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Williams does not expect sustained rise in energy prices
John Williams, President of the Federal Reserve Bank of New York, said Thursday that despite a renewed 'war in the Middle East he did not expect a sustained increase in energy prices for the rest of the year. The markets expect the oil price to drop over the next 6-12 months. Williams told a bank conference that he thought this was a reasonable baseline. Williams said, "I think that's a pretty reasonable baseline." He was speaking at a conference held by his bank. "I still believe kind of the fundamentals is that energy prices will likely be around their peak before coming down over time." Williams responded to if the Fed would respond to recent events during the Federal Open Market Committee (FOMC) meeting scheduled for July 28-29. It's not like we make decisions forever. The New York Fed's leader spoke one day after meeting minutes were released for the central banks mid-June meeting on monetary policy, where officials kept their target interest rate range at 3.5% to 3.75%. Although the forecasts were released, they indicated that officials had penciled in rate increases for this year due to persistently higher than target inflation. Chairman Kevin Warsh was leading his first FOMC and refused to give any guidance on the 'outlook. He even refused when asked how incoming data could influence his monetary policies views. Williams stated in a TV interview on Tuesday that his optimism about the overall low levels of inflation has grown due to the falling energy prices linked to the apparent resolution of the Middle East conflict. He also reiterated that the monetary policy was in the correct position, given the risks that the economy faces. The restart of hostilities, which once again threatens the flow of goods and energy, has quickly thrown this outlook into doubt. The risk of rising energy prices and inflation in the rest of the year has increased, with President Donald 'Trump' claiming the agreement which ended the hot phase was now null and void. Williams spoke out as Warsh considers changes to?the Fed's interest rate toolkit?, in an effort to further reduce the size of central bank balance sheets. Many proposals focus on allowing financial firms to keep less emergency cash in hand. However, many are concerned that this could make them more vulnerable to financial shocks. They may also become more dependent on borrowing money from the Fed during times of crisis. Some Fed officials have argued that the Fed's balance sheet is not a problem. They argue that managing short-term interest rates and market liquidity, the Fed's primary goal, has been successful. Williams stated that any change must prioritize the safety and stability the banking system. Williams said that the focus of any change should not be on how much of the Fed's balance sheet can be reduced. Instead, the priority should be to improve and strengthen the financial system.
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Andy Home: The aluminum supply shock has revived long-idled Western Smelters
The Iran War has caused a supply shock that is reviving the old Western aluminum smelters. Magnitude 7 Metals in the U.S. is reactivating its New Madrid smelter located in Missouri. Over the Atlantic, Norwegian producer Hydro announced the partial restart of the Slovalco joint-venture smelter. The two plants were idled due to low aluminum prices and a spike in energy prices that followed the Russian invasion of Ukraine. Washington and Brussels are both desperate to reduce their reliance on an import of a metal used in a wide range of industries. The return of these zombies smelters will not have a big impact on the global aluminium market, but it does show how much the market has changed since the Middle East conflict erupted in February. Back from the Dead (Again) New Madrid began operating in 1971 under the ownership of Canada Noranda, which had a production capacity of 263,000 tons per year. Magnitude 7 Metals, a privately-owned company, reactivated the plant in 2018, but it closed abruptly in 2024. The smelter was the most polluting plant in the nation in 2019. The plan is to restart one 75,000-ton-per-year(tpy) potline by ?the end of the year, with the possibility of operations ramping up further in 2027. New Madrid's revival has been undoubtedly helped by President Donald Trump's decision to double import tariffs last year from 25% to 50%. The premium for U.S. deliveries has risen to $2,375 a ton over London Metal Exchange (LME basis price). The rise in LME's basis price, from $2,200 per tonne at the beginning of 2024, to $3,165 per tonne today is equally important to New Madrid’s revival, even after the recent, and perhaps premature, unwinding of the war premium. SLOVAK REVIVAL The Slovalco Plant, which is owned by Hydro, a 55.3% stake, and by Penta Investments Group (focused on Central Europe), a 44.7% stake, also plans to restart its 75,000-ton capacity. The decision is based on a new deal for power supply with the state-owned hydropower utility Vodohospodarska Vystavba, and a compensation plan for indirect carbon costs in accordance with the EU Emissions Trading System. This latter still requires approval by the European Commission. Europe has lost half its primary aluminium melting capacity since 2022. This makes the restart a major win for Slovakia and Europe. High power costs combined with EU emissions regulations still create a challenging operating environment for aluminium smelters that are power hungry. Hydro stated that the restart of the remaining capacity of 100,000 tons at Slovalco will "depend on (ETS framework conditions) beyond 2030, combined with additional electricity contracts." WINDOW OF OPPPORTUNITY Gulf Aluminium production has fallen by 2 million tonnes annually due to the war in Iran, a result of both direct missile strikes on two plants as well as logistical constraints at others. The market has gone from years of surplus to a deficit in a matter of weeks. LME inventories have been used to fill in the supply-chain holes, and total inventory (including off-warranty metal) is now below 400,000 tons. The war has highlighted existing import dependence in the U.S. as well as Europe, creating a window for idled capacities to be fired up again. It is irrelevant how long the window remains open. There are other parts of the global supply chains that also react. China is increasing exports of semi manufactured products like?bars, rods, and foils to take advantage of the West's metal shortage. Exports of products fell 9.4% in comparison to 2024, but increased by 10% during the first five months of 2018. May's total of 595,000 tonnes was the highest since November 2024. Chinese investors are also investing in the construction of new smelting capacities in Indonesia. According to Macquarie Bank, a new project called Juwan, with a 270,000 tpy capacity, reached its full capacity in the month of January. Export Genius' trade data platform, Export Genius, reports that the joint venture Adaro, which produces 500,000 tpy, exported its first shipments in July. Adaro wants to increase its capacity to 1.5million tpy as part of an overall?national production boom that could result in over 10 million new tons of annual capacity being ramped up in the coming years. The combined restarts of 150,000 tpy at New Madrid, Slovakia and Slovakia are placed in context regardless of their political significance. What happens in the Middle East will determine a lot of what comes next. The LME aluminium prices has fallen aggressively due to'signs of deescalation' and hoped for normalisation in the Gulf smelters. It's beginning to look optimistic, given the renewed U.S. Bombing Campaign and Iranian Retaliation. For now, the window for further restarts is still open. Andy Home is a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Gold increases by over 1% as Middle East tensions dominate the news
Gold prices rose by more than 1% on Thursday, as investors sought bargains after the price fell to a one-week low. Gold spot gained 1%, to $4116.70 an ounce at 09:13 am EDT (1312 GMT), following a Wednesday drop to its lowest price since July 1. U.S. Gold Futures for August Delivery climbed 1.1% to $4.126.60 an ounce. After yesterday's drop, there is some bargain hunting here. Bob Haberkorn is a senior market strategist with StoneX. He said that the Fed will be the primary driver of gold in the short-term. Haberkorn said that if the Fed adopts a "more dovish" approach to interest rate policy, then gold and silver will move higher. On the other hand, if they signal a need for?further rate hikes?, both metals are likely to be under pressure. In a 'geopolitical' front, Iranian forces launched attacks on U.S. military bases in Gulf neighbours following U.S. airstrikes in Iran’s eastern and southern provinces. This put pressure on a ceasefire agreement that had been in place for three weeks. The war may cause higher energy prices, which can lead to inflationary pressures. This could also fuel expectations that central banks will raise interest rates. Gold is often seen as a hedge against inflation. However, rising rates can make gold less attractive by increasing the appeal for interest-bearing investments. According to the CME FedWatch Tool, traders are pricing in a 64% probability of a rate increase in September. The minutes of the Federal Reserve's meeting in June revealed a growing concern over inflation. A few policymakers saw grounds for an?rate increase before the central banks decided to hold rates. Investors will also closely monitor the Fed's Kevin Warsh congressional testimony and next week's data on inflation to gain further insight into the monetary direction. In a Thursday note, HSBC reduced its average 'gold price forecasts' for 2026-2027 from $4,864 to $4,925. (Reporting by Sukanya Mitra in Bengaluru; Editing by Joe Bavier) (Reporting by Sukanya Mitra in Bengaluru; Editing by Joe Bavier)
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The strategic oil reserves will support the crude demand until 2028
Analysts and officials have said that governments are'set to purchase millions of barrels of crude oil until 2028 in order to replenish emergency reserves depleted due to drawdowns made to plug a 'gap?in the global supply caused by U.S.-Israeli conflict?on Iran. Analysts and officials say that this could increase demand for crude oil, which would help absorb the global surplus expected after OPEC+ increased production. The government drew on emergency reserves to cover supply disruptions caused by the conflict, which removed 1.5 billion barrels of oil from global inventories in this year. Calculations based on data from OPEC, International Energy Agency and U.S. Department of Energy indicate that governments have reduced their emergency reserves. The IEA released a record-breaking 400 million barrels after disruptions along the Strait of Hormuz pushed crude prices dramatically higher. Brent crude surpassed $126 per barrel by the end of April, and U.S. Early March, crude oil approached $120. According to Kpler's commodities analysis firm, replenishing those reserves could lead to a demand of 664,000 barrels a day by the third quarter of 2027. This would help absorb some of the excess supply that is expected next year, as OPEC+ continues unwinding production cuts. This would reduce price drops. Christopher Haines is the head of oil for Energy Aspects. Michelle?Brouhard said that the replenishment of reserves could result in an additional 506,000 barrels per day of crude demand by 2026's fourth quarter, and this number will continue to rise next year. US TO START FILMING FIRST The United States will receive oil back 'later this summer, after releasing 172 million barrels through the IEA program. Under exchange agreements, companies are required to return borrowed barrels and additional barrels in addition to a premium. U.S. Strategic Reserves fell by 6.2 Million Barrels to 319.5 Million in the week ending July 3. This is the lowest level since April 1983. Department of Energy data revealed on Monday. Chris Wright, the U.S. Energy secretary, said at an event held by Next in late June that the government would receive on average 1.28 barrels per barrel of oil released as part of exchange agreements. Wright stated that the returns would be able to help raise SPR stocks above 400 million barrels. Washington is also exploring ways to increase stocks beyond 500 millions barrels. Jay Hakes, former U.S. Energy Information Administration Administrator, said that the United States could replenish its reserves faster than other countries due to exchange agreements which allow stocks to be returned to pre-war levels with no additional government expenditure. Naveen Das is a senior oil analyst with Kpler. He said that the outlook for other IEA members was more discretionary and geared towards 2027. Analysts predict that countries such as?Japan? and South Korea?will replenish their reserves more slowly, and the efforts to do so will depend on oil prices?and government spending decisions. ASIA EXPANDS ITS STOCKPILING Analysts said that lower oil prices may encourage China to stockpile more, which would create a new source of demand in addition to the IEA - countries' efforts to rebuild reserves. Michael Haigh, head of commodities at Societe Generale, said that historically, China has started buying and filling the SPR when Brent crude oil is below its 12-month moving average. Brent front-month contracts were trading at around $78 a bar on Thursday. This was slightly higher than their 12-month moving median of $76.59 a bar, according to LSEG. In addition to replacing the?barrels that were released during the crisis in the Middle East, several Asian countries -- which rely on Gulf supplies -- are increasing storage capacity in order to strengthen energy security. China is constructing 11 new strategic storage sites for oil, and India will more than double the capacity of its strategic petroleum reserves through expansion projects in Padur and Chandikhol. Japan is helping the Philippines develop a national system of strategic petroleum reserves.
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Stocks rise as Middle East worries are offset by a tech rebound
Investors weighed renewed tensions in Middle East with continued strength?in technology stocks and resilient economic data. Oil prices initially fell in Europe but then rose as the 'Iranian' armed forces responded with new attacks against U.S. military facilities in Qatar, Kuwait, and Bahrain. Brent crude futures rose from $77 to $79 earlier in the day. This is a boost of 9% over recent days. Global borrowing costs are also starting to rise. Benchmark 10-year U.S. Treasury Yields increased to 4.58%, having started the month at 4.40%. Germany's Bund rates remained steady in Europe. In Asia, Japan’s 10-year yields hit 2,9%, the highest since 1996. Australia’s 10-year government bonds yields reached a peak of 4,933% in a month. Max Kettner, HSBC's Multi-Asset Strategy Chief, said that the Middle East tensions were likely to have a significant impact on inflation and interest rates globally. He said that the market rates are really influenced by oil prices. "That was evident over the past few days." VOLATILITY OF TECHNOLOGY European shares are moving?tentatively up, helped by a rebound of tech and AI stocks following a couple of stumbling weeks for this high-flying industry. Wall Street futures are still pointing to modest gains for the main markets when they reopen, although Meta META.O dropped?1.2% following reports that it planned to begin making its artificial intelligence microchip in September. In Europe, the pan-European STOXX 600 Index remained?up nearly half a percentage with tech stocks gaining 1.8% after Siltronic surged by more than 16% in response to an analyst upgrade. The global sentiment was also boosted by a report that China may allow limited access to AI leaders Nvidia's chips H200 and SK Hynix’s listing of $28 billion U.S. shares was more than 7 times oversubscribed. The South Korean chipmaker's offering, which will fund new factories and equipment in order to meet the surging demand for AI chips, is expected to be the second largest share sale worldwide after SpaceX's $85.7 billion IPO record last month. Kettner, from HSBC, said that the "realised volatility" of South Korea's KOSPI was currently 75%. Comparatively, an exchange-traded U.S. Treasury fund with a maturity of 7 to 10 years has historically had a realised volatility around 3%. Imagine you're an institutional investor. Who could really invest in a class of assets with a 75% realized volatility? Kettner stated. HSBC has closed its "overweighted" position on emerging markets stocks following the?surge' in key markets such as Korea. MUTTED CURRENCY Markets Wall Street futures are 0.2% to 0.6% up ahead of the return of trading. The day's early data revealed that the number of Americans who filed for unemployment benefits dropped last week. This suggests the labor market is stable, despite the slowdown in June in terms of job growth. The Labor Department reported on Thursday that initial claims for unemployment benefits fell by 2,000, to 215,000 seasonally-adjusted for the week ended July 4. The economists polled had predicted 218,000 claims for this latest week. The currency markets were rather quiet, with the dollar barely moving, the yen clinging to a low of 40 years, and the euro and sterling, as well as most other European currencies, also not changing much on the day. The first FOMC minutes under new Federal Reserve Chairman Kevin Warsh were released on Wednesday, and they showed some?growing concern about inflation. According to CME FedWatch, the implied probability that a Fed rate hike will occur this year has increased to 87%. As oil prices fell, gold rose 0.8% to $4109 an ounce. Tim Waterer is the chief market analyst for KCM Trade. He said that traders are watching to see how Middle East tensions will develop. He said that oil prices are currently held back by the possibility of a de-escalatory move.
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Brazil to decide on gasoline subsidy next week, plans rural debt restructuring
Brazil's decision to remove a gasoline subvention has been?postponed to next week.?Finance minister?Dario?Durigan said on Thursday that the uncertainty surrounding the Iran war is what has driven oil prices up. Durigan told a local radio station that the government initially planned to implement the measure this coming week, following the partial elimination of tax incentives related to diesel announced last week. He said that the conflict in the Middle East is still highly uncertain and caution should be exercised in deciding whether to withdraw benefits to protect consumers from price shocks. The economics team's advice to Luiz Inacio Lula da Silva reflects the leftist approach of the administration amid increasing oil revenues. Latin America's biggest economy is a net exporter. Durigan stated that the ethanol blend is expected to increase from 30% to 32% in the next few days. The economic team supports the addition of biodiesel in diesel fuel. A MINISTER SAID RURAL DEBT RESOLVING PROGRAM IS EXPECTED TO BE IMPLEMENTED IN THE NEXT DAYS Durigan stated that after more than a full year of talks with the agricultural sector, the government would issue an executive order to allow the restructure of rural debt in the next few days. This measure is an alternative to the bill that Congress has currently passed, which the government deems too broad. He said that the program is expected to cost between 389 million and 583 million dollars ($389 millions?and $583million) per year. This excludes the implicit subsidy costs. The stock of renegotiated loans should total just over 100 billion reais. Borrowers who qualify for a more lenient repayment schedule must show that they have suffered severe losses in successive harvests as a result of adverse weather conditions such as floods or droughts. Farmers who have?suffered losses greater than 30% due to price volatility? will also be eligible. Durigan stated that producers who are involved in climate-related cases will be able renegotiate debts for a period of 10 years with a grace period of two years and no upfront payment.
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Fortuna CEO: Fortuna expects Senegal project permit in a few weeks
Fortuna Mining's chief executive said that the company expects to get the final permit for the Diamba Sud gold project in Senegal, within weeks. He added that the country can become a regional mining hub with the support of the government. Senegal is a traditional mineral sands, phosphate and phosphate mining country. However, it has been pushing to expand into the gold industry. It is a small producer of gold by West African standards. The country's output in 2025 will be about 334,000 ounces, which is well below the leaders in the region, Ghana and Mali. Endeavour operates the Sabodala Massawa mine and Morocco's Managem runs the Boto Mine. Fortuna is a West Africa focused gold miner that has invested nearly $400 million in developing Senegal’s Diamba Sud Project. The company aims to produce the first gold in 2028, and a peak annual production level of approximately 230,000 ounces. SENSEGAL'S FASTER LIFTING In an interview on Wednesday with Fortuna CEO Jorge Ganoza he said that Senegal approved Diamba Sud’s environmental and social assessment within nine months. He noted?that similar approvals can take years in Peru, Mexico, and parts of North America. He said, "We are only waiting on our final building permit which should arrive in the next few weeks." The Senegal mines ministry didn't immediately respond to an inquiry for comment. The recent Senegal political turmoil, which included cabinet changes and tensions involving President Bassirou Diomaye Faye, ousted Prime Minister Ousmane sonko and other officials, have not affected investment plans. He said that the?Canadian mining company is placing orders to secure delivery dates in light of tightening supply chains. According to the feasibility study of the company, a project of this size could have an internal rate-of-return of 60% and a 'net present value' of approximately $1 billion. This is based on gold prices of $3.500 per ounce. Fortuna has spent more than 15 million dollars on the exploration of the project. Further discoveries could make it more profitable. Fortuna, which is also evaluating other acquisition and exploration options in Senegal, Ivory Coast, and Guinea, has announced plans to "deepen" its footprint in this region. Ganoza stated that deals could be announced before the end of this year. He said that Senegal had a "unique" opportunity to establish itself as a mining jurisdiction of choice, as investors continue to direct capital to stable West African nations. He said that consistency in mining regulations, taxation, and permitting will be key to attracting long term investment. Maxwell Akalaare Adombila, Robbie Corey Boulet and Susan Fenton edited the report.
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RKI: Heatwave in Germany linked to over 5,000 deaths
The Robert Koch Institute for Public Health (RKI) reported on Thursday that Germany had recorded approximately 5,120 deaths attributed to heat so far this summer. Most of these occurred in late June, when the weekly average temperature was well above 20 degrees Celsius. The RKI reported that the majority of deaths - 4,270 people - occurred among those aged 75 or older. Women died more than men, mostly because they are a larger proportion of very old people. German data are part of a grim story across Europe. In a Thursday bulletin, the EU's Copernicus Climate Change Service stated that Western Europe experienced its hottest ever June with an average of 20.74°. The national authorities in France, Belgium, Spain, and the Netherlands have reported that more than 4,700 deaths occurred during the heatwave of June 20-28. According to RKI, Germany's highest heat-related death rates in the last decade occurred in 2018 and 2019 with 8,400 and 6900 deaths respectively. PRESSURE ON GOVERNMENT MOUNTS Katharina Droege of Germany's Greens Party, said during a debate in parliament that 120 people died alone during the heatwave weekend from June 27-28 - four more than usual. Droege accused Friedrich Merz, the Chancellor, of not commenting on the heatwave despite the increasing death toll, and the ongoing efforts of emergency services. She also accused his government to water down climate protection laws. Greens criticise the draft budget of the government for 2027. They are particularly critical that billions were taken from climate protection to fill budget gaps. The budget draft does not specify the exact 'cuts' that will be made to the Climate and Transformation Fund. In March, Germany announced plans to reduce its dependency on volatile fossil fuels and help meet the 2030 climate goals. Eight?billion euro will be made available to finance measures like expanding wind power capacity or boosting EV sales. Europe's largest economy wants to reduce greenhouse gas emissions at least by 65% from 1990 levels and be climate neutral by 2045. Currently, the reduction has been only 48% and experts believe that existing policies are not sufficient.
The Red List reveals that deep-sea mining threatens the molluscs which hold promise for science.
The world's largest conservation organization warned that deep-sea mining is threatening to exterminate half of the molluscs species clustered around underwater vents. These molluscs have?promising? potential for medicine and technology.
IUCN (International Union for Conservation of Nature) reiterated its call for a ban on these operations in advance of the U.N. led talks that will take place this month. Growing numbers of companies are extracting 'critical minerals, such as copper or cobalt, from superheated fluids released by natural hydrothermal vents on the ocean floor.
Although these species make up less than 1% the global biodiversity of molluscs, they play an important role in the food webs at deep-sea vents.
According to IUCN’s "Red List", 62% of vent dwelling mollusc species--125 of 201 -- are now classified as being at risk of extinction because of mining operations that create sediment blankets which disrupt ecosystems.
Dr Chong Chong, a Mollusc Specialist Group member at the IUCN, said that deep-sea mines would destroy the ecosystem. He explained that the loss or molluscs in a vent field would mean the death of other vent species.
Chen stated that some vent molluscs had already proved to be valuable for the human society. For example, a scaly foot snail has developed a process of biomineralisation that helps researchers create nanoparticles that are used in new technologies like solar cells. Other vent molluscs are being studied in order to develop alternative materials to plastics.
He added that allowing these species to go extinct would mean losing biological solutions for future challenges in medicine and materials.
The Red List has been?released in advance of a U.N. meeting on the International Seabed Authority, which will be held from July 13 to 31 in Jamaica to discuss how to'regulate' metals extractions from the ocean floor. Like other environmental groups IUCN?has called for these activities to banned. However, many governments have the opposite view. The U.S. administration of President Donald Trump has expedited permits for U.S. firms searching for minerals in international waters.
(source: Reuters)