Hot Commodities
    Category: Riches from Resources By : Ardian Wibisono Read : 1102 Date : Tuesday, May 05, 2015 - 09:52:38

    Ahmad Zamroni / Forbes Indonesia

    While many now give a cold shoulder to commodities, Alberto Migliucci, the founder and chief executive of Singapore-based advisory firm Petra Commodities, begs to differ. He is optimistic about the sector, and his opinion counts. Alberto has a unique background combining geology and investment banking, with 25 years of experience, 15 of those spent in Asia.

    Before founding his own business, he was Credit Suisse’s managing director and head of metals and mining for Asia from 2008 to 2013. While in that position, Credit Suisse led all its competitors as the number one dealmaker in metals and mining during that period, with a total for the period of 38 deals, a 20% market share and net revenues of $132.5 million, according to Dealogic data.

    Alberto played an important role in a number of commodity-related IPOs, such as those for Berau Coal Energy, Borneo Lumbung Energi and Bumi Resources Minerals. Previously he worked at Standard Bank of South Africa and Societe Generale in Hong Kong. Unlike many other bankers, he has a solid academic understanding of commodities, getting a BS in geology (with first class honors) from the University of New South Wales in Australia. Here’s an edited excerpt of Alberto’s reasons to be bullish:

    Why are you confident in the commodities sector?
    The slowdown in global growth, the European sovereign debt crisis and a significant deceleration in Chinese growth have resulted in a substantial decline in commodity prices. Moreover, mining companies have suffered from an increase in operating costs and lower ore grades, yet production across most commodities remains high. Tepid demand plus increasing supply equals gravity, and consistent with this, many commodity analysts have substantially downgraded their price forecasts, with the now almost universal view being that the so-called commodity super cycle is over. While significant challenges remain, I feel that after a long period of disappointment, expectations have now overshot to the downside. The majority of industrial commodity prices have already returned to around long-run averages.  This, along with cost pressures, suggests that the downside remains relatively limited, outside of a major macro downturn.

    What do you feel about coal?
    There are two key demand drivers that will drive coal consumption well into the next decade. First is global industrial production—an increase in the industrial production means more demand for steel and for power, and coal is an input for both; and second, GDP per capita growth—as wealth grows, people consume more energy intensive goods and services.

    In Asia, about 80% of the electricity generated in China is from coal and in India it’s 69%. China and India rank first and third in terms of coal consumption, and although the world is making up its mind which is the best energy source to displace it, essentially coal remains one of the lowest-cost energy sources. This is in addition to the traditional largest global buyers of seaborne coal—Japan, Korea and Taiwan. Japan remains a key buyer of seaborne thermal coal post Fukushima and is building new coal-fired power plants.