It wasn’t a boom like May, but October turned out to be a solid recovery month for many commodities, until a slide towards the end after the Chinese Communist Party government arced up about soaring coal prices (a situation of its own making) and frightened prices lower, taking other commodities with them.
Oil rose and rose until the final week of the month, copper bounced higher mid-month (and briefly got close to near a new all-time high) but then faded, other metals had solid months – nickel, tin, lead and zinc. Aluminium faded in the final week.
A slightly weaker US dollar helped, but not much. The big driver was the international energy shortage that saw record prices for gas and LNG in Europe, China and other parts of Asia.
That pushed coal prices higher as China scrambled to avoid worsening power blackouts and shortages after it mismanaged a carbon emissions reduction program and cuts to output for polluting industries, such as steel, cement and aluminium.
The property crisis in China might have eased as the stricken developer, Evergrande managed to find more than $US100 million to repay local and foreign creditors, but with the slide in production, weak investment and the vicarious crackdown on big tech companies and industries, the country’s economy slid to the edge of the growth cliff in the three months to September.
Gold did OK, got over $US1,800 an ounce and then retreated, again to around $US1,780 an ounce. Gold rose around 1.6% for the month, silver perked up as well with an 8% plus jump. Copper (Comex) added more than 6%.
London Metal Exchange copper added more than 7%. Copper prices rose earlier in October to as high as $US10,452.50 a tonne in London as global stocks suddenly shrunk in size and remain low, hence the emergence of backwardation in the price.
Iron ore marked time until the end of the month and slumped more than 10% in the last two trading days of the month after further restrictions on crude steel making, sintering of iron ore and coking coal and re-rolling (processing) of steel were imposed in Hebei and Shandong provinces, two major steel producing provinces and including the major steel producing city, Tangshan.
The price of 62% Fe fines slid nearly 5% on Friday after a near 7% drop on Thursday to be down 12.24% for the month, ending at $US107.28. 58% fines did worse – down 15% over the month to $US78.54. 65% Fe fines fell 11.3% in the month.
And there’s more ahead this month and next as China cracks down on emissions and pollution and tries to preserve coal supplies and cut electricity consumption to keep hundreds of millions of homes warm and businesses open in the winter heating season from November 15.
Oil prices gained in October despite losing some steam last week in what turned out to be the first losing week in ten and ending the longest winning streak ever for the commodity.
Brent, the international benchmark was up 7% in October from September, closing at $US83.72 on Friday.
US West Texas Intermediate (WTI) futures rose 11.4% to settle at $83.57. WTI lost 0.9% last week.
OPEC+, the international bloc of oil-producing nations, including Russia, meet on November 4 (This Thursday) to look to cut more barrels from its daily production cap.
The group is currently on track to add two million barrels a day back to the markets by the end of the year in monthly increments of 400,000 bpd.
The number of active US rigs drilling for oil increased by 1 last week to 444, according to Baker Hughes. The total active US rig count, which includes those drilling for natural gas, rose by 2 to 544.
Global coal prices peaked above $US600 a tonne for premium hard coking coal in China and more than $US400 a tonne outside China. Thermal coal in China approached $US300 a tonne and more than $US230 a tonne in Asia. Then they fell after the Chinese government started attacking the way prices were set via futures exchanges and pricing indexes.
That’s because the government, after allowing coal prices to float 20% either side of a pricing band, forgot that in times of shortage, as there is now, the only way is up.
After the government called for prices to be investigated, down went prices and thermal coal was trading around $US150 a tonne on Friday and the government again tried to talk them down again.
China has lifted imports of coal from Russia, Canada and the US, but can’t get much more from Indonesia because of poor weather, bad planning and low quality. Imports from Mongolia remain impacted by Covid infections in mines and among truck drivers (not much rail) who bring the virus into China.
Efforts to boost production of coal inside China are slowly working. the government says output is up 1.2 million tonnes a day compared with September – when there was a big shortfall which contributed to the shortages and power rationing.
Last Sunday, coal stockpiles at the country’s major power plants reached 95.69 million tonnes, up 17 million tonnes from the end of September, and enough for 17 days’ consumption, according to the government. That is not enough if the winter heating season starting in 15 days’ time turns out to be very cold for the second year in a row.
