From Business Insider:
After what can only be described as a horrific year for metals and
bulk commodity prices, market attention is now quickly turning to what
the new year will bring. Some believe that the worst is now over while
others think the bear market that has gripped the commodities complex
this year is only getting started.
In a note released earlier this week, analysts at Macquarie research
have pondered that very question, and it doesn’t make for pleasant
reading for commodity bulls.
They suggest 2016 will be about the three D's: destocking,
divestment, and desperation. Unfortunately, for commodity bulls, another
D — demand — is unlikely to feature in their opinion. As a result,
they've made aggressive price downgrades across the vast majority of
commodities they cover on the back of "the weaker demand outlook and
general cost curve deflation".
Here's a snippet from the report explaining their view — our emphasis is in bold:
For us, 2016 will be the year of the
three D's for commodities: destock, divestment and desperation.
Unfortunately not demand, as it is very hard to see where strong,
co-coordinated demand acceleration could come from. We are
currently projecting 2016 demand for all major metals and bulk
commodities remaining well below the 10-year norms. With financial
markets taking an increasingly negative view on the long-term health of
the industry, pressures on metals and bulk commodity producers seem set
to get worse.
Pointing to the chart below, they plot where each commodity currently
sits based on supply-and-demand dynamics in their view. The arrows
represent where they expect the balance of each commodity will likely
sit in approximately two years' time.
With the exception of zinc, silver, and palladium, the medium-term outlook for the complex appears bleak, to say the least:
"The vast majority still sit in the oversupplied region. Moreover, as we
have lowered our forward demand forecasts, so the arrows have become
shorter," notes Macquarie. "We now expect global industrial production
to grow only 2.3% over 2016, which is historically a level which results
in minimal metals demand growth. Essentially, nowhere in the world is
seeing enough commodity-intensive growth to drive us into bottlenecks
for material availability."...MORE
