Commodity markets stage rally in 2009

Sunday, January 03, 2010
LONDON: Commodity prices rallied in 2009 on keen demand and signs of global economic recovery, with oil soaring and gold striking record levels, while copper and sugar surged.

Many raw materials also rose this week in thin trade ahead of the New Year holiday weekend, with investors winding down for celebrations to usher in 2010.

“2009 has been a rollercoaster ride for most commodity markets, with copper, sugar and New York crude performing especially well,” said VTB Capital commodities analyst Andrey Kryuchenkov. “Refined copper and raw sugar were certainly the outstanding gainers as both more than doubled from lows at the start of the year.” He added: “China’s unprecedented financial stimulus had certainly benefited raw materials linked to the expanding infrastructure and industrial growth.

“Demand (from leading industrialised economies) has yet to show significant and sustained signs of an economy recovery.

However, end-of-year data, especially from the United States, was fairly encouraging.” Back in 2008, crude oil and base metals had forged historic peaks on supply woes, before tumbling as the global financial crisis and recession sparked demand worries.

OIL: Crude oil leapt this year by around 80 per cent as traders were heartened by evidence that the battered global economy was on the mend, with the eurozone, Japan and the United States escaping a fierce recession. The worldwide economic downturn had slammed demand for energy and sent oil prices plunging to around $33 towards the end of 2008.

“So much then for 2009, a year that the oil market spent mainly in a recovery mode,” said Barclays Capital analyst Paul Horsnell. “It produced a (New York oil) average of about $62 per barrel, encompassing a low of $33 and a high of $82, with prices finishing the year close to the highs after a steady 10-month climb.”

However, prices still remain far below the record highs above $147 that were struck in July 2008 on fears of supply disruptions. New York crude rose on Thursday to briefly hit $80 per barrel in light pre-holiday trade. The market had climbed on Wednesday after news of a drop in US petroleum reserves, which suggested stronger demand in the world’s biggest energy-consuming nation.

Prices were also supported this week by cold winter weather in the northern hemisphere, which increases demand for heating fuel, and geopolitical concerns over key crude producer Iran.

Last week, the Organisation of Petroleum Exporting Countries held its crude output quotas unchanged at its meeting in Angola, warning of lingering weakness in the world economy. The OPEC meeting capped a year of recovery for oil prices, which have more than doubled since the cartel set strict quota cuts in the depths of the economic crisis a year ago.

In January, the cartel enforced total OPEC cuts of 4.2 million barrels a day. New York’s main futures contract, light sweet crude for delivery in February, crept eight cents higher to close at $79.36 a barrel. London’s Brent North Sea crude for February fell 10 cents to settle at $77.93.

PRECIOUS METALS: Gold prices sparkled this year, scoring a record peak of $1,226.56 per ounce at the start of December, before tailing off as many traders cashed in gains.

The glamorous metal has smashed records on the back of inflationary fears and increasing moves by central banks to diversify assets away from the dollar, which weakened against the European single currency. The weak level of the greenback made dollar-priced commodities cheaper for buyers using stronger currencies, which tends to stimulate demand.

However, by Thursday on the London Bullion Market, gold stood at $1,104 an ounce, down from $1,104.50 the previous Thursday. Silver edged down to $16.99 an ounce from $17.32. On the London Platinum and Palladium Market, platinum increased to $1,466 an ounce Thursday from $1,456. Palladium rose to $402 an ounce from $377.

BASE METALS: Copper soared this week, striking a new multi-month peak, taking its annual gain to more than 140 per cent as traders fretted over possible strikes in key producer Chile.

Most other base metals also leapt higher on better-than-expected US data and thin market conditions. Copper hit $7,423.75 per tonne on Thursday, reaching the highest level since September 2008.

“A much higher-than-expected Chicago PMI figure out of the United States, continued uncertainty about strike threats in Chile, and generally thin market conditions, all contributed to the stronger tone,” said MF Global analyst Edward Meir. “Copper prices are on course for a stunning 140 per cent advance this year,” he added.

A report showed on Wednesday that manufacturing activity in the Chicago area accelerated for the third straight month in December, analysts said.

The Chicago branch of the Institute for Supply Management said its purchasing managers index (PMI) rose unexpectedly to a seasonally adjusted 60.0 reading, up from 56.1 in November.

Most analysts had expected a fall. By Thursday on the London Metal Exchange, copper for delivery in three months jumped to $7,408 a tonne from $7,070 a week earlier. Three-month aluminium eased to $2,245 a tonne from $2,249. Three-month lead gained to $2,440 a tonne from $2,346. Three-month tin increased to $16,875 a tonne from $16,100. Three-month zinc firmed to $2,575 a tonne from $2,525. Three-month nickel jumped to $18,848 a tonne from $18,721.

SUGAR: Sugar prices, which have more than doubled this year, finished 2009 in style to strike another 28-year pinnacle above 700 pounds on the back of tight supplies, traders said. “Traditionally seasonal commodities like corn and sugar are still likely to perform strongly in 2010 amid low ending stocks in the past season,” added Kryuchenkov.

By Thursday on the New York Board of Trade (NYBOT), the price of unrefined sugar for March rose to 27.24 US cents a pound from 26.76 cents the previous Thursday. On LIFFE, London’s futures exchange, the price of a tonne of white sugar for delivery in March climbed to 706.30 pounds from 694.50 pounds.

COCOA: Prices declined as investors took profits after hitting a 30-year high earlier this month on low output in top producing nation Ivory Coast. “Support in cocoa was associated with tight supply outlooks, which was stimulated by the uncertainty surrounding the incoming harvest from the Ivory Coast,” said analysts at the Public Ledger commodities review.

In London on December 17, cocoa had struck 2,337 pounds a tonne, a level last seen in October, 1977. That compared with just 1,788 pounds at the start of 2009.

However, by Thursday on LIFFE, the price of cocoa for delivery in March slipped to 2,216 pounds a tonne from 2,242 pounds the previous Thursday. On NYBOT, the March cocoa contract dropped to $3,262 a tonne from $3,275.

COFFEE: Coffee prices receded on investment fund selling. “Some funds have been selling, but volume has remained relatively moderate,” said Sucden analyst Ralph Hawes.

By Thursday on LIFFE, Robusta for delivery in March fell to $1,323 a tonne from $1,374 the previous week. On the NYBOT, Arabica for March recoiled to 137.95 US cents a pound from 142.75 cents.

GRAINS AND SOYA: Grains and soya prices moved higher in quiet pre-holiday trade.

By Thursday on the Chicago Board of Trade, maize for delivery in March rose to $4.14 a bushel from $4.08 a week earlier.

March-dated soyabean meal, used in animal feed, increased to $10.50 from $10.08. Wheat for March rose to $5.47 a bushel from $5.24.

RUBBER: Malaysian rubber prices gained ground due to strong demand and tight supplies in producing countries, dealers said.

On Thursday, the Malaysian Rubber Board’s benchmark SMR20 climbed to 280.60 US cents a kilo from 278.10 cents the previous week.