Prices of industrial commodities remain strong in Q3 2017

Prices of industrial commodities continued to strengthen in Q3 2017, while most agricultural prices remained broadly stable, according to the World Bank.

"Non-energy commodity prices rose over 2 percent in the third quarter of 2017 with large variations among major groups. Metals prices surged by 10 percent in the third quarter due to strong demand, particularly in China," the World Bank said in its October Commodity Markets Outlook.

"Precious metals prices moved up 1 percent as a result of solid investment demand and a weaker dollar. Agricultural prices declined nearly 1 percent, continuing a trend of weakness that began earlier in the year. Food prices dropped 1 percent, reflecting softer prices for maize, rice, and other food items such as sugar. Oils and meals bucked the trend by gaining 1 percent on the back of strengthening soybean prices due to a smaller than-expected North America crop. Beverage prices increased modestly due to an advance in coffee prices. Raw materials prices slipped marginally."

Metals prices are projected to ease slightly in 2018 following a projected 22 percent rise this year, added the report, noting that a 10 percent fall in iron ore prices is anticipated to be offset by increases in all base metals prices, particularly due to mine supply tightness in lead (China), nickel (Australia), and zinc (Australia and the U.S.).

Upside risks to price forecasts include stronger-than-projected global demand and production shortages. Downside risks include slower-than-anticipated demand from China and greater-than-expected production including the restart of idled capacity and an easing of production restrictions in China, said the report.

The document expects precious metals prices to decline 1 percent in 2017 as expected hikes in interest rates materialise, but "with some divergence among categories."

Gold prices are projected to drop 1 percent on expected higher U.S. interest rates, according to the report, which added that silver prices are seen slipping slightly as well. Platinum is forecast to strengthen 4 percent on advancing catalyst demand and tightening mine supply.

Agricultural prices are forecast to recede modestly in 2017 but largely stabilise in 2018. Grain prices are projected to remain broadly stable in 2017 but are anticipated to increase 1 percent in 2018 because of a projected tightness in maize supplies. Oils and meals are seen following a similar path to grains because of supply tightness in the soybean market.

Beverage prices, which are expected to tumble almost 8 percent in 2017, will climb only marginally in 2018 because of tightening coffee (Robusta) supplies. Raw materials prices, which are forecast to move up more than 2 percent in 2017, are projected to tick up even more in 2018 due to tight supplies of natural rubber. Overall, the agricultural price outlook is unrevised from April 2017.

Disruptive weather at a global level is not expected during the current season, according to the report. "Fears of a La Ni?a cycle have not materialized. Thus far, subsidies to crop producers facing lower prices have been isolated events and have not skewed global prices. The large growth of biofuel production during the boom years (2005-11), which had a major effect on prices, is projected to slow.

The Commodity Markets Outlook is published twice a year, in April and October. The report provides detailed market analysis for major commodity groups, including energy, agriculture, fertilizers, metals, and precious metals.