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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • March 2015
  • Region: Global
  • 120 Pages
  • The Economist Intelligence Unit

The Economist Intelligence Unit has grown significantly less optimistic about the outlook for Industrial Raw Material (IRM) prices in 2015. The calamitous drop in oil prices from mid-2014 is having reverberations across the commodity complex broadly, as witnessed by a big sell-off in copper in the first weeks of the year. We now expect our IRM index to contract by 0.4% this year, compared with a forecast rise of 3.1% previously. It also means that prices will decline for a fourth consecutive year. Poor investor sentiment towards the sector and shrinking US-dollar liquidity (vital for dollar-denominated prices) will also sap demand from commodities. The lower base in 2015 means that prices are now likely to rise more quickly in 2016. We expect prices to increase by 9% next year, compared with our previous forecast of 6.2%.

Base metal prices will rise by just 0.6% in 2015 (compared with 5% in our previous forecast). Our expectation of slower price growth is largely down to weaker prospects in the global copper markets. Concerns about the health of the Chinese economy (and the state of the global economy more broadly), and the continued fall in the oil price pushed down the LME READ MORE >

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World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
The rebound in industrial prices will be delayed until 2016
The outlook for copper prices remains volatile
Agricultural industrial products have a poor price outlook
Fundamentals and financial dynamics keep downward pressure on oil prices

Aluminium
Demand
Substitution will help to maintain strong demand in 2015-16
US aluminium demand benefits from rising intensity of use
Chinese apparent demand is greater than previously estimated
European aluminium demand softens, but not as much as expected
Japanese slowdown gathers pace as recession hits
Brazilian aluminium is slowing sharply as year-end approaches
Supply
Ex-Chinese production hits four-year low in 2014, but output is rising again
Chinese aluminium production increased by 2.6m tonnes in 2014
Will lower oil prices encourage smelter restarts?
Klesch plans to restart 100,000 t/y of smelting capacity in the Netherlands
Russian output in 2014 will marginally exceed earlier guidance
The Brazilian election result will not affect aluminium supply
Stocks and prices
Greater producer discipline is required in China
Aluminium is caught in the crosswinds from a strong dollar and falling oil
Backwardation runs on, but stock withdrawal rate remains little changed
Price rises in 2015-16 will be limited by a heavy stock position

Coal
Demand
China has announced a public cap on CO2 emissions for the first time
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
Bangladesh aims to change its energy mix radically in favour of coal
Supply
Demand is beginning to soften in China at the start of a long-term trend
US production is on a downward trajectory
The Indian government is aiming to double production by 2019
Falling prices likely to depress investment in Australia's coal industry
Indonesia is making new attempts to control exports and production
The weak rouble and conflict in Ukraine has pushed up Russian output
Colombia's output growth will moderate in 2015-16
Stocks and prices
Coal prices fall to new multi-year lows in November

Copper
Demand
Strong apparent consumption in China in 2014
The State Reserve Bureau will remain an active buyer of copper
China's production of copper semis recorded 13.3% growth in 2014
Japan copper consumption growth will slow in 2015
Copper demand in Asia (excluding China) up by 3.9% year on year in 2014
European copper demand growth will slow to 1% in 2015
US copper demand to record small growth across 2015-16
Supply
Latin America mine production up as expansions fuel mine output growth
Disruptions mean that new mines are not reaching capacity on schedule
Operations in Indonesia are normalising after troubled 2014
Capacity closures announced as copper prices slump
Disruptions at smelters are also occurring
Re-tightening of the concentrate market is expected from 2017
China's refined copper output sets fourth consecutive all-time record in December
Chinese scrap imports fell steeply in 2014
Stocks and prices
Estimate for China's SRB buying more than double, dip-buying to continue
LME stocks on cancelled warrant status remain down on year-earlier levels
2015 copper price forecast revised down to reflect economic headwinds

Cotton
Demand
China will dramatically slash import levels
Government will support investment in India's textile sector
Growth in Pakistan's textile sector moderated by inadequate power supply
Consumption in Bangladesh will grow, regardless of poor safety standards
Dependency on slow-growing EU will weigh on consumption growth in Turkey
Supply
Poor weather conditions weigh on China's cotton output
India is poised for large increase in planted area
The US is poised to deliver a huge crop
A large output is expected in Pakistan, despite flooding
Production will slide in Brazil as weak prices affect planting decisions
Dry weather in Australia's planting season prompts a sharp drop in output
Stocks and prices
Large harvests and stocks will put downward pressure on prices

Crude oil
Demand
Low oil prices are making subsidy reform easier to swallow
China's imports surged at the end of 2014
US consumption will rise as consumers seek out bigger cars
Some consumers will miss out on the benefits of lower oil prices
Supply
OPEC is likely to make an "unofficial" production decision by mid-year
US production is revised down, but still some growth on the cards
Outlook is growing dire for Russian oil production
Canadian output will probably be flat in 2015
Stocks and prices
Prices appear to have hit a floor in late January

Gold
Demand
China's jewellery consumption will return to trend growth in 2015-16
The Indian government does not plan new restrictions on gold imports
The global economy remains broadly unfavourable for investment into gold
Funds have already moved out of gold, so ETF exodus is now less likely
Uncertainty about prices will weaken retail investment demand
The switch to alternatives to industrial gold is accelerating
Supply
Chinese production will continue to add to global supply in the near term
After a strong 2014, production in Russia and Australia will fall back
Scrap sales will stabilise along with prices in 2015-16
Central banks will continue to buy gold to diversify their reserve holdings
Producer hedging will not be a significant source of supply in 2015-16
Stocks and prices
Prices had a strong start to 2015, but will recede gradually

Lead
Demand
China's domestic market remained in slight deficit in January-November
Vehicle sales growth slows to 6.9% in 2014
Demand will benefit from robust battery production growth
Japanese lead demand will stabilise in 2015-16
Headwinds to keep European demand in check
US vehicle sales increased by 5.9% in 2014 to 16.5m units
Supply
Capacity being curtailed in China in response to low prices
Total smelting capacity is expected to have risen strongly in 2014
Global mine production (ex-China) saw little growth in 2014
US mine production up by 7.7% on January-November 2013
Stocks and prices
Prices will be supported by loose monetary policies

Liquefied natural gas
Demand
Japan's imports to slip as nuclear power regains share
Economic improvement should mean higher Korean buying
China's imports slowed sharply, but growth potential remains high
Indian imports could get a boost from lower prices
New markets are emerging in South-east Asia
Europe will scoop up cheap supplies
Supply
Qatar's production will be steady in 2015-16
Projects under construction in Australia will add to global glut of supply
Malaysia's share of the LNG market will shrink as it starts to import fuels
US will contribute to the glut of supplies in 2015-16
Algeria faces temporary shutdowns related to weather
A difficult operating environment makes Nigerian expansion unlikely
Prices

Natural gas
Demand
Fall in oil prices will have indirect effects on natural gas market
US demand will pick up as coal shutdowns expand
Russian consumption will be affected by a poor domestic economic performance
Agreement with Russia ensures six months of supply for Ukraine
Europe's gas demand will improve on dismal 2014
China is continuing to develop its import supply routes
Switch back to some nuclear capacity will come at expense of Japan's gas use
Steady growth expected in consumption in key Middle East economies
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 in natural gas
Stocks and prices
Healthy supplies will push down US prices in 2015

Natural rubber
Demand
Demand in China in 2015-16 will fail to match the strong growth of 2013-14
Indian consumption will accelerate in 2015 despite industry turmoil
Japanese consumption is revised down following descent into recession
Spanish and Polish demand is pulling up the EU aggregate
North American consumption will continue to grow in 2015-16
Supply
Flooding is likely to slow Thai production growth in 2015
Indonesian production will be stronger than previously expected in 2015-16
Malaysian production is struggling and has been hit by bad weather
Government steps in to support India's rubber farmers
Vietnamese production will remain tied to Chinese consumption
Stocks and prices
Prices will remain weak in 2015-16 as stocks are worked through

Nickel
Demand
China's dominance of the nickel market will diminish owing to ore shortages
China's consumption will show signs of recovery in 2015-16
Like most major commodities, EU consumption of nickel will be slow
US consumption will grow in 2015-16 but will not match strong 2014 levels
Japanese demand is affected by higher tax rates
Smaller markets growing at a rapid pace help to bring up the overall market
Supply
Global mine output should recover in 2015 as new sites open
New Caledonia sees mixed results from major new mines
Philippines should benefit from Indonesia's export ban
Nickel companies are moving downstream in Indonesia
Downside risks remain for Australia and Canada
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 a much slower pace than historical levels
US automobile sales and construction will support North American demand
Performance in Europe will be weak as economic conditions remain fragile
Growth in "Other Asia" is likely to be anaemic
Lower energy prices should have little short-term impact on Gulf steel demand
Supply
China's steel production will drop to single-digit growth rates
US imports soar as domestic supplies are high by outages
Both the US and Canada are targeting steel dumping
EU output struggles in the second half of 2014
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 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
Asia will continue to have the world's cheapest steel prices

Tin
Demand
Semiconductor shipments are running at record levels
Production of tinplate is in long-term structural decline
Tin use in chemicals to overtake tinplate as its second-largest market
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 is likely to be in long-term decline
After a rebound in 2014, tin demand growth in Europe will slow
Supply
China's tin mine output is probably running at full capacity
Myanmar has emerged as a major source of supplies to China
Indonesia has introduced a number of controls over exports
Lower Indonesian tin exports have not caused shortages in world markets
Brazil and Bolivia are adding to tin mining 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
Consumption growth in China will slow in 2015 from brisk pace in 2014
Start of QE by the ECB will support stronger zinc demand in the EU
US zinc consumption growth will average 1.2% a year across 2015-16
Japan's zinc demand will continue to grow slowly
Supply
Chinese refined zinc production rose by 12.4% in January-November
EU refined zinc production posts 2.9% growth in January-November 2014
Expansion projects fail to bolster Asian production outside of China
We expect net mine capacity to have risen in 2014
Stocks and prices
Chinese exports of refined zinc totalled 131,368 tonnes in 2014
SHFE stocks continue to decline, down by 6.5% in 2015
Zinc price forecast is cut, LME cash price will average US$2,183/tonne in 2015

Statistical appendix

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Note: Product cover images may vary from those shown

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