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The Economist Intelligence Unit (EIU) released its predictions for the global commodities market with its ‘Commodities Outlook 2024’.
The report forecasts that prices will remain largely resilient, despite global headwinds from the environment, supply chain disruptions and a stagnating global economy.
Here, the IOE&IT Daily Update brings you three key takeaways from the EIU’s research.
Energy pricing
The EIU’s report predicts that energy prices, apart from crude oil, will fall in 2024.
European natural gas is expected to fall by as much as a fifth, following 2023’s drop of almost two thirds, while coal and liquified natural gas (LNG) is also expected to fall.
Crude oil is the exception to this trend. However, this may depend heavily on the activities of OPEC+, formed of the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
The impact of US president Joe Biden’s decision to ‘pause’ new natural gas projects and exports of LNG is currently unknown.
Roger Marshall, a customs and trade expert at the Institute of Export & International Trade (IOE&IT), explained the significance of this:
“Any forecast of a reduction in energy prices, with the narrowing of the gap between EU and US gas prices, is good news for industry.
“In theory, this should alleviate some of the pressures on European and UK producers and improve their competitiveness in the coming year, although this could be influenced by outside events, like any decision by OPEC.”
OPEC+ are due to meet in early February, where a further decision on how much oil its member states produce is expected. Last year, Angola quit the alliance after reportedly disagreeing with the oil production quota it had been assigned.
Green policies
The effect of the transition to a greener and cleaner economy is expected to impact the markets for metals critical to it.
The EIU expects base metals to rise by an average of 3%, following an 11% fall in prices last year.
Additionally, new measures such as the Carbon Border Adjustment Mechanism (CBAM) are likely to have an impact on certain goods like green steel or recycled steel.
Nickel, in particular, is predicted to face supply chain disruption, as the world’s supply continues to lag behind demand.
Demand for nickel is predicted to grow by at least 65% by 2030, but both producers and traders are reporting widespread problems accessing the critical mineral, particularly since Russian markets are now off limits due to sanctions.
As a result, nickel is expected to rise significantly, alongside copper.
Marshall said: “We’re seeing the effect of green policies on the metals market. The interesting thing is that these green measures seem to be offsetting a lack of consumer confidence and outside funding to drive demand.”
A downturn in the Chinese economy, notably in the construction industry with the collapse of building giant Evergrande, is also expected to bring prices down slightly.
Soft commodities
For ‘soft commodities’ prices are expected to continue to rise, fuelled in part by environmental damage.
According to the US National Oceanic and Atmospheric Administration (NOAA), last year was a historically bad year in terms of environmental disasters and the resulting damage to crops is expected to continue into 2024.
The good news is that el niño, a phenomenon of “unusually warm ocean temperatures in the Equatorial Pacific” is expected to come to an end by the middle of the year.
Russia’s invasion of Ukraine, combined with the subsequent formation and collapse of the Black Sea Grain Initiative, also poses a risk to global food prices, according to the EIU.
Other commodity prices, such as for oilseeds and soybeans, are expected to stabilise.