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Aluminium prices have been falling since 2011, despite solid growth in demand. The underlying problem is the scale of excess capacity and output in China which will remain a drag this year at least. But this has been compounded by high premiums owing to …
4th April 2014
Large potential plantings of soybeans, corn and wheat by US farmers underpin our view that US grain and soybeans prices are likely to fall over the course of this year. … US farmers to prioritise soybeans over …
1st April 2014
There was considerable variation in individual commodity price movements in March. Weak Chinese economic data weighed on both industrial metals and energy prices, but the prices of some agricultural commodities continued to strengthen on supply concerns. …
We expect China’s oil demand to continue to grow at a sluggish pace over the next few years. However, rather than this primarily being due to slower economic growth, we would put more emphasis on measures to increase vehicle efficiency and promote public …
28th March 2014
It is often taken as given that demand for coal will continue to rise inexorably as developing countries use it to power their growing economies. However, coal’s poor environmental credentials are leading many developed economies, and some emerging ones, …
27th March 2014
Palladium prices have risen 11% since the beginning of this year. A number of recent developments, including the risk of disruption to Russia’s exports of palladium, have provided a boost. But we believe that solid demand prospects and ever-present risks …
25th March 2014
The latest manufacturing PMIs confirm that China’s economy is continuing to slow and that the recovery in the euro-zone lacks strong momentum. This should continue to weigh on the prices of industrial commodities, notably copper and oil. … No sign of …
24th March 2014
Iron ore prices have fallen by nearly 20% since the beginning of this year, despite still strong Chinese imports. Prices may recover somewhat as we move into the second quarter, a time of seasonal strength in China’s steel output. However, a surge in new …
21st March 2014
The recent surge in Iraqi oil production is a good sign that Baghdad’s ambitious plans to dramatically increase output may be on the right path after stalling for the last year. However, there are still major problems to overcome before higher production …
We think that the sharp rise in agricultural prices since the beginning of the year is likely to be a spike rather than the start of an upward trend. Indeed, the surge in prices is mainly due to a mixture of adverse weather, political tensions and …
20th March 2014
As copper and iron ore prices went into apparent freefall last week, one might have expected a general sell-off in metals markets. However, the response of other metals prices was more nuanced, with some actually gaining on the week. This lends supports …
19th March 2014
The sale of crude oil from the US’s Strategic Petroleum Reserve is not as unusual as some of the media headlines suggest, and the small test release, announced yesterday, is unlikely to have a significant impact on global markets. Indeed, the scale of the …
13th March 2014
Grain and soybean prices are likely to be determined by weather factors and geopolitical risks over the next few months, but we believe that the risks lie to the downside, especially for soybeans. … Crop prices supported by weather and conflict …
11th March 2014
It has been our long-held (and non-consensus) view that copper and iron ore prices were set to fall significantly this year based on improving mine supply and slowing demand growth, notably in China. The speed of the recent price falls has taken even us …
We expect global demand for coal to be subdued and prices to fall further over the next few years as major consuming countries, including China as well as the US, take more steps to reduce pollution. However, the downside should be limited by growing …
10th March 2014
China’s commodity imports were much stronger than expected in year-on-year terms in February. But we suspect that much of this is due to a combination of financing deals and opportunistic buying, rather than a signal of stronger underlying demand. … …
At face value, the “war” on pollution and less investment-driven growth reiterated at China’s ongoing National People’s Congress (NPC) does not bode well for commodity demand (or prices). Indeed, we expect further price falls this year. But the …
5th March 2014
Whilst we do not expect significant disruption to the supply of any commodities, there is much greater potential for exports of grain from the Ukraine to be interrupted than energy supplies from Russia. … Ukraine crisis a bigger threat to grain markets …
4th March 2014
A further escalation of the crisis in Ukraine could return the price of a barrel of Brent to the highs of around $125 seen in the early days of the “Arab Spring”. However, we would expect any such surge to be short-lived. Even if there is significant …
Adverse weather played a major role in the upward price movements of both energy and agricultural commodities in February. Harsh winter conditions in the US boosted energy prices while concerns about drought in Brazil sent soft commodity prices soaring. …
3rd March 2014
The potential end of the controversial support scheme for rice farmers in Thailand this week should add to the downward pressure on rice prices over the next few years. In particular, how the government deals with the enormous stockpile it has already …
26th February 2014
After calming down towards the end of last year, political protests and disruption in key producer countries have re-emerged as a key factor driving oil prices higher. What’s more, the extreme cold in many parts of the US and Asia has boosted demand for …
24th February 2014
Weaker manufacturing PMIs published today underline the downside risks to the prices of industrial metals from the continued slowdown in China and the fragility of the recovery in the euro-zone. Even more than usual now rests on the US economy and US …
20th February 2014
One source of relief for copper producers has been the recent strength of China’s copper imports. This has been somewhat surprising given that other indicators point to weakening Chinese economic activity. One explanation has been that copper is being …
18th February 2014
The announcement that China’s government will place more emphasis on food safety and quality, rather than just quantity, might suggest that the country will have to import significantly more grain. However, the statement represents more of a subtle shift …
Adverse weather is affecting US commodity prices in some obvious and some more surprising ways. As would be expected, the prices of energy and some agricultural commodities have surged. But less intuitively, the weather may have contributed to the …
14th February 2014
The recent partial recovery in the price of gold vindicates the cautiously positive view we have held since the slump in the first half of 2013. We continue to expect further gains over the course of this year, helped by continued strong demand from China …
12th February 2014
Although China’s imports of many commodities reached new “record highs” in levels terms in January, this headline can be written most months. Indeed, the data were probably flattered by demand brought forward ahead of the relatively early Chinese New …
Strong demand for grains is likely to support prices over the first half of the year. However, large harvests in South America and the US should put downward pressure on prices as the year progresses. … Strong demand to limit grain price …
11th February 2014
We believe that the recent surge in US aluminium price premiums will be temporary as it reflects a regional supply bottleneck rather than a fundamentally tight global market. Supply will inevitably find its way to the US market to benefit from the high …
Unlike the majority of base metals, the supply profile for the leading Platinum Group Metals (PGMs), platinum and palladium, is likely to deteriorate. South Africa and Russia account for the bulk of mine output, making it highly vulnerable to disruption …
7th February 2014
High global stocks of sugar and coffee should be more than ample to cover any damage to crop production from the heat wave in Brazil. However, the amount of rain over the next few months will be the key factor in determining prices, at least until …
5th February 2014
Commodity prices initially appeared to have shrugged off the recent sell-off in emerging market (EM) assets, perhaps focussing on the fact that Fed tapering depends on a continued pick-up in economic activity. Since then, weaker manufacturing data from …
4th February 2014
Commodities prices started 2014 on a subdued note as high stocks in the US depressed crude oil while poor manufacturing PMI data from China raised concerns about wider commodity demand. Prices regained some lost ground towards the end of the month, led by …
3rd February 2014
It is often taken as given that oil demand in the developing world will increase exponentially, driven by buoyant economic activity, leading to ever higher oil prices. However, there is huge scope for developing nations to use oil more efficiently and to …
30th January 2014
The extreme cold in the US this winter has caused a dramatic increase in the price of natural gas. This jump is likely to be short-lived but we expect a more sustained price rise from 2015. … Cold weather heats up the US natural gas …
27th January 2014
The scheduled closure of a number of the world’s largest zinc mines after a period of strong growth in consumption suggests that there could be upward pressure on zinc prices in 2014-15. This perceived tightness is already being reflected in the …
Disappointing manufacturing data from China underline the downside risks to the prices of industrial commodities in the coming months, although the news from the euro-zone is continuing to improve. … Bad news from China offsets better news from …
23rd January 2014
Lower production costs and only modest growth in demand is likely to mean that steel mills will have little pricing power in 2014 and that prices will fall. By 2015, however, if consolidation in China’s steel sector progresses - with a reduction in …
22nd January 2014
Changes to China’s farm subsidies, which would allow market forces to have more influence over domestic cotton and soybean prices, should also result in substantially lower state stockpiling. This could release a significant amount of supply onto global …
20th January 2014
Commodities will not of course underperform other assets for ever, especially with end-user demand supported by a strengthening global economy. In comparison, valuations in equity and bond markets are looking stretched. Nonetheless, it may still be too …
The latest slump in the Baltic Dry Index (a measure of sea freight costs) has prompted some concern over the strength of the global economic recovery. However, we would not place much faith in the BDI as an indicator of broader macro trends, as it mainly …
17th January 2014
On 12th January, a law banning ore exports from Indonesia came into effect. The impact will be greatest in the nickel market, where Indonesia has a dominant position as the second largest miner of nickel and the largest ore exporter. At the final hour, …
14th January 2014
Further increases in the production of grains and soybeans this year should put further downward pressure on prices. However, there is still plenty of time for adverse weather to shock the market. … Higher output implies another weak year for grain …
13th January 2014
Confirmation that the interim nuclear deal between the major Western powers and Iran will come into force on 20th January is not in itself a game-changer for oil markets. Indeed, in the near-term, developments in Libya may prove more important. The …
The very cold weather in the US appears to have had fairly little impact on agricultural commodities. Indeed, even those crops most at risk, such as wheat and citrus fruits, seem to be mostly unharmed. … US farmers dig in for cold …
10th January 2014
Unsurprisingly, China’s imports of many commodities, including oil, reached new highs in 2013. More noteworthy were clear signs of a slowdown in the growth of many key commodity imports. What’s more, this trend will continue as China’s economy slows and …
Falling exchange stocks and solid apparent consumption growth in China in the second half of the year pushed copper prices to around a 7-month high of $7,000 per tonne by end-2013. However, the perceived market tightness is likely to fade, in part owing …
The progress being made in defusing tensions over Iran’s nuclear programme has failed to have a marked impact on global oil prices. In part this is because of renewed disruption elsewhere in the region, notably in supply from Libya. Nonetheless, we …
9th January 2014
The end of 2013 marked another year of dismal returns for commodity investors. The prospects for supply have been the key driver of most commodity prices, especially for agriculturals. The main exception is precious metals, where sentiment has been …
8th January 2014
