April turned out to be the best month for ages for commodities, led by the most unlikely candidates in iron ore, oil and aluminium.
Thanks to a surge of speculation in China, which spilled over into global markets and the weakening greenback (especially against the yen), commodities ended the month with gains as high as 20%, partially reversing the falls of earlier in the year.
Take iron ore where the price has stunned on the upside thanks to the speculative surge in China.
Ore with 62% iron content delivered to northeast China jumped 5.3% on Friday to $US66.24 a tonne, reducing this week’s loss to just 0.1% according to data from the Metal Bulletin.
Prices soared 14% last week, topping $US70 for the first time since January 2015. It bottomed at $US38.30 last December and since then is up more than 60%. It rose by around 20% over April.
Friday’s surge came despite more warnings from Chinese markets about unwarranted speculation and trading – the third such warning from regulators and markets in the past week.
Friday saw the largest ever trading in Chinese steel contracts, which occurred despite moves by the Shanghai Futures Exchange to curtail trading by increasing costs.
The surge in iron ore prices has driven the rebound in mining shares, especially in Australia.
BHP Billiton shares jumped 23% in April, the biggest monthly improvement since 1999, while Rio Tinto shares jumped 21%, while Fortescue Metals shares rose 34%.
Brazil’s Vale, which posted its first profit in three quarters last Thursday, has seen its shares surge more than 32% in New York trading.
Oil though stood out in April, continuing the rebound from the lows of January and early February.
In New York West Texas Intermediate crude futures settled at $US45.92 a barrel up 19.8% from March 31.
In London, Brent crude ended at $US48.13, up over 21%. Oil futures rose around 5% last week, driven by the sell-off in the dollar, especially against the yen. That was the best gain for the Brent contract in seven years.
But also helping has been the mixed report from the US industry – falling production which declined to the lowest level since October 2014, but rising stocks which are at the highest level since 1929 for this time of year.
On Friday, the Baker Hughes weekly report on rig use revealed another fall in oil rigs actively looking for oil to 332 as on last Friday, the lowest number since November 2009.
The number of gas rigs dropped by 1 to 87, and will the fall in oil rigs in use, took the total rig count to 420, less than a quarter of the total number of rigs in use in 2014.
Gold and silver futures jumped Friday, posting the highest settlements since January 2015, helped by the fall in the greenback to the US dollar to its lowest level in 11 months.
Comex June gold jumped $24.10, or 1.9%, to settle at $US1,290.50 an ounce, for the fifth straight day of gains. The settlement price was the best since late January last year.
Prices ended roughly 4.4% higher for the month, based on the most-active contracts, and were up over 5% on the week. Comex July silver climbed 23.1 cents, or 1.3%, to end at $US17.819 an ounce, which was the highest settlement price for 15 months. That gave silver a monthly price rise of 15.2%.
The spillover from China markets was also reflected in the performance of aluminium on the London Metal Exchange. Three month metal futures added 0.8% on Friday to close at $US1,678 a tonne, the highest since July last year.
The metal was up more than 10% in April, its biggest monthly gain since September 2012. Analysts said this unexpected surge was despite global stocks of the metal remaining near multi-year highs, and slowing consumption.
But Reuters pointed out that despite these high levels of stocks around the world, especially in China, much of of the metal involved is locked up in financing deals, creating an artificial shortage by cutting the amount available to the market to trade.
And nickel, one of the most unwanted of metals because of the global slowdown in the steel industry (and forced Queensland Nickel into administration) , saw an 11% surge in April. Nickel gained 1.7% on Friday to finish at $US9,445 a tonne.
And copper also saw more interest in April (but not at the levels of aluminium or nickel). In fact LME copper rose 2.2% last week $US5,051 a tonne on Friday. The metal rose 0.8% on Friday to be up 4.2% for the month, the biggest monthly rise in London for a year.
It was a similar story in New York where Comex copper futures for July added 5.2 cents, or 2.3%, to $US2.284 a pound on Friday to be just over 4% higher over April.
