World Commodity Prices to mid-2017 AIECE General Meeting Brussels, November 5, 2015 Paavo Suni, ETLA ELINKEINOELÄMÄN TUTKIMUSLAITOS THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Recent Developments ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
World Industrial Production and Non-Energy Raw Material Prices HWWI non-energy raw material prices, scale to the left Industrial production 240 130 200 120 160 110 120 100 80 90 40 80 2000/1 2002/1 2004/1 2006/1 2008/1 2010/1 2012/1 2014/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Industrial Production in the US, EU27, G7 and China EU28 G7 China USA 30,0 25,0 20,0 15,0 10,0 %-change, yoy 5,0 0,0 -5,0 -10,0 -15,0 -20,0 2001/1 2003/1 2005/1 2007/1 2009/1 2011/1 2013/1 2015/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Non-energy Commodity Prices and the Change in Chinese GDP Non-energy commodity prices GDP, rhs 175 14 150 12 125 HWWI-index, 2010=100 10 %-change, yoy 100 8 75 6 50 4 25 2 HWWI, NBSC, Frances&Meese, ETLA 0 0 2008/1 2010/1 2012/1 2014/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Share of World Commodity Consumption, % Aluminium 54 Nickel 50 Copper 48 Tin 46 Zinc 46 Steel 45 Lead 40 Cotton 31 Soyabean oil 30 Rice 30 Soyabean meal 28 Gold 23 Corn 22 Wheat 17 Crude oil 11 Sorghum 11 Palm oil 10 Sugar 10 Natural gas 6 Prometeia Barley 5 0 10 20 30 40 50 60 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Daily Crude Oil Prices, Brent, spot OPEC (SA) decides to defend Mkt shares; EUR USD Dollars/ euros per barrel 160 Bloomberg. ETLA 140 120 100 80 60 Shale producers as swing 40 producers 20 0 3/1/2000 3/1/2002 3/1/2004 3/1/2006 3/1/2008 3/1/2010 3/1/2012 3/1/2014 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Real Prices of World Raw Materials Energy Total Total excl. energy 500 450 400 350 HWWI ndex, 2000=100 300 250 200 150 100 50 HWWI, ETLA 0 2000/01 2002/01 2004/01 2006/01 2008/01 2010/01 2012/1 2014/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Table 1. Spring 2015 forecasts and realisations USD terms EUR terms 2015 Q2 2015 Q3 2015 Q2 2015 Q3 Forecast Actual Forecast Actual Forecast Actual Forecast Actual Quarterly percentage changes All commodities* 12 11 5 -16 16 13 5 -16 Total excl. energy -1 -3 1 -7 2 -1 1 -7 Food total -4 -5 0 -1 -1 -3 0 -1 Cereals -4 -5 0 0 -1 -3 0 -1 Tropical beverages, sugar -4 -5 1 -2 -1 -4 1 -3 Oilseeds, vegetable oils -4 -5 -1 1 -1 -3 -1 0 Industrial raw materials 0 -3 1 -9 3 -1 1 -10 Agricultural raw materials -1 -3 0 -4 2 -1 0 -5 Non-ferrous metals 6 0 2 -12 10 1 2 -13 Ferrous raw materials -17 -9 -2 -8 -14 -7 -2 -9 Energy raw materials 17 15 6 -19 20 18 6 -19 USD/EUR 1.09 1.11 1.09 1.11 * HWWI index, total ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Price Forecasts ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
World Commodity Prices in 2000-2017 HWWI index in US $, Total Non-energy Energy 2010 =100 160 140 120 100 80 60 40 20 00/1 02/1 04/1 06/1 08/1 10/1 12/1 14/1 16/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Energy, Metals and Minerals ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Oil and coal prices: different profiles Steam coal Crude oil Total excl. Energy HWWI - Index 2010 =100 160 140 120 100 80 60 40 20 00/1 02/1 04/1 06/1 08/1 10/1 12/1 14/1 16/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
World Oil Balance Surplus, scale to the right Demand Supply 98 6 96 5 94 4 Million barrels per day 3 92 90 2 88 1 86 0 84 -1 IEA, ETLA 82 -2 2010/1 2011/1 2012/1 2013/1 2014/1 2015/1 2016/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Industry Cost Curve and Pricing of Crude Oil Break even Supply 1 Supply 0 E 0 P 0 E 1 P 1 B/E Shale oil P temp production OPEC Q 0 = Q 1 Quantity Cumulative peak production in order of cost ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
The US Rig Count and Crude Oil Production Crude oil production Number of rigs 10000 1700 Baker&Hughes, EIA, ETLA 9500 1500 9000 OIl production, 1000 b/d 8500 Numer of active oil rigs 1300 8000 7500 1100 7000 900 6500 6000 700 5500 5000 500 7/01/2011 7/01/2012 7/01/2013 7/01/2014 7/01/2015 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Prices of Metals and Minerals Total excl. energy Non-ferrous metals Ferrous raw materials (iron ore and steel scrap) 140 HWWI index in US $, 2010 =100 120 100 80 60 40 20 0 00/1 02/1 04/1 06/1 08/1 10/1 12/1 14/1 16/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
World Steel Production Production Capacity utilization, % 1.800.000 95,0 OECD, Worldsteel, ETLA 1.700.000 1.600.000 90,0 1.500.000 1.400.000 85,0 1000 tonnes 1.300.000 1.200.000 80,0 1.100.000 1.000.000 75,0 900.000 800.000 70,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Steel Scrap and Iron Ore Prices, 2000 = 100 Iron ore Steel scrap 1000 800 600 400 200 0 1990/1 1995/1 2000/1 2005/1 2010/1 2015/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
A Global Cost Curve of Iron Ore https://www.fool.com.au/2015/07/17/the-mining-investors-handbook-part-3-iron-ore/ ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Soft Commodities ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Prices of Agricultural Commodities HWWI index in US $, Total excl. energy Textile fibres Wood products 2010 =100 180 160 140 120 100 80 60 40 20 00/1 02/1 04/1 06/1 08/1 10/1 12/1 14/1 16/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Food Prices: Wheat and Rice Wheat (in US $ cents / bushel) Rice (in US $ / ton) 1100 1000 900 800 700 600 500 400 300 200 100 00/1 02/1 04/1 06/1 08/1 10/1 12/1 14/1 16/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Beverages’ Prices: Coffee and Cocoa <-- coffee (in US $ cents / lb) cocoa --> (in US $ / ton) 300 3800 280 260 3400 240 3000 220 200 2600 180 2200 160 140 1800 120 1400 100 80 1000 60 40 600 00/1 02/1 04/1 06/1 08/1 10/1 12/1 14/1 16/1 ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
Conclusions: World commodity prices at all-time-high in 2011 China’s rise, inadequate supply response Trend-wise decline after the peak until Oct. 15 Except oil, which fluctuated in 110 USD/bbl until June14 Slowing growth of China, lagged supply rises Commodity prices to slow rise during the winter Strong inflation impacts (mainly from energy) Strong negative contribution in moderation, turning into moderate rise after Q2 in 2016 Risks: Growth in China, US MoPo, El Niño ELINKEINOELÄMÄN TUTKIMUSLAITOS, ETLA THE RESEARCH INSTITUTE OF THE FINNISH ECONOMY
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