Ample supply and sluggish demand have kept commodity prices moderate in the latter half of 2024. In 2025, energy prices are set to stay moderate as oil supply outpaces demand, while weaker industrial activity in key markets will weigh on metal prices. Improved crop forecasts are likely to ease food prices, though disinflation and monetary easing could support consumption, adding upward pressure to agrifood prices. Geopolitical and weather shocks remain the key upside risks.
Projected surplus in global oil markets to cap price increases
Oil prices have remained under pressure in late 2024, primarily due to a lacklustre outlook for global demand and ample supply. In 2025, economic uncertainty and geopolitical risks will remain significant factors shaping oil market dynamics.
After a brief period of volatility in October 2024, triggered by rising tensions between Israel and Iran, oil prices have moderated as concerns shifted from supply disruptions to global demand weakness. China’s persistent economic slowdown, characterised by sluggish construction, manufacturing, and consumer activity, has dampened oil consumption. Similarly, weak manufacturing activity weighs on demand in the US and Europe. While monetary easing is anticipated to provide economic support in advanced economies, the momentum is likely to stay modest.
In natural gas markets, risks are tilted to the upside amid growing supply concerns and anticipated growth of liquified natural gas (LNG) demand. The expiration of the Russia-Ukraine pipeline deal in early 2025 heightens supply risks in Europe, boosting reliance on LNG and intensifying global competition. Additionally, a potential emergence of the La Niña event could lead to colder winter weather in Europe and the US, driving natural gas demand for heating.
Key food commodity prices trend lower, yet risks are tilted to the upside
Food commodity prices continued to moderate during late 2024, as abundant supplies of wheat, corn, rice, and soybeans alleviated market pressures.
Improved weather conditions and productivity gains contributed to strong outputs, with grain prices averaging 16% lower year-on-year from January to October 2024
Source: Euromonitor International from World Bank
While global output of wheat and corn is expected to remain stable in the 2024-2025 marketing year, according to the International Grains Council, higher consumption is likely to tighten stocks, adding upward pressure on prices. Meanwhile, soybean output is projected to hit record highs in 2024-2025, driven by a bumper crop in Brazil, leading to weaker prices. According to Brazil’s National Supply Company (CONAB), soybean output is set to rise 12.5% year-on-year in 2024-2025, supported by an expanding planted area and rising crop productivity. Rice prices, bolstered by Indian export restrictions in 2024, are also expected to moderate in 2025 as trade policies are eased.
Nonetheless, significant upside risks include potential La Niña-driven adverse weather, geopolitical tensions, and trade disruptions. Elevated fertiliser costs may also provide a price floor for grains and oilseeds.
Cocoa and coffee prices remain elevated after surging earlier in 2024 due to weather-related production challenges. Prices are expected to moderate in 2025 as production recovers, with the EU’s delayed deforestation import ban helping to boost global supply. Yet, poor weather conditions in key producing regions remain a significant threat to the outlook.
Metal prices start to improve as China introduces fiscal stimulus
Prices of key industrial metals have started to improve in Q4 2024.
Fiscal stimulus measures in China and signs of recovery in the manufacturing sector are largely driving metal price growth
Source: Euromonitor International
China’s official manufacturing purchasing manager index (PMI) rose above the 50 points mark in October 2024, indicating growth of manufacturing activities and stronger demand for metals. However, the ongoing weakness of China’s construction sector is preventing faster increases in metal prices. A persistently weak manufacturing sector in the EU is also weighing on global demand for industrial metals, particularly hurting the steel market.
Moderate price growth of key industrial metals is forecast to extend into 2025; however, divergence between the metals will prevail. Prices of iron and steel are forecast to remain stable, as the weakness of China’s construction sector and the struggling manufacturing sector in Europe will weigh on demand. Improved global supply of aluminium is also forecast to dent the prices. On the other hand, prices of nickel and copper are forecast to rise faster as anticipated interest rate cuts by the Federal Reserve and investments into the green energy sector will lift the demand.
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