Following article appeared in the local Malaysian Star newspaper today (Mon):
World commodity prices on the uptrend
PRICES of world commodities have recovered since the beginning of the year after the downtrend last year.
The star performer is cocoa. Precious metals, particularly gold, are also outstanding in terms of price performance.
Among the other commodities are crude oil, crude palm oil (CPO), rubber and soyabean which have achieved growth rates of between 10% and 30% this year.
Forecast of a shortfall in global supply for the second successive year has helped sustain the strong rally on cocoa prices.
Cocoa prices have propelled to a 15-year high of £1,304 per tonne last week, before retreating to £1,298 per tonne last Friday. It has soared 31% or £307 since Jan 2.
Cocoa prices started to head upward from November last year due to dry weather in production countries, namely Ghana and Ivory Coast, which had disrupted cocoa production.
Dealers said the uptrend might continue.
“Many chocolate manufacturers are far from sufficiently covered, and are running to catch up with the soaring cocoa price,’’ said a dealer.
The recent “gold rush” among investment fund managers to seek safe havens amid uncertainties on the world political scene has pushed the price of gold up to US$326 per ounce last Friday – the highest level since October 1997.
Platinum prices also rose to a peak of US$554 per ounce in April. The price of platinum finished the week at US$542 last Friday.
In addition to factors such as tension at the India-Pakistan border and the Israeli-Palestinian conflict, the weakening US dollar has also boosted the price of gold.
The fall in the greenback against other currencies will mean a rise in gold price, which is quoted in US dollars. The US dollar slumped to a six-month low of 123.24 against the yen last Thursday before ending the week at 124.09 last Friday.
The low interest rate environment that has resulted in ample liquidity and the perceived higher risk on equities has also benefited gold prices as the opportunity cost for the precious metal becomes lower.
Crude oil prices are also faring well. The Brent oil price had rebounded from the year’s low of US$18.17 per barrel on Jan 18 to a high of US$27.12 per barrel on May 14. It was last traded at US$23.89 per barrel last Friday.
Tapis oil has rebounded to US$24.80 per barrel last Friday from US$19.90 per barrel. It reached a height of US$27.25 on May 14.
The commodity has regained lost ground against the backdrop of rising optimism on the global economy, which will raise the demand for oil since late January.
Meanwhile, the conflict in the Middle East, which pumps up one-third of the world oil supply, has lifted crude oil prices in April and the first half of last month.
Crude oil prices eased off in the past two weeks as worries of supply disruption, due to war, eased. On top of that was the higher-than-expected oil inventory in the US.
Oil prices slumped below US$18 per barrel after the terrorist attacks on the US last September. There were fears of a lower demand for oil.
Crude palm oil (CPO) prices have also staged an impressive run up. CPO prices surged to their three-year high of RM1,426 per tonne last Friday and has gained RM273 or 24% since the beginning of the year.
Oil World has forecast a 600,000-tonne fall in oil stocks for the period between January and September.
This would reduce the world’s stocks to a two-year low of 3.26 million tonnes by end-September compared with 3.81 million tonnes last year and 3.71 million tonnes two years ago.
China’s intention to impose a 24% import duty on soya bean oil has also spurred the uptrend on CPO prices because the higher duty is likely to prompt the Chinese to substitute cheaper palm oil for soya oil.
Traders see the possibility of the CPO price testing the RM1,500 per tonne level in tandem with the strengthening soya bean prices.
“The soya oil prices are likely to remain firm as China has not received enough quantities of soya oil and the expectation of a wet weather in the US will affect production,’’ said a dealer. |
