Commodities enter 2011 on uptick

Despite all the geopolitical and economic jitters around the world, 2010 proved to be a sweet year for commodities investors.

• This was particularly true in the precious metals subsector, where strong investment demand in the developed world combined with robust economic growth in emerging countries such as China, India and Brazil.

London-fixed gold ended 2010 at US$1,410.25 per oz., up US$306.25, or 27.7% year-over-year. Silver eclipsed gold, though, rising US$13.64, or 80.3%, over the year to reach US$30.63 per oz. on New Year’s Eve, and starting 2011 at a fresh 30-year high.
Platinum powered its way US$265 per oz., or 18.1%, over the year to US$1,731.00, but it was low-key palladium that really stole the show percentagewise, rising US$389 per oz., or 96.8%, to US$791 per oz.
The cash bid for London Metal Exchange (LME) copper climbed 32.6% higher over 2010 to end the year at US$9,739 per tonne. Dr. Copper had a choppy first half of the year, but recorded strong gains for the rest of the year, much of it in reaction to a falling U.S. dollar caused by a high degree of quantitative easing in the U.S. The first-ever copper exchange traded fund (ETF) debuted in London in December, which helped drive copper prices to record highs in the New Year. At least another two copper ETFs are due to be launched this year.
Other cash LME metal prices were equally strong over the year thanks to a recovering world economy: nickel was up 35% to US$24,940 per tonne owing largely to strike-related production cuts in Canada; lead eased up 8.1% to US$2,585 per tonne; tin jumped 61.3% to US$26,940 per tonne; and aluminum advanced 11.3% to US$2,456 per tonne. A glaring exception was sad-sack zinc, tumbling 5.3% over the year to close out 2010 at US$2,432 per tonne.
According to UXC Consulting’s figures, uranium oxide prices spent much of 2009 between US$40 and US$50 per lb., but climbed higher throughout 2010 and ended the year at US$62.50 per lb.
Other off-exchange mined commodities such as iron ore, coal, molybdenum, diamonds and rare earth elements also posted substantially higher U.S. dollar prices in 2010.
More broadly, commodities was the best performing sector of the global economy in 2010, highlighted by oil prices posting gains of 15% to 22%, even as natural gas prices got worse, falling 21% in North America, and slipping into the US$4 per thousand cubic ft. range. Even the devastated forestry subsector saw surprisingly buoyant lumber prices that were up by a third in 2010, and grains and oilseeds prices were lifted by a drought in Russia.
However according to Scotia Economics, the top performing commodity in 2010, was actually the dull star sulphur, which shot up 153.3%.
These ebullient commodity prices had a salutary effect on the exploration. Scotia Economics estimates that global exploration spending in non-ferrous metals rebounded to about US$12.1 billion last year from US$7.5 billion in 2009, and it should beat the 2008 peak of US$14.4 billion in 2011.

• Anyone close to a TV over the past couple of weeks will have seen the biblical-scale flooding of central Queensland’s vast Rockhampton region. The Queensland police reported that an estimated 200,000 people have been affected in the state, including 10 dead, with substantial evacuations from Emerald, Condamine, Theodore and Rockhampton.

Described as the worst flooding in Queensland’s recorded history, an estimated 1 million sq. km of the state are affected, or about the same surface area as Ontario. The coastal city and regional centre of Rockhampton, with its population of 75,000, shut its deluged airport and has had its train links cut off. Roads are flooded out to the south and west of the city at presstime.
The state is a major coal and agricultural exporter, and mines and farms large and small in the affected regions have been suspended.
Some of the nation’s biggest miners with assets in the area are chipping in donations to the Queensland Premier’s disaster relief appeal and related charities. BHP Billiton and its partner Mitsubishi donated A$1.3 million, and BHP will match dollar-for-dollar all employee donations. Xstrata also confirmed a A$1-million donation, as did Rio Tinto.
Australia’s Macquarie Group estimates that coal shipments from the state are down 73%, or a US$1-billion loss in production, according to the Australian Broadcasting Corporation. This has put upward pressure on global thermal and metallurgical coal prices, which popped up to their highest levels since November 2008.