- Cocoa prices rose by 72% and reached multi-decade highs, while iron ore rose by 55% due to China’s measures in the property sector.
- Natural gas and coal prices fell sharply in 2023, as did Brent and WTI crude oil futures prices, which fell by 7% due to geopolitical events and lower demand.
- Unfavourable weather conditions affected global rice, coffee and sugar production and led to supply bottlenecks.
The year 2023 was characterised by dynamic changes in the global commodity market, with notable highs and lows in various sectors. When we review the past year, several key themes emerge that characterise the development of cocoa and iron ore, the dynamics of the energy markets and the robust performance of agricultural products.
Cocoa and iron ore: new highs
Cocoa prices rose by an impressive 72% and reached multi-decade highs due to limited supply. At the same time, iron ore recorded a significant increase of almost 55%, driven by China’s strategic measures to strengthen its property sector. These developments marked outstanding achievements in the commodity landscape.
Energy prices in flux: tumult and trends
Natural gas and coal prices, on the other hand, have declined from their record highs in 2022. The decline was attributed to increased supply and reduced demand following Russia’s invasion of Ukraine. Brent and West Texas Intermediate (WTI) crude oil futures in particular saw a 7% decline, a notable development despite record global demand for oil and OPEC+ supply cuts.
Agricultural products shine amid challenges
The agricultural sector experienced challenges and triumphs in 2023. New York cocoa futures reached a 46-year high, fuelled by a poor harvest in West Africa. At the same time, unfavourable weather conditions attributed to El Niño affected global rice, coffee and sugar production, causing prices to rise. Wheat, corn and soya beans suffered losses, but the vulnerability to external factors such as El Niño, export restrictions and biofuel mandates remained.
Shocks to the food supply: Responding to market dynamics
The rice market experienced supply shortages, prompting India, a global supplier, to restrict its exports. This move drove rice prices to a 15-year high and contributed to global pressure on food inflation. Coffee prices experienced a significant upswing, with robustas rising by almost 60%. In India, sugar production is expected to fall short of consumption for the first time in seven years, which could turn the country into a net importer.
Precious metals as safe havens in uncertain times
Gold proved to be a safe haven and enjoyed its best year in three years, reaching an all-time high of over USD 2,100. Citi expects gold and silver prices to continue to rise until mid-2024, reflecting strong demand as investors seek a hedge against equity and property risk in the developed world.
Mixed outlook for industrial metals: navigating surpluses
The outlook for industrial metals was mixed in 2023, with nickel being the biggest loser with a decline of over 40 %. Nickel prices are likely to remain under pressure in 2024 due to higher supply in the main producing countries of Indonesia and China, as the metal used in stainless steel and electric vehicle batteries is in abundant supply globally.
Analysts’ forecasts for 2024: navigating the uncertainty
Market analysts, including Macquarie and S&P Global Commodity Insights, expect commodity prices to remain weak in 2024. Macquarie highlights concerns over faltering economic growth in the US, while S&P Global Commodity Insights forecasts record crude oil and liquid commodity production in the US, Brazil and Canada.
To summarise, the global commodity market in 2023 has shown a fascinating interplay of upswings, downturns and resilience in various sectors. As we head into 2024, it remains important to manage uncertainty. Analysts are closely monitoring the economic indicators and global developments that will shape the commodities landscape in the coming months.