Except for coal, oil and gas, September proved once again to be the most miserable of months for investors, with little way of avoiding significant damage especially if you were exposed to the likes of iron ore, copper or bonds.
But carbon – in the shape of coal (especially premium hard coking coal) and gas – saved the day (as we saw with the latest estimates for the record value of Australia’s resources and energy exports in 2021-22.
Take equities – Thursday, September 30 saw Wall Street end the worst month of the year so far on a sour note.
The Dow dropped 546.80 points, or 1.59%, to close at 33,843.92. The S&P 500 lost 1.19% to 4,307.54, while the tech-heavy Nasdaq fell 0.4% to 14,448.58 after being in the green for most of the session.
Rising rates, inflation fears, concerns about the Chinese property market and the continuing Chinese energy shortage, not to mention the gas crisis in Europe and surging US gas prices belted stocks lower.
The S&P 500 finished September down more than 4% for its worst month since March 2020, when the pandemic’s big sell-off was coming to an end (the market bottomed out on March 23 of last year).
The Dow and the Nasdaq suffered their worst months in 2021 with falls of 4.3% and 4.8% respectively.
For the quarter the Dow lost 1.9% but the S&P 500 was up a tiny 0.2% and the Nasdaq managed to hang on to a 0.4% gain.
The slide will see the ASX 200 starting October and the final quarter of 2021 with a big slump of 117 points or 1.6%.
That will almost reverse the silly 1.9% jump on Thursday on the final day of the month and quarter which saw Australian investors go out on a limb that Wall Street eventually sawed off behind them.
The ASX 200 ended September at 7,332.2, 18 points above the June 30 close of 7,313.
Thursday’s sharp rise pushed the index to a small gain for the quarter – without the 135 point jump the index would have finished the three months down 117 points or about 1.6%.
Thursday’s one-off gain also trimmed September’s loss to 2.6% from a nastier 4.5% which was probably a more accurate reflection of the damage done by the slide in iron ore and copper prices and the uncertainty caused by China’s emerging problems.
While Chinese shares were weak for most of September, the performance was better than in July and August when the full weight of Xi Jinping’s attack on the country’s leading growth businesses in and around the tech sectors was in full flight.
The key CSI 300 index, which covers the top stocks from the Shanghai and Shenzhen exchanges lost 6.8% in value in the quarter. That was the biggest quarterly loss since the first quarter of 2020 when the pandemic was crashing over China.
But the Hong Kong market took the brunt of the nerves about China – the index was crunched in September and the quarter, losing 5.8% in the month and more than 14% for the quarter as the market slumped into a deep correction.
Japan’s Nikkei index wrapped its best month since November 2020 on Thursday even as markets fell for a fourth straight session on concerns over China’s economic growth due to a worsening power crunch.
The Nikkei slipped 0.31% to 29,452.66 but posted a monthly gain of 4.85%. The broader Topix index lost 0.4% to 2,030.16 but ended September with a monthly rise of 3.54%, its biggest since March. For the quarter the Nikkei was up 2.3%.
US 10-year bonds ended the month and quarter around 1.52%, up from 1.467 on June 30 and 1.30% on August 31.
The 10-year Treasury yield hit a low of 1.13% in the quarter and peaked above 1.57% this week. Australian 10-year bonds ended the month at 1.49%, up 33 points from the end of August and almost steady over the quarter from June 30’s 1.478%.
That saw the US dollar hit a series of year highs this week while the Aussie dollar ended the month and quarter well under 73 US cents and weaker at 72.30.
That was down sharply from 75 US cents at the end of the June quarter and a tick under 73 US cents at the end of August.
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Book ‘em Danno went the famous line from Hawaii Five-o, so in that spirit here are the ‘usual’ suspects with claims to have worried markets to distraction in September and the quarter.
It was investor fears that saw these commodities impacted by continuing and persistently high inflation, weaker demand (for iron ore), the Chinese property and energy crisis, rising interest rates in the US and the higher greenback which hit a series of year highs towards the end of September.
The damage for Australia was done by the slump in iron ore prices in the month and the quarter. the price of 62% Fe Fines slid more than $US34 a tonne in September, a drop of 22% as the price ended September on $US119.23.
For the quarter, the loss was startling – more than $US94 a tonne or 44%. That will crunch the likes of BHP and Rio and it’s no wonder three small mines have or are on the brink of closing.
For 58% Fe Fines (the type produced by BHP and Fortescue, as well as 61% and 62% Fe fines) the slide was just as nasty.
The price ended September at $US91.06, a drop of almost $US32 a tonne or 26% for the month and nearly $US90 a tonne or just over 50% for the quarter. That is going to crunch Fortescue in particular.
The fatality reported at a Fortescue mine on Thursday saw prices jump sharply as traders tried to grab as much tonnage as possible in the event of a shutdown and a halt to exports.
That’s why the price of 62% Fe fines jumped nearly 5% on the final day of the month and the quarter.
Copper prices ended the month closer to the $US4 a pound level on Comex than they have been recently with the price settling at $US4.09 a pound. The price topped $US4.10 a pound in after-hours trading. Copper lost 4.8% in the month and 2% for the quarter.
Gold prices rose on Thursday ending at $US1,755.30 for a 2% gain on the day while shares sold off. That was a loss of $US59 or 3.3% for the month and a small 0.9% drop for the quarter.
Silver was whacked both for the month and the quarter, losing 8.1% in the month and 15.8% for the quarter. But it was up around 3% on Thursday (tracking gold higher) to settle at $US22.047 an ounce.
Oil prices rose for yet another month and quarter as shortages and the continuing impact of Hurricane Ida on wide sections of the US industry – especially gas – in late August kept prices higher in September.
US West Texas Intermediate crude ended the month and the quarter on $US75.03 a barrel, up 4.51% for the quarter and 7.6% for the month. Brent crude ended at $US78.52 up 7.6% for the month and nearly 4% for the quarter.
And the winners for the month and the quarter were (drum roll) – coal (coking and thermal) and gas.
Thermal coal futures closed Thursday up 4.2% on China’s Zhengzhou Commodity Exchange after hitting an all-time high of 1,408 yuan ($US218) a tonne.
The contract surged 96% in September period on tight supplies and strong demand, its biggest quarterly jump since the first quarter of 2017.
The price of thermal coal ex Newcastle also hit $US218 a tonne on Thursday. The March 2022 ICE contract is close to $US200 a tonne – up 5% on Thursday and up more than 55% since the end of June.
Coal prices went the same way – the price of premium hard coking coal in the Asian basin more than trebled in the September quarter from just over $US190 a tonne to $US603 a tonne on Thursday (that’s on a cfr basis, including shipping costs arranged by the exporter).
For September the price rose 50% from $US421 a tonne.
And US gas prices won with a surge of 60% in the September quarter (it closed at $US5.867 a MBTUs (Million British Thermal Units) with a 34% plus jump in September.
It ended at $5.841 MBTUs and a seven and a half year high for the second day in a row.
