Commerzbank Commodities Radar October 2022

Commodities radar at a glance

Source: Bloomberg data

Metals prices vulnerable to demand concerns and supply failures

Good demand prospects, rising energy prices and fear of production outages in Russia, the world's second-largest producer – at the beginning of March these factors had caused aluminium prices to rocket above US$4,000 per ton for the first time.

But then, sentiment soured: Increasing economic worries alongside China’s production soaring from one record high to the next saw the aluminium price become the biggest loser among base metals. The downward trend halted only after China had to shut down aluminium production in the Sichuan region as a result of heatwaves and associated low water levels. On top of this, further production facilities elsewhere in industrialised nations were shuttered due to high energy prices. While this trend is likely to continue in Western Europe, the closures in China are probably a temporary phenomenon. Slow demand due to the economic situation is likely to remain a persistent burden on aluminium prices for some time to come. High energy costs in Europe are also taking their toll: Regional premiums are likely to remain high here due to ongoing reports of production cuts at aluminium smelters. A significant recovery in aluminium prices can be expected for 2023 if we consider the price development during the economic and financial crisis of 2007-08: The recovery began in February 2009, and just over one year later prices had already doubled.

Price of Aluminium in USD per tonne

The nickel market also faces further headwinds in the short term due to economic developments – especially in China, the world’s largest consumer of metal. In spring, the International Nickel Study Group (INSG) was still forecasting a supply deficit for this year, not least due to an increase in demand. Now, however, INSG has reported that in the first half of the year, the nickel market showed an excess supply of almost 31,000 tons. This time last year, there was a supply deficit of 125,500 tons. Weaker demand from China is likely to be one major reason for the trend reversal. At the same time, Indonesia, which has the largest nickel reserves after Australia, has been increasing production. However, the Indonesian government plans to introduce an export tax on nickel pig iron (NPI) and ferronickel, in order to support the domestic production of batteries for electric cars. This would tighten the supply of NPI and ferronickel on the global market. In the short term, it is the combination of economic worries with a view to China and strong supply in the nickel market that is likely to weigh on the price. For the year ahead, we see potential for higher nickel prices as the global recovery gathers pace.

Price of Nickel in USD per tonne

The price of copper has been supported by a shortage in supply. According to the International Copper Study Group (ICSG), the global supply deficit was seasonally adjusted to 175,000 tons in the first seven months this year.. Both supply and demand for refined copper increased during the first six months of the year. However, there are several indications that both trends will slow down in the short term. Some of the largest copper producers have already reduced their output forecasts for this year. At the same time, there is also significant risk on the demand side, which should outweigh the looming cut in production. In July, the supply deficit of 30 thousand tons was already significantly smaller than in June; seasonally adjusted, the market was evenly balanced. We are therefore expecting the copper price to trend downwards in the short term. As with aluminium and nickel, next year – at the latest – we are expecting support for the copper price from an ongoing global economic recovery.

Price of Copper in USD per tonne

The year’s price highs and lows at a glance

in EUR per unit in EUR per unit
Precious metals Agricultural products
Gold per troy ounce High
Low
1,874.04
1,484.34
Cocoa per mt High
Low
2,221.74
1,873.92
Palladium per troy ounce High
Low
2,898.54
1,422.35
Coffee per pound High
Low
2.40
1.65
Platinum per troy ounce High
Low
1,057.57
817.47
Cotton per pound High
Low
1.47
0.84
Silver per troy ounce High
Low
24.13
17.90
Maize per mt High
Low
379.00
219.50
Sugar per pound High
Low
0.19
0.15
Wheat per mt High
Low
438.25
253.25
Industrial metals Energy
Aluminium per mt High
Low
3,548.87
2,183.52
Brent Crude Oil per barrel High
Low
117.15
60.82
Copper per mt
High
Low
9,794.98
7,083.78
Coal per mt
High
Low
420.18
98.22
Iron Ore per mt High
Low
152.53
75.85
Diesel per mt High
Low
1,312.38
523.29
Lead per mt High
Low
2,267.96
1,807.32
Electricity per MWh
High
Low
674.75
140.92
Nickel per mt High
Low
44,322.76
15,426.89
EUA per tonne High
Low
98.01
54.92
Tin per mt High
Low
44,654.12
20,872.57
Gasoil per mt High
Low
1,283.23
530.24
Zinc per mt High
Low
4,226.61
2,561.31
Jet Fuel per mt High
Low
1,407.72
548.23

Source: Bloomberg data, period: 27/09/2021 - 28/09/2022

From the perspective of German companies, the listed commodities are generally priced in a foreign currency. For this reason, currency risks need to be considered in addition to commodity price risks.