• Commodity markets have been mixed, but the overall sentiment remains bearish on the back of soft economic data in most regions. On the other hand, signs of improvement in the US economy could help to support commodity demand, but the effect on market expectations for Fed stimulus will create headwinds.
• Bulk commodity prices have continued to come under pressure from difficult conditions in global steel markets and plentiful supplies of raw materials. End user demand for steel remains low, and downward revisions to economic growth forecasts suggest little support over the remainder of the year. Anticipated additions to supply capacity this year will further contribute to loosening market balances.
• The price of gold has fluctuated with an uncharacteristic degree of volatility over the past two months. The driving force behind the most recent price decline has been rising speculation that the US Federal Reserve will begin scaling back its $85 billion a month of Treasury and mortgage debt purchases.
• The Bureau of Resources and Energy Economics’ (BREE) latest biannual update on the state of mining, infrastructure and processing facilities projects in Australia has provided further evidence that the peak in mining investment is quickly approaching.
• Reflecting ongoing weakness in prices, we have lowered our near-term forecasts for some commodities. We are holding onto our expectation for a modest recovery in demand over the forecast horizon that will help to stabilise prices, but the recovery is likely to be more muted than previously thought.

For further analysis download the full report.

• Commodity Update: Minerals and Energy – May 2013 (PDF 327 KB)