Nasty Night for Commodities Markets – ShareCafe

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Commodity prices fell sharply on Wednesday, with oil, copper and iron ore falling amid renewed concerns about growth and especially the health of the Chinese economy.

Oil prices fell sharply to around $109 a barrel for West Texas Intermediate, the US marker, and just over $111 a barrel for the global benchmark, Brent.

The falls reflect growing fears among traders that supplies will rise too quickly if the United States and other economies slow as central banks try to control runaway inflation.

US Federal Reserve Chairman Jay Powell told the US Congress on Wednesday that the central bank was committed to reducing inflation and had the ability to do so.

“At the Fed, we understand the difficulties that high inflation causes. We are firmly committed to bringing inflation down, and we are moving quickly to do so,” the Fed Chairman told the US Senate Banking Committee. .

But he admitted that a recession was possible.

“It’s not at all the expected outcome, but it’s certainly a possibility, and frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want, that is- i.e. 2% inflation and a still strong labor market.”

And that hit commodities a bit harder than equities.

Wall Street slowed to a close that saw the Dow Jones fall 47.12 points, or 0.15%, to 30,483.13, slowing lower in the final hour of trading.

The S&P 500 fell 0.13% to 3,759.89 and the Nasdaq slipped 0.15% to 11,053.08.

But the most notable moves came from commodities.

Iron ore is at its lowest levels since early last December and, if the current weakness continues, will fall below US$100 a tonne sooner rather than later.

Concerns about weak demand and rising inventories in China (as evidenced by the 192 million tonnes of crude steel produced in April and May) are driving prices down.

The MB Fastmarkets price of 62% Fe fines imported into northern China fell nearly 6% to US$108.98 a tonne on Wednesday.

Markets are particularly concerned that demand growth expectations linked to China’s commitment to boost infrastructure investment will not materialize, especially with China’s zero covid policy still in effect,” said Vivek Dhar, analyst of the Commonwealth Bank of Australia.

Concerns remain about renewed restrictions that are dampening overall domestic demand, as China continues to detect new cases of coronavirus day by day.

Disruptions to construction activity caused by heavy rains in parts of China have also caused steel inventories to pile up, prompting steel mills to shut down blast furnaces to cut losses.

“Doubts about the future growth of steel demand in China meant that markets could no longer ignore the current oversupply market conditions in China’s steel sector,” Dhar said.

The price of iron ore futures on the Singapore Stock Exchange (SGX) fell more than US$6 to around US$108 a tonne (for 62% Fe fines) on Wednesday.

That saw shares of BHP and Rio fall 3.8% and 4% respectively in London on Wednesday.

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Copper prices fell to their lowest level since March 2021 on Wednesday as fears of a global economic slowdown rattled investor sentiment.

Even the start of a national strike by copper workers in Chile, the world’s largest producer, could not stop the slide.

Copper for July delivery fell 2.6% from Tuesday’s settlement, hitting a low of $3.88 a pound ($8,550 a tonne) on Wednesday morning in New York’s Comex market.

Base metals remain under pressure due to a difficult demand outlook linked to the covid-19 blockages in China and the tightening of monetary policy raising fears of a recession on the inflation-growth trade-off,” Standard Chartered wrote in a statement. note.

Chile’s state-owned copper producer Codelco, the world’s largest, was hit with a nationwide shutdown on Wednesday over the miner’s decision to permanently shut down an allegedly polluting smelter in the country’s central region.

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