Commodity Update: Minerals and Energy – April 2013

Commodity markets remain bearish following disappointing global economic data outcomes in the US, China, and Europe. However, weaker growth has increased expectations for policy stimulus.

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  • Commodity markets remain bearish following disappointing global economic data outcomes in the US, China and Europe. However, weaker growth has increased expectations for policy stimulus.
  • Bulk commodity prices have continued to ease in line with difficult conditions in global steel markets and increases in global supplies. End user demand for steel remains low, although a modest recovery during the course of the year remains a possibility. Expectations for supply to increase over coming years will see additional slack enter the market, providing headwinds to prices.
  • Gold demand fell sharply in the first half of April on news of soft US inflation, slowing Chinese growth as well as fears that highly indebted European countries like Cyprus may resort to selling gold reserves. Prices partially recovered over the second half of the month, as purchases of gold coins and bars at mints across the globe surged following a 14% price tumble in two days in mid-April.
  • Reflecting recent downside surprises, we have lowered our near-term forecasts for some commodities, but held on to our expectation of a modest recovery in demand conditions over the forecast horizon. Nevertheless, concerns over declining growth activity in the US, Europe and emerging markets will linger for some time, adding to market volatility. Overall, prices in most markets will generally ease in the current demand environment as production begins to ramp up.

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