Green Hedge Funds: The New Commodity Play
Energy hedge funds have mostly been a North American phenomena until this year with the vast majority located in the New York metropolitan area. However, our continuing research into the secretive world of energy hedge funds is revealing evidence of a next wave of interest in Europe as well as an extension of the commodity trading platform into green markets.
By Peter C. Fusaro, Chairman, Global Change Associates.

Riding the Metals & Mining 'Super-Cycle'
A long-term 'super-cycle' combined with an extended current cycle will drive sustained earnings growth in the metals and mining sector and outweigh conventional sell signals in a maturing cycle, according to Alan Heap of Smith Barney (a division of Citigroup Global Markets Inc.)
By Alan Heap, Smith Barney (a division of Citigroup Global Markets Inc).

Life on Hedge Row
It's not all about the numbers. So in this Year of the Rooster - or the year 4,702 in the Chinese calendar - let's not overtax the quantitative side of hedge funds. I realise that the fashionable 'Pink Slip' month is over and large firms still have numerous over paid quants who need to keep their jobs because mortgage rates are going up, their debt increasing and the numbers on the bank accounts are decreasing, but ... look at what has happened over the last 30 years of investing in hedge funds.
By Cai Palmer, Managing Director, Court Cavendish Consultancy.

LME Plastics Ready to Launch on May 27th
The detractors are slowly being won over. They should see the LME initiative not as a cost to the industry, but an opportunity to move to a more sophisticated model for risk control and transfer. To whatever extent the plastics market will embrace plastics contracts is obviously a 'wait and see' question. Equally, the LME will measure the success of its initial plastics offerings before considering additional resins and grades. At the end of the day, the market will decide the usefulness of a plastics futures trading proposition.
By Guy Isherwood, Commodities Now.

The Fall of China Aviation: Lessons to Learn
China Aviation Oil Singapore (CAO) - the Singapore-listed subsidiary of state-owned China Aviation Oil Holdings Co, and China's largest jet fuel supplier - announced last December that it had filed for court protection after it suffered a speculative derivatives trading loss of US$ 550 million.
By Dr Carlos Blanco & Dr Robert Mark.

Aluminium: Growth Prospects Continue
After a dramatic New Year sell-off, aluminum prices have traded in a broad sideways to higher pattern. Several factors however, argue for higher price levels this year. Supply growth is catching up with demand, but there is still likely to be a production/consumption deficit in 2005. Much will depend on the strength of the Chinese economy, the level of Chinese exports and global industrial demand. Currency movements - particularly the dollar - will be important as always. Going forward, a continuing market deficit lingering through the first half of 2005 should keep aluminum stable to higher during the first half of 2005.
By Jim Steel, Refco.

Modelling Nickel Prices
The price of nickel is generally considered to be much more volatile than the prices of the other base metals and it has the reputation of being by far the hardest to forecast. Research by the London based consultancy Bloomsbury Minerals Economics Ltd (BME) has confirmed the extreme volatility of the nickel price (see Table 1), but tantalisingly has indicated that people find nickel prices so difficult to forecast mainly because they are focusing on a single price driver in isolation, when they should be looking at several jointly and, worse still, they are focusing on the individual driver with the weakest link to prices. Why traditional analysis of nickel prices fails - and how modelling helps you get to the right answer.
By Peter Hollands, Adam Sotowicz, Mire Zloh & Leon Westgate (Bloomsbury Minerals Economics).

Jewellery Boost for Palladium
China has replaced Japan as the biggest consumer of platinum jewellery - representing 30% of demand. But demand is falling at sustained current high prices as palladium jewellery demand soars.
By Guy Isherwood, Commodities Now.

Kyoto Era Begins
February 16th marked the start of the first phase of the Kyoto mechanism to address climate change. The first officially traded market mechanisms to combat CO2 emissions began in the EU on January 1st.
By Guy Isherwood, Commodities Now.

EU Market Shifts Up a Gear
The first of January this year heralded the formal start of the EU emissions trading scheme (ETS). At first glance it was an inauspicious start, with several National Allocation Plans (NAPs) still outstanding, uncertainty hanging over several more and no sign of a spot market emerging.
By Andreas Arvanitakis, Point Carbon.

A Recruiter's View of the Power Industry
I wrote the first installment of A Recruiter's View of the Power Market for the December 2000 edition of this magazine when the horizon looked bright and all appeared well with the world. The irony of the cover graphic of that edition - a picture of a man in a suit standing in what appears to be a post-apocalyptic setting, holding a sign that says 'THE END OF THE WORLD IS NIGH' (in reference to global warming) - only revealed itself in retrospect.
By Steve McAleavy, Manhattan Resources.

ETRM: Top 5 IT Imperatives
The Californian energy crisis, followed in quick succession by the Enron debacle caused an industry disruption on a massive scale. Major players in the energy markets ramped down their trading operations and reduced their exposures to the financial markets. Overall energy trading activity witnessed a steep drop in volumes. During this fall, regulators focussed their lenses, investors became more demanding, financial institutions acquired the assets of failing energy companies thus gaining big scale entry into energy trading, and energy firms re-oriented their trading strategies and started focussing more on asset optimisation and risk control. This disruption and the ensuing consolidation have not only laid the foundation for a robust growth in trading activity but have also brought in a paradigm shift in the way IT would be leveraged by energy trading firms. In this article, we examine what this shift means in terms of key IT challenges for those firms.
By Rahul Shah, Principal Consultant, Domain Competency Group, Infosys Technologies.

Financials & Physicals Converge as Integration Comes of Age
Professionals in energy trading, transport and risk management seek the holy grail: more accurate forward perspectives and a better understanding of risk - in turn enabling more confident decisions and strategic agility. New software technologies and streamlined, integrated business processes are propelling energy companies toward that goal.
By Jonathan English, Allegro Development.

Emerging Trends Amongst Leading Energy Businesses
Given the challenges the energy industry has faced over the past three years it is unsurprising both that market maturity has been slow to arrive and that there has yet to emerge a recognised 'best practice' business model that can be adopted by trading organisations as a whole. KWI recently undertook a qualitative survey into the factors driving forward the energy trading business model. One of the key objectives of our study was to take best practice from around the industry and pool it so that our customers can begin to benchmark key portfolio metrics such as 'deals per day', 'complexity of transactions' and 'number of commodities traded' against those of an extensive peer group. We looked at the issues from a number of different angles including, organisation structure, book structure to accommodate inter-book trading and transfer pricing, limits and controls, trading volumes and commodities, information sources, valuation and risk methodology, daily processes, accounting standards and compliance and technology. Some of our findings are discussed in more detail.
By David Bucknall, Chief Executive Officer, KWI.

Independent Commodity Research
Independent research is garnering further support propelled by structural changes, market developments and legal and regulatory issues. As ever, the US has led the way. But what are the prospects for this specialisation in commodity markets?
By Jamie Stewart, Eden Group.

Proof That Technical Analysis Really Works
Of course technical analysis really works! But since the days of early chartists like Edwards and McGee, technicians have struggled to prove it directly - as demanded by sceptics - with hard mathematical evidence. This article, which focuses on the performance of momentum indicators, demonstrates that now, with the number crunching power that computerisation affords, all that has changed and the proof is in.
By Cynthia Kase, Kase & Company Inc.