ABN AMRO Group Economics
Monthly Commodity Update
Commodity Research
May 2015 Downward risks have the upper hand The recent weakening of the US dollar and building of speculative long positions by hedge funds and other investors, resulted in significant support for many commodities, except for precious metals. The support for those commodities was driven by hopes of economic recovery (leading to increased demand) as well as fear of supply disruptions. The weakening of the US dollar was the result of disappointing US data, in combination with fears of delayed Fed action. Going forward, we expect the US dollar to strengthen based on growth and monetary policy divergence. This would cap the upside for commodity gains in the near term. Looking further out, as demand accelerates, and individual supply issues are balanced out, we see upside potential for commodities.
Energy: Price recovery was based on speculation, not facts ABNAMRO AMRO price expectation Q2-2015 ABN price expectation Q2-2015 (Click here for the latest update on energy) 3-month view 3-month view Brent Brent
ll
WTI
ll l ll
WTI
Nat. gas (HH)
Nat. gas (TTF)
Nat. gas (TTF)
Gold
Gold
Silver
Silver Platinum
i i i
Platinum
i
Palladium
i
Palladium
k kh h i i h
l
Nat. gas (HH)
k
k
n k
i
k
n
Copper
i h
n
Zinc
Steel (HRC)
n
i l l nn
CokingWheat coal
Corn ii l nn Wheat i
l
n
k
k
k h
k
i
h
l
k
k
i
i il
h
h
i
Ferrous metals: prices remain under threat of oversupply (Click here for the latest update on ferrous metals)
h k
kh h
k k
k
k
h
i
n
h
i
i
n
h
i
n
(Click here for the latest update on base metals)
h
k h
l
hi
i l n k h n
Base metals: stronger US dollar pushes prices up
i il l
k h k
i
k
n k h
n
For some time, precious metal prices have not showed a clear direction and as a result have moved in ranges. However, a lot is happening below the surface. For the coming months, we anticipate price weakness in precious metals. This is mainly because we expect a higher h 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.
h
The recent lift in base metals prices was caused by the US dollar weakening, demand h improvements and higher oil prices. In our view, fundamentals in the aluminium market do not justify any strong price gain going forward. Sentiment in the copper market will be h influenced by macro-economic data (esp. from China), US dollar volatility and the direction of the oil price. But for this year we keep especially our eye on Chinese import demand levels. Demand from China is still relatively low, but most recent import data shows some h early revival. In the meantime, we expect price support due to positive macro-economic h developments globally.
h
Sugar
i
h
n
h
i
Cocoa
k
i
(Click here for the latest update on precious metals)
h
Corn
i
k
h hi
l nn k
Coking coal Iron ore
Arabica Coffee
i
i
n
nn k k
SteelIron (HRC) ore
Cocoa
h
Precious metals: Why gold’s descent is not over
h
nn
Nickel Zinc
Sugar
i l
The market anticipated a drop in US crude production as a result of lower oil prices. But while US rigs have more than halved already, US crude production only showed a modest h easing in the past weeks. However, this does not change the significant oversupply situation which already exists for several years. The OPEC meeting is coming up in June, but we do h not expect a change in OPEC policy. As the fundamentals did not change, and the situation of oil oversupply lingers on, we see downside risks to oil prices. Only a structural change to h oil demand and global supply (especially US) could lead to a grounded oil price rally in H2.
l
nn k h h i il
Copper Nickel
Arabica Coffee
h
k
n k
Aluminium
Soybeans
i
h n
Aluminium
Soybeans
h
k
i n
i
h
i
h h
i
h
k
i
i
long-term long-term viewview
h k
h
h
i
In response to worsening steel market conditions, the Chinese government announced restructuring measures and aims to reduce domestic capacity. The plans are certainly a welcome initiative for the global steel market, but similar plans two years ago were not fully executed. This year’s main goals are to cut capacity (by 10% until 2018), gain more control over emissions and encourage M&A-activity. This looks ambitious, but we have our doubts that this will restore balance. In the meantime, excess steel from China is finding its way to international markets, depressing prices along the way.
k
k
Agriculturals: Sugar is in grip of dollar movements (Click here for the latest update on agriculturals)
i
The sentiment in the grains market was dominated by mostly weather-related issues and news about sowing data in the last weeks. Good prospects for US corn, wheat and soybeans signals stabilisation at the current low price levels. Wheat is moving in a divergent direction from the USD since half April. The reason therefore is abundant supply. The cocoa price has risen over 5% in the last two weeks, because of weakening in Ghanese production data, which could also support prices in the coming months.
i
n k h i
i
decrease by 11% or more
i
l
i
l
k
decrease betw een 5% and 10%
n
price movement betw een -4% and +4% k
increase betw een 5% and 10% h
increase by 11% or more
- 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.
2
Monthly Commodity Update | 13 May 2015
ABN AMRO Group Economics
ABN AMRO forecasts
ABN AMRO Commodity Price Forecasts Spot rate
3-months
3m
6m
12m
2015f
2015f
2016f
2016f
12 May
performance
(Sep. 2015)
(Dec. 2015)
(Jun.16)
(year-end)
(year avg)
(year-end)
(year avg)
Commodity Index: - CRB index
231.68
9%
215
215
240
230
225
- Brent
65.25
21%
60
65
75
65
60
80
75
60.72
27%
55
60
70
60
55
75
70
2.86
9%
3.00
3.25
3.50
3.25
3.00
3.75
3.50
20.80
-4%
18
20
16
20
19
18
18
1,191.40
0%
1,050
1,000
900
1,000
1,115
800
900
16.57
-1%
15.5
16.0
17.0
16.0
15.9
18.0
17.0
1,134.00
0%
1,150
1,200
1,300
1,200
1,154
1,400
1,300
786.00
8%
675
700
725
700
707
750
725
1,861.00
4%
1,900
1,940
2,015
1,900
1,875
2,125
2,075
(USD/barrel)
- WTI (USD/barrel)
- Gas HH (USD/mmBtu)
- Gas TTF (EUR/MWh)
- Gold (USD/oz)
- Silver (USD/oz)
- Platinum (USD/oz)
- Palladium (USD/oz)
- Aluminium (USD/t)
0.86
(USD/lb)
- Copper (USD/t)
6,446.50
6%
6,400
14,318.00
(USD/t)
16%
14,800
2,368.50
(USD/t)
14%
2,400
- Steel (global) (HRC; USD/t)
- Iron ore (fines, USD/t)
- Coking coal (USD/t)
- Wheat (USDc/bu)
- Corn (USDc/bu)
- Soybean (USDc/bu)
- Sugar (USDc/lb)
- Arabica coffee
15,500
6,600
2,450
0.86
6,280
2.99
16,900
7.03
1.09
(USD/lb)
0.91
2.95
6.71
(USD/lb)
- Zinc
6,500
2.90
(USD/lb)
- Nickel
0.88
1.11
6,200
2.85
16,000
7.67
2,450
0.85
1.11
6,900
2.81
15,500
7.19
2,300
0.96
1.04
6,800
3.13
18,200
7.03
2,250
0.94
3.08
18,000
8.26
2,490
1.02
8.16
2,400
1.13
1.09
426.91
-1%
433
435
445
460
440
550
510
62.88
22%
61
65
68
57
60
70
68
91.00
-13%
90
92
107
110
101
118
112
487.50
-5%
500
530
-
530
550
-
-
361.00
-4%
375
395
-
395
390
-
-
955.50
-2%
950
910
-
910
945
-
-
13.89
15%
13.50
13.50
-
13,50
13,50
-
-
135.50
0%
130
145
-
145
130
-
-
3,037.00
13%
2,950
2,950
-
2,950
2,750
-
-
(USDc/lb)
- Cocoa (USD/t)
3
Monthly Commodity Update | 13 May 2015
ABN AMRO Group Economics
Contributors & Disclaimer
Group Economics: Contact information ABN AMRO | Group Economics (in order of appearance): Primary area of expertise:
Phone:
E-mail:
- Marijke Zewuster
Head Emerging Markets & Commodities
+31 20 383 05 18
marijke.zewuster@nl.abnamro.com
- Georgette Boele
Precious Metals, top down
+31 20 629 77 89
georgette.boele@nl.abnamro.com
- Hans van Cleef
Energy
+31 20 343 46 79
hans.van.cleef@nl.abnamro.com
- Casper Burgering
Ferrous and Non-ferrous metals
+31 20 383 26 93
casper.burgering@nl.abnamro.com
- Frank Rijkers
Agriculturals
+31 20 628 64 37
frank.rijkers@nl.abnamro.com
E-mailbox of Group Economics: abn.amro.group.economics@nl.abnamro.com
More information: Websites Group Economics -
Internet Group Economics (Macro Research and theme reports, including commodities):
English: insights.abnamro.nl/en/ Dutch: insights.abnamro.nl/
All publications of ABN AMRO on macro-economics, commodity and sector developments can be found on: insights.abnamro.nl/en. Follow Group Economics on Twitter: https://twitter.com/sectoreconomen
Other commodity research products of ABN AMRO Group Economics:
4
Monthly Commodity Update | 13 May 2015
ABN AMRO Group Economics
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