Since the global energy crisis triggered by the Russia-Ukraine war has spurred a huge spike in prices, the coal and natural gas markets were poised to lead the commodities rally in 2022, completing the year with strong gains.
Industrial metals, iron ore, and rubber, on the other hand, are expected to end the year in the red due to China’s zero-Covid policy and global recessionary concerns.
“Despite the recent price declines, commodities will still likely finish the year as the best performing asset class,” Goldman Sachs said in its 2023 commodity outlook.
“From a fundamental perspective, the setup for most commodities next year is more bullish than it has been at any point since we first highlighted the super-cycle in October 2020,” it added.
Newcastle coal futures have risen by about 140% in 2022, the largest increase since 2008. US gas futures and Dutch wholesale gas prices have climbed by more than 20% for the third year in a row. This was due to Europe continuing to import LNG to refill gas inventories next winter. Gas prices are projected to stay high due to little new supply coming on-stream.
The removal of China’s stringent pandemic restrictions could potentially boost economic recovery and LNG demand next year.
However, beginning in February, a European cap on gas prices could help keep the market under control and lessen the volatility shown this year.
