After considerably subdued growth in the past year, metals seem to be regaining momentum in 2024 so far. Gold prices globally have been holding steady ahead of the US Fed meeting, while prices in India are up by 6%.
However, silver and nickel grab the limelight, with prices up by 8.5% and 10%, respectively. Copper prices are also hovering at an 11-month high on the LME and all-time highs in China.
The factors contributing to this growth are the rise in China’s industrial output, the decline in the dollar index, geopolitical factors, and the expectation of a Fed rate cut.
Speaking to CNBC-TV18, Ole Hansen, Head- Commodity Strategy at Saxo Bank, said, “I primarily focus on copper and with the LME price at the next big level is when we eventually do take out the record highs and I think we will move towards that $10,000 level on LME copper that’s the target for now.”
India big beneficiary of Chinese deflation: Ed Yardeni
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Ed Yardeni, the President of Yardeni Research, outlined key factors contributing positively to the Indian markets including the role of China.
India is a significant beneficiary of the deflationary trends emanating from China, said Ed Yardeni of global economic analysis firm, Yardeni Research.
“I think we’re checking all the boxes, we’re seeing that inflation is moderating worldwide and in India because oil prices are down…. The one thing that still is not in favour of emerging economies generally, is weak commodity prices, but India is not a major exporter of the kind of commodities that matter for the economies of China or others….And then of course the political stability issue got checked as well. So it’s looking pretty good (for India),” Yardeni noted in a chat with CNBC-TV18.
Deflation refers to a reduction in the overall price level of goods and services.
In early December, Moody’s Investors Service, a leading global ratings agency, revised China’s credit rating outlook from “stable” to “negative.” The decision was influenced by anticipations of diminished medium-term economic growth and concerns about a significant downturn in the expansive property sector of the country.
The rating agency expects the country’s annual gross domestic product (GDP) growth to be 4% in 2024 and 2025 and an average 3.8% from 2026 to 2030.
In its latest Global Economic Outlook report for India released in November, Fitch noted that the Indian economy has the highest potential among the top 10 emerging economies. The rating agency forecast an annual average growth rate of 6.2% in the medium term for the country during the 2019-27 period.
Moody’s decision on the China downgrade came just a day after S&P Global, another investment rating agency, pointed to challenges faced by China both domestically and internationally, highlighting the particularly concerning “deteriorating property crisis.”
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Palm oil prices continue to surge on robust demand
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Malaysian palm oil prices continue to surge, its trading at 6-week highs. The prices increased because — 1) rival edible oil prices are increasing, so proxy inflation was coming into the prices and 2) weak Malaysian ringgit was making the product expensive.
Malaysian palm oil prices have continued to surge and were trading at six-week highs. The prices increased because rival edible oil prices were rising, so proxy inflation was coming into the prices and because weak Malaysian ringgit was making the product expensive.
The other major producer Indonesia is seeing taxes and the Indonesian government, yet again, is trying to curb too many exports. There are higher taxes, especially within the February 18 to February 28 period, which will see less exports and high taxes within Indonesia.
The markets are also looking at higher consumption within the country. So, in 2018, Indonesia was consuming 13 million tonne, which now has turned up to 21 million tonne. A lot of bio-fuel mandate has also kept the palm oil prices on the higher side.
Also, with Ramadan, the international markets are buying a lot of edible oil.
India also has imported record palm oil in the months between October and December. For January, there has been a 20 percent decline.
The markets believe that as the demand, ahead of the summer season and because of festivals goes higher, it is seeing edible oil as a sector seeing strong prices.
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International coffee prices hit 16-month low on weak demand
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Coffee and sugar prices declined quite sharply. International coffee prices trading at 16-month lows. Prices declined by 26 percent in the previous year and this year has started on a weaker note because the Brazil weather has improved, the supplies have increased and with Brazilian Real weakening has seen the coffee prices go down.
Coffee and sugar prices declined quite sharply. International coffee prices trading at 16-month lows. Prices declined by 26 percent in the previous year and this year has started on a weaker note because the Brazil weather has improved, the supplies have increased and with Brazilian Real weakening has seen the coffee prices go down.
Also, ICE Arabica inventories have risen to 5.5-month highs. December inventories seen at around 814,000 tonne, in November it was just about 382,000 tonne. So, a lot of material have come into the exchanges because there are no buyers or takers in the open market and that is showing the trend.
The markets are looking at weak demand, especially from Europe, good crop prospects, rising inventories, all of that seems to be weighing on prices.
That’s exactly the case in terms of sugar. December saw strong prices; two-year highs in the international markets, but the prices have come down quite strongly.
Meanwhile, coffee shipments from India, Asia’s third-largest producer and exporter, rose 1.66 percent to 4 lakh tonne in 2022 on the rise in instant coffee exports and re-exports, according to the Coffee Board. Exports stood at 3.93 lakh tonne in 2021.
In value terms, coffee export was higher at Rs 8,762.47 crore in 2022 as against Rs 6,984.67 crore in the previous year.
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Gold prices fall to nearly three weeks low in choppy trade
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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On MCX, gold prices fell as much as 0.3 percent to Rs 50,065 per 10 grams on Thursday, lowest in three weeks. White metal futures too moved in choppy trade falling to Rs 55,604 per kg before rising 0.6 percent to Rs 56,366 per kg.
Domestic gold prices oscillated between the red and green on Thursday, falling to the lowest since September 29, as domestic equities rebounded from the day’s low during the fag end of the trading session. Globally, gold benchmarks edged lower pressured by high US Treasury yields.
On MCX, gold prices fell as much as 0.3 percent to Rs 50,065 per 10 grams on Thursday, lowest in three weeks. White metal futures too moved in choppy trade falling to Rs 55,604 per kg before rising 0.6 percent to Rs 56,366 per kg.
The dollar index — which gauges the strength of the greenback against six peers — was marginally down at 112.8 at the last count.
“In yesterday’s session gold tested three weeks low as US dollar reversed most of its recent losses to trade near 113. US Treasury yields gained and tested new highs as traders dumped bonds on Fed’s aggressive rate hike expectations. It will be important to see whether US Dollar holds on to the gains or it falters once again as seen in the previous few sessions,” said Ravindra Rao, VP-Head Commodity Research at Kotak Securities.
Indian equity benchmarks BSE Sensex and NSE Nifty50 rose later in the trade on Thursday supported by gains across sectors.
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Why food prices are unlikely to come down from current levels anytime soon
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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According to Carlos Mera Arzeno, Senior Commodity Analyst at Rabobank, the high global prices of wheat, sugar and edible oil may not collapse from the current levels anytime soon.
The prices in the commodity space will largely remain elevated for a few months to a year with the food inflation unlikely to go down from the current levels as supply-side concerns remain amid the ongoing Ukraine-Russia war, according to experts.
According to Carlos Mera Arzeno, Senior Commodity Analyst at Rabobank, the high global prices of wheat, sugar and edible oil may not collapse from the current levels anytime soon.
“Don’t expect food prices reverting to pre-war levels,” said Arzeno in an interview with CNBC-TV18.
The global wheat prices have doubled recently mainly due to the Russia-Ukraine conflict and the crops in the US getting affected due to the dry winter and soggy spring. Russia and the US are the top two exporters of wheat.
Countries with largest share in the overall quantity of wheat export:
Source: Government data
“If we look at the US, the crop conditions for winter wheat, which is a majority of the wheat in the US, were disastrous… In Europe, it has been quite dry in the last three months and we are expecting a heat wave… It might not be a disaster but certainly Europe is not going to be very aggressive in exporting in the next 12 months. The Russian crop is relatively good and it has been exported, but it’s anyone’s guess how Russia will export in the next 12 months,” said Arzeno.
Similarly, since the war-hit Ukraine is responsible for more than half of the world’s export of sunflower oil, the prices are expected to remain elevated at least for the next 12 months.
“I think we are going to see, in the next 12 months, the war still raging up and Ukraine still unable to export large amount of sunflower seeds, sunflower oils,” he said. Corn prices too are unlikely to fall with Ukraine being a large producer.
While sugar is not directly affected by the war, the skyrocketing energy prices are leading to sugarcane being diverted for ethanol to increase fuel blending, which in turn, is raising the rates for sugar. Adding to the jump in prices is the bad weather affecting the crops, he said.
The wheat, sugar and corn prices, though off their multi-year highs, are sharply up compared to last year.
India has announced a ban on wheat exports while it has put a cap on sugar exports at 100 lakh metric tonnes (LMT) owing to higher prices.
Ole Hansen, analyst, Saxobank, also said that the supply-side concerns will keep the commodity prices high though recession is expected to begin in the second quarter of FY23. “Even if we do get an economic slowdown, the underlying trends will be supported just simply because supply is not as strong as it has been.”
Giving an example of oil, he explained that the oil prices have remained elevated despite risk of recession in the past weeks on supply-side concerns.
Talking about metals, Hansen said that the prices could move higher in the coming quarters and years. He added that industrial metals have corrected around 25 percent from March highs due to factors such as COVID-induced lockdown in China.
“Could see markets remaining tight and prices moving higher for metals as well… Supply outlook tighter for the energy space considering Russia is such an important part,” he said.
However, according to him, there could be some correction in the agri commodity space.
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Crude oil prices climb after European Union agrees to ban 90 percent of Russia crude oil imports by the end of this year. News of China getting ready to lift COVID restrictions in Shanghai and Beijing adds to the rise, with traders expect China’s reopening to add to oil demand. The US dollar has come off its 20-year highs, but the Russia-Ukraine conflict is still on, and so is the commodity volatility.
CNBC-TV18’s Manisha Gupta spoke to Edward Morse, MD & Global Head — Commodities — Citi Research, to discuss Russia the -Ukraine war and its impact on commodities.
Later, Siraj Hussain, former Agricultural Secretary and Senior Visiting Fellow, ICRIER, talks about the government’s policy action on agriculture commodities.
Oil prices rose to 11-week highs on Monday as traders waited to see if the European Union would reach an agreement on banning Russian oil. Other supportive factors like tight global supplies and large drawdowns in the US stocks also nudged the prices higher.
The EU is due to meet on Monday and Tuesday to discuss the sixth package of sanctions against Russia for its invasion of Ukraine, which Moscow calls a “special operation” to disarm its neighbour.
Crude oil price is holding around $114 per barrel because of tight supplies. The US refineries are processing at the highest pace since the pandemic began, at 93 percent. Self-sanctions from many European companies continue to add a premium to prices.
However, product prices seem to be running even higher. The US natural gas price is at a 2008 high, above $9 per MMBtu. The markets believe that $10-11 per MMBtu would be high in this rally. The all-time high is at around $13 per MMBtu.
Watch the accompanying video of CNBC-TV18’s Manisha Gupta for more details.
Oil prices were trading above $110/bbl on Friday as worries about weaker economic growth offset expectations that crude demand could rebound in China as Shanghai lifts some of the Covid lockdowns.
This morning, the People’s Bank of China (PBoC), the Chinese central bank, slashed the 5-year loan prime rate (LPR) by 15 basis points. China has been working on infrastructure and home prices. This cut will now influence the home mortgage prices, bring those prices down and make it more affordable for people who want to buy a first home. This is supportive for metals as well.
Watch the accompanying video of CNBC-TV18’s Manisha Gupta for more details.
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