China’s faltering recovery is weighing on the outlook for commodity prices in the months ahead, says Fitch Ratings.
In a new report, the rating agency said it expects commodities will “remain range-bound” and volatile in the fourth quarter “due to uneven growth in the Chinese economy, especially in the property sector.”
The fundamentals for most commodities remain solid, Fitch said, with the exception of chemicals, which are expected to see soft prices into next year.
“We believe that the global chemicals market is at the bottom and anticipate a recovery only in 2024,” the report said. “Chemicals have underperformed compared to other commodities due to severe de-stocking and weak demand on a softer economy.”
Oil prices are getting some support from Saudi Arabia’s decision to extend its voluntary output reduction to the end of the year, Fitch said.
This supply reduction “led to a recent price spike,” and Fitch said “it will provide the necessary support to prices although we believe that the rally has now peaked.”
The report said the European gas market “looks comfortably supplied” and noted that imports in China are up only 12% this year, following a 20% drop in 2022, “providing some headroom in an otherwise tight global [natural gas] market.”
Fitch also reported that iron ore prices have been strong recently “on low inventories and high Chinese consumption but we do not expect a sustained rise.”
“Copper has been in a narrow trading range with some volatility due to wider macroeconomic developments,” it added.