NAB’s commodity forecasts

Find attached NAB’s monthly commodity forecasts. She’s a slow old day so this might make some interesting reading. It’s a reasonable enough document though with my own view that China is likely to struggle with a bouncy (though not hard) landing I’ll take the under on most projected prices.

Commodity Update M&E – Feb 2012

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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  1. Jeremy Grantham recently on commodities:

    “What else strikes your fancy?

    I like stuff in the ground—metals, hydrocarbons, oil, even natural gas. There are obviously powerful technical reasons depressing the price for natural gas. But it’s the premium fuel. It burns cleaner and better than any other hydrocarbon, and it sells at the lowest ratio of heat equivalent to oil in 50 years. It is about 15% of the energy-equivalent oil price. It has sold at parity from time to time over the last 30 years. This is a dazzling opportunity.

    We are running out of low-cost oil, out of cheap copper. All the miners with big reserves are interesting. Now, the prices aren’t low; in ’08, they shot up to multidecade highs. It used to be $16, and now it’s $117. Something doesn’t tally here. From the price, people think we are running out, and what happens when Europe and the U.S. get back into gear like in 2006, when the whole world was growing 5½%? The easy days of commodities are finished. We live in a new era where they are very volatile. But we are in an era of long-term price rises in pretty well every commodity.”

    and again, in case anyone missed it:

    “…we are in an era of long-term price rises in pretty well every commodity.”

    • There is a difference in what NAB are sawing and the MS presentation I went to two weeks ago on commodities.

      “Volatility in financial markets has declined over recent weeks and the resolution of European sovereign debt problems appears to
      be progressing steadily.” Maybe they looked at the VIX:IND for that assessment. I don’t see they really can justify it. So everything is resolved is it.

      I’m not sure all commodities will have long term price rises, but I think they will be stronger due all the QE’ing and the debt that has accumulated. Commodities continue to also be a financial asset, and I expect China and others to accumulate even if they only stockpile.

  2. One item to consider will be natural gas pipelines from Russia to China. Russia has the biggest reserves of natural gas, and China has one of the biggest populations.

    Do you think the two countries could get into bed together to make it happen?

    Shipping LNG from the north west shelf for AU is no where near as effecient as getting it from Russia.