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China’s PMIs ticked up a little in February, but the big picture is that economic growth remains lacklustre in part owing to measures to contain COVID-19. The subdued demand picture confirms that the ongoing strength in commodity prices is all about …
1st March 2022
In this Update , we answer the key questions about what the exclusion of Russian banks for SWIFT means for Russia and the rest of the world. What is SWIFT? SWIFT (“The Society for Worldwide Interbank Financial Telecommunication”) provides payments …
28th February 2022
We have raised most of our commodity price forecasts this week to account for Russia’s invasion of Ukraine and the heightened risk of disruption to commodity supply . Given that Russia is a leading exporter of many commodities, prices will stay high so …
25th February 2022
Our estimates suggest that risk premiums are currently adding around 40% to commodity prices. This suggests that commodity prices could fall a long way whenever concerns over the Russia-Ukraine conflict begin to ease, though clearly this is unlikely to …
The latest twist in the Russia-Ukraine crisis is likely to keep commodity prices elevated over the coming weeks and months. And if the situation spirals into a more serious and wide-ranging conflict between Russia and the West, commodity prices could rise …
24th February 2022
It was a rollercoaster week for many commodities as tensions between Russia and the West over Ukraine ebbed and flowed and the West held talks with Iran over a new nuclear deal. In the end, it was signs of progress in the Iran talks that pushed oil prices …
18th February 2022
In this Update , we discuss the possible ramifications for the global oil and natural gas markets of a Russian invasion of Ukraine. Much would depend on whether Western sanctions are placed on Russian energy companies and/or Russia decides to withhold …
16th February 2022
Growth in China’s economy has slowed sharply and US interest rate expectations have jumped but commodity prices continue to hold up well . In some cases, constrained supply explains the resilience in prices and, in others, there are fears of supply …
11th February 2022
Our forecasts for commodity prices this year are subject to greater uncertainty than usual. While we expect growth in energy demand to slow, it may still be the case that supply remains constrained. As a result, energy prices may stay high for longer, …
OPEC+’s reluctance to consider a more radical adjustment in its output policy this week raises the risk that production falls short of the group’s target this year . Admittedly, the group agreed to a further 400,000 bpd increase in output in March. But it …
4th February 2022
A Russian invasion of Ukraine or severe ratcheting up of sanctions would add as much as 2%-pts to inflation in DMs, particularly in Europe. Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more …
The latest PMI data out of China suggest that demand for commodities softened again in January. And with Chinese demand unlikely to bounce back meaningfully this year, we continue to expect sharp falls in industrial metals prices by year-end as …
31st January 2022
The US Fed announced at its meeting this week that it will “soon be appropriate” to raise interest rates and hinted that a hike was coming as soon as March . (See here .) The US dollar strengthened, with the DXY index hitting an 18-month high of over 97, …
28th January 2022
Overview – Supply shortages have directly pushed up the prices of energy commodities and have indirectly raised prices of other commodities by boosting production costs. We think this will remain the case for at least another few months. But as we move …
26th January 2022
Despite falls in the prices of most other risky assets, including equities, commodities held up well this week . The prices of equities and commodities tracked each other relatively closely throughout the pandemic, but they have diverged sharply since the …
21st January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
14th January 2022
Most commodity prices increased this week, with coal prices leading the pack on the back of Indonesia’s ban on coal exports this month. That said, we don’t see commodity prices rising for much longer . Indeed, Chinese imports of most raw materials fell …
After a stellar run in 2020-21, we expect the prices of most commodities to ease back this year as economic activity slows, notably in China, and supply bottlenecks start to ease . The macro-economic backdrop for commodities will deteriorate in 2022 . As …
13th January 2022
Overview – Two themes have dominated commodity markets at the turn of the year: the ongoing shortage of energy commodities and the global rise in cases of COVID-19. On the former, we think that shortages will start to ease meaningfully later this year, …
7th January 2022
The experience of South Africa (see here ) with the Omicron variant seems to have allayed investors’ fears over commodity demand. Indeed, the net long position held by investors in the oil futures market has begun to rise, indicating an improvement in …
The December PMI data for China point to a healthy pick-up in commodity demand. But this only partially reverses the declines from earlier in 2021, and the big picture remains that commodity demand in China is set to struggle this year as headwinds facing …
4th January 2022
Commodity supply shortages have been widespread over the last year or so There doesn’t appear to be a single cause of these shortages But a key theme is that prices are now close to a peak (if they haven’t peaked already) In this Commodities Watch , we …
21st December 2021
It was a week of central bank decisions, culminating in ‘Super-Thursday’. (See our Drop-In here .) The big picture is that central banks generally sounded more concerned about the rise in inflation , despite the ongoing spread of the Omicron variant. …
17th December 2021
We are sceptical that commodity demand growth in China is about to reignite, despite this week’s cut to the required reserve ratio (RRR) for most banks and data showing surprisingly strong imports of key commodities in November . After all, both …
10th December 2021
Overview – Most commodity prices have fallen in the last week or so following the identification of Omicron – a new, and potentially more transmissible, strain of COVID-19. However, while commentary has generally focused on the effects that the new strain …
7th December 2021
The sharp rise in China’s commodity imports last month could be taken as a sign that underlying demand growth is undergoing a renewed acceleration. But given that this is just one month’s data, and that other indicators point to a further softening in …
Oil prices fell briefly on Thursday after OPEC+ decided to push ahead with its plan to raise oil output by 0.4m bpd a month, despite plunging oil prices since news of Omicron broke . Prices recovered shortly after, though, probably because OPEC+ left the …
3rd December 2021
Taken together, China’s manufacturing PMIs point to somewhat stronger industrial activity in November, but this was almost entirely due to improved power supply last month rather than a pick-up in underlying demand. Accordingly, there was little to offer …
1st December 2021
We were already downbeat on the outlook for most commodity prices in 2022, not least because we thought that prices had lost touch with demand fundamentals. The risk of Omicron-related effects on demand just adds weight to our view . The prices of most …
29th November 2021
Most commodity prices fell on Friday after South African scientists declared they had identified a new COVID-19 variant on Thursday which may be more transmissible. We think it’s still early days to say what this means for the global economy, but it has …
26th November 2021
Some commentators have pointed to the slump in the Baltic Dry Index as a sign that shipping bottlenecks are easing. But we think it is more a symptom of lower Chinese steel output and plunging iron ore prices . The Baltic Dry Index (BDI) is a composite …
25th November 2021
This week showed that the energy crisis is not in the rear-view mirror just yet . Germany’s energy regulator suspended its certification process of the Nord Stream 2 pipeline on Tuesday, owing to issues regarding the organisational structure of the …
19th November 2021
After soaring towards the tail end of 2020, steel prices in Europe have eased back in recent months. And we think that prices will fall much further over the next couple of years, as a combination of healthy profit margins and low inventories continue to …
18th November 2021
Although the climate deal struck at COP26 appears to have fallen short on many counts, it does at least reaffirm our view that demand for traditional energy commodities will struggle in the long run . Following two weeks of negotiations, the ‘Glasgow …
16th November 2021
Despite falling short of its targeted increase in output once again in October, we think OPEC+ will continue to snub calls to raise output more rapidly . The week began with comments from the Biden Administration that OPEC+ was imperilling the global …
12th November 2021
China’s imports of iron ore and copper rose in October compared to a month prior (in seasonally adjusted terms). But we doubt this is the start of a renewed upswing, not least as indicators of demand have deteriorated and volumes were still down sharply …
8th November 2021
Most commodity prices fell this week, adding to the sense that the recent rally is close to a peak (if it hasn’t peaked already) . Either way, we think energy prices will be falling next year on weaker demand growth and greater supply, contributing to …
5th November 2021
Despite their recent positive correlation, we think that oil and the dollar will go in opposite directions before long: we continue to think that oil prices will fall back as the supply situation improves, while we expect the greenback to stay strong …
1st November 2021
Although the China PMI data were a mixed bag in October, the big picture is that they remain at odds with sky-high industrial metals prices. This adds to our view that prices have quite a long way to fall over the next year or so as constraints on supply …
It is perhaps too soon to call the end of the energy price rally, but the prices of European natural gas and Chinese coal took a tumble this week as supply fears were, at least partially, allayed. What’s more, the recent surge in oil prices stalled. …
29th October 2021
Download the PDF for the Full Report Overview – Low stocks ahead of winter in the Northern Hemisphere have sent energy prices soaring. In turn, higher energy costs have also constrained the production of other commodities, most notably industrial metals. …
28th October 2021
The meteoric rise in energy commodity prices over the last few months lost momentum this week . Natural gas and coal prices were down particularly sharply in Europe after President Putin reiterated comments that there is scope for a rise in supply from …
22nd October 2021
Most commodity prices increased this week . Optimism over electrification, which was a hot topic during LME Week, seemed to feed through into higher industrial metals prices. But the prices of energy commodities were the pick of the bunch . Brent crude …
15th October 2021
China’s imports of key commodities slumped almost across the board in September. The main exception was imports of coal, which soared in response to recent power shortages. We expect coal imports to remain strong over the next few months, but they too …
13th October 2021
As energy prices hit multi-year highs, we look into the link between energy and non-energy commodity prices. It is clear that industrial metal prices track energy prices the most closely over time, which is mainly because the drivers of demand are …
11th October 2021
Commodity prices generally rose this week, helped by the US senate approving a deal to increase the federal debt ceiling . After a rollercoaster of a week, European natural gas prices ended the week lower following comments from President Putin that …
8th October 2021
The price of European natural gas (TTF) surged by around 35% this morning, before crashing back down on Putin’s reassuring comments about Russian supply. The latest price moves appear speculative, and we retain our view that it is just a matter of time …
6th October 2021
Overview – Natural gas and coal prices soared in September. In turn, this has raised the output costs of industrial metals, most notably those which are especially energy intensive such as aluminium and steel. At the same time, reports suggest that some …
5th October 2021
Commodity prices generally rose this week , but especially energy prices, which continued to surge on constrained supply, unseasonably high demand and low stocks. That said, we think the supply shortfalls will prove temporary and expect energy prices to …
1st October 2021
Natural gas prices have soared and are likely to remain historically high for some time But there has not been an underlying structural shift up in demand And high prices will incentivise supply At the time of writing, global natural gas prices are …