TORONTO, Dec. 20, 2018 /CNW/ - Commodities
were on the Naughty List in 2018, a year of broad declines mixed
with severe volatility. As a group, industrial and precious
commodities are down 12% year-to-date. Some beat the trend, but
even the top three performers—Henry Hub natural gas (+22%),
palladium (+19%) and WCS crude (-4%)—are far from inspiring.
Losses have been much more pronounced, led by AECO natural gas
(-43%), lumber (-28%) and cobalt (-24%).
It was also an exceptionally volatile year. Lumber prices moved
from +45% in May to -28% today, while WCS shifted from bull market
(+68%) to bear market (-61%) to more-or-less neutral (-4%).
Nice List:
- Henry Hub Natural Gas (+22%): cold weather and extremely low
inventories helped push the Louisiana-based natural gas benchmark, the
primary price referenced in North
America, to the top spot in 2018.
- Palladium (+19%): steady demand and years of supply deficits
have eroded inventory levels and propelled palladium to the status
of most-valuable precious metal, beating out gold for the first
time since 2002.
- Canadian Heavy Crude (-4%): WCS had a rough year but level
prices ended more or less neutral for 2018 (-4%), helped by a
dramatic improvement in differentials to US benchmarks but weighed
down by the generally poor performance of global crude prices
Naughty List:
- AECO Natural Gas (-43%): AECO gas underperformed significantly
in 2018 as midstream infrastructure constraints added to the
challenge presented by cheap and surging US shale gas, with
year-to-date AECO losses surpassing 90% on multiple occasions.
- Lumber (-28%): Canadian rail bottlenecks eased and brought more
supply to the US market just as US housing market conditions began
to deteriorate, breaking the pull run that had brought lumber
prices to all-time highs this past spring.
- Cobalt (-24%): a weaker Chinese auto market coupled with robust
growth in Chinese cobalt hydroxide production capacity has resulted
in a domestic glut, bringing prices back down off their prior
highs.
Scotiabank Economics provides in-depth commentary on economic,
financial market, and policy developments, both domestically and
internationally.
Read the full December 2018
Scotiabank Commodity Price Index online here.
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twitter account @ScotiaEconomics or visit
www.scotiabank.com/economics.
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SOURCE Scotiabank