CRU Group: Where Macroeconomics Meet Commodities
Commodities are crucial to our everyday lives. From the homes we live in, to the energy we use and the food we eat—none of these would be possible without commodities.
Today’s infographic from CRU Group celebrates 50 years of commodities research and charts the prices of the materials that make our world work.
The Importance of Commodities
CRU Group has 50 years of experience in providing business intelligence on the global metals, mining, and fertilizer industries. Regularly analyzing over 50 commodities, here are CRU’s highlights on four key commodities: aluminium, copper, steel, and nitrogen.
Similarly to stocks, commodities are available for sale on the open market, and prices are susceptible to changing economic conditions.
Factors Affecting Commodity Markets
CRU Group has identified five key factors that are currently affecting commodity markets.
- China Stimulus: China’s economy has recently slowed and policy makers are using stimulus to support sustainable economic growth. However, the delivery of stimulus is different from the past, moving away from infrastructure investment and towards tax cuts for businesses and households.
- Recession: Some analysts have been warning of a recession since 2018. When the economy is in decline, commodity sectors feel the downturn more acutely, because industrial production tends to slow down and there is less demand for materials.
- Automotive Tariffs: During 2019, there was a sharp contraction in automotive sales and production, due to the threat of U.S. auto tariffs. However, the main driver is stricter auto emissions standards introduced in Europe and Asia, creating uncertainty for consumers.
- Environment: Governments continue to adopt regulations in response to rising environmental concerns. Green policies will encourage investment in renewable energy infrastructure and electric vehicles, changing the type of minerals required for these technologies.
- Rise of Asia: By 2035, 3.5 billion people will be living in Asian cities, an increase of 47% from today. These growing cities will necessitate large-scale infrastructure projects, which consume vast amounts of resources.
These five factors will drive the economic patterns of key commodities into the future.
CRU Group has been providing business intelligence on the global metals, mining and fertilizers industries for over 50 years. Regularly analyzing over 50 commodities, CRU highlights four key commodities here:
Aluminium is one of the most in-demand metals in the world by volume, second only to steel. Its lightweight, reflective, ductile and anti-corrosion properties make it the metal of choice for a range of applications. It takes four to five tonnes of bauxite ore to produce one tonne of aluminium.
Copper plays a huge role in the transition to clean energy. It is a good conductor of heat and electricity, and is also ductile and recyclable. These properties make it a crucial material in electric vehicles and renewable energy infrastructure, as well as electronic goods and construction.
In the past 5,000 years, 550 million tonnes of copper has been produced. To keep up with demand, the world will need the same amount in the next 24 years.
Steel is lightweight, flexible, tensile, and recyclable. Its versatility and cost-saving benefits make it a preferred material within the construction sector. Demand for steel across various sectors signals growth and is a good indicator of the health of the general economy.
China is responsible for 51% of the world’s steel production, and accounts for 49% of its demand.
Nitrogen is an odorless, colorless gas that makes up 78% of the earth’s atmosphere by volume. Industrial processes capture ammonia from the air and convert it to other nitrogen compounds. Urea is the most common, and is primarily used as fertilizer. The global nitrogen market is worth $62.8 billion.
How CRU Navigates Complex Commodity Markets
Commodity prices have many different drivers, from supply and demand dynamics to exchange rate movements. Volatility is a common feature to all these commodities and up-to-date pricing and information is critical.
CRU commodity specialists disentangle these forces to interpret and forecast price movements. They apply a range of modelling techniques, as well as their experience and expert judgement.
For 50 years, CRU Group has tracked the commodities that drive the modern world, bringing macroeconomic insights to investors for accurate pricing—and will continue to do so for the next 50 years.
The 26-Year History of ETFs, in One Infographic
This graphic timeline highlights how the exchange-traded fund (ETF) came into existence, as well as the 26-year history of ETFs as an investment vehicle.
The 26-Year History of ETFs, in One Infographic
In recent decades, there have been many breakthrough technologies that have re-shaped the nature of entire industries.
In finance, perhaps the most notable disruption has come from the rise of the exchange-traded fund (ETF) — an investment vehicle that has quadrupled in size over the last decade alone. But how did the ETF originate, and how has its use evolved through to today?
Today’s infographic comes to us from iShares by BlackRock, and it shows how the ETF has gone from an obscure index tracking tool to becoming a mainstream investing vehicle that encompasses trillions of dollars of assets around the world.
The Origin and History of ETFs
ETFs emerged out of the index investing phenomenon in the late 1980s and early 1990s, and there are two early examples that can be referenced as a starting point:
- Index Participation Shares – 1989
This initial attempt to create an ETF was set to track the S&P 500, and garnered significant investor interest. However, it was ruled to work like a futures contract according to a federal court in Chicago, so it never made it to the exchange.
- Toronto 35 Index Participation Units – 1990
These were a warehouse, receipt-based instrument that tracked Canada’s major index, the TSE-35. They allowed investors to participate in the performance in the index, without owning individual shares of stocks in the index.
Since these pioneering ETF endeavors, the investment vehicle has caught on in popularity — and it is now clear that ETFs provide a range of important benefits to investors, such as: low costs, liquidity, diversification, tax efficiency, flexibility, accessibility, and transparency.
Key Milestones in U.S. ETF History:
- 1993 – The First ETF launches in the U.S., tracking the S&P 500
- 1998 – Sector ETFs debut, tracking individual S&P 500 sectors
- 2004 – The first U.S.-listed commodity ETF is formed, offering exposure to gold bullion
- 2008 – Actively-managed ETFs get the green light from the SEC
- 2010 – Term-maturity ETFs debut, holding bonds that all mature in same year
- 2015 – First factor-based bond ETFs are launched
- 2019 – U.S.-listed ETFs hit $4 trillion in AUM, and global bond ETF AUM crosses $1 trillion
How ETFs are Used Today
Today, the U.S. ETF industry has $4.04 trillion of assets under management (AUM), covering a wide spectrum of assets including equities, bonds, alternatives, and money markets.
ETFs are now the go-to index vehicle for 78% of institutional investors, according to a study by Greenwich Associates. Here are the 10 most popular applications for ETFs based on the same data:
|Tactical adjustments||72%||Over- or underweight certain styles, regions, or countries on the basis of short term views.|
|Core allocation||68%||Build a long-term strategic holding in a portfolio.|
|Rebalancing||60%||Manage portfolio risk in between rebalancing cycles.|
|Portfolio completion||57%||Fill in gaps in a strategic asset allocation.|
|International diversification||56%||Gain efficient access to foreign markets.|
|Liquidity management||54%||Maintain exposure in a liquid investment vehicle to meet cash flow needs.|
|Transition management||44%||Facilitate manager transitions with ETFs.|
|Risk management||42%||Mitigate undesired portfolio risk and hedge asset allocation decisions.|
|Interim beta||37%||Maintain market exposure while refining a long-term view.|
|Cash equitization||37%||Put long-term cash positions to work with ETFs to minimize cash drag.|
In the 26 years since the introduction of ETFs, they have grown and evolved to cover almost every aspect of the market. The next stage of growth for the ETF will be driven by investors finding even more uses for these versatile tools.
Why Telcos Must Get in the Game for the Rise of Esports
Telcos failed to capitalize on the ‘Netflix’ opportunity — however, the birth of a new multi-billion dollar industry (esports) could change the game.
Why Telcos Must Get in the Game for the Rise of Esports
Over the last century, the world’s telecommunications companies have built out the complex infrastructure that makes the information age possible.
Hundreds of billions of dollars has been invested into phone lines, submarine cables, wireless towers, and fiber optics to connect the world. And with 5G innovations in the pipeline, the world has never been able to communicate faster and more effectively.
Despite this impressive accomplishment, telcos find themselves in an awkward situation: their revenue growth is stagnating and margins continue to shrink, all while companies like Netflix are monetizing internet bandwidth around the world.
Today’s infographic is from Swarmio Media, and it highlights challenges faced by telcos — and how they can potentially capitalize on the emergence of esports and a massive gaming market.
A Missed Opportunity
Habits around content consumption can change abruptly, and fast-moving technology companies have been able to capitalize on these changes.
That’s why, in recent years, there’s been a boom in over-the-top (OTT) media services (Netflix, Amazon Prime, Skype, etc.) that have found effective ways to operate on top of the telco infrastructure, streaming content or providing VoIP services to end consumers.
|Television||Voice & Messaging||Audio|
|Example OTT services||- Netflix|
- Amazon Prime
- Apple Music
- Internet Radio
|Global market size (2018)||$68.7 billion||$26.7 billion||$8.9 billion|
|Growth rate (2017-2018):||28%||15%||33%|
Although telcos arguably missed the boat on video streaming, voice, and messaging, there is now an emerging segment that could help fill the gap.
The rising popularity of esports could be the multi-billion dollar industry that provides telcos a much-needed growth area to better monetize their infrastructure.
The Esports Boom
In recent years, the growth in professional gaming has been explosive.
Already worth over $1 billion, the market is projected by experts to triple by 2025. Esports is regularly packing stadiums with avid fans, spawning new professional teams, and selling massive sponsorship deals.
This boom in esports – and in online multiplayer gaming in general — has created a commercial audience of digital natives that is both young and affluent. It’s a growing segment that sees gaming as a lifestyle, and they see professional esports gamers and personalities as their heroes.
The Need For Speed
Any multiplayer gamer will tell you that there is one surefire way to ruin the gaming experience: high latencies (or as they call it, “lag”). This is an area telecoms are uniquely positioned to help with, especially with the advent of edge computing technology and 5G.
When it comes to online gaming, a sophisticated edge computing system will be able to detect where each player is located, while creating a server in an optimal location that provides all the players with the same high bandwidth, low latency, and experience.
By leveraging technology that enables edge computing at scale, forward-looking telcos can take gamers to where they want to go – and with plenty of value-adds.
Living on the Edge
To compete against growing outside threats like Netflix and Google, telcos must make bold investments in enabling technologies that bring edge computing to their customers at scale.
Beyond acting as the gatekeeper to lightning fast connections, telcos can take advantage of esports and gaming by building internal online communities, delivering tailored esports content, and enabling and promoting esports tournaments.
If done right, this can help telcos engage with digital natives, create meaningful experiences, win lifelong customers and advocates, and maximize average revenue per user (ARPU).
For many of the 2.5 billion gamers globally, there is little reason to be loyal to a telco – until now.
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