Volatility to linger in commodity markets

Commodity prices remained extremely volatile this week. After all the supply fears associated with the war on Ukraine, a rising number of COVID-19 cases in China raised concern about both demand and supply given widespread lockdowns in key industrial centres. We think the current see-sawing of prices is likely to continue in the coming weeks at least until we have greater clarity on commodities supply. What’s more, market participants appear increasingly wary of entering such volatile markets, which is weighing on liquidity. Developments in the war in Ukraine will continue to be the overarching driver of commodity prices next week. We will also be following China’s measures to contain the virus outbreak. The authorities may provide some policy stimulus to try to get growth plans back on track, but we think it will be limited in scope and unlikely to give a significant boost to commodities demand.