Commodity prices show strength in the first quarter
The Bloomberg Commodities Index, which tracks the total return of 24 major futures markets, spread close to evenly between energy, metals, and agriculture, has traded up 12.2 per cent in the past twelve months, with the bulk of that gain being achieved within the last three months. The year-to-date return shows a 7.9 per cent gain, well above the return seen on some of the major equity market indices.
On a sector level, precious and industrial metals stand out, having delivered returns this quarter of 15.2 per cent and 12.5 per cent, respectively, while the 12-month performance is even more impressive at 37.6 per cent and 18.1 per cent. This has been driven by continued haven demand for gold (+14.7 per cent) and silver (+16.7 per cent) amid ongoing demand from investors seeking protection in tangible assets against geopolitical and economic uncertainties, as well as central bank purchases of gold to reduce their dependency on fiat currencies, especially the dollar.
The industrial metals sector shows a clear distinction between New York-traded HG copper and those traded and tracked by futures contracts on the London Metal Exchange. The HG copper contract has surged to a record high on speculation that Trump may implement tariffs on imports within weeks. The premium HG copper trades over London has reached 17 per cent, helping to explain the major contribution of industrial metals to the BCOMTR — a sector that otherwise would struggle amid global growth concerns.
The energy sector has mostly been a story about natural gas strength, with a total return so far this year of around 25.5 per cent, while crude and fuel products have struggled amid a tug-of-war between economic growth concerns impacting demand and the increased threat of sanctions potentially reducing supply from Iran and Venezuela. 'This has, in turn, offset a planned OPEC+ production increase from next month,' Ole Hansen, Head of Commodity Strategy, Saxo Bank, wrote in a report.
Finally, the agriculture sector has delivered a small return of 2.2 per cent, with broad losses across an amply supplied grain and soybean complex partly offsetting gains in softs and livestock. Standout performances have come from Arabica coffee and sugar and, to a certain extent, live cattle.
Looking at the performances and individual weights, it can be seen that gold, copper, and natural gas have delivered close to 75 per cent of the total return, despite the three contracts only carrying a total index weight of 27.5 per cent. 'This highlights the advantage of holding broad exposure to commodities instead of trying to pick individual winners,' Hansen said.
Hansen identifies seven megatrends that are likely to push the commodities market this year upwards:
● Deglobalisation: The US-China rivalry is reshaping supply chains, prioritising security over cost, and increasing demand for critical resources.
● Defence: Rising geopolitical tensions are fuelling record military spending and stockpiling of key materials.
● Decarbonisation and power demand: Investments in renewables, EVs, AI, and data centers are driving demand for metals and energy.
● De-dollarisation: A shift from US dollar reliance is boosting gold purchases as a financial hedge.
● Debt and fiscal risks: High global debt and deficits are increasing demand for hard assets like gold and silver.
● Demographics & urbanisation: Ageing Western populations and growing emerging economies are driving resource demand.
● Climate change: Higher power needs for cooling, food security concerns, and protectionism
'So far this millennium, we have witnessed three major commodities bull cycles, the biggest being the China-led rally from 2002 to 2008, followed by the pandemic- and Ukraine war-led spike between 2020 and 2022. In the past three years, the index has traded mostly sideways before making a renewed upside attempt within the past couple of months,' Hansen said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Khaleej Times
an hour ago
- Khaleej Times
Industrial pruning won't pull China out of deflation as quickly as last time
China's hardened rhetoric against price wars among producers is raising expectations Beijing may be about to kick off industrial capacity cuts in a long-awaited, but challenging, campaign against deflation that carries risks to economic growth. Communist Party leaders pledged this month to step up regulation of aggressive price-cutting, with state media running its harshest warnings yet against what it describes as a form of industrial competition that damages the economy. These signals echo Beijing's supply-side reforms a decade ago to reduce the production of steel, cement, glass and coal, which were crucial to ending a period of 54 consecutive months of falling factory gate prices. This time, however, the fight against deflation will be much more complicated and poses risks to employment and growth, economists say. The trade war with the U.S. meanwhile is intensifying price wars, squeezing factory profits. Challenges Beijing didn't face last decade include high private ownership, misaligned incentives at local and national level, and limited stimulus options in other economic sectors to absorb the job losses resulting from any capacity cuts. Beijing sees employment as key to social stability. Exporters and even the state sector are already shedding jobs and cutting wages, while youth unemployment runs at 14.5%. "This round of supply-side reform is far, far more difficult than the one in 2015," said He-Ling Shi, economics professor at Monash University in Melbourne. "The likelihood of failure is very high and if it does fail, it would mean that China's overall economic growth rate will decline." Economists expect that any efforts by Beijing to reduce capacity will be undertaken in small, cautious, steps, with officials - keen to achieve annual economic growth of roughly 5% - keeping a close eye on spillover effects. An expected end-July meeting of the Politburo, a decision-making body of the Party, might issue more industry guidelines, although the conclave rarely delivers a detailed implementation roadmap. Analysts expect Beijing to first target the high-end industries that it once billed as the "new three" growth drivers, but which state media now singles out for fighting price wars: autos, batteries and solar panels. Their expansion accelerated in the 2020s as China redirected resources from the crisis-hit property sector to advanced manufacturing to move the world's No.2 economy up the value-chain. But China's industrial complex, a third of global manufacturing, looks bloated across the board. Most sectors have capacity utilisation rates below the 80% "healthy" level, Societe Generale analysts said, blaming weak domestic demand and an investment-driven growth model that favours producers over consumers. U.S. and EU officials have repeatedly complained that this model is flooding global markets with cheap goods made in China and endangers their domestic industries. A foreign chemicals company manager surnamed Jiang, who asked for partial anonymity to discuss the industry, said overcapacity in her sector was evident as early as 2023, yet firms continue to expand. "If money is cheap and abundant, any company thinks it won't go bankrupt and can crush competitors to death," Jiang said. Local incentives For all the state support manufacturers receive, most are privately owned, unlike the raw material producers Beijing trimmed last decade, largely through blunt administrative orders. Reducing capacity now requires a less predictable process of curbing subsidies, cheap land supply, preferential loans or tax rebates, then letting markets pick winners and losers. But the local officials who would have to implement this have the opposite incentive: developing industry champions that draw supply chain investments and employment to their region. "Local governments, in their efforts to transform the local economy, encouraged firms to invest in these new sectors," like solar or batteries, a policy adviser said on condition of anonymity due to the topic's sensitivity. "There's nothing inherently wrong with transformation and upgrading, but the problem is that everyone is targeting the same few sectors," said the adviser, adding that the U.S. trade war has exposed such industries as being "too big." Yan Se, deputy director of the Institute of Economic Policy at Peking University, said local government resistance would turn "important and necessary" capacity cuts into a long-term, gradual process that won't end deflationary pressure on its own. Stimulating demand would work better, Yan told a conference last week. Forver blowing bubbles Producer prices dropped for the 33rd month in June. China faces a painful trade-off between a deeper and shorter stretch of price falls as output cuts trigger job losses and a longer run of overcapacity and deflation that delays the blow to employment, economists say. Macquarie estimates last decade's reforms chopped tens of millions of jobs. But an ambitious project to redevelop shanty-towns across China, estimated by Morgan Stanley at 10 trillion yuan ($1.4 trillion), offered displaced workers new ones. Manufacturing is now much less labour intensive. Still, jobs will be lost, and "there's no way" other economic sectors, also facing weak consumer demand, can absorb the shock, said Monash University's Shi. In another echo from last decade, high-level talk of urban redevelopment re-emerged last week. But any new investment in that area would likely be too small to compensate for lost industrial activity and jobs. "I don't think we can expect real estate to digest job losses from supply-side reforms anymore," said John Lam, head of Greater China property research at UBS.
Zawya
2 hours ago
- Zawya
Egypt: SCZone launches 1st roadshow for FY2025/26 in China to attract major investments
Arab Finance: The General Authority of the Suez Canal Economic Zone (SCZone) has launched its first roadshow for fiscal year (FY) 2025/2026 in China to promote opportunities and attract Chinese investments in Egypt, according to a statement. The authority mainly aims to draw in investments in the fields of textiles, ready-made garments, automotive, ports, and logistics services. During his tour, Waleid Gamal El-Dien, the Chairman of the SCZone, discussed Hong Kong-based Crystal International's plans to establish a textile factory on an area of 1.5 million square meters in the Qantara West zone, with expected investments ranging between $250 and $300 million. The project is expected to offer job opportunities for 30,000-35,000 people. The Chairman also inspected the Shenzhen Qianhai Exhibition Hall, hosted by the Qianhai Authority, to review the development projects in the Qianhai Special Economic Zone, which include industrial, logistics, and port-related activities. He also visited the Yantian International Container Terminals, which is managed by the global operator Hutchison, the same operator of the Sokhna Port Container Terminal. The terminal boasts a 1,200-meter quay length and a yard area of 720,000 square meters, with an investment cost of $250 million. It is expected to open soon. The first day of the SCZone delegation's tour of Shenzhen concluded with a visit to BYD's headquarters, where they learned about the company's leading products in the electric vehicle (EV) industry. BYD also specializes in the manufacture of electric car batteries, storage batteries, and solar panels. Moreover, Gamal El-Dien met with the company's officials to discuss its presence in the SCZone as a gateway to reach African and Middle Eastern markets. He emphasized that the company's investment in the zone will strengthen the establishment of a major industrial base, including the manufacture of EVs, electric car batteries, and solar panels. © 2020-2023 Arab Finance For Information Technology. All Rights Reserved. Provided by SyndiGate Media Inc. (
Broadcast Pro
2 hours ago
- Broadcast Pro
York Space Systems to acquire ATLAS Space Operations
Acquisition will strengthen York's position as a fully integrated space solutions provider for national security and commercial missions. York Space Systems, a US-based defence technology company known for redefining how space-based capabilities are built and operated, has announced its agreement to acquire ATLAS Space Operations. A Ground Software as a Service (GSaaS) provider, ATLAS is expected to significantly enhance Yorks software-driven approach to satellite communications and ground systems. With this acquisition, York gains access to a software-led ground architecture designed to streamline satellite operations, eliminate integration barriers, and improve space-to-ground resiliency. The deal is set to accelerate Yorks mission of delivering secure, high-performance space systems with greater speed and efficiency. ATLAS will play a critical role in supporting Yorks Golden Dome architecture, an advanced defense platform integrating spacecraft, software, and ground operations to offer comprehensive capabilities in contested space environments. ATLAS, which was founded in 2015, will continue to operate independently under its established brand. Its Freedom software platform, which provides cloud-native satellite connectivity through a single API and a global network of more than 50 antennas in over 20 countries, is the only GSaaS solution developed and based in the US. The platform shifts the burden of satellite communications from hardware to software, allowing for real-time tasking, automated scheduling, and cloud delivery of mission data, resulting in a cost-effective, scalable, and flexible solution for both government and commercial clients. Dirk Wallinger, CEO of York, said: 'ATLAS has built one of the most sophisticated and secure ground communications platforms in the industry. This acquisition will enhance York's ability to deliver mission-ready systems on the timelines our customers demand while continuing to support the broader space ecosystem with best-in-class ground solutions.' The Freedom platform enables operatorswhether managing a single satellite or a vast constellationto onboard quickly, stream data to the cloud, and access a global infrastructure without the need for additional physical buildout. Corey Geer, CEO of ATLAS, added: 'York shares our vision for a future where space systems are faster, smarter, and seamlessly integrated. Together, we are building the infrastructure to meet that future head-on, reducing risk, increasing resilience, and enabling critical data delivery on demand.' Pending regulatory approvals including from the FCC, the acquisition is expected to significantly strengthen Yorks ability to deliver integrated, mission-ready space systems by combining its high-performance spacecraft and software-defined operations with ATLASs trusted ground communications capabilities. The result will be faster deployment, improved data throughput, and more autonomous, resilient operations supporting both commercial ventures and national security missions.
