Globally, Switzerland-based Glencore was the biggest loser in September with around $14b wiped off its market cap. The market pushed down Glencore shares mainly because of worries over its large debt pile but the sell-off still pressured other commodities-orientated companies including miners in the South Caucasus and Central Asia.
And the drop in commodities prices it also a sovereign issue in Central Asia and the South Caucasus with national budgets partially reliant on income from sales. This will hurt Kazakhstan in particular, although it will reverberate across the region.
Analysts were quick to point the finger at weak Chinese demand for commodities, especially copper, for the drop in prices. Copper is regarded as a good conductor of electricity and heat and used widely in manufacturing.
“With China slowing down and a lot of uncertainty, fears in the market have intensified, and the reduction in the pace of demand growth for all commodities has seemed to send everybody off the cliff,” Ed Hirs, professor of energy economics at the University of Houston told Bloomberg.
China uses more than half of world’s copper production and any fluctuation in its demand curve has significant effects in the markets. A strong US dollar and uncertainty over Fed interest rate decisions has also hit commodities prices.
London-listed KAZ Minerals, formerly known as Kazakhmys, is particularly exposed to Chinese copper demand whims. Its main product is copper and China is one of its main clients.
Shares in KAZ Minerals were down 20.5% in one week closing at 84.65p, its lowest ever price. It later rebounded above 90p, due to a wave of short-term rebounds across the sector.
KAZ Minerals/Kazakhmys has been portrayed as a company closely interlinked with the elite in Kazakhstan.
ENDS
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(News report from Issue No. 250, published on Oct. 2 2015)