Asian commodity traders grit teeth
Asian commodity traders grit teeth
SYDNEY (Reuters): Asian commodity dealers are preparing for a
slowing in trade as a new round of economic turmoil squeezes
Japan demand, sidelines Indonesian players and makes it even
harder to assess future market trends.
Only Australian exporters are cheering as the Australian
dollar is stalled below 50 U.S. cents, boosting local currency
earnings from exports. But even they see darkening clouds.
Volatile currencies, tumbling share values and a bout of
concern over systemic risk in Japan -- plus the threat of a major
U.S. economic slide -- have cast a blanket of gloom over Asia's
commodities trade.
Leading commodities importer Japan, top exporter Australia,
and emerging market countries Indonesia and Thailand, are all
affected.
In industrial Japan, any export gains offered by 20-month lows
for the yen against the U.S. dollar are overpowered by flagging
American demand.
"As 20-30 percent of Asian exports are directed to the U.S.,
the slowdown in the U.S. economy has a major negative impact on
industrial production in Asia, depressing demand for
commodities," said Akio Shibata, associate senior officer,
industrial research section, at trade house Marubeni Corp.
Demand for oil, base metals and rubber in Japan and elsewhere
in Asia are all being hurt by the U.S. slowdown, he said.
In developing Indonesia, gyrations of the local currency the
rupiah have driven soymeal, wheat and sugar buyers from the
market.
"Some deals under negotiation have not materialized because
the rupiah is really scary. Traders and feedmillers are staying
away from the market...They won't make any purchases right now,"
a grain trader at an international house said.
For big sugar, rubber and rice exporter Thailand, a weakening
but volatile currency - the baht - added to the difficulties of
selling into markets suffering from scant demand and low prices.
"Nobody can speculate about what prices we would sell for
shipments a few months ahead - it is just a gamble," one rice
trader said.
A weakening baht was likely to drive rubber exporters to boost
sales, Choosit Opaswongse, president of the Thai Rubber
Exporters' Association said.
But even those who see benefits from falling currencies fear
the good times may not last.
"Rather than a risk, it (the Australian dollar collapse) is
probably a benefit," said Lloyd George, public affairs manager in
Australia for U.S. grains giant Cargill Inc.
"(But) at some stage or another that logic starts to fail, I'm
not sure whether its at 45 cents or 35 cents, but a drop in
currency at this rate isn't good." George was speaking as the
Australian dollar remained below 50 U.S. cents after sinking to a
new low of 49.23 U.S. cents.
Commodity traders in Asia and Australia see medium-term risks
for all commodity prices from the current turmoil.
Currency gyrations and share market slides could be managed by
the trade, but the factor causing most worry was falling U.S.
demand and its effect on Japanese, Korean and Taiwan output and
commodities buying, an Australian metals trader with a major
Japanese house said.
There is no sign of a flight to commodities as a safe haven in
either Asia or Australia, nor do deal-makers see trade grinding
to a halt because of financing pressure from banks.
But deals were taking longer to put together with some major
Asian markets very cautious, the trader said.
Metals were insulated from currency volatility by the normal
practice of trading in U.S. dollars. But this would not save them
from falling demand in Japan, Korea and Taiwan, nor from
uncertainty in the U.S., the trader said.
"Producers from Australia are still quite bullish. But with
the Australian dollar so low, nerves are on edge with some mining
houses here a very cheap buy."
Cargill's George takes the pragmatic view that life goes on
and demand is the key. "It's still going to be the normal
supply/demand issues that will drive commodity prices. And
they're the same issues we've been dealing with over the last 12-
18 months," he said.