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World Commodity Forecasts Industrial Raw Materials Product Image

World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • April 2015
  • Region: Global
  • 117 Pages
  • The Economist Intelligence Unit

The Economist Intelligence Unit remains pessimistic about the outlook for Industrial Raw Material (IRM) prices in 2015. Fundamentals in many markets are set to remain bearish in the coming months. The plunge in oil prices from mid-2014 is having repercussions across the commodity complex more broadly, as witnessed by a big sell-off in copper in the first weeks of the year, and there are few signs as yet of investors regaining their appetite for holding commodities. We now expect our IRM index to contract by 2.6% this year, compared with 0.4% previously. This 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 10.8% next year, compared with our previous forecast of 9%.

Base metal prices will fall by 2.6% in 2015 (compared with a rise of 0.6% in our previous forecast). Our expectation of falling prices is largely down to a cut in our forecast for aluminium prices, which are heavily weighted in our index. READ MORE >

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World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
The rebound in industrial prices is delayed until 2016
The outlook for aluminium is softening
Agricultural industrial products have a poor price outlook
Fundamentals and financial dynamics keep downward pressure on oil prices

Aluminium
Demand
Chinese apparent demand ends 2014 on a strong note
US aluminium demand goes from strength to strength
Indian demand estimates revised from contraction to growth
European aluminium demand softens, but not as much as expected
Substitution will help to maintain strong demand in 2015-16
Supply
Production (excluding China) hits four-year low in 2014, but output now rising
Chinese output slows in January, but we believe this to be due to reporting delays
Russian output in 2014 will marginally exceed earlier guidance
Will lower oil prices encourage smelter restarts?
Klesch plans to restart 100,000 t/y of smelting capacity in the Netherlands
The Brazilian election result will not affect aluminium supply
Stocks and prices
Aluminium stuck at US$1,800/tonne
Weight of consistent LME stock outflows is starting to takes its toll
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
It is too soon to call the peak of Chinese coal consumption
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
China's apparent copper consumption surged by 15.5% in 2014
The State Reserve Bureau has remained an active buyer of copper
China plans "record investment" in grid expansion for 2015
Japan copper consumption growth will slow in 2015
Copper demand in Asia (excluding China) was up by 3.1% 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
Operations in Indonesia are normalising after troubled 2014
Capacity closures increase in February
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 is slashing 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 set to deliver a bumper 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 remain elevated
US consumption will rise as consumers seek out bigger cars
Weak economic performance will constrain oil demand in EU and Japan
Supply
Some unofficial cuts to Saudi production are likely this year
US production will continue to rise in 2015, but not at recent rates
Outlook is weakening for Russian oil production
Canadian output will probably be flat in 2015
Stocks and prices
Prices will remain volatile in 2015

Gold
Demand
India has overtaken China as the largest consumer of gold jewellery
China's jewellery consumption will return to trend growth in 2015-16
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
Industrial gold is less competitive than alternatives
Supply
Chinese production will continue to add to global supply in the short term
After a strong 2014, production in Russia and Australia will fall back
Scrap sale volumes will remain below levels achieved in 2008-14
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 will remain under downward pressure in 2015, despite volatility

Lead
Demand
China's demand for lead increased by just 2% in 2014
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
Signs of economic momentum will support lead consumption in the EU
US vehicle sales increased at a rapid rate in January
Supply
Capacity is being curtailed in China in response to low prices
Global smelting capacity is forecast to increase by 255,000 t/y in 2015
Global mine production (ex-China) saw little growth in 2014
Global mine capacity is to increase by 66,000 tonnes in 2015
Stocks and prices
We have lowered our price forecast, despite widespread monetary loosening

Liquefied natural gas
Demand
Japan's imports to slip as nuclear power regains share
South Korea's LNG imports to grow modestly in 2015-16
China's imports will pick up pace in 2015-16, after slowing in 2014
Indian imports could get a boost from lower prices
Energy-scarce South-east Asia is becoming an important LNG market
Europe will scoop up cheap supplies
Supply
Qatar will continue to try and diversify its export base
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 add to the glut of supplies in 2015-16
Algeria faces temporary shutdowns related to weather
African LNG exporters struggle to sustain output
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
Growth in Chinese demand will slow as the economy rebalances
High stocks will act as a constraint on India's rubber usage in 2015-16
Asian demand is expected to grow steadily
EU consumption will grow steadily in 2015-16
US consumption should pick up in 2015
Supply
Flooding is likely to slow Thai production growth in 2015
Indonesian production will bounce back in 2016
Malaysian production is struggling and has been hit by bad weather
India's production is falling sharply
Vietnamese production will remain tied to Chinese consumption
Stocks and prices
Prices will stage a modest rally 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 weak
US consumption will grow in 2015-16 but will not match strong 2014 levels
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 short term
Stocks and prices
A market deficit will help to boost prices in 2015-16

Steel
Demand
Growth in Chinese consumption will be much slower 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 steady, but not spectacular
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 hit 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 rising strongly, driving solder demand
Production of tinplate is in long-term structural decline, excluding China
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, 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 tin raw materials for China
Indonesia has introduced a number of controls over tin 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 a brisk pace in 2014
Loose monetary policy settings by the ECB will support zinc demand
US zinc consumption growth will average 1.2% a year in 2015-16
Japan's zinc increased by just 1.6% in 2014 and will continue to grow slowly
Supply
Chinese refined zinc production surged in 2014, and hit a record in November
EU refined zinc production growth will slow in 2015-16
Asian refined production declines as expansion projects fail to bolster output
Growth in net mine capacity is set to slow in 2015
Stocks and prices
Chinese exports of refined zinc totalled 131,368 tonnes in 2014
SHFE stocks rise from five-year low
The LME zinc cash price is running in line with our first quarter forecast

Statistical appendix

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Note: Product cover images may vary from those shown

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