Here is the CBA price forecast for iron ore, coal, LNG, oil and gold in 2021
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Low interest rates, a weaker US dollar along with strong economic growth in China and rising inflation expectations — a concoction of factors that have sparked talk of the next “commodities super cycle“.
As Stockhead’s Mike Cooper flagged recently, iron ore is seen as the cornerstone of that growth, with analyst price forecasts between $US150 to $US165 per tonne.
So, are markets in for a repeat of the China-led 2000s commodities super cycle?
CBA analysts Gareth Aird and Vivek Dhar are “not quite convinced” — largely due to their doubts around China’s medium-term commitment to maintain such high levels of investment in its commodity-intensive sectors.
As a result, the pair noted that their commodity prices forecasts are more measured compared to other analysts.
But that also means that if anything, the risk to their forecasts for bulk commodities are all “skewed to the upside”.
They added that while there are plenty of bullish calls about prices right now, that won’t necessarily flow through to a big lift in capital investment.
Instead, resources companies will heed the lessons learnt from past boom-bust cycles and exercise more caution when it comes to boosting capacity.
“We expect that reluctance to invest to continue in a broad sense in 2021, which in turn supports prices,” they said.
Here are CBA’s price forecasts for Australia’s largest commodity exports:
Iron Ore: Prices to remain above $US140 per tonne through the first half of this year. After that, CBA expects to see a moderate decline as China takes its foot off the commodity-driven growth pedal.
That will warrant a move back to $US110/t by the end of 2021, although the analysts said that price point is still “well above the marginal cost of production”.
Coking coal: Prices slumped in the wake of China’s October import ban, before picking up rapidly as exports to other jurisdictions promptly surged. China subsequently relented in December, and CBA expects prices will continue rising towards $US150/t by June 2021. “We then expect prices to ease modestly to finish the year at ~$US135/t,” the analysts said.
Brent crude oil: CBA expects oil prices to remain supported through increased demand in the wake of vaccine developments and US fiscal stimulus, as well as more controlled supply by OPEC and US shale producers. That combination will support the Brent crude price at around $US64/barrel through to the end of the year.
LNG: Prices for LNG are off their early-year highs, and CBA expects that trend to continue as increased supply out of the US isn’t matched by global demand. From Q1 2021 levels of $US9 per MMBtu (metric million british thermal units), the bank forecast LNG spot prices to fall to $6/MMBtu by the end of the year.
Gold: The precious metal is likely to “track sideways”, as rising bond yields are offset by a weaker US dollar. “We think gold prices will remain range-bound between $US1,800-$US1,900/oz in 2021,” CBA said.