Commodity prices went nowhere for most of April as China’s re-opening has gone flat, oil slid sideways, iron ore prices weakened and the health of the US economy the underlying fear for many investors.
News of a surprise slowing in activity in the Chinese economy in April (especially manufacturing) – the biggest buyer and consumer of commodities – will command attention today because it was simply not forecast
Gold and silver ended April with small gains, but they were nowhere as large as they looked a week or so ago.
But in a bit of good news, lithium prices perked up last week for the first week since last November.
Oil was mixed after the production cut from the OPEC+ group at the start of April – it comes into force from today (May 1). Prices were surprisingly weaker last week when they should have firmed in anticipation of the cut.
That’s partly because China is not the big deal that many analysts thought earlier in the year. It’s appetite for commodities (including oil) has been lower than first thought in late 2022 and early this year as the economy started re-opening.
While iron ore imports hit a record 294 million tonnes in the March quarter and prices topped $US130 a tonne in March, the bloom has gone off the price and the loss in April was around 17-18%, depending on the price reporting site.
Iron ore prices briefly dipped below $US100 a tonne early last week but bounced back to $US104.50 a tonne on Friday on the SGX commodities market.
China’s weaker-than-expected peak construction season, which runs from April through June, has faded with the building industry weaker than thought and the recovery in housing still a distant hope.
But battery-grade lithium carbonate prices rose 10.6% from a week earlier to 182,500 yuan ($US26,380) a tonne, the first weekly increase since November 2022, data.
The price had surged 10-fold in less than two years to 605,000 yuan a tonne by November as supply failed to keep up with soaring demand due to solid EV sales.
But prices fell more than 70% after China’s ended EV purchase subsidies in December.
Newcastle thermal coal eased over April, falling from around $US205 a tonne to $US202 a tonne for the September contract (and around $US185 a tonne for more current months such as May).
Oil prices were mixed – US West Texas Intermediate crude rose 1.4% over April to end at $US76.78 a barrel but Brent faded to lose 0.3% over the month to finish at $US79.34 a barrel.
Crude prices surged on April 3 after the OPEC+ group announced a surprise oil production cut of 1.1 million barrels per day (bpd) starting today (May 1).
Saudi Arabia said the cuts were a “precautionary measure aimed at supporting the stability of the oil market.” OPEC March crude production fell by -80,000 bpd to 29.16 million bpd. That should be around 28 million barrels in a month’s time if the cut happens.
US crude oil production in the week ended April 21 fell 0.8% from the week before to 12.2 million bpd, only 900,000 bpd (down 6.9%) below the February, 2020 record-high of 13.1 million bpd.
Services group, Baker Hughes reported Friday that active US oil rigs numbers in the week to April 28 were unchanged at 591, well under the 2-1/2 year high of 627 rigs reported on December 2.
…………
Gold ended the month higher, as did silver but copper also suffered from the quiet China factor (and a big drop in imports in March).
Comex gold futures ended a touch higher over April, for a second straight monthly gain as demand kept the price not far from the key $2,000-an-ounce mark on a belief that the greenback will fall again soon.
Gold for June delivery settled Friday’s trade up at $US1,999.10 an ounce after the day’s high of $US2,004 an ounce. Gold was up 1.07% for the month – the fifth positive month of the last six.
The spot price of gold, which reflects physical trades in bullion and of more immediate interest to some traders, lost 35 cents to $US1,998.65
Both spot gold and Comex’s most-active contract for the yellow metal are down about 2.5% or more from an April 13 peak around $US2,050 an ounce.
The Australian dollar price ended the month at $A3,007 an ounce.
Friday’s sell-off in gold came as the dollar rebounded lately on expectations that the Federal Reserve will embark on a quarter-point rate hike this week.
“Wall Street is confident the Fed will raise rates next week, but it seems these latest inflation pressures may not allow them to signal they are ready for a pause,” said Ed Moya, analyst at online trading platform OANDA, Reuters reported.
“The last few key data points leading up to the Fed could suggest the service sector is still healthy and that manufacturing activity is stabilising.”
Moya said gold might not benefit too much from safe-haven plays related to the ongoing U.S. banking crisis though it could surge “if the Fed is comfortable enough to signal they are reading to hold rates for a while.”
“Monetary policy is restrictive and as it filters through the system, we will start to see larger parts of the economy enter slowdown mode,” Moya added.
Comex silver added 3.83% to end the month under $US25 an ounce – just – at $US24.999 an ounce.
But copper slumped 5.7% to end April at $US3.89 a pound.
…………
Shell has bailed out of the Browse LNG project on the North West Shelf by selling its 27% stake to BP for an undisclosed price.
The deal came only days before the two energy majors release their March quarter financial and production details this week.
The estimated $A20.5 billion Browse project is Australia’s largest untapped gas resource but has been stuck in the slow lane while other resources were developed in the North West Shelf, Timor Sea and in the coal seam gas fields of Queensland.
But now it is being considered to replace ageing gas fields to supply the North West Shelf LNG (liquefied natural gas) plant.
In a statement issued on Saturday, Shell Australia said it “regularly assesses its portfolio to inform capital allocation and maximise returns and performance however, the Browse asset is no longer a strategic fit in the context of Shell’s global portfolio”.
“Browse remains an important Australian resource which if developed will provide much needed energy to customers as the energy market transitions towards lower carbon energy,” it said.
If approved by regulators (FIRB), BP will overtake Woodside (30.6%), operator of Browse, as the biggest stakeholder in the project with a total holding of 44.3%. There are also shareholder first rights of refusal on each other’s shareholdings to be confirmed.
Based on the valuation that an independent expert last year put on Woodside’s stake in Browse, Shell’s 27% stake would have been worth around $US350 million – a fraction of the $US2 billion that Mitsui and Mitsubishi paid for their 14.4% stake in 2012.
PetroChina also bought a 10.67% stake for $1.63 billion.
Shell was an foundation shareholder in the North West Shelf.
As well as Woodside, the other participants in the NWS Project are BP, BHP Billiton Petroleum, Chevron, Mitsubishi/Mitsui and Woodside.
Shell also has an interest in the domestic gas joint venture which has been producing domestic gas for Western Australia since 1984.
Shell also has a 50% holding in a coal seam LNG business in Queensland and is also a 25% shareholder in the Gorgon LNG project managed by Chevron.
