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Commodities Primed for Major Week as Lockdown Shackles Ease Off

Matthew Martin, James Attwood and Thomas Biesheuvel
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Commodities Primed for Major Week as Lockdown Shackles Ease Off

(Bloomberg) -- Commodities investors will zero in this week on the tide of moves around the globe to ease the anti-virus lockdowns that have crippled economies. Raw materials may get a lift as the shackles are gradually loosened from the the U.K. and the U.S. to Australia, Germany and India, although plenty of risks remains, including a possible resurgence in infections.

In energy, there’ll be earnings from behemoth Saudi Aramco, as well as monthly market snapshots from OPEC and the International Energy Agency. Metals investors get insights from Alcoa Corp. and Rio Tinto Group as top miners present at a Bank of America Corp. conference. Significantly, the event is virtual, offering a template for gatherings in the post-pandemic era.

Crop investors can dissect the fine print of the USDA’s influential monthly World Agricultural Supply and Demand Estimates report on Tuesday. China is in focus, too, with industrial production data set to yield clues on the state of demand as Asia’s top economy moves past the virus-driven dislocation.

Rounding out the picture, 13F filings for the first quarter are due for release by the end of the week. The disclosures from money managers and hedge funds that oversee more than $100 million cover U.S.-traded stocks, options and convertible bonds. Positions in energy and gold will be of particular interest.

Eye of the Storm

Saudi Aramco reports earnings Tuesday at an intriguing moment. Saudi Arabia’s government just announced a slew of harsh austerity measures to cope with the pandemic and oil rout. At the same time, there’s speculation Aramco itself may seek to rejig its payment schedule for the acquisition of petrochemical giant Saudi Basic Industries Corp. When the results come, investors also want to know if the world’s biggest company stands by a pledge to pay $75 billion to shareholders even after majors including Royal Dutch Shell Plc cut dividends.

In addition to insights from Aramco, the Organization of Petroleum Exporting Countries and the International Energy Agency release monthly reports Wednesday and Thursday, which will be scrutinized for shifts in supply and demand. Last week, Saudi Arabia moved to prop up a nascent recovery by raising prices for customers. On Monday, oil traded lower as investors weighed signs of a recovery in demand against the huge global glut.

China Calling

On-the-ground conditions in China go a huge way toward setting the overall mood and direction in global commodity markets, and this week’s industrial production data will offer key intelligence on the state of raw materials demand as the coronavirus outbreak moves into the rear-view mirror. A positive reading on-month is expected in the Friday release.

At the weekend, the People’s Bank of China said the while country faces unprecedented economic challenges, it will resort to “more powerful” policies to counter the hit to growth. Improved data would further support appetite for risk, and bellwether copper may garner particular attention. Since a March low it’s up 14% in London, and it may push closer to a bull market this week.

The Shape of Things to Come

Miners won’t actually be getting together this year for Bank of America’s Metals, Mining and Steel Conference -– but they’ll still be seeing and hearing from each other. In what’s likely to be a harbinger of things to come with the coronavirus pandemic limiting travel and in-person gatherings, BofA will host the event from Tuesday as a virtual meeting.

On tap to speak are diversified miner Teck Resources Ltd. CEO Don Lindsay, Alcoa’s Roy Harvey and Rio’s Jean-Sebastien Jacques, among other heavy hitters. Investors will be looking for insights on how long these companies see the hit to production and demand lasting, and whether there’s now any sign of a bottom after a dismal first quarter for most in the metals industries.

Fielding Inquiries

There’s a shadow hanging over the corn market in the form of slumping ethanol demand, given the biofuel industry usually accounts for a third of the yellow grain grown in America. That will make corn a key area of interest in this week’s World Agricultural Supply and Demand Estimates report. Traders will be focused on any adjustments by the U.S. Department of Agriculture for corn demand and exports, as well as how much will be planted, to determine how large supplies will get.

The other area of interest is Chinese demand for U.S. products as part of pledges by Beijing in the phase-one trade accord. China has picked up purchases of goods including soybeans and pork of late and traders will be watching for forecasts on potential trade-deal demand. On top of the WASDE snapshot, agricultural investors may also follow results on Thursday from Australia’s GrainCorp Ltd. amid expectations for a bumper local crop this year.

Diamond Distress

The two biggest diamond producers are set to give sales updates this week and are likely to confirm that the global industry has come to a near standstill, with the pandemic crippling the sector’s supply chain. The shutdown of India’s cutting industry, which handles almost all of the world’s stones, has effectively halted diamond manufacturing. At the same time, retailers have closed stores across the U.S., where shoppers buy about half all diamonds.

De Beers, which canceled its last sale, will report from an offering in Botswana. The company has handed unprecedented flexibility to its buyers, allowing them to defer purchases. In addition, Russia’s Alrosa PJSC also plans to release numbers from its April sale on Tuesday.

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