A new price surge seems to be underway in some key commodity prices – aluminium, nickel and copper are seeing some encouraging runs, with lead, zinc and tin at or near recent highs.
The price of iron ore though hit a 12-month low on Friday for the benchmark 62% Fe fines but prices of coking and thermal coal hit record highs in Asian and Australian markets last week.
While iron ore prices are responding to China’s efforts to limit price rises and cut production, that country’s campaign against metal and oil prices continue to fail with big rises seen last week, and especially in oil on Friday when China tried to force the price lower with a leak of a rumoured sale of some of its strategic stockpile.
But last week’s commodities star performer was aluminium, thanks to the coup in Guinea which drove up the price of the lightweight metal, adding to price pressures from moves in China where millions of tonnes of annual production has been cut this year as part of the carbon emissions reduction scheme and because of power shortages in some provinces.
Guinea is a major producer of bauxite, as well as alumina (as is Australia).
The coup raised concerns about the reliability of supply lines inside the country and exports. That saw the London Metal Exchange price jump 6% last week to a 13 year high above $US2,950 a tonne on Friday for three-month metal.
Guinea is the second-largest producer of bauxite (after Australia) and the largest supplier to China.
Aluminium prices have already surged more than 40% this year as a rise in demand due to massive global stimulus measures came on the top production cuts in China and shipping disruptions.
In the last few months, output in China shrank due to disruptions caused by floods and as the country suppressed smelting to reduce pollution and meet green targets.
Meanwhile, India, the second-biggest producer of the metal, inadequate coal supply at power stations threatens local production with looming production cuts to conserve supplies for domestic power generation.
There has also been a shortage of shipping containers used to move industrial metals from Asia to the US and Europe which are in short supply putting additional pressure on prices (and user costs).
The price of Alumina shares (a bauxite, alumina and aluminium producer and investor) are up 27% in the past month, closing at $2.18 on the ASX on Friday – the highest the shares have been since late 2019.
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In iron ore markets, Friday saw the price of 62% Fe fines delivered to northern China from the Pilbara at $US129.71 a tonne, down $US5.50 a tonne on the day and just over 10% for the week, 58% Fe fines were steady on Friday at $US104.92 a tonne, down $US10 a tonne. 65% fe fines from Brazil also lost $US10 over the week to end at $US153 a tonne (up $US2.30 a tonne on the day).
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Friday saw nickel prices leaped to a record high in Shanghai and surpass a seven-year high in London on the same day on upbeat demand and falling stocks.
The October nickel contract on the Shanghai Futures Exchange advanced as much as 4.1% to 155,140 yuan ($US24,067.64) a tonne.
Three-month nickel on the London Metal Exchange hit $20,705 a tonne, its highest since May 2014, before easing to trade at $US20,350 a tonne, still up 0.8%.
Shanghai inventories fell to 5,950 tonnes on Friday, above the record low of 4,455 tonnes hit in August, while LME nickel stocks dipped to their lowest since January, 2020 at 181,368 tonnes.
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LME and Comex copper prices rose – LME three-month metal ended at $US9,533 a tonne on Friday, up by just over 1.3% while Comex metal rose more than 3% on Friday to settle at just over $US4.45 a pound and up 2.1% for the week.
As in nickel, falling stocks in Shanghai are helping push copper prices higher.
Reuters reported that copper stocks fell 10.7% from the previous week. The Shanghai exchange said on Friday, falling to their lowest level in almost 10 years as tight supplies push metal prices higher.
Deliverable copper stocks in warehouses monitored by the Shanghai Futures Exchange now stand at 61,838 tonnes, the lowest since December 2011, according to Reuters.
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But gold was left out of the rush (like iron ore) and it saw its first losing week in five. A strong Producer Price Index for the US helped the metal on the day and the rise in the value of the greenback hit gold as well.
Gold traded through the range of a high of around $US1,806 and a low for the day of $US1,788 and it settled at $US1,792.60. That was down around half a per cent and 2.2% for the week.
Comex silver fell 3.6% over the week to end at $US23.85.
Friday saw the US Labor Department report that the Producer Price Index (PPI) rose 0.7% in August following July’s rise of 1.0%. That was stronger than the 0,6% rise forecast.
For the year, headline inflation hit another record high, increasing 8.3%. The report said that this is “the largest advance since 12-month data were first calculated in November 2010.”
Core producer prices rose 0.6% last month, following a 1% rise in July. The core inflation data was also stronger than expected with consensus forecasts calling for a rise of 0.5%.
For the year, core PPI rose 6.7%, in line with expectations.
The heat in US PPI is similar to that in China in August which saw a 9.5% annual rise.
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And finally, China’s latest attempt to influence oil markets failed in a big way on Friday.
After a drop caused by the Chinese announcement of a drawdown on its strategic reserves to supply the market, the price rose 2.3% on Friday to settle at $US69.72.
That left WTI up 0.6% for the week and Friday’s rise turned a small loss for the week into a gain, with that help from China.
Brent crude settled higher at $US72.92.
Meanwhile Baker Hughes said in its weekly rig use report that energy firms added oil and natural gas rigs for a fifth time in six weeks as offshore oil units in the Gulf of Mexico slowly started to return after Hurricane Ida slammed into the coast.
The number of oil-directed rigs rose by 7 to 401 and the total number of rigs in use was up 6 at 503. That’s 249 more than this time in 2020.
