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CEE ECONOMY - Czech inflation rises in March, but remains below the central bank's target
The 'Iran War' sent fuel prices soaring in March, but the headline figure was still below?predictions and the 2% central bank target. According to preliminary data released by the statistics office on Tuesday, the?headline?figure increased 1.9% from a previous year in March, which is faster than February's 1.4%. According to a poll, analysts had predicted 2.0%. The data revealed that consumer prices increased 0.6% month-over-month, with a rise of 5.3% in energy prices, including motor fuels. After?the government took steps to reduce energy bills, the global oil price shock came at a time of low inflation in the Czech Republic. Last month, the Czech National Bank revised its forecasts to include higher oil prices. The Czech National Bank still expects inflation to be below 2% in this year. The UniCredit economist Pavel Sobisek stated that the consideration of higher interest rates would likely only take place in the fall, when secondary effects from the oil shock have an effect on inflation. At the last policymakers' meeting on March 19, they voted to keep 'their main interest rate? at 3.50%. According to the minutes of the meeting, Governor Ales Michl said that the bank should not undervalue the "cost shock" caused by the conflict in the Middle East. Michl stated in the minutes that the Board was ready to tighten the monetary policy if there was a risk of rising core inflation.
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Iron ore prices fall due to rising inventories and anti-dumping measures
Iron ore futures declined on Tuesday, as a result of?rising inventories?and fresh anti-dumping actions on Chinese finished steel products. However, hopes for a?stronger?demand after Beijing announced accelerated energy-related construction helped to limit losses. The May contract for the most traded iron ore on China's Dalian Commodity Exchange fell 0.44%, to 797.5 Yuan ($116.04), per metric ton. As of 0715 GMT, the benchmark May iron ore price on the Singapore Exchange had fallen by 0.22% to $106.4 per ton. Steelhome data shows that iron ore stocks at major Chinese ports have increased by?0.65% in the past week, despite a rise in hot metal production. This is a sign of difficulties to reduce stockpiles due to weakened fundamental support. Vietnam has imposed a temporary antidumping levy of up to 27,83% on certain Chinese hot-rolled steel coil products as of April 17, raising concern over the demand for steelmaking materials. The downside of the situation was tempered by the stronger demand, as Chinese President Xi Jinping urged for accelerated planning and construction of a brand new energy system in order to ensure the security of the country's power supply as the Middle East conflict continues. The price of raw materials like iron ore will be supported by the construction of the largest hydropower dam in the world on the eastern rim of?the Tibetan Plateau. The?DCE also fell Tuesday with coking coal down 1.16 % and coke down 0.72 %. The Shanghai Futures Exchange also saw a decline in steel benchmarks. Rebar fell by?0.29%. Hot-rolled coils dropped by 0.37%, and wire rod dropped 0.39%. Stainless steel declined 0.11%. (Reporting and editing by Subhranshu Sahu, Sonia Cheema, Ruth Chai)
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Ukraine's March diesel imports jumped 27% m/m despite war in Iran, consultancy says
Analysts at A95 Consulting Group reported late Monday that Ukraine's imports of diesel jumped 27% in March over February to a five-year-high of 577,000 tons, despite the difficulties associated with the war? in the Persian Gulf. After Russian missile attacks virtually destroyed Ukraine's refining capability, the country became?entirely reliant on imported fuel. It sourced supplies elsewhere in Europe. The consultancy stated in a report that "Importers operations in March were hindered by the effects of the war in the Middle East which made it extremely difficult to secure supplies." The report also stated that ORLEN, Poland's largest supplier, had suspended its shipments to Ukraine in early March. There was also uncertainty about supplies from suppliers in Romania and Greece. After a brief pause, the Polish shipments resumed and reached?244,000 tonnes in March. This was 51% more than one year ago. A-95 reported that Greece shipped 119.300 tons and 154,000 tons came from Romania. It was noted that Ukrainian traders built up an important carryover stock in April. A-95 stated that "there is every reason to believe" that April will be a tense month, because there are "few resources available in Europe, record high prices, and contracting terms which require double the amount of capital." (Reporting and editing by Ronojoy Mazumdar; Reporting by Pavel Polityuk)
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China's coal-based fertiliser protects its farmers against global fertiliser turmoil
China's unique dependence on coal to produce urea may have farmers around the world switching to less nutrient-hungry plants as the Iran War affects the supply of fertilisers. Analysts say that China could 'not?allow?exports of urea, the most widely-used fertiliser in the world, after spring planting, as it usually does, because this would drive up local prices. Beijing usually waits until May to determine if there's a surplus before deciding how much it can export abroad. China produces 78% of its urea with coal, a cheap and abundant resource. Other big exporters like Russia, Qatar, and Saudi Arabia produce urea using gas. Willis Thomas, CRU's head of fertilisers analyses, said that China is self-sufficient in urea. China's massive deployment of coal, which it?uses for oil, gas and to produce other products, has been particularly prescient, even though it is more pollution than natural gas. It reduces the need for imported energy that could be "cut off" in a war. Price increases outside China The benchmark price for urea has risen by 70% since February, as the war is preventing ships from crossing the Strait of Hormuz. This route is vital for 30% of global fertiliser trade. Last week, urea prices in Indonesia were around $700-780 a metric ton. Thomas of CRU said that in contrast, the price per tonne was around 1,760-1.840 yuan (about 255-$267) last week in northern China. The U.S. Department of Agriculture announced last week that U.S. Farmers plan to plant less of the nitrogen-intensive corn crop than they did last year and more soybeans. Australian farmers are expected to prefer barley in the coming season over nitrogen-intensive canola and wheat. In China, where the government has already restricted exports of other fertilisers and ordered an early release of commercial reserves of fertiliser, there is little chance of a switch. "I'm still sticking with corn this season because it's more profitable than soy beans," said a farmer named Guo, who lives in the north-eastern Heilongjiang Province. AMPLE UREA SUPPLIES According to the China Nitrogen?Industry?Association, China will produce 76.5 million tonnes of urea in 2018, an increase of 6.3% over last year. The domestic demand is estimated at 66 millions tons, including 43,000,000 tons for agriculture. Thomas stated that nine new plants will be starting production in the coming year. This will add 4.9 million tons of coal per year. According to StoneX, China's exports last year were?4.9 millions tons. This is below the historical norms of 5 to 5,5 million tons that would normally account for 10% of global trade. India, which imported over 40% of its DAP and urea, a mixture, from the Middle East last year, asked China to permit the sale of certain urea cargoes. Analysts said that China could continue to restrict exports over the next few months. If China exports, the local urea price will soon jump up to match the global market. StoneX analyst Josh Linville said that the government does not want this situation. The National Development and Reform Commission and China's General Administration of Customs did not respond immediately to requests for comment. India is among the few countries to have explored coal gasification for urea as an alternative feedstock. However, these projects are still in their early stages.
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Andy Home: LME traders at the ROI were wrongly pricing metal supply crises.
Metals traders began the year fretting?about an looming shortage of copper, but by the end of the first quarter they were facing a very impending supply crisis?in aluminum. In its fifth week of existence, the Iran war has dampened the speculative frenzy which erupted in the London Metal Exchange's (LME) base-metals complex in January. Aluminium has risen to its highest level in 2022, despite the fact that two Gulf smelters were damaged by Iranian missiles and shipping across the Strait of Hormuz is still severely restricted. Even though energy prices are surging, the metals bulls still have a good grip on the market. EXPLOSIVE ALUMINIUM The Iran War has revealed the fragility in the Western Aluminium Supply Chain. Around 9% of the world's smelting capability and 18% global exports are accounted for by the Gulf. Initial impact was the logistical squeeze that resulted from the closure of the Strait of Hormuz. The Qatari smelter Qatalum as well as Aluminium?Bahrain(Alba) both reduced their operating rates in order to conserve raw material stock. Next came direct attacks. Alba has been hit by Iranian missiles, and its capacity is down to 30%. The giant Al Taweelah aluminium smelter is out of commission after damage to the power plant. The supply chain is being shook by a crisis no one could have predicted. Western aluminium buyers face a double hit from both the rise in LME aluminium prices and the sharp increase in physical premiums. The LME copper price hit a nominal record of $14,527.50 a metric ton last January, as investors bought into its bull story of soaring demand and limited supply. However, there is no shortage of the metal in the present. Global exchange stocks closed March at a record high of just over 1.4m metric tons. LME's three-month copper ended the third quarter at $12335.50 per tonne, 15% lower than the peak of January and pretty flat compared to the beginning of the year. In January, tin reached a record-high price of $59 040 per ton as investors chased a similar meme of scarcity. Industrial players also responded to the scarcity of tin by delivering it into LME's warehouses. Since the beginning of the year, registered tin stock has increased by 60%. Another 2,951 tonnes are in the LME’s non-warranty stocks. As with copper, the LME spread structure for tin shows no signs of tightening. Both metals are in a wide contango, which indicates that there is no shortage of units. Nickel and lead markets are not in danger of a shortage. Both LME stocks are very high, and the time-spreads have been relaxed. In fact, LME lead stock?has mushroomed to more than 500,000 tons. The heavy metal is set to replace aluminium as the preferred metallic financing vehicle. Zinc?remains a outlier. The galvanising metal?still refuses to perform according to script. LME inventories have not been rebuilt in a meaningful way. Stocks are only up 7,900 tonnes on the start the year. It is trading with a marginal contango rate of $5.00 per ton. SECOND ROUND IMPACT As we enter the second half of the year, the biggest question hanging over LME base metals is the impact that the Iran war will have on demand. The escalating energy costs are bad news for both manufacturers and consumers. It is important to consider how long the hostilities will last. This is why, in January, metals were in the spotlight. By?March they had been largely replaced by them. The war in the Gulf has already lasted 'too long' for aluminium. And the impact of the loss of production assets will be felt over many months. Andy Home is a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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MORNING BID - A breakthrough or a crude awakening in Europe?
Ankur Banerjee gives us a look at what the future holds for European and global markets. The markets are 'holding their collective breath' as optimism about a possible deal to open the Strait of Hormuz combines with growing fears of an impasse which could lead to an escalation of violent conflict, and yet another U.S. deadline is looming. Risk-off hasn't yet turned into a selloff as traders wait for the deadline set by U.S. president Donald Trump on Tuesday at 8 pm Eastern Time (00:00 GMT Wednesday) to reach a deal with Iran. Both sides have exchanged barbs, insults and attacks as Iran rejected a proposed ceasefire. Instead, they are looking for an end to the war that has shut down the Strait of Hormuz - a vital waterway of energy supply that has affected markets and economies. Trump, on the other hand, warned that Iran would be "taken" if they did not reach an agreement by his deadline. He threatened to destroy Iranian bridges and power plants, while he dismissed concerns that such actions could be considered a war crime. The dollar's stability and the stock market's struggle for direction kept investors hesitant on Tuesday. Even the stellar earnings of chipmaker Samsung Electronics could not lift the mood. U.S. Stock Futures dropped 0.44%, while European Futures indicated a subdued opening as the region returns from holidays on Friday and Sunday. Brent crude is currently at $111.43 a barrel, up $39 or 53% from the start of the war. The yen is perilously close the 160 dollar level, which traders are worried will?bring Tokyo to the market to help support the fragile currency. The demand for U.S. dollars is unrelenting and any intervention could be futile. The manufacturing data that will be released later today could give a glimpse into the impact the six-week war has had on the European economy, and whether or not the fears about the price 'pressure caused by the energy shock' are warranted. Investors will be focusing on another binary event, which could have a significant impact on sentiment in the near term. The following are key developments that may influence the markets on Tuesday. PMI data for France, Germany and the Eurozone for March
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Iran's defiance on the eve before Trump's ceasefire deadline
Iran and Israel exchanged attacks on Tuesday, as Tehran defiantly refused to reopen Strait of Hormuz or accept a ceasefire agreement on the eve of the deadline set by U.S. president Donald Trump for Tehran to comply with his demands. According to a source familiar with the plan, Iran rejected the U.S. proposal that was mediated by Pakistan. The plan called for an "immediate" ceasefire, the lifting of the effective blockade in the Strait of Hormuz, and then talks about a wider peace settlement to be held within 15 to 20 working days. IRNA, the official news agency, reported that the Iranian response included 10 clauses. These included an end to conflicts, a protocol ensuring safe passage through Strait of Hormuz and lifting of sanctions. Trump stated on Monday that "the whole country could be destroyed in one night. That night may be tomorrow." He threatened to destroy Iranian infrastructure and?power plants if Tehran did not agree to the deadline. Trump warned that without a deal "every bridge" in Iran would be destroyed by midnight on Wednesday (0400 GMT). "Every power plant?in Iran will go out of business and be burned, exploded, and never used again." Fight Unabashed The Israeli military announced early on Tuesday that it had successfully completed a wave airstrikes against Iranian government infrastructure located in Teheran and other places. It was using air defence systems in order to intercept missiles fired from Iran. The Saudi defence ministry did not specify who fired the projectiles, but said that debris fell near energy facilities. Saudi Arabia has been attacked by hundreds of Iranian drones and missiles since Israel and the U.S. launched their war against Iran on February 28. Authorities have confirmed that the majority of these were intercepted. Saudi Arabia, the United Arab Emirates, and Bahrain all issued public safety alerts at the same time on Tuesday. Trump dismissed questions about whether his pledge to destroy Iranian power plants would be war crimes. He said he was not concerned at all by the possibility. He said, "I hope I won't have it to do." Iran's ambassador to the United Nations stated on Monday that Trump's threats to strike were "direct incitement of terrorism" and provided clear evidence to commit war crimes according to international law. On Tuesday, Iran's deputy sport minister, Alireza Rahimi called for artists and athletes to create human chains in power plants throughout the country. The top military command of Iran said that Trump is "delusional." According to Mehr, a U.S. and Israeli projectile struck a synagogue located in the heart of Iran's capital on Tuesday. ChokeHold The price of oil hovered at $110 per barrel as Trump's deadline approached and there was little prospect of the Strait of Hormuz being reopened, a major global oil transit chokepoint which has fueled inflation fears around the globe. Iran has effectively closed Hormuz. This is a conduit that supplies about a fifth of the oil and gas in the world. It's a powerful bargaining tool for Tehran, which it does not want to give up. Brent crude futures increased 0.4% to $101.9 a barrel, while U.S. West Texas Intermediate oil futures climbed by 0.8%?to $113.31. Trump is on the brink of a political crises as Iran has proven to be a more formidable adversary than what he had predicted when he began the conflict. He said that the conflict was meant to stop Iran from developing nuclear weapons and missiles for them. After 13 U.S. military personnel were killed in the conflict, Trump found himself in a 'perilous situation' when an F-15E U.S. fighter jet crashed on Friday. One of the two airmen remained stranded on Iranian soil. The rescue mission by U.S. commandos, to bring the stranded weapons officer to safety, helped to avert an escalation in a political crisis that could have been disastrous for Trump. The war has killed thousands of people in the Middle East, including 3,546 Iranians, according to the U.S. rights group HRANA, and almost 1,500 Lebanese, where Israel is targeting the Iran-backed Hezbollah.
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China's iron ore trade returns; Trump's Iran deadline looms
After a long weekend of holidays, trading resumed on Tuesday in the 'top buyer China. Investors were awaiting clarity on the prospects for a resolution of the 'Iran War. Demand expectations were also a factor in the price rise, following Beijing's call to accelerate energy-related projects. By 0243 GMT, the most traded May iron ore contract at China's Dalian Commodity Exchange rose 0.5% to $805 yuan (US$117.03) per metric ton. The benchmark May ore traded on the Singapore Exchange rose 0.25% to $106.9 per ton. Iran on Monday said it wanted to?a permanent end to the conflict with the U.S., Israel and other countries, and resisted pressure to reopen Strait of Hormuz. Meanwhile, U.S. president Donald Trump warned that the country would be "taken" if they did not meet the deadline of Tuesday night to reach a settlement. As a'response to the global energy shocks' caused by the Iran War, Chinese President Xi Jinping called for accelerated planning of a new system to ensure the energy security of the country. The construction of the largest hydropower project in the world on the eastern edge of the Tibetan Plateau will support the prices of industrials and construction materials, including iron ore. Iron ore prices rose, but gains were restricted by the high inventory levels and anti-dumping policies on Chinese steel. Steelhome data showed that iron?ore stocks at major Chinese port cities increased by 0.65% from week to week. The increase was despite rising output of hot metal, which highlights difficulties in inventory reduction and weakening basic support. Vietnam's trade ministry announced that it has implemented a temporary anti-dumping tax of up to 27,83% on certain Chinese hot-rolled coil steel. Coking coal was down 0.45% and coke was up 0.33% on the DCE. The majority of steel benchmarks on the Shanghai Futures Exchange are negative. Rebar was not much changed. Hot-rolled coil and wire rod both declined 0.27%. Stainless steel rose 0.21%. ($1 = 6.8784 yuan) (Reporting by Ruth Chai; Editing by Subhranshu Sahu)
Japan finance minister vows close G7 coordination as market volatility persists
Satsuki Katayama, the Japanese Finance Minister, said that the country would remain in close contact with other countries of the Group of Seven. The Middle East conflict has caused concern about Japan's fiscal expansion.
The yield curve for Japan's government bonds has risen this week. The 10-year JGB yield reached a 27-year-high of 2.43%. Meanwhile, the yen hovered near the psychologically significant 160-per dollar mark, which analysts warn may trigger a government intervention.
Katayama, a G7 Finance Minister and Central?Banker, said that the sharp changes in oil prices and developments in the Middle East are having an impact on markets. This was in response to a question about rising JGB yields.
She added, "Our position has always been that we will continue to be in close contact with our G7 counterparts and make sure that we communicate clearly our message."
Analysts claim that the JGB selloff reflects "growing unease" over Japan's increasing fiscal spending in order to cushion the rising energy costs. This strain is made worse by yen's decline.
After a snap-election in January, the Japanese parliament will?pass on Tuesday an unprecedented 122.3 trillion-yen general-account (765.48 billion dollars) budget for the fiscal period that began in April.
Japan's economy is vulnerable to fuel price increases due to its heavy reliance upon imports. The government could soon be under pressure to allocate an additional budget for stimulus.
How to pay for fuel subsides to keep gasoline around 170 yen per litre is the immediate problem. The programme, which was launched on March 19, was estimated to cost 300 billion yen per month. This bill has now risen to 500-600 bn yen as the oil price rises due to a prolonged war in Iran.
Reserve funds of 800 billion yen ($5billion) will be used to fund the subsidies. Even if Tuesday's budget unlocks another 1 trillion yen in reserves, the current pace of the program would exhaust these funds within months.
A government official said privately: "Unless the structure of the subsidies is changed, a supplementary Budget will sooner or later be necessary."
Sanae Takaichi, the Japanese Prime Minister, told lawmakers on Tuesday that she has 'no immediate plans' to ask businesses and households to reduce energy consumption in a way that would harm economic activity. This is despite concerns about supply triggered by war in Iran. $1 = 159.8100 Japanese yen (Reporting and editing by Sonali Paul, Shri Navaratnam and Makiko Yamazaki)
(source: Reuters)