The industrial metals sector jumped to a three-month high on the prospect of rapidly declining inventories, supply disruptions and the mentioned prospect for Chinese stimulus raising the potential for a renewed upside push. Nickel led from the front after reaching a decade high on worries Indonesia, the world’s biggest shipper, will introduce export taxes on raw nickel exports to focus on expanding more profitable refining activities at home. The move by Indonesia, together with solid demand towards the production of electrical-vehicles batteries, may trigger a large supply deficit in 2022.
Following months of sideways trading, copper showed signs of breaking higher with the move above the $4.47-50 area of resistance-turned-support being driven by the prospect for rising demand towards electrification, tight supplies and signs China is stepping up its policy response to support a slowing economy, thereby off-setting recent macro risks, especially those stemming from China’s beleaguered property sector.
The agriculture sector has seen a mixed start to the year with tight supply markets such as coffee, cotton and soybeans trading higher while weakness in wheat has continued this month. Gathering pace after the USDA raised its forecast for world inventories, and after the International Grains Council forecast record world production in the upcoming 2022-23 season. Adverse weather developments in Brazil continues to negatively impact supplies of coffee and most recently also soybeans, although some beneficial rains are now expected in the growing areas
Another roller-coaster week unfolded in global gas markets. The US natural gas first month futures contract jumped 14% on Wednesday to a six-week high, in response to frigid freezing weather before collapsing by 12% the following day on the prospect for weather turning milder and after the weekly stock draw was in line with expectations. Adding to this was the recent surge in LNG shipments to Europe and the once-insulated US market has become much more exposed to international developments, all of which supported the biggest weekly rise since November.
Meanwhile in Europe, the energy crisis rumbles on and despite an armada of LNG ships delivering increased supplies, prices remain at punitively and, for some, unaffordable prices. The mentioned arrival of LNG shipments and so far mild January weather has reduced the risk of blackouts and gas storage running empty, but uncertainties regarding the Nord Stream 2 pipeline and Russia’s intentions in Ukraine continue to trigger sudden spikes and high volatility. On Thursday, the Dutch TTF benchmark gas future briefly traded below €70/MWh in response to the mentioned mild weather and strong overseas LNG supplies, before suffering a sharp reversal higher back above €90/MWh after Russia-US talks failed to ease fears of military action in Ukraine, a crossing point for around one-third of Russian gas to Europe.