Five outstanding events of the commodity market in 2023

Below are 5 outstanding events affecting the commodity market in 2023 reviewed by the Vietnam Commodity Exchange (MXV).

“WAVE” OF US BANKRUPTCY, PRECIOUS METALS “RISE”

In March 2023, the world financial market in general and the commodity market in particular staggered when a series of large commercial banks in the US such as SVB, Signature Bank, Republic Bank… encountered liquidity problems and collapsed. This is a consequence of the US Government’s tightening monetary policy to cool inflation.

However, this has brought a positive trend to precious metal prices, which serve as a safe haven during periods of economic volatility and recession risks. Notably, during the trading session on March 13, silver prices suddenly increased by nearly 7% – the highest daily increase in the past year. Silver and platinum prices even reached their highest peak of a year in late April and early May.

OPEC+ STRONGLY CUT PRODUCTION, OIL PRICE APPROACHING TO 100 USD/BEL

2023 is considered the year the Organization of Petroleum Exporting Countries and its allies (OPEC+) has intervened the most in the world oil market in the past few years. Starting from a context of weak global growth, leading to limited oil consumption demand, OPEC+ has continuously cut production sharply to support oil prices.

The strongest impact was in June, when Saudi Arabia, the leading country of the OPEC+ group, suddenly announced a unilateral production cut of 1 million barrels/day, in addition to the general commitment. This statement pushed the oil market into a deficit of more than 1 million barrels/day and led to a clear upward price trend throughout the third quarter with an increase of nearly 40% in value. Brent oil prices even approached the 100 USD/barrel mark at the end of September.

Five outstanding events of the commodity market in 2023 - Photo 1

However, despite OPEC+ continuously cutting production, oil prices were unable to maintain a long-term upward momentum and began to decline towards the end of the year due to rising non-OPEC+ output and weakening global economic growth.

BLACK SEA GRAINS AGREEMENT COLLAPSES, WHEAT PRICE INCREASED DIFFICULTY

On July 17, Russia announced its withdrawal from the Black Sea grain agreement – an important agreement that allowed Ukraine to safely export grain through Black Sea ports. This event immediately disrupted transportation in the region and threatened world food supplies. Prices of agricultural products fluctuated very strongly.

Although no longer a long-term factor affecting corn and wheat prices like when the Russia-Ukraine conflict broke out in February 2022, these unexpected events caused the prices of agricultural products to increase rapidly. Within just one month since exports were interrupted, wheat prices increased by more than 20% and then quickly returned to their original level.

Five outstanding events of the commodity market in 2023 - Photo 2

El NINO HEAVILY AFFECTS SUPPLY

Appearing in the summer of 2023 and peaking in November, the El Nino phenomenon is estimated to have the strongest intensity, causing severe drought in major agricultural production areas in Asia. Among them, major agricultural producing countries such as Vietnam, Indonesia, Thailand and India are all seriously affected. Crop damage has pushed sugar and raw rice prices to 12-year highs; Robusta coffee prices hit a 28-year high. Domestic coffee prices in Vietnam even reached the highest level in history.

The period when El Nino is most active is also an important period of development for the strong agricultural products of Brazil, the world’s leading agricultural producer. Therefore, planting activities of soybean and corn crops are also affected. Fears of reduced supply are the reason why prices of animal feed ingredients remained high throughout the fourth quarter.

CASH FLOW FOR COMMODITY TRADING IN VIETNAM IS SHIFTING

According to statistics from MXV Transaction Management Block, soybean meal is the product with the highest trading volume in Vietnam in November 2023. This is the first month after more than 2 years that WTI crude oil and WTI micro crude oil were overtaken.

In addition, the market witnessed a strong shift in cash flow to items in the metal group, which recorded large fluctuations in 2023. Cumulatively for the first 11 months of 2023, the trading volume of all items Micro copper and platinum goods are ranked 7th and 8th respectively out of 45 products being traded at MXV. For platinum, this is a transaction growth of up to 57% over the same period in 2022. In November 2023 alone, platinum was the 4th most traded commodity in Vietnam.

Five outstanding events of the commodity market in 2023 - Photo 3

This result shows that the commodity trading market in Vietnam is developing in both breadth and depth. Products with high liquidity and easy access still attract huge investment cash flows. However, investors have begun to explore other potential commodities to diversify their investment portfolios. In the long term, the more diverse the trading products, the more effective the trading activities will be, minimizing risks when the market has unusual fluctuations.

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