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Commodities

Commodities Update

Auto sector woes to weigh on natural rubber prices

After a post-pandemic rebound in 2021, we expect growth in global demand for natural rubber (NR) to slow this year in tandem with a downturn in industrial activity, notably in the NR-intensive auto sector. That said, the market will remain in a deficit and higher energy prices will act as a floor under prices.

18 May 2022

Commodities Weekly Wrap

Energy prices no longer appear to be “lifting all boats”

Most commodity prices fell this week amid a general sell-off in risky assets and a stronger US dollar. That said, we think the days of higher energy prices leading to an all-encompassing rally in commodity prices could be over. Natural gas prices rose on news of disrupted supply through a key transit point in Ukraine but, unlike in previous weeks, other commodity prices didn’t follow natural gas upwards. Instead, difficulties gaining unanimous approval from EU member states for an oil embargo weighed on oil prices. And industrial metals prices fell as data released this week highlighted the severe impact of lockdowns on Chinese demand. Commodity prices will continue to take their direction from latest developments in the newsflow, but we can expect a more nuanced story as commodity groups follow different drivers in the coming weeks. Energy and certain agricultural commodity prices will probably track developments in the war and related sanctions. But industrial metals will continue to take direction from the outlook for demand in China. Prices will probably suffer next week as activity data from China are likely to show that economic activity took a big hit in April as efforts to contain the latest virus outbreak intensified.

13 May 2022

Commodities Update

Some bright spots in China’s commodities trade data

Energy commodity imports held up relatively well in April given the widespread COVID-19 restrictions. But the trade data throw up some question marks about demand for industrial metals given the downturn in export volumes and somewhat lower metals imports.

9 May 2022

Most Recent Alerts

14 hours ago

Commodities Update

Auto sector woes to weigh on natural rubber prices

Key Forecasts

Key Commodity Price Forecasts (End-Period)

Actual

Forecasts

1mth ago

1 wk ago

Latest*

2022

2023

15th Apr.

6th May

13th May

Q2

Q3

Q4

Q1

Energy

Crude Oil (Brent, US$ per barrel)

112

112

110

110

105

100

95

US Natural Gas (US$ per mBtu)

7.30

8.04

7.60

5.00

4.00

5.00

4.75

Coal (Newcastle, US$ per tonne)

309

380

392

275

200

160

145

Industrial Metals

Copper (US$ per tonne)

10,298

9,411

9,064

9,800

9,400

9,000

8,750

Aluminium (US$ per tonne)

3,272

2,810

2,722

3,000

2,750

2,500

2,380

Iron Ore (US$ per tonne)

155

137

125

120

105

90

83

Precious Metals

Gold (US$ per ounce)

1,975

1,883

1,806

1,900

1,800

1,600

1,590

Silver (US$ per ounce)

25.68

22.34

20.66

23.00

21.00

19.00

18.88

Platinum (US$ per ounce)

990

963

936

950

925

900

875

Agriculturals

Corn (US cents per bushel)

790

792

814

700

650

600

563

Soybeans (US cents per bushel)

1,682

1,656

1,660

1,650

1,500

1,400

1,300

Wheat (US cents per bushel)

1,097

1,097

1,175

1,000

900

800

725

Sources: Refinitiv, Capital Economics. *Iron Ore latest price is 12th May 2022


Energy prices no longer appear to be “lifting all boats”

Commodities Weekly Wrap

19 May 2022

Our view

We think energy prices will stay historically high this year, regardless of the outcome of the war in Ukraine, as we expect the West to persist with plans to reduce its dependence on Russian energy. This process will disrupt existing supply chains and prove costly. That said, we expect the price of oil to start to ease back as we move into 2023 as supply responds to higher prices and demand growth slows. But there are major risks to the upside for energy prices given the uncertainty surrounding the war in Ukraine. Most other commodity prices will also be supported in the near term by higher energy costs as they raise the cost of production. But we forecast that industrial metals prices will fall this year on the back of weaker Chinese demand. The price of gold also looks set to fall as inflation rates ease back and the historic inverse relationship with US real yields is restored. It will be a similar story with the prices of agricultural commodities, which should ease back as supply chains adjust and production rebounds, incentivised by earlier high prices.

Latest Outlook

Commodities Outlook

Prices to stay high for longer

The war in Ukraine and its negative impact on commodities supply has prompted us to revise up our forecasts for the prices of most commodities in 2022. Regardless of the outcome of the war, we think energy prices will remain historically high this year as Western countries, particularly in Europe, reduce imports from Russia. Alternative sources of supply will prove more costly, not least because they will come from further afield with higher transport costs. High energy prices will in turn raise the cost of production of most other commodities and act as a floor under prices. That said, we expect slower growth in global economic activity, particularly in China, to weigh on the prices of industrial metals later this year. We also expect the prices of most agriculturals to fall back from their current highs as supply chains adjust and high prices incentivise planting and exports, but again prices will remain elevated for much of this year.

29 April 2022