industrial commodities it must be really different this time

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INDUSTRIAL COMMODTIES:- IT MUST BE REALLY DIFFERENT THIS TIME…. Over the last twelve months we had some 100-200% gain in key industrial commodities like crude oil and its derivatives and base metals. I would not bore you with any post mortem analysis as to why it happened, you must have been already inundated with that information. Rather I would like to draw your attention to a few key issues: 1) If EMs, lead by China and partially supported by rest of the world have kept the demand for such industrials alive and kicking, why is so much of inventory pilling up thick and fast in various warehouses of LME and SHFE or tank firms in US? 2) Inspite of such a brutal winter, demand for distillates in US is still well below last year, and as a result stockpiles are above 5 year average. Import demand for crude oil is heading south and is a good 10 below last year average. Same story for gasoline in the US. 3) IN OECD inspite of a very cold winter, demand for oil lead by winter fuels is way below average. Stock piles are accumulating. 4) China is showing strong demand growth in fuel but I am surprised as to the divergent trend between effective demand for base metals and published demand for oil. By effective demand, I mean adjusting consumption with stockpiling. With stockpiles accumulating in LME and SHFE, even without considering non- exchange warehouses, I can safely say that effective demand is weak for base metals, even in China. Alas, I don’t have the stock pile figures for oil and oil derivatives or even petchem in China and Asia, because I can safely assume that it would have shown similar trend like metals. The reason I say so because a divergent trend amongst industrial commodities can not exist because they are all indicators of the same economic condition. When I read reports and analysis I see little attention being paid to this fast rising stockpile issue, as if to say, that the world has found out a new way of analyzing commodity fundamentals. I beg to differ, mainstream analysis has always been about fitting the news to the existing trend, that’s how the famous phrase is born, time and again” IT’S DIFFERENT THIS TIME”…. But sadly its never….. Regards, Anindya Banerjee- mailto:[email protected]

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Page 1: Industrial Commodities  It Must Be Really  Different This Time

INDUSTRIAL COMMODTIES:- IT MUST BE REALLY DIFFERENT

THIS TIME….

Over the last twelve months we had some 100-200% gain in key industrial commodities

like crude oil and its derivatives and base metals. I would not bore you with any post

mortem analysis as to why it happened, you must have been already inundated with that

information. Rather I would like to draw your attention to a few key issues:

1) If EMs, lead by China and partially supported by rest of the world have kept the

demand for such industrials alive and kicking, why is so much of inventory pilling

up thick and fast in various warehouses of LME and SHFE or tank firms in US?

2) Inspite of such a brutal winter, demand for distillates in US is still well below last

year, and as a result stockpiles are above 5 year average. Import demand for crude

oil is heading south and is a good 10 below last year average. Same story for

gasoline in the US.

3) IN OECD inspite of a very cold winter, demand for oil lead by winter fuels is way

below average. Stock piles are accumulating.

4) China is showing strong demand growth in fuel but I am surprised as to the

divergent trend between effective demand for base metals and published demand

for oil. By effective demand, I mean adjusting consumption with stockpiling.

With stockpiles accumulating in LME and SHFE, even without considering non-

exchange warehouses, I can safely say that effective demand is weak for base

metals, even in China.

Alas, I don’t have the stock pile figures for oil and oil derivatives or even

petchem in China and Asia, because I can safely assume that it would have shown

similar trend like metals. The reason I say so because a divergent trend amongst

industrial commodities can not exist because they are all indicators of the same

economic condition.

When I read reports and analysis I see little attention being paid to this fast rising

stockpile issue, as if to say, that the world has found out a new way of analyzing

commodity fundamentals. I beg to differ, mainstream analysis has always been about

fitting the news to the existing trend, that’s how the famous phrase is born, time and

again” IT’S DIFFERENT THIS TIME”…. But sadly its never…..

Regards,

Anindya Banerjee-

mailto:[email protected]

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SHANGHAI BASE METALS INVENTORY CHANGE

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