Australian cyclone pushes copper prices to new highJust after Queensland, Australia had gotten over the worst flooding in a century, the people there are bracing for a huge category 5 hurricane/cyclone - being compared to the US' Hurricane Katrina. Winds are gusting up to 300 km/h, and there is warning of life and property damages.
From the Australian Government Bureau of Meteorology:
SEVERE TC YASI IS A LARGE AND VERY POWERFUL TROPICAL CYCLONE AND POSES AN EXTREMELY SERIOUS THREAT TO LIFE AND PROPERTY WITHIN THE WARNING AREA, ESPECIALLY BETWEEN CAIRNS AND TOWNSVILLE. THIS IMPACT IS LIKELY TO BE MORE LIFE THREATENING THAN ANY EXPERIENCED DURING RECENT GENERATIONS.
Here's a satalite photo of the hurricanee/cyclone:
And the expected path of the storm:
Let's take a look at the impact of the recent flooding in regards to currency markets.
The AUD/USD pair had been riding high coming into the New Year, but in addition to some other external events - such as China hiking rates - we see a pretty steep move over the span of a week from the 1.02 area down to 0.9825 on the back of the strong flooding in Queensland. This is a province that provides a good chunk of the natural resources used in export industry. We see the AUD/USD taking a strong move upward yesterday, rising above the parity level, it could be in a spot to reverse some of this gains as Cycole Yasi makes landfall.
We'll see if the impact of the hurricane can cause the widespread damage the flooding did, but if we have serious damage to infrastructure that this could have more serious impact. Depending upon the damage, normal business should re-start on Friday, but it is still an unknown factor. Agriculture is expected to take a big hit as winds and rains wipe out crops. Sugar alone is worth hundreds of millions of dollars. Tourism, the lifeblood of the Cairnes regions, may be out of action for a long time with island resorts expected to be battered as well as coral reefs and the rainforest.
Here's some other stories on the cyclone's potential impact on Australia:
Cyclone Yasi is bearing down on 85 per cent of Australia's banana crop. If Yasi does the damage predicted, it will be the second time in five years the banana crop has been devastated by cyclone. Cyclone Larry in 2006 cost the industry $460 million, without counting its impact on suppliers, backpacker hostels which house pickers, and other parts of the economy.
The news that mining giant Xstrata is evacuating its copper refining and port operations in Townsville as cyclone Yasi approached helped to push the metal to as high as $9,985 a tonne. The Townsville plant produces around 300,000 tonnes of copper cathode a year, from ore extracted from the Mount Isa Mines in north west Queensland. The refinery is the largest of its kind in Australia, and employs around 220 people.
Tin also hit a record high this morning, tracking the move in copper, to $30,425 a tonne. Both metals have already been at record levels in recent days, driven by reports of strong manufacturing output in many countries as the global economic recovers.