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How commodities will perform in 2022?
Here we take a look at some specialists' forecasts of several commodities for 2022. Feel free to visit the author's profile page for more detailed information on commodities.
The World Bank's Commodity Markets Outlook. October 2021.
What have they projected for 2022?
Generally, prices for energy are set to stabilize or decline this year. Likewise for agricultural goods. Risks include further supply-chain constraints and new outbreaks of COVID-19. A concern is that if prices continue their upward trend, it will harm the growth prospects of energy-importing countries, and exacerbate food insecurity in low-income countries.
Crude oil prices are forecast to average $74 per blue barrel of crude (bbl) in 2022, up from a projected $70/bbl in 2021. After rising more than 48 percent this year, metal prices are projected to decline five percent in 2022. Agricultural prices are expected to broadly stabilize in 2022, following a 22 percent increase in 2021.
Fitch Solutions produces a report each year entitled Country Risk and Industry Research. They reckon "commodity prices to ease in 2022 from current levels and forecast most commodity prices to average lower year-on-year basis, as we see supply improving while demand growth will ease,”
Regarding energy prices, Bloomberg is sanguine about the market. The company believes that “In 2022, we expect the ingenuity that created Covid-19 vaccines in months will accelerate pre-pandemic deflationary trends, notably in energy commodities. Crude oil and natural gas have bounced, but remain well below all-time highs, and that’s for a reason — enduring bear markets, on the back of rapidly advancing technology and demographic shifts.”
As the world is changing and adopting alternative renewable energy sources, copper is considered an essential metal for these technologies. For example, the "green transport" sector consumes a lot of copper.
Thankfully, this metal is also 100 percent recyclable. However, as stated by Fastmarkets, “Copper, aluminum and battery raw materials will be needed in greater quantities to build the electric vehicles (EV), batteries and power grids of the future.” This is backed up by S&P Global Market Intelligence, which projects the global metals sector set to continue rebound in 2022 amid driving growth in EV's energy transition in key markets.
Generally, a soft commodity refers to futures contracts where the actuals are grown rather than extracted or mined. This includes coffee, cocoa, sugar, corn, wheat, and soybean.
According to ING, agricultural commodity prices should ease though they will remain above long-term averages. For the all-important commodity of wheat, "the market has traded to multiyear highs due to weather hitting crops from a number of key producers. Assuming normal weather in 2022, wheat should see ending stocks edging higher." Uncertainties exist with sugar and coffee going into next season because of the threat of La Niña-influenced weather changes in Brazil. "The coffee market has already suffered from drought and frost damage. How much of an impact this will have on next season’s crop will depend on precipitation over the rainy season. Given the uncertainty, coffee prices are likely to remain elevated until the market gets a better idea of how big Brazil’s next crop will be.”
Further reading by the same author:
Sources:
Commodity Markets Outlook. October 2021. (worldbank.org)
Commodities Outlook 2022: Keeping the faith | Article | ING Think
Energy transition metals price outlook 2022 - Fastmarkets
The higher-price cure? Commodity reversion may dominate 2022 | Bloomberg Professional Services
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With 20 years of experience in a bank in the commodities sector, my responsibilities included managing information, specializing in press reviews and information research for managers. In addition, documentary products such as a dictionary of metals were created under my supervision.