Coal and Gas Lead the Commodities Rally in 2022; recession clouds new year


By Naveen Thukral and Florence Tan

SINGAPORE, December 30 (Reuters)Coal and natural gas markets were poised to end 2022 on Friday with strong gains after a global energy crisis triggered by the Russian-Ukrainian war fueled prices, and an expected supply crunch in 2023 could fuel further of earnings.

Industrial metals, iron ore and rubber are on track to end in negative territory, pushed lower in 2022 by China’s strict zero-COVID policy and fears of a global recession.

Agricultural markets, including grains and palm oil, hit historic highs in March due to unfavorable weather and pandemic-related supply disruptions, triggering food inflation, but these commodities lost much of their gains in the second half.

“Despite recent price declines, commodities will likely end the year as the best performing asset class,” Goldman Sachs said in its 2023 commodity outlook.

“From a fundamental perspective, the setup for most commodities next year is more bullish than it has ever been since we first highlighted the supercycle in October 2020. “

FOOD STRAIN

Global gas markets have been turned upside down this year after Russia cut off supplies to Europe and a major pipeline was damaged during the war in Ukraine, leading European countries to import record volumes of unscheduled gas. Russian to ensure the winter supply.

The additional demand for liquefied natural gas (LNG) and the tight supply of piped gas has put enormous pressure on the global market, causing an energy crisis that has pushed gas prices to historic highs.

Newcastle Coal Futures NCFMc1 soared nearly 140% in 2022, the biggest jump since 2008.

In the European market, the benchmark Dutch first-month gas contract was on course to end 2022 up almost 8%, but has fallen around 75% from record highs seen earlier in the year. after Europe succeeded in building up gas stocks.

U.S. Gas Futures NGc1 jumped by more than 20% and wholesale gas prices in the Netherlands TRNLTTFMc1 rose nearly 8%, both up for the third consecutive year.

Because Europe is going Continue to import LNG to replenish gas inventories next year after the winter, gas prices are expected to remain high due to the commissioning of limited new supplies.

The dismantling of strict pandemic controls in China, the world’s second-largest LNG importer, could also spur economic recovery and greater LNG consumption next year.

However, a European gas price cap from February could keep a lid on the market and reduce the volatility observed this year.

Oil prices are on track for a second annual gain, with Brent LCOc1 up nearly 6% and U.S. crude CLc1 up nearly 5%.

Brent oil futures traded above $139 a barrel in early 2022, not far off their 2008 all-time high, but have since fallen to around $85 a barrel due to a weaker economic outlook and modest market disruptions. Russian exports.

In industrial metals, copper on the London Metal Exchange CMCU3 is on track to fall 13% this year and aluminum CMAL3 is down about 15%. Both hit record highs in March.

Iron ore spot price to China SH-CCN-IRNOR62which consumes around two-thirds of global supply, fell around 5% this year, ending at nearly $115 a tonne.

Citi analysts are bearish on nickel and zinc for the next six to 12 months, seeing strong supply growth, and bullish on iron ore and aluminum.

“Iron Ore should remain strong in the near term and could continue in the bullish case of a major credit easing in China,” they said in a note.

China’s U-turn on COVID policy and its promise to increase support for the real estate sector helped support both ferrous and non-ferrous metals in December.

Still, optimism has been tempered by the surge in COVID infections in the country and the risks of a global recession in 2023 if central banks, as expected, continue to hike rates.

Nickel CMNI3the metals outperformer, is on track for a 45% rise, its strongest since 2010, partly due to a shortage of metal available for delivery against the LME contract and partly due to the volatility created by low volumes and liquidity after a trade fiasco in March.

FOOD INFLATION

Chicago Benchmark Wheat Futures Price Wv1 jumped to a record high of $13.63-1/2 a bushel in March as the invasion reduced supply from major grain exporter Ukraine to a world market already pushed higher by adverse weather conditions and restrictions related to COVID-19.

Corn CV1 and soy Sv1 reached a decade high, while benchmark crude palm oil prices in Malaysia FCPOc3 reached an all-time high.

Going forward, food prices are likely to be supported as wheat production is unlikely to replenish depleted global stocks, at least in the first half of 2023, while crops producing edible oils suffer from unfavorable weather conditions. in Latin America and Southeast Asia.

“US winter wheat is facing severe cold weather and even if the harvest improves, we won’t have these supplies (only) until the second half of 2023,” a Singapore-based trader told a company. of international trade.

The rice market, which failed to follow the rise in grain prices in the first half of the year, received a boost after India, the world’s largest exporter, decided in September to limit its supplies. India’s 5% broken parboiled rice RI-INBKN5-P1 is up nearly 6% in 2022 and broken rice from Vietnam 5% RI-VNBKN5-P1 gained more than 15%.

Among the precious metals, gold XUA= lost about 1% in 2022, down for a second year, silver XAG= is up nearly 3%, platinum XPT= gained 9% and palladium XPD= is down 4%.

Coffee is among the biggest losers, along with robusta LRCc2 23% drop and arabica KNc2 lose a quarter of its value.

Tokyo Rubber JRUc6 lost more than 7% while raw sugar SBc1 up more than 7%. cotton ICE CTc1 fell more than 26% in 2022.

Stock indiceshttps://tmsnrt.rs/3Wxzqzg

Energy Futures 2022https://tmsnrt.rs/3vkzl6e

Metals performance 2022https://tmsnrt.rs/3jyP66P

Cereals, edible oil priceshttps://tmsnrt.rs/3WxrduT

(Reporting by Naveen Thukral and Florence Tan; Additional reporting by Emily Chow, Enrico Dela Cruz and Pratima Desai; Editing by Bradley Perrett and Barbara Lewis)

((naveen.thukral@thomsonreuters.com; +65-6870-3829; Reuters Messaging: naveen.thukral.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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