Posted on 25 Sep 2020
Commodities, including iron ore, have surprised positively this year despite the Covid-19 pandemic. There has been a big demand shock, but this has been coupled with a considerable supply reduction, thereby balancing the market, according to Commerzbank head of commodity research Eugen Weinberg.
“The demand shock has however been greater, so I’m pessimistic,” Weinberg said at the MBI Stahl Tag conference in Frankfurt this week attended by Kallanish. The price of oil will take longer to cross back over the $50/barrel mark than year-end, which most analysts are forecasting. A “…normalisation” will happen at the earliest in 2022 if the Covid-19 vaccine is successful, Weinberg observed.
Office and commercial buildings will suffer because of the crisis, but warehouses will benefit. Also, residential construction is doing well. Interest rates are lower than ever before, making it a good time to take out credit to make investments.
China will likely be the only country in 2020 to register economic growth, as it has almost completely recovered from the pandemic shock and is handling the crisis with aplomb, Weinberg said. Were Joe Biden to win the US presidential election, meanwhile, US trade policy is unlikely to change towards China, which means risks to international trade remain, he added.
Global steel demand will rebound in 2021 but remain below pre-Covid-19 pandemic levels. Besides China, which will record output this year, meanwhile, other countries will see production decline notably in 2020, followed by moderate growth in 2021, Weinberg commented.
In the nickel industry, meanwhile, the supply expansion planned for 2020 has been somewhat postponed due to the pandemic, with global production curbed by -15% so far this year. Nickel demand has been hampered considerably by reduced stainless steel output. However, the longer-term prospects are much stronger thanks to increasing nickel use in electric vehicle battery production.
Iron ore prices will average at $100/tonne in 2020, falling to $88/t in 2021. Nickel will average at $13,300/t in 2020, rising to $17,100/t next year.
Source:Kallanish
