• November’s Third Plenum unveiled a wide ranging reform agenda from China’s Government. Proposed deregulation would increase free market influence and could support a stronger medium term growth profile for the economy. That said, there remains some uncertainty as to the Government’s capacity to implement these reforms.
• Business surveys in major economies have continued to strengthen – reflecting greater optimism in the United States, Japan and United Kingdom.
• Average oil prices fell for the second consecutive month in November. In addition to the bearish sentiment in the crude oil futures market, oil prices have generally returned to be more aligned with the reality of fundamentals where ample supplies, combined with seasonally weak global demand, have served to weigh on prices.
• Steel input markets have been relatively stable – with modest declines in metallurgical coal prices and slight gains in iron ore. With winter being a weak period for steel demand, there seems little prospect for major price movements in the short term. Thermal coal prices have recovered from recent lows but remain well below recent peaks.
• Base metals prices declined in November despite generally positive economic data. Metals markets appear to be in a state of flux as expectations over the future path of US monetary and government debt policies, as well as changes to warehousing rules, continue to evolve in respect to timing and magnitude.
• Market expectations regarding Fed tapering have reduced gold’s appeal to investors as a ‘safe haven’ asset and inflation hedge. However, declining prices have kept physical demand strong in Asia, particularly China, although Indian demand continues to be weighed down by government policies.
• Overall, our forecasts for commodity prices have been left largely unchanged. We continue to expect only a modest recovery in demand over the forecast horizon, but the recovery is expected to be bumpy, ensuring ongoing volatility in commodity markets.

For further analysis download the full report.

• Commodity Update: Minerals and Energy – November 2013 (PDF 259 KB)