World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • November 2015
  • Region: Global
  • 119 Pages
  • The Economist Intelligence Unit
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The Economist Intelligence Unit expects only a modest rise in the prices of Industrial Raw Materials (IRM) in 2016, following four consecutive years of decline in 2012-15. 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. Broad-based US-dollar appreciation is also sapping demand for commodities (most commodity prices are dollar-denominated). In addition, softening economic growth in China is 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 soften demand for several commodities, for which China is the largest market. After a double-digit decline in 2015, IRM prices are slated to rise by 2.3% in 2016, as higher energy prices push up production costs and widespread cuts to operations lead to a tighter market. Further tightening will occur in 2017, but amid plentiful stocks we do not expect prices to increase by more than 7.5%.

Base metal prices will stage a modest rebound in 2016-17, gaining 3.1% and 8.3% respectively, following a 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
Producers are beginning to respond to persistently low prices
Oil demand growth will moderate
OPEC will begin to reclaim lost market share in 2016 as US output falls
Crude oil prices will recover only slowly from their collapse in 2015

EU demand struggles over the summer months
Chinese demand growth remains robust
US aluminium demand encourages imports of semi-fabricated products
Confidence in aluminium demand wavers amid switch to spot buying
Century announces closure of Hawesville smelter
Non-Chinese smelters are awaiting a supply response from China
Intervention of local authorities still complicates the smelter closure process
Production costs are not only falling in the West, but within China too
Stocks and prices
Any near-term recovery in aluminium prices will come from external factors

We expect China's coal demand to decline further in 2016-17
A rebound in US consumption is on the cards in 2016
Stricter environmental regulations are detrimental to coal
Competition from other energy sources is also weighing on coal use
Coal use will fall in the EU in 2016-17
The EU has adopted binding emissions targets to 2030
India's coal consumption will remain robust
China's output growth will be nearly flat amid low prices and soft demand
US production is on downward trajectory
The Indian government will struggle to double production by 2019
Indonesia's coal sector faces many headwinds
Stocks and prices
The rebound in 2016-17 will be modest, after prices halved in 2011-15

China's apparent consumption growth continues to weaken
China's State Reserve Bureau will be less active in 2016-17
Real Chinese copper consumption remains steady
Japanese copper consumption will see minimal growth in 2016-17
Destocking holds back copper demand in Asia (excluding China)
European copper will benefit from slightly improved economic conditions
US copper demand to record minimal growth in 2015-17
Global mine production growth will slow, as disruptions have intensified
Producers announced a host of cuts in September amid greater price pressure
Projects in Latin America are pushing global mine production up higher
Export disruptions are re-emerging in Indonesia
Copper concentrate supplies will tighten from 2016
China's refined copper output growth will slow in response to lower prices
Chinese scrap imports fell by 5% in January-August
Stocks and prices
Chinese bonded-warehouse stocks have fallen since mid-2015
LME warrant cancellations at 18% in late September
We have raised our 2016-17 price fore-casts slightly, to reflect mine closures

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
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 output in the US
Pakistani government's efforts to support farmers will disappoint
Production will slide in Brazil as weak prices affect planting decisions
El Niño poses downside risk to production in Australia
Stocks and prices
Large harvests and high stocks will put downward pressure on prices

Crude oil
US consumption growth in 2016 will decelerate
Demand in OECD Europe will revert to long-term decline
Japan's oil demand will remain on a downward trend, despite low prices
China's demand growth is stabilising
Low oil prices are making subsidy reform easier to swallow
OPEC members will maintain high production
Iran will gradually revert to pre-sanctions output
US production will dip in 2016, after resisting the price declines in 2015
We have revised up our outlook for Russian oil production in 2016
Stocks and prices
Prices will stage only a modest rebound in 2016

Low prices should support jewellery consumption in China and India
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
Chinese production will continue to add to global supply in the short term
After falling back in 2015, Australia's production will edge up in 2016-17
Peru's output has risen strongly in 2015, but downside risks remain
Low prices will deter recycling efforts
Producer hedging will remove supply in 2016-17
Stocks and prices
There is little to support gold prices going into 2016

Chinese lead demand is set to recover in 2016-17
Passenger-vehicle sales growth in China is slackening
China's lead-acid battery sector faces growing environmental pressures
Japanese lead demand will stabilise in 2016-17
EU lead demand will average around 1.6m tonnes/year in 2016-17
US lead consumption will not return to growth until 2016
Chinese refined lead production fell by 4.1% in January-August
The Vernon recycling facility will remain closed permanently
Global smelting capacity will expand in 2016
Mine closures in Australia and Ireland will slow global mine production
Stocks and prices
LME/SHFE stocks have fallen sharply so far in 2015
Negative investor sentiment and demand headwinds weigh on prices

Liquefied natural gas
Japan's LNG imports are expected to stagnate at best in 2016-17
High stocks will curb South Korea's LNG imports this year
China's imports will pick up in 2016-17
Indian imports will be boosted by the shortage of domestic gas
Middle East demand is growing strongly
South-east Asia is expanding its regasification capacity
European LNG consumption will continue to grow strongly
Recession in Brazil is curbing LNG demand
Qatar is having to adapt to greater competition in the market
Australia's LNG exports are set to surge
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
Iran has the potential to enter the market
African LNG exporters are struggling to sustain output

Natural gas
US demand will pick up as coal shutdowns increase
Russian consumption will be limited by the domestic economic performance
Europe's gas demand will show a more settled pattern
Gazprom moves ahead with Nord Stream-2
China is continuing to develop its import supply routes
A return to some nuclear use will come at the expense of Japan's gas demand
North American production continues to benefit from strong US demand
Russian production will increase despite new sanctions
Shale exploration in Europe has so far been disappointing
Iran courts upstream gas investment following nuclear deal
Saudi Arabia is planning new capacity
Stocks and prices

Natural rubber
Growth in Chinese demand will pick up modestly in 2016-17
India's NR usage is expected to grow strongly in 2016-17
Japan's NR demand should rebound modestly next year
"Other Asian" demand should pick up in 2016-17
We suspect that stocks are being drawn down in the EU
Strong growth in car sales should bolster US rubber demand
Thai production will remain subdued
Indonesian production should post positive growth in 2016
Vietnam is expanding output, but export growth is more muted
Malaysian production is struggling and stocks are falling
India's production is continuing to fall
Stocks and prices
Producers are again trying to support prices
Thai prices will pick up from 2016 onwards

China's volatile apparent consumption in part reflects stock movements
Worsening prospects in the stainless steel sector weigh on nickel demand
Modest growth in nickel use in advanced economies will not offset fall in China
Nickel mines in the Philippines will benefit from Indonesia's export ban
Australia and Canada are stepping up output
After mixed results from major mines in 2015, output will expand in 2016
Nickel companies are moving downstream in Indonesia
Russia's refined nickel output growth will be flat in 2016
Rising mine output will support refined production in Canada and Australia
Stocks and prices
Having fallen to a six-year low, prices will begin to recover in 2016

Chinese demand will fall for a second consecutive year in 2015
US automobile sales and construction will support North American demand
EU consumption will grow modestly, with 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
China's steel production will slow in the near term due to poor margins
US mills cut output in 2015
NAFTA governments are targeting steel dumping
EU moves to protect its steel industry
CIS steel output will recover slowly in 2016-17 after a difficult 2014-15
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 2016-17
Coking coal production cutbacks will return the market to balance from 2016
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

Semiconductor shipments start to fall after prolonged growth
Excluding China, production of tinplate is in long-term decline
Expanding use of consumer electronics will support tin demand in 2016-17
China's tin demand growth, while slowing, will continue to rise steadily
Long-term prospects for Japan's tin consumption are bleak
European tin demand growth is likely to slow in 2015-17
US tin demand bounced in 2014 but future prospects are mixed
China's output is setting new records owing to ore supplies from Myanmar
Indonesia has introduced a number of controls over tin exports
A third revision of Indonesian tin export regulations took effect in August
There are doubts about Indonesia's tin mine output potential in the long term
New tin mines are being brought on line in Africa and Australia
In South America, prospects for tin mine output are mixed
Stocks and prices
Tin prices will rebound in 2016

China's zinc demand in 2016-17 will grow roughly in line with GDP
Brazil bucks stronger zinc usage from emerging markets
Recovering vehicle markets will support zinc consumption in Europe
High imports of galvanised steel are weighing down on US zinc consumption
Strong refined zinc exports from Japan act as a drag on apparent consumption
Strong concentrate imports will support refined zinc output in China in2016
EU refined zinc production growth will continue to slow in 2016-17
Outside of China, India leads refined output growth in Asia
Zinc concentrate market will tighten from 2016 as exhausted mines close
Stocks and prices
We have lowered our price forecast for 2015-17

Statistical appendix

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