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Finmin: Indonesia will absorb the shock of oil price increases using its state budget
Indonesia's Finance Minister?said? on Monday that the country will absorb the shock of a rise in oil prices by increasing the allocation to fuel subsidies and using the state budget. Indonesia has budgeted 381.3 billion rupiah (22.50billion dollars) for energy subsides and to compensate Pertamina, the state energy company and PLN, the utility company for their efforts to maintain some fuel and electricity prices at an affordable level. The budget is based on assumptions that Indonesian crude oil prices will average $70 per barrel in 2026 and the average rupiah rate of exchange for dollars will be 16,500. Oil prices rose to more than $100 per barrel on Monday, amid fears that the Middle East conflict would cause a prolonged supply shock. Investors rushed to "safe haven" assets, causing the rupiah to hit a new record low on Monday of 16,990 per dollar. Purbaya Yudhi Sadewa, finance minister, told reporters that "even if oil prices increase globally, we will absorb the shock" with our budget and control the impact to the maximum extent possible. He said that the amount of money allocated to subsidy will increase. However, the size of the increase will depend on the length of time oil prices remain high. The government will evaluate the situation in the next month and formulate a more specific policy response. He said that after a month we could better predict the direction of oil prices and decide on an appropriate policy. We're not smart enough. "Any adjustment we make will not disrupt the economic growth." According to state news agency Antara, Energy Minister Bahlil Lahadalia, Indonesia has a sufficient fuel supply and no plans are in place to increase the subsidised 'fuel prices until Eid al-Fitr which is at the end next week. $1 = 16,950 rupiah (Reporting and editing by Gayatri Suryo, Ananda Teresia)
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Iron ore continues to rise on the back of surging energy and rising freight costs
Iron ore futures were trading at a'month-high price on Monday. Dalian iron ore was up for the sixth straight session, largely due to the surge in 'energy prices and freight prices resulting from the Iran war. The most traded contract for?May?iron ore on China's Dalian Commodity Exchange was 2.28% higher, at 784.5 Yuan ($113.44). As of 0705 GMT, the benchmark April iron ore traded on Singapore Exchange was $103.15 per ton, up 1.54%. The oil prices rose by more than 25% Monday, as the U.S. and Israel's expanding war against Iran caused some Middle Eastern oil producers cut their supplies. The price increase was also influenced by fears of a prolonged disruption of shipping through the Strait of Hormuz. Atilla Widnell is the managing director of Navigate Commodities. She said that rising?energy prices will increase costs for bunker fuel, war risk premium and insurance. He added that the risks of central banks increasing interest rates to curb inflation risk are more likely in the medium and long term, which will dampen the outlook for steel and iron ore. China exports steel to the Gulf via the Strait of Hormuz, which is now its second largest market. It accounted for 16% of China's exports in 2013, as other countries erected trade barriers. Iran is the tenth largest producer of steel in the world. Iran's steel production would also be affected by a blockage, since it imports coal and exports its products. Steelhome data showed that iron ore inventories at major Chinese port cities increased by 0.67% in the week ending March 6. Steelhome data showed that spot prices for seaborne iron ore rose by 1.51% to $100.6 per ton on March 6. Coking coal and coke, which are used to make steel, have both increased in price by 5.51% & 3.82% respectively. The Shanghai Futures Exchange steel benchmarks mostly rose. Rebar rose 1.3%, hot-rolled coil grew 1.58% and wire rod increased 1.44%. While stainless steel fell 0.42%. $1 = 6.9155 Yuan (Reporting and editing by Janane Venkatraman; Ruth Chai)
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Fill up your car now, MORNING BID EUROPE
Wayne Cole gives us a look at what the future holds for European and global markets. Okay, this is shaping up to be a real global energy shock like the one of the 1970s. It is unique, however, in that it was a choice made by one individual. Brent surpassed $100 at the opening and has never looked back, reaching $119.50 as of yet. Brent crude is up by 25% today, which would make it the largest daily gain on record, if the rise holds. Its gains since President Trump's attack on Iran are now at a staggering 60%. These are numbers usually associated with a global recession. Analysts agree that the world is no longer as oil-intensive, and other sources of crude are available, but it's not enough to sustain a long conflict. It does seem to be long. Trump's "unconditional" surrender and Iran's selection of the son?of the previous hard-line Supreme Leader as the new Hard-line Supreme Leader would appear to make it difficult for either side back down. Marine Traffic, the shipping tracker, shows that tankers do not cross the Strait of Hormuz. In fact, given the way Iran hurls ordinance around, they might not, even if affordable and available war insurance were offered. Some Gulf states have run out of storage space and are scaling back production. Fuel prices are rising too quickly. The Strait of Gibraltar is the route through which half of Europe's fuel for jet engines travels. Prices have reached record levels, equivalent to $190 per barrel. You might have missed it in the general chaos, but airline stocks were hammered across Asia on Monday. The Nikkei has fallen around 7%. South Korea is down 8%, and Taiwan is down 5%. European share futures have fallen anywhere from 1% to 3 %, while Wall Street futures are down around 2%. Investors are hedging the risks of inflation and central banks easing their policies even if economic activity is slow. Prices for jet fuel, fertiliser, and liquefied natural gas are set to rise, making it more expensive to heat your home, go on holiday, or buy food. The real pain for U.S. customers is petrol. It's not a gas, it's a fluid. If you wait until the price of petrol rises by 10%, 20%, or even more, it could be enough to bring an end to a war. Market developments on Monday that may have a significant impact * ECB Board member Piero Cilpollone with Euro zone Finance Ministers at Eurogroup Meeting in Brussels * Sentix investor confidence, German industrial output
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The government's response to the oil price spike and the Middle East conflict escalating
The oil prices are soaring, while the share market is tumbling on the fear that the escalating U.S./Israeli war against Iran will cut energy'supplies and hamstring industry?all over the world. The following?are?actions?that governments are taking, or plan to take?to reduce the impact of war on their economies. SOUTH KOREAN PLANS FUEL CAPITAL South Korean President Lee Jae Myung announced?on?Monday that the authorities will cap domestic fuel prices?for?the first?time in almost 30 years. He said that the country would also "look for energy sources beyond those shipped through the Strait of Hormuz" and a 100 trillion won (67 billion dollars) programme to stabilize markets should be expanded if necessary. JAPAN INSTRUCTS NATIONAL OIL RESOURCE SITE TO PREPARATE FOR RELEASE According to Akira Nagatsuma of the Centrist Reform Alliance, an opposition party member, Japan instructed a storage facility for national oil reserves to prepare for possible crude releases. Nagatsuma stated that details such as the timing of the release are still unclear. VIETNAM WILL REMOVE 'FUEL IMPORT TRADING TARIFFS' The government of Vietnam has announced that it will remove the import tariffs for fuel to ensure supply amid the?disruptions. BANGLADESH WILL CLOSE 'ALL UNIVERSITIES' Bangladesh will close 'all universities, starting Monday. This is part of an emergency measure to conserve fuel and electricity. (Compiled by Edwina gibbs, edited by Lincoln Feast.)
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LME Aluminium reaches nearly 4-year high amid supply fears
The price of aluminium in 'London has reached its highest level for nearly four years, due to the conflict in the Middle East, which is escalating. This increased concerns about a possible shortage in global supplies. The benchmark?three-month aluminum on the London Metal Exchange reached its highest level since March 31, 2020, earlier in the session, when it hit $3,544 a metric ton. By 0305 GMT, it was up 1.77% to $3,507 per metric ton. The Shanghai Futures Exchange's most traded aluminium contract rose by 3.29%, to?25.310 yuan per ton ($3,658.15), after reaching its highest level since January 30, at 25,860 Yuan. The U.S. and Israel war against Iran has caused shipping to be disrupted through the Strait of Hormuz. This is a vital waterway in the Gulf that accounts for about 9 percent of global aluminum production. Last week, the light-weight metal used in 'construction and packaging' posted its largest weekly gain since January 20, 2023, as concerns about supply grew after Qatari Qatalum started shutting down production, and Aluminium Bahrain declared force majore on shipment. "An extended disruption in the Strait will simultaneously choke off alumina exports from Middle Eastern smelters and alumina imports." This would result in a significant tightening of global supply," EwaManthey, commodities analyst at ING wrote in a report. Manthey said that the escalation in the Middle East could push aluminum prices above $4000 per ton. The stronger dollar has largely tempered the price rise of oil by about 20%. The dollar's strength makes commodities that are denominated in other currencies less affordable to investors. Copper, nickel, lead, and tin all fell in price, while zinc gained 0.49%. Nickel and lead reversed their earlier losses, to gain 0.43%?and 0.244% respectively. This was due to better inflation data in China. Zinc rose 0.52%. Due to the Lunar New Year, China's consumer inflation has accelerated to its highest level in over three years. Reporting by Amy Lv, Lewis Jackson and Eileen Soreng; editing by Eileen Soreng.
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Iron ore continues to rise on the back of surging energy and rising freight costs
Iron ore futures were trading at month-high prices Monday. Dalian iron ore rallied for the sixth consecutive session on the back of rising energy prices and freight prices amidst the Iran war. As of 0247 GMT, the?most-traded?May iron ore contract?on China’s Dalian Commodity Exchange?traded 3% higher to 790 yuan (114.19 USD) per metric ton. The benchmark iron ore for April on the Singapore Exchange rose by 2.13% to $103.75 per ton. The price of oil jumped by about 20% Monday, as the U.S. and Israel war with Iran grew. This led to some Middle Eastern oil producers cutting back on their supplies. The price increase was also influenced by fears of a prolonged disruption to shipping through the Strait of Hormuz. Atilla Widnell, managing director of Navigate Commodities, says that rising energy costs will increase costs for bunker fuel, war risk premium and insurance. He added that in the medium to long term, central banks are more likely to raise interest rates again, in order curb inflation risks, which would dampen the outlook for steel and iron ore. China exports steel to the Gulf via the Strait of Hormuz, which is now its second-largest market. It accounted for 16% of China's exports in 2013, as other countries erected trade barriers. Iran is the tenth largest producer of steel in the world. Iran's production would also be affected if the waterway was blocked, since it imports coal and exports steel products. Steelhome data showed that iron ore inventories at major Chinese ports increased by 0.67% in the week ending March 6. Steelhome data showed that spot prices for seaborne iron ore had risen by 1.51% to $100.6 per ton on March 6. Coking coal and coke?up 7.99% each and 7.19% respectively. The Shanghai Futures Exchange steel benchmarks have mostly been in the ascendant. Rebar rose 1.88%; hot-rolled coils rose 1.99%; and stainless steel increased 1.92%. Meanwhile, wire rod drifted 0.11% lower. Ruth Chai reports. $1 = 6.9182 Yuan
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South Korea will cap fuel prices to protect the economy from an energy shock
South Korean President Lee Jae Myung announced on Monday that the government would cap domestic gasoline prices for the first time in nearly 30 years to contain a price spike after the Middle East conflict sent global crude oil prices sharply higher. At an emergency meeting to discuss the Middle East Crisis, Lee stated that the government would "boldly and swiftly" implement a maximum pricing system on petroleum products which have seen recent price increases. In his opening remarks, Lee stated that the current crisis is "a significant burden" on our economy which is heavily dependent on global trade as well as?energy imported from the Middle East. He also added that South Korea would look at other sources of energy than those shipped through the Strait of Hormuz. Lee called for the expansion of a market stabilisation program worth 100 trillion won (66.94 billion dollars) if necessary, and urged the government and central bank to take additional measures in response to the volatility on the financial and foreign exchange markets. South Korean shares fell 8% on Monday, activating circuit breakers for the second time in this month due to the escalating conflict in the Middle East. The won also dropped by more than 1% and traded near the psychological barrier of $1500 per dollar. The won cut losses after?Lee?s comments to trade at 1,493.5 won/dollar, against a session's low of 1,499.2.
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Aluminium prices rise on supply fears; dollar firm puts pressure on other base metals
The escalating conflict?in the Middle East increased concerns about tighter supplies globally, which offset pressure from a stronger dollar. As of 0202 GMT the most traded aluminium contract on?the Shanghai Futures Exchange increased 3.41%, to 25,340 Yuan ($3,659.63), per metric ton. It had earlier reached its highest level since January 30, at 25,860 Yuan. The benchmark three-month aluminum contract on the London Metal Exchange gained 1.12%, to $3484.5 per tonne. The contract reached its highest level since March 31, '2022, when it was $3,544 per ton. The U.S. and Israel war against Iran has caused shipping to be disrupted through the Strait?of Hormuz. This is a vital waterway in the Gulf that accounts for 9% of the global aluminium?production. Last week, the light-weight material, which is used for construction and packaging purposes, recorded its biggest weekly gain since January 2023. This was due to supply concerns that were exacerbated when Qatari smelter Qatalum started shutting down production, and Aluminium Bahrain declared a force majeure on shipments. "An extended disruption in the Strait will simultaneously choke off alumina exports from Middle Eastern smelters and alumina imports." This would 'tighten the global supply significantly,' wrote EwaManthey, commodities analyst at ING. Manthey said that the Middle East escalated could push aluminium prices above $4000 per ton. The rise in oil prices by about 20% weighed on other base metals. The stronger the dollar, the less affordable commodities are for investors who use other currencies. SHFE copper fell by 1.78%. Nickel also declined by 1.72%. Lead was down 0.18%. Tin dropped 5.45%. Copper, nickel, and lead all fell in price. Tin also dropped 5.96%. The zinc contracts in Shanghai were similar to those in London. Reporting by Amy Lv, Lewis Jackson and Eileen Soreng; editing by Eileen Soreng.
Takaichi, the PM of Japan, says that Japan is considering measures to cushion its economy from the conflict with Iran
Sanae Takaichi, the Prime Minister of Japan, said that the country would 'consider steps to cushion economic damage caused by rising fuel costs resulting from the conflict in the Middle East. This includes reducing gasoline prices.
Takaichi, a member of the Japanese Parliament, said that many people were concerned about rising gasoline prices. The government has been evaluating what steps it can take to address this concern since last week.
She said that she was considering measures to prevent gasoline prices from increasing?to levels unacceptable for the public. Such measures could be funded through reserves.
Takaichi has ruled out a major overhaul of the draft budget for fiscal 2026, currently being debated by the Parliament.
The oil price surged by more than 25% on Monday, reaching its 'highest level' since mid-2022. Fears of shipping disruptions due to the expanding U.S.-Israeli conflict on Iran gripped the market.
If the spike in oil prices continues, it will be a heavy blow to Japan's economy, given that its economy is heavily reliant on fuel imported from abroad. (Reporting and editing by Tom Hogue, Thomas Derpinghaus, and Leika Kihara)
(source: Reuters)