Commodities Outlook: What Are The Big Boys Saying?

Published on 22 Sep, 2015

Commodity Market Research

Over the past year, commodity prices have been under pressure. In fact in some cases, it has fallen to levels not seen since the global financial crisis of 2008-09. Slowdown in demand from China, the largest consumer of major commodities, and continued rise in supply have created a glut in the commodity market.

Moreover, correction in China’s equity market and the recent devaluation of Yuan has resulted in financial market concerns impacting commodity trading further.

Current Decline in Commodities Prices

To understand where the commodity markets and prices are heading, we analyzed the outlook of major industry players and gathered their general consensus on the Street.

Major Producer's commodity market outlook

Commodity Price forecasts

Cautiously Optimistic Outlook

We believe the views and forecasts of the industry players as well as market analysts reflect cautious optimism. Consensus forecasts indicate expectations of a pick-up in commodity prices from their current levels; however, the increase is unlikely to be anywhere close to the levels witnessed during the previous boom-cycle.

A strong recovery in the macro economic situation (read China) is the key requirement to drive recovery in the commodity markets. The low commodity prices should allow the demand-supply dynamics to come into alignment. It simply translates to reduced investments and output cuts on the supply side and gradual increase in consumption led by global macro-economic improvements on the demand side.

As such, we expect the downward pressure on prices to ease going forward. The industry expects near-term growth driven by the US, and long-term growth driven by Emerging Markets. While the current expectations indicate that the commodity prices may have bottomed, they do little to change investor confidence significantly for now.