Strong commodity prices dampened by European debt crisis

On the global front, cocoa prices on both London and New York markets are experiencing new rallies due to shrinking stockpiles and tight supplies for chocolate ingredients despite higher demand.

Cocoa stockpiles in the warehouses monitored by US ICE Futures are at the lowest since March 24.

Last Friday, cocoa on ICE Futures for July delivery touched a high of US$3,065 per tonne – the highest recorded since May 11 – before closing at US$3,048 per tonne.

Similarly, the commodity advanced to £2,567 a tonne on the Liffe exchange in London, the highest price since at least 21 years ago.

CPO

After touching a high of RM2,700 per tonne in May, CPO has gradually come down to trade below RM2,500 per tonne currently.

CPO, which takes its cue from the lower crude oil and soybean prices, also had to succumb to higher stock build-up and lower offtake from major overseas buyers.

In the coming months, market players feared that local palm oil stocks would increase further, particularly in September and October, being seasonally high production periods for the year.

Malaysian Estate Owners Association president Boon Weng Siew said CPO was not likely to touch RM3,000 per tonne this year, on expectation of further increase in palm oil stocks for the rest of 2010.

“Should crude oil prices fall below US$70 per barrel, CPO prices are expected to come down further,” he added. Palm oil biodiesel is a substitute for fossil fuel.

To ensure stability in CPO prices, Boon said that Malaysia needed to speed up the implementation of its mandatory biodiesel programme. “We must quickly take some of the high palm oil stocks for biodiesel production,” he said.

Tin

Tin prices on the Kuala Lumpur Tin Market so far this year have fared better than in 2009. On average, the commodity has been trading at the US$17,000 per tonne level. It touched a high of US$18,666 per tonne in April before coming down to US$17,500 per tonne last Friday.

A tin analyst said tin prices would stay strong at current levels but “will not reach the all-time high at US$24,040 per tonne recorded in 2008.”

There is still fear over supply tightness. This is view of the ongoing move by Indonesia, the world’s largest tin exporter, to clamp down on illegal mining and depletion of onshore mines at its Bangka-Belitung islands off Sumatra after centuries of unregulated mining, the analyst said.

On the local front, the latest interesting development is the Perak government’s intention to revive tin mining operations in the state and potential review of its mining policy.

(biz.thestar.com.my)