Monthly Commodity Market Review

Monthly Commodity Market Review PLEASE NOTE: COMMODITY MONTHLY WILL FOCUS ON CRUDE OIL AND ETHYLENE ONLY DUE TO THE FORTHCOMING ‘SRD MINING MONITOR’ W...
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Monthly Commodity Market Review PLEASE NOTE: COMMODITY MONTHLY WILL FOCUS ON CRUDE OIL AND ETHYLENE ONLY DUE TO THE FORTHCOMING ‘SRD MINING MONITOR’ WHICH WILL EXAMINE BASE METALS ON A MONTHLY BASIS.

TOM HADDON +44-(0)20-7577-2186 [email protected]

TAKEHITO KONO +44-(0)20-7577-2183 [email protected]

STRATEGIC RESEARCH DIVISION (LONDON) Bank of Tokyo-Mitsubishi UFJ A member of MUFG, a global financial group

Crude Oil (Brent) Prices Crude oil prices held relatively steady through July, bound within the $45 to $51 per bbl range during the month. Prices in July did not benefit from many significant “black swan” events which provided upward support in previous months such as Canadian wildfires, a worker’s strike in Kuwait or renewed disruption to Libyan exports. The price recovery from multiyear lows has also stalled in July due to the IEA reporting that Middle Eastern output had climbed to record levels in June to over 31mb/d. This is unlikely to change once full month July data is available. Increasing Middle Eastern output is also offsetting decreasing output from US shale and limiting its effect on pricing. Elevated inventory levels also continued to weigh on price sentiment even though US inventories are reported to have dropped consistently through July by about 2m bbl per week. This has disappointed analysts and traders as it is not enough to prevent inventories being at record levels. The data also showed growing US gasoline inventories over July, causing concern that the glut is simply moving down the value chain and not being consumed, further limiting price support for crude. Demand fundamentals improved during the month with IEA data showing European demand had, in the second quarter of 2016, reached a five quarter high for year on year growth. This prompted the organization to add 100kb/d to its forecast for full year 2016 demand. However despite demand responding to lower prices, analysts continue to hold a cautious outlook based on the levels of inventory being held. As such inventory levels, allied to strong Middle Eastern output will continue to constrain prices to the $45-50 per bbl range for Q3.

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Monthly Commodity Market Review | 26 July 2016

Ethylene Prices After a spike on 29 April 2016 driven by healthy demand and planned and unplanned cracker shutdowns, ethylene prices have decreased by 7% to $995/tonne to 15 July 2016. During the same period, naphtha prices have also declined by 3%, following the oil prices with a time lag. In addition to a little drop in naphtha prices, demand for ethylene was weaker because demands for ethylene derivatives, such as polyethylene, were lower due to pressure from increasing imports from Middle East. Those two factors have caused the recent trend of a gradual decrease in ethylene prices. Crude oil prices are expected to remain around their current level during 3Q 2016. Considering the recent lower demand of ethylene derivatives, ethylene prices should decrease in August due to healthy supply on the back of limited cracker maintenance plans in Europe. The prices are expected to remain around the $850-$900/tonne band through August. In September, however, the seasonal demand spike after the summer break is expected. Therefore ethylene prices are expected to increase in the month. It should be noted there has been little impact in ethylene prices from the result of UK referendum so far. In terms of capacity, UK production accounts for less than 10% of total European production. Therefore, limited impact is expected on European ethylene pricing in the short term, though it is uncertain whether there will be an impact of currency depreciation on UK ethylene production, which imports more than 60% of feedstock from the US.

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Monthly Commodity Market Review | 26 July 2016

1. Crude Oil (Brent) Prices

2. Ethylene Prices

3. Aluminium Prices

4. Copper Prices

5. Nickel Prices

6. Zinc Prices

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Monthly Commodity Market Review | 26 July 2016

7-1. Iron Ore Prices

7-2. EU Steel Prices

8. Gold Prices

9. Platinum Prices

10. Paper and Pulp Prices

11. Cotton Prices

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Monthly Commodity Market Review | 26 July 2016

12. Sugar Price Index

13. Cocoa Prices

14. CRB Index

15. CRB Food Price Index

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Monthly Commodity Market Review | 26 July 2016

This communication has been prepared by Bank of Tokyo Mitsubishi UFJ London Branch (“BTMU”). It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore is not subject to any prohibition on dealing ahead of the dissemination of investment research. As such it is considered to be a marketing communication. Consequently we are not constrained from dealing ahead of trading suggestions contained in this material and other clients may have received such information in advance of you. It is for the sole use of eligible counterparties and professional clients as defined by The Financial Conduct Authority (“FCA”). This material should not be regarded as an offer of, or solicitation for, a transaction in any financial instrument. Information in this communication relating to pricing or exchange rates is for indicative purposes only and should be read subject to the understanding that the market continuously fluctuates. No representation or warranty is given as to the accuracy or completeness of this information. BTMU accepts no responsibility for any use that may be made of the information and these comments and for any consequences that might result. This communication does not constitute a financial promotion, investment advice or a personal recommendation to buy or sell any financial instrument described within as defined by the FCA. Any information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. BTMU retains copyright to this report and no part of this report may be reproduced or re-distributed without its written permission of. BTMU expressly prohibits the re-distribution of this report to Retail Customers in any manner, via the internet or otherwise. BTMU, its subsidiaries or affiliates accept no liability whatsoever to any third parties resulting from such re-distribution. BTMU is a limited liability stock company incorporated in Japan and registered in the Tokyo Legal Affairs Bureau (company no. 0100-01008846). BTMU’s head office is at 7-1 Marunouchi 2-Chome, Chiyoda-Ku, Tokyo 100-8388, Japan. BTMU’s London branch is registered as a UK establishment in the UK register of companies (registered no. BR002013). BTMU is authorised and regulated by the Japanese Financial Services Agency. BTMU’s London branch is authorised by the Prudential Regulation Authority (FCA/PRA no. 139189) and subject to regulation by the Financial Conduct Authority and regulation by the Prudential Regulation Authority. Details about the extent of BTMU London branch’s regulation by the Prudential Regulation Authority are available from us on request.

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Monthly Commodity Market Review | 26 July 2016