Most commodity prices forecast to fall on average in 2022 – report

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Fitch predicts that its aggregate commodity price index will decline 7.9% yoy in 2022 in nominal terms, following the impressive 43.8% yoy growth expected in 2021.

Of the 27 key products, Fitch sees 19 (or 70%) on average lower from one year to the next. Especially, Fitch sees ferrous metals (iron ore, steel), NBP natural gas, thermal coal and oil crops (palm oil and soybeans) on average significantly lower; while he expects Asia LNG, US Henry Hub, tin and lithium to be on average higher.

The macroeconomic backdrop will remain favorable for commodity demand next year, according to Fitch, which will keep prices high compared to 2017-2021 averages.

The analyst’s Country Risk team predicts that the global economy will grow by 4.1% in 2022, well above the 3.1% average recorded between 2015 and 2019. However, the pace of growth of global economic activity is slowing down from 5.5%. Fitch estimates for 2021, which will put some downward pressure on commodity demand.

In particular, the Chinese economy faces a number of downside risks, mainly related to the financial difficulties of its real estate sector.

Fitch predicts a slowdown in China, where it expects real GDP growth to decline from 7.8% in 2021 to 5.4% in 2022 due to less favorable base effects; Beijing’s zero covid strategy, which will continue to slow consumption growth; regulatory repression in several sectors of the economy and persistent tensions in the real estate sector.

During this time, Fitch The Country Risk team expects the tightening of monetary policy, which began in emerging countries in 2021 with interest rate hikes in many markets, to continue and extend to DMs throughout. long 2022.

Most DM central banks will begin to end their quantitative easing (QE) programs in early 2022, and Fitch is forecasting an interest rate hike of 25 basis points in the United States. A more hawkish US Fed will strengthen the US dollar in the coming months, according to Fitch, which is another headwind for commodities through 2022.

(Read the full report here)

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