Hurricane Gustav Strikes Metals Futures

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Fact of life: Natural disasters almost always have an impact on commodity prices, as we noted after the disastrous earthquake in China  earlier this year. However, commodities producers down South recently noted that Hurricane Gustav, which weakened before hitting land, had a lower impact than expected.

It’s too early to assess all damage, but producers and facility-owners are hopeful. “A spokesman for a London Metal Exchange warehouse, which houses base metals like copper and zinc, said his facility was elevated above the canal and Ëœhighly unlikely’ to see flooding. He said he would have to wait until the storm subsided before he could get back to the warehouse,” one article reports.

“It would have to be one hell of a deal for the water to get up to the warehouse,” the spokesman told Reuters while watching the news. “If any roof damage has occurred that let rain in, I can’t say. I’m not saying flooding is impossible, but it seems highly unlikely right now.”

Alcoa was also optimistic: “Alcoa spokesman Kevin Lowery said Gustav was too far from its alumina refinery in Point Comfort, Texas, and it was too early to know the condition of its anode plant in Lake Charles, Louisiana. By around 3 p.m., wind speeds in Lake Charles ran around a tolerable 16 miles an hour, but were forecast to accelerate to 50 mph later on Monday.”

Gustav caused crude oil prices to plunge last week, and certain base metals futures were hit hard. Headlines now read “Gustav heads north; commodities, south”  — but if the impact isn’t as bad as expected, commodities could return to normal  during the calm after the storm.

However, you might want to stay tuned for Hurricane Ike…

–Amy Edwards

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