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| May 12, 2003 | Monday | Rabi-ul-Awwal 9, 1424 |
World commodity report
Platinum prices have been hit by the effect of the Sars virus on world demand. On May 1, platinum slipped by $6 to $603/$608 an ounce on fears of weaker jewellery demand in China because of the impact of the Sars virus on consumer spending.
Platinum prices fell as Chinese jewellery retailers suffered from the impact of the deadly Sars virus. The spread of Sars has kept shoppers away during the May-day holiday week, usually one of the busiest retail periods of the year. Almost empty shops in upmarket areas of Beijing and Shanghai have affected the sales of platinum, which has replaced gold as the fashionable metal of China’s nouveau riche.
The fall in Chinese platinum demand has had a big impact on the metal’s price. Prices have fallen more than $100 per troy ounce after reaching a 23-year peak in early February, and are trading at slightly more than $600 an ounce, the level at which it started the year.
China’s new wealth has turned it into the world’s largest jewellery consumer of platinum in a less than a decade. China accounts for 24 per cent of the platinum jewellery demand or almost 1.5 million ounces, having risen from nearly nothing in the mid-1990s.
Gold prices have risen to six week highs, pushed along by the weakness of the dollar, which plunged to its lowest level against the euro for four years during the first week of May. On May 2, gold stood at $340.50 per ounce on the London Bullion Market from $333.25 the previous week. Some analysts say the gold prices could even hit the $350 mark if the dollar continues to weaken.
Kevin Crisp, precious metals analyst at Dresdner Kleinwort Wasserstein, said the rise in the gold price was more a reflection of the dollar’s weakness than a gold price rally. “If you measure the gold price in other currencies such as the Australian dollar, the South African rand and the euro the chart doesn’t look too good,” said Mr. Crisp.
The dollar is under pressure, while the euro surged to four year peaks against the dollar, the yen and sterling on April 30, consolidating its gains after a regional US economic report and Federal Reserve Chairman Alan Greenspan’s testimony.
Cocoa situation is improving in major supplier the Ivory Coast, which has in the recent past been wrecked by violence. Prices fell to a five month low, with further falls forecast. The May cocoa contract on Liffe dropped to a session low of 1,193 pounds a ton in late trading, down more than 2 per cent on the day. The July contract fell 2.6 per cent to 1,200 pounds a ton. Jean-Michel Boehm, head of coffee and cocoa trading at ABN Amro Futures, said cocoa prices fell due to the better than expected production from Ivory Coast, Ghana and Nigeria for the key October to April season.
“The market was looking for a 150,000 ton deficit; instead we have a surplus of between 20,000 and 30,000 tons,” said Mr. Boehm. He said the civil war in Ivory Coast, the world’s largest cocoa producer, had little impact on output, with the country producing a surplus of about 60,000 tons.
Meanwhile coffee prices, particularly in New York, on the back of a strengthening of the Brazilian currency and because of an expected fall in the country’s coffee harvest. Also, the beginning of winter in the southern hemisphere was pushing prices up.
According to forecasts by the US Energy Department, global demand for crude is expected to rise by 50 per cent, to 119 million barrels a day over the next two decades. Oil consumption would grow 1.8 per cent a year from the current 78.6 million barrels per day to 2025.
“Over the past several decades, oil has been the world’s foremost source of primary energy consumption, and it is expected to remain in the position,” the federal Energy Information Administration (EIA) said in its forecast.
Opec producers are expected to be the major source of the additional oil that will be needed, with the group’s output more than doubling from the current 27 million barrels per day to almost 56 million barrels per day by 2025.
However, oil production will also increase from non-Opec suppliers located in the Caspian Sea region, Latin America and west Africa, according to the EIA.
Oil’s share of world energy use will only drop slightly from
the current 39 per cent to 38 per cent by 2025, although many countries will switch from oil to natural gas and other fuels to run their electric generating plants. The jump in oil demand will be due to the strong growth in transportation sector - which accounts for the majority of crude use.
While industrialized countries continue to consume more of the world’s petroleum products than developing nations, the gap is projected to narrow during the forecast period. Developing countries use about 64 per cent as much oil as the industrialized nations, and by 2025 their consumption will increase so that it will be 86 per cent, EIA said.
Cotton prices slid on a wave of speculative selling and mounting fears about the effect of the Sars virus on China, a major world market for cotton. “Cotton futures have been thrashed by multiple waves of speculative selling sending the market to lows not seen since early February,” said Refco’s Prendergast. “There remains some concern in the market about the impact of Sars epidemic especially since the bulk of Sars is in China, a major consumer of cotton.”
Cotton sales in the week to April 24 had slumped 50 per cent from the week before, according to US Department of Agriculture figures. In New York, the July outlook slipped to 55.98 cents a pound from 57.86 the previous week. The Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, fell to 58.90 cents from 60.60 cents the week before.
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