Program & Batch:

PGDM (2015 17)

Term:

Term II

Course Name:

Macroeconomics

Name of the faculty:

Prof. Manas Paul

Topic/ Title :

Global Commodities Market (Base/ Industrial/ Precious

Metals Market)

Original or Revised
Write-up:

Original

Group Number:

Group 9

Section Name:

Section A

Contact No. and email of Group

Coordinator:
Group Members:

7065565571 Saurabh Kumar Singh

Sl.

Roll No.

Name

150103154

Saurabh Kumar Singh

150102017

Ankit Goyal

150103066

Harmandeep Singh Vohra

150102105

Tejas Shah

150102057

Mounica Reddy Chereddy P

150103168

Shyani Ghoshal Chaudhuri

150101064

Lakshay Bhambri

Contents
Executive Summary............................................................................................... 3
Industrial/ Base Metal Market- At a Glance............................................................4
Separate Commodity Analysis............................................................................5
Iron Ore........................................................................................................... 5
Tin................................................................................................................... 5
Nickle.............................................................................................................. 5
Aluminium....................................................................................................... 6
Lead................................................................................................................ 6
Copper............................................................................................................. 6
Forecasts............................................................................................................ 7
Precious Metal Market- At a Glance.......................................................................8
Separate Commodity Analysis............................................................................8
Gold................................................................................................................. 8
Silver............................................................................................................... 9
Forecast.............................................................................................................. 9
BIBLOGRAPHY...................................................................................................... 10

Executive Summary
The commodity market saw an onslaught of decline as most of the index
declined due to increasing supply and weak demand. Crude Oil prices rebounded
in the last quarter, however weakened since due to excess surplus. Energy index
rose 12 percent owing to the increase in oil prices during the last quarter.
Agriculture index fell by 2.6 percent due to the decline in food commodities,
despite fear of El Nino effect hovering over United States. Industrial and base
Metal Prices slumped by 2 percent even though most of the metal markets were
in surplus. This was due to the plummeting of Iron Ore prices by two thirds from
their 2011 price. Precious metal prices decreased marginally by 2 percent due to
adverse investor sentiment going through the market.
Future hold a dip in markets during most of 2015-16 as supply continues to
increase mainly in the industrial commodities. Risks involved maybe both upside
and downside. Downside risk forecasts the decline of OIL prices due to increase
in supply by OPEC nations whereas upside risks include disorders in supply due
to environmental risk.

Industrial/ Base Metal Market- At a Glance

The markets are continuing to witness a fall at a high rate of 16.7 percent in FY
14-15 as compared to 6.6 percent in FY 13-14 and 2011 level. Most of the fall
can be attributed to the following:

Decreasing demand in China which is both the biggest producer and

consumer- notably of base metals. Chinas metal consumption grew by
50% due to increase in usage of Aluminium. However, rest of the base
metal consumption continues to decrease. Out of China, rest of world is
witnessing a decline in metal consumption.

Fig: World Metal Consumption

A steadily increasing supply caused due to increase in investment and low

prices which was caused due to devaluation of producer country
currencies and falling production cost(due to energy sector being weak)
leading to an increase in export.

Fig: World Metal Prices

Renewed Dollar Strength

High inventories particularly in Nickle market due to the Indonesian ore
export ban.

Separate Commodity Analysis

Iron Ore
Iron ore is majorly used to make steel.
Prices fell by 7 percent after a growth of 20 percent is the last quarter due to
stringent supply owing to the bad weather leading to less exports from Australia.
The second quarter, however witnessed ease in exports and decrease in demand
in China (which is both the largest consumer and producer of Iron Ore) after the
stock market crash led to Inventory de-cumulating and dumping causing supply
increase to the rest of the world.

Tin
Tin which has China as its major producer and consumer finds its major use in
electronics and Tin Plates industry.

Fig: Price of Tin

The Tin market was subjected to decrease in price due to weak demand even
though the London Metal Exchange (LME) inventories depleting. This demand
was Over Shadowed by the increase in supply from Myanmar.

Nickle
Nickle is used in alloying and chemical industry and has China as its major
producer and consumer.

Fig: Price of Nickle

The Nickle industry was also down 9 percent due to destocking of inventories in
China leading to an increased supply and less demand. China stalked up after
the Indonesian Export ban

Aluminium
Aluminium demand remains robust due to its many usage. However, the overall
market was down 2 percent due to higher export and slowing demand.

Fig: Price of Aluminium

Lead
Lead is a by-product In the Zinc mines and closure of Zinc mines because of
environmental purposes has led to a decrease in supply and an increase in price.
This supply is being filled by Recycled batteries. China is the major producer and
Consumer of Lead.

Fig: Price of Lead

Copper
A decrease in supply of copper owing to the flood in Chile which is the largest
producer of copper has led to a price increase of 4 percent.

Fig: Price of Copper

Forecasts
Industrial/ Base metal prices are forecasted to fall by 17 percent due to the
following:

Slowing demand in China leading to less demand overall

Higher Supply due to Lower Costs

Source: World Bank

Fig: Commodity Price Forecast

Precious Metal Market- At a Glance

The precious metal market is down marginally by 2 percent majorly due to the
weak demand and over supply of Platinum. Anticipation of US interest hike
coupled with strong dollar value which led to rising interest rates and hence
decrease in price of gold.

Fig: World Precious Metal Prices

Separate Commodity Analysis

Gold
Supply continues to increase with falling prices and depreciating producer
currencies. The highest growth is in Asia, Latin America and Africa.
China is the Major Producer of Gold and India is the major consumer of Gold.

Source: http: www.bulliondesk.com

Fig: Gold Prices

Silver
Silver demand and prices are associated with investor sentiment which is weak.
Supply from mines continues to rise in Asia and United States causing in fall of
prices overall. However, prices have reason recently began to rise same as gold
owing to the boosted investment.
Mexico is the highest producer of silver whereas United States is the highest
consumer.

Source: Infomine.com

Fig: Silver Prices

Forecast
Precious metal prices would continue to decline at a price of 9 percent in the
short run mainly due to the tremendous increase in supply and the reducing
demand of platinum. The key element of precious metal prices would be investor
demand. A tighter monetary policy would be contributing to the downside risk
whereas n upside risk would be caused due to weak United States growth
pattern.

Source: World Bank Q3 Report

Fig: Forecasts for precious metal prices

BIBLOGRAPHY

World Bank Commodities Market Outlook Report (Q3), Pg. 3,4, 26-28, 6068
World Bank Website, www.worldbank.org/commodities
http://www.bulliondesk.com/gold-quarter-report/gold-forecast-and-analysisreport-for-q3-2015/