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Aluminium rallies bring Middle East turmoil to the forefront
After a brief selloff caused by comments made by U.S. President Donald Trump about the Iran war, the focus shifted to 'pricing global supply losses due to the Middle East conflict. At 1018 GMT, benchmark aluminium at the London Metal Exchange had risen 1% to $3,439 per metric tonne. It reached $3,544 per ton earlier this week, its highest level since April 2022. Around seven?million tons of aluminum smelting is located in the Middle East, which represents 9% of global capacity. Trump predicted on Monday that the conflict would be over well before the four-week timeline he had set out. The war has frozen global supplies of aluminum used for transport, construction, and packaging. Last week, Aluminum Bahrain, or 'Alba', which operates one of the largest smelters in the world, declared force majeure, warning customers of delays. Meanwhile, Qatari smelter Qatalum began to shut down. Aluminium stocks in LME approved warehouses are a source of concern about supply. . On Tuesday, the number of cancelled warrants and metals destined for delivery was 177,325, which is 40%, up from 9% the previous day, before the Middle East turmoil began. Concerns about tight?aluminum?supplies has created a premium for the cash contract?over the three month?forward?on the LME. The soaring dollar and oil prices are causing concern about the global economy. The dollar's value is inflated by a rising U.S. currency, making metals priced in dollars more expensive to holders of other currencies. This could reduce demand. The inflation data due on Wednesday could provide clues about U.S.?monetary policy, and the dollar?s prospects. Copper fell 1.1% to $12,997 per ton. Zinc was down 0.6% at $3,326, while lead dropped 0.2% to 1,940. Tin declined 1.3% to $48,800, and nickel was down 0.4% at $17,425.
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Russian oil prices used to tax state revenues exceed budget targets
Calculations showed that the price of Russian crude oil, used to tax the country, has exceeded the budget target?for the first time since Jan 2025?because?of?the rise in global prices due to the Iran War. Since the beginning of the war in Ukraine, in 2022, Russia has increased its military spending, increasing its deficit. In January-February, it was 3.45 trillion Russian roubles (43.70 billion dollars), or 1.5%. The Iran War, which involved U.S., Israeli and Iranian strikes on Iran, and Iranian strikes against Israel and U.S. military bases, as well as Gulf states has fueled a significant increase in demand for Russian gas and oil,?boosting the exports that had been affected by sanctions related to the war in Ukraine. To highlight the boost in Russian revenue, traders said on Friday that Russian flagship Urals delivered to Indian ports for the?first time sold?at a higher price than Brent crude, which is the international benchmark. Based on industry data, calculations show that the Russian oil used to calculate taxation on Monday reached 6,105 Russian roubles a barrel, an 82% increase from the 27th of February, just a day prior to the United States' and Israel's military campaign against Iran. This is more than the assumed price of $5,440 per barrel (or $59 per barrel) at a rouble exchange rate of $92, per U.S. dollars, in the federal budget for 2026. The Russian oil trade above budget targets may be short-lived due to a drop in the price of oil globally and the strong rouble. The price of Russian oil on Wednesday was around $62 per barrel, after reports of possible oil stockpile releases to reduce the oil deficit due to a blockage of Strait of Hormuz. This is an important route used for oil flow globally. According to data from the Finance Ministry, the state's?oil-and-gas revenues in February fell by 44% to 432.3 billion Russian roubles compared to the same month last year. This was due to lower oil prices and the stronger rouble.
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Minister says oil producers should invest in Nigeria in order to diversify their supply during times of crisis.
Yusuf Tuggar, the Foreign Minister, told?that the Middle -East conflict shows that Gulf oil and gas companies should view Nigeria as a 'partner, not a rival' to help diversify their supply in times of crisis. The remarks coincide with the war in Iran, which has disrupted shipments through Strait of Hormuz. This corridor accounts for about a quarter of global supplies, forcing exporters and price spikes. Tuggar stated that Nigeria's untapped oil and gas reserves provide Gulf States with an alternative source at a moment when global flows of crude are vulnerable. The demand for hydrocarbons will?remain high for many years to come, he added. He said, "It is in line with our advocacy - that other countries who might consider us competitors?should partner with and invest with us so they can increase their market share by working with us." NIGERIA'S TOTAL OUTPUT HAS BEEN RAISED TO ABOUT 1.7 MILLION BPDS Nigeria's long-hampered economy has been impacted by theft, pipeline vandalism and underinvestment. The total production is now 1.7 million barrels a day, up from 1.4 million in 2023, when Bola Tinubu assumed office. Tuggar said that the country could increase its output further with more capital for pipelines and fields. Tuggar says the opposite may also be true. Some analysts believe that U.S., Israeli and Iranian strikes against Iran and Tehran's attacks against Gulf states could cause the region to delay African bets. It could cause them to want to work with oil-rich countries like Nigeria to diversify the market for both countries' benefit, or it could cause them to hold back. Nigeria and the United Arab Emirates (UAE) signed the Comprehensive Economic Partnership Agreement in January. Abuja claims that the agreement will unlock trade and investments. Qatari investors also have plans to invest in gas in Nigeria, but timelines are unclear. Analysts Flag Long Approval Cycles, Execution Risks Analysts warn that headline investment promises often face long approval cycles and execution risk in Nigeria. Tuggar stated that Nigeria felt the impact of higher oil prices because it imports large quantities of refined products. This has led to a rise in transport and food costs, particularly during Ramadan when muslims fast. He said Nigeria would be better able to handle longer-term shocks, as the domestic refining industry expands. Dangote, a privately-owned refinery, says that it operates at a nameplate capacity of 650,000 barrels per day. This is enough to meet the domestic demand. Tuggar said that oil will "remain relevant for many years." At the moment, the world consumes between 105 and 106 million barrels of oil per day. I don't think that will change anytime soon. We need to work together in order to have enough hydrocarbons. (Reporting and editing by Clarence Fernandez; David Lewis is the reporter)
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UK gilts suffer new decline as investors focus on oil reserves
The price of British government bonds?fell dramatically in early trade on Tuesday, as the markets questioned if the plans for a record releasing?of oil reserve could offset any potential supply shocks resulting from the U.S. and Israeli war against Iran. As of 0906 GMT the short-dated gilt yields were up around 12 basis points, completely erasing Tuesday's large drops. Investors have also reduced their bets for a Bank of England rate cut in this year. The probability is now?roughly 20 percent, down from 50 percent a day ago. The British public is more vulnerable to a shock in energy prices than many other European countries, due to the 'weakness of its finances and its heavy dependence on gas. The yield on two-year bonds is 46 basis points higher than the equivalent French, German, and U.S. debts. Investors have been watching developments in the Strait of Hormuz. This is a major artery that accounts for about 20% of global oil and natural gas supplies. It has fallen 'rapidly' since the Iran conflict started on February 28. Emma Wall, chief investment strategist of Hargreaves Lansdown, said that the Strait of Hormuz is a major factor in determining long-term impact on equity markets, bond markets, inflation, and economic growth. The Treasury Committee of Parliament will be asking questions to the Finance Minister Rachel Reeves at 945 GMT. Andy Bruce is reporting; Suban Abdulla is editing.
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Sources: Rio Tinto increases Q2 Japan Aluminium Premium Offer
Rio Tinto increased its offer of a?aluminum premium to?Japanese customers to $350 per ton for April-June primary shipments. This is up 79% compared to the current quarter. The revised offer, which is 40% more than Rio's prior proposal of $250, would, if accepted by the client, be the highest premium since the April-June 2015 quarter, when it reached $380 per ton. Japan is the largest?Asian metal importer and the premiums it agrees to pay each quarter for primary metal shipments over the London Metal Exchange cash price are the benchmarks for the region. Global?producers in late February offered Japanese buyers premiums ranging from $220 to $250 per ton of metal for the April-June period, up 13%-28% on the current quarter. They pulled the offer or let it expire as they assessed the risks of the Middle East conflict on cargoes that transit the Strait of Hormuz. One source involved directly in the quarterly talks stated that the reason for the higher offer was the stronger European and U.S. Premiums, as well as the rising freight and insurance cost. Due to the sensitive nature of the issue, the sources refused to give their names. Rio Tinto refused to comment. The Middle East war, which is responsible for 9% of the global aluminum?supply has shook the light metal market, effectively freezing shipments through the Strait. The Qatari smelter Qatalum has begun shutting down its production, and Aluminium -Bahrain which operates one of the largest smelters in the world, declared force majeure. In 2025, Japan will import about 20% of its primary aluminium ingots. Since the end of February, premiums for aluminium have increased dramatically in South Korea. Japan's quarterly price negotiations began last March and are expected continue until late March. (Reporting from Yuka Obayashi, in Tokyo; Additional reporting from Melanie Burton in Melbourne. Editing by Christian Schmollinger, Saad Sayeed and Saad Schmollinger)
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Stocks fall as Middle East conflict and volatile oil prices weigh on trading
Investors were worried about inflationary pressures, and the risks of economic growth. Investors were reminded about the vulnerability of 'private credit' after Financial Times reported, citing a source familiar with the issue, that JPMorgan Chase JPM.N marked down the?value? of some loans held in private-credit groups, and tightened its lending policies to the sector. The price of oil was volatile again, but the price movements were relatively mild compared with Monday's record-breaking price swings. The Wall Street Journal reported that the International Energy Agency had proposed the largest release in history of reserves to bring down crude oil prices. Energy ministers from G7 countries said they supported using stockpiles as a way to address the situation. Brent crude futures rose around 2% to $89.47 per barrel after trading as low as $86.24 over night. The MSCI All-World Index eased slightly on the day, as losses in European stocks mounted. This left the STOXX 600 at a loss of 0.7%. It also shrugged off gains in Asia where the Nikkei gained 1.7% and South Korea’s Kospi gained 1.75%. U.S. Stock futures were almost flat on the day. The markets will continue to be influenced by the volatile news flow surrounding Iran and the outlook of oil flows until we move on to the next big event. The narrative is now cautiously optimistic, despite the fact that there are few signs of an imminent resolution to the conflict," said Jim Reid, a strategist at Deutsche Bank. Investors are on edge, as the Middle East conflict could freeze global energy trading and cause a price spike. This is a threat that world leaders are scrambling to deal with. It is important to know when the Strait of Hormuz will be open again for traffic. This critical chokepoint for oil supplies worldwide, which Iran controls, is an immediate concern. Christine Lagarde, President of the European Central Bank, said that the central bank will do all it can to control inflation to prevent a repeat in 2022 of the energy price shock. Several ECB officials are urging a wait and see approach before taking any action. SAFE-HAVEN DOLLAR As the war enters its second week, the dollar remains the preferred safe-haven asset for investors. Since the beginning of the conflict, the dollar has gained over 1% compared to a basket other major currencies. This compares with the Swiss Franc, which fell by 1%, and gold, which lost 1.5%. Frank Benzimra is the head of Asia equity and multi-asset strategy at?Societe Generale. "Even gold and Treasuries didn't play this huge role of safe-haven. Treasuries are a good choice because they're inflation-proof, while gold is a great option if you want to offset losses on the stock market. The euro and pound were almost unchanged, at $1.1615 each, and $1.3432 respectively. The yen fell, which led to the dollar rising 0.15%. The rise in bond yields that began the week, due to the possibility of a sustained increase in energy prices, has increased concerns over other areas of the market, which many believe are at risk of overheating. These include private credit, and in particular the huge sums associated with the 'rollout of artificial intelligent. Investors have been withdrawing money from private credit funds, such as BlackRock's HPS Corporate Lending Fund, due to concerns over deteriorating credit. The FT reported that PMorgan is concentrating on lending to the software companies they consider most vulnerable to disruption. U.S. Treasuries dropped again on Wednesday. The yield on the benchmark 10 year note increased 3 basis points, to 4.165%. This was ahead of the February monthly inflation report later that day. (Additional reporting from Rae Wee, Singapore; Editing done by Shri Navaratnam & Pooja Deai)
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The ECB's VP has warned that market volatility can amplify the shocks in the euro zone economy.
ECB Vice-President Luis de Guindos stated on Wednesday that financial market volatility could amplify shocks to the economy. The European Central Bank is expected to consider various scenarios of 'growth and inflation' when determining its policy next week. The fallout of the war in Iran has likely pushed inflation higher, and increased pressure on the ECB to step in and curb price pressures. De Guindos acknowledged that the forecasting process has become "more complex" and the volatility of the markets could have a greater impact on the real economy. He told a Madrid conference that "an amplification of the shock effect of an Energy Shock can occur, and may lead to an even more intense impact on Economic Activity." De Guindos stated that the ECB needs to consider different scenarios as it did in 2004, when Russia invaded Ukraine, and accept uncertainty and difficult forecasting. The financial?markets expect the ECB?to raise interest rates in the fall on the premise of higher oil prices?feeding through to the price and that the ECB would be less tolerant if an?inflation?overshoot based on its experience 2021/22. The bank had to raise rates in record time to stop the price increase, which was soaring into double-digit territory. De Guindos warned of the downside risks to the economy from the war. (Reporting and writing by Jesus Aguado, Paolo Laudani and Balazs Koranyi. Editing and reviewing by Andrew Heavens and Clarence Fernandez.
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Malaysia has enough fuel to maintain the subsidised price of transport fuel, says PM
Malaysia can continue to provide subsidies for a widely used fuel, according to Prime Minister Anwar Ibrahim, amid the surge in oil prices worldwide due the Middle East conflict. The government has decided to 'keep the price for RON95 fuel at 1.99 ringgit per litre ($0.51) despite a spike in prices. Checks with the state energy company Petronas have confirmed this. Anwar, in a televised statement, said that the?reserves of oil will last until May. Anwar stated that the government was able to protect the people against the full impact of the rising prices for oil and other essentials. He added that?government officials were ordered to limit their overseas travel and that all government agencies, as well as government-linked businesses, would not be organizing celebrations for the upcoming Eid al-Fitr holidays. Anwar stated that the cabinet would hold a special meeting to review the fiscal situation of the country on Friday. He added that the government would closely monitor the developments in the Middle East.
Shanghai Aluminium holds the top spot with Mideast Supply disruption in focus
Aluminum prices in Shanghai recovered on Wednesday, as the focus shifted to the loss in global supply due to conflict in the Middle East. This followed a brief sell-off that was triggered by Donald Trump's remarks about the Iran War.
The Shanghai Futures Exchange's most traded aluminium contract closed the daytime trading up 2.6% to 25,215 Yuan ($3,672.23) a metric ton. The contract fell 1.41% Tuesday, as Trump's remarks suggesting that the Iran War would soon be over temporarily eased supply concerns.
Benchmark three-month aluminum on the London Metal Exchange eased 0.19% per ton to $3,399.5 by 0802 GMT. It reached a nearly four-year high of $3,544 per ton on Monday.
The Middle East war, which is responsible for?around 9 percent of the global supply of aluminium, has caused shockwaves in the 'global aluminum market, by?freezing the shipments through the Strait of Hormuz.
In response, the Qatari smelter Qatalum has begun to shut down production, and Aluminium Bahrain, one of the largest smelters in the world, declared force majeure for shipments.
Jing Xiao is a senior analyst at broker SDIC Futures. She said that the structure of backwardation reflects the tight supply in near-term.
A market structure called backwardation occurs when immediate deliveries are valued higher than later deliveries.
SDIC's Xiao said that once the production had been shut down, it would be at least a half-year before operations could resume. This indicates a 'prolonged lack of supply in Middle East.
Investors are also awaiting the release of a number of?U.S. This week, the Federal Reserve will be releasing economic data including the consumer price indices to gauge its policy outlook.
Copper was unchanged, while nickel dropped?0.69%. Lead fell 0.06%. Tin lost a hefty?0.71%. Zinc slipped?0.08%.
Other LME metals saw a decline of 1.07%. Nickel fell 0.45%, while lead remained flat. Tin dropped 0.34% and zinc dropped 0.75%. Reporting by Amy Lv, Lewis Jackson and Ronojoy Mazumdar; Editing by Ronojoy Mazumdar.
(source: Reuters)