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Although China’s official and unofficial PMIs improved in March, the underlying picture is that the economy remains weak and is unlikely to offer much support to commodity prices . The Caixin manufacturing PMI jumped from 40.3 in February to 50.1 in March …
1st April 2020
Commodity prices are still highly volatile, but they have remained in the doldrums this week despite the rally in other risky assets, notably equities. We have argued for some time that until the virus-containment measures are lifted, looser monetary and …
27th March 2020
We think there will be some permanent loss of commodity consumption in 2020 owing to virus-related disruption to activity, but we do see prices picking up later this year as economic growth starts to revive . Few would dispute that measures to contain the …
26th March 2020
Stockpiling and labour shortages associated with the coronavirus have supported the prices of some agricultural commodities, particularly the grains, in recent weeks. However, once the virus-related containment measures are lifted, we think that their …
25th March 2020
While the price of Brent has dropped by nearly 60% since January, agricultural prices have so far held up comparatively well. Although we wouldn’t rule out agricultural prices falling further, the recent divergence in prices reveals that the relationship …
24th March 2020
Industrial commodity prices slumped this week amid virus-related economic disruption in the US and Europe and rising concerns about a deeper economic downturn in Asia, particularly China. Meanwhile, governments and central banks have continued to roll out …
20th March 2020
As commodity prices continue to flash red, this Update summarises how we think things will play out from here. In the near term, we suspect that further price falls are in store, regardless of policy support. Instead, it will be signs that the virus is …
18th March 2020
Commodity prices tumbled this week, echoing moves in other financial markets . Oil was among the worst performers as Saudi Arabia and Russia announced that they will ramp up output from April, after OPEC+ abandoned its efforts to balance the oil market …
13th March 2020
In the last few weeks, we have revised down our forecast for global economic growth this year owing to the hit to activity from the coronavirus. At the same time, we now expect looser global monetary conditions. As a result, we have revised up our …
Even before OPEC+ abruptly abandoned output cuts, oil had fared far worse than most other commodities. Some of this can be explained by oil’s greater use in the forms of economic activity most affected by virus containment measures, such as transport. And …
10th March 2020
Against a backdrop of a coronavirus-related slump in demand, Saudi Arabia appears to have abandoned efforts to balance the oil market and is instead aiming to protect market share. Its pledge to significantly raise production from April will result in a …
9th March 2020
China’s commodity exports collapsed in the first two months of 2020. In contrast, commodity imports held up relatively well, but this probably reflects the greater logistical challenge faced by outbound shipments. And with almost all high-frequency …
Oil prices closed below $50 per barrel this week for the first time in two years as Russia refused to rollover or deepen OPEC+ output cuts at the latest meeting with OPEC in Vienna. As a result, we will be revising our supply and price forecasts in a …
6th March 2020
Overview – Commodity prices continued to fall in February as the coronavirus, which started in China, spread to most other regions of the world and sparked fears of a slowdown in global economic activity. We have revised down our forecasts of commodities …
4th March 2020
The structural economic slowdown which we expect in China over the coming decade will weigh heavily on consumption of industrial commodities and their prices. Steel will be by far the most affected commodity, but copper and aluminium will also suffer. In …
3rd March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
China’s PMIs slumped in February, and a particularly worrying drop in the employment component suggests that a swift recovery is not on the cards. The data do, however, bolster our case that economic stimulus will be forthcoming, giving a boost to …
The prices of almost all commodities plunged this week amid fears that the coronavirus is morphing into a pandemic , with negative implications for global economic activity and commodities demand. Prior to the virus outbreak, we had expected a gradual …
28th February 2020
Industrial commodity prices trod water this week as investors struggled to assess the extent of the economic fallout from COVID-19. That said, the lingering sense of uncertainty put wind in the sails of precious metals prices . It will be difficult to …
21st February 2020
Our forecast for the US dollar to remain strong in 2020 suggests downward pressure on commodities prices. However, we would argue that there are instances when commodity prices can still rise - despite an appreciating US dollar - if the global …
18th February 2020
Disruption to China’s commodity imports, owing to the outbreak of coronavirus, has sent the Baltic Dry Index into freefall. While freight rates should recover as and when China’s industrial activity picks up, our forecast of lacklustre demand for iron ore …
17th February 2020
The prices of most industrial commodity prices rose this week on hopes that the coronavirus is near to its peak and that economic activity in Asia will start to pick up soon. The announcement of output cuts by several metal producers in China has also put …
14th February 2020
The economic disruption caused by the coronavirus means that we now expect the oil market to be in a surplus in Q1 2020, as opposed to the deficit that we had previously envisioned. However, providing that the virus is contained, we think that demand will …
11th February 2020
Having plunged a week earlier, commodity prices stabilised a little towards the end of this week . That said, until we have a clearer steer on the scale and duration of the coronavirus, it is difficult to assess the economic impact or the direction of …
7th February 2020
Overview – Commodity prices, and energy prices in particular, have been hard hit by the outbreak of coronavirus in China and the prospect of lower global commodities demand. There is still too much uncertainty to factor the virus into our forecasts. But …
4th February 2020
China’s PMIs dipped in January, but they offered little indication of the state of the economy in the wake of the coronavirus outbreak. Though a slump in Chinese activity in Q1 now seems almost certain, the evolution of the epidemic over the coming weeks …
3rd February 2020
Commodity prices lost ground last week, as the rapid spread of the Wuhan coronavirus has dented China’s near-term growth prospects . Indeed, both oil and base metals prices have fallen 10% from their respective January peaks. While it is impossible to …
31st January 2020
Our analysis suggests that it is difficult to square the coronavirus-led sell-off in oil markets with the fundamentals. Instead, we think the move is rooted in a marked deterioration in investor sentiment which, if signs emerge that the virus is being …
29th January 2020
Overview – A gradual rebound in global economic growth and, in many cases, constrained supply mean that we are broadly positive on the outlook for most commodity prices in 2020-21. One exception is the price of gold, which we expect to fall on the back of …
27th January 2020
Fears that the outbreak of a new coronavirus in China could dent demand hit industrial commodity prices hard this week, erasing almost all year-to-date gains . We don’t pretend to be experts on public health issues. However, experiences of previous …
24th January 2020
The lukewarm market reaction to the signing of the Phase One trade deal between the US and China lends weight to our view that an agreement had already been priced by commodities markets . For our part, we think that China is unlikely to meet its US …
17th January 2020
There has been a muted response in commodities markets to the signing of the Phase One trade deal between the US and China, perhaps because the good news was already priced in. That said, it may also be a reflection of the fact that China’s promises to …
16th January 2020
The deal signed yesterday between the US and China was broadly as expected and has not led us to change our economic forecasts. The apparent ceasefire in the battle over tariffs removes a downside risk to growth. But tariffs remain high and we suspect …
We think that a combination of stronger supply, and weaker demand, growth will push the wheat market into a surplus this year. As a result, we expect wheat prices to drop by about 20% in 2020 . To recap, the price of wheat has surged to around 570 cents …
15th January 2020
China’s commodity imports were strong in December, and in 2019 as a whole, in part because a number of one-off structural factors boosted volumes. Looking ahead, we expect growth in commodity imports to ease back this year as China’s economy slows . …
14th January 2020
We think that the prices of wheat and soybeans will tumble this year on the back of high stocks. However, the outlook is more encouraging for the prices of some of other agricultural commodities, such as corn, which should rise due to a gradual upturn in …
13th January 2020
Oil prices yo-yoed last week, as US-Iran warmongering faded almost as quickly as it started. Similarly, the price of gold spiked, but ended the week unchanged . Meanwhile, the market reaction to the slowdown in US non-farm payrolls growth in December was …
10th January 2020
We are cautiously optimistic about the outlook for commodities prices this year. While global economic growth will remain subdued, we think it will start to revive over the course of 2020. Therefore, there is now scope for price gains, particularly as the …
7th January 2020
Overview – The prospect of a ‘Phase One’ trade deal between the US and China buoyed commodity prices in December. Although we expect trade tensions to remain elevated, we think that most commodity prices will rise in the year ahead as fears of a global …
6th January 2020
Oil prices received a shot in the arm following Friday’s assassination of Qassem Soleimani , a top ranking Iranian general. Regardless of geopolitical events, we expect constrained supply growth and a modest pick-up in demand to push oil prices higher in …
3rd January 2020
China’s official and unofficial manufacturing PMIs remained strong at the end of 2019, which is positive news for commodities demand. However, we think that the ongoing slowdown in construction activity will constrain economic growth, and will weigh on …
2nd January 2020
Most commodity prices rose this week, in part owing to the release of strong Chinese activity data. Lingering optimism following the announcement of a US-China “Phase One” trade deal at the end of last week also supported prices . We expect investor …
20th December 2019
We don’t think that China will import the $40bn of agricultural goods that it has reportedly pledged to buy from the US. As such, the impact on prices should be fairly minimal . Last Friday, the US and China reached a ‘Phase One’ trade deal. (See our …
16th December 2019
Most industrial commodity prices rose this week, as the US and China announced that they had reached a phase-one trade deal . The agreement cancels the tariffs scheduled to come into effect this Sunday (which had the potential to be particularly damaging …
13th December 2019
Our new oil demand proxy provides a timely indication of the health of global oil demand, and lends insight into whether it is demand, or other factors, that is driving prices at any given time. We find that expectations for future oil demand and supply …
Regardless of the outcome of US-China trade talks, we think lower Chinese consumption will weigh on the price of soybeans next year . China typically consumes just under one-third of the global soybean crop and accounts for about two-thirds of the trade …
11th December 2019
China’s commodity imports were relatively strong in November, perhaps reflecting some front-loading of regional spending on infrastructure. But our view that growth in China’s property sector is set to slow suggests the strength in commodity imports will …
9th December 2019
The announcement that OPEC+ will deepen output cuts by 0.5m bpd in the first quarter of 2020 boosted oil prices this week . While the decision means that the market will be a bit tighter next year than we had anticipated, we think the drop in supply won’t …
6th December 2019
Today, OPEC+ announced that it will deepen its oil output cut by 0.5m bpd to 1.7m. More surprising, is that it looks as though Saudi Arabia will cut supply by a further 167,000, despite the fact that it is already producing well below quota . This could …
Overview – Commodity prices struggled to find direction in November despite the release of somewhat stronger economic data. Meanwhile, developments on the US-China trade front remained a key driver of sentiment. While a “phase one” trade deal seems likely …
3rd December 2019
