Coal and gas dominate the commodities rise in 2022; economic concerns welcome the New Year.

SINGAPORE, (Reuters) – Coal and natural gas markets were ready to close 2022 with substantial gains on Friday, as a global energy crisis precipitated by the Russia-Ukraine conflict fueled a dramatic increase in prices, while tighter supplies projected in 2023 might drive further gains.

Industrial metals, iron ore, and rubber are on course to end in the red in 2022, thanks to China’s tough zero-COVID policy and worries of a global recession.

Agricultural markets, notably grains and palm oil, reached all-time highs in March as a result of severe weather and pandemic-related supply interruptions, resulting in food inflation, but those commodities lost most of their gains in the second half.

“Despite recent price drops, commodities will likely end the year as the top performing asset class…,” Goldman Sachs said in its commodity view for 2023.

“From a fundamental standpoint, the outlook for most commodities next year is more optimistic than it has been since we first identified the supercycle in October 2020.”

SEARCH FOR SUPPLIES

This year’s global gas markets were roiled when Russia halted supplies to Europe and a key pipeline was destroyed during the Ukraine conflict, forcing European nations to acquire record amounts to assure winter supplies.

The increased demand for liquefied natural gas (LNG) combined with restricted supply of piped gas put great pressure on the world market, sparking an energy crisis that drove gas prices to record highs.

Newcastle coal futures have increased by about 140% in 2022, the largest increase since 2008. US gas futures and Dutch wholesale gas prices have risen by more than 20% for the third year in a row.

Because Europe will continue to import LNG to replenish gas stockpiles after the winter, gas prices are projected to stay high in the face of little new supply coming on-stream.

The relaxation of strict pandemic restrictions in China, the world’s second-largest LNG importer, may help encourage economic recovery and increased LNG usage next year.

However, beginning in February, a European ceiling on gas prices might help keep the market under control and lessen the volatility experienced this year.

Oil prices are on course for their second yearly increase, with Brent up almost 6% and US crude up about 5%.

In terms of industrial metals, three-month copper on the London Metal Exchange has down more than 13% in 2022, while aluminium has fallen around 15%, despite both prices reaching record highs in March.

Spot iron ore prices for China, which uses around two-thirds of global supply, have declined by 5% this year, closing at $115 per tonne.

Citi analysts are negative on nickel and zinc for the next six to twelve months due to robust supply increases, but positive on iron ore and aluminium.

“Iron ore is projected to continue robust in the short term and might follow through in the bull scenario of significant Chinese credit easing…,” they said in a note.

In December, ferrous and nonferrous metal prices were supported by China’s U-turn on COVID policy and commitment to enhance assistance for the struggling real estate industry.

Nonetheless, excitement has been tempered by the country’s mounting COVID infections and the growing possibility of a worldwide recession in 2023 if central banks continue to raise interest rates to combat inflation, as projected.

Nickel, the metals segment’s top outperformer, is on track for a 45% increase, its biggest since 2010, due in part to a scarcity of metal that can be delivered against the LME contract and in part because the market has been volatile since volumes plummeted after a trading catastrophe in March. learn more

INFLATION OF FOOD

Benchmark In March, Chicago wheat futures hit an all-time high of $13.63-1/2 a bushel due to a reduction in supply from key grain exporter Ukraine to a global market already pushed higher by severe weather and COVID-19-related restrictions.

Corn and soybean prices reached a decade high, while Malaysia’s benchmark crude palm oil prices reached an all-time high.

Wheat output is unlikely to rebuild reduced global supplies, at least in the first half of 2023, while crops yielding edible oils are suffering from severe weather in Latin America and Southeast Asia.

“We are experiencing extreme cold weather in the United States, and even if the crop improves, we will get such supplies (only) in the second half of 2023,” said a Singapore-based trader with an international trading business.

The rice market, which had lagged behind the grain price surge in the first half of the year, received a lift in September when India, the world’s largest exporter, chose to cut supply. In 2022, India’s 5% broken parboiled rice is up almost 6%, while Vietnam’s 5% broken rice is up more than 15%.

Gold has lost roughly 1% in 2022, down for the second year in a row, silver is up almost 3%, platinum is up 9%, and palladium is down 4%.

Coffee is one of the greatest losses, with robusta down 23% and arabica down a quarter.

Tokyo rubber has declined by more than 7%, while raw sugar has increased by more than 7%. Cotton ICE has declined by more than 26% in 2022.