Domen Zavrl is a business leader with extensive expertise of structured financing, commodities trading, securities lending, real estate development and business brokerage. This article will share market predictions for 2023, from trading in precious and industrial metals to agricultural commodities markets.
The commodity markets experienced a rollercoaster ride in 2022, with global socio-political events causing commodity prices to surge in the early part of the year. Russia’s invasion of Ukraine triggered international sanctions against Russia – the second-largest natural gas producer globally after the United States and the second-largest oil exporter after Saudi Arabia. In addition to gas and oil, Russia is also a major exporter of commodities like lithium and nickel, as well as the world’s top wheat exporter.
According to Capital.com, in early March 2022 Brent crude oil prices reached $139 a barrel, with natural gas prices reaching a record high of €345 megawatts per hour that month.
Following a dip in the last quarter of 2022, oil prices are predicted to average above $80 a barrel in 2023 – and, despite falling sharply from mid-year highs seen in 2022, they are forecast to remain elevated throughout 2023 as OPEC production falls by around 3 million barrels a day from its peak in 2022. The attached infographic contains some interesting statistics about the global oil industry in 2023.
Conflict in the Ukraine also drove up the price of gold, if only briefly, with its price reaching $2,000 an ounce in March 2022, just short of the all-time high of $2,075 per ounce established in 2020. The attached PDF contains more information about global trade in precious metals.
Moving through 2023, Fitch Solutions predicts that copper could trade at $8,400, down from $8,800 in 2022. The World Bank forecast suggests that nickel prices will ease to $21,000 in 2023, falling to $20,708 in 2024. Meanwhile, the World Bank predicted that the silver market would remain steady at $21 an ounce throughout 2023 and 2024. The attached video contains more information about the history of the World Bank.
A report published by the Economist Intelligence Unit suggested that base metal prices could remain volatile in 2023. The report predicted that the average industrial raw material price index would fall in 2023 as raw material supply constraints that arose in 2021 – and were then exacerbated by the war in Ukraine – continue to ease. The report also suggests that while slowed economic growth is likely to cut demand for base metals, increased manufacturing and construction in China, combined with added demand for production in Europe and Asia, could help to stabilise base metal prices.
Turning to agriculture, the World Bank forecast suggested that wheat could trade at $410 per metric tonne in 2023, edging down to $405 per metric tonne in 2024. The World Bank also predicted that higher quality Arabica coffee beans would fall from a trading price of $5.9 per kilo in 2022 to $5.5 per kilo in 2023, dropping to $5.41 per kilo in 2024. Experts predict that the war in Ukraine will continue to affect agricultural commodities markets throughout 2023, although global supply chain disruptions stemming from the pandemic are predicted to subside.
The US dollar rallied throughout 2022 as the federal government’s aggressive monetary tightening policies widened differentials between the US and other countries in terms of interest rates. In 2022, the US Dollar Index surged to a 20-year high. However, some financial analysts predict that the dollar’s rally has peaked, forecasting a trend reversal in 2023. Experts suggest that a softening could be conducive to a rise in demand for commodities, particularly gold, which had seen downward pressure in 2022 as investors favoured the dollar over non-yield gold.