Concerns over demand in China continues to weigh on sentiment
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
A weak outlook for demand in China continues to weigh on sentiment. The stronger USD is creating strong headwinds for commodities.
Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.
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Ahead Today
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Market Commentary
Crude oil was under pressure early in the session amid unconfirmed reports that Iran may hold off retaliating against Israel. This comes in light of Trump’s victory in the US presidential election. Any response may now not come until negotiations with the new administration begin. However, Israel said some projectiles had been launched from Lebanon. The market was still digesting the move by OPEC to cut its forecast for demand for the fourth consecutive time. The oil producing group now expects global oil consumption to increase by 1.8mb/d, which is 1007kb/d lower than its previous forecast. It attributed the change to weakening demand in China and India. Outlooks from the EIA and IEA are due later this month. This comes ahead of a meeting between OPEC and its allies. Earlier this month the group announced it would delay production hikes planned for December. However, the focus at the 1 December meeting will be on whether it adjusts its target of the complete phase-out of the production constraints. In a meeting yesterday, Russian President Vladimir Putin and the Saudi Crown Prince stressed the importance of continuing close coordination in OPEC+.
North Asian LNG prices edged lower amid signs of easing supply tightness. Brazil is re-exporting LNG for the first time in about a year after rising hydropower output shifted energy supplies to a surplus. Expectations for drier weather by the end of the year have not materialised, resulting in lower gas demand for power generation. The US oil & gas industry is already lobbying the Trump administration to lift the suspension on LNG export licences. This could allow several projects currently stuck in the approval process to restart their development plans. European gas was also lower as profit-taking emerged after the recent strong gains. However, traders remain wary that the expected bout of cold weather will boost demand and accelerate drawdowns from storage facilities.
The stronger USD continues to create headwinds for the base metals sector. Copper fell more than 1% to hit a two-month low amid the pullback in investor interest. The market also remains concerned that recent stimulus measures in China will do little to improve demand. Eagle Metal International, a major importer of copper in China, warned the country needs to deploy more economic stimulus if copper demand is to revive. State-backed government researcher, Beijing Antaike Information Development Co, said China’s copper demand will likely peak around the end of this decade. This comes as the world’s top copper producers meet in China to hammer out annual supply deals. Recent disruptions to mine supply have seen smelters eager to secure deals, pushing concentrate fees to record lows.
Iron ore prices fell as supply continues to grow. Shipments from Australia’s leading terminal, Port Hedland, totalled 45.6mt in October. This brings this year’s total to 472.3mt, the highest level for that period in four years. This matches estimates from the Australian government, which expects exports to increase 1.9% to 908mt in 2024.
The stronger USD also pushed gold lower despite easing US inflation confirming the Fed is likely to continue cutting rates.?
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Chart of the Day
Operating rates of Chinese aluminium wire and rod producers has continued to rise in 2024, suggesting demand is showing signs of growth.
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Assistant Vice President, Wealth Management Associate
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