Foreword
By Charlotte James, Sales & Production Director.

Managing Commodity Price Uncertainty
Fundamental principles of economics can help explain the problems facing companies in many industries where commodity prices have risen to new levels and exhibited tremendous volatility. Over the last few years, rising global demand, production shortages and delivery constraints have led to price increases across a wide variety of commodities. While the price characteristics of crude oil and other key energy commodities have received the greatest attention, this overall trend has affected a large number of diverse commodity groups, including livestock, crops, food and fibre, precious and base metals.
By Charles Tooman & Gary Germeroth, PA Consulting Group.

Life on Hedge Row
In the light of remarks made by the head honcho of Yale University's Investment Portfolio, David Swensen, I thought that it may be politically correct to take a closer look at the role of Fund of Funds in the Hedge Fund investment arena. For those without access to 'all the news' on this side of the pond, David Swensen is the Chief Investment Officer for Yale University's US$14 billion endowment fund. Recently, Swensen spoke on the record to the Op-Ed columnist for the New York Times. He stated that, in his view, the regulators should do more to prohibit "unsophisticated players" from investing in hedge funds. Does that mean we should prohibit all investors with an IQ less than his or possibly only those that still wear brown polyester suits? I think that what he was trying to infer is any investor that does not have millions of dollars and an army of intelligent young do-gooders to do the dog work, should perhaps play the crap tables instead.
By Cai Palmer, Cavendish Consultancy.

Commodities Finance: Basel II Changes Bank Financing & Opens Up an Asset Class
The way commodities are financed is changing because of the Basel II Accord. As a result we expect to see more hedge fund activity in the market. This article explains what Basel II is all about and how these changes are occurring.
By James Parsons, LTP Trade.

Worldwide Non-Ferrous Exploration Budgets Reach US$5.1 Billion
Metals Economics Group's (MEG) analysis of budgets from the 2005 edition of Corporate Exploration Strategies shows that budgets this year have increased for a third time to almost US$4.9 billion.
Metals Economics Group.

A Rational Alternative to the Commodities Super-Cycle Theory
The prices of many - but not all - commodities have been rising sharply over the past two years. There are many good reasons for this. The increase in prices reflects the combination of several fundamental trends. Fabrication demand for many commodities is rising, reflecting strong economic growth in many quarters of the world and an overall expansion in demand for basic commodities due to the emergence of new consumer economies in India, China, Russia, and elsewhere. Economic development conditions have increased the demand for many commodities at any given price. Investment demand is also rising. Supply increases meanwhile have been slower than the increases in fabrication and investment demand, reflecting the lagged effects of many years of low prices and structural under-investment in the productive sectors of the commodities markets.
By Jeffrey Christian, CPM Group.

The Changing Nature of the Base Metal Cycle: A Producer's Perspective
Whatever the precise terms used to describe it, there is little doubt that the mining and metals industries have been going through something extraordinary. Quite how extraordinary we won't know for certain for some time to come. Meanwhile, we can enjoy debating the exact nature of the experience, its origins and its sustainability. For producers these have unquestionably been good times. However, they are also potentially dangerous times because of the expectations they engender.
By David Humphreys, Chief Economist, Norilsk Nickel.

Welcome to the Co-ordinated Real-Time Enterprise
Winners in today's complex, volatile markets will utilise business intelligence for better performance management and to achieve competitive advantage. The right decision support tools can harness data for better trading and business results.
By Michael Schwartz, Triple Point Technology.

Software Solutions Revolutionise Emissions Trading
Jean-Claude Riss, Managing Director of OpenLink's London operation, discusses how traders can help support the Emission Allowance, and optimise trading by controlling risk and ensuring straightforward management of emissions compliance obligations by employing online STP solutions.
By Jean-Claude Riss, Managing Director, OpenLink London.

Improving Risk Literacy & Communication
The effectiveness of a risk management function is often hampered by the quality of 'communication' with internal and external stakeholders. If risk management is to be an integral and effective part of the business decision making process, (encompassing both tactical and strategic issues), then a significantly greater emphasis needs to be placed on dramatically upgrading the active communication of risk.
By Carlos Blanco & Robert Mark.

Shipping: The China Syndrome
Over the last two years the shipping industry has seen tremendous growth, not only in terms of freight capacity and freight rates, but also from burgeoning activity in the Forward Freight market. This increased growth has been driven by a number of contributing factors, not least the increasing cost of freight and the considerable surge in global demand for commodities, particularly from China.
By Natalie Dencker & Emma Garvey, SunGard.

Dry Bulk Shipping Derivatives: A Screen Market in the Making
For the last 21 years, the dry bulk shipping market has had its very own and perfectly comfortable derivatives market, also known as the Forward Freight Agreements (FFA) market. But there are changes taking place in the structure of the shipping market writes Mikal Boe of IMAREX
By Mikal Boe, IMAREX.