LAUNCESTON, Australia, Dec 21 (Reuters) – It’s that time of year when crystal balls get taken out and polished up, but forecasting commodity markets for 2017 is less certain than usual given the unpredictability of the three main likely drivers.
After a largely stellar year in 2016, the outlook for major commodities is likely to come down to the actions of Donald Trump, the Chinese government and the Organization of the Petroleum Exporting Countries.
Note the word “actions” in the above paragraph, as what these three players actually do will ultimately have a far larger bearing than what they say they are going to do. Take China for example. This year saw most analysts surprised by the strength of both China’s coal and iron ore imports, which led to rallies in the prices of both commodities.
While there are several reasons for this, the main one is that many analysts didn’t really believe that China would cut its domestic coal output, but did believe that it would close excess steel capacity.
By November, China’s coal output was down 10 percent year-on-year, and while steel capacity was cut by close to the government target, this didn’t lead to a corresponding drop in production, which was up 1.1 percent in the first 11 months of the year.
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