Commodity Market Outlook Q3 2024

An improving supply outlook and muted demand have eased pressures in the commodity markets. In 2024, weaker manufacturing activity in key markets is set to limit price growth for energy and metals, while robust crop forecasts should curb agrifood price increases. That said, disinflation and monetary easing are likely to support private consumption and business activity, going forward, adding upward pressure to commodity markets, while geopolitical and weather shocks may add volatility.

Demand concerns weigh on the global oil market

Crude oil prices have softened since July, driven by mounting concerns over the global demand. A significant slowdown in Chinese oil consumption remains a focal point, as a prolonged real estate crisis, weak consumption, and declining manufacturing activity have weighed heavily on the world’s biggest oil importer.

China’s factory activity has remained in contraction for three consecutive months, as of July

^{Source: Euromonitor International from national statistics}

On the supply side, non-OPEC+ countries like the US, Guyana, Brazil and Canada are expected to drive up global production. Moreover, OPEC+ plans to gradually unwind voluntary production cuts, starting in October 2024. If implemented, the resulting increase in global output could potentially deepen the supply-demand imbalance, putting downward pressure on prices. Geopolitical risks, particularly in the Middle East, remain a significant factor that could introduce further volatility to the oil market.

Natural gas prices have been trending downward, supported by robust supplies and softer demand. In the US, comfortable storage levels and reduced concerns over cooling demand have kept prices on a declining path. The shutdown of the Freeport LNG terminal has helped to leave more gas in the domestic market. In Europe, gas prices have eased as the EU reached its 90% storage target for the upcoming winter season well ahead of schedule. Strong inventories, coupled with weak manufacturing activity and the bloc’s push for energy efficiency and renewable adoption, are expected to continue easing price pressures. However, potential supply disruptions due to maintenance or geopolitical tensions could still lead to volatility in the natural gas markets.

Improving agricultural output outlook alleviates price pressures

Production of key agricultural commodities such as wheat, corn, rice, and soybeans is forecast to be strong in 2024 and 2025, supported by favourable growing conditions and improved productivity. For instance, higher wheat output in the US, Australia, China, Kazakhstan, India and Canada is anticipated to offset weaker production in Russia and Europe. Meanwhile, global rice production is projected to reach record levels, driven by expanded acreage, adequate rainfall and higher yields. With rice inventories at a record high in India, the country plans to ease some of its export restrictions, which could further lower prices.

As the El Niño weather pattern transitions into La Niña, the resulting shifts in weather conditions are likely to impact the performance of grains, oilseeds, and other food commodities. For instance, increased rainfall in Southeast Asia is expected to improve the outlook for rice, sugar, and food oils. Similarly, cocoa prices have eased as La Niña is anticipated to support better crops in West Africa. In contrast, the transition may exacerbate dry conditions in Latin America, negatively affecting crops and yields for commodities such as soybeans, maize and sugarcane. Additionally, La Niña could intensify extreme weather events such as flooding, drought and heatwaves, and hurricanes across key producing regions, adding a layer of uncertainty to the agrifood market outlook.

Metal prices dip amid disappointing economic performance and improved supply

Prices of key industrial metals dipped in Q2 2024 with similar trends expected to prevail by Q4 2024.

Sustained demand weakness in China and lack of broader stimulus measures for the economy largely contributed to the declining metal prices

^{Source: Euromonitor International} 

At the same time, improved supply further eroded prices. For example, China boosted aluminium output while Indonesia delayed its plans to ban copper exports until the end of 2024, easing the fears of potential copper shortages.

Anticipated interest rate cuts in the US and the Eurozone are expected to stimulate economic growth and support the manufacturing sector’s demand for metals towards the end of the year. Recovering industrial output in South Korea and Japan are also set to add to the growing demand. However, these positive developments are likely to have minimal effect on metal prices throughout 2024 as improved supply and stocked warehouses will continue to cap larger price increases.

Despite the stable price outlook, geopolitical tensions and trade disruptions are among the key risks for price stability. In July 2024, the US announced new rules for aluminium and steel imports from Mexico, as Chinese companies rerouted trade to avoid tariffs. Under the new rules, steel shipped through Mexico will be subject to a 25% tariff and aluminium to a 10% tariff. These changes can impact the global market and trade of metals and cause more price volatility in the short term, as companies will need to reroute some of the shipments.

Learn more about the global commodities market outlook in our annual report, Global Trends in Commodities Market. And check out our recent article, Global Economic Outlook: Q3 2024, to understand how global economic developments may influence commodities’ market dynamics.