This is the second of a two-part series on resource volatility. As noted in the first post, globalization has created an environment of resource volatility. This post, with numbers 11 through 20 on the list, describes resources that are more stable than the previous 10. However, that doesn’t mean there isn’t turmoil, whether that’s environmental concerns in Indonesia’s palm oil production industry, or community organization for water rights in Chile. And, of course, whatever China does, the markets follow.
Top resources and trends
11. Natural Gas
According to the International Energy Agency, most natural gas comes from Russia, the United States, Canada, Qatar, and Iran, and the countries that use the most are the U.S., Russia, China, and Iran. There are sufficient reserves of natural gas, again according to the IEA’s projections, that should last past the year 2040. Liquefied natural gas, which is produced mostly by Qatar, with Australia set to overtake Malaysia for second place, has had a flat market recently. There isn’t the demand to keep up with increased production, so liquefied natural gas producers are looking for new markets, like cruise lines, to grow demand.
Most of the world’s tin comes from China and Indonesia. The tin market tanked last year because of less demand and lots of tin, although it did rally in July and then improve earlier this year, mostly because Indonesia is exporting less and easing the flood of tin on the market.
It seems like everyone’s crazy for gold right now. The precious metal is often perceived as a safer investment than other asset classes, and it’s up 20% this year. Famed investor George Soros just bought $264 million worth of shares in Barrick Gold. The Toronto-based gold-mining company is the world’s largest. Gold prices bumped down a bit while the market waited on the Federal Reserve’s meeting minutes, but some are saying gold will soon recover – and then some.
Russia, Canada, and New Caledonia are the largest producers of nickel. Most is used to make stainless steel. Like several other commodities we’ve examined, there is more production than demand of nickel at the moment, which has led to depressed prices. China is a big consumer of nickel for stainless steel, and the country is using less because of a slowing real estate market.
The global demand for beef is up, but production is down due to a variety of factors. One is Australia’s decreased production due to drought conditions, which will mean 300,000 tons less beef for export this year. As Australia is a favored trading partner of the U.S., that will affect the American beef market. A recent study from Radobank predicts that China will increase live cattle imports for domestic processing, and Brazil will enter the U.S. market as well.
It’s a good year for wheat. North American wheat production is doing well, although levels are down from the previous year, with five percent less planted in the U.S. and six percent less in Canada. According to the most recent USDA World Agricultural Supply and Demand Estimates report, total U.S. wheat supplies and use are up six percent and seven percent, respectively. Globally, the report projects a two percent increase in wheat supplies, and consumption will increase, too.
17. Iron Ore
Earlier this year, the iron ore market jumped, reportedly because of the Chinese government’s moves to help along the country’s economy. Things have settled down since then, with recent trading sending the per ton price downwards 22.9% from its high in April, which seems to be due to China’s increased crude steel production and also the government’s stopping speculative trading. They’ve also committed to transportation infrastructure projects, but there is still too much iron ore compared to demand.
As with iron ore, China’s announcement that it would be investing in transportation infrastructure affected the price of copper recently. This is likely a welcome piece of news, as copper had been trading at the lowest levels since March 2009. Output and demand are both projected for small increases this year. Chile has the largest open pit mine and the largest global reserves of copper, but it’s been facing difficulties in recent years including lack of water, which is essential for mining, and local community resistance.
19. Palm oil
Palm oil is a global big business to the tune of $50 billion, which is projected to increase to $88 billion by 2020. It’s in almost everything these days because it’s inexpensive, stable, and can be used for many applications. (It’s not always listed on ingredient labels as palm oil). Most is produced in Malaysia. It’s also a bête noire of environmentalists – it’s linked to deforestation, the recent massive forest fires in Indonesia which were set, it’s thought, to clear land for plantations, and lost habitat for orangutans and increased worries about their extinction.
Aluminum rose overall in 2015, but took a dive in the last few months of the year. Market-watchers are hoping that China’s announcement that it will reduce aluminum output will help energize the market once oversupply is balanced. But one of the world’s biggest producers, Alcoa, is reorganizing, which could be an indication that the company is preparing for an era of depressed prices, despite continued healthy demand.
Digital transformation is affecting different industries at different speeds and on different scales. IDC reveals how in The Internet of Things and Digital Transformation: A Tale of Four Industries.