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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • Published: August 2014
  • Region: Global
  • 129 Pages
  • The Economist Intelligence Unit

The Economist Intelligence Unit still expects its Industrial Raw Materials (IRM) price index to fall again in 2014, but at a decline of 3.7% it is a slightly smaller slide than we had forecast previously. Some recent firming of the copper and aluminium markets will help to prevent a major slide in the index this year, as sentiment on industrial output in China is improving. Prices will move upwards by over 7% in 2015 as tightness in several key markets starts to have an impact on prices.

In early July aluminium was trading at its highest level in 2014, at around US$1,922/tonne, well above the lows of around US$1,640/tonne seen in late January. Production cutbacks outside of China mean that we expect the market to record a deficit this year, and long waiting lists to get metal out of warehouses are also contributing to an artificial tightness in the market. Nevertheless, we still expect prices to be lower on average in year-on-year terms in 2014 owing to the weak showing in the first quarter. 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 READ MORE >

World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Prices in key metals are starting to turn around
Outlook for rubber this year remains poor
Oil price spike will be short lived

Aluminium
Demand
WBMS data show consumption slowing somewhat into second quarter
Outside China, no growth in consumption at global level
Chinese aluminium demand growth slows but remains in double-digits
Japanese consumption is surging from the doldrums
Brazilian consumption to slow in second half of 2014
Supply
India's new production is coming on slower than expected
Production in China is slowing as domestic prices remain low
Output in the Americas declines, but is offset by strong growth in the GCC
Improving price and preimums mean closure threats could be receding
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 is slowing down
China's new policies will act as structural limits to long-term demand
Bump in use in 2014 does not mean that the US is going back to coal
Cheap carbon prices will support EU demand for coal
India to be among 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
Consolidation will take its toll on smaller mines in China
US production will not be affected by EPA laws in the near term
India's new government is prioritising raising output to meet growing demand
Production in Australia is under pressure as prices decline
Indonesia seeking new attempts to control exports and production
Russia is trying to revamp its coal industry
South Africa's mining industry is coming under downward pressure
Colombia's output to resume growth in 2014-15
Stocks and prices
Prices are expected to fall in 2014-15

Copper
Demand
Chinese apparent demand remains high, but is moderating
SRB is believed to have a remit to acquire up to 400,000 tonnes this year
Double-digit growth in output of semi-fabricated products drives real usage
Double-digit growth rates for copper consumption in Japan unsustainable
Copper demand growthlooks strong across Asia this year
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 also ambitious
Disruptions mean that new mines are not reaching capacity on schedule
Indonesian concentrate exports are still suspended, Batu Hijau output stopped
Disruptions at smelters are also occurring
Re-tightening of the concentrate market is expected from 2017
Growth in China's refined copper production to moderate to 9%
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
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
Cotton consumption in China will remain subdued
India's millers will take time to adjust to the loss of the China market
Pakistan identifies textiles as a key growth area
Consumption in Bangladesh will grow, regardless of poor safety standards
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 is unlikely to affect US production in 2014
Pakistan seeks to protect domestic farmers from Indian competition
Brazilian output will benefit from the weaker Real
Uzbekistan has pledged to improve the image of its sector
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
We still expect higher oil consumption in 2014-15
European oil demand will remain sluggish despite monetary stimulus
Lower Japanese demand will drag down Pacific region consumption
Despite a slow start, China is still expected to recover
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
ISIS's attacks threatening medium term prospects in Iraq
The impact on the oil sector of ISIS's advance
Hydrocarbons resources in ISIS areas
Piping and refining hit
The potential for Kurdish exports
Southern disruptions could slow investment
Progress on nuclear negotiations but little impact on Iran's oil output
Overall OPEC production to be flat in 2014
Non-OPEC production will help to ease pressure on bloc to make up shortfalls
US oil production will continue to grow strongly
Canada is seeking export opportunities for its heavy oil
A more liberal Mexican oil scene is likely
Russian supply in 2014 has been struggling so far
Kazakhstan's output has been limited by delays at Kashagan
Stocks and prices
Iraq events are adding to political risk and driving up prices

Gold
Demand
China is unlikely to repeat 2013's stunning growth in 2014
Indian consumption will grow in 2014 if import restrictions are relaxed
Geopolitical risks provide some support to 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
The new Tropicana mine is driving output growth in Australia
Lower gold prices will drive 2014 output down in Russia and the US
South Africa's gold sector is in structural decline
New mining centres will make up for lower output among large producers
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
Gold is on the rise again on the back of instability in Iraq

Lead
Demand
There are now more positive signs emanating from emerging markets
China's domestic market is balanced in early 2014 amid softer demand
China vehicle sales record double-digit growth in 2014
Lead-acid-battery production returns to growth
Japanese lead demand will moderate after pre-tax-rise boost
Indian lead consumption will benefit from extended cut in vehicle excise duty
EU demand forecast is raised as auto-market recovery continues
US demand growth will slow in 2014, reflecting destocking
Supply
Chinese production forecast is trimmed further, owing to maintenance closures
Total smelting capacity is expected to rise strongly in 2014
Nyrstar announces upgrade package for Port Pirie smelter in Australia
Expansion of global lead-mine production slows to 1.4% in 2014
Rate of mine expansions is expected to slow in 2014
Stocks and prices
Prices will be supported by stimulus-fuelled growth in China

Liquefied natural gas
Demand
Gas will still have a place in Japan's energy mix, despite nuclear restart
Stockbuilding at new terminals will see South Korea's imports rise in 2015
China's LNG demand could be boosted by cheaper gas
Liberalisation of gas prices could lead to higher LNG demand
New markets emerging in South-east Asia
Weak energy demand in Europe will drag on LNG imports in 2014-15
Import demand is accelerating in Latin America
Supply
Qatar's output to be flat in 2014-15
Output in Malaysia is still expanding, despite strong growth in 2013
US government revises its LNG approval process
Algeria's exports up strongly in first quarter
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 starting 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
US consumption will slow as local prices rise
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
Outlook for OECD Europe gas demand is poor
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 up strongly in 2014 on weather-related demand
Russia will focus on eastern regions to support Asia export plans
Europe's shale prospects will make little headway in 2014-15
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 will be supported by further government stimulus
Indian consumption to be over 1m tonnes by 2015
Momentum is returning to the Japanese economy
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 are reducing Thai output
Indonesian producers will look to exploit weak Thai production
A host of structural problems will push down Malaysian output
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
Chinese ore imports will struggle, following Indonesia export ban
Expected government stimulus will provide base for stainless steel demand
EU consumption will not turn around until 2015
US consumption to improve strongly in 2014-15
Outside China, Asian markets are mixed
Smaller markets growing at a rapid pace help to bring overall market higher
Supply
Low prices drove some capacity closures in 2013, but overall mine output rose
Disruptions at Vale site affecting New Caledonia's output
The Philippines will benefit from the Indonesia ban
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
Auto sales will boost European demand
Higher Japanese consumption tax poses only a minor risk to steel consumption
Infrastructure investment will mean higher Indian demand
"Other Asia" growth will struggle
CIS consumption is increasingly subject to political risks
Latin American consumption will 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 half
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 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
The industry will remain plagued by overcapacity

Tin
Demand
Global semiconductor shipments have been running at record levels in 2014
Consumer demand trends should be supportive of tin consumption
China will take a further share of the global tin market
Moderate recovery is expected in Japan's tin consumption in 2014
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
Quality standards are raised, but less stringently than first planned
Indonesia's exports slow 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 12.4% year on year in January-April
Mini-stimulus measures in China will support zinc demand
EU zinc consumption is unchanged so far in 2014
Growth in US zinc consumption at 2.8% so far in 2014, after a 3.4% rise in 2013
Japan's zinc demand will increase by 2% a year in 2014-15
Supply
Chinese zinc production is sluggish so far in 2014
EU 2014 refined zinc production growth estimate is revised higher, to 3.2%
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
Exchange stocks continue to decline, down 12% in the first half of 2014
2014 price outlook is raised as LME stocks fall

Statistical appendix

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