Commodity prices can rely on fundamentals again in 2019

by: Casper Burgering , Georgette Boele , Hans van Cleef

The majority of commodity prices have lost significantly in value, while only a handful managed to buck the trend. Gas Henry Hub and TTF, wheat and palladium showed strongest price gains since the start of 2018 and increased by more than 20%. Cocoa, corn and coking coal prices also have risen from January until now, but in a smaller pace. Buoyant demand – either physical or speculative – was the main reason for the price increases for these commodities.

All other commodity classes declined this year. Most headwinds for commodity prices came from the trade tensions between the US and China and other macro related uncertainties.

There was relief in commodity markets when Trump and Xi Jinping ended their talks on a more positive note. But the vagueness of the talks poisoned sentiment quickly again. Commodity prices and sentiment weakened again on resurfacing trade war tensions, possible smaller output cut of oil by OPEC members, weakness in equity markets globally and the strengthening of the US dollar.

For 2019 we expect, however, that most commodity prices will increase again. We think that positive commodity market fundamentals, a slower, but continued global economic growth and a weakening of the dollar will provide a solid base for higher prices.

Monthly-Commo-Insights-Dec-2018.pdf (951 KB)