The supply worries come at a time of a strong rebound in demand from the automotive sector and heavy inflows of palladium into two South African ETFs. Palladium and platinum are key components in the manufacture of auto catalysts.
Spot palladium hit $886.00 an ounce in the pm fix on the London Platinum and Palladium market on July 17, its highest since late February 2001. In late January that year, the spot metal had peaked at $1,090 an ounce. On Nymex, palladium futures continues to trade at 13-year highs with the September contract settling at $876.75 an ounce on July 16, up $2 on last week’s close at $874.75.
Platinum is holding up just off 10-month highs, with the spot precious metal at $1,497 an ounce in the pm fix in London on July 17. Nymex platinum futures for October finished at $1,485.70 an ounce, having closed at $1,516 a week ago.
Meanwhile, after its recent rally culminating in close to a four-month high last week, gold fell back below the key $1,300 an ounce threshold on July 15. This marked the precious metal’s first drop below this key psychological level for the first time in near to four weeks. A diminishing demand for safe-haven assets and comments by U.S. Federal Reserve chair Janet Yellen this week that were widely interpreted as downplaying inflationary risks triggered a sell-off in the precious metal.
Gold futures for August delivery on the Comex division of Nymex dipped to an intra-session low of $1,292.60 an ounce on July 15 before settling at $1,296.90. August gold finished marginally higher at $1,299.60 the following day.
However, gold edged back above $1,300 on July 17 as investors took advantage of the lower prices to buy the precious metal and the fresh round of U.S. economic sanctions on Russia boosted interest.
Raw sugar, arabica slip to 5-month lows
Among the soft commodities, U.S. raw sugar futures slipped to their lowest level in five months on New York’s ICE Futures U.S. exchange on July 17, touching 16.88 cents a pound. ICE October raw sugar had finished at 17.07 cents the previous day. Raw sugar has come under further pressure as stocks continue to build in Brazil, the top producer and exporter, amid favorable weather which is helping the pace of the harvest.
Rabobank is among the latest market commentators forecasting a global sugar deficit next sugar season, which begins on Oct. 1, after four-years of supply surplus. While conceding continued uncertainty over the size of top producer and exporter Brazil’s 2014-2015 output, the bank, nevertheless, expects global production to fall slightly for the second year in a row.
In its Sugar Quarterly Q2 2014 report, released at the end of last week, Rabobank said preliminary global production estimates for the 2014-2015 (October/September) global balance suggest a projected deficit of 0.9 million tonnes raw value. In addition to lower output in Brazil’s key Center-South region which has been hit by drought, the bank forecast lower production in the second-biggest producing country, India, as well as in Thailand and China.
However, the bank warned that its preliminary balance for 2014-2015 “suggests only limited additional support for prices from fundamentals as we move from the current international crop year to a new one”.
Rabobank analyst Andy Duff said that despite a return to a global deficit for the first time in four years, the projected deficit is not enough to “materially reduce” the level of year-end global stocks. Nor does it look sufficient “to significantly impact” the global stocks/consumption ratio, he said.
White, or refined, sugar for October delivery on NYSE Liffe was also lower, finishing at $452.75 a tonne at midweek.
Arabica coffee futures touched a five-month low on July 15 as concerns ebbed further over the extent of damage to Brazil’s crop following prolonged drought earlier this year. Some 50 percent of the 2014-2015 (April 1-March 31) harvest is reported to have been brought in and is generating selling pressure.
Benchmark September arabica coffee on ICE Futures U.S. on July 15 touched $1.5925 a pound, the lowest since February 19, before settling the day at $1.6195. By close at midweek, September arabica had clawed back to $1.6255 a pound. Arabica futures prices are now around 25 percent below the peak of $2.19 a pound reached in April at the height of market concern on the extent of the drought damage to Brazil’s arabica crop.
September robusta coffee on London’s NYSE Liffe exchange was also lower, settling at $2,010 at midweek. September robusta had touched a seven-week high of $2,085 a tonne on July 3, supported by tightening certified stocks.
North American cocoa grindings rose 4.52 percent in the second quarter of 2014 to 131,737 tonnes from the same quarter a year earlier, data from the National Confectioners Association showed on July 17. The cocoa grind, which is taken as a measure of demand for the key-chocolate-making ingredient, came in above market expectations, and was considerably stronger than Europe’s second quarter 0.7 percent decline reported last week.
Ahead of the North American data being released, ICE September cocoa had settled at $3,072.50 a tonne at midweek, while Liffe December cocoa finished £1,889 pounds a tonne.
While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.
