SEB report: New Year rally – but not in commodities

7/29/2019 SEB report: New Year rally but not in commodities

1/20

Commodities MonthlyNew Year Rally But Not in Commodities 22 JANUARY 2013


2/20

2

Commodities Monthly

New Year Rally But Not in Commodities

GENERAL 0-3 M 4-6 M 7-12 M The World Bank has lowered its 2013 global GDP growth

projection from 3.0% to 2.4%, forecasting continued

contraction in Europe and only 1.9% expansion in the US. While confirming US economic improvements, the Federal

Reserve Beige Book warns momentum is weak.

Limited growth this year should ensure quantitative easingand ultra-low interest rates continue throughout, despitewishes expressed by some US Fed members that monetarystimulus measures may be scaled back in 2013.

ENERGY 0-3 M 4-6 M7-12 M Saudi Arabia must double production cutbacks made in Q4-12

to ensure market equilibrium in H1-13.

Brent crude prices continue to move sideways, despite theNew Year rally in global equity markets on increased hopes of

recovery fuelling risk-on sentiment. The IEA has raised its oil demand estimates for 2012 and 2013

due to increases in China, US and Brazil, while only slightlyupgrading its forecast call on OPEC for this year.

INDUSTRIAL METALS 0-3 M4-6 M7-12 M Industrial metals look most likely to end 2013 higher as global

economic conditions stabilize and growth accelerates slightly.

Reasonable prices relative to production costs still limitdownside risk.

However, with the recent (dubious) rally on more positiveChinese sentiment having lost momentum, we see betterbuying opportunities in H1.

Most likely, the exclusive market focus on Chinese economicconditions will end this year as OECD demand appearsincreasingly likely to improve.

PRECIOUS METALS 0-3 M4-6 M7-12 M Gold continues to disappoint even our already downgraded

forecasts and new offensives in the global devaluation war.

With macroeconomic conditions expected to stabilize andgrowth to pick up slightly, a return to the gold bull market isnow less likely.

Still, increasing inflation expectations or a US debt ceilingdebacle as in 2011 are upside risks.

This year, we recommend exposure to palladium and

platinum, both of which are more likely to respond well toimproving global economic prospects.

AGRICULTURE 0-3 M4-6 M7-12 M Persistent US Midwest drought conditions are worrying with

the new planting season only two months off.

We therefore remain tactically cautious though long-termdownside risk is decreasing.

Otherwise, global crop conditions are largely normal.

US soil moisture conditions will most likely be decisive forgrain markets in 2013.

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

(price indices, weekly closing, January 2011 = 100)

75

80

85

90

95

100

105

110

115

120

125

130

135

140

jan-11

feb-11

mar-11

apr-11

m

aj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

m

aj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

dec-12

jan-13

Industrial Metals

Precious MetalsEnergyAgriculture

(MSCI World, UBS Bloomberg CMCI price indices)

-2

-1

0

1

2

3

4

5

Equities

Commodities

Energy

Industrial

metals

Precious

metals

Agriculture

YTD (%) M/M (%)

(%)

-30

-25

-20

-15

-10

-5

0

5

10

15

20

CO2(EUA)

Power(Cont.)

Power(Nordic)

Sugar

Cocoa(US)

AluminiumZinc

Soybeans

Wheat

Nickel

Lead

Copper

Silver

CornGold

Heat.oil(US)

Brent

Steelbillets

Cotton

Gasoline(US)

Nat.gas(US)

Palladium

PlatinumTinWTI

Coffe(Ar.)

Chart Sources: Bloomberg, SEB Commodity Research


3/20

3

Commodities Monthly

General

Despite efforts by the World Bank to dampen currentpositive market sentiment by downgrading itseconomic outlook for 2013, we expect improvements inH1-13, reflecting stimulus measures announced duringH2-12. In the US, for example, the Fed initiated yetanother round of quantitative easing in December,while in China infrastructure investments andsubstantially expanded total financing have boostedlocal activity. Furthermore, we expect PMIs worldwideto become increasingly positive in H1-13. While the USdebt ceiling will remain of concern, we believe it will beraised yet again. The question now is - how far will lastyears stimulus measures carry growth momentum into2013?

Since our previous monthly Commodity Report onNovember 20 last year, the CMCI commodity price indexhas increased by only 0.7%, a poor performance during a

period in which markets have become substantially moreoptimistic concerning the possibility of a global economic

recovery, prompting a 14% rally in Chinese equities and a6% rise in European and US stocks. Even a 1.7% decline inthe USD index added little to commodity prices. Currently,

OECD Composite Leading Indicators suggest economicactivity is finally stabilizing in most major economies,

supported by stronger growth in the US and UK andevidence markets have bottomed and are recovering in bothIndia and China. The JPMorgan Global PMI returned to

(modest) positive growth in January with indications of evenhigher readings in coming months. Strong Chinese import

and export values in December and further expansion intotal local financing provisions also provided furtherevidence that the countrys economy has bottomed and is

recovering. Partial resolution of the US fiscal cliff furtherencouraged positive market sentiment as the New Year

began. Indications from many US Fed members that theywant an end to quantitative easing later this year led many

investors and markets to speculate whether it is almost timeto rotate out of safe-haven into growth assets. Suchthoughts have been very apparent in changes in asset class

values generally, with prices of government bonds (safe)falling and equities (unsafe) rising. Concurrently, the same

pattern was apparent within the commodities sector withindustrial metals the strongest performer, adding 8% overthe period, while gold and silver lost almost 6% of their

value.

Currently, markets are more cautious, wondering if presentpositive sentiment has been exaggerated. The latest USFederal Reserve Bank Beige Book suggests the countrys

economy is recovering but that momentum is weak, a viewimplying no imminent threat of higher interest rates or an

end to quantitative easing. Moreover, optimism has recededsomewhat thanks to the World Banks decision todowngrade its 2013 global growth outlook from 3% to

2.4%, signalling that while risks have decreased, growth

remains weak.

(price index, weekly closing)

750800850900950

10001050110011501200125013001350140014501500155016001650

170017501800

2007

2008

2009

2010

2011

2012

2013

(monthly, PMIs >50 expansive)

34

36

38

40

42

44

46

48

50

52

54

56

58

2007

2008

2009

2010

2011

2012

(monthly, 100 corresponds to long term trend growth in industrial production)

93

94

95

96

97

98

99

100

101

102

103

104

2007

2008

2009

2010

2011

2012

China

Eurozone

OECDUSAReference



4/20

4

Commodities Monthly

Crude oil

Saudi Arabia cut oil production as necessary in Q4-12 making further reductions more credible. Wetherefore slightly raise our Brent crude oil price

forecast for Q1-13 from $105/b to $107.5/b.However, given their potential large scale, weremain sceptical whether Saudi Arabia will make allcuts needed in H1-13. In addition, the bullish NewYear rally has been unable to drive Brent crudeprices significantly higher. Consequently, evenmodest setbacks to sentiment will see Brent crudeonce again testing the downside towards $105/b.

Between October and December, Saudi Arabiaconvincingly cut production by 600 kb/d, helping reducetotal OPEC production to 30.6 mb/d in December, largelyin line with the total call on OPEC output in Q4-12. Thecountrys determination makes it more likely it willcontinue to reduce production as necessary.Consequently, we raise our Brent crude oil forecast forQ1-13 from $105/b to $107.5/b while leaving our Q2-13estimate unchanged at $105/b. We maintain our H2-13projection at $110/b. Moving into Q1-13, demand forOPEC oil will decrease by 1 mb/d compared with Q4-12before falling by a further 0.5 mb/d in Q2-13. In otherwords, Saudi Arabia may need to cut current output byan additional 1.5 mb/d heading into Q2-13 to avoid therisk that global oil stocks may increase, unless of courseits production cutbacks are also supported by other

OPEC members. With the requisite reductionssubstantial, it remains unclear whether Saudi Arabia willin fact make them all. This uncertainty, together with theknowledge that US oil production is steadily increasing,is likely to weigh on the oil price during H1-13. Moreover,markets are highly optimistic regarding possibleeconomic recovery with equities having rallied into theNew Year. Nevertheless, despite such positive sentimentand generally improving markets, the Brent crude pricehas been unable to move much out of a fairly tighttrading band since October last year. Consequently, ifcurrent positive market conditions recede even slightly in

H1-13, Brent crude could easily fall back towards $105/b.

Middle East tensions will remain a wild card in 2013, asthey have for several years. The Iranian nuclear situationis by no means resolved with sanctions expected tointensify in February. Currently, Iran suffers from aliquidity shortage, adversely affecting maintenance andoil production investments. In addition, since last month,problems have escalated in Iraq, the second largestOPEC producer, with increasing tension between thecountrys Sunni Muslim minority which sides with rebelsin Syria, and the Shia Muslim majority which supportsShia-ruled Iran. A continued deterioration in the situation

in Syria will probably also adversely affect the position inIraq.

(NYMEX/ICE, $/b, front month, weekly closing)

30

40

50

60

70

80

90

100

110

120

130

140

150

2007

2008

2009

2010

2011

2012

2013

NYMEXWTI

ICE Brent

(DOE, mb, weekly data)

315

320

325

330

335

340345

350

355

360

365

370

375

380

385

390

j f m a m j j a s o n d

2008-2012 avg.

2012

2013


2012

(mb/d)

Revision

(kb/d)

2013

(mb/d)

Revision

(kb/d)IEA 89.8 +170 90.8 +240EIA 89.17 +130 90.11 +110

OPEC 88.80 -10 89.55 -10

($/b) Q1 Q2 Q3 Q4 FullYear

2013 107.5 105 110 110 108.12014 - - - - 110.02015 - - - - 115.0


5/20

5

Commodities Monthly

Energy

(NYMEX, $/b) (ICE, $/b)

85

86

87

88

89

90

91

92

93

94

9596

97

98

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

12-11-16

12-12-18

13-01-18

90919293949596979899

100101102103104105106107108109

110111112113

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

mar-15

jun-15

sep-15

dec-15

mar-16

jun-16

sep-16

dec-16

mar-17

jun-17

sep-17

dec-17

mar-18

jun-18

12-11-16

12-12-18

13-01-18

(NYMEX, /gal, front month, weekly closing) (DOE, mb, weekly data)

75

100

125

150

175200

225

250

275

300

325

350

375

400

425

2007

2008

2009

2010

2011

2012

2013

NYMEXGasoline

NYMEXHeating oil

120

130

140

150

160

170

180

190

200

210

220

230

240

j f m a m j j a s o n d

Gasoline 2008-2012 avg.

Gasoline 2013

Distillate fuel oil 2008-2012 avg.

Distillate fuel oil 2013

(NYMEX, $/MMBtu, front month, weekly closing) (NYMEX, $/MMBtu)

2

3

4

5

6

7

8

9

10

11

12

13

14

2

007

2

008

2

009

2

010

2

011

2

012

2

013

3,25

3,50

3,75

4,00

4,25

4,50

4,75

5,00

jan-13

m

aj-13

s

ep-13

jan-14

m

aj-14

s

ep-14

jan-15

m

aj-15

s

ep-15

jan-16

m

aj-16

s

ep-16

12-11-16

12-12-18

13-01-18



6/20

6

Commodities Monthly

Nordic power

Since our last report there has been a fairly dramaticchange in overall Nordic power market conditions. Forthe past two years hydroresources have been readily

available. Indeed, supplies have remained high with ahydrologic balance well above normal (at +12 TWh asrecently as early December). However, winter began withcold weather and little precipitation. In our last report westated that prolonged low temperatures were the onlything likely to push prices higher. They are now doing so.In addition, around the turn of the year the hydrologicalbalance had returned to normal and today it stands at -3TWh. Based on current weather forecasts indicatingcontinued cold, dry weather for the next 10 days, weexpect it to increase to -15 TWh over the next month.This is an excellent illustration of just how rapidly theNordic power system can shift from one extreme toanother. Still, nuclear availability is better than in recentwinters, with between 90% and 95% capacity availablesince current cold conditions began, reducing the risk ofspot prices spiking when temperatures drop.

Continental European power prices have come undersevere pressure. The emissions market has traded lowerwith EUA contracts for delivery in 2013 now well belowEUR 6/tonne and coal prices also continuing downward.Further, the German power market is experiencing aseismic shift in favour of more environmentally friendlyproduction, supported by subsidies for the manufacture

of solar panels and windmills to replace gas firedproduction and other traditional sources.

The system spot price in December was EUR42.94/MWh, compared with a EUR 31.20/MWh averagefor 2012, a post-2007 low, reflecting the current stronghydrological situation and low consumption due tocontinuing weak macroeconomic conditions.

The changed environment has had a serious effecton forward prices. The forward curve has twistedwith prompt contracts moving sharply higher due to

the cold spell, while contracts further out on thecurve trade ever lower, following continentalmarkets. Provided coal prices do not turn we seelittle upside for contracts far out on the curve. Whilethere may however still be some scope for a furtherrise, we have a neutral outlook at current levels withprices having already moved substantially higher.

(by Mats Forsell and Mats Hedberg, Commodities Trading)

(Nord Pool, /MWh, front quarter, weekly closing)

20

25

30

35

40

45

50

55

60

65

70

75

80

2007

2008

2009

2010

2011

2012

2013

(EEX, /MWh, front quarter, weekly closing)

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

2007

2008

2009

2010

2011

2012

2013

(ECX ICE, /t, Dec. 13, weekly closing)

4

5

6

7

8

9

10

11

12

13

14

15

16

1718

19

20

2009

2010

2011

2012

2013



7/20

7

Commodities Monthly

Industrial metals

The industrial metal rally in late 2012, triggered byrelief that the Chinese economy was showing signs ofstabilizing, had already lost momentum by late

December. Still, we believe the industrial metals sectoris most likely of all commodity sectors to end 2013higher. Prices remain reasonable relative to productioncosts while demand fundamentals could more broadlystabilize this year. We therefore expect a positive pricetrend with smaller deviations from the trend comparedto 2012. Our opportunistic recommendation in 2012,i.e. to sell rallies and buy dips, is thus gradually turninginto a strategic recommendation to buy on dips andhold. There is a good chance that buying opportunitieswill materialize in Q1-13 as current prices reflect thegeneral New Year optimism that has boosted riskappetite in general and possibly fabricated positive

data coming out of China lately. Further, the generaluptrend in reported metals inventories should highlightthe risk of further short-term setbacks. Absoluteinventory levels, high for several metals, are lessproblematic with substantial volumes locked up incurve plays to create low risk returns in the current lowinterest rate environment.

Current data still support the view that the Chinese

economy has re-stabilized with growth consistent withgovernment objectives. However, positive local figures areroutinely accused of being largely fabricated, being more

bullish than those provided by more independent observers.

We recommend caution, pending a longer data series andanecdotal evidence showing economic stabilization and/orrecovery before entirely precluding the possibility of aChinese hard landing as a tail risk scenario. Regarding

stimulus measures once Chinas new political leaders takeoffice, we also recommend caution. Current rising inflation,

while blamed on cold weather, can also be matched withmonetary easing since mid-2012. Although the inflation

cycle may very well be turning, massive long-terminfrastructure projects will still guarantee healthy underlyingdomestic demand for industrial metals in all but the most

bearish scenarios. Thus a free fall in metal price fromcurrent levels appears unlikely in 2013.

In the industrial metal market, we have become used toattributing only marginal importance to the non-Chinese

world. Demand from both the US and Europe has remainedweak following the sub-prime crisis with market action

entirely dominated by China. This may however change in2013 as the European economy appears to be bottomingwhile its US counterpart is beginning to show very general

signs of a recovery. Still the main tail risk in both regions is alack of political resolve.

Overall, in all major areas, this years potential appearssignificantly better compared to the outcome of 2012.

However, current prices to some extent discount this view,leaving a limited room for bullish price action unless growth

forecasts are revised higher.

(weekly closing)

1400

1600

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

38004000

4200

4400

4600

2007

2008

2009

2010

2011

2012

(LME, indexed, weekly closing, January 2011 = 100)

60

65

70

7580

85

90

95

100

105

110

115

120

125

130

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

dec-12

jan-13

Copper

Nickel

AluminiumZinc

Lead

Tin

(LME)

+57.2

-13

-11-9

-7-5

-3

-11

35

7

911

13

15

17

Aluminium

Copper

Nickel

Zinc

Lead Ti

n

Steel

Price (%)

Inventories (%)



8/20

8

Commodities Monthly

Industrial metals

(weekly data)

Both LME and SHFE aluminium inventories trendedhigher through 2012, reflecting a substantial market

surplus likely to persist in 2013. The market is still quite likely to tighten due to stronger

demand, while inventory outflows are limited bywarehouse queues and financial transactions, restrictingphysical availability (cancelled warrants currently exceed40% of total inventories).

Positive for aluminium demand, global vehicleproduction data remain solid.

Absolute price levels are decisive for supply withcapacity likely to come back on line as prices edge higheralong the marginal production cost curve, reducingupside potential.

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

5500000

2007

2008

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2013

1250

1500

1750

2000

2250

2500

2750

3000

3250

3500LME inventoris (t, left axis)

LME price ($/t, right axis)

(weekly data)

In the most optimistic scenarios, copper mine supplygrowth will be substantial this year, even spurring someforecasters to expect a market surplus for the full year.

Historically however, supply has almost alwaysdisappointed due to frequent disruptions and projectdelays. For example, several South American labourcontracts are subject to renegotiation in 2013 with asignificant risk for labour conflicts.

We expect a less tight market in 2013 but still see asubstantial risk of a full year deficit. Consequently, thecopper market is likely to remain highly sensitive thisyear.

LME inventories ended 2012 trending sharply higher,indicating no current shortages of available metal.However, total inventories outside China are estimatedsignificantly tighter than inside.

0

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(weekly data)

The nickel market is likely to post a surplus in 2013 vs.2012, albeit smaller.

Stainless steel industry demand remains lacklustre whilevery strong production, inventories have continued on asolid uptrend throughout 2012 and into 2013, tocurrently stand near record highs.

The biggest upside risk concerns potential delays in thenew supply project pipeline.

Highly unpredictable Chinese NPI production will, as sooften, prove a decisive factor, determining importdemand and therefore market sentiment.

Chinese imports of Indonesian nickel ore are back at thesame level they reached prior to the, in retrospect, fartoo premature export restrictions.

High marginal production costs still substantially limitnickel downside risk.

0

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40000

45000

50000





9/20

9

Commodities Monthly

Industrial metals

(weekly data)

LME zinc inventories stand just below all-time highsfollowing a consistent five-year uptrend.

After suffering near chronic oversupply, the zinc marketmay see its demand-side deficit decrease this yearfollowing refined supply cuts in 2012. However, minesupply increased substantially last year, despite fallingrefined demand.

Significant price improvements will very likely and easilyboost and refining activity, depressing them once again.Consequently, zinc rallies should be short lived relativeto the rest of the sector.

Refined zinc supply exceeded demand by 267 ktbetween January and November 2012, according to theILZSG, down from 323 kt during the correspondingperiod in 2011, with refined supply pegged at 11,560 ktand demand at 11,293 kt.

0

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LME inventoris (t, left axis)


(by Maximilian Brodin, Commodities Sales)(weekly data)

Recent sharply higher iron ore prices ignorefundamentals. A correction was inevitable.

Concerns regarding potential weather-related disruptionin Australia are receding, while cold weather in China hasdeferred construction activity, weakening steel demand.

Steel mills are offering material in the spot market inexpectation of continued weaker prices.

Iron ore prices have fallen for four consecutive days atthe time of writing. The index stands at 145.40$/t withthe February contract bid at 135$/t and Q2 at just under130$/t.

0

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(weekly data) (weekly data)

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25000

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0

2500

5000

7500

10000

12500

15000

17500

20000

22500

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9000

12000

15000

18000

21000

24000

27000

30000

33000





10/20

10

Commodities Monthly

Industrial metals

(LME, $/t) (LME, $/t)

1900

1950

2000

2050

2100

2150

2200

2250

2300

23502400

2450

2500

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

12-11-16

12-12-18

13-01-18

7500

7600

7700

7800

7900

8000

8100

8200

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

12-11-16

12-12-18

13-01-18

(LME, $/t) (LME, $/t)

15800

16000

16200

16400

16600

16800

17000

17200

17400

17600

17800

18000

18200

18400

18600

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

12-11-16

12-12-18

13-01-18

1850

1900

1950

2000

2050

2100

2150

2200

2250

2300

2350

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

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nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

12-11-16

12-12-18

13-01-18

(LME, $/t) (LME, $/t)

2125

2150

2175

2200

2225

2250

2275

2300

2325

2350

2375

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

12-11-16

12-12-18

13-01-18

20000

20500

21000

21500

22000

22500

23000

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24500

25000

25500

feb-13

mar-13

apr-13

maj-13

jun-13

jul-13

aug-13

sep-13

okt-13

nov-13

dec-13

jan-14

feb-14

mar-14

apr-14

12-11-16

12-12-18

13-01-18



11/20

11

Commodities Monthly

Precious metals

Gold trades almost exactly in line with the averageprice for the past 18 months. We had expected QE3 andcorresponding money printing by other central banksto drive the gold above its nominal record high postedin mid-2011 ($1900/ozt) but it stopped short at$1800/ozt before falling backwards to currently thehigh 1600s. While growth is only expected to recovermodestly in 2013 downside risks have decreasedsubstantially with the potential for positive surprises,certainly within the OECD, having increased.Consequently, the market looks set to refocus ongrowth, at the expense of liquidity, a bearish factor forgold unless inflation expectations increase. So far,there is no suggestion that will happen. In combinationwith, for example, an expected strong dollar, we adopta slightly bearish view on gold for this year (Q1:$1700/ozt, Q2: $1650/ozt, Q3: $1600/ozt, Q4: $1600/ozt,Year average: $1638/ozt). Indeed, if global growth wereto accelerate more rapidly than expected, withoutsignificant inflation pressure, a sell-off in physicalinvestment products as investors seek higher returnscould quickly push gold prices significantly lower. For2013 we prefer exposure to palladium and platinuminstead of gold and silver.

Central bankers appear convinced that inflation is undercontrol despite the OECDs ultra-dovish monetary policy.However, what they think and what the future will produce

are not necessarily the same things. A vast economicexperiment is being conducted in which enormous

quantities of potentially combustible inflationary money arebeing printed as central bank balance sheets continue togrow. However, money multipliers remain low while

borrowers are deleveraging. If this situation changes andexit policies are not implemented quickly enough, it would

spell trouble.

S&Ps US credit rating downgrade in 2011 was acontributory factor in driving the gold price to a newnominal high. The downgrade was a direct result of the

inability of US politicians to agree on a plan to reducedeficits to sustainable levels over the coming decade. With

US politics still highly polarized, there is an appreciable riskwe may see similar turbulence this year. This represents anupside event risk for the gold market. However, it should be

remembered that, in 2011, Euro-zone stress was alsoincreasing exponentially, sending risk-averse European

investors running for cover, in other words into gold.However, from this perspective, we are seeing adiametrically opposed development at the moment with

PIIGS yields falling rapidly.

Both platinum and palladium are likely to post solid gains in2013 with supply probably stretched and strengtheningdemand likely. Palladium may lead the way being more

exposed to the Chinese and US economies than platinum

whose consumption is skewed towards troubled Europeanmarkets.

(COMEX/NYMEX, indexed, weekly closing, January 2011 = 100)

70

80

90

100

110

120

130

140150

160

170

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

dec-12

jan-13

Silver

Platinum

Gold

Palladium

(front month, weekly closing)

30

34

38

42

46

50

54

58

62

66

70

74

78

82

86

2007

2008

2009

2010

2011

2012

2013

c

-7

-6

-5

-4

-3

-2

-1

0

1

2

GOLD EUR JPY GBP SEK RUB NOK CHF

YTD (%) MoM (%)



12/20

12

Commodities Monthly

Precious metals

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

Net speculative long positions in COMEX gold fell backsharply in Q4-12, largely due to a reduction in long

positions, but also increasing shorts. They currentlystand near 2012 lows.

Physical gold ETF holdings stabilized around a newrecord high (2,633 tonnes) in December beforedecreasing slightly in early 2013 to 2,615 tonnes.

Last year, US Mint monthly gold coin sales exceeded2011 only in October and November. Total sales in 2012(753,000 ozt) were 25% lower than during the previousyear.

However, gold coin sales appear to have begun 2013strongly, possibly attributable to greater inflation fearsamongst retail investors than in financial markets.

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

2007

2008

2009

2010

2011

2012

2013

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

In December, net speculative long positions in COMEXsilver fell back from high levels, mainly due to areduction of long positions.

Since decreasing in H1-11, physical silver ETF holdingshave trended upwards, hitting new highs last December.Current holdings total 19,700 tonnes.

Like gold, US Mint silver coin sales rebounded in late2012 and appear also to have begun this year relatively

strongly. Sales in 2012 totalled 33,742,500 ozt, down15% compared to 2011.

The gold-to-silver ratio is 53.1, stable in the mid 50-60range, where it has traded for the last 18 months.

8101214161820222426283032343638404244464850

2007

2008

2009

2010

2011

2012

2013

(NYMEX, $/ozt, front month, weekly closing)

Net long speculative positions in NYMEX platinum andpalladium are high, reflecting relatively bullish market

expectations for both. While physical platinum ETF holdings have printed a new

record of 54 tonnes palladium positions are relatively

stable, around 13 tonnes below their previous 2011 all-timepeak (73 tonnes).

Gold-to-platinum and gold-to-palladium ratios remain closeto 1.05 and 2.5, respectively, as they have for the past 18

months, but seem keen to break out lower.

Both markets, palladium in particular, will probably betightly balanced this year if global growth remains on track.Mine closures due to poor profitability could tighten

balances further while unpredictable recycling is mainly adownside risk.

100

200

300

400

500

600

700

800

900

1000

1100

2

007

2

008

2

009

2

010

2

011

2

012

2

013

300

550

800

1050

1300

1550

1800

2050

2300

Palladium (left axis)

Platinum (right axis)



13/20

13

Commodities Monthly

Precious metals

(COMEX, $/ozt) (COMEX, $/ozt)

1650

1675

1700

1725

1750

1775

1800

1825

feb-13

maj-13

aug-13

nov-13

feb-14

maj-14

aug-14

nov-14

feb-15

maj-15

aug-15

nov-15

feb-16

maj-16

aug-16

nov-16

feb-17

maj-17

aug-17

nov-17

feb-18

maj-18

12-11-16

12-12-1813-01-18

31,4

31,6

31,8

32,0

32,2

32,4

32,6

32,8

jan-13

apr-13

jul-13

okt-13

jan-14

apr-14

jul-14

okt-14

jan-15

apr-15

jul-15

okt-15

jan-16

apr-16

jul-16

okt-16

jan-17

apr-17

jul-17

12-11-16

12-12-18

13-01-18

(NYMEX, $/ozt) (NYMEX, $/ozt)

620

630

640

650

660

670

680

690

700

710

720

730

mar-13

jun-13

sep-13

dec-13

mar-14

12-11-16

12-12-18

13-01-18

1540

1560

1580

1600

1620

1640

1660

1680

1700

jan-13

apr-13

jul-13

okt-13

jan-14

12-11-16

12-12-18

13-01-18

(weekly data, tonnes) (weekly data, tonnes)

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

dec-12

jan-13

16500

17000

17500

18000

18500

19000

19500

20000Gold holdings

Silver holdings

35

40

45

50

55

60

65

70

75

jan-11

feb-11

m

ar-11

apr-11

m

aj-11

jun-11

jul-11

a

ug-11

s

ep-11

okt-11

nov-11

d

ec-11

jan-12

feb-12

m

ar-12

apr-12

m

aj-12

jun-12

jul-12

a

ug-12

s

ep-12

okt-12

nov-12

d

ec-12

jan-13

Palladium holdings

Platinum holdings



14/20

14

Commodities Monthly

Agriculture

During Q4-12 persistent US drought conditions madeus increasingly cautious concerning short-term outlookfor the grain market, ensuring a three month neutraloutlook in our last Commodities Monthly. With nosigns of anything other than marginal improvements,we remain tactically cautious while the long termdownside risk has also started to moderate slowly. Ifsoil moisture conditions do not improve in comingmonths, we will probably further upgrade our priceexpectations. With the rest of the world enjoying fairlynormal weather conditions, at least from anagricultural production perspective, markets arefocused on the US. Winter wheat conditions arealready terrible, a fact well known and fullydiscounted. Thus the most important issue is whethersoil moisture levels in the Midwest can improvesufficiently to encourage farmers to plant acreage aslarge as price incentives suggest. It is highly probablethat developments in this area will be the decisivefactor for grain markets in 2013.

In the current nervous grain market environment we shouldnot forget circumstances which brought us to this point.

Weather conditions differed substantially from the normalmost constantly between mid-2009 and mid-2012. What

is worse is that these deviations have had a significantimpact on several important agricultural regions duringcritical stages of crop development, i.e. worst case

scenarios. As a result, in recent years, grain prices havebeen deflected from their long term bearish real price trend.

Considering the still far from optimized global agriculturalproduction system, an uptrend in real grain prices is unlikelyto be maintained for a prolonged period. It should also be

remembered that current tight grain stocks mainly concerncorn. From a global perspective, soybean inventories

trended slightly higher between 2000 and 2010 in terms ofdays of supply. During the same period, wheat inventories

have been both significantly higher and lower thancurrently. US corn inventories are trending lower due to thecountrys ethanol production. However, with booming tight

oil production, the role played by highly questioned ethanolin the countrys efforts to establish energy independence is

no longer that obvious.

Outside the US, global weather conditions are fairly

satisfactory, certainly from an agricultural perspective.Australian bush fires and exceptionally low Asian winter

temperatures have had only a marginal impact. ENSOconditions are neutral and expected to remain so thisspring. ENSO models forecast only modest deviations from

normal meteorological conditions, with no bias towardseither la Nia or el Nio conditions. Few and fairly limited

disturbances are reported from Europe, the FSU, SouthAmerica and Asia.

(CBOT, indexed, weekly closing, January 2011 = 100)

70

75

80

85

90

95

100

105

110

115

120

125

130

135

jan-11

feb-11

mar-11

apr-11

maj-11

jun-11

jul-11

aug-11

sep-11

okt-11

nov-11

dec-11

jan-12

feb-12

mar-12

apr-12

maj-12

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

dec-12

jan-13

Wheat

SoybeansCorn

(WASDE, yearly data updated monthly)

45

55

65

75

85

95

105

115

125

135

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

Wheat

Soybeans

Corn

(WASDE, monthly data, %, 2012/2013)

-14-13-12-11-10-9-8-7-6-5-4-3-2-10123456789

jun-12

jul-12

aug-12

sep-12

okt-12

nov-12

dec-12

jan-13

Corn productionCorn stocksWheat production

Wheat stocksSoybean productionSoybean stocks

Chart Sources: Bloomberg, USDA, SEB Commodity Research


15/20

15

Commodities Monthly

Agriculture

(CBOT, /bu, front month, weekly closing)

Net long speculative positions in CBOT corn fell sharplyin late 2012, driven by reduced long and increasing short

positions. Considering the US drought situation, netpositions at H1-12 levels signal rebound risk.

USDA US quarterly corn stocks of 8.03 bn bu were belowaverage consensus expectations of 8.21, and were welldown from 9.65 bn at the end of 2011, furtherconfirming corn as the tightest grain market.

Global 2012/2013 corn ending stocks were revised downmarginally in the December WASDE but by 1.4% inJanuary.

So far South American crop conditions suggest aplentiful crop this year, while dry US conditions are causefor concern going forward.

US corn ethanol production continues to decline asprofitability deteriorates.

250

300

350

400

450

500

550

600

650

700

750

800

850

2007

2008

2009

2010

2011

2012

2013


Net long speculative positions in CBOT wheat becamenegative in December as long positions continued totrend lower and short positions increased sharply.Consequently, if fundamentals deteriorate speculatorsmay fuel a rebound when rebuilding long positions.

Concerning wheat, US quarterly grain stocks of 1.66 bnbu were largely in line with expectations (average: 1.67bn) and unchanged since the end of 2011 (1.66 bn).

Global 2012/2013 wheat ending stocks were revised1.6% higher in the December WASDE and marginallylower in the January report.

Northern hemisphere wheat will remain dormant foranother month while the southern hemisphere harvest islargely finished.

400

500

600

700

800

900

1000

1100

1200

2007

2008

2009

2010

2011

2012

2013


Net long speculative positions in CBOT soybeanstrended lower through Q4-12 due to reduced long andincreasing short positions.

US quarterly soybean stocks at 1.97 bn bu were largely inline with consensus (average: 1.98 bn) but down from2.37 bn at the end of 2011.

Global 2012/2013 soybean ending stocks were revisedslightly lower in the December WASDE and by 0.8% inJanuary.

So far, South American crop conditions indicate anexcellent harvest this year while dry US conditions createmajor planting concerns.

Meal prices have fallen slightly vs. soybeans following astrong H2-12 while oil prices are recovering slowly afterthe palm oil market stabilized.

600

800

1000

1200

1400

1600

1800

20

07

20

08

20

09

20

10

20

11

20

12

20

13



16/20

16

Commodities Monthly

Agriculture

(CBOT, /bu) (CBOT, /bu)

560

580

600

620

640

660

680

700

720

740

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

mar-15

12-11-16

12-12-18

13-01-18

790

800

810

820

830

840

850

860

870

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

12-11-16

12-12-18

13-01-18

(CBOT, /bu) (NYBOT, /lb)

1200

1225

1250

12751300

1325

1350

1375

1400

1425

1450

1475

1500

mar-13

jun-13

sep-13

dec-13

mar-14

jun-14

sep-14

dec-14

mar-15

12-11-16

12-12-18

13-01-18

8

10

12

14

1618

20

22

24

26

28

30

32

34

36

2007

2008

2009

2010

2011

2012

2013

(NYBOT, /lb) (NYBOT, $/t)

30405060708090

100110120130140150160170180190

200210220

2

007

2

008

2

009

2

010

2

011

2

012

2

013

1400

1600

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

3800

2

007

2

008

2

009

2

010

2

011

2

012

2

013



17/20

17

Commodities Monthly

Commodity related economic indicatorsEUROZONE Current Date Previous Date NextIndustrial production (%, YoY) -3,7 2012-11-30 -3,3 2012-10-31 2013-02-13

Industrial production (%, MoM) -0,3 2012-11-30 -1,0 2012-10-31 2013-02-13

Capacity utilization (%, sa) 76,8 2012-12-31 77,9 2012-09-30

Manufacturing PMI 46,1 2012-12-31 46,2 2012-11-30 2013-01-24

Real GDP (%, YoY) -0,6 2012-09-30 -0,5 2012-06-30 2013-02-14

Real GDP (%, QoQ, sa) -0,1 2012-09-30 -0,2 2012-06-30 2013-02-14

CPI (%, YoY) 2,2 2012-12-31 2,2 2012-11-30 2013-02-22

CPI (%, MoM) 0,4 2012-12-31 -0,2 2012-11-30 2013-02-22

Consumer confidence -26,5 2012-12-31 -26,9 2012-11-30 2013-01-23

USA

Industrial production (%, YoY) 2,3 2012-12-31 2,9 2012-11-30

Industrial production (%, MoM) 0,3 2012-12-31 1,0 2012-11-30 2013-02-15

Capacity utilization (%) 78,8 2012-12-31 78,7 2012-11-30 2013-02-15


Real GDP (%, YoY) 2,6 2012-09-30 2,1 2012-06-30

Real GDP (%, QoQ, saar) 3,1 2012-09-30 1,3 2012-06-30 2013-01-30

CPI (%, MoM) 1,7 2012-12-31 1,8 2012-11-30 2013-02-21

CPI (%, MoM, sa) 0,0 2012-12-31 -0,3 2012-11-30 2013-02-21

OECD Composite Leading Indicator 103,4 2011-03-31 103,1 2011-02-28Consumer confidence (Michigan) 71,3 2013-01-31 72,9 2012-12-31 2013-02-01

Nonfarm payrolls (net change, sa, 000) 155 2012-12-31 161 2012-11-30 2013-02-01

JAPAN

Industrial production (%, YoY, nsa) -5,5 2012-11-30 -4,5 2012-10-31 2013-01-31

Industrial production (%, MoM, sa) -1,4 2012-11-30 1,6 2012-10-31 2013-01-31

Capacity utilization (%, sa) 82,2 2012-11-30 82,4 2012-10-31

Manufacturing PMI 45,0 2012-12-31 46,5 2012-11-30

Real GDP (%, YoY) 0,5 2012-09-30 3,9 2012-06-30

Real GDP (%, QoQ, sa) -0,9 2012-09-30 2012-06-30 2013-02-14

CPI (%, YoY) -0,6 2012-12-31 -0,5 2012-11-30 2013-01-25

CPI (%, MoM) -0,4 2012-11-30 0,0 2012-10-31

OECD Composite Leading Indicator 104,9 2011-02-28 104,2 2011-01-31

Consumer confidence 39,1 2012-12-31 39,0 2012-11-30

CHINAIndustrial production (%, YoY) 10,3 2012-12-31 10,1 2012-11-30 2013-03-09


Real GDP (%, YoY) 7,9 2012-12-31 7,4 2012-09-30 2013-04-15

CPI (%, YoY) 2,5 2012-12-31 2,0 2012-11-30 2013-02-08

OECD Composite Leading Indicator 102,3 2011-03-31 102,1 2011-02-28

Consumer confidence 105,1 2012-11-30 106,1 2012-10-31

Bank lending (%, YoY) 15,0 2012-12-31 15,7 2012-11-30

Fixed asset investment (%, YoY) 20,5 2012-09-30 20,4 2012-06-30

OTHER

OECD Area Comp. Leading Indicator 103,2 2011-03-31 103,0 2011-02-28

Global manufacturing PMI 50,2 2012-12-31 49,6 2012-11-30

Sources: Bloomberg, SEB Commodity Research


18/20

18

Commodities Monthly

PerformanceClosing

last weekYTD(%)

1 m(%)

1 q(%)

1 y(%)

5 y(%)

UBS Bloomberg CMCI Index (TR) 1316,08 1,0 0,6 -1,9 1,3 -0,3UBS Bloomberg CMCI Index (ER) 1236,72 1,0 0,6 -1,9 1,2 -2,1UBS Bloomberg CMCI Index (PI) 1591,43 0,9 0,6 -1,5 2,0 22,0UBS B. CMCI Energy Index (PI) 1547,44 2,3 4,1 -0,1 2,3 8,4UBS B. CMCI Industrial Metals Index (PI) 1095,56 0,0 -1,1 0,3 -3,5 0,9UBS B. CMCI Precious Metals Index (PI) 2518,05 1,7 1,1 -3,1 2,2 89,4UBS B. CMCI Agriculture Index (PI) 1783,78 0,3 -1,7 -5,1 4,1 25,1Baltic Dry Index 837,00 19,7 12,7 -15,4 -9,6 -87,0

Crude Oil (NYMEX, WTI, $/b) 95,56 4,1 8,7 3,8 -5,0 5,5Crude Oil (ICE, Brent, $/b) 111,89 0,7 2,8 -0,5 1,1 25,4Aluminum (LME, $/t) 2042,00 -1,5 -2,8 1,3 -7,4 -16,7Copper (LME, $/t) 8061,00 1,6 0,5 -1,9 -2,2 12,9Nickel (LME, $/t) 17550,00 2,9 -1,4 1,3 -10,0 -39,0Zinc (LME, $/t) 2034,00 -2,2 -2,7 5,9 1,6 -13,6Steel (LME, Mediterranean, $/t) 325,00 6,6 3,2 -7,1 -39,3 N/AGold (COMEX, $/ozt) 1687,00 0,7 1,0 -3,2 1,6 91,3

Corn (CBOT, /bu) 727,50 4,2 1,0 -4,4 22,6 46,0Wheat (CBOT, /bu) 791,25 1,7 -2,5 -8,9 33,6 -17,8Soybeans (CBOT, /bu) 1429,25 0,7 -2,5 -7,5 20,8 13,1

Sources: Bloomberg, SEB Commodity Research

Major upcoming commodity eventsDate Source

Department of Energy, US inventory data Wednesdays, 16:30 CET www.eia.doe.gov

American Petroleum Institute, US inventory data Tuesdays, 22:30 CET www.api.org

CFTC, Commitment of Traders Fridays, ~21:30 CET www.cftc.gov

US Department of Agriculture, Crop Progress Mondays, ~22.30 CET (season) www.usda.gov

International Energy Agency, Oil Market Report February 13 www.oilmarketreport.com

OPEC, Oil Market Report February 12 www.opec.org

Department of Energy, Short Term Energy Outlook February 12 www.eia.doe.gov

US Department of Agriculture, WASDE February 8 www.usda.gov

International Grains Council, Grain Market Report February 21 www.igc.org.uk

OPEC ordinary meeting, Vienna, Austria May 31 www.opec.orgSources: Bloomberg, SEB Commodity Research

Contact listCOMMODITIES Position E-mail Phone MobileTorbjrn Iwarson Head of Commodities [email protected] +46 8 506 234 01

Peter Lvaas Head of Commodities

Norway

[email protected] +47 22 82 72 70

RESEARCH

Bjarne Schieldrop Chief analyst [email protected] +47 22 82 72 53 +47 92 48 92 30

Filip Petersson Strategist [email protected] +46 8 506 230 47 +46 70 996 08 84

SALES SWEDENPr Melander Corporate [email protected] +46 8 506 234 75 +46 70 714 90 79

Karin Almgren Institutional [email protected] maternity leave

SALES NORWAY

Maximilian Brodin Corporate/Institutional [email protected] +47 22 82 72 73 +47 92 45 67 27

SALES FINLAND

Jussi Lepist Corporate/Institutional [email protected] +358 9 616 285 21 +358 40 844 187 7

SALES DENMARK

Peter Lauridsen Corporate/Institutional [email protected] +45 331 777 34 +45 616 211 59

TRADING

Niclas Egmar Corporate/Institutional [email protected] +46 8 506 234 55 +46 70-618 560 4


19/20

19

Commodities Monthly

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to provide background information only. It is confidential to the recipient, any dissemination, distribution, copying, or other use ofthis communication is strictly prohibited.

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DisclosuresThe analysis and valuations, projections and forecasts contained in this report are based on a number of assumptions andestimates and are subject to contingencies and uncertainties; different assumptions could result in materially different results.The inclusion of any such valuations, projections and forecasts in this report should not be regarded as a representation or

warranty by or on behalf of the SEB Group or any person or entity within the SEB Group that such valuations, projections and

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RecipientsIn the UK, this report is directed at and is for distribution only to (I) persons who have professional experience in matters relatingto investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (The

Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred toas relevant persons. This report must not be acted on or relied upon by persons in the UK who are not relevant persons. In the

US, this report is distributed solely to persons who qualify as major U.S. institutional investors as defined in Rule 15a-6 under the

Securities and Exchange Act of 1934. U.S. persons wishing to effect transactions in any security discussed herein should do so bycontacting Skandinaviska Enskilda Banken AB (publ) (SEBAB). SEBAB accepts responsibility for the content of this report in

connection with its distribution in the US. The distribution of this document may be restricted in certain jurisdictions by law, andpersons into whose possession this documents comes should inform themselves about, and observe, any such restrictions.

The SEB Group: members, memberships and regulators

Skandinaviska Enskilda Banken AB (publ) is incorporated in Sweden, as a Limited Liability Company. It is regulated byFinansinspektionen, and by the local financial regulators in each of the jurisdictions in which it has branches or subsidiaries,including in the UK, by the Financial Services Authority; Denmark by Finanstilsynet; Finland by Finanssivalvonta; Germanyby Bundesanstalt fr Finanzdienstleistungsaufsicht and Norway by Finanstilsynet. In the US, SEBAB is a U.S. broker-dealer,registered with the Financial Industry Regulatory Authority (FINRA). SEBAB is a direct subsidiary of SEB. SEB is active onmajor Nordic and other European Regulated Markets and Multilateral Trading Facilities, in as well as other non-Europeanequivalent markets, for trading in financial instruments. For a list of execution venues of which SEB is a member or

participant, visit http://www.seb.se.


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www.seb.se

SEB Commodity Research

Bjarne Schieldrop, Chief Commodity [email protected]

+47 9248 9230

Filip Petersson, Commodity [email protected]

+46 8 506 230 47

SEB report: New Year rally – but not in commodities

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