With 2018 firmly in sight on a supply-demand basis for analysts, a number of commodity market fundamentals are looking considerably tighter than in previous compilations of CRU Group’s price outlook.
For those unfamiliar with the CRU Group price forecast rankings for various metals and mineral commodities, the mechanics of compiling the 2018 outlook goes as follows.
Firstly, the respective CRU Group analyst teams for the specific commodity markets compile their forecast average mineral market prices for calendar 2018.
Secondly, a recent reference date is chosen; namely the average price for a suitable preceding period to provide context.
In this instance, April-June (second quarter) 2014 prices have been used as a starting reference point or baseline for comparisons.
Finally, a comparison between the 2018 forecast prices to the recent reference levels gives a directional indicator – whether a particular market will go up or down.
Prices forecast to be higher in 2018 than in 2014 are considered “hot”
Conversely those commodity prices forecast to be lower in 2018 than 2014 are not surprisingly deemed “cooler”
The usual words of caution apply at this juncture to avoid misinterpretation: a higher forecast average commodity price for 2018 above prevailing 2014 prices does
not
imply a steadily rising commodity price over 2015, 2016 and 2017.
This is perhaps stating the obvious. Why? Commodity prices are of course far more volatile than that, fluctuating on a daily, weekly, monthly, quarterly and annual basis, let alone over a multi-year outlook period.
A 2018 time horizon is nevertheless a valuable forecasting tool, however, as it clearly provides a sufficient period of time to assess whether demand is set to outstrip supply in a given market, or vice versa.
To the forecast hot commodities for 2018 then.
Strictly Boardroom has listed CRU Group’s current ranking for 24 commodities, with those markets set to move upwards by the furthest amounts in percentage terms from their 2014 levels ranked from first (highest forecast price rise) through to 24th (weakest forecast price performance).
Here they are, with the metal set to soar highest right at the top of the list once again –Zinc*.
Next comes Nickel, with Tin grabbing third place.
Silver is the cellar dweller – ranked last of the 24 commodities.
As to what is hot in terms of future prices, the story is a very bullish one.
Some 15 separate minerals markets are officially declared hot by CRU Group, meaning that the 2018 forecast price for each of these markets is at least 15% above the prevailing 2014 price.
Only the lowest ranked five mineral markets on the list are expected to cool in average price when forecast 2018 prices are compared to 2014 in US-dollar terms.
To the full rankings then:
Zinc
Nickel
Tin
Palladium
Coking coal
Aluminium
Bauxite
Manganese
Platinum
Alumina
Cobalt
Urea
Ferrochrome
Potash
Phosphate rock
Lead
Copper
Phosphate DAP
Oil
Molybdenum
Iron ore
Ammonia
Gold
Silver
Things are warming up: watch that space.
Allan Trench is a professor at Curtin Graduate School of Business and research professor (value and risk) at the Centre for Exploration Targeting, University of Western Australia, a non-executive director of several resource sector companies and the Perth representative for CRU Consulting, a division of independent metals and mining advisory CRU Group (allan.trench@crugroup.com).
*Zinc also topped the most recent previous compilation of CRU price forecasts – see “Zinc tops 2018’s hot commodity parade” http://www.miningnewspremium.net//storyview.asp?storyID=801883182§ion=Strictly+Boardroom§ionsource=s176
** With thanks to Lucent Nicholson and Peter Ghilchik, multi-commodity market analysis at CRU Group – lucent.nicholson@crugroup.com and peter.ghilchik@crugroup.com
