Walking the Dollar Tightrope
The US dollars’ continued fall has had a major impact on the prices of dollar denominated assets – including commodities, over and above the real increase in prices seen over the last 2-3 years. The world’s FX markets have been in turmoil since the G7 Dubai meeting, but current global imbalances are beginning to adjust. Has the dollar fallen enough and what of Asian currency pegs?
By Guy Isherwood, Editor, Commodities Now.

Currencies & Metals: The need for rigorous price analysis in a range of currencies
Mining and metals companies have opportunities and risks across a range of commodities and currencies. They therefore need to be able to analyse and forecast interactions between commodity prices and exchange rates for decision making generally, and for hedging. Since many currencies have long periods of severe over or under-valuation, metal price trends can vary dramatically in different currencies. It is not sufficient to think just in US dollar terms. The USA only accounts for 10-20% of the production and consumption of most metals. Price trends expressed in Canadian and Australian dollars, in euros and yen, are as important to the mining and metals industries as those expressed in US dollars.
By Peter Hollands, Leon Westgate & Adam Sotowitcz, (BME).

The World’s Changing Climate
Commodity market practitioners around the world are assessing the impact of a carbon constrained future on their operations and the resulting impact on business and where it will be conducted. Similarly, the world’s changing climate and action designed to curtail the man-made effects on the Earth’s temperature and ecosystems will continue to challenge policy makers.
By Guy Isherwood, Editor, Commodities Now.

National Allocation Plans
The European Emissions Trading Scheme (ETS) is set to start on 1st January 2005. Across all 25 Member and Accession States, Governments, lawyers, consultants and industry specialists are debating the implementation of the scheme – particularly on the issue of how to allocate European allowances to each of the 16,000 included installations.
By Lucy Mortimer.

Making Emission Markets More Efficient
How two companies are saving companies millions by reducing pollution. While studying a NOx emissions trading programme in Houston, Texas, Air Products and Chemicals, Allentown, PA and VisionMonitor Software, Houston, Texas determined that the Houston Industry could overspend in meeting the mandated regional NOx reduction targets by over US$300m. The two companies decided to create a service offering that could be applied to any emissions programme operating within a ‘cap and trade’ programme that will dramatically reduce industry’s spending in achieving regulated emissions.
By Rick McAllister & Venkata Kasireddy.

Are Platinum Group Metals More than a ‘Spike’?
“He first became interested in ships when his mother approached him. ‘John, our father wants you to build a boat at once’, she said. ‘Where is father?’ asked John. ‘In the middle of the lake, drowning,’ was the reply.” Spike Milligan, 1961 [in ‘The Essential Milligan’, 2002]. Few relationships are as bizarre as that recounted by Mr Milligan – outside the platinum group metal family, that is. Sympathise with one director of a major platinum mining company who admitted in November, “...because of the many factors involved price modelling is seen as being impossible.” Take pity, even, on hedge funds seeing what appears to be the arbitrage opportunity of a lifetime between platinum and palladium, but not knowing whether a US$600 price gap is part of a secular rising trend.
By Andy Smith.

Centre Stage: LNG
Liquefied Natural Gas (LNG) – a relatively small but rapidly growing market – will play an increasingly important role in the natural gas industry and global energy markets. The combination of higher natural gas prices, lower LNG costs, rising gas import demand, more stringent emission targets, and the desire for gas producers to monetize their gas reserves is setting the stage.
By Guy Isherwood, Editor, Commodities Now.

The Art of Investing in Managed Futures
“Compound interest is the eighth wonder of the world” (Albert Einstein).
By David Harding & Georgia Nakou, Winton Capital Management.

Gold’s Brave New World
The gold market is undergoing a major transformation in 2003 and 2004. Where gold is headed is open to debate, and the debate is quite heated.
By Jeffrey M. Christian, CPM Group.

Stuck in the ‘Commodity Trap’
World trade in merchandise has enjoyed phenomenal growth over the last decade, consistently growing faster than output. In Africa, however, the share of world exports has fallen from 6% in 1980 to just 2% today. And its a similar picture for imports. Africa is now stuck in a ‘commodity trap’, condemned to continued indebtedness and poverty unless it can reduce its commodity dependence and new international commodity initiatives are enacted.
United Nations Publications.

Power & Gas Deals, 2003
2003 proved to be a waiting game for those investing in electricity and gas utilities, according to a new report.
PricewaterhouseCoopers.

Managing Physical Asset Risk with a Dynamic Programming Model
In this paper, the results of a simple spread option model and a dynamic programming model utilising a multi-factor spot price process model are compared. The paper demonstrates that a slightly more complex model can fulfil completely the three criteria for valuation and risk management of power generation assets.
By David Peterson & Josh Gray.