LNG and coal rally to 2021 commodities as markets consider COVID-19 for next step

  • LNG up more than 200%, as coal prices double in 2021
  • Copper added a quarter in 2021, aluminum up 40%
  • Agricultural markets, including vegoil, have grown strongly
  • Raw materials are expected to remain firm in 2022 if COVID-19 tamed

SINGAPORE, Dec.31 (Reuters) – Agricultural commodity, energy and metals prices rebounded strongly in 2021 as electric fuels lead the rally, driven by tight supplies and a strong economic recovery while vaccinations against COVID-19 have prevented widespread blockages.

Global demand for commodities is expected to remain robust in 2022 and support prices as the global economy continues to recover, although similar price increases are unlikely, analysts and traders say.

“2021 has been characterized by a huge rally across the board,” said Jeffrey Halley, senior analyst at brokerage firm OANDA.

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“While I believe commodity prices will remain robust, I believe the rebound in 2020 and the rally in 2021 will be exceptional years and as such I do not anticipate the same level of gains in the year. future.”

Energy and food prices have skyrocketed this year, hitting utilities and consumers from Beijing to Brussels, increasing inflationary pressures.

High prices are encouraging producers to increase production, but some analysts expect supplies for products such as petroleum and liquefied natural gas (LNG) to remain limited, as these projects take years for production. comes online.

Main energy markets in 2021

ENERGY

Record prices for coal and natural gas have led to a severe electricity shortage from Europe to India and China in 2021.

Asian LNG has increased by more than 200%, while benchmark coal prices in Asia have doubled.

“Global demand for LNG grew by 20 million tonnes per year in 2021, with Asia accounting for virtually all of this growth,” said Valery Chow, head of gas and LNG research in Asia at Wood Mackenzie, adding that more than 20% growth in demand from China has made it the world’s largest importer, overtaking Japan.

“However, still high LNG spot prices are expected to start to dampen overall demand growth, especially in the more price sensitive markets of South Asia and South East Asia,” he said. he declared.

Global oil prices have also recovered 50-55% in 2021, with Brent settling at $ 77.78 per barrel and WTI at $ 75.21 per barrel, and are expected to rise further next year as demand for jet fuel will catch up. [nL1N2TG03Y]

In China, coal prices have more than halved from the record high reached in October after major producers and consumers boosted production and contained prices.

METALS

The electricity crisis in China and Europe has hit aluminum production, pushing prices up by more than 40% for a second year of gains. However, it has also affected demand for iron ore as the world’s largest steel producer, China, has cut production.

Iron ore prices, which hit record highs in May, collapsed in the second half of the year amid tight production restrictions in China. Dalian iron ore futures have fallen more than 10% after a massive rally in the past two years. Read more

Base metals are expected to outperform as the energy transition will boost demand, analysts say, while supply chain bottlenecks may persist.

LME copper rose for a third year, up about 25% in 2021.

“Demand for copper is expected to enter its second year of expansion, especially after the recently concluded COP26 demonstrated a growing willingness by governments to prioritize clean energy,” OCBC economist said. Howie Lee.

The main metals markets in China in 2021

RALLY AGRICULTURAL MARKETS

Chicago soybeans rose for the third consecutive year, corn by 22% and wheat by more than 20%.

Supply constraints due to inclement weather and high demand have generally boosted agricultural markets.

Malaysian palm oil and soybean oil both added more than 30%, each rallying for a third year.

Main global agricultural futures markets in 2021

For beverages, arabica coffee rose nearly 80%, bringing gains into a second year and robustas jumped 70%, recouping three years of losses, as supply chain problems escalated the appetite.

Raw sugar rose more than 20%, recovering for a third year, and white sugar posted similar gains, as production fell in the main producing country, Brazil, due to a drought and frosts.

Precious metal prices could cool, dragged down by strong risk appetite in stocks and other markets, analysts said.

Gold was largely unchanged after falling last year and silver is expected to end the year lower after two strong years.

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Reporting by Naveen Thukral and Florence Tan in Singapore; additional reporting by Yuka Obayashi in Tokyo, Enrico Dela Cruz, Manila, Muyu Xu and Emily Chow in Beijing; graphics by Gavin Maguire; edited by Richard Pullin

Our Standards: Thomson Reuters Trust Principles.

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Natalee Broderick

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