If traders ever doubted that we live and work in a global marketplace, look no further than the fact that I am watching Greek bond yields in Europe and copper mines in Chile to trade resource shares in Johannesburg.
And on my far left screen, (the number four one), the euro vs dollar plays out with every uptick on the US dollar translating to a downtick on the S&P 500. As much as all the emerging-market decoupling talk has been around, we are still at mercy to the overseas markets. With extreme volatility being the theme for last year, it looks much the same again this year.
The big story of the trading week has been ArcelorMittal (ACL) and Kumba Iron Ore (KIO). Kumba said that from Monday, it will only supply the steelmaking ingredients to ArcelorMittal South Africa “on commercial rates”. The two companies have had a long-term agreement since 2001 when Kumba’s Sishen Iron Ore subsidiary was supplying iron ore at cost plus 3%. ArcelorMittal has rejected the move and will seek to enforce the agreement — unfortunately for ArcelorMittal it sources 65% of its Iron Ore needs from Kumba.
The result was that ACL was suspended on the JSE and KIO jumped 7% to a new high of 3 8150c. Where this gets really interesting is that Kumba is rumoured to be the most shorted stock on the JSE after Shoprite, and this news benefits Kumba sweetly — there must be a lot of people burning on those short positions. The latest is that ACL will resume trading on Wednesday morning and the OTC (over the counter) prices are anywhere from 8 000c to 9 000c, a drop of about R30. If you are short ACL, congrats on the early Christmas present.
As I write, the South African government has waded into the argument and has stated that the trade minister is handling the dispute. That is all we need, government interference in the mining sector. Something tells me this soap opera is going to run for a while.
Nick Kunze is head of trading at BJM Private Client Services