Commodity markets should be tracked for potential macroeconomic risks, Dallas Federal Reserve analysts said in the latest sign that liquidity concerns in the sector have caught the eye of central banks and regulators.
“Ongoing developments in commodities should be monitored for potential impacts on financial conditions broadly,” said the note from Dallas Fed economists, including Jill Cetina, who leads surveillance and supervisory risk analysis.
The commodities industry has long operated under the radar of regulators, but the clamber to restrict trade with Russia following its invasion of Ukraine is highlighting the role of trading companies as takers of market risk and intermediaries for global consumption.
“The threshold for central bank intervention in unregulated markets is high,” the economists said. “It would be prudent for firms active in commodities markets to proactively assess and further strengthen their liquidity profiles.”
The Bloomberg Commodity Spot Index reached a record in March as part of a 32 percent increase so far this year. Traders are taking steps to minimize the stresses of high and volatile prices: adding billions of dollars in credit, using options markets to hedge against increased margin requirements and reducing exposure to deals.
“While so far, commodity trading firms appear to have obtained the credit necessary to continue their intermediation activities, the recent situation highlights some vulnerabilities,” the economists said. “A pullback in credit to a few commodity trading firms could leave remaining ones unable to meet demand for commodity intermediation, potentially creating a negative feedback loop that causes commodity prices to rise further.”
Incidents such as the collapse of nickel trading on the London Metal Exchange are “evidence of risk management weakness,” the economists said.
UKRAINIAN CROPS
The outlook for spring planting in much of Ukraine has improved as Russian troops narrow their offensive to focus on eastern areas.
The Ukrainian government yesterday said it expects a 17 percent decline in planted area from last year, versus the 20 percent drop it forecast early this month.
METALS
Gold for June delivery on Thursday fell US$9.80 to US$1,974.90 an ounce, up 1.5 percent for the week.
Silver for May delivery fell US$0.33 to US$25.70, up 3.5 percent weekly, and May copper rose US$0.01 cent to US$4.72 a pound, little changed from last week’s US$4.73 a pound.
Additional reporting by AP
KEEPING UP: The acquisition of a cleanroom in Taiwan would enable Micron to increase production in a market where demand continues to outpace supply, a Micron official said Micron Technology Inc has signed a letter of intent to buy a fabrication site in Taiwan from Powerchip Semiconductor Manufacturing Corp (力積電) for US$1.8 billion to expand its production of memory chips. Micron would take control of the P5 site in Miaoli County’s Tongluo Township (銅鑼) and plans to ramp up DRAM production in phases after the transaction closes in the second quarter, the company said in a statement on Saturday. The acquisition includes an existing 12 inch fab cleanroom of 27,871m2 and would further position Micron to address growing global demand for memory solutions, the company said. Micron expects the transaction to
Nvidia Corp’s GB300 platform is expected to account for 70 to 80 percent of global artificial intelligence (AI) server rack shipments this year, while adoption of its next-generation Vera Rubin 200 platform is to gradually gain momentum after the third quarter of the year, TrendForce Corp (集邦科技) said. Servers based on Nvidia’s GB300 chips entered mass production last quarter and they are expected to become the mainstay models for Taiwanese server manufacturers this year, Trendforce analyst Frank Kung (龔明德) said in an interview. This year is expected to be a breakout year for AI servers based on a variety of chips, as
Global semiconductor stocks advanced yesterday, as comments by Nvidia Corp chief executive officer Jensen Huang (黃仁勳) at Davos, Switzerland, helped reinforce investor enthusiasm for artificial intelligence (AI). Samsung Electronics Co gained as much as 5 percent to an all-time high, helping drive South Korea’s benchmark KOSPI above 5,000 for the first time. That came after the Philadelphia Semiconductor Index rose more than 3 percent to a fresh record on Wednesday, with a boost from Nvidia. The gains came amid broad risk-on trade after US President Donald Trump withdrew his threat of tariffs on some European nations over backing for Greenland. Huang further
HSBC Bank Taiwan Ltd (匯豐台灣商銀) and the Taiwan High Prosecutors Office recently signed a memorandum of understanding (MOU) to enhance cooperation on the suspicious transaction analysis mechanism. This landmark agreement makes HSBC the first foreign bank in Taiwan to establish such a partnership with the High Prosecutors Office, underscoring its commitment to active anti-fraud initiatives, financial inclusion, and the “Treating Customers Fairly” principle. Through this deep public-private collaboration, both parties aim to co-create a secure financial ecosystem via early warning detection and precise fraud prevention technologies. At the signing ceremony, HSBC Taiwan CEO and head of banking Adam Chen (陳志堅)
RSS