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The high cost of oil reflects hopes of a strong recovery in demand at least as much as fears of a military conflict between the West and Iran. However, the price of a barrel of Brent probably still includes a premium of $5-10 for the possibility of more …
2nd October 2012
Confirmation of the launch of QE3 by the US Fed appears to have marked at least a temporary peak in many commodity prices, with the focus quickly returning to the underlying weaknesses in economic and financial conditions that made the additional stimulus …
1st October 2012
Rather than providing a further boost to oil prices, the announcement of open-ended quantitative easing (QE3) by the US Fed appears to have marked at least a temporary peak. The focus is already returning to the deterioration in economic conditions that …
28th September 2012
We have revised our near-term soybean price forecasts higher to reflect the ongoing support from lower US supplies. However, this support should fade as the focus moves on to the prospect of a record South American harvest early next year. Falling oil …
24th September 2012
With the boost to commodity prices from global policy stimulus already fading, the continued weakness of the flash manufacturing PMIs for China and the euro-zone is a timely reminder of the poor economic backdrop that made additional stimulus necessary in …
20th September 2012
Thailand’s exports of rice in 2012/13 are likely to be some 20-40% higher than the latest estimates for 2011/12. This should enable Thailand to regain its position as the world’s top rice exporting nation. What’s more, against a backdrop of ample global …
19th September 2012
Reports that Saudi Arabia is ready to increase oil supplies may be little new but they support our view that prices are set to fall sharply. As it happens, the Gulf state has already ramped up production this year and oil is not currently in short supply. …
Oil prices are likely to fall back without the need for the release of emergency reserves as optimism about the impact of global policy stimulus fades and demand remains weak. But if prices do rise further, the US could and probably would release reserves …
18th September 2012
The recent announcements of additional stimulus in the euro-zone, China and the US might prove to be a turning point for the global economy, thus justifying and even extending the recovery in commodity prices. However, there are still serious doubts over …
14th September 2012
The prices of metals and ores, particularly iron, have been boosted over the past few days by reports that China has approved a large number of infrastructure projects. However, a closer look confirms our initial suspicion that these announcements do not …
12th September 2012
The highlight from the “World Agriculture Supply and Demand Estimates”, published today by the United States Department for Agriculture (USDA), is a smaller than expected downward revision to the US corn harvest. Demand estimates were also lowered, …
Even after the slight recovery in the last few days, the price of iron ore has fallen by a third in the last two months. While the unusual contrast with the strength of copper prices can partly be explained by different supply fundamentals, we think the …
11th September 2012
Today’s Chinese trade data highlight the continued weakness in demand in the largest global consumer of commodities. Markets have taken some comfort from the increased likelihood of additional stimulus measures. However, we would caution that any policy …
10th September 2012
The dollar price of silver has risen by around 16% since the middle of August, fuelled by the prospects of QE3 and hopes of a stronger industrial recovery, outperforming gold’s 6% increase. However, we think that safe haven demand will be the main driver …
5th September 2012
There has been fresh speculation that the major oil-consuming nations will shortly announce another release of crude stocks from official reserves, coordinated by the International Energy Agency (IEA). Such a move could well help to bring prices back down …
4th September 2012
Commodity prices were supported in August by expectations of additional quantitative easing in the US, but economic activity has remained weak or even worsened. Yet more purchases of US Treasuries or mortgage-backed securities by the Fed will do nothing …
3rd September 2012
Oil prices have been boosted by hopes of additional global policy stimulus and fears of a worsening of geopolitical tensions in the Middle East, but we expect these supports to be shortlived. Possible triggers for a substantial correction include …
30th August 2012
We believe that fears of a reduction in wheat exports from the Black Sea region are overdone. We do not think that an outright ban is likely either from Russia or Ukraine. Any other forms of export restrictions are unlikely to be imposed until next year …
29th August 2012
South African labour disputes have caused platinum prices to rebound. We think that weak demand will cause prices to fall back by around 10% before the end of this year. However, recent events have supported our long-standing view that rising production …
Reports that the Republican Party will call for the establishment of a commission to examine the case for restoring the link between the dollar and gold may be another positive for the price of the precious metal. However, it is very unlikely that the US …
24th August 2012
The US Fed looks set to launch QE3 soon, but a third injection of the same medicine is unlikely to be anywhere near as effective as the first two in supporting the prices of equities or commodities. US Treasury yields should still fall further, although …
23rd August 2012
China’s flash manufacturing PMI has dropped to its lowest level this year. So far today the impact on commodity prices has been trumped by hopes of further quantitative easing from the US Fed. However, we doubt that additional global policy stimulus will …
We have revised our near-term forecasts for the price of Brent crude higher to reflect the ongoing support from hopes of global policy stimulus and fears over tensions in the Middle East. However, these drivers should fade by the end of this year, to be …
21st August 2012
The near-term prospects for US corn prices depend on an improvement in the weather. However, corn prices could also be dragged lower by a reduction in demand for biofuels – due both to a renewed decline in global oil prices and a possible reduction in the …
20th August 2012
Demand in China and India, the world’s two largest gold consumers, has been unusually been weak in recent months, which has dragged gold prices lower. However, we expect another escalation of the euro-zone crisis to spark strong safe haven flows for gold …
Almost all analysts believe that global copper demand is likely to exceed supply this year. We disagree. The official figures over-state Chinese copper consumption and when adjusted for this the copper market is in surplus (i.e. supply is greater than …
16th August 2012
Hopes of a swift rebound in Chinese commodity imports were dashed by today’s trade data which have sent commodity prices lower. We expect this to be a recurring theme as any rebound in China’s economy is likely to be sluggish and commodity imports to …
10th August 2012
US corn production estimates published today by the United States Department for Agriculture (USDA) were revised down sharply. However, this was largely anticipated by the market, and was mainly offset by significant cuts to US demand estimates, as …
The current elevated levels of grains prices probably already reflect the worst possible outcome for US harvests. In the absence of any further adverse weather shocks, we believe that the prices of corn, wheat and soybeans will drop back by an average of …
8th August 2012
Falling global demand for tin, due to slower economic growth, thrifting and substitution, means we expect tin prices to drop from $17,900 per tonne today to around $16,500 by the end of 2013 despite supply problems. If so, tin would substantially …
6th August 2012
We expect the exit of one or more countries from the euro-zone to drive the price of gold significantly higher. For now, the precious metal is losing out to other safe havens, notably the US dollar and high grade government bonds. But this is unlikely to …
3rd August 2012
The further falls in the global manufacturing PMIs and the Baltic Dry Index underline the fragility of global demand and the downside risks to the prices of industrial commodities. Against this backdrop, hopes that additional policy stimulus can quickly …
2nd August 2012
Commodity markets appear to be banking on some unlikely heroes among policy-makers to turn the global economy around quickly and save the euro. However, with midnight fast approaching, any action has to be sure, has to be soon and has to be larger than …
31st July 2012
We expect production cuts at steel mills and iron ore mines will be insufficient to stop the prices of both steel and iron ore from falling further. The price of steel is likely to decline from $395 per tonne to $360 by the end of 2013. Iron ore prices …
30th July 2012
The partial recovery in oil prices over the last month is based on shaky ground. An immediate meltdown in the euro-zone may have been averted, but Europe is sliding into a deep recession and the risks that the single currency breaks apart remain high. In …
26th July 2012
The continued deterioration in the euro-zone economy, as highlighted by today’s weakening manufacturing PMI, is likely to drag commodity prices markedly lower despite a small improvement in Chinese demand. … Pick-up in China’s PMI not enough for a …
24th July 2012
The continued deterioration in the euro-zone economy, as highlighted by today’s weakening manufacturing PMI, is likely to drag commodity prices markedly lower despite a small improvement in Chinese demand. … Pick-up in China's PMI not enough for a …
Despite recent output cuts, we think that platinum prices have further to fall. We have pencilled in a low of $1,300 per oz for early 2013, from current levels of around $1,420. Given rising costs in South Africa and falling prices, the number of closed …
20th July 2012
Today’s announcement that the UAE has approved plans for its first nuclear power plant should help to reduce fears that even more oil will have to be used for domestic consumption rather than exported. Admittedly, the UAE accounts for less than 4% of …
18th July 2012
There is still no sign of a meaningful recovery in the Baltic Dry Index – a composite of global freight costs for dry bulk commodities such as iron ore, coal and grains. Admittedly, this largely reflects the continued surge in the supply of cargo ships. …
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 …
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
