Price forecasts in an uncertain geopolitical environment

Price forecasts in an uncertain geopolitical environment

The year 2022 has been one of the most volatile in recent memory, with a number of flash-points in global geopolitics causing widespread global market disruption and considerable uncertainty in global commodities prices. At present, there is a significant mismatch between some commentators' expectations of a softening of the global economy – with a corresponding opening up of the supply of key commodities, and cooling of inflation – and the potential for market conditions to remain difficult or harden further over the coming months.

What is affecting global business?

The most disruptive geopolitical event has been Russia's invasion of Ukraine in February.

However, there is a risk that the (quite justified) focus on this war leads observers to undervalue the potential for other very significant disruptions in the short term. There is potential for conflict in the South China Sea in the short-term and the medium-term, where a long-term trend of increasingly aggressive Chinese territorial claims, most notably against the island nation of Taiwan, which Beijing threatens to 'reintegrate' by force; authorities there are reportedly watching Russia's invasion of Ukraine with interest and seeking to learn lessons.

There is also complex geopolitics at play in the Middle East, notably around negotiations between Iran and the United Nations Security Council's five permanent members (China, France, Russia, the UK and the US) plus Germany and the EU (who send their own representatives in addition to those of France and Germany). These talks, held in Vienna, aim to revive the Joint Comprehensive Plan of Action (JCPOA) torn up by then-US President Donald Trump in 2018.

A successful conclusion to these talks would lead to a significant increase in the supply of petrochemicals as sanctions on Iran’s oil exports are limited. There are political incentives on both sides to extend the stalemate, and economic incentives to reach an accord, so it is difficult to predict how this situation will develop.

These and other, smaller, flash-points are currently making global commodity prices challenging to predict, with the potential for one or more of these situations to change rapidly, further disrupting global markets. The situation is further compounded by the fact that the aftershocks of the Covid-19 pandemic are still rebounding around the global economy and the uncertainty over whether China can maintain its increasingly economically damaging ‘zero-Covid’ approach.

How can Mintec help?

Mintec's commodity price forecast service offers businesses valuable information to make sense of this complex picture, producing price predictions through specific price targets for over 60 global commodities.

Each of these commodities can be tracked using Mintec's commodity price forecast service. Mintec’s online forecasting chart tracks historical prices alongside realised price targets. These charts provide upcoming targets with their price ranges for up to three years into the future.

The tool provides a number of levels of detail, enabling businesses to access the appropriate level of information easily. It provides summaries of commentaries for each commodity, alongside the current price trends and a hedging recommendation.

A forecast methodology matrix allows for deeper dives into the fundamental analysis, macro-analysis and technical analysis available for each commodity. Keeping businesses up-to-date These analyses (and the underlying data) are invaluable given that the complex geopolitics outlined above have led to many assumptions from just a few years ago being outdated. Many businesses have been forced to tear up many of the assumptions that had underpinned their procurement plans and strategies.

Mintec’s commodity price forecast service helps businesses to navigate this uncertain picture in whatever level of detail is most appropriate for them. Alerts for changes in trends and hedging recommendations are built-in to help businesses stay up-to-date with developments. The future of business Looking again at the most significant shock to global commodity prices, Russia's decision to invade Ukraine in February caused key global commodity prices to surge.

World Bank figures showed a 150% rise in the price of potassium chloride in the three months prior to March 2022. Nickel prices rose by 50% during the same period.

Petrochemical products, wheat and oils such as soybean oil and palm oil were among other commodities that were most severely affected. Analysts now have a huge spectrum of possible scenarios to work through for the coming months.

Domestic politics in key Western supporters of Ukraine, internal tensions in Russia, the performance of both the invading and defending forces on the battlefield – all these questions carry huge uncertainties.

Currently, many businesses' expectations for commodity prices over the months ahead are likely to be off the mark. Some buyers may be operating under assumptions with an optimism bias baked in, notably an over-optimistic expectation of a softening of the global economy and an increase in the supply of key commodities.

Here again, Mintec’s levels of analysis, from summary to detailed analyses and the data underpinning them, provide the most relevant and up-to-date information alongside price forecasts.

If you'd like to have an initial conversation about Mintec might be able to help your organisation, send me a message through LinkedIn, or email [email protected]

Regards,

David Bateman

https://www.mintecglobal.com/

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