China’s war on smog lifts metals to multi-year

peaks

ECONOMY

Monday, 1 Jan 2018

Metals used in the booming renewable energy sector, including copper for transmission lines and solar
panel wiring, have seen strong demand and price rises, as have materials like aluminium used in electric
vehicles.

LONDON: Industrial metals, liquefied natural gas and steel finished 2017 in stunning
fashion as a crackdown on pollution in China, the world’s no. 2 economy, boosts demand for
cleaner fossil fuels and raw materials vital to clean-tech industries.
The world’s most traded commodity, oil, rallied to finish the year at levels not seen in more
than two years on increased demand and efforts by major producers to cut supply.
than two years on increased demand and efforts by major producers to cut supply.

For 2018, analysts predict more of the same: accelerating growth in major economies and
increased infrastructure spending driving prices for industrial commodities and energy
sources above current multi-year highs.

“I think we have seen the end of low commodity prices as funds are expected to focus on
commodities in 2018, with strong economic growth,” said Terry Reilly, senior commodities
analyst with Chicago-based Futures International.

Metals used in the booming renewable energy sector, including copper for transmission
lines and solar panel wiring, have seen strong demand and price rises, as have materials like
aluminium used in electric vehicles.

This year’s best performing metal, palladium, is chiefly used as a component in catalytic
converters, which clean vehicle exhaust fumes. Buoyant car sales in China and Europe, plus
tightening emissions standards, have stoked fears over metal availability after years of
market deficit.

Palladium gained 57% last year, hitting its highest since early 2001 last Thursday at
US$1,072 an ounce and outstripping a buoyant year in fellow precious metal gold , up 13%
in its biggest annual rise since 2010.

Pan Pacific Copper, Japan’s biggest copper smelter, expects copper prices to rise by more
than a quarter over the next two years as global demand continues to grow and outpaces
supply.

Shanghai rebar futures climbed 46% this year, driven by the closure of low-quality Chinese
steelmaking plants and production curbs to fight pollution. High construction activity also
supported steel.

Brent crude oil broke through US$67 per barrel for the first time since mid-2015 in the last
week of 2017, ending up 17% for the year amid record trading volumes.

Oil has benefited from efforts led by the Organisation of the Petroleum Exporting
Countries (Opec) and Russia to withhold production in order to prop up prices.

US West Texas crude futures gained more than 12% on the year, closing above US$60 a
barrel on the final day of trading for the first time since mid-2015.

Preventing further price rises has been US oil production, which has soared more than 16%
since mid-2016 thanks to a rebound in major shale patches in Texas, and is approaching 10
since mid-2016 thanks to a rebound in major shale patches in Texas, and is approaching 10
million barrels per day. Only Opec kingpin Saudi Arabia and Russia produce more.

Liquefied natural gas (LNG) went from loser to winner, in part due to seasonal factors.

Asian spot prices for liquefied natural gas have doubled since June, to the highest level since
late 2014 of more than US$11 per million British thermal units.

Until the last quarter of the year, LNG had been one of 2017’s worst-performing
commodities.

The late rally has been driven by a huge gasification programme in China which this year
alone moved millions of households and industry from coal to gas for heating, just as a
winter bites.

China is making huge investments into renewable power generation.

World solar power capacity has ballooned to around 300 GW from just 1 GW in 2000,
according to International Renewable Energy Agency (Irena) data, a number set to double
by 2020.

Growth is largely driven by China, approaching 100 GW of capacity. Irena says China can
add 50 GW a year of capacity.

Still, coal prices did relatively well in 2017. Australian coal prices rose 10% to over US$100
a tonne, as China ordered the closure of several domestic mines, forcing utilities to import
more.

Raw sugar lost 22%, with the International Sugar Organisation forecasting a global sugar
surplus of 5 million tonnes in 2017/18 compared with a deficit of 3.1 million in 2016/17.

London cocoa ended down 20%, a second successive slump after a 23% fall in 2016, with
prices depressed following a record global surplus in the 2016/17 season.

World corn production has hit a record high for eight of the past 10 years. Soybean
production has climbed to all-time highs in four of the last five years, according to the US
Department of Agriculture. This led to a 5% decline in prices.

Wheat is on track for a modest 5% gain in 2017, after losing ground for four years, as world
supplies of high-protein wheat tighten due to crop losses in the United States and Australia,
in part related to La Nina weather occurrence.
Malaysian palm oil dropped 10% in 2017 with production in South-East Asia outpacing
demand from top importers China and Europe.
demand from top importers China and Europe.

Tokyo rubber has fallen 18% in 2017 after being one of the best performing commodities in
2016. — Reuters

TAGS / KEYWORDS:

Economy , Commodity , China

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