ISTANBUL
Commodity markets wrapped up a challenging 2024 marked by sharp fluctuations driven by rate cuts, geopolitical tensions, US political uncertainties, and global recession fears.
Expectations of rising demand following the Fed’s rate cuts, China’s efforts to stimulate its economy, its retaliation against US sanctions, and global weather events were among the key factors triggering price surges last year.
Historic selling pressure emerged as concerns over a slowdown in US economic activity led to declines in several commodities.
Despite geopolitical risks pushing some commodity prices higher, the Fed’s likely slower rate cuts and China-related demand concerns negatively impacted the markets.
Analysts noted that US macroeconomic data showed the economy remained robust.
The US dollar strengthened after President-elect Donald Trump’s November election win, driving demand for the currency.
Market expectations that interest rates would stay above estimates following Trump’s victory, along with a rise in the US Dollar Index, pressured asset prices.
Trump’s tariffs are expected to impact international trade, adding more strain to the commodity market, while the stronger dollar dampened risk appetite.
Analysts pointed out that Trump’s policies could increase inflationary pressures, prompting the Fed to slow its rate cuts.
In December, the Fed cut its policy rate by 25 basis points, aligning with expectations, bringing it to 4.25%-4.50%. The Fed ended the year with three rate cuts.
The bank raised its federal funds rate estimate from 3.4% to 3.9% by the end of 2025, signaling slower cuts this year. The FOMC's dot plot showed two possible rate cuts totaling 50 basis points.
The Fed was previously expected to implement four cuts this year.
Gold, silver lead precious metals
Gold rose 27.2%, and silver 21.4% per ounce in 2024, while platinum dropped 8.7% and palladium 17%.
Gold prices briefly fell below $2,000 in February, hitting $1,984, after postponed Fed rate cut expectations and higher-than-expected US inflation. Gold reached a historic peak of $2,790.1 per ounce on Oct. 31, driven by Middle East tensions and uncertainty over US elections.
Gold closed the year at $2,623.4 per ounce — the highest annual closing in 14 years — as it remained a top safe-haven asset amid ongoing Fed rate cuts.
Silver hit $34.9 per ounce, its highest since October 2012, driven by slowing mine production and rising demand in automotive, solar panels, and electronics industries.
Analysts say China may increase silver imports due to its use in solar panels. They noted silver could hit $40 per ounce this year if deficits continue or gold gains further momentum.
The ECB’s rate cuts also affected gold and silver prices, while concerns over electric vehicles reduced demand for palladium.
Copper prevails among base metals
Copper hit a record $5.25 per pound last year, gaining 3.2%, as concerns over Trump’s tariffs on China led to expectations of increased support measures. Supply concerns grew due to a lack of new mining projects and market shortages.
Weak eurozone growth, a strong US dollar, and geopolitical risks weighed on base metals.
US and UK bans on Russian aluminum and copper pushed prices higher.
President Joe Biden’s call to triple tariffs on Chinese steel and aluminum raised concerns, while China’s economic stimulus steps suggested higher demand for base metals.
Reports that Chinese copper smelters reduced production heightened supply concerns. Additionally, global mines cut production, contributing to shortages.
The shift toward green energy also drove copper prices higher. Copper is essential in power cables, wind turbines, electric vehicles, and solar panels.
Market expectations that the Fed’s rate cuts would boost demand for industrial metals and support economic growth pushed copper and silver prices further.
Aluminum rose 7.2% after London-based miner Rio Tinto declared force majeure on aluminum shipments from its Queensland refineries due to gas shortages.
Falling Chinese aluminum stocks, along with demand from the renewable energy sector, further tightened supply, contributing to price hikes.
Zinc prices rose 12.5% due to mine shutdowns and reduced production, raising global supply concerns.
Brent crude oil down
Brent crude oil dropped 2.8% to $68.51 per barrel in 2024, amid growing recession fears and expectations that ceasefire talks in the Middle East would yield positive results.
Reports that Libya might suspend oil production and weak Chinese economic data also contributed to the price drop, as demand expectations fell.
Saudi Arabia’s plans to increase production pushed oil prices up temporarily.
The International Energy Agency reported that oil supply could exceed demand in 2025, even if OPEC+ maintains current production cuts.
Analysts say Brent crude prices fell further due to Hurricane Beryl hitting Texas, with earlier precautionary stockpiles preventing price spikes.
Meanwhile, natural gas prices declined 1.4%, as higher-than-average temperatures reduced seasonal demand.
Coffee, cocoa hit highs
Wheat prices plunged 12.2% per bushel as a strong US harvest eased supply concerns, and tensions between Russia and Ukraine appeared to ease.
Cheap Russian wheat and reports that China could cancel US wheat orders also pressured prices. Wheat prices hit a four-year low at $5.1425 per bushel.
Corn prices fell 2.7%, hitting $3.85 per bushel — a low not seen since October 2020 — as US corn deliveries increased.
Soybeans fell 22.2%, reaching a low of $9.47 per bushel, driven by expanded US cultivation and reduced demand from China.
Cocoa prices soared 178.2% to a record high of $12,931 per ton, due to poor weather and crop diseases in West Africa and declining global stocks.
Supply concerns persisted throughout the year, especially in the Ivory Coast and Ghana, with analysts predicting a cocoa deficit in the 2024/25 season.
Coffee prices surged 69.8%, reaching a record $3.4835 per pound, amid production concerns in Brazil and Vietnam due to dry weather and reduced supply.
Houthi attacks in the Red Sea slowed shipments from Asia to Europe.
Extreme heat and droughts in Southeast Asia further hurt coffee harvests, particularly in Vietnam.
Coffee yields may decline further as the La Nina weather phenomenon continues, analysts say.
Typhoon Yagi damaged coffee-producing regions in Vietnam, further supporting prices.
Sugar prices fell 7.1% as above-average monsoon rains in India eased supply worries.
Cotton prices dropped 15.5%, reaching $0.6626 per pound, as India and Australia saw increased yields.
