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Turning a corner in 2020

While there appears to be little to lift spirits in the near term, we think the macro-economic backdrop for commodity markets will turn more positive during 2020. We expect global economic growth to pick up over the course of the year, which in turn will prompt a rise in investor risk appetite. Both developments should give a boost to commodities demand. Meanwhile, the supply of oil and many of the industrial metals is likely to remain constrained next year, adding to the upward pressure on prices. In contrast, we expect the price of gold to fall on the back of weaker demand for safe havens.
Caroline Bain Chief Commodities Economist
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Commodities Weekly Wrap

Easing of lockdown lifts metals prices, for now…

The prices of many industrial metals (IM) picked up this week on news of an easing of COVID-19 restrictions in China. However, we think weak demand and improved supply in China will send IM prices lower in the coming months, even if high energy prices keep them historically elevated. On the energy front, crude oil prices are currently little changed w/w at around $110 per barrel. We think the likelihood of fewer Russian exports in the coming months will keep prices elevated, although slower demand growth and greater non-Russian supply should nudge prices closer to $100 by year-end. Next week, energy and agriculture prices will continue to be driven by the implications of the war in Ukraine. It will be worth watching out for any payment problems reported by European importers of Russian natural gas, given that it is still not clear whether importers can make payments in a way that satisfies both the European Commission and Russia. On the data front, commodity prices could take direction from May PMI data for the US, Europe and Japan on Tuesday, as they will shed more light on demand.

20 May 2022

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

More from Caroline Bain

Commodities Update

China PMIs may be as good as it gets

The key takeaways from China’s May survey data are that while demand remains robust, supply shortages are leading to inventory drawdowns and price inflation. The data are broadly positive for commodity demand, but we think the withdrawal of fiscal stimulus will slow economic activity in the coming months.

1 June 2021

Industrial Metals Update

Calling time on the rally in US steel prices

Limited domestic supply, expensive imports and strong growth in demand have fuelled the rally in US steel prices. But with supply set to improve, at a time of softer growth in demand, prices should fall.

26 May 2021

Metals Data Response

Global Steel Production (Apr.)

Global steel production rose again in April as lower output in India, in particular, was offset by sizeable jumps in production in China, Russia and Brazil. For now, virus-containment measures remain a key driver of global supply, but high global prices mean that where they can, producers are raising output.

21 May 2021
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