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 The London-listed shares of mining and trading giant Glencore
rebounded by around 10 percent, clawing back some ground from a near
30 percent slump on Monday.
Investors sold off Glencore bonds, highlighting nerves over its debt
burden and financial situation.
Glencore has been afflicted by the same issue facing other miners:
the prolonged fall in global metals prices caused partly by a
slowdown in China, which is the world's biggest consumer of metals.
Energy and commodity prices have fallen largely because of rising
output following heavy investment into new assets while prices were
still high, which has increasingly clashed with slowing demand in
Asia, where China's economy is growing at its slowest pace in
decades.
The problems in the sector contributed to global trading group Louis
Dreyfus Commodities B.V reporting a steep drop in first-half profits
on Tuesday.
The crisis has also hit the shipping sector, where dry-bulk merchant
Daiichi Chuo Kisen Kaisha filed for protection from creditors on
Tuesday.
Glencore's shares remain down by more than 80 percent since it
listed in 2011, at the last high point of a long commodities boom,
with its market capitalization briefly dipping below 10 billion
pounds ($15.16 billion) for the first time.
Investment bank Citigroup said there was still value in Glencore.
Citi rated Glencore shares as a "buy" and said Glencore could even
consider going private, but other traders were wary of buying into
commodity stocks.
"It is hard to make a case for buying commodity stocks in general
with the current climate in China and emerging market volatility,"
said Thames Capital Markets' senior trader Gerren O'Neill.
CURRENCY HITS
Shares in Asian commodity merchant Noble fell 10 percent, near to
levels last seen at the height of the global financial crisis of
2008, giving it a market capitalization of just under S$3 billion
($2.10 billion).
Australian energy shares also tumbled, with Santos, Origin Energy
and Karoon Gas all losing around a tenth of their stock market
value.
"There is a crisis of confidence and people are continuing to
de-leverage commodity stocks exposure," said Benjamin Chang, CEO of
hedge fund LBN Advisers, which manages about $600 million in funds.
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Both Glencore and Noble Group have also seen their Credit Default
Swap (CDS) prices - the cost of insuring against the companies
defaulting on their debt - soar this year.
The bankruptcy filing of Daiichi Chuo Kisen Kaisha hit the shares of
rival maritime companies, which in turn affected Japan's benchmark
Nikkei stock market.
Daiichi Chuo, which has suffered four straight annual losses as
Chinese demand for iron ore and coal has dropped, had liabilities of
around 108 billion yen ($900 million) as of end-March. It has a
market value of just $96 million.
Weakening commodities markets also hit currencies from countries
that rely heavily on energy or raw material exports.
In Malaysia, a large producer of oil and natural gas, the ringgit
fell against the dollar on Tuesday to around its lowest level since
the depths of the Asian financial crisis in 1998. In Indonesia, the
world's biggest exporter of thermal coal, the rupiah is languishing
near 17-year lows.
Australia's dollar, closely linked to its commodity exports such as
iron ore, coal, oil and natural gas, has also taken a beating,
losing more than a quarter of its value against the greenback since
June 2014, when the current oil price rout began.
(Additional reporting by Sudip Kar-Gupta in London, Gus Trompiz in
Paris and Jacob Gronholt-Pedersen in Singapore; Editing by Alex
Richardson and William Hardy)
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