What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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The Commodities to Watch in 2019

By Jeremy Hill, Ranjeetha Pakiam, and Jake Lloyd-Smith
January 4, 2019, 8:00 AM GMT+8

Updated on January 7, 2019, 7:46 PM GMT+8

Raw materials enter year after hitting lowest level since 2016

Positive outlook seen for oil, copper, gold in coming quarters

LISTEN TO ARTICLE Commodities took a kicking in 2018 -- with deep losses in

everything from oil and copper to cofee and sugar -- so
6:41
what’s in store for the 12 months to come? The inaugural
What to Watch of the year ofers a selective run through of
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prospects and pitfalls for some of the top raw materials, and
it’s a reasonably positive picture that emerges.
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Pos

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

That road map comes ahead of a busy period. The U.S.-China

Email
trade fght will be in focus this week, with a U.S. delegation in
Beijing for talks from Monday. In addition, there’ll be more
In this article
pointers on the macroeconomic outlook, with the World
CL1
WTI Crude Bank updating its Global Economic Prospects report on
55.74 USD/bbl.
Tuesday and a speech from Federal Reserve Chairman
+0.15 +0.27%
Jerome Powell on Thursday. Investors will also be tracking
HG1
Generic 1s 'HG' Future the U.S. government shutdown as disruption drags on.
283.35 USd/lb.
+3.50 +1.25%

SB1
Generic 1s 'SB' Future
13.00 USd/lb.
+0.58 +4.67%

IOE1
Generic 1s 'IOE' Future
635.00 CNY/MT
+4.00 +0.63%

VALE3
VALE SA
45.25 BRL
-0.63 -1.37%

As a fnal shout-out, two emerging-market hot spots need

highlighting. The Democratic Republic of Congo just delayed
the release of provisional results from the presidential
election as criticism of the vote mounts in the metals
powerhouse. And Venezuela’s Nicolas Maduro is due to be
sworn in for a second term as president on Thursday,
drawing fre from critics at home and abroad, and raising
fresh questions about the nation’s ability to keep pumping oil
.

Oil’s Well

The standout feature in commodity markets last quarter was

crude’s swoon from four-year high into a bear market. The
drivers of the reversal were record U.S. shale output, a clutch
of sanctions waivers on Iranian fows, and a supply cut from
OPEC+ deemed by some as too little. Concern about a
deteriorating global economic outlook gave bears further
ammunition. After that drama, prices may recover, with
supply risks underappreciated.

https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

In 2019, watch for more losses in crisis-hit Venezuela as

supply risks tumbling below 1 million barrels a day. On top of
that, U.S. waivers on Iranian cargoes are temporary, and not
all may be renewed in May. And don’t underestimate the
Saudi resolve to make the cuts stick. OPEC’s next meeting is
in April, and prices may have regained some ground by then.
The median Brent forecast tracked by Bloomberg is $68 a
barrel, compared with about $58 at present.

Golden Opportunity

Gold bulls seized the initiative in the fnal months of 2018

and there’s plenty to suggest the haven may hold up. Look for
support for prices at a six-month high as the Federal Reserve
goes way slower on rate increases, and investors seek
protection from equity market turmoil and slowing global
growth.

There may be more supportive headlines near term. A golden

cross -- as the 50-day moving average tops its 200-day

https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

counterpart -- is close, and a few more tons added to

exchange-traded funds will lift holdings to the highest since
2013. A Dec. 11-19 survey of 20 analysts and traders refected
a positive tone, with the median estimate of $1,325 an
ounce. Futures were at $1,292 at the start of the week after
topping $1,300 on Friday.

Wired for Success

Copper dropped every quarter last year in the worst run since
2015. The metal was hurt by concerns that global growth is
slowing, and the U.S.-China trade fght. Still, investors may
this year focus more on the supportive backdrop ofered by
industry indicators. Among these are global stockpiles
tracked by exchanges, with holdings in London Metal
Exchange sheds at a decade-low.

That drop has come as demand tops supply by some

margin: 595,000 tons in the nine months to September,
according to the International Copper Study Group. Miners
highlight lower grades. And just as trade-war swings hurt
copper in 2018, the same could be true in 2019 -- but in
reverse. Should Washington and Beijing settle some issues,
copper could gain. Prices recovered ground on confrmation
of the talks. The median of forecasts tracked by Bloomberg
puts the metal, which was last at $5,930 a metric ton, above
$6,400.

Slowing Ships of Soy

Soybeans get a boost from any inkling of improving trade

https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

relations between the U.S. and China, and that narrative

should continue to dominate trading in 2019. The oilseed
rallied in late 2018 after a meeting between U.S. and Chinese
leaders resulted in the Asian nation resuming some imports
of American beans. Traders, though, were disappointed by
the extent of the purchases.

Farmers in America are hopeful the two nations will reach an

accord before the end of a 90-day truce. The key question for
trading desks remains whether China, the hitherto top U.S.
soybean buyer, will agree to reduce tarifs on U.S. agricultural
products. Brazil’s coming harvest is also a major factor:
farmers there are looking at yet another bumper year and
that rush of supply would further suppress U.S. prices,
especially if China stays closed.

Porcine Potential

In other farm commodities, it’ll pay to weigh the outlook for

hogs. China has more than 400 million pigs, over half the
world’s herd; the country also has a serious outbreak of
African swine fever that’s been spreading since emerging in
2018. While it doesn’t harm human beings, the disease can be
An error has100
occurred
percent lethal for pigs. Last week brought news of more
infections, with an outbreak confrmed Jan. 1 at a farm that
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had about 73,000 hogs.

https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

There’s concern the outbreak will get a stronger grip within

Asia’s top economy, and may jump to neighboring states,
imperiling producers across the region. Should that happen,
China may go overseas to supplement supplies, benefting the
U.S. even as the trade war drags on. That may also beneft
chicken demand and prices.

That Sinking Feeling

After averaging almost $70 a ton last year, iron ore is at risk
of a drop. The staple, dominated by fows from Brazil and
Australia, will face headwinds from a slower pace of
expansion in China, with steel output likely at best to plateau.
Policy decisions from Beijing -- especially additional stimulus
amid the trade war and conduct of the anti-pollution drive --
remain wild cards.

Adding to downward pressure, more supply is on the way,

with Brazil’s Vale SA adding tons from the ramp-up of its
S11D mine and as Anglo American Plc restarts Minas Rio.

https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

Keep a close watch on China mills’ proftability and industry

data from the mainland. Proftability tanked in the fnal
quarter of 2018 and the purchasing managers index is back at
depressed levels. Heading into the year, Morgan Stanley
was among the bears, warning of a return to global
oversupply and prices at $62 this year.

Agenda

Click here for a run-down of the year’s biggest scheduled

events

What We’ve Been Reading

Trump’s China Strategy Isn’t Working: Anne Stevenson-

Yang

What’s Got Oil So Spooked? It’s the Economy, Stupid:

Julian Lee

Miners Are Budgeting for a Recovery in Copper: David

Have a confdential
tip for our reporters? Fickling
GET IN TOUCH

— With assistance by Krystal Chia, Alex Devine, Luzi-Ann

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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https://www.bloomberg.com/news/articles/2019-01-04/what-to-watch-in-commodities-in-2019-winners-and-losers-line-up[19/2/2019 10:29:26 AM]

What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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What to Watch in Commodities in 2019: Winners and Losers Line-Up - Bloomberg

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