Commodity Update: Minerals and Energy – August 2013

More positive news on the major economies has provided a slight boost to most commodity prices in August, with the long awaited rotation of global growth towards the big advanced economies seemingly underway. Global manufacturing activity also appears to have gained momentum.

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  • More positive news on the major economies has provided a slight boost to most commodity prices in August, with the long awaited rotation of global growth towards the big advanced economies seemingly underway. Global manufacturing activity also appears to have gained momentum more recently, signalling stronger demand.
  • Some commodity prices have risen on the back of the most recent outburst of conflict in Syria, especially oil and safe-haven assets. But speculation about US involvement will add to volatility in the commodities complex over coming weeks.
  • The most severe supply disruptions since early 2009, predominantly due to escalated tensions in the Middle East, have contributed much of the oil market volatility in July and August, also keeping oil prices buoyant.
  • Steel input markets were more robust in recent months than expected. Iron ore prices have remained elevated, while coking coal prices have started to rise. In contrast, thermal coal prices still facing headwinds.
  • Base metals prices gained in August, largely reflecting better data out of China. Gold prices also surged ahead in August on the back of rising fear about the conflict in Syria, which has also pushed oil prices higher on the back of supply concerns.
  • Reflecting some recent unexpected improvements in prices, we have raised our near-term forecasts for some commodities. We continue to expect only a modest recovery in demand over the forecast horizon, but this should help to stabilise prices. The recovery is expected to be bumpy and conditions in many emerging markets appear to be deteriorating, presenting ongoing risks to commodity markets.

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