Matt Geiger blogs that the 5-year commodity bear market accelerated in 2015. The prices of virtually all commodities (soft or hard) saw double-digit declines. There were a few specific commodities that had remarkably bad years. The most newsworthy of course was oil, with both Brent and WTI seeing a roughly 45% drop in 2015. Base metals were mixed, with nickel experiencing a particularly negative 12 months. Copper prices slid close to 25% in 2015.
Supply or demand dynamics indicate that there could be more pain ahead for Zn but saw a similar decline but global supply or demand dynamics look very positive. Precious metals were also mixed, gold and silver held up relatively well, while the PGMs significantly underperformed. The more the metal was linked to industrial consumption (~10% for gold, ~60% for silver, ~90% for PGMs), the worse PGMs did. Sources of renewable energy include solar energy, wind energy, hydropower, geothermal energy, and biomass energy. One trait shared by all of these processes is that no CO2 is emitted during power generation. Geiger likes to lump nuclear power into this category because nuclear generation also emits zero CO2 and the fates of the nuclear and renewable industries are very much intertwined.
Just look to China as an anecdote, where the government is trying to limit the burning of coal, while ramping up investments in both nuclear and renewables dramatically. Historically, there has been a strong inverse relationship between the price of oil and the rate of renewable energy investment globally. Despite the fact that less than 5% of the world electricity is now derived from oil, this makes sense considering that natural gas and coal (which currently generate about 60% of the world electricity) are highly correlated to the price of oil. The crackdown on coal is harder to quantify, but the signs are everywhere. Overall, Geiger anticipates the markets to increase dramatically in the medium to long term.
Original URL: https://seekingalpha.com/article/3855386-market-outlook-physical-commodity-prices-junior-mining-equities-renewable-energy-boom
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