{"id":60373,"date":"2012-08-06T13:04:53","date_gmt":"2012-08-06T03:04:53","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/08\/06\/commodity-price-forecasts-revised\/"},"modified":"2012-08-06T13:04:53","modified_gmt":"2012-08-06T03:04:53","slug":"commodity-price-forecasts-revised","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/08\/06\/commodity-price-forecasts-revised\/","title":{"rendered":"Commodity Price Forecasts Revised"},"content":{"rendered":"

\n\t – Commodity price forecasts revised
\n\t – European uncertainty and Chinese demand major drivers
\n\t – Weak US economic recovery also not offering much support to prices<\/strong><\/p>\n

\n\t
\n\tBy Chris Shaw<\/p>\n

\n\tOngoing European instability and increasing concerns with respect to Chinese demand continue to impact on commodity prices. The latter is particularly important as Chinese demand now represents more than 40% of global demand for many commodities and in particular base metals.<\/p>\n

\n\tIn the view of Natixis<\/span> Commodity Markets, while there are grounds for optimism in many cases, these need be viewed in the context of significant political and economic impediments. These issues need to be overcome if prices are to again trend higher.<\/p>\n

\n\tNatixis<\/span> continues to expect global economic activity will improve in the second half of this year, especially given the view the current situation in China represents a low point in a short-term economic cycle rather than the beginning of the end of a 'super cycle' for Chinese commodity demand. Supporting this is the fact China has a long way to go in developing its economy, as incomes are still only around 35% of G3<\/span> levels. <\/p>\n

\n\tThe other positive in the view of Natixis<\/span> is a number of other developing nations such as India and Indonesia are attempting to copy the recent successes of China. Both offer similarly positive demographics with respect to a shift from low-productivity agricultural economy to a higher productivity industrial development.<\/p>\n

\n\tThis has not stopped ANZ<\/span> Banking Group from lowering commodity price forecasts by an average of 4.0% in 2012 and by 3.4% in 2013. The bank's largest revisions have been in the bulks and aluminium<\/span>, which are most exposed to the currently softer conditions in China. Gold saw the smallest revision as the price of the metal has been tracking more closely to ANZ's<\/span> forecasts.<\/p>\n

\n\tMore specifically, ANZ<\/span> notes iron ore is being heavily impacted by falling Chinese steel prices, which is expected to create a supply overhang in the second half of the year. With sufficient steel supply in place, ANZ<\/span> expects iron ore imports and prices will be capped over the next six months.<\/p>\n

\n\tIron ore price forecasts have been cut by 10% across the next three quarters to reflect this, ANZ<\/span> now expecting spot prices delivered to China to average US$134 per tonne<\/span> this year. Coking<\/span> coal forecasts fall similarly, ANZ<\/span> cutting its estimate for 4Q12<\/span> premium hard coking<\/span> coal contract prices by 9% to US$200 per tonne<\/span>. Forecasts for the first half of 2013 have been lowered by 4-5%.<\/p>\n

\n\tThermal coal estimates have also been trimmed, ANZ<\/span> lowering its estimates for spot Newcastle thermal coal to an average of US$96 per tonne<\/span> for 2012, down from US$101 per tonne<\/span> previously.<\/p>\n

\n\tNational Australia Bank has reacted to weaker demand for steel and electricity in the same manner as ANZ<\/span>, lowering bulk commodity price forecasts over the near-term. As NAB notes, along with weakness in the European economy and the slowing of Chinese GDP, US economic indicators continue to suggest an uninspiring economic recovery.<\/p>\n

\n\tFor NAB this is enough to suggest bulk commodity prices will remain well down from recent peaks, though prices should be sustained at what remain historically elevated levels. What should help in coming months is re-stocking by utilities ahead of the northern hemisphere winter. <\/p>\n

\n\tNAB's revised quarterly iron ore price forecasts stand at US$119 per tonne<\/span> for September and US$113 per tonne<\/span> for December, rising to US$120 per tonne<\/span> for the December quarter of 2013. For hard coking<\/span> coal NAB is forecasting quarterly prices of US$225 per tonne<\/span> for September and US$195 per tonne<\/span> in December, increasing to US$205 per tonne<\/span> in December next year.<\/p>\n

\n\tNAB's new semi-soft coking<\/span> coal forecasts are US$160 per tonne<\/span> for the September quarter and US$140 per tonne<\/span> in December, rising slightly to US$145 per tonne<\/span> in the December quarter next year. In contrast, new thermal coal estimates have prices moving lower next year, from an average if US$115 per tonne<\/span> for both the September and December quarter of 2012 to US4105<\/span> per tonne<\/span> by the end of 2013.<\/p>\n

\n\tBoth banks have also revised oil price forecasts, ANZ<\/span> noting while the trend remains one of higher prices this will be at a slower rate, and prices are expected to peak in the third quarter of next year.<\/p>\n

\n\tNAB's view is the competing forces of a deteriorating macro situation and near-term supply side and geopolitical risks will continue to influence prices through the remainder of this year. Balancing these influences suggests a quarterly average for Brent crude in the December quarter this year of US$109 per barrel, rising to US$111 per barrel in the March quarter of 2013.<\/p>\n

\n\tANZ's<\/span> oil price estimates now stand at US$107 per barrel for Brent crude for the September quarter, rising to US$111 per barrel in the December quarter and US$115 per barrel for the March quarter of next year. <\/p>\n

\n\tIn gold, Natixis<\/span> attributes the price weakness in the June quarter this year to a stronger US dollar as the market reacted to the deepening problems in Europe. Since 2010 the three main sources of gold demand have been developing country central banks, and Indian and Chinese investors.<\/p>\n

\n\tBut as Natixis<\/span> notes, demand from two of these is subsiding and the third appears at risk, which means a new buyer needs to emerge if the gold price is to continue to rally. Without this, Natixis<\/span> suggests the sustainability of higher gold prices can be questioned.<\/p>\n

\n\tThe return of the US dollar as the principal global safe haven has weighed on gold prices, while Natixis<\/span> notes the ongoing European crisis is causing investors to flee commodities altogether rather than switch exposure to gold.<\/p>\n

\n\tBut a combination of a US fiscal crisis and\/or QE3<\/span>, along with a major crisis in Europe, could be enough to return gold to the position of the market's preferred safe haven play. While this is not likely in the near-term it remains a potential scenario over the medium-term. <\/p>\n

\n\tNatixis<\/span> is forecasting an average gold price of US$1,550 per ounce this year and US$1,225 per ounce in 2013. Upside risk is to average prices of US$1,725 per ounce this year and US$2,000 per ounce in 2013, while downside risk is prices fall as low as US$1,450 per ounce this year and US$1,100 per ounce in 2013.<\/p>\n

\n\tANZ<\/span> remains of the view gold will again replace the US dollar as the market's preferred safe haven trade, which supports quarterly average forecasts of US$1,680 per ounce in the September quarter and US$1,720 per ounce in the December quarter, rising to US$1,780 per ounce in the March quarter of 2013.<\/p>\n

\n\tNAB in contrast suggests upside risks to the gold price are likely to dissipate in coming quarters as the global economy strengthens. This should shift demand away form gold and towards currency based investments even as Chinese demand for the metal remains strong. <\/p>\n

\n\tNAB's quarterly average gold price forecasts stand at US$1,550 per ounce in the September quarter and US$1,510 per ounce in the December quarter of this year, with a further fall to US$1<\/span>,340 per ounce expected in the December quarter of next year.<\/p>\n

\n\tSilver price forecasts have also been reduced, ANZ<\/span> cutting its forecasts by 7% this year to an average of US$30 per ounce. Natixis<\/span> expects silver prices will average US$28.50 per ounce this year, falling to an average of US$21.80 per ounce in 2013.<\/p>\n

\n\tFor the base metals, NAB notes the slowing in the world's largest economies continues to weigh on demand. Near-term the bank suggests the outlook for global metal prices remains highly correlated to the demand outlook, which is soft at present. <\/p>\n

\n\tWith metals demand likely to remain restrained, prices could stay at low levels over the near-term. A counter is high operating costs may limit the supply of some metals, so offering some resistance to further price falls. <\/p>\n

\n\tANZ<\/span> has lowered base metal price forecasts by an average of 5% over the next 12 months, the changes more modest in copper but those for aluminium<\/span> more aggressive given continued expansion of Chinese smelter output. <\/p>\n

\n\tNatixis<\/span> also expects oversupply will be a central theme in the global aluminium<\/span> market, while ever increasing physical premiums could add to downward pressure on prices. Natixis<\/span> expects an average aluminium<\/span> price of US$2,0000 per tonne<\/span> this year, rising to US$2,250 per tonne<\/span> in 2013.<\/p>\n

\n\tIn contrast, NAB is forecasting year end aluminium<\/span> prices of US$2,010 per tonne<\/span> this year and US$2,120 per tonne<\/span> in 2013, while ANZ<\/span> forecasts aluminium<\/span> prices of US$2,024 per tonne<\/span> for the December quarter this year and US$2,116 per tonne<\/span> in the March quarter of 2013.<\/p>\n

\n\tCopper's fundamentals remain strongest in the view of Natixis<\/span>, as exchange stockpiles have fallen to just one week of global consumption and supply continues to struggle to catch up to demand. Without an economic recovery prices may struggle to move higher, but Natixis<\/span> suggests if underlying conditions improve a rally in the copper price remains possible. Average price forecasts stand at US$8,250 per tonne<\/span> this year and US$8,750 per tonne<\/span> next year.<\/p>\n

\n\tNAB's forecasts are lower at US$7,830 per tonne<\/span> at the end of the December quarter this year and US$7,930 per tonne<\/span> at the end of 2013, while ANZ<\/span> is forecasting copper prices of US$8,157 per tonne<\/span> at the end of December and US$8,818 per tonne<\/span> at the end of next March.<\/p>\n

\n\tThe global nickel market is undergoing fundamental structural change according to Natixis<\/span>, as new mines are continuing to start-up while Indonesia has halted exports. The supply side of the market is expected to deteriorate through the second half of this year, leading Natixis<\/span> to forecast average nickel prices of US$17,250 per tonne<\/span> in 2012 and US$19,000 per tonne<\/span> in 2013. <\/p>\n

\n\tANZ's<\/span> forecasts stand at US$18,520 per tonne<\/span> for the final quarter of this year and US$19,510 per tonne<\/span> in the March quarter of 2013, while NAB expects average prices of US$16,900 per tonne<\/span> for the December quarter this year and US$18,110 per tonne<\/span> for the final quarter of 2013.<\/p>\n

\n\tZinc has also experienced a period of rapid supply growth but weak demand means fundamentals for the market have not been good. Excess capacity means any improvement in prices is likely to be slow in the view of Natixis<\/span>, leading the group to forecast average prices of US$1,950 per tonne<\/span> this year and US$2,100 per tonne<\/span> in 2013.<\/p>\n

\n\tANZ's<\/span> zinc price forecasts stand at US$1,940 per tonne<\/span> for the final quarter this year and US$2,094 per tonne<\/span> for the March quarter next year, while NAB expects prices US$1,940 at the end of this year and US$2,010 per tonne<\/span> at the end of next year.<\/p>\n

\n\tRising lead output has been driven by the Chinese but production of finished metal has been weak in the first half of this year in line with weaker demand. The demand outlook is likely to improve in coming months according to Natixis<\/span>, leading to forecasts of just under US$2,000 per tonne<\/span> this year, rising to US$2,300 per tonne<\/span> in 2013.<\/p>\n

\n\tNAB's forecasts are for average prices of US$1,980 per tonne<\/span> for the final quarter of this year and US$2,060 per tonne<\/span> in the final quarter of 2013, while ANZ<\/span> expects prices of US$2,160 per tonne<\/span> in December this year and US$2,292 per tonne<\/span> in the March quarter of next year.
\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

With Europe and China continuing to impact on commodity markets, forecasts across the sector have been revised.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[23,24,22],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60373"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60373"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60373\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}