seb report: commodity prices moving up in 2012

8/3/2019 SEB report: Commodity prices moving up in 2012

1/20

SEB Commodities Monthly2012 shaky start, stronger ending 13 DECEMBER 2011


2/20

2

Commodities Monthly

2012 shaky start, stronger ending

GENERAL 0-3 M 4-6 M 7-12 M OECD Composite Leading Indicators for December project

continued above trend growth in the US, Japan and Russiawith China and Canada slowing gradually towards trend.Indicators for Europe, India and Brazil more strongly suggestbelow trend growth.

Absent Euro-zone disruption or a Chinese hard landing we seelittle further downside in energy and metals prices due tomarginal production costs and supply optimization inproducer countries.

Speculative positions have already adjusted downward whilethe USD index currently stands almost 9% above its 2011 low.Consequently, a reversal in either sentiment or fundamentalscould quickly send commodity prices higher.

ENERGY 0-3 M 4-6 M 7-12 M Despite macroeconomic headwinds we expect crude oil prices

to remain strong in 2012 with a Brent average of $114/b. Supply side risk remains high due to geopolitical issues in the

Middle East and Africa. OPEC producers have strong incentives to support crude oil

prices above $100/b even during periods of severemacroeconomic stress.

High temperatures, low petrochemical activity and seasonallyweak demand for fuels are restricting activity (and prices) inEuropean oil product markets.

INDUSTRIAL METALS 0-3 M 4-6 M 7-12 M In all scenarios other than those involving a Euro-zone break-

up or Chinese hard landing we see little downside risk inindustrial metals prices in 2012.

However, substantial industrial destocking implies apotentially rapid recovery in prices if global growthexpectations stabilize.

While adverse developments affecting the Chinese real estateand banking sectors are of concern, authorities have sufficientresources to stimulate the economy if necessary.

PRECIOUS METALS 0-3 M 4-6 M 7-12 M We expect gold to perform strongly in H1-12 as policymakers

loosen monetary policy further to boost growth. In H2-12 more positive growth expectations could start to

drive gold prices lower again. We forecast an average gold price of $2050/t in 2012 and

expect it to peak during the first half of the year.AGRICULTURE 0-3 M 4-6 M 7-12 M

We expect grain prices to trend lower in 2012 as sectorconditions gradually normalize.

Upward revisions of production and inventory estimatescombined with ongoing macroeconomic concerns havebroken the back of the agricultural market.

Current la Nia developments remain weak and are expectedto peak during December and January. We see little likelihoodthey will cause major disturbances.

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

UBS Bloomberg CMCI Sector IndicesUBS Bloomberg CMCI Sector IndicesUBS Bloomberg CMCI Sector IndicesUBS Bloomberg CMCI Sector Indices(price indices, weekly closing, January 2010 = 100)

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Chart Sources: Bloomberg, SEB Commodity Research


3/20

3

Commodities Monthly

GeneralOver the next 12 months we expect oil, copper,nickel and gold prices to move higher whileagriculture is likely to soften further. There are of

course clear risks of a double dip recession in theUS, a hard landing in China and the disintegration ofthe Euro-zone, though we regard them as less likely.China will still probably enjoy a soft landing and iscurrently ready to embark on a period of monetaryeasing as inflationary pressure looks set to ease.The US economy has consistently proved strongerthan expected this autumn and should continue itsgradual recovery. The Euro-zone debt crisis is likelyto be halted in the short term by liquidity provisionswhile a credible, longer term solvency solution willprobably emerge during 2012 as politicians hammerout necessary treaty changes.

The Euro-zone debt crisis was the main driver for globalfinancial markets over the past month, and will remain sofor some time as both Angela Merkel and Mario Draghi(ECB) firmly stated during the latest EU summit there willbe no big bang solution or bond buying bazooka as aquick Euro-zone fix. Instead, what is needed is a credible,fiscal stability pact, one that will probably require a treatychange. The ECB will however continue to provideimmediate support to Euro-zone banks to ensurecontinued liquidity flows and credit availability. TheEuropean economy will struggle to grow in 2012 as

banks de-leverage further and governments implementadditional austerity measures. European manufacturersare naturally acting very defensively, running leaninventories. Physical commodity demand in the region isreportedly very weak due to de-stocking, even absent acomparable decrease in end consumption.

Emerging market concerns have increased during thepast six months with the Brazilian Real and Indian Rupeedepreciating almost 20% vs. the USD. Even the ChineseYuan has started to weaken as growth and exports slow.In China property prices are declining with some fearingthey could fall by up to 30% in 2012. Chinese equitieshave slumped to levels last seen in 2009. However, withinflationary pressure easing the Chinese government isnow in a position to initiate measures to stimulate theeconomy. We believe it has both the means and thedetermination to prevent a hard landing for its economyin 2012.

China will certainly experience slower growth over thenext five years than over the same period historically.Consequently, we forecast a slowdown in previousbreakneck percentage increases in commodityconsumption growth. However, with the Chineseeconomy now much larger year-on-year commodityconsumption growth by volume will still be substantial.

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4/20

4

Commodities Monthly

Crude oil

We expect crude oil prices to remain high in 2012with an average Brent price of $114/b althoughprices during the first half will be limited by a

European recession, lacklustre US growth and thepersistent effects of Chinese monetary tightening.Still, in our main scenario we anticipate eventualmonetary easing in Europe, China and possibly alsothe US to reflate the global economy and boostcrude oil demand during the second half. Evenduring the first six months, we think it unlikelyprices will fall below $100/b other than brieflyduring periods of macroeconomic stress as OPECproducers have strong initiatives to maintain highprices. In addition, the medium- to long term supplyand demand outlook is likely to ensure a continuedhigh crude oil price as outlined in SEBs Oil MarketReport (November 30). If the macroeconomicpicture were to turn bullish faster than expectedthese factors could quickly drive oil prices above$120/b again.

The crude oil market is currently supported by severalsupply side risks and issues, the most important of whichis Iran. With further US and European sanctions likely thesituation could deteriorate rapidly, both because it couldbe tempted to retaliate and because internal tension isincreasing as socio-economic conditions deteriorate.Supply is also depressed by the present embargo onSyrian oil, the lower loading rate in Sudan due to conflictin the recently partitioned country and continued unrestin Nigeria. However, mild weather in the northernhemisphere is restricting demand for heating oils, while jet fuel and gasoline requirements are seasonally low.Further, weak petrochemical demand is weighing on thenaphtha price. Consequently, overall productrequirements are relatively low. Given current moderateinventories the middle distillate situation could changerapidly when cold weather finally strikes.

An important issue next year will be how to handle the

risk of extreme price volatility. While our base scenarioindicates a gradual recovery in crude oil prices over theyear there is a substantial risk of more extreme situationsarising. A Euro-zone collapse, caused by a lack ofpolitical resolve, could also drive the US into recessionand China to a hard landing, sending oil prices sharplylower, possibly below $70/b, despite OPEC interventionsand the positive long term market balance outlook. Atthe other extreme a huge geopolitical risk affects theMENA region due to the Arab spring in general and theIranian nuclear issue in particular, that could potentiallysend prices above $200/b. US troops leaving Iraq at theend of this year is an additional potentially destabilizingfactor. Therefore, both consumers and producers shouldconsider buying insurance against tail risk in 2012.

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Current globalCurrent globalCurrent globalCurrent global crude oil demand estimatescrude oil demand estimatescrude oil demand estimatescrude oil demand estimates

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IEA 89.0 -160 90.3 -200EIA 88.13 -100 89.52 -100OPEC 87.81 +/-0 89.01 +/-0

SEB average Brent crudeSEB average Brent crudeSEB average Brent crudeSEB average Brent crude oiloiloiloil price forecastprice forecastprice forecastprice forecast

($/b) Q1 Q2 Q3 Q4 FullYear

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5/20

5

Commodities Monthly

EnergyWTI futures curveWTI futures curveWTI futures curveWTI futures curve(NYMEX, $/b)

Brent futures curveBrent futures curveBrent futures curveBrent futures curve(ICE, $/b)

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Chart Sources: Bloomberg, SEB C ommodity Research


6/20

6

Commodities Monthly

Nordic power

November and the beginning of December continued tobe characterised by very weak weather fundamentals.Heavy rain and abnormally mild temperatures exerted

pressure on the market. Hydro reservoirs remainedunusually high while snow cover was below seasonalnorms. Overall, the hydro balance maintained a surplusof 10 TWh. Currently, approximately 85% of installedSwedish reactor capacity is running, with two facilitiesoff grid due to technical problems but expected back incoming weeks. Generally bearish sentiment with lowerfossil fuelled power production costs and a weakmacroeconomic outlook have sharply depressed bothspot and forward prices. Especially the CO2 market hasseen a dramatic fall on the back of lower economicactivity outlook and uncertainties surrounding emissiontrading going forward.

While price differences between the four new Swedishprice areas (Lule, Sundsvall, Stockholm and Malm)have generally been limited, we still expect majordifferences when temperatures fall, or in the event ofgrid or nuclear availability related problems.

Since our last report, Q1-12 has traded much lower, atcurrently EUR 40/MWh. Similarly, Cal-12 has brokenbelow EUR 40/MWh, a post spring 2010 low. Price areasMalm and Stockholm still trade at substantial premiumsfor Q1-12 of EUR 10/MWh and EUR 5/MWh, respectively.

We regard the forward curve as fairly priced but seefurther downside risks if the hydro balancestrengthens further. Short term price spikes are stillpossible especially in southern parts of Sweden iftemperatures fall below normal.

Nordic power priceNordic power priceNordic power priceNordic power price(Nord Pool, /MWh, front quarter, weekly closing)

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7/20

7

Commodities Monthly

Industrial metals

We see little further downside for metals pricesother than for very short periods during market sell-offs. While Euro-zone disruption or a Chinese hard

landing would of course send prices lower, weregard those contingencies as unlikely. Except forcopper, most metals trade well into their cost curveswith costs gradually inching higher over time.Copper prices remain high as stocks have fallen byaround 20% since September, mining supply isstagnant and everyone is taking steps to securesupply for 2012. We expect metals to trade sidewaysduring the first half of next year due to a weakEuropean economy and slower Chinese growth.Prices could however recover rapidly as industryhas defensively de-stocked, market tradingpositions have decreased, the USD has alreadyappreciated substantially and marginal costs justifyhigher prices. We expect metals prices to increasetowards the end of 2012 as the Euro-zone situationstabilizes and Chinese monetary easing gainstraction.

Since our last report industrial metals prices were initiallydepressed by rising Euro-zone bond yields but quicklyrecovered to become the best performing commoditysector, ending slightly higher. Such an achievement wasparticularly impressive given present lacklustre physicaldemand in Europe as companies defensively de-stock,and the continued deterioration in Chinese growth,sending local equities to post-2009 lows.

Property prices in China are falling and land auctionsdeclining. Local Chinese governments normally raise upto 40% of their revenues from land auctions. Fewer landsales will therefore generate much less cash for localgovernments for infrastructure projects. Consequently,both infrastructure and housing investments are likely todecline in early 2012. Concerns are increasing that the$2.8trn lending boom unleashed in China during 2009-10 has resulted in a substantial misallocation of capital

especially in the real estate market and that decliningproperty and land values will increase bad debts withinthe banking sector. Still, Chinese central governmentdebt is only 27% of GDP, enabling authorities to taketimely, appropriate action as and when bad debtproblems require. Following prolonged tightening, theChinese government has begun easing monetaryconditions. Several local governments have been allowedto issue bonds for the first time since 1994 to securefunding to replace decreasing land auction receipts. TheBank of China has increased loan approvals as depositsare rising relative to its loan portfolio, while bank reserverequirement ratios were recently lowered for the firsttime since 2008.

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8/20

8

Commodities Monthly

Industrial metalsAluminiumAluminiumAluminiumAluminium LME aluminium price and inventoriesLME aluminium price and inventoriesLME aluminium price and inventoriesLME aluminium price and inventories

(weekly data) We expect the aluminium market to remain in surplus in

2012 though production cutbacks caused by high cost

Chinese marginal producers ($2100-2300/t) goingbankrupt are supportive. While LME inventories have rebounded to record highs,

SHFE inventories are now very low. Given the prevalence of expensive, low quality domestic

aluminium smelting, high cost domestic bauxite reservesand power shortages in China, aluminium imports arelikely to increase in coming years.

We forecast an average 2012 LME aluminium price of$2275/t.

Prices are unlikely to fall significantly below $2000/bwithout a significant deterioration in the Chinese

economy and/or a Euro-zone collapse.

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Over the first eight months of this year, the coppermarket deficit totalled 161 kt (vs. production of 12926 kt)according to the ICSG.

Lack of support from production costs (mostly between$4000-4500/t) still leaves copper sensitive to marketsentiment.

The recent downtrend in LME and SHFE inventories andhealthy Chinese imports show Chinese restocking has

been triggered by lower prices. Given zero production growth expectations and the

likelihood of another significant market deficit in 2012copper prices should be well supported with substantialupside risk if growth expectations stabilize.

We forecast an average 2012 LME copper price of$8625/t.

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(weekly data) With both nickel and iron prices relatively low and power

costs high, Chinese nickel pig iron (NPI) producers are

struggling. Due to support from marginal production costs, lower

inventories and decreasing prices so far this year, we seelittle further downside risk in the nickel market, absent aserious global economic setback.

Like the copper market, we expect Chinese buyers toseize the opportunity to increase nickel buying at lowerprices.

Still, despite significant uncertainties regarding NPIproduction and projects utilizing HPAL technology, apotentially growing market surplus in 2012 is likely, atleast partly, to limit nickel upside.

We forecast an average 2012 LME nickel price of$21250/t.

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9/20

9

Commodities Monthly

Industrial metalsZinZinZinZincccc LME zinc price and inventoriesLME zinc price and inventoriesLME zinc price and inventoriesLME zinc price and inventories

(weekly data) Over the first three quarters of 2011 the zinc market

surplus was 275 kt (vs. production 9720 kt) according to

the ILZSG, confirming that supply continues tosignificantly exceed demand. However, with production costs for most producers in

the region just below $2000/t prices should remain wellsupported provided the growth outlook holds ground.

Positively, we observe a six month inventory downtrendfollowing four years of rising inventories, likely a sign ofrestocking rather than strong consumption. Over thesame period SHFE inventories have also decreased.

Although the zinc market remains in surplus there isgood reason to expect it to tighten in 2012 and return tonear equilibrium in late 2013.

We forecast an average 2012 LME zinc price of $2225/t.

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(weekly data) Iron ore prices have remained volatile since beginning to

fall sharply in September and currently trade at justunder $140/t.

At present, macroeconomic concerns are being offset byChinese monetary easing and supply risks due to wetweather forecast for Australia.

We expect iron ore (62% Fe) prices to be well supportedat $120/t with a 2012 average price forecast of $140/t vs.YTD average of $169/t and 2010 average of $147/t.

In Europe, Japan and Turkey steel producers haveannounced further melting cutbacks while Chinese millsare coming back online after maintenance.

At the beginning of this month, LME billets reversed athree month bearish trend to presently trade at $550/t.The downward trend in the SBB World HRC indexcontinues while US and European HRCs have enjoyedrecent support.

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2 0 1 1 3000

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30000

33000





10/20

10

Commodities Monthly

Industrial metalsAluminiumAluminiumAluminiumAluminium futures curvefutures curvefutures curvefutures curve(LME, $/t)

Copper futures curveCopper futures curveCopper futures curveCopper futures curve(LME, $/t)

2050207521002125215021752200222522502275230023252350237524002425

245024752500

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11-10-07

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720072507300735074007450750075507600765077007750780078507900

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1 5

11-10-07

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11-12-09

Nickel futures curveNickel futures curveNickel futures curveNickel futures curve(LME, $/t)

Zinc futuresZinc futuresZinc futuresZinc futures curvecurvecurvecurve(LME, $/t)

173501745017550176501775017850179501805018150182501835018450185501865018750188501895019050

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Lead futures curveLead futures curveLead futures curveLead futures curve(LME, $/t)

Tin futures curveTin futures curveTin futures curveTin futures curve(LME, $/t)

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11-10-07

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11-12-09



11/20

11

Commodities Monthly

Precious metalsThe gold market has resumed its post-2008 trendfollowing some turbulence in H2-11. Additionaloutbreaks of volatility should however be expected

in coming months during flights to liquidity with theEuropean crisis still in a critical phase and theeffects of Chinese monetary tightening topping out.We expect monetary easing in Europe, China andpotentially also the US (QE3) to increase liquidityand drive the gold price to new record highs,possibly as early as H1-12. Liquidity will be astronger influence on market performance thanmacroeconomic turbulence. Subsequently,recovering growth expectations could beginadversely affecting gold with prices decreasingtowards the year end. In coming years the goldmarket outlook will be determined by severalfactors, mainly including real interest rates,emerging market demand and mine supply. Whileour long term gold market view is relatively positivewe see a strong probability that the post 2008 goldmarket rally will culminate in 2012. We forecast anaverage gold price of $2050/ozt in 2012.

The question whether the European Central Bank willprint money or not has a considerable bearing onpossible gold market developments going forward. So farbalance sheet expansion has been very limitedcompared, for example, to the Federal Reserve and Bank

of England. As the EMU treaty does not allow the ECB tobuy bonds in the primary market or lend money directlyto states, it has only been able to support distressedstates indirectly by buying bonds in the secondarymarket and restricting yields. However, there are severalways to overcome this limitation. The ECB could lend toother parties (e.g. the IMF) which in turn, would lend tostates directly. However, the central bank also knowsthat political commitment is essential to identifying andimplementing the necessary correction and thatpremature intervention would solve only part of theproblem. Consequently, extensive monetary easing isunlikely before a credible framework is put in place toresolve the crisis. In addition to quantitative easing, theECB could cut interest rates further. In the US, QE3 is stillpossible as growth prospects remain bleak despiterecent stabilization of several macroeconomic indicators.The third major liquidity concern is China. As the effectsof monetary tightening begin to affect the economy andconcerns grow over, for example, a potential real-estatesector collapse, monetary easing also becomes morelikely. Bank lending restrictions are once again beingrelaxed and the market is currently discounting interestrate cuts in 2012. Overall, these issues suggest continuedplentiful liquidity and low real interest rates next year.

Precious metal pricesPrecious metal pricesPrecious metal pricesPrecious metal prices(COMEX/NYMEX, indexed, weekly closing, January 2010 = 100)

8090

100110120130140150160170180190200210220230240250260

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SilverPlatinum

GoldPalladium

Gold to silver ratioGold to silver ratioGold to silver ratioGold to silver ratio(front month, weekly closing)

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2022

GOLD EUR JPY GBP SEK RUB NOK CHF

YTD (%) MoM (%)



12/20

12

Commodities Monthly

Precious metalsGoldGoldGoldGold Gold priceGold priceGold priceGold price

(COMEX, $/ozt, front month, weekly closing) Physical gold ETF holdings printed new highs in

December to currently exceed 2300 tonnes. Overall, ETF

holdings have continued to increase relatively steadilysince their introduction in the early 2000s. US mint gold coin sales, on the other hand, posted a year

low in November, probably reflecting the countrysincreasingly stable macroeconomic situation.

However, European demand for gold coins appearsmuch stronger, as shown by German gold coin importswhich have steadily increased during the second half ofthis year.

Speculative positions in COMEX gold remain at theirlowest levels since 2009, well above 2008 lows and justbelow pre-2008 highs.

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SilverSilverSilverSilver SilverSilverSilverSilver pricepricepriceprice(COMEX, $/ozt, front month, weekly closing)

Physical silver ETF holdings have stagnated this year tostand currently just below 17500 tonnes, about 1000tonnes below their high earlier this year.

US mint silver coin sales fell to a year low in November,in line with developments in the US gold coin market.

Speculative positions in COMEX silver are approaching2008 lows, and are also relatively modest compared tomost of the past decade.

Based on a current gold silver ratio of around 53 weregard silver as a viable alternative to gold though weprefer the latters key characteristics.

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Platinum & PalladiumPlatinum & PalladiumPlatinum & PalladiumPlatinum & Palladium Platinum and palladium pricesPlatinum and palladium pricesPlatinum and palladium pricesPlatinum and palladium prices(NYMEX, $/ozt, front month, weekly closing)

After peaking at 46.3 tonnes in September physicalplatinum holdings have decreased to 40.3 tonnes. Theirpalladium counterparts have maintained an almost year-long downtrend to 53.0 tonnes after peaking at 73.1tonnes in February.

Speculative NYMEX palladium positions are approaching2008/2009 lows while remaining relatively high forplatinum.

Johnson Matthey expects significantly lower supplies ofpalladium from Russian state inventories in 2012 at 145kozt vs. 750 kozt in 2011. Following a small marketsurplus in 2011 it forecasts a deficit in 2012.

Regarding the platinum market the company expects asmall surplus in 2012 due to increasing South African

supply and recycling.

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Platinum (right axis)



13/20

13

Commodities Monthly

Precious metalsGoldGoldGoldGold futures curvefutures curvefutures curvefutures curve(COMEX, $/ozt)

SilverSilverSilverSilver futurfuturfuturfutures curvees curvees curvees curve(COMEX, $/ozt)

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Palladium futures curvePalladium futures curvePalladium futures curvePalladium futures curve(NYMEX, $/ozt)

Platinum futures curvePlatinum futures curvePlatinum futures curvePlatinum futures curve(NYMEX, $/ozt)

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Physical sPhysical sPhysical sPhysical silver and goldilver and goldilver and goldilver and gold ETPETPETPETP holdingsholdingsholdingsholdings(weekly data, tonnes)

Physical pPhysical pPhysical pPhysical palladium and platinumalladium and platinumalladium and platinumalladium and platinum ETPETPETPETP holdingsholdingsholdingsholdings(weekly data, tonnes)

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14/20

14

Commodities Monthly

AgricultureWe expect agricultural commodity prices, grains inparticular, to trend lower during 2012. The northernhemisphere harvest season is finished turning

volatile production estimates into fact. Furthermore,both observed and modelled future la Niaconditions appear weak. In addition, globalmacroeconomic concerns are likely to continue todampen market sentiment during H1-12 as theEuropean crisis and the effects of Chinese monetarytightening peak. We therefore downgrade ouralready bearish outlook for next year even further.Going forward, we expect the sector to graduallynormalise following several years of major weatherdisturbances and record high prices. The mainconcern outstanding is low inventory levels, for cornin particular, that leave little room for disruptions.Weather, diseases and possible oil price spikescould of course all induce rallies in the agriculturalsector in 2012.

Grain prices continue to decrease as they have for thepast three months. Their decline from record highs wastriggered by general upward revisions in production andinventory estimates in the September and October WorldAgriculture Supply and Demand Estimate (WASDE)reports, in combination with a deterioration inmacroeconomic conditions. Production and inventoryforecasts were once again upgraded in the December

WASDE, consolidating bearish sector sentiment.

Global crop weather conditions are partly affected bytypical La Nia-related anomalies although these are byno means either extreme or particularly problematic atthe moment. Such anomalies are consistent withmoderate to weak La Nia observations and modelforecasts. The intensity of the phenomenon is expectedto peak in December and January before decreasing asspring arrives. The Southern US and some parts of theMidwest remain dry although the situation is expected toimprove in coming months. With dormant winter wheatthe only crop in the ground market sensitivity to USconditions is limited. The same applies to Europe andwestern areas of the FSU, where weather conditions aremixed. The main worry at present is heavy la Nia-related rain slowing the final stage of the Australianwinter wheat harvest with adverse effects on quality.Also typically for la Nia, we note so far moderatedrought conditions in parts of Argentina and Brazil wherecorn planting is coming to an end, soybeans are beingplanted and wheat harvests progress. If conditionsworsen this situation could in due course be supportivefor grains rather than being, as now, an issue to be keptunder observation.

Grains pricesGrains pricesGrains pricesGrains prices(CBOT, indexed, weekly closing, January 2010 = 100)

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Wheat productionWheat year end inventoriesSoybean productionSoybean year end inventories

Chart Sources: Bloomberg, USDA, SEB Commodity Research


15/20

15

Commodities Monthly

AgricultureCornCornCornCorn Corn priceCorn priceCorn priceCorn price

(CBOT, /bu, front month, weekly closing) Ethanol demand for corn is likely to ease as the US

subsidy for ethanol blending in gasoline disappears by

year end. However, ethanol demand for corn is unlikely to collapsenext year as we expect grain prices to continue lower andoil prices to remain high, i.e. encouraging blending.

According to Chinese officials, corn production this yearhas been very strong, although some remain doubtful,regarding the statement as an attempt to restrict prices.

Except for low inventory levels and some la Nia-relateddrought conditions in South America, we see littlesupport for corn prices.

The December WASDE includes upward revisions toglobal corn production and year-end inventories of +1%

and nearly +5%, respectively.

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WheatWheatWheatWheat Wheat priceWheat priceWheat priceWheat price(CBOT, /bu, front month, weekly closing)

With northern hemisphere winter wheat in the groundand the southern hemisphere winter wheat harvest at alate stage, wheat market uncertainty is relatively low.

The main weather-related concern is heavy rain inAustralia which is delaying local harvesting, and couldadversely affect potential quality.

Southern US wheat growing areas remain dry. Cropdevelopment would benefit from more rain.

In general, the wheat market outlook remains relativelybearish with ample inventories, unlike other grainproducts.

Demand for US wheat continues low as Black Sea grainsstill flood the market.

For the fifth consecutive month wheat production andinventories were revised higher, by +1% and +3%respectively in the WASDE.

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This years seasonal wave of US soybean exports peakedin November with exports now steadily decreasing.

La Nia-related drought in South America is the onlyobvious weather phenomenon operating at present withthe northern hemisphere in between crops over thewinter.

Soybean oil prices have recovered relative to soybeanssince mid-October, although the ratio has remainedcomparatively stable since mid-2009.

Soybean meal prices have continued to weaken vs.soybeans, as they have generally since mid-2009.

While soybean production estimates were raised onlyslightly in the December WASDE, year-end inventorieswere increased 1.5%.

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16/20

16

Commodities Monthly

AgricultureCorn futures curveCorn futures curveCorn futures curveCorn futures curve(CBOT, /bu)

Wheat futures curveWheat futures curveWheat futures curveWheat futures curve(CBOT, /bu)

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17/20

17

Commodities Monthly

Commodity related economic indicatorsEUROZONE Current Date Previous Date NextIndustrial production (%, YoY) 2,2 2011-09-30 6,0 2011-08-31 2011-12-14Industrial production (%, MoM) -2,0 2011-09-30 1,2 2011-08-31 2011-12-14Capacity utilization (%, sa) 79,7 2011-12-31 80,8 2011-09-30Manufacturing PMI 46,4 2011-11-30 47,1 2011-10-31 2011-12-15Real GDP (%, YoY) 1,4 2011-09-30 1,7 2011-06-30Real GDP (%, QoQ, sa) 0,2 2011-09-30 0,2 2011-06-30CPI (%, YoY) 3,0 2011-10-31 3,0 2011-09-30 2011-12-15CPI (%, MoM) 0,3 2011-10-31 0,8 2011-09-30 2011-12-15Consumer confidence -20,4 2011-11-30 -19,9 2011-10-31 2011-12-21USAIndustrial production (%, YoY) 3,9 2011-10-31 3,1 2011-09-30Industrial production (%, MoM) 0,7 2011-10-31 -0,1 2011-09-30 2011-12-15Capacity utilization (%) 77,8 2011-10-31 77,3 2011-09-30 2011-12-15Manufacturing PMI 52,7 2011-11-30 50,8 2011-10-31 2012-01-03Real GDP (%, YoY) 1,5 2011-09-30 1,6 2011-06-30Real GDP (%, QoQ, saar) 2,0 2011-09-30 1,3 2011-06-30 2011-12-22CPI (%, MoM) 3,5 2011-10-31 3,9 2011-09-30 2011-12-16CPI (%, MoM, sa) -0,1 2011-10-31 0,3 2011-09-30 2011-12-16

OECD Composite Leading Indicator 103,4 2011-03-31 103,1 2011-02-28Consumer confidence (Michigan) 67,7 2011-12-31 64,1 2011-11-30 2011-12-22Nonfarm payrolls (net change, sa, 000) 120 2011-11-30 100 2011-10-31 2012-01-06JAPANIndustrial production (%, YoY, nsa) 0,4 2011-10-31 -3,3 2011-09-30 2011-12-14Industrial production (%, MoM, sa) 2,4 2011-10-31 -3,3 2011-09-30 2011-12-14Capacity utilization (%, sa) 85,8 2011-09-30 89,0 2011-08-31Manufacturing PMI 49,1 2011-11-30 50,6 2011-10-31 2011-12-30Real GDP (%, YoY) -0,7 2011-09-30 -1,7 2011-06-30Real GDP (%, QoQ, sa) 1,4 2011-09-30 -0,5 2011-06-30 2012-02-13CPI (%, YoY) -0,8 2011-11-30 -0,5 2011-10-31 2011-12-28CPI (%, MoM) 0,1 2011-10-31 0,0 2011-09-30OECD Composite Leading Indicator 104,9 2011-02-28 104,2 2011-01-31Consumer confidence 37,7 2011-11-30 38,5 2011-10-31

CHINAIndustrial production (%, YoY) 12,4 2011-11-30 13,2 2011-10-31 2012-01-13Manufacturing PMI 49,0 2011-11-30 50,4 2011-10-31 2012-01-01Real GDP (%, YoY) 9,1 2011-09-30 9,5 2011-06-30 2012-01-13CPI (%, YoY) 4,2 2011-11-30 5,5 2011-10-31 2012-01-09OECD Composite Leading Indicator 102,3 2011-03-31 102,1 2011-02-28Consumer confidence 100,5 2011-10-31 103,4 2011-09-30Bank lending (%, YoY) 15,8 2011-10-31 15,9 2011-09-30Fixed asset investment (%, YoY) 25,6 2011-06-30 25,0 2011-03-31OTHEROECD Area Comp. Leading Indicator 103,2 2011-03-31 103,0 2011-02-28Global manufacturing PMI 49,6 2011-11-30 49,9 2011-10-31

Sources: Bloomberg, SEB Commodity Research


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18

Commodities Monthly

PerformanceClosing

last weekYTD(%)

1 m(%)

1 q(%)

1 y(%)

5 y(%)

UBS Bloomberg CMCI Index(TR) 1276,18 -6,3 -2,3 -8,8 -1,1 19,9UBS Bloomberg CMCI Index(ER) 1200,33 -6,4 -2,3 -8,8 -1,1 11,9UBS Bloomberg CMCI Index(PI) 1529,59 -5,6 -2,0 -8,4 -0,3 43,5UBS B. CMCI Energy Index(PI) 1517,12 5,3 -0,5 0,8 8,7 36,2UBS B. CMCI Industrial Metals Index(PI) 1082,57 -16,1 2,1 -10,7 -10,6 -4,5UBS B. CMCI Precious Metals Index (PI) 2552,86 18,1 -4,5 -9,9 21,3 159,1UBS B. CMCI Agriculture Index(PI) 1659,54 -15,6 -7,5 -18,3 -8,9 68,9Baltic Dry Index 1922,00 7,1 6,7 4,6 -9,0 -55,2

Crude Oil (NYMEX, WTI, $/b) 99,41 8,8 3,8 14,0 12,5 60,3Crude Oil (ICE, Brent, $/b) 108,62 14,6 -3,3 -3,7 19,4 74,6Aluminum (LME, $/t) 2065,00 -16,4 -2,8 -12,8 -11,7 -26,9Copper (LME, $/t) 7815,00 -18,6 2,5 -11,4 -12,7 13,6Nickel (LME, $/t) 18600,00 -24,8 3,0 -12,1 -21,2 -45,7Zinc (LME, $/t) 2003,00 -18,4 3,6 -8,3 -12,9 -54,0Steel (LME, Mediterranean, $/t) 547,50 -3,9 2,5 -8,0 2,3 N/AGold (COMEX, $/ozt) 1712,80 20,5 -4,4 -7,8 23,0 173,6Corn (CBOT, /bu) 585,50 -6,9 -10,7 -19,4 4,5 65 ,3Wheat (CBOT, /bu) 573,50 -27,8 -10,8 -18,2 -23,4 22,3Soybeans (CBOT, /bu) 1107,00 -20,6 -5,8 -21,8 -13,6 68,8


Major upcoming commodity eventsDate Source

Department of Energy, US inventory data Wednesdays, 16:30 CET www.eia.doe.govAmerican Petroleum Institute, US inventory data Tuesdays, 22:30 CET www.api.orgCFTC, Commitment of Traders Fridays, 21:30 CET www.cftc.govUS Department of Agriculture, Crop Progress Mondays, 22.00 CET www.usda.govInternational Energy Agency, Oil Market Report January 18 www.oilmarketreport.comOPEC, Oil Market Report N/A www.opec.orgDepartment of Energy, Short Term Energy Outlook January 10 www.eia.doe.govUS Department of Agriculture, WASDE January 12 www.usda.govInternational Grains Council, Grain Market Report N/A www.igc.org.ukOPEC ordinary meeting, Vienna, Austria December 14 www.opec.org


Contact listCOMMODITIES Position E-mail Phone MobileTorbjrn Iwarson Global Head of

[email protected] +46 8 506 234 01

RESEARCHBjarne Schieldrop Chief analyst [email protected] +47 22 82 72 53 +47 92 48 92 30Filip Petersson Strategist [email protected] +46 8 506 230 47 +46 70 996 08 84SALES SWEDEN

Pr Melander Corporate [email protected] +46 8 506 234 75 +46 70 714 90 79Karin Almgren Institutional [email protected] +46 8 506 230 51 +46 73 642 31 76SALES NORWAYMaximilian Brodin Corporate/Institutional [email protected] +47 22 82 71 62 +47 92 45 67 27SALES FINLANDJussi Lepist Corporate/Institutional [email protected] +358 9 616 285 21 +358 40 844 187 7SALES DENMARKPeter Lauridsen Corporate/Institutional [email protected] +45 331 777 34 +45 616 211 59TRADINGNiclas Egmar Corporate/Institutional [email protected] +46 8 506 234 55 +46 70-618 560 4


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Commodities Monthly

DISCLAIMER & CONFIDENTIALITY NOTICE

The information in this document has been compiled by SEB Merchant Banking, a division within Skandinaviska EnskildaBanken AB (publ) (SEB).

Opinions contained in this report represent the banks present opinion only and are subject to change without notice. Allinformation contained in this report has been compiled in good faith from sources believed to be reliable. However, norepresentation or warranty, expressed or implied, is made with respect to the completeness or accuracy of its contents andthe information is not to be relied upon as authoritative. Anyone considering taking actions based upon the content of thisdocument is urged to base his or her investment decisions upon such investigations as he or she deems necessary. Thisdocument is being provided as information only, and no specific actions are being solicited as a result of it; to the extentpermitted by law, no liability whatsoever is accepted for any direct or consequential loss arising from use of this documentor its contents.

SEB is a public company incorporated in Stockholm, Sweden, with limited liability. It is a participant at major Nordic andother European Regulated Markets and Multilateral Trading Facilities (as well as some non-European equivalent markets)for trading in financial instruments, such as markets operated by NASDAQ OMX, NYSE Euronext, London Stock Exchange,Deutsche Brse, Swiss Exchanges, Turquoise and Chi-X. SEB is authorized and regulated by Finansinspektionen in Sweden;

it is authorized and subject to limited regulation by the Financial Services Authority for the conduct of designatedinvestment business in the UK, and is subject to the provisions of relevant regulators in all other jurisdictions where SEBconducts operations.

SEB Merchant Banking. All rights reserved.

SEB Commodity Research

Bjarne Schieldrop, Chief Commodity [email protected]

+47 9248 9230

Filip Petersson, Commodity [email protected]

+46 8 506 230 47


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seb report: commodity prices moving up in 2012

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