The world’s largest commodity trading houses have turned upbeat on economic growth, signalling firmer raw materials prices in the second half of the year.
The positive outlook from traders including Glencore, Cargill, Mitsubishi, Archer Daniels Midland and Noble Group comes after a tough first half for the sector, with most companies reporting a plunge in sales and profits. But executives were optimistic for the second half on the back of China’s stimulus package.
“We are seeing demand pick up,” said Steve Marzo, chief financial officer at Noble Group, the Hong Kong-based diversified trader – echoing a view widely held in private by senior executives from rival commodities companies. The trading houses’ outlook is important because they are at the centre of trade and their wide business relationships allow them to anticipate economic cycles.
Glencore, the world’s largest trader, said it saw “encouraging signs of increased levels of business activity”. Mitsui & Co, Japan’s second largest sogo shosha or general trading company, added that the global economy appeared to have “started to pull out” of the recession, while its larger rival Mitsubishi said the world was observing “the beneficial effects of economic stimulus measures”.
Senior executives said China’s strong growth was filtering into neighbouring Asian countries and noted restocking in the US after companies there had run down inventories to pipeline levels. But they said demand was lacklustre in Europe. These views contrast with cautious comments earlier this year, and some executives admitted they were surprised by the speed of the rebound. “It feels as if the recovery is arriving three-six months ahead of schedule,” said one.
Traders said they were bullish on metals and minerals such as copper, coking coal and iron ore, even though prices have already doubled since January. Their view on energy was neutral, with most seeing oil little changed at $70 a barrel, while for food commodities such as wheat and corn they saw firm demand.
Low prices earlier this year have hit the trading houses hard. Glencore suffered a 57 per cent drop in net profits in the first half, while Cargill said its fiscal year earnings fell for the first time in eight years.
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