Predicted rise in prices supported by supply constraints, China’s recovery, and energy transition; decline expected in 2025.

HSBC has forecast that commodity prices will remain elevated in 2024, driven by a combination of squeezed supply, increased demand from China, and the global energy transition. In its latest report, released on January 2, the bank expects prices to rise by an average of 2% this year, before falling by 4% in 2025.

The forecast is underpinned by expectations of a recovery in China’s growth, which is expected to drive demand for key commodities. Additionally, supply constraints in various sectors, including energy and agriculture, are expected to continue exerting upward pressure on prices.

HSBC also cited geopolitical risks and the potential for looser monetary policy in the latter half of 2024 as factors that could further support commodity prices. However, it warned that the ongoing global economic slowdown presents a downside risk to its outlook.

The bank’s analysis highlights some notable trends in specific commodities. For instance, cocoa and iron ore prices surged in 2023, while natural gas and coal prices saw a significant decline. Looking ahead to 2024, HSBC expects agricultural products to outperform energy and industrial metals due to ongoing supply issues and adverse weather conditions.

For energy markets, HSBC predicts Brent crude will average US$82.50 per barrel, while Henry Hub natural gas prices are expected to average US$3.75 per million British thermal units.