45.936.87.1
– Net Position:-13,48813,109379
– Gross Longs:13,27334,5884,515
– Gross Shorts:26,76121,4794,136
– Long to Short Ratio:0.5 to 11.6 to 11.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):20.374.654.5
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-1.7-7.145.2

 

Mexican Peso Futures:

Mexican Peso Futures COT ChartThe Mexican Peso large speculator standing this week recorded a net position of 74,125 contracts in the data reported through Tuesday. This was a weekly increase of 669 contracts from the previous week which had a total of 73,456 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 84.4 percent. The commercials are Bearish-Extreme with a score of 14.2 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

MEXICAN PESO StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:42.549.72.6
– Percent of Open Interest Shorts:15.079.10.7
– Net Position:74,125-79,0644,939
– Gross Longs:114,396133,8476,875
– Gross Shorts:40,271212,9111,936
– Long to Short Ratio:2.8 to 10.6 to 13.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):84.414.242.7
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:26.1-26.815.0

 

Brazilian Real Futures:

Brazil Real Futures COT ChartThe Brazilian Real large speculator standing this week recorded a net position of 46,664 contracts in the data reported through Tuesday. This was a weekly decrease of -3,580 contracts from the previous week which had a total of 50,244 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 95.0 percent. The commercials are Bearish-Extreme with a score of 4.5 percent and the small traders (not shown in chart) are Bullish with a score of 55.8 percent.

Price Trend-Following Model: Weak Downtrend (Possible Trend Change)

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

BRAZIL REAL StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:73.320.95.5
– Percent of Open Interest Shorts:5.392.32.2
– Net Position:46,664-48,9552,291
– Gross Longs:50,30514,3753,767
– Gross Shorts:3,64163,3301,476
– Long to Short Ratio:13.8 to 10.2 to 12.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):95.04.555.8
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:48.4-47.85.7

 

Bitcoin Futures:

Bitcoin Crypto Futures COT ChartThe Bitcoin large speculator standing this week recorded a net position of -2,067 contracts in the data reported through Tuesday. This was a weekly increase of 183 contracts from the previous week which had a total of -2,250 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 35.3 percent. The commercials are Bullish-Extreme with a score of 94.9 percent and the small traders (not shown in chart) are Bearish with a score of 32.9 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BITCOIN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:74.17.97.8
– Percent of Open Interest Shorts:83.82.33.7
– Net Position:-2,0671,188879
– Gross Longs:15,7141,6841,654
– Gross Shorts:17,781496775
– Long to Short Ratio:0.9 to 13.4 to 12.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):35.394.932.9
– Strength Index Reading (3 Year Range):BearishBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-4.87.30.8

 

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Forex and Currency News Opinions
16 Dec

Speculator Extremes: SOFR-3M, Steel, Ultra 10-Year & Soybeans lead Bullish & Bearish Positions

By InvestMacro 

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on December 12th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)

Here Are This Week’s Most Bullish Speculator Positions:

3-Month Secured Overnight Financing Rate


The 3-Month Secured Overnight Financing Rate speculator position comes in as the most bullish extreme standing this week. The 3-Month Secured Overnight Financing Rate speculator level is currently at a maximum 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 25.1 this week. The overall net speculator position was  718,226 net contracts this week with a strong gain of 206,446 contract in the weekly speculator bets.

Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

Steel


The Steel speculator position comes next in the extreme standings this week. The Steel speculator level is now at a 97.6 percent score of its 3-year range.

The six-week trend for the percent strength score was 8.3 this week. The speculator position registered -485 net contracts this week with a weekly dip of -318 contracts in speculator bets.

1-Month Secured Overnight Financing Rate

The 1-Month Secured Overnight Financing Rate speculator position comes in third this week in the extreme standings. The 1-Month Secured Overnight Financing Rate speculator level resides at a 97.3 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 52.6 this week. The overall speculator position was 93,215 net contracts this week with a small rise by 6,248 contracts in the weekly speculator bets.

Brazil Real


The Brazil Real speculator position comes up number four in the extreme standings this week. The Brazil Real speculator level is at a 95.0 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 48.4 this week. The overall speculator position was 46,664 net contracts this week with a change of -3,580 contracts in the speculator bets.

DowJones Mini


The DowJones Mini speculator position rounds out the top five in this week’s bullish extreme standings. The DowJones Mini speculator level sits at a 87.6 percent score of its 3-year range. The six-week trend for the speculator strength score was a huge gain of 85.5 this week.

The speculator position was 3,451 net contracts this week with an increase of 3,143 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Ultra 10-Year U.S. T-Note


The Ultra 10-Year U.S. T-Note speculator position comes in as the most bearish extreme standing this week. The Ultra 10-Year U.S. T-Note speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -4.4 this week. The overall speculator position was -276,476 net contracts this week with a drop of -8,621 contracts in the speculator bets.

Soybeans


The Soybeans speculator position comes in next for the most bearish extreme standing on the week. The Soybeans speculator level is at a 0.5 percent score of its 3-year range.

The six-week trend for the speculator strength score was 0.5 this week. The speculator position was 17,539 net contracts this week with a dip lower by -2,759 contracts in the weekly speculator bets.

WTI Crude Oil


The WTI Crude Oil speculator position comes in as third most bearish extreme standing of the week. The WTI Crude Oil speculator level resides at a 3.3 percent score of its 3-year range.

The six-week trend for the speculator strength score was -27.7 this week. The overall speculator position was 151,599 net contracts this week with a decline of -17,391 contracts in the speculator bets.

Palladium


The Palladium speculator position comes in as this week’s fourth most bearish extreme standing. The Palladium speculator level is at a 5.6 percent score of its 3-year range.

The six-week trend for the speculator strength score was -2.5 this week. The speculator position was -10,638 net contracts this week with a small rise of 614 contracts in the weekly speculator bets.

Lean Hogs


Finally, the Lean Hogs speculator position comes in as the fifth most bearish extreme standing for this week. The Lean Hogs speculator level is at a 6.3 percent score of its 3-year range.

The six-week trend for the speculator strength score was -8.4 this week. The speculator position was -28,455 net contracts this week with a drop of -3,765 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Opinions
13 Dec

Copper Shortages Are Looming and Four Stocks to Benefit

Source: Ron Struthers  (12/12/23)

Investment in copper mining is very low at a time when it should be at record highs to accommodate electrification of world economies. Ron Struthers of Struthers Resource Stock Report looks into three promising copper exploration plays and a pure producer, Capstone. 

For a long time, copper has been described with a PhD in economics. It is tied so much to all industries that its demand cycles can mirror economic cycles.

As most of the world seeks to reach net-zero targets and transition to cleaner, renewable forms of energy, copper is a big requirement. However, the amount of copper needed to successfully facilitate the energy transition is staggering. Nearly 70% of all copper produced is used in electrical applications, which is why it’s so important to the energy transition.

While the average internal combustion engine vehicle contains approximately 48 pounds of copper, a typical EV contains nearly four times that amount. Solar Technology uses about 5.5 tons copper/MW of electricity and wind about 4 tons/MW onshore and 10 tons/MW offshore.

Jerome Leroy, vice president of the Canadian business unit of cable supplier Nexans, worries that copper mines won’t be able to keep up. This concern partly stems from the fact it takes many years to secure regulatory approvals for new mines. Moreover, ore grades at existing mines have long been in decline. (Production is concentrated in Chile, Peru, and China.) Mr. Leroy points to forecasts suggesting production capacity will grow to 27 million tonnes a year by the end of this decade, whereas demand could rise as high as 35 million tonnes. A shortfall could materialize as soon as next year, he warns.

“I start to see it happening at the power utility level,” he said. “People are requesting more and more cable. The likes of BC Hydro and Hydro-Québec, and others, say that probably they will need at least 5% more cable every year starting from now.”

Blair DeBruyne, the director of operations, inventory, and fleet services at SaskPower, points out that copper is a major ingredient in transformer coils and almost every power line. But he’s worried about all mined materials because order lead times are being pushed out.

Last year, IHS Markit (a market research firm owned by S&P Global) projected that copper demand could double in little more than a decade — from 25 million tonnes today to 50 million by 2035.

“The chronic gap between worldwide copper supply and demand projected to begin in the middle of this decade will have serious consequences across the global economy,” an IHS report warned, “and will affect the timing of net-zero emissions by 2050.”

Demand for copper in energy transition applications is expected to climb about 8.2% over the next decade, outstripping a projected 2.9% increase in copper demand in that period for traditional uses such as construction, infrastructure, machinery, and transportation, said Mohsen Bonakdarpour, executive director of economics & country risk for Market Intelligence.

My take — I am not as bullish as many on the speed to electrification and EVs, but if demand even grows at half of the projections, there will be shortages. You see, the problem is really on the supply side, mainly because of years of underinvestment in mining. The chart below on copper production shows that growth has been flat since 2016.

The global copper industry needs to spend more than $100 billion to build mines able to close what could be an annual supply deficit of 4.7 million tonnes by 2030, Erik Heimlich, head of base metals supply at CRU, said in 2022.

The supply gap for the next decade is estimated at six million tonnes per year as the clean energy and electric vehicles sectors ramp up. This means the world would need to build eight projects the size of BHP’s (ASX: BHP) Escondido in Chile, the world’s largest copper mine, over the next eight years.

Such task, Heimlich said, seems questionable.

“Many of the projects currently developed have been in the making for almost three decades, and with exploration activity relatively limited in recent years, supply increases may fade from 2025,” experts at BoA said.

Global development and expansion capital for primary copper mines peaked in 2013 at $26.13 billion, almost halved in subsequent years, and has not recovered since.

Capital spending on copper projects is estimated to have been only $14.42 billion in 2022, based on Mine Economics’ universe of coverage. A further decrease of 18.7% is projected for 2023. This chart is just the top 10 companies.

Mine expansion activities rose in 2021, with some major announcements in Chile, Indonesia, and Mongolia that will add 3 million tonnes (mt) over the next four years. Most miners continue to allocate a major portion of the budget to the expansion of existing mines, while the root share was 34% in 2021.

Over the last decade, there have been 19 major grass root discoveries, but only three in the past five years, adding just 5.6mt to the total production. Latin America (LatAm) remains the top region in terms of total discoveries; however, over the past decade, new supplies have come more from Africa and Asia. In particular, between 2012 and 2021, around 56% of the top 10 discovered deposits were added by the Kamoa-Kakula deposit in the Democratic Republic of the Congo in 2014 and the Onto deposit in Indonesia in 2013.

Catch 22 — The Climate Activists Want to Electrify and Go Green but Don’t Want New Copper Mines — Dah!

The changes in LatAm royalty taxes add to the regulatory uncertainty prevailing in the region. The Chilean government is considering a modified version of a 2021 bill to impose a 1% sales tax for copper companies producing less than 200 kilotonnes per annum (ktpa) and up to 3% for companies with output exceeding 200ktpa.

However, companies producing under 50ktpa are exempted from this tax. Similarly, tax changes and local community protests in Peru have impacted production from major mines in the region. This is likely to impact the new project pipeline over the coming years.

Freshwater usage is another major concern for copper mines, especially in Chile, Peru, and the southwest United States. Peru has been rocked by protests since former President Pedro Castillo was ousted in December 2022 in an impeachment trial. The South American nation accounts for 10% of the global copper supply.

Shares in First Quantum Minerals Ltd. (FM:TSX; FQM:LSE) have dropped a whopping 2/3rds (66%) since opposition to a mining contract on their massive copper mine went viral in Panama.

The mine is about 1/2 their copper production, so the stock might be getting oversold.

Let’s see where it bottoms.

Their contract deal gave the company the right to mine the site for at least the next two decades in exchange for US$375 million a year to the government. It has become a flashpoint for local protesters. That opposition has escalated into broader anti-government protests that officials say are costing Panama US$80 million a day.

The mine faces legal and constitutional challenges from the country’s top court, and citizens may get a chance to vote on the contract extension in a referendum next month. Because of the blockade, Quantum announced on November 23 that they suspended production at the mine.

No Way Supply Will Meet Demand

There is no way that supply will ramp up enough to meet rising demand, even if demand increases are half of what is expected. Bringing new mines on stream is becoming more difficult with regulation and climate activists.

The major mining companies are mostly focused on expanding and improving profits at their existing mines. The two main results are higher copper prices, which will likely go to new highs, and a huge focus on junior copper explorers. Not by investors yet, but the majors who are watching these like hawks will be jumping on discoveries and promising projects.

First, a long-term chart on copper. Prices have not gone crazy, but the 2011 highs were tested in 2021 and 2022. Since then, a wedge pattern has developed. A breakout will occur, and I would bet to the upside.

Next chart, short term on the next page, the recent move up and then back was a test of resistance and support levels.

There are virtually no pure copper producer plays, but perhaps one and the big copper producers also produce other base metals, so they are nowhere near a pure copper investment. One option is the junior copper explorers, and I will highlight three of my favorites before I touch on the best pure producer play.

Midnight Sun Mining Corp. (MMA:TSX.V; MDNGF:OTCQB)

Recent Price: $0.20

Midnight Sun has done a lot of exploration work on their Solwezi mineral exploration licenses in Zambia that are located directly adjacent to the largest copper mine in Africa — Once again, First Quantum Minerals’ Kansanshi copper/gold mine.

Midnight Sun has a copper discovery there and needs further work to prove it.

With Midnight Sun, it is all about location.

The Zambian-Congo copper belt is host to some of the world’s richest mines, with operators that include Barrick, Rio Tinto, Glencore, Ivanhoe Mines, and First Quantum and a lot of them surround MMA.

This graphic shows a better closeup.

MMA has four main targets: Dumbwa, Kazhiba Dome, Mitu Trend, and Crunch Zone.

Dumbwa is a continuous high-grade copper-in-soil anomaly for over 20 km along strike and about 1 km wide with peak values up to 0.728% copper.

Kazhiba Dome has multiple high-grade hits in the 22 zones, with the discovery hole running 11.3 meters and grading 5.71% copper. Other intercepts include 21 meters of 3.26% copper and 6.4 meters of 5.08% copper.

The Mitu Trend shows a similar style of mineralization as the Sentinel Mine with associated cobalt and nickel. Drill hits include 11.6 meters of 3.44% copper and 11.5 meters of 1.41% copper.

The Crunch Zone has a newly identified structural target with a largely untested VTEM conductive anomaly. It occurs on the same stratigraphy as First Quanum’s Kanasanshi Mine.

MMA has a large 506 sq km property and already has two high grade discoveries. They are in the right place and have caught the attention of the major miners. I expect we will see some type of JV deal on one or more of their target areas and/or some more great results in the next drill program.

They have 118 million shares out, and at $0.20, the market cap is just around CA$24 million, which is quite cheap for their location and discovery. The company is run by CEO Al Fabbro, whom I have known for many years and who made good returns on his last deal, RoxGold.

The stock bottomed in 2022 with the correction in copper prices. Since then, it recovered but has been stuck in a range between $0.20 and $0.32. It is a good buy here at the bottom of this range.

Zonte Metals Inc. (ZON:TSX.V)

Recent Price: $0.08

Zonte is in a great location as well, miner-friendly NFLD Canada. Year-round road access, high voltage power at the one end of the property, and near tidewater at the other end.

There has been a gold rush there with New Found Gold Corp.’s (NFG:TSX.V; NFGC:NYSE.American) high-grade discovery at their Queensway project.

There has not been much copper exploration, although NFLD was the world’s 4th largest copper producer back in the WW2 era. However, I think this will soon change as Zonte has discovered a grassroots new copper district, an Iron Oxide Copper Gold (IOCG) system.

These can produce huge mines, and Zonte has done a lot of tedious work over the past several years and has discovered 12 priority targets so far. I expect multiple mines could be discovered.

Zonte did some drilling, testing magnetic and gravity highs, and from this, learned that potential deposits are likely adjacent to these anomaly highs. Their soil sampling and rock sampling in the last two years appear to confirm this.

They did make one high-grade hit at their Dunns Mountain target, but it was narrow. It was 0.43 meters with 14% copper, 15 g/t gold and 352 g/t silver. With their new exploration approach, they are currently drilling the K6 target.

In the graphic, you can see that the copper soil anomaly sits adjacent to the gravity and magnetic highs. It is also proven with copper in rocks. Zonte has drilled four holes there so far, and I expect results in the New Year.

The stock just bottomed at historic lows in October but needs to break the downtrend channel. There is only mild resistance, around $0.08, with stronger resistance, around $0.13.

I did an 18-minute interview with CEO Terry Christopher, and we went over, in detail, the exploration of the K6 target. It is well worth watching at this YouTube link.

Zonte also has a gold project in the Yukon that is adjacent to Victoria Gold’s mine. Victoria Gold has been advancing a second discovery there and has been conducting sampling and drilling right up to Zonte’s property boundary. I have little doubt that it extends onto Zonte’s property. Zonte also had a drill discovery on this property in 2015 that is on trend. Zonte has about 70 M shares outstanding and, at current prices, has a market cap of just over $5 million.

Element 29 Resources Inc. (ECU:TSX.V; EMTRF:OTC)

Recent Price: $0.15

Element 29 is advancing two new, high-quality copper projects in Peru — Flor de Cobre & Elida — each with excellent potential for resource growth and development.

They have 100% ownership in these projects and are at a favorable lower elevation < 2,700 meters and with good infrastructure.

ECU’s Elida project is in an advanced stage, but things have been quiet with the company. However, they just closed a $2.8 million financing in the middle of September, so I expect they will soon announce a new exploration and drill program. ECU has 106 M shares outstanding, so at $0.16, it has a market cap of about $16 million.

Explorers Ripe for Deals and Buyouts

All three of these junior explorers are ripe for either a JV deal or a buyout from a major. Of the three juniors, Zonte is the cheapest with a market cap of $5 million compared to the $16M (ECU) and $24M (MMA ) of the other two and has an active drill program, so additional catalysts to move the stock.

I suggest owning all three stocks with a focus first on Zonte if you don’t own any because they will have drill results in early 2024. For a copper producer, I think the best play is:

Capstone Copper Mining Corp. (CS:TSX)

Recent Price: $6.05

52-week trading range: $4.40 to $7.25

Shares outstanding: 695 million

Capstone is a pure copper producer with four producing mines: one in Arizona, one in Mexico, and two in Chile. And 97% of its revenues are derived from copper sales.

An expansion of their Mantoverde Mine in Chile is going to significantly increase copper production in 2024 and lower costs. Here are the operating results of the four mines in Q3 2023.

All operations performed a bit lower in Q3 and are temporary in nature.

Pinto Valley Mine, Arizona U.S.A.

Copper production of 13,600 tonnes in Q3 2023 was 3% lower than in Q3 2022, mainly on lower mill throughput during the quarter (Q3 2023 — 47,426 tonnes per day (tpd) versus Q3 2022 — 48,143 tpd), resulting from unplanned eight-day downtime related to the secondary crusher jack shaft replacement and counter shaft repairs. The grade was consistent quarter-over-quarter (Q3 2023 — 0.34% versus Q3 2022 — 0.34%). Recoveries were lower compared with the same period last year (Q3 2023 — 87.4% versus Q3 2022 — 89.1%).

Mantos Blancos Mine, Chile

Q3 2023 production was 12,200 tonnes, composed of 9,100 tonnes from sulfide operations and 3,000 tonnes of cathode from oxide operations, 11% lower than the 13,600 tonnes produced in Q3 2022. The lower production was driven primarily by lower dump throughput, grade, and recoveries impacting cathode production. The mill throughput of 14,176 tpd in Q3 2023 was impacted by mill downtime caused by planned repair and maintenance of the concentrator plant that lasted six days (liners and major components change). Recoveries were lower in Q3 2023 compared with the same period last year (76.3% in Q3 2023 versus 79.3 % in Q3 2022), mainly driven by ore characteristics in the upper areas of the mine. A plan to address the plant stability during the second half of 2023 is underway which includes improved maintenance and optimization of the concentrator and the tailings system.

Cozamin Mine, Mexico

Q3 2023 copper production of 5,900 tonnes was lower than the same period the prior year, mainly due to lower mill throughput (3,567 tpd in Q3 2023 versus 3,829 tpd in Q3 2022). Recoveries and grades were consistent quarter-over-quarter.

Mantoverde Mine, Chile

Q3 2023 copper production of 8,600 tonnes was 26 % lower compared with 11,600 tonnes in Q3 2022. Heap operations grade was lower as a result of mine sequence (0.32 % in Q3 2023 versus 0.45 % in Q3 2022), and recoveries were lower (66.5 % in Q3 2023 versus 86.7 % in Q3 2022) due to lower solubility ratio of the processed mineral and lower grades, all of which was partially offset by higher heap throughput (2.7 million tonnes in Q3 2023 versus 2.5 million tonnes in Q3 2022). Throughput from dump operations was lower compared with the same period last year due to a temporary sulphuric acid supply shortfall in September, and grades were consistent with the same period last year.

Mantoverde development project’s overall progress is at 93 % and remains on schedule. Construction is progressing well in all key areas of the project. Total project spending since inception was $763 million at the end of September 2023, compared with $706 million in June 2023.

The project is on target for construction completion by year-end 2023. As the project nears completion, the updated total project cost is estimated at $870 million, which is a 5% increase and includes approximately $20 million in project improvements.

Financial

Total available liquidity of $424.5 million as of September 30, 2023, composed of $129.5 million of cash and short-term investments, and $295 million of undrawn amounts on the corporate revolving credit facility. Capstone is in strong financial shape to get the Mantoverde on stream, and from that, revenues and cash flows will see significant increases.

Conclusion

Q3 2023 copper production totaled 40,300 tonnes at C1 cash costs of $2.88 per payable pound of copper produced. Copper production in the third quarter was impacted by an unplanned eight days of cumulative downtime at Pinto Valley related to the secondary crusher jack shaft replacement and counter shaft repairs, plus planned maintenance downtime at Mantos Blancos. Lower production levels and maintenance expenses were the key drivers related to higher consolidated cash costs in the quarter.

The company reaffirms its H2 copper production guidance of 83,000 tonnes to 93,000 t. C1 cash costs are trending toward the upper end of the H2 guidance range of $2.55/lb to $2.75/lb due to additional unplanned maintenance expenditures noted above.

John MacKenzie, CEO of Capstone, commented in the Q3 results: “I am encouraged by the progress we made during the third quarter in executing on our plan to improve operational reliability and expand margins across our portfolio. As construction at our flagship Mantoverde development project (MVDP) approaches completion by year-end, we look forward to a transformational year in 2024. Our excitement follows many years of dedicated effort by our mine build team in Chile. MVDP will drive a significant reduction in our consolidated unit costs and provide a pathway to record operating cash flow generation for Capstone Copper.”

This graphic is from their presentation and highlights the strong growth in 2024 with the MVDP ramp-up. Future growth is expected with their Santo Domingo project in Chile. It is an IOCG system with a targeted 200,000 tonnes per year of low-cost copper with cobalt. An updated feasibility is planned for 2024.

With Capstone, you get the leverage to copper prices and exposure to strong production growth. The stock dipped with the overall market weakness in September/October and has recovered.

The drop in the stock in 2022 was when copper prices had some substantial weakness, see copper charts above.

The stock has strong resistance above $7.00 and will probably take higher copper prices or when their increased production and revenue come on stream in 2024.

The stock has seen a very good rally, and I would look for some weakness or pull back to around $5.50 to buy.

 

Important Disclosures:

  1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of [Midnight Sun Mining Corp.].
  2. [Ron Struthers]: I, or members of my immediate household or family, own securities of: [Zonte Metals and Midnight Sun]. I determined which companies would be included in this article based on my research and understanding of the sector.
  3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  4.  This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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Metals Opinions
13 Dec

Uganda will soon be exporting oil: an energy economist outlines 3 keys to success

By Micah Lucy Abigaba, Makerere University 

Uganda entered into agreements in 2012 with two foreign oil entities to exploit its oil resources. Total Energies holds 56.67% of the joint venture partnership and China National Oil Offshore Company (CNOOC) has 28.33%. Through Uganda National Oil Company, the government owns the remaining 15%.

Production is due to start in 2025. As part of the production sharing agreement, the production licences are valid for 25 years upon extracting the first oil.

To secure the best possible outcome for Uganda, the government needs to focus on three issues: the production sharing agreement, completion of the development stage, and export timing. My co-authors and I identified these areas of crucial concern in a paper based on my PhD thesis: Four essays on oil price uncertainty, optimal investment strategies and cost transmission of an oil price shock.

The context

Uganda joined the list of prospective oil-producing countries in 2006, with six billion barrels of proven oil reserves in the Albertine Graben, part of the western arm of the east African rift valley. Out of this discovery, 1.4 billion barrels are economically viable for extraction. The peak production is projected to be between 200,000 and 250,000 barrels of oil per day, and the extraction is expected to last 25 years.

The cost of extracting oil over this period will amount to about US$19 billion in capital expenditures and operating expenses. Before this production stage, the development of infrastructure, operation facilities, and production wells will cost around US$12.5 billion to US$15 billion.

The annual revenues from oil production are expected to be US$1.5 billion to US$2 billion. The oil revenues have the potential to stimulate Uganda’s economic growth and real household incomes.

But, like many resource-rich sub-Saharan countries, Uganda has limited capacity to solely finance and operate immense complex oil projects. Hence the current production-sharing agreement.

Production sharing agreement

The interests and strategic investment decisions of foreign companies are bound to be in conflict with Uganda’s. That’s why they need an effective agreement.

Uganda’s final investment decision was initially expected in 2015, but was delayed for another seven years. The reasons included tax disputes, negotiations among contract partners, the compensation and relocation of communities affected by the oil project, and oil price volatility.

An effective production sharing agreement is one that maximises returns for both the government and the companies. In my PhD thesis, I examined the implications of the agreement, given the risk factors that influence the project.

The agreement sets out how the government and the foreign companies will share risks and revenues throughout the project’s lifespan.

  • The foreign companies carry the cost of exploration, development of the oil fields and crude oil pipeline, and oil production.
  • The government supplies other infrastructure for the oil project, including roads and the Hoima International Airport.
  • The foreign companies are allowed to claim up to 60% of their net field revenues as cost. Whatever remains after royalties and cost recovery is the “profit oil” shared between the foreign companies and the government.
  • The foreign companies pay royalties to the government based on the daily production. They also pay corporate income tax on their share of the profit oil. So Uganda earns revenues from royalties, profit oil and income tax.

The roadmap to the first oil production

Being a landlocked country, Uganda has to get its crude oil to a regional seaport. It needs a pipeline through Tanzania or Kenya.

In February 2022, Total Energies and CNOOC signed the decision to develop the oil fields and construct the East Africa crude oil export pipeline. The pipeline, costing an estimated US$3.5 billion to US$5 billion, is scheduled to be completed in time for oil production in 2025. It will take the oil to the port of Tanga in Tanzania.

A pipeline company with shareholding from the Uganda National Oil Company (15%), the Tanzania Petroleum Development Corporation (15%), Total Energies (62%) and CNOOC (8%) operates the East African pipeline project.

Exports timing

It is important that Uganda’s oil gets to the global market at profitable terms. The slump in oil prices between 2014 and 2016 resulted in the foreign companies drastically trimming their local workforce and cutting their investment budgets by 20% to 30%. The drop in oil prices due to the COVID-19 pandemic and the ensuing lock-downs in Uganda also created uncertainty about when the oil would be ready to sell.

The uncertainties about the completion of the development stage and crude oil price volatility still prevail. This has raised concerns about whether the project can generate returns for the government and foreign companies.

In my PhD thesis, I focused on estimating the influence of these uncertainties on the value of Uganda’s oil project, taking into account the design of the production sharing agreement. I found that:

  • For the development stage to start, the global crude oil price must be equal to or higher than US$63 a barrel. The crude prices, which fell below US$25 per barrel in 2020, have recovered to sell above US$80 now.
  • The required prices to start oil production differed among the parties. It was US$18 for the government and US$42 for the foreign companies. This suggests conflicting interests. I further found that when crude oil prices are highly volatile, the government prefers to delay production. The foreign companies prefer the opposite.
  • I found that as the oil price rises and the project becomes profitable, the government’s revenue share rises faster than that of the foreign companies. But the oil price volatility exposes the government to revenue losses when the prices fall.

What next

The development of the oil fields and pipeline has resumed in Uganda after the COVID period lull. The government needs to design production sharing agreements to allow for options that encourage investments by foreign companies while stabilising government revenues from the oil sector. One option could be delaying investment until oil prices are favourable.

My results indicate that the government’s revenue share is more sensitive to oil price shocks than the foreign companies’ share. These shocks may translate into fluctuations in government oil revenues and, ultimately, macroeconomic instability. The government must consider these shocks when designing and negotiating oil agreements.

Uganda also needs to manage its petroleum fund effectively. It could learn a lesson from how Norway manages its oil fund. Some share of its oil revenues should be put aside for the period when oil earnings begin to decline. This would counteract the macroeconomic instability arising from sudden government oil revenue changes.The Conversation

About the Author:

Micah Lucy Abigaba, Energy Economics Lecturer, Makerere University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Energy Opinions
13 Dec

Mid-Week Technical Outlook: NQ100_m waits on Fed rate decision

By ForexTime 

  • NQ100_m hits fresh 2023 high yesterday
  • Index could be rocked by looming Fed decision
  • Bulls in control but RSI overbought on D1 chart
  • Levels of interest at 16770.6, 16100 & 15800

The NQ100_m jumped to a fresh 2023 high in the previous session after signs of slowing inflation supported hopes around the Fed cutting interest rates next year.

November’s inflation report painted a mixed picture with annual consumer prices slipping to 3.1%, down from 3.2% in October. The annual core figure, which strips out volatile energy and food prices rose by 4% in line with the prior month. However, the monthly core figure rose 0.3%, slightly faster than 0.2% in the previous month.

While traders are still pricing in a 25-basis point cut by May 2024, this could be influenced by the Fed decision later today.

As highlighted in our week ahead report, the central bank is widely expected to leave rates unchanged, so focus will be on the updated economic projections, “dot plot” and Powell’s press conference.

Whatever the outcome of the Fed meeting, it could rock the NQ100_m which is filled with tech stocks that remain sensitive to interest rates.

Redirecting our attention back to the technicals…

The NQ100_m is respecting a bullish channel on the weekly charts with the next key level at the all-time high of 16770.6 created back in November 2021.

It is a similar story on the daily charts with bulls clearly in a position of power. There have been consistently higher highs and higher lows while prices are trading well above the 50, 100, and 200-day SMA. However, the Relative Strength Index (RSI) is trading above 70, signalling that prices are heavily overbought, suggesting a potential throwback down the road.

  • Should 16100 prove to be reliable support, this may provide a foundation for bulls to charge towards 16770.6

  • A move back below 16100 could trigger a selloff towards 15800 and 15540.

Forex-Time-LogoArticle by ForexTime

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