Commodity prices surged Tuesday despite a big slide on equity markets as the Russian invasion of Ukraine deepened with indiscriminate missile attacks and shelling killing an unknown number of people, while a long convoy of Russian reinforcements neared the country’s capital, Kyiv.
Major sharemarkets were weaker across the trading day on Tuesday but the contrast with commodities was telling – gold, oil, copper, silver, coal wheat, iron ore and other key products rising sharply to multi-year highs.
At the same time the Aussie dollar eased, but not by as much as some local analysts predicted and at 7am it was still well over 72 US cents, even as the US dollar strengthened.
The surge in commodity prices on Tuesday will see Australian gold, copper, iron ore, coal, oil and gas companies go against the weaker overall trend on the ASX on Wednesday.
The prices of a host of commodity companies – large and small will be chased – stocks like BHP, Woodside, Santos, beach, Oz Minerals, Evolution, Northern Star, Perseus, St Barbara, Mincor, Newcrest, Rio Tinto, Whitehaven Coal, GrainCorp, Elders, New Hope, IGO and Fortescue Metals.
Bond yields again tumbled with the key 10-year US Treasury bond yield falling to 1.71% (it was over 2% a week ago) as investors sought safe haven in the face of the intensifying Russian attacks.
US dollar priced commodities deliverable outside Russia and Europe are being sought by investors and industrial buyers seeking to replace Russian purchases or contracts.
Oil prices topped $US100 a barrel again and remained there, settling Tuesday up 8% at $US103.41 for US West Texas Intermediate crude. Brent crude settled at $US104.97, also up more than 8%.
A meeting tonight of the OPEC + group is expected to boost global production by 400,000 barrels of oil a day from April, but there’s no sign of Russia being excluded from the talks, as other trade and sporting groups have already done.
There’s talk of the US, Europe and other countries preparing an emergency release of oil reserves to swamp the market, though China is playing its own game and won’t join, even though as the world’s biggest importer it is being hit with sharply higher import costs.
Brent crude rose further in after-hours trading to be well above $US105.60 a barrel. US crude eased a little from its peak to trade just above $US104 a barrel.
In New York Comex gold jumped more than $US40 an ounce to settle at $US1,941.40, a 13-month high with some analysts eyeing the $US2,000 an ounce level if the Russian assault on Kyiv turns bloody.
Comex Gold was trading higher around $US1,943 an ounce after 7am Sydney time.
Comex silver settled 4.8% higher at $US25.53 an ounce and Comex copper jumped more than 3% to settle at $US4.58 a pound.
In Asia Singapore iron ore futures rose with the front month April contract for 62% Fe fines (the typical Pilbara blend product) rising 4% to more than $US147 a tonne and the current month ending around $US145.
This buying was related not to the Ukraine invasion but to scattered buying interest from Chinese mills and concerns about an intense tropical low just north of the major Pilbara iron ore ports, especially Port Hedland.
The Newcastle thermal coal index (on the ICE or Intercontinental Exchange), surged $US25.50 a tonne to hit $US300 a tonne for the March control and by $US38.50 a tonne to $US290 a tonne for April.
The June through January, 2023 contracts all saw rises of more than $US50 a tonne on Tuesday as the market erupted with more buying interest from previous buyers of Russian coal.
Traders in all commodities say there is confusion about Russian-related charters across all products – especially coal, oil and grains as charter agreements collapse in the face of tighter sanctions.
Insurance cover for the shipping and actual cargoes has vanished if there is any Russian involvement – even a trading houses and there’s also a shortage of shipping capacity to pick up the unwanted deals or to substitute in replacement sales (say of Australian or Indonesian thermal coal instead of Russian or Ukrainian or Russian grains).
The May wheat contract price on the Chicago Board of Trade closed limit up (at the top of their daily trading range) of $US9.84 a bushel, a rise of more than 5% on the day and a 13 year high (since April, 2008).
The March contract was trading above $US10 a bushel after hours, indicating a rise to over that level tonight in regular trading for the May contract.
Russia is the largest exporter of wheat and Ukraine is among the four biggest exporters of the commodity.
Australia or Canada are second or third depending on the quality of the season and both are ideally placed to sell into booming market (which is the price of GrainCorp shares are up 15% in the past month).
Of the 207 million tonne international wheat trade, 17% comes from Russia and 12% comes from Ukraine, according to Bank of America.
Corn prices jumped more than 5% to $US7.25 a bushel and soybeans were trading 3% higher at more than $US16.88 a bushel.
