The price outlook for major commodity markets, in one chart

According to analysts at Macquarie Bank, fundamentals in the commodity market are about to make a comeback.

Yes, in its opinion the days of sudden shifts in Chinese demand and ultra-easy monetary policy settings dictating broader movements in commodity markets are coming to an end, replaced instead by fundamentals as the chief driver of individual price movements.

“In a world where demand is robust, we expect individual fundamentals to come the fore over the coming year, with supply changes a key driver of differentiation across the complex,” the bank wrote in a note released this week.

Given that view, Macquarie has supplied this excellent chart showing where it thinks 24 major commodities currently sit in their price cycle, along with its expectations as to where prices will move looking two years ahead.

The black arrows indicate Macquarie’s two-year view on where individual commodities will sit in the price cycle.

Source: Macquarie Bank

“We find the commodities are shifting broadly into two groups,” says Macquarie. “Those on the left with some price downside to come, and those on the right with more upside.”

On a two-year time horizon, it sees weaker conditions for copper, coking coal, US natural gas and lithium, with LNG tipped to experience even further price declines. In contrast, it sees upside for gold, aluminium, tin, zinc, lead and silver over the same period.

For iron ore, Australia’s largest goods export by dollar value, it sees further downside for prices next year before they recovery into 2019.

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