China, OPEC and Trump to Drive Commodity Prices in 2017

It’s that time of year when crystal balls get taken out and polished up, but forecasting commodity markets for 2017 is less certain than usual given the unpredictability of the three main likely drivers.

After a largely stellar year in 2016, the outlook for major commodities is likely to come down to the actions of Donald Trump, the Chinese government and the Organization of the Petroleum Exporting Countries.

Note the word “actions” in the above paragraph, as what these three players actually do will ultimately have a far larger bearing than what they say they are going to do.

Take China for example. This year saw most analysts surprised by the strength of both China’s coal and iron ore imports, which led to rallies in the prices of both commodities.

While there are several reasons for this, the main one is that many analysts didn’t really believe that China would cut its domestic coal output, but did believe that it would close excess steel capacity.

By November, China’s coal output was down 10 percent year-on-year, and while steel capacity was cut by close to the government target, this didn’t lead to a corresponding drop in production, which was up 1.1 percent in the first 11 months of the year.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza