• Commodity markets have turned bearish again following softer than expected economic data outcomes and concerns over a government crack down on Chinese real estate. The Cyprus banking crisis has also dampened confidence, while the terms of the EU bailout, and subsequent rhetoric has seemingly raised more questions than answers. Nevertheless, the market reaction may have been overplayed and, barring additional shocks, we do not see much additional downside to prices in the near term.
• Bulk commodity prices have eased over the past month or so in line with difficult conditions in global steel markets. End user demand for steel has not yet recovered as expected following Lunar New Year (LNY) period, although a modest recovery during the course of the year remains a possibility. Expectations of additional supply of bulk commodities in coming years will see additional slack enter the market, providing headwinds.
• Gold notched up its fifth consecutive monthly price decline in March; much of gold’s appeal over recent months has diminished due to the relative strength of other financial assets, including equities, which have gained strongly since mid-November 2012, and the US dollar, which is strengthening in line with the modest recover in the US economy.
• Reflecting recent downside surprises, we have lowered our near-term forecasts for some commodities, but hold on to our expectation of a modest recovery in demand conditions over the forecast horizon. Nevertheless, concerns over US and European debt and Chinese real estate policies 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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• Commodity Update: Minerals and Energy – March 2013 (PDF 364 KB)