In 2015, the CRB index lost almost 30% driven down by all categories. Excess supply (physical or investor related) is continuing to put pressure on most commodity prices. With investors being largely positioned for more weakness and consensus being negative, the impact on prices (such as a higher US dollar) is diminishing. Our China growth outlook is in line with market consensus, however we feel that fears about the Chinese economy are overdone. In addition, we expect Chinese imports to improve and global growth to pick up this year, which are supporting the commodity demand outlook. The sharp fall in prices will likely result in producers aiming to cut production. However, this will be less substantial than in the past because producers need the cash flow to survive. We have adjusted downwards our 2016 forecast for commodity prices to reflect the sharp fall in prices in 2015. All in all, we expect commodity prices to rise in the course of 2016 from the current low levels.
Commodities-Monthly-Weak-start-unlikely-to-continue.pdf (435 KB)