Commodities Corner: Soft Finish Doesn’t Tarnish Great Month

By Glenn Dyer | More Articles by Glenn Dyer

April was a very good month for commodities, even though the final day of the period – Friday, April 30 – wasn’t so good with small falls across the board.

Led by iron ore and copper, the sector saw demand outstrip supply with demand from China solid.

Oil also rose as did the prices of other metals, bar gold and sliver which saw smaller rises in April.

But oil markets are starting to worry about the impact of Covid on India and Brazil, two major oil users which may see global prices weaker in coming weeks.

After closing in on a record on Thursday, three-month copper’s turned lower on Friday on the London Metal Exchange to close at $US9,825 a tonne, down $US60 from Thursday.

The red metal did reach $US10,008 per tonne on Thursday, closing in on the all-time high of $US10,190 per tonne from February 2011.

LME copper was up 14% in April.

Comex copper dipped as well, settling at $US4.4680 on Friday in New York – up 11% in April and more than 26% year to date. Comex copper was up around 2.8% in the final week of April.

Comex gold dipped alsightly on friday to settle at $US1,76.70, still range boudn and unable to sustain a move back above $US1,700 an ounce.

Some gold bugs blame the rise of cryptocurrencies such as Bitcoin for taking demand away from gold (and silver) while others point to a large number of short contracts still overhanging the market and pressing down on the price.

June gold on Comex fell by just under 0.5% last week and was up around 3% for the month. Comex silver had a similar experience – a small loss last week and a gain of just over 3% for April.

In oil markets Brent crude futures settled down $US1.30, or 1.9%, at $67.26 a barrel on Friday while US West Texas Intermediate (WTI) crude futures settled down $US1.47, or 2.26%, at $US63.54 per barrel.

Brent gained 1.7% over the week and WTI rose 2.3%.

Traders said oil prices fell from six-week highs on Friday as investors unloaded positions after weak Japanese crude import data and on worries about fuel demand in India, where COVID-19 infections have soared.

In fact while WTI and Brent saw their biggest daily drops in more than three weeks they also saw monthly gains of near 6% and 8%, respectively.

Fuel demand worldwide is mixed, with consumption rising in the US and China, while other nations resume lockdowns to stem the rising infection rate. Jet fuel output and sales remain weak but diesel and petrol sales and production are on the improve.

The situation in India is the major concern with infections now above 400,000 a day and fears that oil demand will slump in one of the world’s fastest growing markets.

US rig numbers rose last week, according to services group, Baker Hughes. The total number of rigs in ruse was up by 2 to 440, while the number of rigs drilling for oil fell 1 to 342.

US oil stocks are now at their five year average of 493 million barrels according to the Energy Information Administration.

US production is now down to 10.9 million barrels a day, dipping 200,000 barrels a day in the past month.

The ’star’ commodity in April was iron ore. Prices eased on Friday to $US188.85 a tonne for 62% Fe fines delivered to northern China (down $US2.75 a tonne on the day).

The Price of 58% Fe fines fell $US4.31 a tonne to $US161.53 and the price of the 65% Fe fines from Brazil eased $US2.80 a tonne to $US222.50 a tonne.

For the week 62% Fe fines were up $US2.60 an ounce, 58% fe fines fell $US1.25 a tonne and the price of 65% fines was up $US1.60 a tonne.

For April 62% fe fines rose 14% or $US23.70 a tonne, the price of 65% fines jumped 14.6% or $US28.40 a tonne and the price of the 58% Fe fines (produced by the likes of Fortescue and Roy Hill – adjusted down for lower grade ores around 55%) was up 10% or $US14.54 a tonne.

It is hard to see April’s surge being repeated in May as China’s crackdown on pollution and capacity continues with major changes to import and export taxes and rebates for some types of steel.

 

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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