950812

London commodities: Cocoa shrugs off

threat of African harvest

LONDON: Cocoa prices rallied this week, defying traders' expectations of continued weakness under the effect of bumper African harvests.

Prices did not jump sky-high but advanced significantly by around thirty dollars, or by three to four percent, supported by largely speculative buying.

These unexpected gains seemed to confirm forecasts made two weeks ago by the International Cocoa Organisation of a growing shortfall in world supply, faced with constantly rising demand.

Sugar followed the same path, gaining ground in the face of pessimistic predictions. Many analysts have forecast a large fall in prices over the coming weeks.

Rubber staged a recovery, halting at least temporarily a bout of weak performances. Tin, a base metal used in the manufacture of tin cans and for welding, continued to move forward on the back of tight supplies.

Elsewhere, the commodities had a subdued week. The only burning topic of conversation among traders was the prospect of a merger between two New York markets, the petroleum Mercantile Exchange (NYMEX) and the Coffee, Sugar and Cocoa Exchange (CSCE).

This tie-up would enable the two New York markets to compete on a level playing field with their two larger Chicago rivals, the Chicago Board of Trade and the Chicago Mercantile Exchange.

GOLD: The price of ground 384 dollars, slightly up on last week, in subdued. The metal failed to react to either a cut in interest rates by encouraging data released by the World Gold Council.

In total, Japanese purchases amounted to 164.40 jump on the first six month. In the industrialised world, demand rose by an avera year, to a total of 452.3 tonnes.

In the US, buying of gold advancement, by nine cents by more than ten cents to 5.30 dollar.

COPPER: Copper prices for three month delivery ended the week around five dollars lower at around 2,960 dollars per tonne.

Sentiment was holding steady despite an LME stocks rise of 5,975 tonnes on Friday, taking the total stocks to 157,325 tonnes, 6,775 tonnes up on the week.

Long-term, analysts at GNI trading house said they were bearish about copper's prospects with the imminent start-up of the giant El Albra mine in Chile and other similarly low-cost operations in the pipeline.

Also on the negative side, GNI warned that the sharp increase in the value of the dollar, which has pushed up the price of copper in other currencies, would act as a brake on demand.

LEAD: Lead ended the week 10 dollars down at around 635 dollars per tonnes, with trading affected by the smaller-than-expected fall in stocks which over the week declined by 1,250 tonnes to 230,450.

Meanwhile, a report by trading house Billiton Metals predicted that the western lead market would have a supply deficit in 1995, and that this physical tightness would lead to higher prices in the latter part of the year.

ZINC: Zinc ended the week around 15 dollars lower close to 1,040 dollars per tonne.

Figures from the International Lead and Zinc Study Group (ILZSG) showed a substantial global supply deficit for zinc in the first five months of the year. The ILZSG now provides coverage of lead and zinc for the whole world, rather than just for the "western" world.

Billiton Metals forecast a "sizeable" global deficit for 1995, but stressed that because of the large stockpile still hanging over the market, price rises were likely to be modest. LME weekly stocks declined by 8,875 tonnes to 773,125.

ALUMINIUM: Aluminium ended the week over 15 dollars down at around 1,920 dollars per tonne.

But the British consultancy Metal Bulletin Research predicted that prices would rise to an average 2,175 dollars per tonne next year, lifted by the continued fall in stocks, which are now at less than a quarter of their levels a year ago.

Meanwhile, figures released by the international Primary Aluminium Institute showed a 74,000-tonne fall in world stocks in June 3.716 million tonnes.

Other developments included the announcement by Swiss-based trading group Glencore that it was putting up for sale its US aluminium business for a price tag of 300 to 400 million dollars. Aluminium stocks fell by 3,550 tonnes to 567,975.

NICKEL: Nickel ended the week around 45 dollars lower in the region of 9,025 dollars per tonne.

A report by investment bank JP Morgan said that US steel demand was slowing in the third quarter of the year, but predicted a rebound in demand in the final part of 1995 as the economy took off once again.Weekly stocks on the LME declined by 80 tonnes to 71,898.

TIN: Tin ended the week around 230 dollars higher at over 6,950 dollars per tonne, falling back after reaching a three-year high at 7,095 dollars per tonne on Monday on the back of an increasingly tight market.

Tin stocks on the LME currently stand at 16,265 tonnes, 485 tonnes up on the week, but still close to the lowest levels seen since January 1993.

Traders, however, suggested that the market was being deliberately squeezed by a handful of banks which have tied up most of the LME stocks in financing deals. But the main bank mentioned in this context, Barclays, denied it was involved in holding up stocks.

Analysts at the trading house GNI said that if price break through the 7,270 dollar-per-tonne barrier, they could rise "well over" 10,000 dollars.

COCOA: Cocoa prices built on last week's gains, advancing 25 dollars to 930 pounds per tonne, reaching the pre-crash levels of early July.

The market was boosted by investment fund and trading house buying and by sterling weakness against the dollar, making the Lond market cheaper than New York.

But with a bumper Ivory Coast harvest of between 800,000 and 850,000 tonnes expected, prices will soon reach a ceiling, traders said.

According to GNI, Ivory Coast, the world's number producer, has agreed with the World Bank to liberalise its cocoa in the framework of negotiation agreement, cocoa export taxes will be reduced and the governing body Caisse de stabilisation (Caistab) will be barred from seuantity of cocoa beans.

The reforms would limit the governmental hold over trade and allow private exporters to compete again, GNI said.

COFFEE: The market a little, by around 40 dollars to 2,650 dollars per tonne, in are still underpinned by tight supply on the cash market, Indonesian and Ivory Coast robusta coffee.

Sentiment has also been helped by the lower estimate or exports by Brazil's Unicafe over 1995-96 of 13.6 million of 15.2 million forecast in January.

SUGAR: The price of sugar advanced by two dollars to reach around 308 dollars per tonnes, lifted by speculative buying on the New York market and a healthy level of imports by the Middle East.

But the International Sugar Organisation (ISO) predicts a difficult time ahead for the market, with prices likely to fall back in August or September. India could set off a downward spiral if it decides to launch mass exports after its bumper harvest.

The ISO, however, said that prices could also move in the other direction if Russia, absent from the market for the last year, decided to start buying suddenly, or if one of the main producers were hit by a poor harvest.

According to GNI, initial indications are that the European sugarbeet harvest will be better than last year's. A turn-around in prices is not far off, the British trading house warned.

VEGETABLE OILS: Prices of vegetable oils fluctuated uncertainly, in a generally calm market.

Soya advanced by nearly three florins to 97.5 florins per 100 kilograms on hopes of US sales to Brazil and South Korea, and also lifted by worse-than-expected weather conditions for the US harvest, the world's largest.

Palm oil feel by 20 dollars to 630 dollars per tonne, under pressure particularly from trading house sales on the market in Kuala Lumpur, Malaysia.

Repeseed gained two florins to 94 florins per 100 kilograms and sunflower oil lost 10 dollars to 770 dollars per tonne.

OIL: The reference price for Brent North Sea oil fluctuated very slightly this week, holding steady around 16.20 dollars a barrel in a calm trading environment.

Prices rose slightly in reponse to figures showing a large fall in crude oil stocks in the US. According to the American Petroleum Institute, US stocks fell by 5.6 million barrels in the space of one week.

The market was unaffected by the threat of tropical storms in the Gulf of Mexico.

RUBBER: Prices rose by over 10 pounds, lifted by US industrial buying, according to one British trader, to reach 850 pounds per tonne.

But the general consensus was that this marked only a temporary respite before renewed falls. Demand is still fairly weak in Europe at a time of rising world production.

Meanwhile, the International Natural Rubber Organisation (INRO) raised by five percent its buffer stock reference price that dictates when INRO can buy or sell to stabilise prices on the market.

This adjustment takes into account the higher current price levels in relation to previous years.

GRAINS: Wheat and barley prices remained at fairly steady levels, under the effect of seasonal summer apathy, ending the week around 112 and 105 pounds per tonne respectively.

The European market was still cautious ahead of results from the new harvests. The Ukrainian, Polish and Czech crops are all expected to be higher than in 1994. In Britain, the wheat promises to be of very high quality, and could even prove a serious competitor for French grains.

The British harvest is estimated at between 13.8 and 14.5 million tonnes, compared with 13.3 million in 1994, according to the British Home-Grown Cereals Authority.

According to GNI, the French crop will be around last year's level of 30 million tonnes.

In Chicago, prices were supported for some time by the prospect of Bangladeshi and Egyptian buying. But Cairo's delays in placing orders on the market depressed sentiment in the end.

Elsewhere, the wheat harvest in Argentina, the world's fifth-largest exporter, is under threat from drought in the south of the country.

TEA: The price for medium-quality tea on the London auctions advanced by three pence to 105 pence per kilogram. Buying interest was particularly marked for high-quality teas from Kenya, some of which were sold for as high as 161 pence a kilogram.

COTTON: The benchmark cotton outlook indicator remained around 0.83 dollars a pound, subdued ahead of the big US harvest, forecast at 21.8 million bales (217.7 kilograms each) by the US Department of Agriculture.

According to estimates of the International Cotton Advisory Committee, the indicator will remain at historically high levels in 1995-96 (July-June) at an average of 0.86 dollars a pound, before falling back to 0.84 dollar the following year.

But higher prices should encourage producer to increase their output, which would boost world stocks.

WOOL: The reference price in Bradford, northern England, rose by three pence to 495 pence a kilogram, boosted by higher prices on the Australian market, where supply remains limited.-APP