Currency crisis threatens tropical commodities' prices<\/p>\n
LONDON (AFP): The currency turmoil sweeping through Southeast
\nAsia grabbed the attention of dealers on the global markets for
\ntropical commodities such as rubber, cocoa and sugar cane.<\/p>\n
This region of the world accounts for two-thirds of the
\nworld's total rubber output. Indonesia and Malaysia are among the
\nleading producers of cocoa beans and Thailand exports more sugar
\nthan Cuba.<\/p>\n
The devaluations of the Thai baht and the Philippine peso and
\nthe sharp falls of the Indonesian rupiah and the Malaysian
\nringgit led many dealers on the trading floors to scratch their
\nheads in perplexity.<\/p>\n
What will be the effect of the spectacular plunge of these
\ncurrencies? There is no clear answer yet. Some, recalling the
\nMexican crisis, believe the countries affected will massively
\nstep up their exports of raw materials.<\/p>\n
The devaluation of the Mexican peso in 1994 had a devastating
\neffect on economic growth and domestic consumption, and led the
\ncountry to multiply its exports, especially of sugar and coffee.<\/p>\n
Will the effect be the same in Southeast Asia? For the moment,
\nthe rubber market, which moves in rhythm with the latest twists
\nand turns in Singapore and Kuala Lumpur, has avoided any panic.<\/p>\n
In fact, tyre manufacturers seem to have decided to take
\nadvantage of the devaluation of the local currencies to stock up
\non rubber supplies at a bargain price, giving a boost to a
\ndepressed market.<\/p>\n
If, as some fear, the Asian storm spreads as far as Brazil,
\nthe consequences will definitely be harsher for the sugar and
\ncoffee markets, since the country is by far the top exporter of
\nthese two commodities.<\/p>\n
Already this week, the Sao Paulo stock market succumbed to a
\nbout of weakness, blamed by some on the departure of investors
\nalarmed that the Asian turbulence could spill over onto the
\nemerging Latin American markets.<\/p>\n
Gold: glittering. The price of the yellow metal recovered some
\nglitter after the previous week's selling frenzy that followed
\nthe announcement of the sale of two-thirds of the Australian
\ncentral bank's gold reserves.<\/p>\n
Gold prices on the London Bullion Market climbed eight dollars
\nto 323 dollars per ounce, lifted by speculative buying on the New
\nYork market and strong purchases by Asian investors attracted by
\nthe current low prices.<\/p>\n
The speculative U.S. investment funds which have played a
\nprominent part in the precious metal's decline in recent weeks
\ncould switch direction and start to buy again, which would push
\nprices much higher, GNI trading house said.<\/p>\n
Silver: scratched. Silver prices fell 10 cents to US$4.25 per
\nounce, weighed down by speculative selling which offset the
\neffect of gold's rebound.<\/p>\n
Copper: steady. Three-month copper prices settled at about
\n$2,280 per ton on the London Metal Exchange, after last week's
\nplunge.<\/p>\n
The market steadied despite a massive buildup in LME reserves,
\nwhich soared by 42,000 tons during the week to a total of 181,150
\ntons. Changes in the LME stock levels are taken as a sign of
\ndemand on the market.<\/p>\n
Some dealers have said that the latest buildup in market
\nreserves might have been caused by speculators switching reserves
\nbetween warehouses in the United States to the LME to take
\nadvantage of a price differential between the two markets.
\nTraders here said that physical supplies of copper were hard to
\ncome by on the LME.<\/p>\n
Aluminum: hard. Aluminum prices hovered around $1,580 per ton
\nthis week, but some dealers predicted that a continued fall in
\nmarket reserves and an upturn in demand unleashed by economic
\ngrowth in, for instance, the United States would lead prices
\nhigher in the future.<\/p>\n
Nickel: dull. Nickel prices remained largely unchanged at
\nabout 6,850 dollars per ton, in the absence of any market-moving
\nnews.<\/p>\n
Tin: tumble. The price of tin, which is widely used in
\nsoldering and the manufacture of cans, fell by $100 to $5,430 per
\nton.<\/p>\n
Oil: warming. Oil prices rose by 60 cents to $18.60 per barrel
\non the wings of speculative purchases, as dealers responded to
\nuncertainties surrounding the resumption of Iraqi oil exports.<\/p>\n
In June, Baghdad suspended shipments under the "oil-for-food"
\ndeal brokered with the United Nations, in protest at delays of
\nseveral months that have beset shipments of medicine and food aid
\nto the Iraqi people.<\/p>\n
However, the Center for Global Energy Studies (CGES) predicted
\nthat Iraqi exports might resume as early as July 24.<\/p>\n
CGES analysts forecast that the latest rise in crude prices
\nwould be short-lived, given the imminent return of Iraqi supplies
\nand the sale of strategic oil stocks by Germany. The latter has
\nsaid that it will start to sell 450,000-cubic-metre batches of
\noil on the open market from August.<\/p>\n
This will have a "negative" impact on prices, along with other
\nfactors, that will depress the crude oil market until mid-1998,
\nthe CGES predicted.<\/p>\n
Increased supplies would cause prices to slip to an average
\n$16.3 per barrel in the second quarter of 1998, the research
\ngroup said. The market could fall further if non-OPEC countries
\nincrease supply, analysts predicted.<\/p>\n
Rubber: bounceback. An upturn in demand from tyre
\nmanufacturers caused rubber prices to bounce back by 20 pounds to
\n610 pounds per ton this week.<\/p>\n
Factories have taken advantage of the current low prices to
\nrebuild stock levels, according to the Lewis and Peat trading
\nhouse.<\/p>\n
Prices have fallen below minimum threshold levels at which
\npoint the International Natural Rubber Organization is authorized
\nto buy up stocks in a bid to inflate market prices.<\/p>\n
However, Lewis and Peat said that the organization has so far
\nstayed away from the market.
\nDevaluation of the Thai baht, the Malaysian ringgit and the
\nIndonesian rupiah has had little impact on the rubber market thus
\nfar.<\/p>\n
But Western importers have been able to purchase rubber at
\nknock-down prices, which has served to bolster demand.<\/p>\n
Cocoa: crushed. The price of the tropical bean fell this week,
\nas the pound's sharp rise against European currencies made London
\ncocoa prices expensive for Continental buyers, and encouraged
\nproducers to sell.<\/p>\n
The price of cocoa dropped 45 pounds to 1,025 per ton.<\/p>\n
Some market players were worried at the dry weather conditions
\nin west Africa over the past few days, which could threaten the
\nregion's crops. But GNI trading house underlined that humidity
\nlevels in Ivory Coast, by far the world's biggest cocoa producer,
\nremain high after June's heavy rainfall.<\/p>\n
Coffee: bitter. Coffee prices in London dived 10 percent
\nduring a single day on a wave of speculative selling. Over the
\nweek, prices fell $165 to $1,585 per ton.<\/p>\n
Prices were dragged down by a mixture of factors, including
\nburgeoning arabica stocks in New York, and the abundant supplies
\nof robusta -- a low-grade bean from Asia and Africa which is
\ntraded in London.<\/p>\n
According to GNI, the end of the winter season in Brazil,
\nwhich has lifted the threat of crop-ravaging frosts, also weighed
\non prices.<\/p>\n
The London-based trading house said that the financial turmoil
\nin Southeast Asia had convinced some traders to sell before
\nIndonesia was swept away in the currency chaos afflicting the
\nregion.<\/p>\n
After the devaluation of the Thai and Philippine currencies,
\nthe Indonesian rupiah has also succumbed to a bout of speculative
\nselling, which might prompt a flood of coffee exports by the
\ncountry, the world's top robusta producer.<\/p>\n
However, for the moment, a British trader commented, the
\ncountry is more preoccupied by adverse weather conditions which
\nhave severely affected the size of the robusta crop, slicing it
\nby as much as 30 percent.<\/p>\n
But the Ivory Coast -- another leading robusta producer -- is
\nexpected to produce a bumper 1997-98 crop, which would compensate
\nfor the shortfall from Indonesia.<\/p>\n
Sugar: hot. Sugar prices rose on the wings of rumored buying
\nfrom Russia and severe flood damage suffered by Polish sugarbeet
\nfields.<\/p>\n
White sugar prices rose by seven dollars to $322 per ton,
\nbefore dropping back to $317 per ton on the London market.<\/p>\n
The GNI trading house predicted that devaluation of the Thai
\nand Philippine currencies might unleash a rise in exports from
\nthe south east Asian countries.<\/p>\n
Dealers paid close attention to monetary wobbles in Brazil.<\/p>\n
The Sao Paolo stock exchange slumped ahead of a feared
\ndevaluation of the Brazilian currency, the real.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/currency-crisis-threatens-tropical-commodities-prices-1447893297",
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