Informe sobre Comodities: por Ricard Torné Lead Economist - Focus Economics

OVERVIEW | Escalating trade tensions and cooling growth in China dampen global commodity prices Global commodity prices recorded the third consecutive drop in August, highlighting the vulnerability of the global economy. Global commodity prices declined 2.5% over the previous month in August following July’s 7.3% decrease, which had represented the steepest fall in nearly seven years. August’s slide was led by lower prices for base metals, which were negatively affected by soft economic data in China. Higher interest rates in the United States are reducing the appetite for safe-haven assets such as gold and, to a lesser extent, platinum and silver, driving the prices of precious metals downward. Despite picking up strongly in the second half of the month, prices for both Brent and WTI crude oil declined overall in August on the back of the ongoing trade war between China and the U.S. and increased supply by key producers including Russia and Saudi Arabia. Despite posting a smaller decline, agricultural prices fell in August due to ample supply for key commodities, including coffee and sugar. Although headwinds persist in the form of an uncertain global economic outlook, our panel of analysts expects that global commodity prices will post solid year-on-year gains in Q4 2018. The increase will largely reflect the boost in prices observed in the first half of the year, especially for coal, nickel, oil and its derivatives, palladium and U.S. steel. FocusEconomics panelists surveyed this month expect global commodity prices to increase 3.7% in Q4 2018 from the same period in 2017 (previous edition: +6.4% year-on-year). Next year, global commodity prices will expand at a slower rate as a broader preference for cleaner energy and increased oil supply will lead energy prices to decline. The Consensus among FocusEconomics panelists is that commodity prices will rise 1.9% in annual terms in Q4 2019. ENERGY | Global economic uncertainties weigh on energy prices Energy prices continued to fluctuate in recent weeks as the evolution of oil prices and its derivatives are shaped by an unpredictable global economic outlook. Energy prices fell 1.3% month-on-month in August, contrasting July’s 0.5% increase. In the first half of August, oil prices were negatively affected by escalating trade tensions between China and the United States, which had the potential to derail global economic growth and thereby reduce demand for the black gold. Moreover, a handful of key oil producers ramped up output to compensate

for falling production in countries such as Angola, Libya, Nigeria and Venezuela, as well as in anticipation of markedly lower production in Iran as increasingly punitive U.S. sanctions loom. Nevertheless, oil prices jumped in the second half of the month as Saudi Arabia reported a decline in output in July. Furthermore, the U.S. campaign to reduce Iran’s oil shipments to “zero” has already started to bite; in August analysts claimed that Iran’s oil exports declined by almost one-third. The second round of U.S. economic sanctions against Iran, which will ban any company from buying Iranian oil or risk exclusion from the U.S. financial system, is scheduled to come into effect in November. In contrast, uranium prices soared in August on supply cutbacks by major producers, namely Canada’s Cameco and Kazakhstan’s stateowned Kazatomprom. The almost uninterrupted rally in oil prices and oil-related products since July 2017 will translate into solid gains in energy prices this year. Analysts surveyed by FocusEconomics see energy commodity prices posting an astonishing 22.1% year-on-year gain in Q4 2018 (previous edition: +22.7% yoy). Next year, however, energy prices are expected to fall 3.5% in Q4 2019 as the ending of the OPEC-led oil cap deal will boost oil production, while efforts by various countries to reduce pollution will trim demand for coal. BASE METALS | Trade disputes and slowing Chinese growth take their toll on base metal prices Base metal prices declined for the second consecutive month in August mostly reflecting cooling growth in China, which consumes nearly half of all base metals. Prices for base metals declined 3.0% over the previous month in August. Nevertheless, this was well below July’s 9.2% month-on-month drop, which represented the sharpest decrease in over eight years. Along with concerns about a sharp slowdown in China and escalating global trade disputes, broad risk-off investor sentiment and volatility in emerging market currencies led prices for most base metals to decline in August. The main bright spot was alumina, which saw prices rising strongly in August following mining strikes in Western Australia and the partial closure of Norsk Hydro’s Alunorte refinery in Brazil, the world’s biggest alumina plant. Weaker demand from China will prompt growth in base metal prices to decelerate markedly this year from last year’s doubledigit increase. Our panel of analysts see base metal prices rising a modest 0.8% year-on-year in Q4 2018 (previous edition: +3.8% yoy) before accelerating to a 2.6% year-on-year gain in Q4 2019. PRECIOUS METALS | Fed tightening cycle and low industrial demand lead August’s decline in precious metal prices Prices for precious metals declined in August for the sixth time in the last seven months, falling 2.9% on a month-on-month basis (July: -3.6% month-on-month). The narrative of previous months is unchanged. Strong economic growth in the United States and higher inflation expectations are  prompting the U.S. Federal Reserve to continue with its tightening cycle. Higher interest rates in the United States reduce demand for safe-haven assets such as gold in favor of U.S. dollar-backed assets. Moreover, usage of some precious metals for industrial purposes has been threatened by an uncertain global economic outlook, especially for China. Softer global economic conditions will reduce industrial usage of precious metals, while higher interest rates in the United States will trim demand for safe-haven assets. Our panel of analysts expect precious metal prices to decline 0.3% year-on-year in Q4 2018 (previous edition: +1.3% yoy). FocusEconomics panelists, however, expect that the trend will reverse next year and that precious metal prices will expand 3.6% in Q4 2019. AGRICULTURAL | Prices decline for third consecutive month in August on ample supply Agricultural prices declined for the third month in a row in August, amid strong supply for key commodities. Agricultural prices fell 0.5% month-on-month in August, but notably less than July’s 4.3% decrease. Cocoa prices posted the sharpest drop on the back of healthy yields predicted in Western Africa. Strong production and subdued demand sent sugar prices down again in August, while coffee prices were negatively affected by expected strong production in Brazil. On the flip side, lower production in Europe, Russia and Ukraine pushed up wheat prices. Soybean prices also rose in the first half of August due to stronger demand from Europe and speculation that talks in late August between China and the United could ease trade tensions. However, soybean prices declined in recent weeks as Chinese tariffs on the commodity start to take effect. A base effect from last year and solid market fundamentals will lead agricultural prices to rise at a double-digit pace of 12.2% in Q4 2018 (previous edition: +15.9% yoy). Gains in agriculture prices, however, will moderate and FocusEconomics panelists see them expanding 0.5% year-on-year in Q4 2019. Ricard Torné Lead Economist.

Por Focus Economics - https://www.focus-economics.com/ - Barcelona España