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How 14 commodities will perform in next two years

Last updated on: January 29, 2013 08:04 IST

How 14 commodities will perform in next two years

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Despite recent hiccups in gold prices, if you're investing in commodities, it is still the best, safest bet, according to Morgan Stanley's commodities team led by Hussein Allidina, according to Business Insider.

Let's take a look at some commodities and see how they are expected to perform in the next two years.

Source: Business Insider

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Image: A woman shops for apples at a farmer's market in Union Square in New York.
Photographs: Andrew Burton/Reuters

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Crude oil

Projected average in 2013: $110/bbl

Projected price in 2014: N/A

Demand for crude oil isn't likely to grow much this year, just 0.9 per cent, which means that simply maintaining 2012 levels of production will be enough to keep the market in balance, and the price of oil stable.

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Image: An drilling platform from state oil company Petroleos Mexicanos off the port of Veracruz, Mexico.
Photographs: Yahir Ceballos/Reuters
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Natural gas

Projected average in 2013: $3.50/mmBtu

Projected price in 2014: N/A

A relatively mild winter which resulted in reduced demands has increased the gas inventories. Prices will remain depressed through the first half of 2013, but should improve a bit later in the year.

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Image: A worker carries out a routine check in a natural gas control centre of Turkey's Petroleum and Pipeline Corporation, 35km west of Ankara.
Photographs: Umit Bektas/Reuters
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Aluminium

Projected average in 2013: $2,300/metric tonne

Projected price in 2014: $2,300/metric tonne

High global stores of the metal combined with high production capacity means that aluminium prices will likely remain depressed.

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Image: Aluminium wheels at a scrapyard in Hamburg, Germany.
Photographs: Fabian Bimmer/Reuters
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Copper

Projected average in 2013: $8,600/metric tonne

Projected price in 2014: $8,200/metric tonne

Supply growth will remain constrained over the next five years. And while the demand for the metal in China has been contracting in the past, this will likely reverse as China's power infrastructure and auto market are stabilising.

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Image: New York state quarter, one of 50 state copper quarters being issued by the US Mint.
Photographs: Handout/Reuters
Tags: China

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Nickel

Projected average in 2013: $18,300/metric tonne

Projected price in 2014: $19,800/metric tonne

The laggard of London Metal Exchange metals, nickel recently dropped to mid-2009 lows, due to poor demand and mounting oversupply.

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Image: Excavators at a nickel-mining area on the hill of Pomala village in Southeast Sulawesi province, Indonesia.
Photographs: Yusuf Ahmad/Reuters

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Zinc

Projected average in 2013: $2,200/metric tonne

Projected price in 2014: $2,300/metric tonne

In 2012, the supply of zinc declined faster than consumption, thanks to a sharp drop in production in China. This an encouraging trend, as the metal has been in over supply since the financial crisis.

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Image: A mining engineer examines a mineralized ore containing copper and zinc in Lafayette Mining's open pit at Rapu Rapu island in the Philippines.
Photographs: Erik de Castro/Reuters
Tags: , China

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Gold

Projected average in 2013: $1,853/oz

Projected price in 2014: $1,800/oz

The third round of quantitative easing from the Fed, combined with the ECB's unlimited bond purchase programme has been good for gold prices. However, the demand for gold is unusually low, with 2012 gold sales at their lowest level in all three years of the current Central Bank Gold Agreement. This lowered demand will likely temper prices.

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Image: A customer tries on a gold necklace at a shop in Hanoi, Vietnam.
Photographs: Nguyen Huy Kham/Reuters

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Silver

Projected average in 2013: $35/oz

Projected price in 2014: $35/oz

Silver could outperform gold on a relative price basis, as it has a cheaper entry point. While silver had been underperforming as investors steered to gold thanks to uncertainty over global macroeconomic policy, it started to rally when speculation over QE 3 emerged in September.

This is a trend that will likely continue, as supply and demand fundamentals remain favourable.

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Image: A worker at the Austrian Mint holds a tray of silver Vienna Philharmonic Bullion coins at the Mint's headquarters in Vienna, Austria.
Photographs: Leonhard Foeger/Reuters
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Platinum

Projected average in 2013: $1,715

Projected price in 2014: $1,785

South African supply issues have helped rid the market of any surplus, and industrial demand remains firm, both of which are boosting the price of this precious metal.

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Image: An employee sets out and sorts ingots of 99.97 per cent pure platinum at the Krastsvetmet nonferrous metals plant in Russia's Siberian city of Krasnoyarsk.
Photographs: Ilya Naymushin/Reuters
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Cotton

Projected average in 2013: 80¢/lb

Projected price in 2014: $1,785

With China purchasing more and more cotton to add to their reserves, it is likely that at least half the global stocks of the fiber will be locked up there. Morgan Stanley remains bullish on cotton, unless a global GDP slowdown lowers demand.

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Image: A cotton picker works in a field in Hami, northwest China's Xinjiang Uygur autonomous region.
Photographs: China Daily/Reuters

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Sugar

Projected average in 2013: 19¢/lb

Projected price in 2014: 20¢/lb

A global surplus of sugar, thanks to larger-than-expected production in Brazil and healthy production in India, will likely cause prices to remain depressed for a while.

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Image: A 64-ounce drink is displayed alongside other soft drink cup sizes in New York.
Photographs: Andrew Burton/Reuters
Tags: , Brazil , India

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Corn

Projected average in 2013: $7.85/bu

Projected price in 2014: $5.90/bu

Global stores of corn remain precariously low, and US demand has not been adequately rationed, which is why Morgan Stanley is bullish on corn for the short term.

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Image: Harvesters chop corn at Sunburst Dairy in Belleville, Wisconsin, United States.
Photographs: Darren Hauck/Reuters

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Soybean

Projected average in 2013: $15.70/bu

Projected price in 2014: $14.50/bu

Strong US demand and recent supply shortages in South America will cause Soybean prices to remain elevated and volatile.

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Image: A worker drives a tractor pulling a sowing machine to plant soybeans in Estacion Islas, Buenos Aires, Argentina.
Photographs: Enrique Marcarian/Reuters
Tags: , South America , US

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Wheat

Projected average in 2013: $8.30/bu

Projected price in 2014: $7.30/bu

Wheat prices will remain sensitive to possible supply challenges in the US, but the fact that it's more expensive that corn will likely temper demand.


Image: A combine harvester is used to harvest wheat in General Belgrano, 160km west of Buenos Aires, Argentina.
Photographs: Enrique Marcarian/Reuters
Tags: US

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