DUBLIN--(BUSINESS WIRE)--The "World Commodity Forecasts Industrial Raw Materials" report has been added to ResearchAndMarkets.com's offering.
The industrial raw materials (IRM) price index is expected to contract by 2.9% in 2019, reflecting a fall in base metal and crude oil prices. Although global economic growth remains firm, key economies-primarily China-have begun to show signs of softening, and the US-China trade war threatens to weigh on industrial activity and goods trade in both countries. As a result, we now expect IRM price growth of 2.2% in 2018-down from our previous estimate of 2.5% growth, as the escalating US-China trade war has sent some base metal prices sliding.
Although the imposition of blanket tariffs on imports of steel (25%) and aluminium (10%) by the US president, Donald Trump, will cause the prices of these metals to rise in US markets, we do not expect this to be replicated elsewhere, including in Europe, where most of our price series are based. Significantly, we expect the tariffs to cause metal prices to diverge in the US (where supply shortages and higher import costs will push prices up slightly) and elsewhere (as extra supplies, which would otherwise have gone to the US, will push prices down slightly).
The base metals sub-index is now expected to fall by 3.6% year on year in 2019, as economic headwinds created by trade tensions weigh on activity in the industrial sector. Although some markets have tightened, others, such as steel, are still plagued by oversupply. Production capacity-bolstered by a surge in investment during a decade-long boom in prices in the 2000s-still exceeds demand.
Moreover, Chinese producers may look to export a larger percentage of their commodities output as domestic consumption slows (albeit modestly), which will put pressure on global prices. IRM prices are now expected to rise by 3% in 2020 as falling stockpiles push up prices despite economic growth moderating in major developed markets. We expect the US economy to enter a brief cyclical downturn in 2020, which will reduce demand for industrial materials.
Average prices in our base metals sub-index rose sharply in the first half of 2018, buoyed by strong economic data in the US and a shift in the Chinese government's strategy to focus on supporting robust GDP growth over debt reduction. However, metal prices sagged in the latter half of the year, as it became clear that the US and China would enter into a full-blown trade war. We do not expect prices to recover to their early-2018 highs over the remainder of 2019 as the trade war weighs on business sentiment, particularly in transport, manufacturing and construction.
However, policy-led decisions to rein in the supply of some metals in China, together with continued demand from key emerging sectors-including electric vehicles-will help to keep a floor under base metal prices in 2019. In 2020 we expect prices to return to growth as weaker GDP growth in both the US and China-partially as a result of the trade war but also because of domestic factors in each economy-reduces demand.
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