SMU Analysis: Commodities Prices Mixed

Commodities prices are a mixed bag. The price of iron ore is falling, but zinc is at a 10-year high. In this report, we examine the latest prices for iron ore, scrap, coking coal and zinc.

On Oct. 25, commodities analyst Andrew Hecht wrote: “President Xi is likely to consolidate his power and take greater control of the Chinese nation, but the path will continue to be slow and steady when it comes to economic growth. The rallies in many industrial commodities based on optimism about the Party Congress could eventually turn to disappointment as China is never in a hurry, and in the great race to the top they are the tortoise rather than the hare. I expect industrial commodities prices to follow the path of the U.S. dollar over the coming months, and it is possible that recent rallies could turn into corrections for the balance of 2017. However, I expect higher lows as the demand side of the equation for raw materials continues to grow and an ever-increasing world population will compete for finite commodities. While raw materials prices rallied on optimism surrounding Chinese growth, the rate and slow pace of initiatives that have worked for decades may not be enough to support price acceleration from current levels in many of the raw material markets over the coming weeks and perhaps months. I am cautiously bullish on commodities prices, but for the rest of the year the path of least resistance for the U.S. dollar is likely to be the chief determinate of price direction for the raw materials asset class.”