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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • Published: July 2014
  • Region: Global
  • 119 Pages
  • The Economist Intelligence Unit

The Economist Intelligence Unit expects its Industrial Raw Materials (IRM) price index to fall again in 2014 as indications of slowing industrial output in China turn sentiment negative in many markets. This follows a decline in 2013 when earlier concerns over China's economy and uncertainty over the duration of accommodative monetary policy from the US dragged prices lower. We expect our IRM index to fall by over 4% in 2014, a sharper drop than previously ex-pected, due mainly to downgrades to our outlook for metals and rubber prices.

Critical base metal prices were already under some downward pressure over uncertainty about industrial demand in China. Although the government has carried out some mini-stimulus measures that should be supportive for prices, several factors will act as negatives for copper and aluminium in particular in our view. In copper, an ongoing investigation into potential misuse of the red metal as collateral in a port at Qingdao will weaken international banks' interest in extending metal-backed credit, at least in the short term. This will lead to softening demand for imports of copper from Chinese firms looking to raise finance this way. Regarding READ MORE >

World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Concern about China will help to weaken metals prices in 2014
US natural gas prices will rise but European prices are set to fall
Political insecurity in Iraq and elsewhere is driving oil prices higher

Aluminium
Demand
WBMS shows a rise in global demand growth of 6.9% in the first quarter
Spain and Sweden see large-scale restocking activity
Chinese aluminium demand reached double-digit growth in the first quarter
Russian demand is being supported by aluminium product exports
Brazilian demand shows major gains in 2014 as imports start to accelerate
Supply
Chinese output on a daily basis falls for the second consecutive month in April
Output in the Americas declines, but is offset by strong growth in the GCC
Stocks and prices
Physical markets outside China remain in deficit
Price rises in 2015-16 will be limited by a heavy stock position

Coal
Demand
China's consumption will slow in 2014
China's new policies will act as structural limits to long-term demand
US introduces new environmental plans that would curb coal use dramatically
Cheap carbon prices will support EU demand for coal
Infrastructure investment in India would support demand for coal
Japan is committed to keeping coal in its energy mix
Supply
China's production has slowed down sharply in the first quarter
US production will not be affected by EPA laws in the near term
New government seeking to shake up India's coal industry
Output set to continue expanding in Australia
Indonesia seeking new attempts to control exports and production
Russia's coal output slowed in the first quarter of 2014
Colombia's output to resume growth in 2014-15
Stocks and prices
Prices are expected to fall in 2014-15

Copper
Demand
Strategic buying provided a temporary boost to Chinese apparent demand
Copper for financing use will come under pressure
Double-digit growth rates for copper consumption in Japan unsustainable
Scrap tightness to continue offsetting effects of austerity on EU consumption
US demand to bounce back after weather-related slide in first quarter
Supply
Major copper miners continue to achieve impressive output growth
Peru leads the copper mine supply surge
The Zambian government's production targets are ambitious
Disruptions mean that new mines are not reaching capacity on schedule
Still no progress on Indonesian export halt
Disruptions at smelters are also occurring
Re-tightening of the concentrate market is expected from 2017
China's concentrate output suggests steady output of refined metal possible
Tightness in scrap supply continues but should ease in the medium term
Stocks and prices
China's SRB may not be finished with its copper-buying spree for this year
Prices are recovering from the March sell-off; a floor may now be in place

Cotton
Demand
Cotton consumption in China to slide as domestic fibre remains uncompetitive
India's millers will take time to adjust to the loss of the China market
Pakistan identifies textiles as a key growth area
Low costs will offer incentives for companies to relocate to Bangladesh
Weak lira will support exports from Turkey
Supply
China introduces new subsidy payment system, but only in Xinjiang
Indian production is expected to pick up despite reduction in planted area
Farm Bill unlikely to affect US production in 2014
Pakistan seeks to protect domestic farmers from Indian competition
Brazilian output will benefit from weaker Real
Uzbekistan needs to improve the image of its sector to recover export markets
Drought and El Niño conditions mean lower Australian output
Stocks and prices
Concerns about US production will offer some suppor to prices in 2014

Crude oil
Demand
Despite the economy contracting in Q1, US oil consumption will grow in 2014
European oil demand will continue to move downwards in 2014-15
Lower Japanese demand will drag down Pacific region consumption
Stockbuilding will cut into China's consumption
Consumption in India is off to a slow start
Subsidised prices will support growth in Middle East oil consumption
Russian consumption will slide as economy weakens
Supply
Saudi Arabia output will be affected by investment
Iraqi output is rising, but internal disputes represent a major risk
We have revised up our forecast for Iranian production
Smaller OPEC members are struggling
Major OPEC producers will need to cover shortfalls
US oil production will continue to grow strongly
Debate on Keystone XL linking Canada to US Gulf coast to persist
Mexico's energy reforms could transform the country's production
Russian supply in 2014 has been struggling so far
Kazakhstan's output has been limited by delays at Kashagan
Stocks and prices
We have revised up prices for 2014, owing to political risks

Gold
Demand
China is unlikely to repeat 2013's stunning growth in 2014
Indian consumption will grow in 2014 if import restrictions are relaxed
Economic fundamentals are negative for investment in gold
Retail investment will fall from the record highs of 2013
Competition from alternatives is driving a fall in industrial gold use
Supply
China's production will help to add to global supply in the short term
Australian output will grow in 2014-15, despite eroding profitability
Lower gold prices will drive 2014 output down in Russia and the US
South Africa's gold sector is in structural decline
Scrap sales will decline in 2014 due to weak prices but will stabilise in 2015
Central bank buying will continue, but at a slower pace
After two years of de-hedging activity, there will be net hedging in 2014-15
Stocks and prices
Easing political concerns mean gold is turning downward again

Lead
Demand
Emerging-market headwinds linger as Russian growth outlook lowered
Battery manufacturers face production tax in China
China's domestic market balanced in early 2014 amid softer demand
China vehicle sales remain high, following a record-breaking March
Lead-acid-battery production growth stalls in early 2014
Japanese lead demand to moderate after pre-tax-hike boost
India's lead consumption to remain sluggish in 2014
EU demand to see modest growth in 2014; auto-market recovery continues
US demand growth to slow in 2014, reflecting destocking
Supply
Chinese production forecast lowered owing to high raw material costs
Total smelting capacity is expected to rise strongly in 2014
Nyrstar announces upgrade package for Port Pirie smelter in Australia
Global lead-mine production rose by 7.6% in 2013 led by China and Australia
Rate of mine expansions is expected to slow in 2014
Stocks and prices
Concerns about Chinese growth are weighing down prices

Liquefied natural gas
Demand
Gas will still have a place in Japan's energy mix, despite nuclear restart
South Korea's policies and plans will support greater LNG imports
China's LNG demand could be boosted by cheaper gas
Higher gas prices could support greater LNG demand in India
New markets emerging in South-east Asia
New markets will not offset weak European import levels
Import demand is accelerating in Latin America
Supply
Qatar's output to be flat in 2014-15
Malaysia raises production via floating LNG and expansion at existing site
US government revises LNG approval process
New gas production will be needed for Algeria to expand LNG exports
Angola LNG has been shut down until at least 2015
New projects are unlikely in Nigeria
Australian projects will lead to significant reshaping of global industry
PNGLNG will start production ahead of schedule
Indonesia's LNG exports to fall sharply as local gas production dwindles
Russia is keen to emerge as a major new LNG exporter
Prices

Natural gas
Demand
New environmental laws will support higher gas consumption in the US
Russian consumption to be affected by Ukraine crisis impact on economy
Consumption in Ukraine is threatened by civil unrest
Ukraine crisis unlikely to affect supply to Europe
Europe's consumption is set to slide again in 2014
China has major import ambitions to meet growing gas demand
Higher prices likely to come into force in India
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 to remain steady in 2014-15
Russia will focus on eastern regions to support Asia export plans
Europe's shale prospects will make little headway in 2014-15
Iran will add new capacity to the Middle East
China is targeting higher output of shale gas
Stocks and prices
Ukraine crisis will have little impact on European gas prices

Natural rubber
Demand
Demand in China will be supported by further government stimulus
Indian consumption to be over 1m tonnes by 2015
Japanese economic growth was strong in the first quarter, but risks abound
Despite stronger economic conditions, EU consumption will underwhelm
North American consumption growth to recover in 2014, despite bad weather
Supply
Drought, low prices and political unrest threaten Thai output
Indonesian producers will look to exploit weak Thai production
Dry conditions across South-east Asia will affect Malaysia's output
Export limits are mooted again in South-East Asia
Government steps in to support India's rubber farmers
Increase in planting area supports global output
Stocks and prices
Prices will remain weak in 2014-15 as stocks hang over market

Nickel
Demand
China's dominance of nickel market to diminish owing to ore shortages
China's nickel pig iron producers will adjust slowly to new ores
China will make greater use of scrap nickel
EU consumption will not turn around until 2015
US consumption to improve strongly in 2014-15
Japan's consumption has stabilised but other Asian consumers are down
Smaller markets growing at a rapid pace help to bring overall market higher
Supply
High prices could make nickel mines attractive purchases for independents
Output in New Caledonia still being disrupted
The Philippines will seek to replace lost Indonesian supply
Indonesia's ore export ban to be maintained in near term
Australia's output will slip in 2014; Canada's will start recovery by 2015
Russia’s exports have recovered and, if sustained, will support output
Stocks and prices
Prices have breached US$20,000, and will stay high in 2014-16

Steel
Demand
China's consumption will remain strong, despite slowdown in GDP growth
The construction sector will begin to support US demand
Outlook for European steel consumption is improving
Higher Japanese consumption tax poses only a minor risk to steel consumption
South Korea's export-oriented steel-intensive sectors will perform weakly
A change of government could trigger higher consumption in India
CIS demand to falter on higher interest rates and capital flight
Latin American consumption to return to growth in 2014-15
Supply
China's steel production will drop to single-digit growth rates
The prospect of industry restructuring in China is looming
A series of operating issues hit NAFTA steel output in the first quarter
EU output will be very uneven in 2014
Weaker demand to hit CIS output, but exports benefit from currency weakness
Consumption tax rate rise will dampen demand in Japan
Rupee depreciation should help Indian steel mills, despite weak local demand
Iron ore prices will fall sharply in 2014
Capacity closures could push up coking coal prices
Scrap prices will be depressed by falling iron ore and coking coal prices
Stocks and prices
The industry will remain plagued by overcapacity

Tin
Demand
Semiconductor shipments start 2014 strongly
Consumer demand trends should be supportive of tin consumption
China will take further share of global tin market
Tentative recovery expected in Japan's tin consumption
Recovering economies will keep EU and US demand flat in 2014-15
Supply
China's tin mine and refined output are not expected to increase in 2014-15
Timah, Indonesia's largest tin producer, is struggling with mine output
Indonesia's quality standards raised but less stringently than first planned
Indonesia's exports slowing because of requirement to trade on local exchange
Brazil and Bolivia will bring on new tin mine 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 10% year on year in the first quarter
Mini-stimulus measures in China will support zinc demand
Russia tensions pose increased risk to EU zinc consumption
Growth in US zinc consumption to moderate after substantial 2013 gains
Japan's zinc demand to increase by 2% a year in 2014-15
Supply
Capacity additions support robust refined zinc supply outlook in China
EU refined zinc production increased by more than 4% in Q1 2014
Expansions bolster Asian output
We expect net mine capacity to rise in 2014
Producers to restart mothballed sites amid expectations of firmer prices
Stocks and prices
China is believed to be taking measures to further curtail finance activity
Exchange stocks continue their established downward trend
Stronger prices will be seen in 2014-16 as global economy revives

Statistical appendix

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