Category Archives: Commodities

JSW Committed to US Business Despite Obstacles

JSW Steel Ltd, India’s most valuable steelmaker, announced its plans to overhaul its US operations. The decision comes at a time when a vision of profits is far from clear.

Two years ago, the company had planned to invest $1 billion in the US to strengthen its global reach. An economic slowing and tariffs inflicted by President Trump, and then the outbreak of the pandemic put an end to the expansion plan.

The company says it will spend the coming year “structurally fixing” its facilities since the coronavirus has caused “the lowest spread of US steel prices seen in the last decade,” said Parth Jindal, the director of US operations.

“Our plan is to reduce the losses and be extremely frugal and focus on completing these projects,” Jindal added. “From next year onward, we truly believe the U.S. operations will be well-positioned to be earnings accretive to JSW Steel.”

JSW has also hired a new CEO for its US division. Mark Bush replaced the previous CEO, John Hritz. Hritz will take over leading strategy and legal affairs.

The JSW Group is still fighting with the Trump administration over import tariff waivers. Nevertheless, when asked if the company would eventually pull its business out of the US Jindal answered that JSW is “very committed” to staying in the US.

“Once the modernization projects are completed and we bring down our cost curve, then we see no reason why the U.S. business can’t generate positive earnings,” he said. “It still remains an important part of our organization and all efforts are on to turn around the operations at the moment.”

Money Management during dual crisis

How to Manage a Dual Crisis: Coronavirus and Market Meltdown

The CEO of Source Financial Advisors, Michelle Smith, has issued several suggestions for how the financial community can endure two conflating situations: the economic fallout of the coronavirus and market declines.

Be in Touch

Use technology to maintain contact with clients. Video platforms should be utilized as much as possible to offer a face-to-face personal interaction. While working remotely may mean that things are a bit more casual, it is important to keep things professional.

Be Authentic

The need to maintain decorum and professionalism notwithstanding, it is also important to be genuine with clients. They want to know that their money is in good hands, but they also want to have a sincere conversation about life. Start and end every conversation with a client by discussing their wellbeing. Ask how they are managing and feeling. Give them the assurance they need. Show them that you care about their physical, mental, and financial health.

Michelle Smith advises maintaining professionalism alongside authenticity during these trying times.

Be Pro-Active

When things are uncertain it is tempting to switch to preservation mode. We have a fiduciary responsibility to do our best for those who are already clients; we may not have the bandwidth to grow our business. But as we focus on the clients we have, we should also maintain business contacts and relationships that can help our business in the future. Look for opportunities in various sectors and actively pursue leads.

Be Thoughtful

Clients are worried about a lot of things right now. It is the job of financial planners and economic advisors to ensure that money is not an additional concern. The current health concerns coupled with economic uncertainties present people with two extremely basic fears: being alone and broke. Now is not the time to overwhelm clients with statistics and trends. Listen closely to what the clients are saying and what they feel most comfortable with at this time. This is unchartered territory for everyone. Every individual, business owner, team leader, and industry specialist is figuring out how to navigate these uncertain times. In the money management field, being attentive, genuine, forthcoming, and caring is the best business practice right now.

Gold to Make a Comeback, Analysts Predict

As a hedge against inflation, gold

Native gold from Nevada, USA. (3.7 ounces). Courtesy of James St. John

gleams. But the stronger the dollar, the lower the price of gold tends to fall.

According to Bart Melek, the global head of commodity strategy at TD Securities in Toronto, investors and observers can expect to see the price of gold to climb as the dollar continues to weaken.

Since April 11, 2018 gold bullion lost about 5% in value, due to a surging dollar. Despite confusion in Italy and other uncertainties around the world, gold was selling for under $1300. Melek is predicting a surge in the price during the final quarter of 2018 to an average of $1375 an ounce, and could possibly hit a high price of $1400.

“As time moves on, there’ll be less and less reasons to get into the U.S. dollar, which will likely reverse some of the flows,” said Melek, a speaker at a precious metals conference in Singapore. “We do ultimately think that as we move into 2019, the U.S. dollar will weaken, which is a very powerful fuel for the gold complex.”

The outlook for the very near future is less optimistic for gold, whcich Melek does not believe will rise given the dollars continued strengthening. In addtion, the Fed is expected to raise interest rates two more times this year. Prices for gold will most likely average at about $1290 in the third quarter, and $1300 in the fourth quarter of 2018.

Hurricane Harvey Forces Closure of Largest US Oil Refinery

The devastation wrought by Hurricane Harvey and its unprecedented flooding has forced several oil refineries to partially or completely close, including America’s largest. Harvey’s ferocious winds and rain forced the Motiva refinery in Port Arthur to close. The plant has the capacity for 603,000 barrels/day. According to the Wall Street Journal the refinery began closing operations at about 5am central time on Wednesday “in response to increasing local flood conditions.” The giant Saudi Arabian oil company Saudi Aramco is the owner of Motiva. Production of oil had already slowed to 60% of capacity on Tuesday.

As of Wednesday morning, about 18 refineries were at least partly closed in Texas, including those located at Port Arthur in Houston.

“The largest impact to energy markets is severe flooding, which has resulted in the closure or part-closure of nearly 25% of the United States’ refinery capacity,” analysts wrote.
“As Harvey heads inland once again, we note a number of refineries in its current trajectory will be under threat,” they added. “This could close up to another 824,000 barrels per day (b/d) of capacity, giving an additional lift to fuel prices, while further depressing crude.”

The hurricane has had more of an impact on refining than on production, which has caused a strange fluctuation in oil prices compared to gasoline prices, which have gone up compared to oil.

Usually oil prices climb in response to extreme weather that hits areas with high concentrations of oil businesses. But prices of oil have fallen recently: West Texas Intermediate crude oil was down 1.1%, at $45.94/barrel. But US gasoline futures went up to their highest level since July 2015.

As refineries close due to damage, or workers are unable to reach their jobs; or it becomes difficult or impossible to move the gasoline out, a lack of demand for oil is created. This leads to more oil in storage, waiting to be refined, thereby forcing prices down. At the same time refiners can’t produce and distribute gasoline and other refined oil products, lowering supply and forcing prices up.

This explains why, when usually the price of oil and gas go up and down together, the unique circumstances caused by Hurricane Harvey has caused oil and gasoline prices to travel independently and in opposite directions.

Oil Prices Stay Steady with Pressure from Both Ends

Oil prices are performing a precarious balancing act as US oil production increases simultaneously with reduction in output from OPEC and other oil producers.

The price for Benchmark crude futures hardly budged from $55.86 a barrel at 6:57am. Yesterday’s price of $56.65 was the high for the month, just before it shrunk slightly today.

Only 6 cents separated today’s and yesterday’s price for US West Texas Intermediate crude futures, falling slightly. Yesterday’s price was the highest a barrel had been since March 7, at $53.76.

The weekly Energy Information Administration (EIA) report points to US oil output rising, while also showing that US stockpiles at the crude hub in Cushing, Oklahoma went up by 276,000 barrels during the week which ended on April 7.

Other data, however, showed a surprising fall in overall US crude inventories. Last week inventories fell by 2.2 million barrels while imports went down by 717,000 barrels per day.

“We saw a bit of a reversal in oil prices (on Wednesday) and it came despite some positive news,” chief market strategist at Sydney’s CMC Markets. “It does appear that there is bit of focus on the data that came alongside inventory numbers which showed further increase in U.S. production.”