countries also have good reason to raise their production levels, mainly countries where political turmoil or sanctions have limited production. In Libya, production has accelerated and is expected to further increase, although there is far to go before reaching previous levels. Higher production from Iran would also raise global supplies. At the same time this is a challenge for OPEC and its production quotas. We expect oil prices to fall from today's levels to around USD 105 a barrel by the end of the year. The coal market is still struggling with faster growth in production than consumption. The imbalances tend to increase in the short term when growth in emerging markets slows, unless production is reduced more than it already has. As an energy source, coal still accounts for a significant share of electricity production in emerging markets.
Coal and crude oil prices, 2010=100 Metal prices bottom out, but emerging markets are a concern
The major price decline in industrial metals is probably behind us, provided that the slowdown in emerging markets doesn't become worse than expected. Industrial metal prices rose for the second month in a row, but with big differences between metals. In January aluminum had the weakest price trend, declining 1.6% compared with December. The price of zinc rose 2.3%, while copper and nickel increased weakly between months.
Metal price trend 2013-2014, January 2013=100
A common denominator for industrial metals is low price levels, where nickel, lead and copper are between 10-20% lower than January 2013. A sluggish global industrial sector and large inventories have forced commodity producers to cut production or postpone planned capacity increases. We remain convinced that metal prices have bottomed out and will turn higher later in 2014 as goods production adapts to lower global demand. Production cutbacks in the mining industry have impacted metal inventories, which have begun to shrink, especially copper, where inventories are their lowest in nearly a year. Although zinc levels have fallen slightly, inventories remain at high levels, which is also true of aluminum and nickel, where they continued to grow in January.
Industrial metal inventories, millions of tons
The critical factor for metal prices going forward is what happens in emerging markets, especially China. A Purchasing Managers Index (PMI) below 50 for the second consecutive month suggests that the Chinese economy is continuing to slow, which would increase the need for further cutbacks in mining production. At the same time there is a consolidation underway in the Chinese steel industry, which tends to reduce steel production. Steel production fell in January, though the Chinese New Year's celebration may have had a constraining effect.
Gold prices in USD and 10-year US government bond (inverted scale) Reduced risk appetite lifts gold prices, but only temporarily
The price drop for precious metals has slowed and an upswing has been seen in the last month. Weaker US data and a reduced risk appetite in the financial market have pushed long-term bond yields lower after they initially rose when the US central bank began scaling back its bond buying in December. Investor interest in precious metals has
I n d e x : 2 0 1 0 = 1 0 0
Crude Oil, brent
Copper Lead Nickel Zinc Aluminium Iron ore and steel scrap Non-Ferrous Metals
1 J a n u a r y 2 0 1 3 = 1 0 0
Source: LME, Reuters EcoWin
T o n ( m e t r i c )
T o n ( m e t r i c ) ( m i l l i o n s )
0,00,10,20,30,40,50,60,70,80,91,01,11,21,3Copper ZinNickel, right scaleLead