The 5-year official forecasts for commodity prices reveal some surprising winners and losers
2 min
The Department of Industry and Resources has released its official five-year forecasts for commodity prices, with the iron ore price expected to trade more than 25 percent lower than where it is today in FY29. Meantime, copper, nickel and uranium prices are expected to rise materially as the world decarbonises and embraces greater electrification and nuclear energy.
Mining stocks comprise a huge proportion of the ASX, and commodity prices directly affect share prices and company earnings. Therefore, these official price forecasts can provide valuable insights for shareholders of major miners like BHP, Rio Tinto, Fortescue, Mineral Resources and South32.
Australian resource and energy export earnings are forecast to be $417 billion in FY24. This is about 10 percent lower than the record $466 billion in exports last year. Those record exports were largely the result of a spike in energy prices as Western countries sought to avoid Russian oil and gas. Export earnings are expected to fall to about $369 billion in FY25 due to falling commodity prices, primarily energy prices, and a rising AU/US dollar. Exports would then level out through to FY29.
Iron ore is expected to remain Australia’s biggest earner among all our resource and energy exports, followed by liquified natural gas (LNG), other metals, metallurgical coal, thermal coal, base metals, and gold. The iron ore price closed 1.5 percent higher overnight at US$104 per tonne. It’s fallen 10.5 percent over the past month due to weaker Chinese demand. The department is forecasting an average price of US$103 per tonne in FY24. By FY29, the average is expected to have fallen to US$75 per tonne.
LNG prices are expected to fall from an average of AU$17 per gigajoule this financial year to AU$12 per gigajoule in FY29. Metallurgical coal will fall from US$289 per tonne in FY24 to US$207 per tonne in FY29. Thermal coal will drop from US$135 per tonne in FY24 to US$115 per tonne in FY29.
The oversupply of lithium seen last year as global production ramped up while demand fell amid fewer people buying electric vehicles (EVs) is set to continue to weaken lithium commodity prices. Some Australian lithium miners, such as IGO and Core Lithium, have suspended some of their operations after lithium prices plummeted in 2023. The department expects an average price of US$1,800 per tonne this year, falling to an average of US$1,231 per tonne in FY29.
Some particular metals are expected to soar in value due to the green energy transition. The average price of copper, which is essential for electrification and used in solar panels, wind turbines and EVs, is expected to be about US$8,258 per tonne this financial year. By FY29, the department expects copper to be trading above US$10,000 per tonne.
The nickel price has fallen dramatically in recent times, largely due to much new supply generated in Indonesia by Chinese-backed operators. The nickel price has dropped from an average price of US$23,911 in FY23 to US$16,845 today. The Federal Government recently added nickel to its Critical Minerals List to give Australian producers access to funding for support. The resources department expects the nickel price to recover somewhat to an average price of US$20,950 in FY29.
Another commodity expected to rise significantly in value over the outlook period is uranium. Many countries are embracing nuclear energy and building small modular nuclear reactors (SMRs) to support domestic energy needs. The uranium price leapt from an average US$51 per pound in FY23 to a 16-year high of US$106 per pound in February. The department anticipates an average price of US$85 per pound for FY24, rising to US$119 per pound in FY29.
“While global prices are easing, the [forecast] shows demand is likely to be sustained for commodities used in low emissions technologies, including iron ore, copper, aluminium and lithium,” said Resources Minister Madeleine King. The department noted that Chinese demand will continue to heavily influence commodity prices, however, India is now experiencing the world’s strongest economic growth and its expanding manufacturing sector will mean higher demand for resources.
Article originally published on Kanebridge News Australia
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Investors normally don’t talk about the risks of a bubble forming in the asset that they’re buying to hedge against a different bubble, but gold’s extraordinary surge is starting to trigger uncomfortable conversations about the yellow metal’s bullish prospects.
Gold prices have gained more than 55% this year, blowing past the $3,000 an ounce mark in early spring and topping the $4,000 threshold for the first time on record last month. Gold was up another 3.3% to $4,108.60 in Monday trading, a new record high.
Myriad reasons have been cited for the surge, including the slumping U.S. dollar, soaring tech stocks that have concentrated broader market risks into a handful of megacap tech names, purchases by central banks seeking to diversify away from the dollar, and renewed inflation risks tied to ongoing tariff and trade disputes.
Central bank buying has also been significant, with China alone adding 39.2 tons to its overall holdings since it returned to the market in November of last year.
“Central banks’ appetite for gold is driven by concerns from countries about Russian-style sanctions on their foreign assets in the wake of decisions made by the U.S. and Europe to freeze Russian assets, as well as shifting strategies on currency reserves,” said ING commodities strategist Ewa Manthey.
“The pace of buying by central banks doubled following Russia’s invasion of Ukraine in 2022.”
Gold-backed ETFs , meanwhile, are attracting billions in new investments, with overall additions likely to have topped 100 tons over the three months ending in September. That’s more than triple the quarterly average over the past eight years.
The combination of forces is likely to drive more gains for gold in the months ahead, according to Société Générale’s commodity research team, headed by Mike Haigh.
“Gold’s ascent to $5000 seems increasingly inevitable,” Haigh wrote in a note published Monday, citing both strong ETF flows and renewed central bank purchases.
Haigh also notes that ETF flows are tracking a rise in SocGen’s U.S. uncertainty index, which is now pegged at more than three times the level it reached over the five months before last year’s presidential election win for President Donald Trump.
“We cannot imagine a situation where we return to pre-Trump index uncertainty normalcy over our forecast horizon, so ETF flows are a key component to our price forecasting,” Haigh said. His $500o price target is pegged for the end of 2026.
Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, has a different take, tied in part to what she sees as a way for governments to “challenge the dollar’s stranglehold on global money movements.”
Gold holdings, Shalett argues, can “improve collateralisation of their fiat currencies and/or cryptocurrencies in a world where currency markets undefined may be remade by digital assets, cryptocurrencies, and stablecoins.”
The gold market’s mimicry of previous historic booms, however, has caught the attention of Bank of America analyst Paul Ciana, who cautioned in a note published last week that “prices have tended to pivot near round-number levels.”
Citing data showing “midway corrections” in long term bull markets for gold, Ciana sees the chances for a near-term pullback that “rhymes” with pullbacks of around 40% in the mid-1970s and 25% following the global financial crisis in 2008.
“This boom is about 10 years old, smaller in size than the 1970s and 2000s boom but nearly as old,” Ciana wrote. “This warrants caution into round number resistance at $4,000, or again later at $5,000.”
Gold isn’t likely a bubble. It’s hard for central banks to sell, and many of the countries encouraging its import, like China and India, also make it difficult for investors to move offshore.
But gold did lose around 60% of its value in the two decades that followed its 1970s boom, with bear markets following in 2008 and 2015.
This year’s really is still going strong, of course, but with gold’s advance tied to nearly all of the concerns currently gripping financial markets, maybe it’s worth asking if it’s being “all things to all people” is the best kind of hedge—or just another risky bet on rising prices.
