LNG, coal lead 2021 commodities rally as markets eye COVID-19 for next move
Commodity prices from energy and metals to agricultural products rebounded sharply in 2021, with power fuels leading the rally, driven by tight supplies and a strong economic recovery as COVID-19 vaccinations staved off widespread lockdowns.
Global demand for commodities is expected to remain robust in 2022 and underpin prices as the world economy continues to recover, although similar price jumps are unlikely, analysts and traders say.
"2021 has been characterised by a huge broad-based rally," said Jeffrey Halley, a senior analyst at brokerage OANDA.
"Although I believe commodity prices will remain robust, I believe the rebound in 2020 and the rally of 2021 will be exceptional years and as such I am not anticipating the same level of gains in the year ahead."
Energy and food prices rocketed higher this year, hammering utilities and consumers from Beijing to Brussels, raising inflationary pressures.
High prices are encouraging producers to ramp up output, but some analysts expect supplies for products such as oil and LNG to stay tight as these projects require years for production to come on line.
Energy
Record coal and natural gas prices led to a severe power crunch from Europe to India and China in 2021.
Asian LNG rallied more than 200%, while Asia's benchmark coal prices doubled.
"Global LNG demand grew by 20 MMtpy in 2021 with Asia accounting for virtually all of this growth," said Valery Chow, head of Asia gas and LNG research at Wood Mackenzie, adding that more than 20% growth in demand from China has made it the world's top importer, overtaking Japan.
"However, persistently high LNG spot prices are likely to start dampening overall demand growth, especially in the more price-sensitive markets of South Asia and Southeast Asia," he said.
Global oil prices also recovered 50% to 60% in 2021 and are set to rise further next year as jet fuel demand catches up.
In China, coal prices have more than halved from a record high reached in October after the top producer and consumer boosted output and tamed prices.
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