Commodities hit as recession fears worsen

Tag : Industry raw materials

Commodity prices took a big hit yesterday from the fallout of theworsening US financial crisis, which deepened internationaltraders' worries about a global economic recession that couldseriously shrink demand for raw materials.
On the Shanghai Futures Exchange yesterday, the prices of five outof six commodity futures contracts fell sharply, in tandem with theinternational market trend.
Fuel oil and copper futures led yesterday's price drop in Shanghai.
Eleven out of 12 fuel oil contracts for delivery in differentmonths dropped to the daily allowable limits, with the mostactively traded contract for December delivery closing at 4,057yuan per ton, down 5.7 percent from the previous trading day.
Meanwhile, 10 out of 12 copper futures contracts dropped to thedaily allowable limits, with the most actively traded contract forDecember delivery falling 4.5 percent to 55,050 yuan per ton.
In contrast, gold futures rose yesterday. The most actively tradedgold futures for delivery in December rose 1.7 percent to close at172.9 yuan per gram.
Traders and analysts said international investment funds wereseeking refuge in the precious metal after the sudden commoditiesplunge led by crude oil prices, which dropped below the$100-barrier on Monday.
"The bearish market mood made investors particularly sensitive tonegative aspects of the news. They chose to ignore positivefactors, such as Monday's credit relaxation by the central bank tostimulate economic growth," Jing Chuan, a non-ferrous metalsspecialist at Great Wall Futures Co in Shanghai, said.
Traders and analysts said the sharp price drop in a wide range ofcommodities on both the domestic and international markets wastriggered by troubling reports surrounding Lehman Brothers and thesale of Merrill Lynch to Bank of America. These reports were widelyseen as a clear indication that the US subprime mortgage crisis isin the process of spreading around the world.
Deepening worries about the global economic slowdown haveheightened investor concerns about a sharp fall in consumption.
The latest China Customs figures show that the nation's totalimports of copper concentrates in the first eight months dropped by16.1 percent year-on-year to 1.02 million tons.
Industry experts estimate Chinese copper producers will operate atless than 50 percent capacity in the second half, as many strugglewith inadequate operating capital and fewer orders from theinternational market, amid a further downshift in global demand.
The latest monthly oil market report released by the InternationalEnergy Agency forecast lower global oil demand for both 2008 and2009. The report put global demand for oil at an average of 86.8million barrels per day in 2008, 100,000 barrels lower than theprevious estimate, and 87.6 million barrels per day in 2009,140,000 barrels lower than the previous projection.