Will commodity markets feel as much of the impact from the Japanese quake and tsunami?
Sure gold and oil will bounce around, as they did on Friday, and from today we can expect to see the price of oil rise as the extent of damage to Japan’s power industry becomes known.
Early this morning it was reported from Tokyo that a fifth of the country’s nuclear power capacity had been shut. The country’s power utilities will be forced to find other energy supplies from thermal coal, LNG and oil suppliers like Australia.
Japan is the world’s third largest oil importer, after the US and China, and the biggest importer of thermal coal and LNG.
Any surge in demand energy demand from Japan could have a major impact in global commodities markets.
This will be on top of insisting factors roiling markets.
These include Libya and oil prices, fears about the strength of global demand (which is partly why copper prices are off 10% in the past month) and worries about inflation, which will get a kick along from US inflation data this week.
But offsetting this was a big sell-off all last week in grains on major markets with soybeans, corn, rice and wheat all seeing sharp falls, not only on Friday.
Oil and copper also lost substantial ground last week.
The currency is not to blame; the falls were much larger than the movement in the greenback.
The dollar fell slightly against the euro and the British pound on Friday, but was down 1.3% against the yen.
Grain prices were down two to three times that on Friday.
But Japanese investors were reported on Friday night to be unwinding their surplus positions overseas — including selling off their dollars and buying yen to repatriate home.
So positions in commodities (Japan is a major importer of US grains), shares and bonds may be liquidated in coming days to allow companies such as banks and insurers to build cash holdings in Japan.
Nymex oil for April delivery fell $US1.54 to settle at $US101.16 a barrel.
Comex April gold rose $US9.30 to $US1,421.80 an ounce, recovering from an earlier drop.
Gold was still down 0.8% for the week, oil lost as well.
The 19-component Reuters Jeffries CRB commodity price index was down about 0.8% on Friday.
Corn, wheat, soybean and rice futures tumbled after the quake struck.
After China, Japan is the second biggest importer of US grains.
Ports have been closed and Japanese reports say port facilities in Kushiro, Hachinohe, Ishinomaki and Kashima were hit by the tsunami, and some feed mills and livestock operations were damaged.
Chicago Board of Trade May corn futures fell 18.5c, or 2.7%, to settle at $6.6425 a bushel on Friday for a loss of 8.8% over the week. Corn had hit a 31 month high on February 22 (the day of the Christchurch quake) on $US7.4425 a bushell.
May wheat futures plunged 21.75c, or 2.9%, to $US7.1875 a bushel. That took the week’s loss to a massive 14%, the biggest since the GFC was at its height in December 2008.
May soybean futures fell 21c or 1.5%, to $US13.345 a bushel. That was a loss of 5.6% last week. The oilseed reached a 30-month high of $US14.5575 on February 9.
And May rice futures fell 4c, or 0.3%, to $US13.01 per 100 pounds. Rice futures lost 8.3% last week, the most since January 2009.
Crude-oil futures fell to a day’s low of $US99.01 in the aftermath of Japan’s earthquake, helped also by a small turn out for the so-called Day of Rage in Saudi Arabia.
In London, April Brent crude fell $US1.59 to settle at $US113.84 a barrel, losing 1.8% on the week, the first loss in seven weeks and biggest since last November.
Nymex WTI in New York lost 3.12% over the week, ending at $US101.16 a barrel.
Comex May silver rose on Friday and the week. It added 87c, or 2.5%, to settle at $US35.94 an ounce on Friday and was up 1.7% for the week.
May copper added a cent, or 0.2%, to $US4.21 a pound, but that saw the week’s loss hit 5.8%.
On the London Metal Exchange, three month copper eased just $US1 a tonne to $US9,190 a tonne (that’s $US4.17 a pound).
Aluminium, lead, nickel and zinc also fell in London. Tin rose.
