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World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • August 2015
  • Region: Global
  • 119 Pages
  • The Economist Intelligence Unit

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The Economist Intelligence Unit remains pessimistic about the outlook for Industrial Raw Materials (IRM) prices in 2015. The commodity complex was hit by the plunge in oil prices in the second half of 2014 and there are no signs yet that investors are regaining their appetite for holding commodities. Despite a wobble in March-April, broad-based US-dollar appreciation this year is also sapping demand for commodities (most commodity prices are dollar-denominated). Softening economic growth in China-we expect real GDP to expand by 6.9% this year, down from 7.4% in 2014-is also undermining demand for industrial raw materials. China's economic rebalancing away from a dependence on investment, coupled with the recent plunge in equity prices, will dent uptake of several commodities, for which China is the largest market. In line with these trends, we now expect our IRM index to contract by 8.1% this year, compared with 6.1% previously. This means that prices will decline for a fourth consecutive year. Despite some tightening in industrial commodities markets from 2016, demand will remain relatively subdued, which, together with ample stock availability, READ MORE >

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World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Industrial prices will begin to recover in 2016
Average prices for all metals but zinc will fall this year
Rubber will be the best-performing agricultural commodity in 2015
The global oil market will remain oversupplied in 2015

Aluminium
Demand
Aluminium demand growth continues to outpace that of other base metals
China will account for over 50% of global aluminium demand in 2015
US aluminium demand remains buoyant
The EU's strengthening recovery will support aluminium demand
Japanese demand shows mixed trends
Supply
Production trends vary widely across regions
Chinese output increases by 22% year on year in May
Depressed LME prices will put some European smelters at risk of closure
Indian smelter commissioning is making only slow progress
Lower oil prices will not trigger widespread smelter restarts
Stocks and prices
Prices will remain under downward pressure from China's oversupply
Aluminium forward curve shifts back to a comfortable contango
Lower all-in prices weaken prospects for investment in new smelting capacity

Coal
Demand
China has announced a public cap on CO2 emissions for the first time
We expect China's coal demand to decline further in 2015-16
US coal consumption will start to decline again in 2015
Coal use will fall in the EU in 2015-16
The EU has adopted binding emissions targets to 2030
India's coal consumption will remain robust
Coal use will rise in Japan as nuclear comes back on stream only slowly
Supply
China's output growth will be nearly flat amid low prices and soft demand
US production is on a downward trajectory
The Indian government is aiming to double production by 2019
Falling prices are likely to depress investment in Australia's coal industry
We have revised down our forecast for Indonesian coal output significantly
Colombia's output growth will accelerate in 2015-16
Stocks and prices
Coal prices to remain under US$60/tonne until end-2015

Copper
Demand
High Chinese imports are supporting apparent demand
China's State Reserve Bureau has remained an active buyer of copper
Reduced finance activity weighs on real consumption
Japanese copper consumption growth will slow in 2015
Destocking holds back copper demand in Asia (excluding China)
European copper demand will rise as GDP growth slowly picks up
US copper demand will record near-flat growth in 2015-16
Supply
Latin American producers will drive modest growth in mine supply
Indonesian output is facing fewer disruptions than in 2014
Producer disruptions have been a feature of early 2015
The concentrate market is expected to tighten again from 2017
China's refined copper output was up by 9.5% in the first five months of 2015
Chinese scrap imports fell by 8.1% in the first five months of 2015
Stocks and prices
Chinese bonded-warehouse stocks have risen since late January
LME warrant cancellations fall back as demand wanes
Economic slowdown in China is weighing down on prices

Cotton
Demand
China is struggling to reduce stockpiles, despite slashing import levels
Inadequate textile-sector reforms will weigh on India's consumption growth
A power deficit, policy uncertainty and slow reform hinder growth in Pakistan
Consumption in Bangladesh will grow, regardless of poor safety standards
Quicker growth in the EU will support consumption growth in Turkey
Supply
China's output will drop, despite generous subsidies to Xinjiang farmers
Cotton remains attractive in India despite subdued prices
Low price environment will weigh on 2015/16 output
Farmers' greater access to inputs will maintain elevated output levels
Production will slide in Brazil as weak prices affect planting decisions
El Niño poses major downside risk to production in Australia
Stocks and prices
Large harvests and high stocks will put downward pressure on prices

Crude oil
Demand
China's demand growth is stabilising
Low oil prices are making subsidy reform easier to swallow
US consumption will rise as consumers seek bigger cars
Demand will turn positive in OECD Europe for the first time in a decade
Supply
OPEC members will maintain high production
A nuclear deal will enable Iran to raise output gradually
US production will dip in 2016, but not significantly
We have revised up our outlook for Russian oil production in 2015
Canadian output will probably be flat in 2015
Stocks and prices
Prices will remain volatile in 2015

Gold
Demand
China's jewellery consumption will pick up in the medium term
India's gold demand has grown robustly so far this year
Beyond China and India, demand for gold jewellery will remain subdued
Funds have already moved out of gold, so ETF exodus is now less likely
Uncertainty about prices will weaken retail investment demand
Industrial gold is less competitive than alternatives
Central banks will continue to buy gold to diversify their reserve holdings
Supply
Chinese production will continue to add to global supply in the short term
After a strong performance in 2014, production in Australia will fall back
Peru's output has risen strongly in 2015, but downside risks remain
Low prices will deter recycling efforts
Producer hedging will not be a significant source of supply in 2015-16
Stocks and prices
Prices will remain under downward pressure in 2015, despite volatility

Lead
Demand
China's lead demand will grow by just 1.5% in 2015 amid destocking
Passenger-vehicle sales in China are up by 6.4% year on year so far in 2015
Performance in the battery production sector will remain mixed
Japanese lead demand will stabilise in 2015-16
Recovery in Europe's vehicle market will continue to support lead demand
US lead consumption will remain flat in 2015
Supply
Chinese refined-lead production fell in early 2015
The Vernon recycling facility will be closed permanently
Global net smelting capacity will expand in 2015
Global mine capacity additions to offset planned closures in 2015
Stocks and prices
LME/SHFE stocks have fallen by almost 30% so far in 2015
2015 price forecast has been lower as firmer prices may not materialise

Liquefied natural gas
Demand
The timing of a return of nuclear power in Japan is still unclear
South Korea's LNG imports are expected to fall by 8% this year
China's imports will remain subdued in 2015-16, after a weak 2014
Indian imports will be boosted by the shortage of domestic gas
South-east Asia is becoming an important import market
European LNG consumption has been revised up
Brazilian import demand will remain high this year
For now, a lack of infrastructure is curbing the use of LNG as a fuel
Supply
Qatar will remain the world's largest supplier in 2015-16
Australia's LNG exports set to surge in 2015-16
Facility expansions will boost Malaysian exports
Low prices could deter investment in North America
Algeria's export potential may be curbed by rising domestic demand
African LNG exporters are struggling to sustain output
Mergers to characterise the sector
Prices

Natural gas
Demand
US demand will pick up as coal shutdowns expand
Russian consumption will be affected by poor domestic economic performance
Agreement with Russia ensures six months of supply for Ukraine
Europe's gas demand will improve on a dismal 2014
Gazprom forges ahead with Turkish Stream
China is continuing to develop its import supply routes
Switch back to some nuclear capacity will come at expense of Japan's gas use
Supply
A cutback in US oil production could spark gas production downgrades
Russian production will increase despite new sanctions
Shale exploration in Europe has so far been disappointing
Saudi Arabia is planning new capacity
Stocks and prices

Natural rubber
Demand
Growth in Chinese demand will slow as the economy rebalances
A pick-up in economic activity and car sales will support India's NR usage
Stocks could weigh on Japan's consumption this year
"Other Asian" demand was weak in the first quarter
EU consumption will slow but remain positive in 2015-16
Strong growth in car sales should bolster US rubber demand
Supply
Thai production is expected to fall this year
Indonesian production should bounce back in 2016
First-quarter data on Vietnam's output could be distorted
Malaysian production is struggling and has been hit by bad weather
India's production fell sharply in the first quarter of 2015
Stocks and prices
Producers are again trying to support prices
Prices will stage a modest rally in 2015-16 as stocks are worked through

Nickel
Demand
China's consumption will show signs of recovery from 2016 onwards
Modest growth in nickel use in advanced economies will not offset fall in China
Supply
Nickel mines in the Philippines will benefit from Indonesia's export ban
New Caledonia sees mixed results from major new mines
Some silver linings in Latin America's nickel mining sector
Nickel companies are moving downstream in Indonesia
Russia's refined nickel output growth will be flat in 2015
Downside risks remain for Australia and Canada
Stocks and prices
Having fallen to a six-year low, prices will begin to recover later in 2015

Steel
Demand
After a dip in 2014, Chinese steel use will expand modestly in 2015-16
US automobile sales and construction will support North American demand
Performance in Europe will be weak, despite some support from the ECB
Growth in "Other Asia" is likely to be steady, but not spectacular
Lower energy prices should have little short-term impact on Gulf steel demand
Supply
China's steel production growth will drop to low levels
US mills cut output in early 2015
Both the US and Canada are targeting steel dumping
EU moves to protect its steel industry
CIS steel output will recover slowly in 2015-16 after a tough 2014
Japan's steel exports will face tough competition
Better business confidence in India has failed to translate into higher output
Iron ore prices will stay in a narrow, low band in 2015-16
Coking coal production cutbacks will affect the market in 2015
Scrap prices have finally adjusted to lower iron ore and coal prices
Stocks and prices
Lower raw material prices will drive steel prices down further

Tin
Demand
Semiconductor shipments are rising, but the rate of increase is slowing
Excluding China, production of tinplate is in long-term decline
Expanding use of consumer electronics will support tin demand in 2015-16
China will continue to shape outcomes in the global tin market
Japan's tin consumption appears to be in long-term decline
After a rebound in 2014, demand growth in Europe will slow
Supply
After a record 2014, China's refined tin output will stabilise in 2015-16
Myanmar has emerged as a major source of tin raw materials for China
Indonesia has introduced a number of controls over tin exports
There are doubts about Indonesia's longer-term output prospects
Brazil and Bolivia are adding to tin mining and processing capacity
New tin mines are being brought on line in Australia and Africa
Stocks and prices
Tin prices will remain under pressure in 2015 before a rebound in 2016

Zinc
Demand
Public infrastructure projects will support zinc use in China
Brazil bucks stronger zinc usage from emerging markets
Recovering vehicle markets will support zinc consumption in Europe
US zinc consumption growth will moderate in 2015-16
Japan's consumption will moderate as economic headwinds persist
Supply
Chinese smelters will register robust output growth in 2015-16
EU refined zinc production growth is slowing in 2015
Other than in China, Asian refined output faces headwinds
Growth in net mine capacity is set to slow in 2015
Stocks and prices
China exported high levels of refined zinc in early 2015
Softening fundamentals continue to weigh on prices

Statistical appendix

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