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Not for the first time, commodity prices have recently been propped up by hopes of additional monetary stimulus from the US central bank. This explains the initial market disappointment that Chairman Bernanke failed to signal the imminent launch of QE3 in …
18th July 2012
Cuts in power tariffs to high cost Chinese smelters and global economic weakness mean aluminium prices are likely to fall from $1,880 to no more than $1,750 per tonne over the next 12 months. … Aluminium prices have further to …
12th July 2012
Fears of the “worst drought in the US in 25 years” have led to a spike in US grain prices and understandably added to concerns about another global food inflation shock. However, there are at least six reasons why these concerns are overdone. … Six …
With the notable exception of the impact of the dry weather in the US on grain markets, macroeconomic and financial factors continued to drag commodity prices lower in the second quarter. The consensus view is that fears about the global backdrop are …
11th July 2012
China’s commodity imports fell in June, with industrial commodities the worst affected due to the slowdown in economic activity. While end-user demand may recover a little in the second half, this may still not lead to a rebound in imports given already …
10th July 2012
In this note we set out three illustrative scenarios for the price of US corn. If the dry weather remains the key driver and conditions turn out to be as bad as those in 1988, then corn could still rise as far as 930 US cents per bushel, from the current …
9th July 2012
The price of Brent crude has jumped back above $100 per barrel (pb) today, but we doubt this rebound will last for long. In particular, Iran’s threats to disrupt the flow of oil through the Strait of Hormuz still lack credibility. What’s more, if the Fed …
4th July 2012
The markets have taken the alarmingly weak US ISM data in their stride, seemingly banking on European policymakers and the US Fed to turn things around quickly. This muted reaction looks complacent to us. … Are the markets right to shrug off the US …
3rd July 2012
June’s price volatility offered something for everyone, with several key commodities seeing unusually large moves either up or down, and, in the case of oil, both over the course of the month. This underlines the importance of stepping back from the …
2nd July 2012
We maintain our view that the imminent tightening of Western sanctions on Iran is unlikely to have anywhere near as large an impact on global oil prices as many had feared. Demand is weakening and other suppliers are both able and willing to meet any …
29th June 2012
The recent jump in US corn prices has led to fears of an upturn in world food inflation. However, agricultural prices in general are still much lower than they were a year ago, and even the surge in corn prices has done little more than reverse the falls …
The $30 slump since early May, which has taken Brent below $90 per barrel (pb), suggests that the global benchmark oil price could hit our end-2012 target of $85 even sooner than we had anticipated. Over the next 18 months we expect Brent to trade mostly …
22nd June 2012
The Chinese and euro-zone flash manufacturing PMIs both fell in June. China’s economy should pick up again in the second half of the year but the slump in commodity prices has further to run. … Manufacturing PMIs drag commodities …
21st June 2012
The recent weakness of global coal prices is relatively easy to explain, as it reflects a straightforward mix of surging supply, sluggish economic activity, falling oil prices and the boom in the natural gas sector in the US. But in contrast to the …
20th June 2012
Our working assumption is that there will only be a limited break-up of the euro-zone, with Greece and one or two other smaller countries leaving this year or next but policy-makers managing the process sufficiently well to keep the rest of the union …
18th June 2012
Japan’s post-earthquake policy stimulus may be having a positive impact on the demand for commodities, but any boost will be short-lived and should be far smaller than the potential adverse effects of developments in China and the euro-zone. … Can …
13th June 2012
The United States Department for Agriculture’s (USDA) latest estimates for 2012/13 indicate a further marginal increase in both the global corn and soybean end stocks. This is consistent with our forecast that the prices of these two commodities will fall …
12th June 2012
OPEC is almost certain to maintain its official output ceiling at 30 million barrels per day (bpd) at its meeting on Thursday. This decision would not preclude some cuts in production in the coming months if demand continues to weaken, since actual output …
11th June 2012
China’s imports of commodities were surprisingly strong in May. The figures were probably flattered by the temporary closures of customs offices in the previous month and by some commodity-specific factors. Taking April and May together, the picture is …
Wheat prices have been very volatile recently due to uncertainty over the crops in key producing countries such as the US and Russia. Unfavourable weather may indeed reduce the global harvest compared to what it might otherwise have been. However, we …
8th June 2012
Commodity prices have regained some ground this week on hopes of additional policy stimulus. However, actions speak louder than words. With the exception of widely anticipated rate cuts in China, the world’s major central banks have remained on the …
7th June 2012
Other analysts are reportedly “shell-shocked” by the sharp declines in the prices of oil and other commodities in May, but we had already been braced for the fall-out from an escalation of the crisis in the euro-zone, slower growth in China and only a …
6th June 2012
The prices of industrial and agricultural commodities were hit hard in May by the escalating crisis in the euro-zone and worries over demand from China (as we had anticipated). In particular, oil fell sharply as concerns about the global economy again …
31st May 2012
The relationship between the dollar price of gold and the size of the US monetary base is not as robust as often assumed. Prior to the global financial crisis there was barely any relationship at all. Since then, the price of gold has risen in line with …
30th May 2012
The flash manufacturing PMIs for both China and the euro-zone fell in May. Despite the prospect of some near-term support from policy easing in China, industrial commodity prices are likely to fall further over the remainder of 2012. … Falling PMIs show …
24th May 2012
A partial break-up of the euro-zone, with the weakest economies leaving and the core holding together, could be part of the solution to Europe’s problems, rather than the disaster that many assume. As such it would ultimately be positive for the rest of …
23rd May 2012
Concerns about the crisis in the euro-zone, fears of a “hard landing” in China and weaker data in the US have displaced tensions with Iran as the main driver of global oil prices. Nonetheless, a further easing of these tensions, culminating in the lifting …
21st May 2012
Our central forecasts for industrial commodity prices already reflect some of the potential fall-out from a Greek euro exit. In particular, the economic and financial uncertainty is one of several factors behind our low end-2012 forecasts for copper …
15th May 2012
The price of gold has dropped sharply in recent days and is barely changed in 2012 to date. The fact that gold has struggled despite the worsening crisis in Europe has added to doubts about its status as a refuge from turmoil in other markets. But we …
10th May 2012
Chinese commodity imports have been undermined by weak industrial demand and high stockpiles. We expect these factors to continue to put downward pressure on commodity prices. … China’s commodity imports drop …
Crude oil prices have remained weak after last week’s sharp falls, largely due to concerns over the US economy and the escalating problems in Europe. We expect these pressures to ebb and flow over the rest of the year but the overall trend in oil prices …
9th May 2012
Wheat prices fell by around 7% last week as concerns about crop damage due to a late winter freeze in the US were replaced by expectations of a bumper harvest. Prices have recovered a little this week, but we continue to expect the benchmark US wheat …
8th May 2012
The price of iron ore has risen by 6% since the start of the year, chiefly due to lower production, while the price of steel fell by 7%. We don’t expect this divergence to continue as higher iron ore output in Brazil and Australia will be a catalyst for …
4th May 2012
The lack of a reliable income stream makes gold notoriously hard to value objectively, whilst the key drivers constantly seem to be changing. The current price is around $1,645 per ounce, having been as high as $1,900 last September and as low as $710 in …
3rd May 2012
Commodity prices as a whole were little changed in April. The drought-related rise in soybean prices has drawn some media interest, but this was more than offset by falls for other agriculturals, notably sugar. Industrial metals prices were supported by …
1st May 2012
Hopes of a rebound in demand in the second half of the year are keeping copper prices above $8,000 per tonne despite the huge overhang of inventories in China and the continuing economic and financial crisis in Europe. This position is unsustainable. We …
30th April 2012
The first estimates of the Chinese and euro-zone manufacturing PMIs for April remained below 50 and are consistent with further sharp falls in the prices of industrial metals. Most worryingly, the euro-zone manufacturing PMI has fallen to its lowest level …
23rd April 2012
The price of the benchmark yellow no. 1 soybean has risen by about 20% since the beginning of 2012, to 1400 US cents per bushel, from 1180. Factors that contributed to this rise are drought related damage to South American harvests, optimism about China’s …
20th April 2012
The bulk of the decline in the price of US natural gas, from $6 per million British thermal units (MMBtu) early in 2010 to around $3 at the start of 2012, can be explained by the surge in supply. But the further fall in the last few weeks, taking prices …
16th April 2012
North Korea’s rocket program appears to be at greater risk of an imminent “hard landing” than China’s economy. But beyond that, today’s Q1 GDP data tell us little about the prospects for China’s commodity demand over the rest of the year and into 2013. …
13th April 2012
The IEA’s latest assessment that the “tide of remorseless tightening in the oil market” appears to have turned is surely right. Indeed, this has already been reflected in the levelling out of crude prices since early March. However, the IEA’s views on the …
12th April 2012
Global soybean production estimates published by the United States Department for Agriculture (USDA) were revised down today, but by no more than already anticipated by the market. However, expectations of a significant tightening for US corn were not …
10th April 2012
Many analysts have focused on the still-high levels of China’s commodity imports in March and the rapid year-on-year growth rate. However, the seasonally adjusted data show imports ended the quarter on a low note, especially those of industrial metals. … …
US natural gas prices have fallen to around $2 per million British thermal units (MMBtu) due to soaring supply and the mild winter in North America. But they now look far too low relative to production costs, to the price of gas in Europe and particularly …
5th April 2012
The price of sugar has strengthened recently due to concerns over harvests in Brazil, the world’s largest producer. The consensus is for prices to continue rising from the current level of 23.4 cents per pound (for the US benchmark sugar no. 11) to 24.5 …
4th April 2012
The support to commodity prices from the general improvement in investor confidence, which had been fostered earlier in the first quarter by better economic data from the US and China and the ECB’s generous liquidity provisions, faded in March. Iran …
3rd April 2012
The price of Brent has remained close to $125 per barrel despite verbal intervention from Saudi Arabia and the threat of an early release of official stocks led by the US. We are therefore nudging up our price forecasts to reflect this resilience, as well …
30th March 2012
The positive reaction in commodity markets to Fed Chairman Bernanke's seemingly dovish speech on Monday has already begun to fade, which makes sense to us. What's more, any additional bond buying is likely to fall well short of the hoped-for QE3. Indeed, …
28th March 2012
A quick review of recent developments in the world economy supports our relatively downbeat forecasts for the prices of the commodities, notably oil and industrial metals, most sensitive to global activity and financial conditions. We continue to expect …
26th March 2012
Recent industry reports suggest that China’s corn production in 2011/12 could be as much as 14% lower than current official estimates. As a result, China’s imports are likely to be considerably higher than current USDA forecasts, which would squeeze …
21st March 2012
