MARKET DEVELOPMENT
04-06-2002
World commodity prices on the uptrend
Monday, June 3, 2002 (The Star) - PRICES of world commodities haverecovered since the beginning of the year after the downtrend last year.The star performer is cocoa. Precious metals, particularly gold, are alsooutstanding in terms of price performance.Among the other commodities are crude oil, crude palm oil (CPO), rubberand soyabean which have achieved growth rates of between 10% and 30% thisyear.Forecast of a shortfall in global supply for the second successive yearhas helped sustain the strong rally on cocoa prices.Cocoa prices have propelled to a 15-year high of £1,304 per tonne lastweek, 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 dryweather in production countries, namely Ghana and Ivory Coast, which haddisrupted cocoa production.Dealers said the uptrend might continue.“Many chocolate manufacturers are far from sufficiently covered, and arerunning to catch up with the soaring cocoa price,’’ said a dealer.The recent “gold rush†among investment fund managers to seek safe havensamid uncertainties on the world political scene has pushed the price ofgold up to US$326 per ounce last Friday – the highest level since October1997.Platinum prices also rose to a peak of US$554 per ounce in April. Theprice of platinum finished the week at US$542 last Friday.In addition to factors such as tension at the India-Pakistan border andthe Israeli-Palestinian conflict, the weakening US dollar has also boostedthe price of gold.The fall in the greenback against other currencies will mean a rise ingold price, which is quoted in US dollars. The US dollar slumped to asix-month low of 123.24 against the yen last Thursday before ending theweek at 124.09 last Friday.The low interest rate environment that has resulted in ample liquidity andthe perceived higher risk on equities has also benefited gold prices asthe opportunity cost for the precious metal becomes lower.Crude oil prices are also faring well. The Brent oil price had reboundedfrom the year’s low of US$18.17 per barrel on Jan 18 to a high of US$27.12per barrel on May 14. It was last traded at US$23.89 per barrel lastFriday.Tapis oil has rebounded to US$24.80 per barrel last Friday from US$19.90per barrel. It reached a height of US$27.25 on May 14.The commodity has regained lost ground against the backdrop of risingoptimism on the global economy, which will raise the demand for oil sincelate January.Meanwhile, the conflict in the Middle East, which pumps up one-third ofthe world oil supply, has lifted crude oil prices in April and the firsthalf of last month.Crude oil prices eased off in the past two weeks as worries of supplydisruption, due to war, eased. On top of that was the higher-than-expectedoil inventory in the US.Oil prices slumped below US$18 per barrel after the terrorist attacks onthe US last September. There were fears of a lower demand for oil.Crude palm oil (CPO) prices have also staged an impressive run up. CPOprices surged to their three-year high of RM1,426 per tonne last Fridayand 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 periodbetween January and September.This would reduce the world’s stocks to a two-year low of 3.26 milliontonnes by end-September compared with 3.81 million tonnes last year and3.71 million tonnes two years ago.China’s intention to impose a 24% import duty on soya bean oil has alsospurred the uptrend on CPO prices because the higher duty is likely toprompt the Chinese to substitute cheaper palm oil for soya oil.Traders see the possibility of the CPO price testing the RM1,500 per tonnelevel in tandem with the strengthening soya bean prices.“The soya oil prices are likely to remain firm as China has not receivedenough quantities of soya oil and the expectation of a wet weather in theUS will affect production,’’ said a dealer.(The informations and opinions expressed in this article represent theviews of the author only. They should not be seen as necessarilyreflecting the views of Palm News)
