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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • Published: March 2014
  • Region: Global
  • 244 Pages
  • The Economist Intelligence Unit

Concern over a slowdown in China's economy, as well as uncertainty over how long accommodative monetary policy from the US would continue, contributed to a broad sell-off in commodity markets in 2013. The Economist Intelligence Unit's Industrial Raw Materials (IRM) price index showed weakness throughout the year and we estimate that it fell by 5.9% in 2013, as base metals and natural rubber showed considerable declines. The only bright spot was a period of relative strength in cotton prices early in 2013, but cotton then weakened in the fourth quarter.

A number of factors were behind the price weakness. From a fundamental perspective, supply prospects for many of the base metals (particularly copper) improved over the course of 2013. Furthermore, stocks were generally at healthy, and in some cases very high (aluminium and nickel), levels. Indeed, were it not for delays in releasing metal from warehouses and metal tied up in financing deals-which gave markets a tighter feel-arguably, prices could have fallen further. Perhaps the most significant factor, however, was the loss of investor confidence in commodities, which have generally been perceived as a beneficiary of loose central READ MORE >

World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Prices to remain weak in 2014 as US continues monetary tightening
Physical demand may increase across more regions in 2014
There is a risk of a large release of metal stocks in 2014
Ample supply of oil will see prices fall in 2014

Aluminium
Demand
Chinese apparent demand accelerates
European demand continues to disappoint
India continues phase of heavy destocking
Premiums break all previous records
Net importing regions’ choices will prove pivotal in setting premiums
Aluminium demand remains on solid footing in the long term
Supply
Alcoa to permanently close all existing potlines at Massena East
North American production increase by 1.4% in 2013
Chinese production revised up to take into account unreported production
BHP Billiton considers the future of the Bayside smelter
Alcoa is also reviewing the future of its Point Henry smelter
Klesch Group applies for bankruptcy at Delfzijl smelter in the Netherlands
Stocks and prices
Heavy stock building is going unreported
Prices touched below US$1,700/tonne for first time since 2009

Coal
Demand
2014-15 consumption revised down as China prioritises cutting coal use
High natural gas prices will support coal use in the US in 2014
EU consumption will slip in 2014-15
Supply challenges are preventing stronger growth in India's consumption
Cheaper coal is proving to be an attractive fuel for Japan
Coal consumption in South Korea is expected to pick up in 2014-15
Supply
China's 2013 coal output is revised upwards
US output to weaken as the export incentive starts to fade
Government attention will help India improve production in 2014-15
Australian exports will support production growth in 2014-15
Russia's coalmining industry is looking for new markets in Asia
South Africa is struggling to increase coal production
Colombia's output to resume growth in 2014-15
Large Asian countries likely to increase financing of coal projects globally
Stocks and prices
Prices will show some upside in 2014-15 but will remain well below 2011 highs

Copper
Demand
Chinese copper imports peaked and will tail off in first-half 2014; destocking
Consumption growth in Japan to turn positive in 2014
Growth accelerated in the EU in the final quarter of 2013
Housing and autos still driving US copper demand
Supply
After Oyu Tolgoi, Peruvian and African mines dominate supply surge
Chinese smelters must show discipline in surplus concentrate market
Chinese smelters must show discipline
Tightness in scrap supply should ease in the medium term
Stocks and prices
Much of the surplus is held up in financing deals and unavailable
The upside is limited for prices in the short to medium term

Cotton
Demand
China may abandon its cotton stockpiles
China's stockbuilding policy has eroded competitiveness of cotton
India's yarn exports at risk as export incentives are reintroduced
Pakistan will import cotton to meet the needs of the booming textile sector
Low-costs will offer incentives for companies to relocate to Bangladesh
Robust consumption growth is expected in Vietnam and Indonesia
Supply
China plans to abandon its cotton hoarding programme
Indian cotton output set to increase in 2013/14 following strong monsoon
US production will recover some lost ground in 2014/15
Pakistan is likely to miss targets in 2013/14 as flooding affects production
More favourable prices to support Brazilian production in 2013/14
Uzbekistan seeks to upgrade the image of its sector to recover export markets
There will be no further crop-switching away from cotton in Australia
Stocks and prices
China's stock policy is uncertain in the medium term
Cotton prices willl continue to struggle until 2015

Crude oil
Demand
US demand revised to expansion in 2014-15
European oil demand will continue to move downwards in 2014-15
A weak yen and higher taxes will bring down Japanese (and Pacific) demand
China's consumption is still expected to grow steadily in 2014-15
Subsidised prices will support growth in Middle East oil consumption
Russia's consumption path will depend on pricing
Steady growth is expected in African consumption
The transport sector is driving Brazil's demand
Supply
Saudi Arabia will tailor its production to meet export demand
Security and political risks continue to drag on Iraq's production
Iran's output could quickly reverse direction if diplomacy improves
Civil unrest and sabotage are disrupting output in the Middle East and Africa
OPEC output to show relatively limited growth in 2014
US oil output to expand strongly in 2014-15
New technology and new locations will help to increase Russian production
Kashagan remains offline, holding back Kazakh output
Brazil is making only slow progress on pre-salt production
Debate over Keystone XL will hang over Canada's oil output in 2014
Norway looks north to improve production
Stocks and prices
Prices for 2014 revised up slightly, but still projected to fall
Brent-WTI spread to narrow in 2014-15

Gold
Demand
Despite slower growth, China will remain the biggest jewellery consumer
India's consumption prospects depend on the government's import policies
ETF outflows to continue, but at a lower level in 2014-15
Developing economies will lead retail investment
Industrial usage should pick up amid falling prices and economic recovery
Supply
China's lower cost production will help add to global supply
Australian mine output will dip in 2014-15 owing to price weakness
Russia will overtake the US as the world's third-largest producer of gold
Structural challenges remain in place for South Africa's mining sector
Outside India, scrap sales are being constrained by relative price weakness
Central bank buying will continue, but at a slower pace
Lower prices are expected to lead to a small amount of hedging activity
Stocks and prices

Lead
Demand
Emerging markets as a driver of global lead demand growth are stuttering
China continues efforts to modernise battery recycling
Efforts to temper debt levels slow China's downstream demand
China vehicle sales expand by 13.9% in 2013 to fresh record
4G technology, alternative-fuel vehicle subsidies, PV growth to boost demand
Potential downside risks for China's lead demand outlook
China's e-bike market may have reached a plateau; exports to provide growth
Japan's lead consumption to grow slightly in 2014, after 2013 contraction
India's lead consumption to remain sluggish in 2014
EU demand forecast raised as auto market recovery reduces downside risks
US demand to slow in 2014, reflecting destocking
Supply
Lower secondary production to continue into 2014; estimates revised lower
Potential for secondary lead output growth in China, but headwinds exist
Outside China there have been only a few notable smelter capacity additions
Paroo Station experiences challenges, but output is on track to meet guidance
Lower Canadian output is being offset by increases from Australia
Rate of mine expansions is expected to slow
Stocks and prices
LME, SHFE stocks remain stable, but availability is tight
The tight market outlook means further price appreciation in 2014-16

Liquefied natural gas
Demand
Japan's imports in 2013 reach record high
South Korea adopts gas supportive policy but conservation will limit growth
Strong growth in China's LNG demand is expected in 2014-15
India's LNG import to recover slowly in 2014-15
LNG market to deepen in the rest of Asia
UK's LNG imports are expected to pick up modestly in 2014-15
European demand to be disguised by reloading
Latin America offers potential for spot market deliveries
Supply
Qatar is wooing European customers again
US gradually approving more LNG exports
New gas production needed for Algeria to expand LNG exports
Angola LNG faces disruption that will extend into 2014
New projects are unlikely in Nigeria
Australia's LNG operations continue to face cost overruns and delays
PNG LNG to begin operations in 2014 while another project is considered
Indonesia's LNG exports to fall sharply as local gas production dwindles
Expansion projects ongoing in Malaysia but domestic demand will limit growth
Russia keen to emerge as major new LNG exporter
Prices

Natural gas
Demand
US demand will pick up from 2015 as coal plants shut down
Russia uses its gas supplies to retain influence in Ukraine
European demand will continue to balance between gas and coal on prices
LNG is taking a larger share of China's gas imports
Higher wholesale prices in 2014 will boost output and consumption in India
Japan's consumption to continue to fall in 2014-15
Steady growth expected in consumption in key Middle East economies
Supply
Demand from LNG export projects will lead to US output growing in 2014-15
Russia production shifting to Asia- export focus
Production from the Caspian region is set to ramp up in the next few years
Shift to Arctic production will help European supply to recover
Steady increases in Middle East production are planned
Stocks and prices
Cold snap sparks price rise in US but ample supplies will limit gains

Natural rubber
Demand
Firm Chinese demand growth anticipated for 2014
Indian consumption to reach 1m tonnes by 2015
Scope for further decline in Japan's consumption
EU NR consumption will pick up in 2014-15
North American consumption growth to recover in 2014 after small decline
Supply
Rubber farmers' participation in protests likely to disrupt output
Indonesia's rubber agency calls for cutbacks in 2014
Malaysia's output stages a modest recovery
Production in India should recover in 2014-15
Increase in planting area supports output
Stocks and prices
Despite cuts to supply outlook, stock overhang will still weigh on prices

Nickel
Demand
Nickel pig iron stocks will allow China to continue stainless steel output
EU and US consumption to record positive growth in 2014-15
Japan's nickel demand up strongly in 2013 while Taiwan sags
Smaller markets growing at rapid pace help to bring overall market higher
Supply
Low prices drove some capacity closures in 2013 but overall mine output rose
New Caledonia's output is rising quickly but some obstacles remain
Typhoon did not appear to disrupt Philippines output
Indonesia relents somewhat on ore exports, but not for nickel
Australia's output is expected to slip in 2014, but Canada's will recover
Russia's exports have recovered and, if sustained, will support output
Stocks and prices
Some recovery in prices is expected in 2014-15

Steel
Demand
China's steel consumption to remain firm, albeit lower than recent years
North American consumption set to rise by 3% in 2014-15, but risks to upside
2013 consumption estimate revised up on improved industrial activity
Infrastructure spending in 2014 will support Japan's consumption
South Korea's export-oriented steel-intensive sectors perform weakly
Public infrastructure projects should support Indian steel consumption
Latin American consumption to turn positive in 2014-15
Supply
China's shift to a new economic model will lead to slower production growth
Move to higher energy prices may also lead to some capacity restrictions
US and Mexican output growth will push NAFTA output to 3.5% in 2014
EU production to turn positive but 2014 growth will be flattered by base effects
Weaker yen to support exports of Japanese good containing steel in 2014
Rupee depreciation should help Indian steel mills despite weak local demand
Chinese pre-holiday buying will support iron ore prices in early 2014
Current prices expected to be the floor for coking coal prices
Scrap prices will be depressed by falling iron ore and coking coal prices
Stocks and prices
Mills pricing power may be restored in 2015

Tin
Demand
Global semiconductor data suggests demand grew strongly at end 2013
Consumer demand trends should be supportive of tin consumption
Changes to China's economy will be positive for tin demand
Japan's reflationary policies and weaker yen should support tin demand
European and US tin demand has been in structural decline
Supply
China's tin mine output will be stable in 2014-15
Timah, Indonesia's main producer, is struggling with mine output
Indonesia's export quality standards are less stringent than first planned
Passing exports through a local exchange causes short-term disruption
Indonesia's ore export bans less relevant for tin markets
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
A finely balanced market should offer support to tin prices in 2014-15

Zinc
Demand
Chinese zinc demand accelerates on stronger imports, downstream activity
Record vehicle sales fuel Chinese zinc consumption growth
EU zinc demand to increase in 2014 as auto market poised to expand
Growth in US zinc consumption to moderate after substantial 2013 gains
Japan's zinc demand to increase 2% in 2014 after minimal growth in 2013
Supply
ILZSG's downward revision to 2012 out‑put again questions accuracy of CNIA
EU to record moderate production growth in 2014
Expansions bolster Asian output
Chinese mine supply slowed sharply in 2013, high TCs charges pose risks
MMG complexities could cause scheduled mine additions to lag planned closures
Stocks and prices
Concentration of stock continues to create bottlenecks
China is also taking steps to end financing deals involving commodities
Zinc prices finally find support; stronger sentiment seen across 2014-16

Statistical appendix

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