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Most Base Metals Fall as US Recession Jitters Dampen Sentiment

Specialist Dilip Patel works at his post on the floor of the New York Stock Exchange, Monday, Aug. 5, 2024. Nearly everything on Wall Street is tumbling as fear about a slowing US economy worsens and sets off another sell-off for financial markets around the world.(AP Photo/Richard Drew)
Specialist Dilip Patel works at his post on the floor of the New York Stock Exchange, Monday, Aug. 5, 2024. Nearly everything on Wall Street is tumbling as fear about a slowing US economy worsens and sets off another sell-off for financial markets around the world.(AP Photo/Richard Drew)
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Most Base Metals Fall as US Recession Jitters Dampen Sentiment

Specialist Dilip Patel works at his post on the floor of the New York Stock Exchange, Monday, Aug. 5, 2024. Nearly everything on Wall Street is tumbling as fear about a slowing US economy worsens and sets off another sell-off for financial markets around the world.(AP Photo/Richard Drew)
Specialist Dilip Patel works at his post on the floor of the New York Stock Exchange, Monday, Aug. 5, 2024. Nearly everything on Wall Street is tumbling as fear about a slowing US economy worsens and sets off another sell-off for financial markets around the world.(AP Photo/Richard Drew)

Prices of most industrial metals dropped on Tuesday, weighed down by bleak demand outlook following US data that sparked fears of a possible recession in the world's biggest economy.
Three-month copper on the London Metal Exchange (LME) was down 0.3% at $8,858.50 per metric ton, as of 0303 GMT. The contract was hovering near a 4-1/2-month low of $8,714 hit in the previous session, Reuters said.
The most-traded September copper contract on the Shanghai Futures Exchange (SHFE) declined 2.5% to 71,260 yuan ($9,964.90) a ton. The contract tumbled as much as 3.3% earlier in the session to 70,630 yuan, its lowest since March 13.
US data showed job growth fell short of expectations and the unemployment rate rose, pointing to possible weakness in the labor market and greater vulnerability to recession.
On the COMEX, fund managers dropped their bullish bets for copper, with net long positioning down to 9,449 contracts on July 30, an 87% drop from May 21, latest exchange data showed.
LME copper has shed 20% since its record high of $11,104.50 a ton hit on May 20.
Physical demand, however, improved as prices fell.
The premium to import copper into China rose to $48 a ton on Monday, the highest since March 18. Copper stocks in SHFE warehouses eased to 295,141 tons, the lowest since May 17, although inventories outside of China remained elevated.
LME aluminium eased 0.1% to $2,248.50 a ton, nickel edged down 0.4% at $16,205, zinc dipped 0.2% to $2,629, while tin advanced 0.3% to $29,570 and lead rebounded 0.7% to $1,944.50 after tumbling 4.6% in the previous session.
SHFE aluminium fell 0.7% to 18,855 yuan a ton, nickel dropped 1.1% to 128,910 yuan, zinc declined 1.4% to 22,225 yuan, lead shed 3% to 17,345 yuan and tin decreased 1.6% to 243,880 yuan.
SHFE lead hit its lowest since May 7 of 17,075 yuan, tracking losses in the previous session on the LME.

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Smuggling of Iranian Oil Raises Insurance Complications Amid Western Sanctions

A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters
A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters
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Smuggling of Iranian Oil Raises Insurance Complications Amid Western Sanctions

A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters
A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters

A collision between two tankers off Singapore in July raises questions over insurance claims, as one of the vessels previously shipped Iranian oil, potentially complicating payments due to Western sanctions, ship-trackers and industry sources told Reuters.

What Happened?

The Singapore-flagged Hafnia Nile and the Sao Tome and Principe-flagged Ceres I collided and caught fire about 55 km northeast of the Singaporean island of Pedra Branca on July 19.

No oil spill has been detected, only a sheen believed to be from damage to the Hafnia Nile's bunker tank, Malaysia's Marine Department said.

The vessel, which was carrying a cargo of naphtha, suffered engine damage and was secured by tugs at the collision site.

On Thursday, ship manager Hafnia said that an oil boom has been deployed at the stern of the ship and around the damaged area, and two tugboats are dispersing the light oil sheen.

Hafnia said it was working with Malaysian and Singaporean authorities to finalize a towage plan.

What’s the Iranian Oil Connection?

The Ceres I had no cargo at the time of the accident.

However, ship data from providers including LSEG and Kpler show the tanker carried Iranian crude in the past.

Ceres I last loaded Iranian oil via transfer with an Iranian tanker in March off the country's Kharg terminal, subsequently transferring the cargo to two tankers around the Malacca Strait between April 7-9, said Claire Jungman, chief of staff at advocacy group United Against Nuclear Iran, which tracks Iran-related tanker traffic via satellite data.

That cargo reached China on May 29, Jungman said.

Ceres I loaded Iranian oil at least four times since 2019, transporting 8 million barrels, according to analysis by Jungman. The vessel also made four trips carrying Venezuelan oil between 2021 and 2023 totaling 7.5 million barrels, she said.

The China-based owner of the Ceres I listed in shipping databases could not be reached for comment.

China, the biggest buyer of Iranian crude, says it opposes unilateral sanctions, but traders rebrand Iranian oil destined for the country as originating elsewhere. Chinese customs have not reported any imports of Iranian oil since June 2022.

Growing Shadow Fleet

This is believed to be the first such collision in recent years involving a vessel that is part of the so-called shadow fleet of tankers transporting oil cargoes that are subject to Western sanctions, insurance specialists told Reuters.

Government and industry officials have raised concerns over risks posed by the growing shadow fleet.

“The recent collision between Hafnia Nile and Ceres I marks a dangerous precedent,” said Jonathan Moss, head of transport with law firm DWF and an insurance claims specialist.

“Neither vessel nor owners are designated (by Western sanctions), however, if the Ceres I was or had in the past been carrying Iranian crude, their insurers may have reason to decline cover or may need to notify the authorities of a potential sanctions breach,” he said.

What Insurance is in Place?

Ships typically have protection and indemnity (P&I) insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.

The Hafnia Nile is covered by Norwegian P&I insurer Gard, one of the top 12 such providers covering around 90% of the world’s ocean-going ships.

Gard said it was “actively supporting” its member BW Group, which operates the Hafnia Nile, declining to give specifics.

Typically, a P&I club that is part of an international group of the 12 biggest companies in the sector covers the first $10 million of P&I losses, with members mutually reinsuring each other by sharing claims above $10 million to $100 million. The group holds reinsurance cover up to $3.1 billion.

A person familiar with the matter said the Ceres I has P&I coverage with an international insurer that is not among the leading 12 providers, and hull and machinery coverage from a Chinese insurer.

What Happens with Claims?

Claims in this case could include costs to repair both vessels, towing the Hafnia Nile to a dock, time in dock for repairs and those incurred by the salvage company and tugs as well as ship surveyors.

Typically, each party in a collision instructs its own loss assessor to prepare a report on what happened, establishing liability and then notify its insurers and make a claim.

The claims process itself is typically dealt with by both hull and P&I insurers and will last months if not longer.

Liability will be determined by a court, probably in Asia.

Any claims sent to hull & machinery, cargo and P&I insurers will be complicated by sanctions rules, DWF's Moss said.

Moss said if the hull & machinery or P&I cover had been placed by insurers in the London market or other jurisdictions, sanctions exclusion clauses could be triggered. This could prevent investigation of the claim including the appointment of loss assessors, loss adjusters, fire experts and others, potentially leaving the insured without cover from both direct insurers or reinsurers, Moss added.