Russia Reveals It Is Sitting On 'Trillions Of Carats' Of Diamonds

An amazing story again: 

• The discovery of a vast new diamond field containing "trillions of carats," enough to supply global markets for another 3,000 years.
• The diamonds could be worth $1 quadrillion at current market prices (amazing number, but completely meaningless as you couldn't sustain the current market price and even you would likely divide the prices by 10 or 100 should you flush the market with that enormous amount of diamonds)
• It seems like it's not going to be cost efficient to mine these industrial quality diamonds - and might be a good reason why nobody has mined them yet; if you believe the story is real.

From CSMonitor

MOSCOW — Russia has just declassified news that will shake world gem markets to their core: the discovery of a vast new diamond field containing "trillions of carats," enough to supply global markets for another 3,000 years.

The Soviets discovered the bonanza back in the 1970s beneath a 35-million-year-old, 62-mile diameter asteroid crater in eastern Siberia known as Popigai Astroblem.
According to the official news agency, ITAR-Tass, the diamonds at Popigai are "twice as hard" as the usual gemstones, making them ideal for industrial and scientific uses.
The institute's director, Nikolai Pokhilenko, told the agency that news of what's in the new field could be enough to "overturn" global diamond markets.

"The resources of super-hard diamonds contained in rocks of the Popigai crypto-explosion structure, are by a factor of ten bigger than the world's all known reserves," Mr. Pokhilenko said. "We are speaking about trillions of carats. By comparison, present-day known reserves in Yakutia are estimated at one billion carats.

From CSMonitor again

If that wasn't crazy enough, the head of the Novosibirsk Institute of Geology and Mineralogy, Nikolai Pokhilenko, bragged about the value of the diamonds, telling Russian reporters about "trillions of carats" under the surface of Siberia. Pokhilenko even said that they would have enough diamonds to supply the global market for "3,000 years".
The news invariably went viral, with one website saying that the diamonds could be worth $1 quadrillion at current market prices, and arguing that the find could cripple the market value of the gem.

Unfortunately: 

Alrosa, the Russian mining giant, confirmed that the huge diamond deposit really does exist. Unfortunately, the diamonds are not jewelry quality, a spokesperson for Alrosa said, and while they could feasibly be used for industrial purposes, they are located in an area without good infrastructure and it would not prove cost efficient to mine for them when low-grade, industrial-use diamonds can be made in labs more cheaply.

Portfolio Update: Stops Hit...

My stops on gold, silver and EUR.USD where all hit in the overnight market where all three assets took a serious hit. My profits dropped from 300% on my position to only 80%. Disappointing.

I'll look into re-entering these positions and also other commodities soon.

WWF Jumps in the Bandwagon of Commodities Über-Bulls

Markets have peaked, commodities are way down, and it's not anything to do with so-called fundamentals. It's all had to do with speculation, and always will have.

Now, since all forecaster only seem to be able to forecast linear or exponential growth extrapolation, and never seem to realize that everything that rise can also fall and collapse, many are set for quite a painful moment.

Today, WWF jumps in the bandwagon of the exponential growth extrapolation and state that Another Earth Needed to Meet Humans’ Demand for Resources

(Bloomberg) May 14, 2012 — Humans are using resources at such a pace they need another world to meet demand for land to grow crops and forests and raise animals, WWF International said. 

People required 18.2 billion hectares (45 billion acres) of land by 2008, with 12 billion productive hectares available, WWF said today in its biennial Living Planet report. About 55 percent of land needed was for forest to absorb carbon dioxide emissions. The Earth takes one and a half years to regenerate natural resources used annually by human inhabitants, WWF said.
“We are living as if we have an extra planet at our disposal,” WWF International Director General Jim Leape said in the report. “We are using 50 percent more resources than the Earth can provide, and unless we change course that number will grow very fast. By 2030, even two planets will not be enough.”

That's the main take away: there's no two planets in 2030, and there's no "unless": we will see a dramatic change in the course of the next few years, and the global Greater Depression will take its toll on everything you can imagine: consumption will fall, governments will fall — both have already started — and population will decrease as well — this has already started as well, and Japan is yet again the leader in this area, but China, Europe and even the US (excluding immigration) already have aging and declining populations.

The report, which urges humanity to cut waste and use food, energy and water more sustainably, is published before a United Nations conference in Rio de Janeiro next month where leaders from around the world will debate how governments can eradicate poverty while also halting the degradation of the environment. 

The average person required 2.7 so-called global hectares, or biologically productive hectares, to produce the resources they consumed in 2008, the most recent data available, according to the report. That compares with the Earth’s so-called bio- capacity of 1.8 hectares per person, it said. The UN has said the world’s human population passed 7 billion in October.

Agricultural Commodities Glut Across the Board — Farmland Price Bubble In The US

Short summary: the agricultural will, like any other of these inflationist trades, end in tears. Do not believe the hype, the Greater Depression will be just as the Great Depression was: deflationary, and full of oversupply, creating a self-sustaining declining spiral.






Record corn crop in China, but the Chinese government is still building inventories. This cannot last forever.

(Bloomberg) Nov 3, 2011 — China reaped its seventh record corn crop in eight years in the harvest now ending. 

That still won’t be enough to meet demand, driving a fivefold gain in imports as prices head for the highest-ever annual average. 

The world is awash with wheat.

(Bloomberg) Nov 14, 2011 — France may lose its place as the second-biggest wheat exporter after failing to win more than a dozen tenders in Egypt, the world’s biggest buyer, as shipments from Russia, Ukraine and Kazakhstan overwhelm markets. 

[...] France’s crop office expects a 23 percent drop in shipments in the 12 months ending in June, the most in at least a decade. 

[...] Output is also expanding elsewhere and the United Nations expects the biggest-ever global harvest. Wheat may drop another 20 percent in Paris by May, said Greg Grow, director of agribusiness at Archer Financial Services Inc. in Chicago.  “The world is awash with wheat and unless you can compete with the Black Sea you’re stuck,” said Tom Fritz, the Chicago- based co-founder of EFG Group LLC, a researcher and adviser to commodity traders. “The bias is for lower prices in an effort to clean up the glut.” Production reached 189.2 million metric tons in the harvest that began in September, 6.7 percent more than a year earlier, according to a survey of growers in the seven main producing regions carried out by Geneva-based SGS SA for Bloomberg.

Japan buys 800,000 Tons corn from Ukraine as U.S. substitute:

Nov. 16 (Bloomberg) — Japan, the world’s largest corn importer, made its biggest purchase of European grain in at least a decade, seeking a cheaper alternative to U.S. supply. 

The country bought about 800,000 metric tons from Ukraine after it removed a tax on exports last month. The purchase, made by five Japanese trading companies, was for shipments in November to March at prices that were about $20 a ton cheaper than U.S. corn, Nobuyuki Chino, president of Continental Rice Corp. in Tokyo, said in an interview today. 

Japan, which sourced almost 90 percent of its corn last year from the U.S., the biggest exporter, is seeking different options after a drought hurt the U.S. crop, driving annual prices to an all-time high and curbing global food supplies. 

“Japan joined other Asian buyers in finding cheaper alternatives to U.S. corn in feed as the American supply became too expensive,” Takaki Shigemoto, a commodity analyst at research company JSC Corp. in Tokyo, said today by phone. “A shift in demand will drag Chicago futures toward $6.”

We already discussed this a few days ago, but it's now making more headlines: the prices of farmland in the US have disconnected from their historical average yield. Their yield is now at a 40 year low.

Via Calculated Risk:

From the NY Fed earlier today: Conditions for New York manufacturers held steady in November

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers held steady in November. After a string of five consecutive months of negative readings, the general business conditions index rose nine points, to 0.6. While the new orders index edged down to -2.1, indicating that orders were a little lower, the shipments index rose to 9.4, indicating an increase in shipments. The inventories index fell to -12.2 — a sign that inventory levels dropped.
...
Employment indexes were mixed: employment levels were slightly lower and the average workweek slightly longer.

And from the Chicago Fed: Third Quarter Midwest Farmland Values Surge

At 25 percent, the year-over-year gain in agricultural land values in the third quarter of 2011 for the Seventh Federal Reserve District was the largest in just over three decades. Moreover, at 7 percent, the quarterly increase in the value of “good” farmland matched the highest since the late 1970s.

EON and RWE Pay Consummers To Take Their Production Off The Grid

Here's a very good Bloomberg report about the state of the renewable energy in Europe. This is a very good report from several reasons that I will try to list here:

1. It shows how much effort there is behind something everyone takes for granted: the electricity that turns your lights on and makes your appliances work.
2. It also shows that the price of some commodities, such as electricity can go below zero. It is also true for natural gas. Having worked in commodities trading in a firm that also traded electricity, I can tell you that these occurrences were quite rare.
3. It's good to push for green energy, but the way governments do it, is as with every other government action, destroying value instead of creating it.
4. Yet another example of completely stupid regulation: The law in Germany is that renewables have priority, so utilities have the choice of turning plants down for a few hours or paying a negative price to someone in Germany or abroad
5. And, from one side they force you to take a loss (see 4.) and from the other hand, they take public money and hand it too you to keep your plants running: the International Energy Agency said in August. U.K. energy regulator Ofgem is considering paying generators to keep plants open as back-up suppliers, compensating them for down time.
6. The (un?)intended consequence is that coal, gas, and nuclear power plants will slowly be shut down and or disappear, making electricity production far less reliable, and most probably making the prices not only unstable, but also move higher.

Sept. 30 (Bloomberg) — The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG had to pay consumers to take it off the grid.

Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks.

The phenomenon was unheard of five years ago. With Europe’s wind and solar farms set to triple by 2020, utilities investing in new coal and gas-fired power stations no longer face stable returns.

As more renewables come on line, a gas plant owned by RWE or EON that may cost $1 billion to build will be stopped more often from running at full capacity. It may only pay for itself on days like Jan. 31, when clouds and still weather pushed an hour of power on the same-day market above 162 ($220) euros a megawatt-hour after dusk, in peak demand time.

“You’re looking at a future where on a sunny day in Germany, you’ll have negative prices,” Bloomberg New Energy Finance chief solar analyst Jenny Chase said about power rates in wholesale trading. “And a lot of the other markets are heading the same way.”

Europe’s biggest power markets give preference to renewable energy including forcing some utilities to use their fossil-fuel plants less. That cuts into profit, complicating investment decisions as the companies try to meet emission targets and replace older plants and networks that Citigroup Inc. estimates will cost them more than 900 billion euros by 2020.

Profit Margins Northern Europe’s renewable-energy goals call for about 200 gigawatts of solar and wind capacity by 2020, or almost a third of the current installed base, compared with about 70 gigawatts today, according to the Finnish energy consultant Poyry. Even by 2014, gross profit from burning coal in Germany may skid by as much as 41 percent, according to Barclays Plc.

The gross margin at a coal power plant after deducting fuel and emission permit costs, the so-called clean dark spread, may “collapse” to as low at 3.50 euros a megawatt-hour, Barclays analysts including Peter Bisztyga said in a Sept. 1 report. The spread was at 6.15 euros today, Bloomberg data show. Narrower margins mean it will take longer for companies to pay off building new gas- and coal-fired facilities. Those plants are needed.

They can run around the clock, preventing blackouts when the sun sets or the wind dies as European power demand grows 5 percent through 2015 compared with 2010, according to Paris-based bank Societe Generale SA’s forecast.

“The more intermittent technology like renewables, the more baseload generation will be squeezed out,” Volker Beckers, chief executive officer of RWE’s U.K. Npower unit, said in an interview at Bloomberg’s London bureau. Npower’s plants are largely coal- and gas-fired, or baseload, meaning they can run around the clock. Electricite de France SA is spending 6 billion euros on its new 1,650-megawatt nuclear reactor at Flamanville in Normandy. Dong Energy A/S, Denmark’s biggest utility, inaugurated its first power station in the U.K. in February, an 824-megawatt combined-cycle gas turbine plant for 600 million pounds.

[...] “Too much wind can depress power prices, but then there are times when very little wind is blowing,” Poyry Director Phil Hare said in a telephone interview. Based on weather patterns over the past 10 years, there’s a 72-hour period each year when a wind farm would produce less than 5 percent of its potential output, Hare said. “Some other plant has to be there, but the company has to make the return on its investment in just those 72 hours over 10 years.”

[...] Solar plants in Germany generated as little as 23.8 megawatts at 7 a.m. Berlin time yesterday compared with 11,570 megawatts at 1:30 p.m., according to a European Energy Exchange AG’s website, tracking power capacity. A steady supply of 1,000 megawatts is enough for about 2 million homes in Germany. Power prices on the Epex Spot SE exchange in Paris that handles German and French supply vary hour-by-hour depending on how available capacity is. At times they can become negative when renewable energy peaks and there’s a surplus of power. Take Renewable Output At such times, generators or the grid operator pay consumers to take their electricity if they aren’t able to reduce output or hedge it.

Grid operators in Germany, Europe’s biggest power market, are also required to take renewable output if it is available, just as in Spain and France. The highest-ever hourly price in the combined German-French intraday market was 162.06 euros a megawatt-hour for delivery between 6 p.m. and 7 p.m. in Germany on Jan. 31, while the lowest was minus 55.11 euros for 2 p.m. to 3 p.m. on Feb. 6, data from the exchange showed.

The negative German prices on July 24 occurred on a day when winds averaged 15 mph in the northern state of Mecklenburg- Western Pomerania, home to many wind farms, Bloomberg weather data show. Germany’s same-day electricity price was below zero for nine hours on that windy day on July 24, with negative prices for a total of 31 hours so far in 2011, according to Epex data. France had 9 negative hours this year.

The joint French-German intraday market started last year and has so far helped to “buffer the volatility of prices,” Epex company spokesman Wolfram Vogel said by e-mail on Sept. 16. “The law in Germany is that renewables have priority, so utilities have the choice of turning plants down for a few hours or paying a negative price to someone in Germany or abroad,” EON spokesman Georg Oppermann said in a telephone interview. The company’s traders can protect EON against losses by watching weather patterns, he added. “The huge amount of renewable capacity due to be added to the grid will depress not just spreads but also the outright power price,” UniCredit analyst Scott Phillips said.

“This is clearly a negative predominantly for all thermal power plants, particularly coal.” Britain plans to install more than 8,000 offshore wind turbines by 2020 to get 15 percent of electricity from renewable sources. Germany installed 7.4 gigawatts of solar photovoltaic capacity last year, the most of any nation, driving total capacity to 17,200 megawatts. Spain aims to get 20.8 percent of its total energy from marine energy, geothermal and offshore wind projects, as well as hydropower, by 2020.

German wind power capacity peaked at close to 12,000 megawatts on July 24, according to Meteogroup data, the last day of negative prices. Four days later, the most that the country’s wind parks generated was 315 megawatts. Photovoltaic and solar-thermal plants may meet most of the world’s demand for electricity by 2060 -- and half of all energy needs -- with wind, hydropower and biomass plants supplying much of the remaining generation, the International Energy Agency said in August. U.K. energy regulator Ofgem is considering paying generators to keep plants open as back-up suppliers, compensating them for down time.

The so-called capacity payments, which also are being studied in Germany, are likely to favor gas over coal, as gas plants can be turned on and off faster, according to Phillips.

Subsidized power rates called feed-in tariffs, a proposed carbon floor price in Britain and other measures favoring renewable projects will lead to a shift in the “merit order” of plants across Europe, he said. Power from renewable projects will be the first to be used, followed by gas-fired power plants, which release less carbon-dioxide than coal stations. “Margins are going to get worse over the next few years but as the value of the plant for backup starts getting interest, it becomes an issue of what they’re worth, not what they cost,” Hare said.

(No So) Rare Earths - Illustration of the Power of the Market Economy - Part 2

Market forces, set in motion by the monopolistic and dictatorial behaviour of pseudo-communist-really-fascistic China led to the discovery of two gigantic deposits of Rare Earths:

• one containing about 100 times the current global reserves of Rare Earth metals have been found by the Japanese in international waters.
• the other one in Nebraska may be sitting on the world's largest untapped deposit of "rare earth" minerals

Note that it only took a few months to make such incredible discoveries. The lessons?

1. Do not interfere with the markets, let them do their thing, good thing will happen
2. Be careful when you speculate and bank on the rarity of an item or asset: if prices are driven high enough, one way or another new supply will reach the market
3. When you hear that oil will reach $1,000 (or read statements like Jim Rogers "no oil available at any price"), become very sceptical. Demand might be more elastic that you think, and more importantly, supply or newer form of replacements might appear all of the sudden
4. If you are still long the Rare Earth, it's most likely time to sell...

Here are quotes about the two discoveries.

2011-07-04 (Reuters) - Vast deposits of rare earth minerals, crucial in making high-tech electronics products, have been found on the floor of the Pacific Ocean and can be readily extracted, Japanese scientists said on Monday.

"The deposits have a heavy concentration of rare earths. Just one square kilometer (0.4 square mile) of deposits will be able to provide one-fifth of the current global annual consumption," said Yasuhiro Kato, an associate professor of earth science at the University of Tokyo.

The discovery was made by a team led by Kato and including researchers from the Japan Agency for Marine-Earth Science and Technology.

They found the minerals in sea mud extracted from depths of 3,500 to 6,000 meters (11,500-20,000 ft) below the ocean surface at 78 locations. One-third of the sites yielded rich contents of rare earths and the metal yttrium, Kato said in a telephone interview.

The deposits are in international waters in an area stretching east and west of Hawaii, as well as east of Tahiti in French Polynesia, he said.

He estimated rare earths contained in the deposits amounted to 80 to 100 billion metric tons, compared to global reserves currently confirmed by the U.S. Geological Survey of just 110 million tonnes that have been found mainly in China, Russia and other former Soviet countries, and the United States.

Details of the discovery were published on Monday in the online version of British journal Nature Geoscience.

The level of uranium and thorium -- radioactive ingredients that are usually contained in such deposits that can pose environmental hazards -- was found to be one-fifth of those in deposits on land, Kato said.

A chronic shortage of rare earths, vital for making a range of high-technology electronics, magnets and batteries, has encouraged mining projects for them in recent years.

China, which accounts for 97 percent of global rare earth supplies, has been tightening trade in the strategic metals, sparking an explosion in prices.

Japan, which accounts for a third of global demand, has been stung badly, and has been looking to diversify its supply sources, particularly of heavy rare earths such as dysprosium used in magnets.

Kato said the sea mud was especially rich in heavier rare earths such as gadolinium, lutetium, terbium and dysprosium.

"These are used to manufacture flat-screen TVs, LED (light-emitting diode) valves, and hybrid cars," he said.

Extracting the deposits requires pumping up material from the ocean floor. "Sea mud can be brought up to ships and we can extract rare earths right there using simple acid leaching," he said.

"Using diluted acid, the process is fast, and within a few hours we can extract 80-90 percent of rare earths from the mud."

The team found that sites close to Hawaii and Tahiti were especially rich in rare earths, he said.

He gave no estimate of when extraction of the materials from the seabed might start.

Rare Earth are not so rare anymore.

Washington Post 2011-08-03 — Elk Creek, Neb. (population 112), may not be so tiny much longer. Reports suggest that the southeastern Nebraska hamlet may be sitting on the world's largest untapped deposit of "rare earth" minerals, which have proved to be indispensable to a slew of high-tech and military applications such as laser pointers, stadium lighting, electric car batteries and sophisticated missile-guidance systems.

Canada-based Quantum Rare Earths Developments Corp. last week received preliminary results from test drilling in the area, showing "significant" proportions of "rare earth" minerals and niobium.
[...]
Quantum acquired a circular piece of land - a bit more than 4 miles in diameter - near Elk Creek late last year. The land, which the U.S. Geological Survey projects may have one of the world's largest deposits of niobium and rare earths, has since been poked, prodded and drilled to determine whether it held any niobium, which has never been mined in the U.S., or rare earths, which the U.S. has not mined in almost 10 years.
[...]
The Quantum project is the latest example of U.S. attempts to become less dependent on foreign sources for the obscure minerals found in few places on earth, but essential to a variety of modern gadgets.

The U.S. has relied on China for years for the 17 minerals that are defined as rare earths by the International Union of Pure and Applied Chemistry. Despite having such obscure names as praseodymium, promethium and samarium - no copper or zinc here - they are necessary for such routine contemporary technologies as magnets, laser pointers and miniature electronics, such as iPods.

"Without these minerals, our cellphones would be 3 pounds," Quantum CEO Peter Dickie said.

The U.S. used to produce rare earths through the Mountain Pass Mine in California, but it was shut down in 2002, primarily because of environmental concerns, including the spillage of hundreds of thousands of gallons of water carrying radioactive waste into a nearby lake.

China has emerged as the world's predominant supplier, controlling 97 percent of the global market for rare earths. In recent years, lawmakers have expressed concerns about China's "rare earth" dominance, and these concerns were heightened when Beijing temporarily halted exports to Japan last year during a territorial dispute.

Another essential mineral Quantum hopes to mine is niobium, a steel strengthener used by the automotive and aerospace industries.
[...]
On July 5, the U.S. and European Union won a major case against China when the World Trade Organization ruled that China was engaging in restraint of trade by keeping world supplies low on several other minerals on which it is the major supplier. Trade analysts said that ruling could set a precedent for a future rare-earth minerals case that also could loosen China's grip on that market.
[...]
"It's important to develop other sources [for rare earths] in the United States and not be so reliant on China," Mr. Coffman said.  

[...] Other companies racing to exploit the rare-earth rush include Molycorp, which is attempting to reopen the former Mountain Pass Mine in California and recently secured the environmental permits to proceed there.

Rare Earths - Illustration of the Power of the Market Economy - Part 1

What are Rare Earth Minerals? Rare earths are a group of 17 chemically similar metallic elements, such as lanthanum, cerium, neodymium and europium. The elements are used in radar, high-powered magnets, mini-hard drives in laptop computers, catalytic converters for vehicles, electric-car batteries and wind turbines.


I never had the time to post about them, but now is the right time it seems, given the news flow.
In case you never heard about these minerals or didn't follow the story since last October, here are a few quotes from 2010.

Oct. 21 2010 (Bloomberg) -- Rare-earth prices have jumped as Chinese export quotas crimped worldwide supplies for the elements used in the manufacture of disk drives, wind turbines and smart bombs.

Prices have climbed sevenfold in the last six months for cerium oxide, which is used for polishing semiconductors, and other elements have more than doubled, according to Metal-Pages Ltd. in London, which tracks rare-earth prices.

Actions by China, which produces more than 90 percent of the world’s rare earths, have drawn criticism from U.S. lawmakers and officials in Japan and Germany. China reduced its second-half export quota for the minerals by 72 percent in July. It is now further restricting exports, according to industry participants.
[...]
China said the quota reduction was needed in order to shut polluting mines and still be able to meet domestic demand. It will “continue to supply rare earth to the world” while maintaining restrictions “to protect exhaustible resources and ensure sustainable development,” the Commerce Ministry said in a statement yesterday.

Contributing to the rise in prices is an expectation of further restrictions. China will probably tighten export controls on rare earths next year, Shigeo Nakamura, president of Advanced Material Japan Corp., said at a conference in China yesterday.

Rare earths are a group of 17 chemically similar metallic elements, such as lanthanum, cerium, neodymium and europium. The elements are used in radar, high-powered magnets, mini-hard drives in laptop computers, catalytic converters for vehicles, electric-car batteries and wind turbines.

Rare-Earth Furor Overlooks China’s 2006 Industrial Policy Signal

Oct. 22 2010 (Bloomberg) -- China’s curbs on rare-earth exports may owe more to a 2006 policy to create fewer, larger companies than a knee-jerk response to trade and territorial disputes.

A directive that year tagged mining among the pillar industries the government wanted state enterprises to dominate to enhance returns and global competitiveness. This year it started closing down private mining companies to consolidate the industry around a handful of producers led by Inner Mongolia Baotou Steel Rare Earth High-Tech Co.

Global repercussions from the overhaul drew attention in July when the government said it would cut export quotas 72 percent in the second half of the year. China accounts for more than 90 percent of worldwide production of the metals, used in components for Toyota Motor Corp. hybrid cars, Lockheed Martin Corp. radars and General Dynamics Corp. tanks.
[...]
The export cutbacks and China’s near-monopoly has prompted the U.S. government to seek to revive domestic mining and led German Chancellor Angela Merkel to call for expanded production in eastern Europe and Central Asia as an alternative supply.
[...]
Japan said China halted shipments of rare earths last month after a collision in disputed waters between a Chinese trawler and the Japanese Coast Guard led to the fishing-boat captain’s detention. Chief Cabinet Secretary Yoshito Sengoku said Oct. 20 that the import situation “hadn’t changed” weeks after the captain’s release.

Nobel Prize-winning economist Paul Krugman wrote in the New York Times on Oct. 18 that “the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation.”

China started to rein in mining of rare earths in May 2009, setting production quotas to help bolster prices. The caps and subsequent export restrictions did just that. Cerium oxide, used for polishing semiconductors, soared sevenfold in the past six months and other elements have more than doubled, according to Metal-Pages Ltd. in London, which tracks prices. The term rare earth applies to a group of 17 chemically similar metal elements that also include lanthanum and neodymium.

Race to Replace China’s Rare Earths May Take Decade — Remember this highlighted sentence; it's very important for the part2 of this story.

Oct. 26 (Bloomberg) -- China’s decision to curb exports of rare earths is set to spark a global race for alternative sources that may still take a decade to secure sufficient supplies, the head of the German commodities agency said.
[...]
“We’re faced with a gap in rare-earth supplies that cannot be plugged overnight,” Steinbach said by phone ahead of a conference in Berlin today on securing commodity resources. “Realistically, bringing rare earths in volume to markets from new sites like Mongolia, Africa and Greenland may take five to 10 years.”

Germany joins Japan and the U.S. in calling on China to restore rare-earth exports after the Chinese government in July announced cuts in production of the elements used in everything from hybrid vehicles and flat-screen TVs to weapons systems. With demand for rare earths already forecast to outstrip supply, a scramble to secure substitute supplies is underway.

German Economy Minister Rainer Bruederle, whose ministry is hosting today’s conference, plans seven “strategic partnerships” to secure commodities, including rare earths and copper, according to two officials with knowledge of the matter.

The partner nations are Mongolia, Namibia, Nigeria, Kazakhstan, South Africa, Chile and Peru, said the two officials, who spoke on condition of anonymity because the plans are not yet public.

Safeguarding rare-earth supplies is “crucial” and Germany will forge partnerships with mining states to help do so, Bruederle said in a speech to the conference, without naming the countries.

The “ghost of protectionism” haunts global trade and China must realize that its policy is not a “one-way street,” he said.

China’s policy on rare-earth shipments is a sovereign right that doesn’t conflict with World Trade Organization rules, Foreign Ministry Spokesman Ma Zhaoxu said in Beijing today.

That stance won some support from the trade arbitrator’s director general, Pascal Lamy, who said the WTO has historically focused on combating import restrictions rather than exports, which “are nearer to sovereignty matters.”

China’s Rare-Earth Exports Plunge 77% After Quota Cut — Remember this highlighted sentence; it's very important for the part2 of this story.

Nov. 23 2010(Bloomberg) -- Rare-earth exports from China, the world’s biggest supplier, declined 77 percent in October from a month earlier after the government reduced shipment quotas for the second half.

Exports were 830 metric tons last month compared with 3,660 tons in September, the General Administration of Customs said in an e-mail. Total exports were 32,990 tons in the first 10 months, according to the e-mail, which was sent yesterday.
[...]
Japan, the largest rare-earth importer, has stepped up efforts to diversify supply sources, develop substitutes and recycle minerals from used products after shipments from China were disrupted in September.

Japan and Vietnam signed a deal to cooperate on rare earths, according to an October statement from Japan’s trade ministry, which didn’t give details. Mongolian President Tsakhia Elbegdorj earlier this month called for Japanese companies to invest in rare earths in his country.
[...]
Prices for rare earths will probably keep rising as new supplies won’t appear any time soon, Commerzbank said in its report. While China may “mitigate its position in the face of strong international pressure, supplies of rare earths are likely to decline further, with delays in the startup of envisaged projects,” the bank said.

Rare Earth Prices Double on China, Industrial Minerals Says

June 17 2011 (Bloomberg) -- Prices of the rare earths used in lasers and plasma televisions more than doubled in the past two weeks as China tightens control of mining, production and exports, according to market researcher Industrial Minerals.

The cost of dysprosium oxide, used in magnets, lasers and nuclear reactors, has risen to about $1,470 a kilogram from $700 to $740 at the start of the month, Industrial Minerals said in an e-mailed statement. Europium oxide, used in plasma TVs and energy-saving light bulbs, has more than doubled.

China, supplier of 95 percent of the 17 elements known as rare earths, has clamped down on rare-earth mining and cut export quotas, boosting prices and sparking concern among overseas users such as Japan about access to supplies. The government may further reduce export quotas, pushing prices higher, Goldman Sachs & Partners Australia Pty said last month.
[...]
Rare earths are used in wind turbines, hybrid cars and defense applications such as guided missiles. The market for the minerals may double to as much as $6 billion by the middle of the decade, according to an April 21 report by Ernst & Young LLP analyst Michel Nestour.

China’s Inner Mongolia Baotou region produces so-called light rare earths such as lanthanum, cerium and samarium. Heavy rare-earth production, concentrated in the south of China such as Ganzhou, includes the elements dysprosium, gadolinium and terbium.

The price of europium oxide, used for its phosphorescent properties found in plasma TVs and light bulbs, has risen to as much as $3,400 a kilogram from between $1,260 and $1,300, Industrial Minerals said.
[...]
Delays in rare earths projects coming on stream from the U.S. and Australia will ensure that China continues to be biggest producer until at least 2013, Sang Yongliang, a metals and mining analyst with Guotai Junan Securities Co., wrote in a June 3 report.

When It's Obvious to the Public, it's Obviously Wrong

Silver buying Mania on eBay
eBay buyers are rushing to buy silver coins, paying 16% premium over the price you can find elsewhere. Moreover, sales of silver are now twice as much as gold sales. Alix Steel (no pun intended) from TheStreet.com was interviewed on DailyTicker. Here are a few quotes:

TheStreet.com's Alix Steel and I have a trade for you:

1. Go to Kitco.com and buy a 100 oz. bar of silver for $3,706
2. Follow some simple steps to smelt your silver in a regular microwave
3. Pour your molten silver into homemade 1 oz. molds... carefully
4. Sell your homemade 1 oz silver bars on Ebay for $43.75 per

[...]
At the heights of silver stampede, the premium for physical silver was as high as 16% over what could be bought in the pits a number drifting under 10% at the moment, according to Ebay.

See video below:

NAV for PHYS is back to March highs
ZeroHedge is reporting that the premium over the NAV for PHYS is the highest since the March highs, despite paper gold trading at all time records.


Google  Trend Shows Silver Price Query as Number One Search

ZeroHedge again:

Precious Metals Mania Ripples Down to the Commodities Complex

July 18 (Bloomberg) -- Funds boosted bets on rising commodity prices by the most in almost a year as traders added gold amid escalating debt crises in the U.S. and Europe.

Speculators raised their net-long positions in 18 commodities by 15 percent to 1.09 million futures and options contracts in the week ended July 12, government data compiled by Bloomberg show. That’s the biggest gain since early August. Gold holdings surged the most since September 2009 as prices climbed to a record. A measure of bullish agriculture bets climbed the most in 11 months.

[...] Gold futures climbed for nine straight sessions to July 15, the longest rally since November 2009, on increasing demand for the precious metal from those seeking to protect their investments. 

[...] “People know there is tangible value for metals and commodities. There is a store of value in these products.”

 Let's remember that "when it's obvious to the public, it's obviously wrong".

[...]
Speculators raised their net-long position in 11 U.S. farm goods by 16 percent to 655,798 contracts as of July 12, the biggest increase since August.

Holdings of soybeans surged 40 percent, the most in a year. Prices of the oilseed climbed for 10 straight sessions, the longest rally since September 2007, as hot, dry weather threatened crops in the U.S., the world’s leading exporter.

Oil, Gold, Silver, Softs & Grains: Be Careful About What You Wish For

You probably already know that I do not believe that oil will reach $300 or $400 a baril, nor do I believe that gold will reach a five figure price per ounce or silver to reach $150 or $300 like many über-bull believes. I actually believe that we'll have a major collapse in risky asset classes, but time will tell.

In anyway, I wanted to make a few arguments against those forecasts because greed seems to disable some of the thinking areas of the brains of these otherwise clever people (most of them, at least).

First, demand is not 100% inelastic as they seem to believe. A baril at $150 destroyed a lot of consumption in 2008. And believe me, a lot of people will stop taking their cars and start carpooling, working from home, and taking public transports if the price of oil goes back to $150, so that even $200 seems unlikely.

Second of all, imagine that oil would actually reach $300 and that other soft/grain commodities such as wheat and pork bellies would skyrocket. Do you believe that everything would be rosy? The most probable outcome of such a move would be major civil unrest all around the world, and probably even war between countries who do not have oil and the producers. Believe me, I'm about as sure as possible that the US would start invading other countries in the name of war on terror and that China would also start annexing countries for their oil.

The $300/baril of oil scenario remains very unlikely, but be careful what you wish for nonetheless.

Option Market Show Big Jump Into Bullishness Territory

The VIX has plummeted to about 15 and is now just a few percentage points higher to its multi-year low in the low 14.xx while the VXO is in the mid 14.xx and just a few percentage points higher than its multi-year low in the 13.xx.

And the various equity put-call ratios are reverting extremely quickly to their multi-year mean, the short term 5-day one being already at 1 standard deviation from its mean, into the call buying.

These are again showing extreme complacency and bullishness in the face of crumbling economies worldwide, and western countries at the edge of the cliff, close to default.

At the same time, commodities are edging lower, even in the face of a plummeting USD, massively sold during yet another phase of risk-on trade.

Extremely speculative equities are also rebounding massively, as shown by the Russell 2000 just a couple of percentage points lower than its all time high, and LinkedIn up 50% in a few days.

The equities speculation and mania are still going on full steam. This will end in tears. Just look at Silver to see how things can rapidly reverse in a dramatic fashion.

Mish Interview on Daily Ticker

Mish was interviewed today on the Daily Ticker.

His points are that markets price a perfect economic recovery while the worldwide, economies are sinking. He mentions Europe, the US, and also China over-heating and Australia's bubble popping.

The stimulus that the Fed and Congress have provided is running out of steam, and not just in the US, it's worldwide.

We're in BubbleLand in Commodities and BubbleLand in Junk Bonds.


In the second segment, he discusses the political soap opera that is going about the debt ceiling, where it's clear that the Republican will finally raise the debt ceiling, but that "there is no political problem from either party to address the problem".

The two segments are available embedded below, or you can watch them directly from Yahoo:

1. What Recovery? The Economy’s Weak And Getting Weaker, Says Mish
2. Debt Ceiling Vote a “Political Sideshow”, Mish Says: Real Issue Is “Govt. Spending Run Amok”

Market Sentiment: Analyst Predicts Copper Has 30% Gain Left in 2011

After about 400% gains in copper since the bottom in 2009, nothing could me more surprising than analysts coming with crazy forecasts for copper, as they are doing for silver, cotton, etc. Unfortunately for Snodown of BarCap, he'll be on record with his +30% gain in 8 months forecast, on Yahoo! Breakout:

Here's the chart of copper, courtesy of Kitco:

Oh, and by the way: no, copper has not great fundamentals, no, there are no shortages of it, and no, China is not going to consume all the copper of the universe until the end of times as analysts and economists seem to believe.

Playing the Silly Game of Calling a Top: Have Cotton, Silver and Oil Topped?

Here's a chart of silver. I am wondering whether we have topped last Friday near $38.25:

Oil is finding some strong resistances around $107 and hasn't been able to breach it yet:

March 25 (Bloomberg) -- Oil fluctuated in New York as the U.S. economy grew more than previously estimated in the fourth quarter, a signal demand may be increasing, and crude failed to breach technical resistance at its 30-month high.

Oil swung between gains and losses as the economy expanded at a 3.1 percent annual rate in the quarter, compared with a 2.8 percent estimate last month, Commerce Department figures showed today in Washington. Crude reached $106.69 a barrel in intraday trading yesterday, near the peak of $106.95 on March 7.

“We’re having difficulty maintaining upward price momentum,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois-based consulting company. “We tried to push up to those March highs yesterday and failed just below the $107 mark.”

[...] Prices have risen 3.2 percent this week and have gained 31 percent in the past year.

New York crude has rallied 25 percent since protests began Feb. 15 in Libya, a member of the Organization of Petroleum Exporting Countries. The conflict is the bloodiest in a wave of uprisings that has toppled the presidents of Tunisia and Egypt and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen.

Finally, one of the most overpriced commodity, cotton, might have left its days of glories in the past. But the fact that analysts are forecasting a big drop makes me very suspicious of my own forecast:

March 28 (Bloomberg) -- The rally that drove cotton prices to the highest since America was recovering from the Civil War is ending as farmers from Texas to New South Wales plant record crops and replenish stockpiles for the first time since 2007.

Cotton will drop 51 percent to $1 a pound by Dec. 31, according to the median in a Bloomberg survey of 14 analysts and traders. Hedge funds are already cutting bets on higher prices by the most in three years. Output may rise 11 percent to 127.5 million bales in the year that starts Aug. 1, three times faster than a 3 percent gain in demand to 120 million bales, the U.S. Department of Agriculture estimates. One 480-pound bale is enough for 215 pairs of jeans.

“We have had quite a nice run, and I don’t see it sustaining,” said John Stephenson, who helps manage more than C$2 billion ($2 billion) at First Asset Investment Management Inc. in Toronto. “More acreage will be dedicated to cotton, and in a scenario where consumers are facing higher food and fuel prices, clothing will take a back seat.”

Cotton rose to $2.197 on March 7, the highest in 140 years of trading in New York, after flooding in Australia and Pakistan and freezes in China ruined crops.  

[...] Farmers are responding by planting more cotton, which may come at the expense of corn and soybeans, First Asset’s Stephenson said. Corn gained 79 percent since July 1 and soybeans climbed 50 percent, driving global food costs to a record, the United Nations estimates. An extra 44 million people were driven into “extreme” poverty since June, according to the World Bank, and riots spread across North Africa and the Middle East, toppling leaders in Egypt and Tunisia.

While March 7 marked the peak, it’s much less than in previous decades. In 1973, cotton jumped to the highest in at least 14 years to 99 cents, the equivalent of $4.92 today, according to a calculator on the website of the Federal Reserve Bank of Minneapolis.

Cotton closed at $2.0449 on March 25, after surging 178 percent since mid-July, the most among the 24 commodities in the Standard & Poor’s GSCI index. The raw-materials gauge climbed 42 percent, the Standard & Poor’s 500 Index gained 20 percent and Treasuries lost 0.2 percent, a Bank of America Merrill Lynch index shows.
[...]
Futures anticipate a drop to $1.2792 by December, according to ICE Futures U.S. data. Costs won’t fall to the $1 predicted in the Bloomberg survey until October 2012, the data show.

Even $1 would still be 64 percent higher than the 10-year average of 61.16 cents. Stockpiles in warehouses monitored by ICE Futures U.S. plunged 81 percent since June and in October fell to the lowest level since at least August 2002.
[...]
The same surge in prices that is helping boost U.S. farm profit by 20 percent to a record $94.7 billion is hurting manufacturers, retailers and consumers.

 My comment here: I am as sure as can be, than when the price of cotton falls, farmers all over the world will be in the streets asking the governments to do something, and putting the blame on the evil speculators. They are not complaining when prices rise and when those same evil speculators help them make a windfall profits...

[...]

Extreme Speculation in Commodities: CCI at all time high

While oil is not making a lot of headlines because it's still trading pretty far from its all time high achieved in mid 2008, the rest of the commodity complex is on steroids and in complete denial of economic reality. 

The CCI (the original methodology of the CRB index) is now reaching all time high after all time high, and is more than 20% above it's 200 DMA. This shows that it is extremely overbought.

Things can go pretty wrong from here, when sentiment is so much one-sided and people are betting on commodities with a 20-to-1 leverage (what you get with Futures contracts).

Copper is shining as much as gold, with two new physical copper ETFs and a new copper index

We just discussed the Nat Gas ETN trading 10% above its NAV. Here's another proof that commodities are frothing and that the boom is very much exuberant is the number of the new ETFs and instruments that are created, some of which do not really make sense...

Why not making sense in my opinion? Because copper is wildly abundant, and that it very cheap compared to its density. Storing it is going to be extremely expensive if it ever reaches the same size as GLD and doesn't have a lot of value, since most (non ferrous) metals are already stored in approved LME storage locations. As you can see below, neither JPM nor iShares mention the expense ratios applied to their ETFs.

(IndexUniverse, the 24th of October) J.P. Morgan filed with the Securities and Exchange Commission for permission to launch a new physical copper-based fund, the first of its kind in the ETF industry.

(IndexUniverse, the 26th of October) The investment objective of the J.P. Morgan Physical Copper Shares ETF “is for the shares to reflect the performance of the price of Physical Copper Grade A,” less expenses, according to the J.P. Morgan’s filing.

iShares, the world’s biggest exchange-traded fund company, filed papers today with the U.S. Securities and Exchange Commission to market its own physical copper ETF, taking on J.P. Morgan in a space that until a few days ago was unoccupied by any money management firm.

The price of iShares Copper Trust shares will be based on settlement prices of the London Metals Exchange, the filing said. The copper will be stored in warehouses at locations in the United States or in other places if it has approval from the trustee and the sponsor, the paperwork said.

iShares’ filing follows a similar move by J.P. Morgan, which filed to offer a physical copper ETF last Friday. The sudden emergence of two competing funds shows how hot the copper market has become in recent years.

(IndexUniverse, the 8th of November) SummerHaven Index Management, the Stamford, Conn.-based index provider behind the U.S. Commodity Funds’ broad commodities ETF (NYSEArca: USCI), launched an investable copper benchmark that’s designed to minimize contango and maximize backwardation of copper futures contracts.

The SummerHaven Copper Index is made up of Comex high-grade copper futures contracts with maturities of 18 months or less, and maintains positions in liquid portions of the copper futures curve, the company said in a press release. Through use of fundamental signals about the underlying physical copper market, the index weights its composition to closer-to-maturity contracts in backwardated markets and shifts to longer-duration contracts when markets are in contango.

Natural Gas ETN trading as much as 10% above NAV

Commodities are really frothing, even more than the equities markets. Natural Gas ETFs and ETNs are just another case as it's normally retail investors who trade them, not having access or enough capital to trade futures contracts, as discussed by this IndexUniverse report. The report is also quite interesting to get insights about ETNs and ETFs from the investment banking/market making side.

The iPath Dow Jones-UBS Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) has been trading at a premium of as much as 10 percent above net asset value this week, the result of a recent spike in demand coming after the ETN’s issuer halted creations of new notes in August 2009.

Halting creations of new GAZ notes has essentially transformed the fund into a closed-end product, according to industry sources who spoke to IndexUniverse.com on condition of anonymity. GAZ ended Wednesday’s session at $7.79 a share, 6 percent above NAV of $7.34, according to data compiled by IndexUniverse.com. Spikes in demand are normally met by issuers creating new notes, thus keeping the price in line with NAV.

The spike in demand recently could be related to retail investors buying without being aware that GAZ creations are halted, or by more sophisticated traders and institutional investors who are trying to profit from pushing GAZ’s price higher, ETF traders and market makers told IndexUniverse.com.

Barclays halted creations on GAZ in August 2009, citing “current market dynamics and ongoing regulatory review,” as we reported last year. One industry source said creations stopped not because of an ongoing regulatory review of position limits for ETNs and ETFs that use futures, but because hedging costs to run the portfolio had simply become too expensive. A Barclays official declined to comment.

The question of hedging costs goes to the heart of one of the important distinctions between an ETN and an ETF. An ETF in the same position as GAZ, such as the United States Natural Gas Fund (NYSEArca: UNG), would just pass on higher hedging costs to shareholders. Those costs would show up in investor returns as higher tracking error. In the case of an ETN, which commits by contract to provide a precise pattern of returns at the note expiration, the note holder would be spared such tracking error, and responsibility for hedging that promise-to-pay is entirely the responsibility of the issuing bank (Barclays, in the case of GAZ), whatever the cost.

“With ETNs, you have no way of passing along those hedging costs,” one exchange-traded product industry source said, adding that hedging futures positions on futures-based energy commodity funds did indeed rise last year.

Clearly, the size of the fund isn’t the issue: UNG had almost $2.49 billion in assets as of Tuesday’s close, compared with $117.6 million for GAZ.

In its announcement last year, Barclays said the “temporary suspension” could impact other iPath ETNs. Indeed, in October 2009, Barclays halted creations on its iPath Dow Jones-UBS Platinum Subindex Total Return ETN (NYSEArca: PGM). PGM, which has $78.2 million in assets, is now trading at a slight discount to NAV.

How To Close GAZ?

The source said it was likely that the rising costs of hedging GAZ, plus marketing and distribution expenses, had probably pushed GAZ close to the edge of solvency.

“The question really is: When will iPath close GAZ?” the source said.

But the rub is that the ETN in particular, which is essentially a bond that promises the holder the returns of a given index minus expenses, isn’t callable.

Barclays addressed the issue of callability of GAZ and 18 of its other commodity ETNs in a regulatory filing in June that amounted to a replication of most of its commodity ETN lineup. We wrote about Barclays’ plans in a story titled “New iPath Commodity ETNs Look Like Cannibals.”
The new callable copycat ETNs—The iPath Dow Jones-UBS Natural Gas Subindex Total Return Callable ETN (NYSEArca: GAZC) in the case of GAZ—will come with an expense ratio of 0.70 percent, a touch cheaper than the 0.75 percent on the existing ETNs, in what amounts to an enticement for investors to make the switch, the source said.

The Barclays official said it’s not yet clear when the new ETNs will go live.

GAZ has drifted in and out of normal ranges since creations were halted, and has been steadily above NAV since about mid-September.

ETF industry sources contacted for this story suggested that retail investors unaware of the premium issue surrounding GAZ may be seeking a tactical allocation in natural gas before the weather cools down, but are simply choosing the wrong product to express that intent. Another possibility is that institutional investors are squeezing short-sellers by trying to force them to pay a premium to NAV to get out of their positions.

“The people who bought into the note before they halted the creations are loving this,” said one market maker who requested anonymity. “The losers are the people who are unknowingly buying now that this thing is trading at a premium with creations halted.”

ETNs are debt obligations backed by the issuer—Barclays in the case of GAZ. Apart from the issues like the one GAZ now faces, ETNs typically deliver returns extremely close to that of the underlying index, minus expenses, making them different from ETFs, which typically have some level of tracking error.

In this case, however, the NAV of the ETN is no longer relevant. Without a functional way to arbitrage price differences, investors should be extremely cautious of closed-end funds in ETN clothing like GAZ.

China stockpiling Uranium

Looks like China might be recycling some of their useless dollars. On top of stocking oil and to a smaller extent, gold, it looks like they are also stockpiling Uranium:

(Bloomberg) China is buying unprecedented amounts of uranium, signaling that prices are poised to rebound after three years of declines.

The nation may purchase about 5,000 metric tons this year, more than twice as much as it consumes, building stockpiles for new reactors, according to Thomas Neff, a physicist and uranium- industry analyst at the Massachusetts Institute of Technology in Cambridge. Prices will jump by about 32 percent next year, the most since 2006, RBC Capital Markets said.

India and China are leading the biggest atomic expansion since the decade after the 1970s oil crisis to cut pollution and power economies growing more than twice as fast as Europe and North America. The boom, combined with slowing supply growth, may benefit Cameco Corp., a co-owner of the world’s largest uranium mine, and Areva SA, the largest builder of reactors.
[...]
Uranium has tumbled 69 percent since peaking at $136 a pound in July 2007 as companies boosted production, according to the firm’s data.
[...]
The cost of mining one pound of uranium is about $31, up from $26 in 2007, according to Edward Sterck, an analyst at BMO Capital Markets in London.

China’s demand for uranium may rise to 20,000 tons a year by 2020, more than a third of the 50,572 tons mined globally last year, as it boosts output to 85 gigawatts, nine times its current capacity, according to the World Nuclear Association. The nation agreed on June 24 to buy more than 10,000 tons over 10 years from Cameco.

India’s needs will grow 10-fold to 8,000 tons as it quadruples capacity to 20 gigawatts, according to Jagdeep Ghai, finance director at state-owned Nuclear Power Corp.

“They are essentially stockpiling in anticipation of new reactor build,” Neff, who is an independent director of GoviEx Uranium Inc., a privately held exploration company with interests in Niger, said in a July 6 telephone interview. “They are stockpiling like crazy.”

China plans at least 60 new reactors by 2020, Xu Yuming, executive director of the China Nuclear Energy Association, said in Beijing on July 6. The average 1,000-megawatt reactor costs about $3 billion, according to the World Nuclear Association. Loading a new reactor requires about 400 tons of uranium to start, Neff said.
[...]
Companies that build reactors may be among the biggest beneficiaries. Areva’s shares have tumbled 53 percent in the past three years. Miners including Cameco, whose stock has fallen 60 percent since then, Paladin Energy Ltd., which has lost 63 percent, and Darwin-based Energy Resources of Australia Ltd., which is down 25 percent, may also benefit.
[...]
Commissioning new plants is a “game-changer” for uranium, said Mark Pervan, head of commodity research at Australia and New Zealand Banking Group Ltd. in Melbourne. Though many won’t come on line for as long as two years, “speculative interest” may drive prices to the “$60 to $80 range pretty quickly.”

This is a great report by Bloomberg, with lots of research and original data.

Jim Puplava over at Financial Sense has picked up on this, and interviews James Dines, along with a couple other guests specifically about Uranium. Quite an interesting interview, definitely worth listening to. Here's the direct link to the MP3 file.

A whole bunch of new commodities ETF and ETN, including Brent Oil

I'm really glad to see all these new instrument available to the retail investor today while they remained only available to the investment banking clients for some time. The retain investor can now comfortably invest/trade/speculate on the commodities and commodities indices without going through the high fees that come from structured products.

[Index Universe] United States Commodity Funds, the exchange-traded fund company behind the popular U.S. crude oil ETF “USO,” launched a similar oil fund focused on Brent oil produced in Europe’s North Sea.

The United States Brent Oil Fund LP’s (NYSEArca: BNO) investment objective is to track daily changes in percentage terms of the near-month contract price of Brent crude futures as traded on the IntercontinentalExchange (ICE), except when the near-month instrument is within two weeks of expiration. At such times, the fund’s focus will turn to the next futures contract set to expire.

[Index Universe] iPath, the line of exchange-traded notes backed by Barclays Capital, is issuing a total of 19 new commodities-related ETNs

Dow Jones-UBS Commodity Index Total Return Callable ETN (NYSEArca: DJPC)
Dow Jones-UBS Commodity Index Total Return ETN (NYSEArca: DJP)
Dow Jones-UBS Agriculture Subindex Total Return Callable ETN (NYSEArca: JJAC)
Dow Jones-UBS Aluminum Subindex Total Return Callable ETN (NYSEArca: JJUC)
Dow Jones-UBS Cocoa Subindex Total Return Callable ETN (NYSEArca: NIBC)
Dow Jones-UBS Coffee Subindex Total Return Callable ETN (NYSEArca: CAFE)
Dow Jones-UBS Copper Subindex Total Return Callable ETN (NYSEArca: JJCC)
Dow Jones-UBS Cotton Subindex Total Return Callable ETN (NYSEArca: BALC)
Dow Jones-UBS Energy Subindex Total Return Callable ETN (NYSEArca: JJEC)
Dow Jones-UBS Grains Subindex Total Return Callable ETN (NYSEArca: JJGC)
Dow Jones-UBS Industrial Metals Subindex Total Return Callable ETN (NYSEArca: JJMC)
Dow Jones-UBS Lead Subindex Total Return Callable ETN (NYSEArca: LDC)
Dow Jones-UBS Livestock Subindex Total Return Callable ETN (NYSEArca: COWC)
Dow Jones-UBS Natural Gas Subindex Total Return Callable ETN (NYSEArca: GAZC)
Dow Jones-UBS Nickel Subindex Total Return Callable ETN (NYSEArca: JJNC)
Dow Jones-UBS Platinum Subindex Total Return Callable ETN (NYSEArca: PLAC)
Dow Jones-UBS Precious Metals Subindex Total Return Callable ETN (NYSEArca: JJPC)
Dow Jones-UBS Softs Subindex Total Return Callable ETN (NYSEArca: JJSC)
Dow Jones-UBS Sugar Subindex Total Return Callable ETN (NYSEArca: SGAR)
Dow Jones-UBS Tin Subindex Total Return Callable ETN (NYSEArca: JJTC)
Dow Jones-UBS Natural Gas Subindex Total Return ETN (NYSEArca: GAZ)
Dow Jones-UBS Platinum Subindex Total Returns ETN (NYSEArca: PGM)
Dow Jones-UBS Lead Subindex Total Return ETN (NYSEArca: LD)

Just a word of caution though: Investors should be particularly cautious and read the prospectus that comes with each product, specially when it's commodities related, in order to avoid losing money on rolls. ETNs are also bringing in counterparty risks. Make sure you understand what the callable bit of the ETN is...
Caveat Emptor.

Google Gets Approval to Trade Electricity

A couple of month ago, I noted that Google was requesting approval to trade electricity in the US. Well, the approval has now been granted by the FERC.

Bloomberg reports:

Feb. 18 (Bloomberg) -- [...] The Federal Energy Regulatory Commission voted today to authorize a Google subsidiary to buy and sell wholesale power. Google’s request was like those of “a large number of industrial companies” seeking to manage energy costs, Pamela Harvey, a FERC economist, said at a commission meeting in Washington.

Some of those companies include grocery chain Safeway Inc., consumer-products manufacturer Kimberly-Clark Corp. and Merck, the second largest U.S. drugmaker, Harvey said.

Google wants to reduce the cost of buying electricity from wind turbines and solar panels to help power its data centers, said Dan Reicher, the company’s director of energy and climate initiatives. There is “less than meets the eye” to Google’s foray into bulk power markets, he said. [...]

Google to enter electricity trading business

I don't have much to add, except that I'm positively surprised by the news:

SAN FRANCISCO (MarketWatch) -- Google Inc. has applied with the U.S. Federal Energy Regulatory Commission for permission to buy and sell power in bulk, in a move that could help the Internet giant better meet its daunting electricity needs.
Google applied last month through its Google Energy LLC subsidiary for market-based rate authority, under which it could "engage in wholesale electric power and energy transactions as a marketer," according to public documents.
"In addition to engaging in sales of electricity that are unregulated by the commission, applicant proposes to act as a power marketer, purchasing electricity and reselling it to wholesale customers," the Google subsidiary said in its application.