Commodities Go Through A Dull Phase

While the easing of lockdowns and increase in the vaccination percentage has provided some cheer to the commodity market, a new policy announcement from China has dampened the spirits

During the recent fortnight, Brent oil touched USD 76.18 per barrel, rising to its highest level since October 2018 and climbing 4.56 per cent in 15 days. On similar lines, crude oil also ascended by 4.47 per cent. This rally was supported by improving demand rebound outlook as economies across the world eased restrictions coupled with the mass rollout of vaccines, weaker US dollar and optimistic expectations that the OPEC+ might choose to announce a small boost in output at their meeting on July 1, 2021. Meanwhile, the light at the end of the tunnel for the sanctions imposed on Iran being lifted has further dimmed as talks with the US have been stalled.

Following the two energy commodities is MCX Cotton which rose by 3.13 per cent. This trend could pursue in the coming weeks as the US Department of Agriculture (USDA) has decreased the estimates of global stock levels for 2021-22 by 1.7 million bales and there has been a sharp increase in demand from Bangladesh, China and Turkey.

MCX Lead and MCX Aluminium have ended mute, losing a mere 0.26 per cent and 0.64 per cent. MCX Gold turned bearish over the fortnight, falling by 3.29 per cent due to the US Federal Reserve’s hawkish stance – sooner than expected policy tightening outlook along with rising inflation concerns.

Irrespective of a sharp price drop, retail gold demand in India continues to remain weak. MCX Silver was the top loser, falling by a massive 7.06 per cent. The recent announcement by the Chinese government to start making use of their own aluminium, zinc and copper reserves rather than importing from neighbouring countries triggered a fall in metal prices. MCX Zinc recorded a fall of 3.40 per cent while MCX Copper lost 3.82 per cent over the fortnight. Also, preliminary data from the International Lead and Zinc Study Group (ILZSG) suggests that global zinc supply exceeded demand by 31,000 metric tons through the first four months of CY21.

"The recent announcement by the Chinese government to start making use of their own aluminium, zinc and copper reserves rather than importing from neighbouring countries triggered a fall in metal prices"