We expect three factors to combine to rescue the prices of key industrial commodities in the coming months. First, the responses of producers to the previous slump in prices will start to constrain supply. The pace at which this will happen will vary – probably much sooner, for example, in the case of crude oil than iron ore where there is still ample low-cost supply. But the old adage that “the best cure for low prices is low prices” still holds true. Second, markets have become too pessimistic about the outlook for demand. We expect the economic news from China in particular to improve over the remainder of the year and into 2016. Third, investor sentiment towards commodities is starting to bottom out. Indeed, compared to high-priced equities and bonds, many commodities now look attractively valued.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services