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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • October 2014
  • Region: Global
  • 123 Pages
  • The Economist Intelligence Unit

The Economist Intelligence Unit still expects its Industrial Raw Materials (IRM) price index to fall by 3.6% in 2014, its third consecutive year of decline. Although prices have started to recover in several critical industrial markets, weakness at the start of the year, as China's demand trajectory was uncertain, will weigh on average prices. In 2015 prices will move upwards as the global economy accelerates, drawing in demand for industrial inputs.

Aluminium appears to have shaken off much of its earlier weakness and is now trading at over 20% higher than its February lows. Outside China, the market for the light metal is tight owing to delays in getting material out of warehouses and production cutbacks from leading metals. However, substantial transparent stock levels may limit any extended run in 2014. Prices will break over US$2,000 tonne in 2015 but will remain below the elevated levels seen in 2005-07. Copper markets have also strengthened, after spending most of the second quarter below US$7,000 tonne. Uncertainty over the effects of China's mini stimulus measures and an investigation into potential misuse of copper as collateral in a port at Qingdao sapped interest away from the red metal, but it now appears to be on a recovering trend and we anticipate prices moving slightly higher in 2015.

Prices for refined nickel received another boost in the third quarter after a politician in the Philippines, the second-largest ore producer, proposed a ban on raw materials exports, similar to Indonesia's. We feel that it would take several years before such a ban were fully implemented, but nickel prices will remain elevated as consumers will draw down their stockpiles of nickel pig iron, a lower-grade alternative.

World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Industrial prices will fall in 2014 before a turnaround next year
Cotton prices will remain weak in 2014-15
Soft demand is pushing down global oil prices

Aluminium
Demand
Key aluminium-consuming regions show increasingly divergent trends
The deteriorating situation in Europe will weigh on non-China growth
Japanese consumption is surging
US demand rebounds in first half
Indian demand patterns remain puzzling
Supply
Aluminium production outside China is expected to fall
GCC output increase will be limited to capacity creep for foreseeable future
Chinese capacity restarts are proceeding cautiously
Rebuilding of alumina stocks getting underway in China
Stocks and prices
Tight markets outside of China are generating a price rally
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
Balance of risk to China consumption in 2014 is tilted to the downside
China's new policies will act as structural limits to long-term demand
Bump in use in 2014 does not augur long-term recovery in US coal demand
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 will not be affected by EPA laws in the near term
India will consider structural reforms to improve coal output
Production in Australia is under cost pressures as prices decline
Indonesia is making new attempts to control exports and production
Russia is trying to revamp its coal industry
South Africa's coal output is sinking below year-earlier levels
Colombia's output will resume growth in 2014-16
Stocks and prices
Coal prices are at multi-year lows

Copper
Demand
China apparent consumption remains elevated, but growth rates are waning
SRB is believed to have a remit to acquire up to 400,000 tonnes this year
First half of 2014 saw rapid growth in output of semi-fabricated products
Growth in Japanese copper consumption is slowing
Copper demand growth looks strong across Asia this year
European copper demand growth is moving ahead of expectations
US consumption will increase by 2.6% in 2014, despite WBMS downgrade
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 is running at 9.8% year on year
Chinese scrap imports remain down on a year-on-year basis in January-July
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 to average over US$7,000/tonne in the second half of 2014

Cotton
Demand
China's cotton imports will be slashed and demand will be at muted levels
India's millers will take time to adjust to the loss of the Chinese market
Pakistan will target textile exports to EU
Consumption in Bangladesh will grow, regardless of poor safety standards
Support from a weak lira will wear off in Turkey
Supply
China introduces new subsidy payment system, but only in Xinjiang
Record large planted area will see India emerge as the world's largest producer
US to record bumper crop in 2014/15
Pakistan seeks to protect domestic farmers from Indian competition
Production will slide in Brazil as weak prices affect planting decisions
Uzbekistan has pledged to improve the image of its sector
Dry weather in Australia's planting season prompts a downgrade
Stocks and prices
Large US and Indian harvests will weigh on prices in 2014-15

Crude oil
Demand
US demand slowed midway through 2014
US refiners will benefit from captive crude
Economic uncertainty and structural changes will curb European demand
Eventual return of nuclear power will cut into Japan's oil use
China seems to be slowing its stockbuilding
India will attempt to build up reserves in 2015-16
Smaller Asian markets face a mixed trajectory in 2015-16
Subsidised prices will support growth in Middle East oil consumption
Russian consumption will slide as the economy weakens
Supply
Saudi Arabia will benefit from large investment from Aramco
Iraq's political turbulence is weighing on near- term production outlook
Iran's production is stabilising, but well below historic levels
Libya's output will struggle for the rest of 2014
OPEC's African producers are struggling to raise output to targeted levels
Infrastructure choke points could hamper US output
Canada is seeking export opportunities for its heavy oil
A more liberal Mexican oil scene is likely
New sanctions will challenge Russia's unconventional oil plans
Operational challenges are hampering Brazil's production prospects
Stocks and prices
Brent prices are lingering at around US$100/b in the third quarter

Gold
Demand
After falling in 2014, China's jewellery demand will move upward in 2015-16
India's underlying demand for gold jewellery remains robust
Geopolitical uncertainty provides some support for gold investment
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
In Australia the new Tropicana mine will drive output growth in 2014-15
Reduced profitability will constrain mining activity in several countries
New mining centres will make up for lower output among large producers
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
Economic and geopolitical volatility may cut into lead demand
China's domestic market remained in slight deficit in the first half of 2014
Sluggish commercial vehicle sales are a drag on lead demand
More battery production cuts announced by Chinese authorities
Japanese lead demand to increase in 2014 as sentiment supports car sales
EU demand forecast is raised further as automobile market recovery continues
US lead demand outlook for 2014 is raised as vehicle sales improve
Supply
China's output to be limited by consumer destocking
Total smelting capacity is expected to rise strongly in 2014
Nyrstar announces upgrade package for Port Pirie smelter in Australia
Global mine production improves, but still lags year-ago levels
Rate of mine expansions expected to slow in 2014
Stocks and prices
Prices will be range-bound until stronger Chinese demand emerges

Liquefied natural gas
Demand
Japan's imports of LNG will decline in 2015-16 but remain at elevated levels
South Korea is seeking to push away impending LNG cargoes
China will take greater share of LNG import market
If gas prices rise in India, importers are likely to chase more LNG
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 2014-15
Output will continue to grow in Malaysia owing to FLNG
US will enter the market in a big way from 2016
Algeria's exports will rise owing to new terminals
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 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 to 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 has major import ambitions to meet growing gas demand
The Indian government is to decide whether to raise prices imminently
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
Russia will focus on eastern regions to support Asia export plans
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 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 in 2014-15 will struggle to match the growth of 2013
Indian consumption to rise to over 1m tonnes by 2015
Volatile data are masking the underlying state of Japanese demand
EU demand is likely to rise in 2014, led by growing Spanish consumption
North American consumption growth to recover in 2014, despite bad weather
Supply
A supply glut is posing problems for the Thai government
Indonesian producers will be hit by the sale of the Thai stockpile
Malaysian output is struggling amid structural problems
Government steps in to support India's rubber farmers
Weaker Chinese demand will push down Vietnamese production
Stocks and prices
Prices will remain weak in 2015-16 as stocks hang over the market

Nickel
Demand
China's dominance of nickel market will diminish owing to ore shortages
China may face further restrictions in sourcing ore
Significant headwinds remain in the face of stronger EU nickel demand
US consumption will improve strongly in 2014-16
Outside China, Asian markets are mixed
Smaller markets growing at a rapid pace help to bring up the overall market
Supply
Mine output will contract substantially in 2014.
New Caledonia set for strong mined output in 2014
The Philippines will benefit from the Indonesia ban
Indonesia's ore export ban will continue to disrupt the market
Australia's output will flatline 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
Prices will trend upwards strongly on supply restrictions in 2015-16

Steel
Demand
China's consumption will grow, despite slowdown in GDP growth
Strong US outlook will support higher steel consumption in 2014
Outlook remains limited for Europe
Higher Japanese consumption tax poses only a minor risk to steel consumption
New government in India has opportunity to drive steel demand
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
The prospect of industry restructuring in China is looming
US has seen imports rise, displacing local output
Rising imports trigger anti-dumping complaints
EU output will be very uneven in 2014
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
Capacity closures could push up coking coal prices
Scrap prices will be depressed by falling iron ore and coking coal prices
Stocks and prices
Over capacity 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 shape direction of global tin market
Moderate recovery is expected in Japan's tin consumption in 2014
Increases in European and US tin demand are likely to be limited
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 will add further restrictions on exports
Indonesia's exports slow because of requirement to trade on local exchange
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 13.1% year on year in the first half
Railway spending is supporting strong zinc use in 2014
EU zinc consumption returns to growth in 2014, despite economic headwinds
Growth in US zinc consumption has accelerated strongly so far in 2014
Japan's zinc demand will increase by 2% a year in 2014-15
Supply
Chinese refined zinc production growth is raised as output hits a record in July
EU 2014 refined zinc production growth estimate is revised higher, to 5%
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 22.8% by late August 2014
Strong first-half price sentiment continues into the third quarter

Statistical appendix

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