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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • November 2014
  • Region: Global
  • 120 Pages
  • The Economist Intelligence Unit

The Economist Intelligence Unit still expects its Industrial Raw Materials (IRM) price index to fall by over 4% in 2014, its third consecutive year of decline. Although prices have started to stabilise in several critical industrial markets, weakness at the start of the year, as China's demand trajectory was uncertain, will weigh on average prices for the year. In 2015 prices will rise as the global economy accelerates, drawing in demand for industrial inputs.

We now expect our base metals complex to fall slightly in 2014, rather than the small increase forecast previously. A third-quarter rally in aluminium prices has run out of steam and we have cut our price for the light metal slightly. Prices are set to recover strongly in 2015, as a global market deficit outside China will provide some fundamental support to prices. However, there are substantial stockpiles available (along with shuttered capacity) that could quickly swamp the market. Likewise, impressions of soft manufacturing activity in China have sapped momentum from copper prices, which we expect will fall by 5% on average in 2014. A larger market deficit should be a positive for prices in 2015 but the potential for READ MORE >

World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Industrial prices will fall in 2014 before a turnaround next year
Metal prices are wavering on insecurity about China's demand
Oil prices cut as demand is unable to accommodate surging output

Aluminium
Demand
Demand in the US and Japan goes from strength to strength
European buying slows
Japanese consumption is still gaining momentum, despite slower GDP growth
Indian and Brazilian demand is flying in the face of economic indicators
Supply
Aluminium production outside China is expected to hold at current levels
Restarts in China are gathering pace
GCC output increase will be limited to capacity creep for foreseeable future
Stocks and prices
A price rally comes to an abrupt end
LME stocks continue to be drawn down, but little is going to end-use consumers
The time is still not right for widespread capacity reactivation
Price rises in 2015-16 will be limited by a heavy stock position

Coal
Demand
China's new coal curbs show rising importance of environmental issues
US coal consumption will start to decline again from 2015
Coal use will fall in the EU in 2014-16
India will be among the fastest-growing markets in Asia
Japan is committed to keeping coal in its energy mix
Asia will remain the driver of global coal consumption
Supply
Demand is beginning to soften in China at start of a long-term trend
US production likely to fall in next two years
Cancellation of licences will cause only limited output disruption in India
Repeal of Mineral Resource Rent Tax could boost investment in Australia
Indonesia is making new attempts to control exports and production
Sanctions will hamper efforts to overhaul Russia's coal industry
South Africa's output will grow only slightly in 2014
Colombia's output will resume growth in 2014-16
Stocks and prices
Coal prices fall to new multi-year lows in September

Copper
Demand
China apparent consumption remained at a strong pace in January-August
SRB is believed to have a remit to acquire up to 400,000 tonnes this year
Production of semi-fabricated products records strong growth in January-July
We are raising our Japanese copper consumption estimate for 2014
Copper demand growth looks strong across Asia this year
European copper demand growth is moving ahead of expectations
US copper consumption remains sluggish
Supply
Peru leads the surge amid strong Latin America growth
The Zambian government's production targets are also ambitious
Disruptions mean that new mines are not reaching capacity on schedule
Freeport resumes Indonesian exports in August, Newmont to follow
Disruptions at smelters are also occurring
Re-tightening of the concentrate market is expected from 2017
Growth in China's refined copper accelerates as output sets new record
Chinese scrap imports remain down on year-earlier levels
Stocks and prices
China's SRB may not be finished with its copper-buying spree for this year
Chinese bonded warehouse stocks may have peaked for a while
Prices will average US$6,990/tonne in the final quarter of 2014

Cotton
Demand
China will dramatically slash import levels
Government will support investment in India's textile sector
Higher raw cotton prices could squeeze Pakistan's millers
Consumption in Bangladesh will grow, regardless of poor safety standards
Support from a weak lira will wear off in Turkey
Supply
China begins its subsidy programme in Xinjiang
India is set for another large crop in 2014/15
US to record bumper crop in 2014/15
Pakistan could be poised for a large crop
Production will slide in Brazil as weak prices affect planting decisions
Dry weather in Australia's planting season prompts a downgrade
Stocks and prices
Price outlook cut, as global stockpiles will weigh on the market

Crude oil
Demand
US consumption will grow but will not get as high as pre-recession levels
Poor prospects for Europe's oil consumption
Eventual return of nuclear power will cut into Japan's oil use
Growth in Chinese consumption will accelerate in 2015-16
India will attempt to build up reserves in 2015-16
Smaller Asian markets face a mixed trajectory in 2015-16
Russian consumption will slide as the economy weakens
Supply
Scrutiny over OPEC's supply decisions is looming
Major new projects will come on line in Saudi Arabia in 2015-16
Iraq agrees to lower production targets
Iran's production is stabilising, but well below historical levels
Libya's output is fluctuating
New pipelines in 2015 will abet rapid growth in US output
Canada is seeking export opportunities for its heavy oil
Mexico's short-term oil prospects remain limited, despite reforms
New sanctions will challenge Russia's unconventional oil plans
Brazil will add significant volumes of crude in the medium to long term
Stocks and prices
There are few indicators of a near-term recovery in Brent prices

Gold
Demand
China will move back on to trend consumption patterns in 2015-16
India's underlying demand for gold jewellery remains robust
An ETF exodus is unlikely in 2015-16
Retail investment will fall from the record highs of 2013
Competition from alternatives is driving a fall in industrial gold use
Supply
Depressed prices will hit producers who face higher costs
But mining output will continue to rise in 2014-15
Production in China and Russia will also help to add to global supply
Scrap sales will stabilise along with prices in 2015-16
Central banks will continue to buy gold to diversify their reserves holdings
Net hedging will be positive, albeit on a small scale
Stocks and prices
Prices in 2015-16 will begin to reverse the downward trend of 2013-14

Lead
Demand
China's domestic market remains in slight deficit so far in 2014
Passenger vehicle production growth remains at strong, double-digit pace
Demand will benefit from robust battery production growth
Japanese lead demand will increase in 2014 as sentiment supports car sales
EU car sales record 12th consecutive monthly year-on-year increase in July
US vehicle market gathers further momentum
Supply
China's 2013 production is revised down
Total smelting capacity is expected to rise strongly in 2014
Nyrstar announces upgrade package for Port Pirie smelter in Australia
Global mine production (excluding China) rises by 3% year on year
Rate of mine expansions is expected to slow in 2014
Stocks and prices
Prices will be range-bound until stronger Chinese demand emerges

Liquefied natural gas
Demand
Japan will remain reliant on LNG, despite return of nuclear power
Mild temperatures have reduced South Korean demand
China will take greater share of LNG import market
India's government is vacillating on raising domestic prices
New markets are emerging in South-east Asia
Despite weak gas demand, Europe will add new terminals in 2015-16
Supply
Qatar's production will be steady in 2015-16
Output will continue to grow in Malaysia owing to FLNG
US will enter the market in a big way from 2016, changing its fundamentals
Algeria's exports will rise owing to new terminals
A difficult operating environment makes Nigerian expansion unlikely
Australian projects are being dogged by questions of cost-competitiveness
PNGLNG starts ahead of schedule, meeting demand in Japan
Tangguh expansion moves a step closer in Indonesia
Ukraine-related tensions are unlikely to derail Russia's LNG plans for now
Prices

Natural gas
Demand
US consumption will slow as local prices rise relative to coal
Russian consumption will be affected by a poor domestic economic performance
Consumption in Ukraine is threatened by continued military conflict
Ukraine crisis unlikely to affect supply to Europe
European gas demand will recover in the medium term
China's consumption outlook is cut on higher prices
India has delayed price-rise decision
Japan's new energy plan will sap some momentum away from gas
Steady growth expected in consumption in key Middle East economies
Supply
US output will rise in 2015-16 to meet growing demand from LNG exporters
Russian production will increase despite new sanctions
Europe's shale prospects will make little progress in 2014-15, despite UK ruling
Saudi Arabia and Algeria will add new gas capacity
China is scaling back shale ambitions
Stocks and prices
Ukraine crisis will have little impact on European gas prices

Natural rubber
Demand
Demand in China in 2015-16 will struggle to match the growth of 2013
Indian consumption should strengthen in the forecast period, from a low base
Volatile data are masking the underlying state of Japanese demand
Spanish and German demand is pulling up the EU aggregate
North American consumption growth will return in 2014, despite bad weather
Supply
A supply glut is posing problems for the Thai government
Indonesian production will be stronger than expected in 2015-16
Malaysian output is struggling amid structural problems
Government steps in to support India's rubber farmers
The global supply glut is weighing down on Vietnamese production
Stocks and prices
Prices will remain weak in 2015-16 as stocks hang over the market

Nickel
Demand
China's dominance of the nickel market will diminish owing to ore shortages
Ore shortages will lead to slower consumption in China
Significant headwinds remain in the face of stronger EU nickel demand
US consumption will grow on the back of strong economic output
China's stainless steel exports are taking share from other Asian producers
Smaller markets growing at a rapid pace help to bring up the overall market
Supply
Mine output will contract substantially in 2014
New Caledonia sees mixed results from major new mines
The Philippines will benefit from the Indonesia ban
Indonesia's ore export ban will continue to disrupt the market
Australia's output will fall in 2014; Canada's will start recovery by 2015
Russian output is unlikely to be affected by sanctions in the near term
Stocks and prices
A market deficit will help to boost prices in 2015-16

Steel
Demand
China's consumption will be at much slower pace than historical levels
Strong US outlook will support higher steel consumption in 2014
Performance in Europe will be weak as economic conditions remain fragile
Higher Japanese consumption tax poses only a minor risk to steel consumption
India's consumption has struggled in 2014 but has potential to expand
Growth in "Other Asia" is likely to be anaemic
CIS consumption is increasingly subject to political risks
Latin American consumption will disappoint
Supply
China's steel production will drop to single-digit growth rates
Restructuring likely as Chinese millers struggle to get credit
US has seen imports rise, displacing local output
Rising imports trigger anti-dumping complaints
A cheaper Euro could help European exports
CIS steel output to recover in 2015-16
Japan's exports will face competition from cheaper origins
Rupee depreciation should help Indian steel mills, despite weak local demand
Middle Eastern output is growing strongly
Iron ore prices have fallen sharply in 2014
Coking coal production cutbacks to be limited
Scrap prices will be depressed by falling iron ore and coking coal prices
Stocks and prices
Overcapacity will weigh on prices in 2014-15

Tin
Demand
Global semiconductor shipments are running at record levels
Consumer demand trends should be supportive of tin consumption
China will continue to shape direction of global tin market
Moderate recovery is expected in Japan's tin consumption in 2014
European tin demand will be weak in 2015-16
Supply
China's tin mine output is likely to be at full capacity already
Timah, Indonesia's largest tin producer, is struggling with mine output
Indonesia displays some flexibility on export requirements
Indonesia's exports are at their lowest levels since 2007
Brazil and Bolivia are adding to tin mining capacity
New tin mines are being developed in Australia and Africa
Myanmar has the potential to be an important new source of supply
Stocks and prices
Concerns about supply-side stability should support tin prices in 2014

Zinc
Demand
Apparent consumption in China grew by 13.8% year on year in January-July
Railway construction investment rose by almost 20% year on year so far in 2014
EU zinc consumption to record slow growth in 2014
Growth in US zinc consumption has accelerated strongly so far in 2014
Japan's zinc demand will continue to grow slowly
Supply
Chinese refined zinc production increasing by 10%
EU refined zinc production posts 5.8% growth so far in 2014
Expansions bolster Asian output
We expect net mine capacity to rise in 2014
Producers will restart mothballed sites amid expectations of firmer prices
Stocks and prices
China is believed to be taking measures to further curtail finance activity
SHFE stocks continue to decline, down by 32.7% by late September 2014
2014 price outlook trimmed in light of China growth concerns

Statistical appendix

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