Quiet week offers a chance to reflect on our forecasts

It was another largely uneventful week in commodity markets. For all the talk of an impending ‘super cycle’, the prices of most commodities have generally continued to struggle to extend the large gains made towards the end of last year. In fact, as we outlined in our latest Commodities Outlook, we are sceptical that a further broad-based rally in prices is waiting in the wings. Instead, we expect many of the trends which characterised commodity markets during 2020 to go into reverse, with oil prices outperforming while industrial metals prices falter as policy stimulus in China starts to be withdrawn later this year. Next week brings a slew of survey data, which will be useful to gauge the health of underlying demand for commodities. We expect the manufacturing PMI data for China to show that growth in industrial activity continued to cool in January. (See here.) Meanwhile, we think that the ISM manufacturing index in the US will edge down compared to December but remain consistent with a continued recovery in activity.