Bloomberg Says Commodity Markets Seizing Up

March 21, 2022 (EIRNS)—Bloomberg News on March 18 reported that lack of liquidity is paralyzing some of the world’s most important commodity markets, in a story headlined, “The World’s Biggest Commodities Markets Are Starting To Seize Up.” Starting from the nickel market, in which two of the world’s biggest trading companies (which are also producers and lenders) have come close to bankruptcy, the news service notes that “there are signs of contagion as trading in other metals also slumps. That’s bad news for manufacturers and end users as it could leave them exposed to more violent price swings” (because of the lack of liquidity and severe margin calls all across the metals markets). “There are signs of spillover in specialist instruments LME traders use to manage price risks.... In aluminum, dealers say scarce liquidity is sparking wild moves in prices between key contracts.... Bids and offers are now frequently hundreds of dollars apart.”

Bloomberg limits itself to repeatedly giving evidence that “traders are pulling back” and even market-maker firms are not participating in the metals markets. But the source of this, clearly, is a sudden reluctance of financial firms to trust each other with credit, even short-term credit. This can be the opening “break” to what becomes a full-scale global liquidity crisis.

Not limited to metals markets, the same thing is true for wheat and grains, writes Reuters in “Wheat Prices Soar on Ukraine Fears, but U.S. Growers Can’t Cash In.”