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Trading confidence rattled

As the saying goes, all great changes are preceded by chaos. While chaos still continues to run amok in financial and commodity markets alike, the known outcomes are already spelling disaster and fear.

A few weeks back, Trafigura reported a loss of US$ 577 million by way of a systematic fraud through forged representation and documentation by a supplier who allegedly shipped it alloy steel instead of pure nickel. This was followed by a story of stones rather than nickel being found in a consignment stored in an LME warehouse in Rotterdam; the consignment was owned by JP Morgan Chase and was valued at US$ 1.3 million. Although this sum was dwarfed by that involving Trafigura, both these cases have rattled confidence in international metals trading and have sparked discussions about propriety and risk management in international trade, as well as about warehousing checks and controls.

In the midst of the above, a banking crisis has wreaked havoc: in a span of just 11 days, four US banks and front-line, banking icon Credit Suisse either collapsed or were pushed into receivership and subsequent takeovers. This has stoked fears of a spreading contagion, potentially causing mayhem in financial markets. To rein this in, the US Federal Reserve, the European Central Bank (ECB) and central banks in Canada, the UK, Japan and Switzerland have issued statements announcing co-ordinated action to improve market liquidity. However, investor nerves - especially those of bank bond holders - are too frayed to be soothed by any action short of a pause in the Fed’s cycle of interest rate hikes, knowing that the ECB delivered a half-percentage-point increase despite UBS’s known fragility.  

There is already palpable nervousness in commodity markets as consumer sentiment is turning more conservative and prices have started to correct. There has already been a considerable downshift in the value of key metals like lithium and cobalt. Copper too has retreated sharply from its high point seen earlier this year.

As for our own business, industry and society worldwide celebrated Global Recycling Day on March 18. It coincided with the release of the synthesis report from the Intergovernmental Panel on Climate Change which told the world of a 1.1-degree temperature increase already registered post-industrialization and of the irreversible risks of destruction to homes, loss of livelihoods and fragmentation of communities should we fail to change the pace and course of further warming. With all social media platforms abuzz with details of how our industry is taking initiatives to stop this climate Armageddon, Global Recycling Day truly demonstrated our commitment to a net-zero transition.

It is expected to be a bumpy ride over the coming months. So make diligence your best friend and proceed with utmost safety.