Bank of America Merrill Lynch’s analyst team pointed out in its “2025 Commodity Outlook” report that trade wars and a stronger US dollar may lead to a decline in commodity prices. Analysts expected there will be a surplus in the global oil market in 2025, and the price of Brent crude oil may hover around $65/barrel, while gold continues to strengthen due to macro uncertainty, with a target price locked at $3,000/oz.
Analysts predict that two metals, copper and aluminium, could see a price rebound in 2025, driven by demand for electric vehicles, solar and grid upgrades. Copper prices are expected to recover from $8,500 per tonne to $10,500 per tonne; while the aluminium market could see prices break through $3,000 per tonne as it enters a supply deficit phase.
Meantime, according to its latest research report by China International Capital Corp Ltd (CICC), one of China’s largest investment banks, global commodity markets may still be in the adjustment phase at the bottom of a major cycle in 2025.
CICC researchers pointed out that the less-than-expected effect of domestic stimulus policies, less-than-expected U.S. economic growth, geopolitical risks, and trade policy uncertainty are the biggest risks affecting commodity prices.
Igor Isaev, head of analytics of Mind Money, said this week that as one of the world’s largest economies, a sharp slowdown in China’s economic growth is likely to completely disrupt the global commodities market.
Isaev noted that commodities are facing a number of challenges, including the incoming Trump administration, ongoing conflicts in the Middle East, and natural disasters off the coasts of Mexico and the United States. And the deteriorating outlook for China’s economy could expose the commodities market to greater volatility in the coming year.
Overcapacity, a sluggish property market and weak consumer spending in China, all of which will continue to put downward pressure on prices, he added. Some analysts believe that a downward trend in China’s economy is already established after peaking in 2021.
Isaev believes that given all the problems within the Chinese economy, investors should look for new opportunities in different regions and market sectors, including companies in promising areas such as US energy, artificial intelligence, robotics and big data. These companies are likely to increase output, which could also lead to new investment opportunities.
At the same time, Indian and Mexican companies that can displace Chinese manufacturers in the global consumer market are also worth watching. These two countries are aggressively developing their production facilities to become important alternative production centres.
On top of this, it is important to keep an eye on the large amount of natural resources that China exports and look for alternative suppliers. This will help prepare for possible restrictions or export tariffs on Chinese exports.
According to Isaev, the huge challenges facing the Chinese economy have prompted some investors to start moving away from Chinese assets in favour of gold or U.S. bonds, with foreign direct investment in China turning negative for the first time since 1998.
