The state of the resources market
The question on everyone’s mind for the past few weeks has been; can this rally keep going? In their latest report, Paul Bloxham, Chief Economist at HSBC, answers just that question. “There are arguments in both directions, although we favour the view that commodity prices have probably troughed.” They see a dip in average commodity prices in 2016, but are now forecasting a rise in 2017 on the back of higher oil prices. “We strongly believe that prices around current levels are unsustainable in the longer term. We cannot rule out a near-term price correction after the recent rally, but view a return to the low levels of early 2016 as highly unlikely.“ The outlook for iron ore, however, is not so rosy. “As the wave of liquidity pulls back, the focus will shift back to fundamentals, which are not very encouraging. We believe that stagnating demand, excess supply and cost deflation will make the current rally in ore prices unsustainable.” See the attached report for the full details.