World Commodity Forecasts Industrial Raw Materials

A combination of somewhat weaker data from the US, a resurgence of concerns about sovereign creditworthiness in the euro zone (related to Cyprus) and a disappointing first-quarter GDP result in China led to a sell-off in global commodity markets in mid-April. Gold was the worst-performing commodity, falling by over 10% on one day as investors sold the metal en masse. (The high level of technical trading of gold exacerbates changes in sentiment.) However, base metal prices also fell sharply, primarily because of concerns about the lack of a pick-up in China's economy. Since April, commodity prices have been volatile, reacting to economic data releases and monetary policy announcements. However, for the most part, prices have not returned to levels seen earlier in the year.

The strength of the US dollar, particularly against emerging-market currencies in recent months, has been a key factor depressing investor sentiment towards commodities. This has more than offset the positive impact of some encouraging US data, in particular the improvement in the US housing sector and steady growth in the auto industry.

In recent months we have become somewhat more positive about US growth prospects, as the country appears to have shrugged off the significant tightening of fiscal policy since the beginning of the year. We have also revised up our GDP forecast for Japan following the announcement of reflationary policies and strong first-quarter data. However, offsetting these positive developments for commodity demand has been the lack of any signs of momentum in China's economy and an EU economy mired in recession.

Industry List: Agriculture and food production, Textiles, Coal, Mining (excluding oil and gas), Mining (excluding oil and gas), Oil and gas, Oil and gas, Oil, gas and other chemicals
Industry Codes (NAIC): 11;313;211;22;212;212;22;22
Industry Codes (SIC): 1;22;10;10;49;13;49;49 SHOW LESS READ MORE >

World Commodity Forecasts Industrial Raw Materials

Economist Intelligence Unit commodity price index
Weak demand will lead to supply cutbacks, supporting prices
Despite supply disruptions, the oil market will be in surplus in 2013/14

Aluminium
Demand
Steady US consumption growth in 2013 14
India's demand is strong but the 2014 election will be key to future trends
Brazil's consumption will recover over the course of this year
China's demand will slow but will be supported by infrastructure plans
Japan will eke out modest growth as stimulus supports the economy
The outlook for EU consumption continues to deteriorate
Supply
Rusal is following through with its pledges to cut output
Alcoa is also applying the brakes to its primary metal output
Production in the GCC will continue to expand in 2013-14
Australian smelters struggle with a strong currency and rising power prices
China pledges to close capacity in 2013
Weak economic performance in the EU will keep output below historical trend
Stocks and prices
The second quarter will represent the trough in prices this year

Coal
Demand
China's consumption will grow at an average of around 4.2% in 2013-14
Coal consumption in the US will recover as gas prices rise
Coal will remain an attractive option in the EU, at least until 2015
Turkey's consumption is expected to grow steadily
Indian imports are expected to increase steadily
Japan is also showing a preference for cheaper coal
Lower nuclear output will lead to a higher uptake of coal in South Korea
Supply
Growth in China's coal output expected to remain at some 4% in 2013 14
US production is expected to fall throughout the forecast period
India's production will fail to keep pace with demand
There are growing doubts about the competitiveness of Australia's coal
Indonesia's coal output will struggle given weaker prices
Russia's higher-cost producers may curtail production
Doubts exist over South Africa's coal production keeping pace with transport
EU output will struggle in the lower price environment
Colombia's output is expected to recover after a weak first quarter
Stocks and prices
Prices will move up in 2014 as global economic growth starts to pick up

Copper
Demand
China apparent demand was inflated by stockbuilding in 2012
Destocking in 2013 will depress apparent consumption in China
China property market curbs should have limited effect on copper demand
Japan's demand weak, but outlook improving after government stimulus
Asian consumption growth to return in 2013-14
EU demand to contract for third consecutive year in 2013
Housing and auto sales drive US copper consumption
Supply
Copper mine production continued its strong recovery in the first quarter
Major miners facing weaker growth on disruptions and base-year effect
More growth forecast from the top three producing nations
African Copperbelt renaissance slowed by disruptions, and risks remain
Oyu Tolgoi's full-scale start-up imminent
Chinese refined production forecast raised, despite scrap tightness
Concentrate freed up in Asia by outages will probably end up in China
Scrap supply has become tight
Stocks and prices
Physical ETFs have not led to shortages of supply so far
Metal volatility has increased, but price recovery is expected

Cotton
Demand
China's consumption is not expected to fall further in the next two seasons
India's consumption will be boosted by China's cotton yarn demand
Prospects look bright for Pakistan, as long as power supplies are maintained
Industrial disasters will not deter demand growth in Bangladesh
Turkey's government is proactively protecting the textile industry
Supply
Sowing of China's 2013/14 harvest is benefitting from good weather
Indian output will edge back down in 2013/14
Unfavourable weather has delayed planting for 2013/14 in the US
Pakistan's cotton planting has made good progress so far
Australia's output will stagnate in 2013/14
Franc Zone countries are reviving their cotton sectors
Stocks and prices
China's stocks policy will be maintained in 2013/14
Cotton prices are expected to regain some lost ground in 2013-14

Crude oil
Demand
US oil consumption has not picked up in tandem with the wider economy
There is little prospect of a recovery in EU oil consumption in 2013-14
Japan's consumption will decline in 2013 and beyond
China's oil consumption will pick up modestly in the second half of 2013
Retail price subsidies in the Middle East will continue to support consumption
The transport sector is driving Brazil's demand
Supply
Iran's oil output and exports are in decline as a result of sanctions
Security risk in the Middle East and North Africa remains high
Theft and sabotage continue to constrain Nigeria's output potential
Saudi Arabia's output will be more restrained this year
Security risk in Iraq has escalated in recent months
OPEC output target unchanged, but decisions on thornier issues delayed
Russia is expected to lift output through enhanced oil recovery
Infrastructure problems are threatening the potential of Canada's oil industry
US production prospects look bright
Stocks and prices
Prices will pick up in the second half of 2013, but remain subdued
The WTI-Brent spread should narrow in 2013-14

Gold
Demand
India's government intensifies measures to dampen gold demand
China's consumers have been enthusiastic buyers of gold this year
Investor demand in emerging markets is likely to prove more resilient
We have become more negative on prospects for ETF buying in 2013-14
Industrial usage should pick up as prices fall
Supply
Chinese output is relatively lower-cost, which will support activity
South Africa's gold output appears in long-term decline
Canada's output is expected to recover in 2013-14
There are concerns about future investment in both Australia and Russia
The outlook for production in Indonesia has deteriorated
Peruvian output could recover in 2014
Output in smaller African producers may prove uneconomic if prices falter
Scrap sales are being constrained by recent relative price weakness
Central bank buying looks here to stay
Small-scale hedging is expected to continue in 2012-14
Stocks and prices
Gold prices are not expected to make up recent sharp falls

Lead
Demand
China to focus on raising lead recycling rates after battery industry overhaul
China's demand will improve after stock correction and weak growth in 2012
Passenger vehicle sales up 16.2% year to date, commercial sales turn positive
Other battery sectors contributing to solid lead demand growth in China
China's lead consumption is outpacing the broader economy
Japanese lead demand falls in the first quarter of 2013, despite improved GDP
EU outlook remains negative for 2013 despite ECB rate cut
US refined lead consumption grew strongly in the first quarter
Supply
China's refined lead output could surprise on the upside in 2013-14
There is massive potential for secondary lead production to grow in China
Portovesme boosts Glencore Xstrata's European lead production
Paroo Station mine aims for 45,000 tonnes by end 2013
Mine supply rises at a slower pace at the start of 2013
Rate of mine expansions may slow on investment and environmental concerns
Stocks and prices
LME cancelled warrants jump and Chinese stocks ease back
Warehouse queues help to maintain tightness
Lead prices fall to eight-month low amid commodity sell-off

Liquefied natural gas
Demand
Japan's LNG demand will soften after a sharp increase in 2012
Nuclear shutdown to support South Korea's LNG demand
LNG import plants will spread across Asia
China's demand for LNG to continue growing strongly
LNG trading to develop further in South-east Asia
UK consumption is expected to pick up modestly in 2013-14
European demand to be disguised by reloading
Supply
Qatar can exploit fast growing demand in China and India
Second US LNG export facility approved, with more likely
Canadian LNG could enter a saturated market by the time it is on line
Increased Algerian LNG capacity may outpace additional gas supply
Further delays affect Angola LNG
Nigerian output to dip slightly in 2013 owing to gas pipeline damage
Despite cost overruns, Australian LNG still looks attractive
Long-delayed PNG LNG may be expanded
Indonesia has plans for additional LNG supply, but perhaps not exports
Malaysia will also import LNG but remain a net exporter
Russia's proximity to Asian markets attracting interest in LNG projects
Prices
International momentum to set up enhanced LNG spot market

Natural gas
Demand
Natural gas as a transport fuel could add to US demand
There appears little likelihood of Russia significantly increasing consumption
Europe's demand will be limited by weak economic performance
New pipelines and LNG terminals will help China meet fast growing demand
The scope for increasing India's gas consumption is limited
Japan's demand to be soft as nuclear returns and efficiency improves
Latin American gas consumption is expected to grow steadily in 2013-14
Weak Iranian demand will act as somewhat of a brake on Middle East
Supply
US gas output will focus on fields with liquids potential
Steady growth expected from the former Soviet Union outside of Russia
Environmental concerns are likely to limit shale gas output in Europe
Supplies are coming on line from new Middle East producer, Israel
China has the potential to increase output, but faces challenges
Stocks and prices
US gas prices will rise in 2013 as production is limited

Natural rubber
Demand
China's high level of stocks will limit apparent consumption levels
Indian demand affected by pressures from producers and consumers
Japan demand to be soft in 2013 as car sales stay negative
Euro zone consumption will start to pick up only in 2014
Positive signs for rubber demand in US in 2013
Supply
Indonesia's output to be roughly flat in 2013
Thailand gives up on export restrictions
Base effects from 2012 will mask structural changes in Malaysia's output
Three major producers are assessing effectiveness of export caps
Indian output to be affected by government policies on imports
Steady production growth is expected in China
Vietnam unlikely to repeat success of 2012
Production in Côte d'Ivoire starts to recover
Stocks and prices
Prices to suffer another weak year in 2013

Nickel
Demand
Recent falls in nickel prices will make NiCrFe less competitive in China
EU nickel demand will pick up in 2014
Outside China, Asian consumption is expected to grow steadily
Supply
Mine supply is expected to rise strongly in 2013, before slowing next year
Mines in New Caledonia are set to ramp up production in 2013-14
Output growth in the Philippines set to accelerate in 2013-14
Indonesia's proposed export ban may not unduly affect global supply
Output in established producers is expected to pick up in 2014
Russia's weak domestic market is deterring producers
Stocks and prices
High output and stocks to weaken prices in 2013

Steel
Demand
Stimulus and stock building will support China's consumption in 2013
US consumption will be supported by strong auto and construction demand
Modest economic recovery and restocking will lift EU demand in 2014
Expansionary policies in Japan will prevent a fall in steel consumption
Latin American demand to grow steadily, notably in Brazil
Indian consumption will slow despite low per-capita usage now
Infrastructure and diversification in Middle East to boost steel demand
Supply
Global capacity is now estimated to be in excess of 2.1bn tonnes/year
China's output growth outpaces demand and will have to pull back
Strong demand should encourage growth in US production in 2013
Some recovery in EU production is expected in 2014
Japanese steel exporters face competition in the region
China is seeking to boost domestic iron ore output
Coking coal prices will fall in 2013‑14 on ample supply
Scrap prices typically follow the trend in coking coal and iron ore prices
Stocks and prices
Prices will diverge across regions, but will slip in 2013-14

Tin
Demand
Recent demand-related data have been mixed but positive in aggregate
Rising demand for mobile electronics products is positive for tin consumption
Rising demand for electronic goods will lift tin demand in China
Japan's tin consumption may benefit from a weaker yen
EU tin demand is expected to turn positive only in 2014
Supply
China's refined tin output is limited by a lack of access to raw materials
Small-scale producers have gained market share in Indonesia
New government regulations could limit exports of tin from Indonesia
In Latin America, some tin mines are expanding
New mines are being developed in Australia, Asia and Africa
Stocks and prices
Market deficit will support prices in 2013 before a surplus emerges in 2014

Zinc
Demand
Chinese demand growth accelerating, consumer destocking phase complete
EU demand sinks by 8.7% in 2012, growth expected to remain flat in 2013
US auto sales slow, house sales pick up as stop-start recovery continues
Japan starting to see a boost from capital spending plans
Supply
Risk to Chinese supply forecasts on the upside, as growth accelerates
EU and Asian refined production to rise on expansion programmes
Mine supply still rising, led by China, but below exceptional pace of 2012
New mine capacity additions will continue to outweigh capacity closures
Stocks and prices
Zinc market appears tighter owing to deals related to warehouse financing
Prices have now bottomed out

Statistical appendix