Commodities May Have Already Reached Bottom, CrediJ_K
Commodities May Have Already Reached Bottom, Credit Suisse Says
By Chanyaporn Chanjaroen
April 9 (Bloomberg) -- Commodity prices, after slumping the most in at least a half century, have probably reached the bottom and should rebound over the next several years as demand outpaces supply, Credit Suisse said.
The Reuters/Jefferies CRB Index of 19 commodities fell 4 percent in the first quarter, extending last year’s 36 percent decline. Demand for everything from copper to oil shrank, with global growth likely to contract for the first time since World War II and trade decline the most in 80 years, the World Bank said last month.
“There are some signs of stabilization and we are becoming more optimistic that we have seen the lows for the cycle,” Adam Knight, head of the Credit Suisse Glencore Commodities Alliance, said in April 3 interview in London.
The slump in prices has spurred mining companies including Melbourne-based BHP Billiton Ltd. and London-based Anglo American Plc to curb production and shelve new projects. That may mean that when economies recover, supply may not be able to keep up with consumption, Knight said.
“A number of commodity markets could find the supply side unable to respond,” said Knight, a former head of metals at New York-based Goldman Sachs Group Inc. His bank’s alliance with Glencore International AG, the biggest commodity-trading company, covers oil and other energy products, industrial and precious metals, cobalt, iron ore, emissions and freight.
“It’s a structure whereby Glencore gives us access to the latest information, for example physical flows, inventories, the industry cost structure,” said Knight, who joined Credit Suisse in 2007. Glencore gets a share of revenue in return, he said.
Credit Suisse’s value at risk in commodities, a measure of how much the firm estimates it could lose in a single day, rose to 36 million Swiss francs ($31.4 million) last year, compared with 17 million francs a year earlier, according to a report from the bank. Goldman Sachs’s value at risk in commodities was $44 million last year.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net.
Last Updated: April 9, 2009 10:02 EDT