MEET the most hoped-for term for commodity producers in 2013: "green shoots". There's no doubt the year ahead will be a test for the commodity investor. Not only is there deep uncertainty about all the potential global growth engines -- China, the US, Europe, Brazil -- but the ground is moving beneath our feet on the energy front. The base metals market managed to avoid ending 2012 with a whimper and gold is probably not dead, just resting before its next spurt. The indications, tentative though they are, suggest our iron ore sector may not head into the new year in as bad a shape as it appeared a month or two ago. In September, remember, spot iron ore dipped as low as $US86 a tonne but in the lead-up to Christmas we're well through the $US135-a-tonne mark. Bloomberg reports that iron ore inventories in China have dropped to their lowest levels since September 2010 after falling for eight straight weeks. Even more encouraging is the fact that manganese (there is no substitute in steelmaking) registered very sharp price rises last week. No such luck yet with that other steel additive, molybdenum, where China accounts for 31 per cent of usage. There is also a surfeit of supply: small and medium-scale producers in China are resisting government efforts to close them down and the reopened Climax molybdenum mine in Colorado alone will add 3 per cent to world supply as it ramps up. But, so far as the big picture is concerned, the UBS global commodities team has come over all bullish, saying they're overweight mining in 2013. The bank's China economist, Tao Wang, is expecting a short-term recovery there going into the new year, led by accelerating infrastructure investment, a rebound in property and the fading of destocking. China's restocking season has arrived so far as iron ore and copper are concerned, although many other analysts believe China's copper stockpiles are much higher than official figures suggest. UBS also sees thermal coal prices edging higher with winter in the northern hemisphere. The team remains, in their words, "undaunted gold bulls" due to the likelihood of an expanded quantitative easing program. Nickel (large project overhang, lack of interest from stainless steel producers) and uranium are UBS's least preferred commodities. Canada's Scotiabank begs to disagree on the latter. It sees yellowcake as a deeply discounted commodity. The recent fall in spot prices reflects the slower-than-expected restart of Japan's nuclear power stations with only two of 50 operating, it says. But the landslide vote for the Liberal Democratic Party points to a more favourable view of nuclear in Japan. Japanese newspapers report the LDP making noises about stronger safety standards and the new government will tread lightly until the upper house elections in the northern summer, but the LDP is determined to get more reactors back in business. Moreover, China has recommitted to building a raft of new plants by 2020. All at a time when many mine projects are stalled and shortages loom. In general, Scotiabank's Patricia Mohr agrees with UBS that in 2013 commodity prices will receive a lift as consumers restock after liquidation and deferred orders in 2012. This is already the case in China where a pick-up in orders from steel producers has boosted spot prices for iron ore and coking coal. She sees a rally in the latter by mid-year. Green shoots? Russia gassed up WHILE everyone has been watching the shale oil and gas revolution in the US, which is due to make America the world's energy powerhouse by 2017, Russia seems to have been cast into the shale shadows. But The Nikkei Weekly newspaper reports that Rosneft, the Russian state oil giant, is forging relationships with Western energy companies aimed at gaining access to shale technology. Meanwhile the gas monopoly Gazprom has produced plans for two new gasfields in Siberia (together containing an estimated 110 trillion cubic feet of gas) with a 3200km pipeline running to Vladivostok. That would supply a Japan-Russia proposed liquefied natural gas plant at Vladivostok to supply to Japan and other Asian customers. The newspaper says the Russians are seeking to tie up contracts before cheap US LNG starts being shipped across the Pacific. Both are developments Australian LNG producers will be watching with great interest. No sneezing matter A GROUP is reported to have cornered 7800 tonnes of Indian pepper futures in an attempt to control prices. Traders at Mumbai's national commodity exchange want reforms, as this follows attempts to manipulate futures trading in chilli, cumin and turmeric. But financial paper The Hindu Business Line says the latest manipulators may have made the wrong move: there has been a sharp fall in the pepper price in recent weeks.

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