Commodities in Crisis as Asian Shares Tumble and Shipper Files for Bankruptcy

By Henning Gloystein and Denny Thomas

SINGAPORE/HONG KONG, Sept 29 (Reuters) – A Japanese shipper filed for chapter on Tuesday and world buying and selling agency Louis Dreyfus posted decrease earnings, the most recent victims of tumbling vitality and uncooked materials costs.

The London-listed shares of mining and buying and selling big Glencore rebounded by round 10 p.c, clawing again some floor from a close to 30 p.c droop on Monday.

Investors bought off Glencore bonds, highlighting nerves over its debt burden and monetary scenario.

Glencore has been troubled by the identical concern dealing with different miners: the extended fall in world metals costs induced partly by a slowdown in China, which is the world’s largest shopper of metals.

Energy and commodity costs have fallen largely due to rising output following heavy funding into new belongings whereas costs have been nonetheless excessive, which has more and more clashed with slowing demand in Asia, the place China’s economic system is rising at its slowest tempo in many years.

The issues within the sector contributed to world buying and selling group Louis Dreyfus Commodities B.V reporting a steep drop in first-half earnings on Tuesday.

The disaster has additionally hit the delivery sector, the place dry-bulk service provider Daiichi Chuo Kisen Kaisha filed for defense from collectors on Tuesday.

Glencore’s shares stay down by greater than 80 p.c because it listed in 2011, on the final excessive level of an extended commodities growth, with its market capitalization briefly dipping beneath 10 billion kilos ($15.16 billion) for the primary time.

Investment financial institution Citigroup stated there was nonetheless worth in Glencore. Citi rated Glencore shares as a “buy” and stated Glencore might even think about going personal, however different merchants have been cautious of shopping for into commodity shares.

“It is hard to make a case for buying commodity stocks in general with the current climate in China and emerging market volatility,” stated Thames Capital Markets’ senior dealer Gerren O’Neill.

CURRENCY HITS

Shares in Asian commodity service provider Noble fell 10 p.c, close to to ranges final seen on the top of the worldwide monetary disaster of 2008, giving it a market capitalization of just below S$3 billion ($2.10 billion).

Australian vitality shares additionally tumbled, with Santos, Origin Energy and Karoon Gas all dropping round a tenth of their inventory market worth.

“There is a crisis of confidence and people are continuing to de-leverage commodity stocks exposure,” stated Benjamin Chang, CEO of hedge fund LBN Advisers, which manages about $600 million in funds.

Both Glencore and Noble Group have additionally seen their Credit Default Swap (CDS) costs – the price of insuring towards the businesses defaulting on their debt – soar this yr.

The chapter submitting of Daiichi Chuo Kisen Kaisha hit the shares of rival maritime firms, which in flip affected Japan’s benchmark Nikkei inventory market.

Daiichi Chuo, which has suffered 4 straight annual losses as Chinese demand for iron ore and coal has dropped, had liabilities of round 108 billion yen ($900 million) as of end-March. It has a market worth of simply $96 million.

Weakening commodities markets additionally hit currencies from nations that rely closely on vitality or uncooked materials exports.

In Malaysia, a big producer of oil and pure gasoline, the ringgit fell towards the greenback on Tuesday to round its lowest stage for the reason that depths of the Asian monetary disaster in 1998. In Indonesia, the world’s largest exporter of thermal coal, the rupiah is languishing close to 17-year lows.

Australia’s greenback, intently linked to its commodity exports akin to iron ore, coal, oil and pure gasoline, has additionally taken a beating, dropping greater than 1 / 4 of its worth towards the dollar since June 2014, when the present oil value rout started. ($1 = 0.6595 kilos) ($1 = 1.4318 Singapore {dollars})

(Additional reporting by Sudip Kar-Gupta in London, Gus Trompiz in Paris and Jacob Gronholt-Pedersen in Singapore; Editing by Alex Richardson and William Hardy)