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The decline in the flash manufacturing PMI for China in February, reported today, is the latest sign that the pick-up in global manufacturing may be faltering. The equivalent US and euro-zone data were a touch weaker too. It is perhaps too early to call …
25th February 2013
Global copper mine supply grew at its fastest rate in eight years in the closing months of 2012 and mine output is likely to grow just as quickly this year. This should enable smelters to raise their output, but it will also add to the stockpiles of …
22nd February 2013
Despite the uncertainty created by the latest FOMC minutes, we do not believe that the Fed will be in any hurry to halt its additional asset purchases completely. Nonetheless, the reaction in the markets to the possibility of an early end to QE3 has …
21st February 2013
The spreads between the prices of Brent and other crude benchmarks such as WTI and Dubai have recently widened to levels which are hard to justify on the basis of underlying supply and demand. This may well be another example of how speculative pressures …
19th February 2013
Even though the global price has already slumped by around a third over the last two years, sugar has been the worst performing of the major agricultural commodities so far in 2013, falling by another 7%. This weakness has been driven by ample supply, as …
14th February 2013
The price of cotton, which fell by around 20% in 2012, has turned around to become the best performing of the major agricultural commodities so far this year, rising by about 10%. This recovery has primarily been driven by optimism over the prospects for …
11th February 2013
It has taken two years of dismal returns and a regulatory backlash, but the consensus has finally swung round to our long-held scepticism about the “super-cycle” and the diversification benefits of investing in commodities. The danger now is that the …
8th February 2013
The value of China’s commodity imports rose y/y in January at their fastest rate since October but this may well have been due to the distortions caused by the timing of the lunar New Year as much as any recovery in underlying demand. What’s more, …
The high cost of oil reflects hopes of a strong recovery in demand at least as much as tensions in the Middle East. However, the price of a barrel of Brent probably still includes a premium of $10-15 for the possibility of more significant disruption to …
7th February 2013
One commodity-related indicator that has failed to show any signs of a revival is the Baltic Dry Index of global shipping costs, which remains more than 90% below its pre-crisis peak. Indeed, the BDI has dropped by 10% in the past fortnight, to 740. We …
Further signs of an improvement in the Chinese economy, combined with data indicating that the euro-zone will probably fare better in Q1 than in Q4 2012, have helped to lift commodity prices so far in 2013. But industrial metals continue to lag behind the …
4th February 2013
Improving business conditions and the positive sentiment in financial markets should support the prices of industrial metals and crude oil at least for the remainder of the first quarter and possibly through to mid-year. The “Goldilocks” recovery in the …
1st February 2013
The improvements in global economic conditions indicated by the latest manufacturing surveys, as well as the positive mood in financial markets, have already prompted us to revise our near-term oil price forecasts higher. Nonetheless, the upside from …
29th January 2013
Lumber, or sawn timber as it is also known, is being added to our coverage of agriculturals from today. Despite a sharp rise in lumber prices last year and our expectations of only a lacklustre recovery in the global economy this year, we believe US …
28th January 2013
The prices of industrial metals are likely to remain firm in the first half of the year, although we do not expect large gains. In the second half, most prices should drop back as the global economic recovery disappoints, the appetite for risk fades, and …
25th January 2013
Improving business conditions and confidence in financial markets should support higher prices for industrial commodities through the first quarter at least, but doubts remain about their sustainability. … Strengthening global sentiment to support …
24th January 2013
We continue to expect the price of a barrel of Brent to drop back below $100 this year, despite recent speculation that cuts to Saudi production signal an increased willingness to allow oil prices to settle at current levels of around $110. Nonetheless, …
17th January 2013
Substantial production cuts have been announced today by Anglo American Platinum, the world’s largest platinum producer. As a result, the price of platinum has risen above that of gold for the first time since last March. However, we don’t expect this to …
15th January 2013
Wheat and corn prices have risen over recent days as the USDA revised down its projections for year-end stocks. However, we still expect prices to fall during 2013 as supply improves and the macroeconomic and financial conditions deteriorate again. …
14th January 2013
China’s imports of commodities continued to grow at a decent pace in 2012, setting new highs in many cases. However, the December data did not show much of an acceleration, with import volumes for some key commodities, such as copper and oil, actually …
10th January 2013
Alumina is being added to our coverage of commodities from today. We expect the price of alumina, as shown by the MB alumina index, to rise from around $330 per tonne (FOB Bunbury, Australia) at present to $360 by year-end. This is due to increased demand …
9th January 2013
The performances of many commodity prices have been more nuanced than the headlines might suggest. This is clearest in the case of agriculturals, where far more attention is still being paid to the mid-2012 surges in the prices of US grains than to the …
3rd January 2013
The price of gold looks set to end 2012 on a low note, perhaps below $1,700 per ounce, but we continue to expect the precious metal to reach new record highs of at least $2,000 in 2013. The monetary, regulatory and macroeconomic backdrops should still be …
19th December 2012
Rhodium is being added to our coverage of precious metals from today. Despite our expectations of a deep recession in the euro-zone and lacklustre growth elsewhere, we believe that the price of rhodium could still double over the next two years. … …
18th December 2012
This edition of our monthly Energy Watch looks at the prospects for energy prices in 2013, focusing on crude oil, coal and US natural gas. We present some central forecasts, compare them to the consensus, and discuss the upside and downside risks. In …
Today’s flash manufacturing PMIs for China and the euro-zone have both improved, but they remain at relatively low levels. Other recent data suggest that China’s recovery still lacks momentum and that the euro-zone recession is deepening, while today’s …
14th December 2012
The muted reaction to the Fed’s announcement yesterday supports our view that the boost to commodity prices from exceptionally loose US monetary policy has now largely run its course. The monetary base could be inflated by another $1,000bn or more each …
13th December 2012
Mainland China’s net rice imports will have risen to record levels in 2012, whereas the country has traditionally been a net exporter . At first sight this might have been expected to have a major impact on the global price of rice. However, this swing …
12th December 2012
The latest “World Agriculture Supply and Demand Estimates” published today by the United States Department for Agriculture (USDA) has relieved concerns about the supply of wheat, whilst the prospects for most other key crops are little changed. … USDA …
11th December 2012
This week’s OPEC meeting will be dominated by the tricky choice of a new Secretary-General, while the decision on output should be relatively simple. We agree with the consensus that the notional ceiling will be kept at 30mn barrels per day, at least for …
10th December 2012
Today’s Chinese trade data highlight the continued weakness in demand in the largest global consumer of commodities. The headline data did show commodity imports rising month-on-month but after adjusting for seasonal factors they dropped across the board. …
The US Energy Information Administration’s recent decision to switch to Brent rather than West Texas Intermediate (WTI) as its reference oil price has reignited the debate about the appropriate benchmark for US crude. The answer probably depends on the …
7th December 2012
Molybdenum is being added to our coverage of industrial metals from today. We expect the molybdenum price to fall by at least another 10% next year, to $9.50 per pound ($21,000 per tonne), as Chinese and European demand disappoints and global supply …
Metals prices rallied in November, helped by the general improvement in market sentiment and some better economic data from China. However, global sentiment remains fragile and China’s recovery still looks slow and unbalanced. And while the cost of crude …
3rd December 2012
This edition of our monthly Energy Watch takes a closer look at two hot topics in the oil market. The first is the size of the Middle East risk premium in the price of crude, which we believe to be at least $10 and perhaps as much as $20. The second is …
30th November 2012
The conventional method of estimating China’s copper consumption has probably been exaggerating industrial demand for the red metal since the middle of 2011. This is because it does not allow for changes in unreported stocks, which appear to have surged. …
29th November 2012
There is still widespread confusion and uncertainty over the impact that the Basel III regulations might have on the demand for gold. Gold is an “asset” rather than “capital” and therefore accumulating more gold would actually make it harder to meet the …
28th November 2012
Today’s flash manufacturing PMIs for China and the euro-zone have both risen and appear to have sent commodity prices slightly higher. However, the former only points to a weak recovery in China while the latter is consistent with continued recession in …
22nd November 2012
Labour unrest in South Africa, the dominant global producer of platinum, has raised the floor for platinum prices and should limit their downside in 2013. This is despite the prospect of continued weakness in the global economy and uncertainty generated …
16th November 2012
The recent increases in the level of the oil price required to balance government budgets for the major Gulf producers are often cited as a reason to expect the cost of crude to remain high. In reality, the finances of Saudi Arabia and the UAE are strong …
15th November 2012
The likelihood that the US will become the world’s largest oil producer by the end of the decade is not the game-changer that it may first appear. Total oil output in the US has already surged to a level which is close to that in Russia (the current no.1) …
13th November 2012
A rebound in China’s imports of oil in October flatters the state of underlying commodity demand. The current improvement in economic activity is unlikely to lead to a similar rebound in overall imports given high stock levels. … China's commodity …
12th November 2012
The latest “World Agriculture Supply and Demand Estimates” published today by the United States Department for Agriculture (USDA) appear to have calmed the markets, and rightly so. In particular, projected wheat exports from the Ukraine have actually been …
9th November 2012
The ongoing debate over whether or not Ukraine is set to ban wheat exports misses the bigger points that (i) Ukraine has already exported almost all of the grain it was expected to this year, and (ii) Ukraine is a relatively small player in the global …
6th November 2012
The slide in commodity prices today following the release of an apparently strong US Employment Report underlines their sensitivity to expectations of further monetary support. As it happens, the pace of improvement in the US labour market is still …
2nd November 2012
Commodity prices mostly declined last month, led by the industrial metals most sensitive to macroeconomic and financial conditions. The main exception was US natural gas, whose price recovered further in anticipation of more normal winter weather in North …
1st November 2012
The differences between the energy policies of US President Obama and his equally worthy rival Mitt Romney are largely ones of rhetoric and emphasis rather than substance. Oil prices might fall a little more quickly under a Romney administration, but …
31st October 2012
November is the month when the price of gold is traditionally assumed to be boosted the most by a seasonal pick-up in demand. There does indeed appear to be a seasonal pattern in the gold price but, as the potential for arbitrage would suggest, the …
30th October 2012
A powerful cocktail of cyclical and structural factors is likely to maintain the downward pressure on commodity prices over the coming months. The launch of QE3 has failed to provide the sustained boost that some had hoped for as the focus has quickly …
29th October 2012
We still expect the price of a barrel of Brent to drop back to around $85 next year, despite threats of a complete halt to Iranian oil exports. Our forecast would also be well below the “fair price” of $100 suggested by Saudi officials, but this informal …
25th October 2012
