ABN AMRO Group Economics
Monthly Commodity Update
Commodity Research
June 2015 Position for a price recovery The CRB index has moved lower driven by lower oil and metal prices. We see near-term price weakness as an opportunity to position for a recovery. An expected recovery in base metal prices will likely compensate weakness in WTI and gold prices. We remain positive on an one-year horizon with an expected performance of the CRB of around 10% driven by strong stronger global demand and a diminishing supply overhang.
ABN AMRO price expectation 3-month view
Energy: Price recovery ran out of steam, downside risks build
long-term view
(Click here for the latest update on energy)
CRB Index
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Brent
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Nat. gas (HH)
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Nat. gas (TTF)
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WTI
Gold
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Aluminium
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Nickel
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Precious metals: El NiĂąo & Indian gold demand?
(Click here for the latest update on base metals)
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For some time, precious metal prices have not shown a clear direction and as a result have moved in ranges. For the coming months, we anticipate price weakness in precious metals. This is mainly because we expect a higher US dollar and higher US interest rate expectations to lead to further investor position liquidation. We also remain negative on gold in 2016 for the same reasons. But at some point in the coming months, economic fundamentals will come to the rescue and support silver, platinum and palladium prices in contrast to the situation for gold prices.
Base metals: Prices struggle on sluggish demand, plentiful supply
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The recovery of oil prices, which started in January ran out of steam. In fact, some downward pressure is building as investors started to realize that fundamentals did not change and the recovery was mainly based on hope and speculation. With US production still around record levels, the OPEC keeping its output quota unchanged at 30 mb/d and indications that OPEC members may even increase its production, the situation of oversupply will remain longer than expected. This, combined with our forecast for a stronger US dollar, will keep downside risks alive.
(Click here for the latest update on precious metals)
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Palladium
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During the last month, base metals prices fell by 8% on average, while LME stocks dropped by 2% on average. Relatively speaking, fundamentals in most base metals markets are still positive. But sentiment has been generally low, which depressed prices. Aluminium prices posted a loss on oversupply and the removal of the export tax in China. Copper demand remained subdued and the rally of the dollar added to price pressure. Nickel and zinc prices also decreased, due to well supplied markets. Going forward we expect prices to rise due to positive macro-economic developments.
Ferrous metals: Steel demand still weak, output decreases (Click here for the latest update on ferrous metals)
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Steel (HRC) Iron ore
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Coking coal
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Wheat
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Corn
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Soybeans
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Sugar
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Arabica Coffee
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Cocoa
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Low raw material prices (iron ore, coking coal) and overcapacity are still the leading themes in ferrous metals markets. Global steel output dropped by 2% yoy until April, with a strong decrease in the US (-9%). During last month, global steel price lost 1%. An increase in Chinese steel exports will keep foreign markets well supplied and this continues to depress prices internationally. And while car sales in EU and China are doing well, construction activity in these regions remains weak. US construction activity, on the other hand, is in better shape, but car sales have disappointed. Overall, a mixed outlook and we expect prices to remain flat.
Agriculturals: Abundant supplies determines ag’ prices (Click here for the latest update on agriculturals)
Sentiment in the grains market has been dominated by mostly weather-related issues and news about crop progress in the last weeks. Good prospects for US and EU corn, wheat and soybeans signals stabilisation at the current low price levels. Price movements are forced by USD movements and speculative buyers. In softs the sugar price has fallen sharply due to abundant world supply and a weaker position of the BRL. The cocoa price is still in grip of weak Ghanese production data. For coffee sentiment is mixed by different output data around the globe, but overall it might be a good crop year.
decrease by 11% or more
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- Short term view: our three-month outlook versus spot rate on 12 May. - Long term view: 2016 avg forecast price versus 2015 avg forecast price.