Commodity Prices Tumble Again as Markets Undergo Worst Week Since 2008


Wednesday, March 04, 2020   / 05:57PM  /  By William May, Senior Economist, IHS Markit  /  Header Image Credit:  Caixin Global 


..... Intensifying Fears of The Global Impact Of COVID-19 Sparked a Major Sell-Off In Markets, Which Hit Commodity Prices Once Again Last Week....


COVID-19 panic spread across global markets last week causing an 11% week-on-week drop in the S&P 500, the worst week for equities since 2008. This sentiment spilled over into commodities prices, which fell 1.8% as measured by the IHS Markit Material Price Index (MPI).


 Proshare Nigeria Pvt. Ltd.

Energy prices led last week's MPI drop, with the energy sub-index falling 5.3%. Oil fell 8.0%, with Brent crude retreating to $53.2 /bbl, its lowest level since April 2019.


The drop has prompted the Vienna Alliance of oil producers to call a special meeting this week to discuss cutting production even further. Gas prices tumbled 4.7%, with large falls in the US and Europe. Asian gas prices, however, jumped 13.0%, their first weekly rise in nine weeks as bargain hunters bought cargoes at record low prices. Lumber prices declined 7.4% from an 18-month high as virus concerns hit expectations for both spring US home sales and construction.


Freight rates fell 3.4%, continuing a 10-week rout that has seen falling freight volumes outstrip attempts by shippers to reduce capacity. The decline in freight rates may be coming to an end, as bulk freight volumes from Australia and Brazil have been moving higher.


The MPI's chemical index fell 2.7%, though Asian ethylene and polypropylene showed some strength, posting gains of 1.4% and 4.0% respectively. Like the rise in Asian natural gas prices, these increases appear to have been tied to opportunistic purchases of cheap cargoes. Non-ferrous prices, already hit hard by a large early sell-off, fell 1.9%, with all six big industrial metals declining.


In a sign of supply chain disruptions in China, base metal inventory on the Shanghai Futures Exchange has more than doubled since December, with the China Nonferrous Metal Industry Association calling on the government to stockpile metal to offset the lack of consumption.


Proshare Nigeria Pvt. Ltd.


The only good news from markets last week was the late Friday rally, which saw US equities cut some of the day's losses in late trading, while other safe haven plays such as gold pulled back slightly.


Whether these were signs of market capitulation with a bottom beginning to form, or simply a pause on an even deeper correction - the proverbial dead cat bounce - remains to be seen. However, we believe the disruptions to production and weakness in consumption is likely to be concentrated in the first and second quarter, which would seem to be what commodity markets have now priced in.


A further decline in prices toward the levels seen in late 2015 would be a sign that markets are beginning to perceive an even deeper and more prolonged slowdown in global growth.


Related Links #Coronavirus

1.           World Bank Group Announces Up to $12bn Immediate Support for COVID-19 Country Response

2.          China's Official Manufacturing Index Crashed from 50.0 to a Record Low of 35.7 In February 2020

3.          Coronanomics: Understanding The Darker Side of A Virus's Economic Downside

4.          Coronavirus: Establishing The Nexus Between A Bug and Global Equity Markets

5.          Coronavirus: Africa Braces for the Economic Impact of China Slump

6.          COVID-19 Refinancing Risk Elevated for 6% of Rated China Corps

7.          Global Ports Vulnerable to Coronavirus-Related Volume Declines

8.          Coronavirus May Add to Liquidity Strain for Some APAC Corporates

9.          Coronavirus Set to Dampen China's Economic Growth 


 Proshare Nigeria Pvt. Ltd. 


Related News

1.          Ginger Prices Surge Higher - AFEX Commodities Weekly Report 210220

2.         Cocoa Prices Gained; Driven By Shortage in Supply

3.         Grain Prices Are Expected to Remain Low as Chinese Demand Slow

4.         Open Market Prices Take a bullish Turn - AFEX Commodities Weekly Report 210220

5.         Brent Likely to Trade Around $59-$61pb in the Coming Days

6.         Falling Demand for Wheat and Corn to Taper Prices in the Coming Days

7.         Commodities Markets Take Bearish Turn As Traders Contemplate Coronavirus

8.         Export Crops Maintaining Gains in Price - AFEX Commodities Weekly Report 140220

9.         Cocoa Prices Up As Adverse Weather Conditions Limit Global Output

10.      Export Crops face Bullish Trend- AFEX Commodities Weekly Report 060220

11.       Declining Demand for Grains to Depress Prices in the Near Term

12.      Global Commodity Markets Calm After a Very Choppy Day

13.      Commodities Prices Maintain Steady Sail - AFEX Commodities Weekly Report 230120

14.      Increase In Demand For Cocoa In Southeast Asia To Drive Prices Higher

15.      Diversification From Oil Will Be Enhanced By Investment Flows

16.      All Commodity Group Index Grew By 2.48% in Q3 2019


 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News