Aluminium gains 1.1% as oil surge drives New Zealand commodity prices

The ANZ World Commodity Price Index rose 0.6 per cent month on month and 1.0 per cent year on year, with prices increasing across most categories. The rise was largely driven by higher energy prices, while a weaker New Zealand dollar pushed the index in local-currency terms up 2.8 per cent.

Oil surge lifts aluminium prices along with milk powder 

Aluminium benefited from supply disruption linked to the Middle East conflict. Prices rose 1.1 per cent during September and are around 23 per cent higher year on year, with production and exports in the region remaining disrupted.

Dairy prices increased 1.0 per cent in September, led by skim milk powder. Prices for the product jumped 9.2 per cent month on month and are now 41.1 per cent higher than a year earlier.

ANZ said milk powder prices are tracking oil prices more closely, with the latest energy-price surge supporting the gains. Butter prices moved in the opposite direction, falling 5.1 per cent in September as stronger milk production in the Northern Hemisphere weighed on the market.

The meat and fibre index declined 0.8 per cent during the month as lower beef prices outweighed gains elsewhere. Horticulture and forestry prices both increased.

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Conflict raises freight and import costs

The impact of the Middle East conflict is not limited to commodity prices. Freight rates have also increased amid disruption in the region.

ANZ said higher shipping costs are preventing modestly stronger overseas log prices from flowing through to New Zealand harvesters and exporters.

The combination of higher export commodity prices and rising freight costs is creating mixed effects for New Zealand’s trade position. While commodities such as milk powder and aluminium are benefiting from the energy and supply disruptions, exporters are also facing higher costs to move goods.

Weaker kiwi boosts local-currency returns

The benefit to exporters was stronger when measured in New Zealand dollars. The NZD Commodity Price Index increased 2.8 per cent in September as the New Zealand dollar weakened, partly due to higher US interest rates.

A weaker kiwi raises the value of export earnings in local-currency terms, supporting returns for New Zealand exporters. However, ANZ noted that the same currency movement makes imports more expensive.

The September data therefore show a two-sided impact from the Middle East conflict: higher oil and gas prices are supporting milk powder and aluminium, while disruption is increasing freight and import costs.

ANZ’s next commodity price update is due on November 4.

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