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LNG, Coal Lead Commodities Rally 2021 as Markets Eyes COVID-19 for Next Step

By Naveen Thukral and Florence Tan

SING -ORE (Reuters) – Commodity prices from energy and metals to agricultural products rebounded sharply in 2021, with fuels leading the rally, fueled by tight supplies and a strong economic recovery as COVID-19 vaccinations prevented widespread lockdowns.

Global commodity demand is expected to remain robust in 2022 and support prices as the global economy continues to recover, although similar price jumps are unlikely, analysts and traders say.

“2021 was marked by a huge, broad-based rally,” said Jeffrey Halley, senior analyst at brokerage OANDA.

“While I believe that commodity prices will remain robust, I believe that the recovery in 2020 and the rally in 2021 will be exceptional years and so I don’t expect the same gains in the year ahead.”

Energy and food prices soared this year, weighing on utilities and consumers from Beijing to Brussels and adding inflationary pressures.

High prices are encouraging producers to ramp up production, but some analysts expect supplies for products like oil and liquefied natural gas (LNG) to remain scarce as these projects take years to get production up and running. (Gr -hic: Top Energy Markets 2021, https://fingfx.thomsonreuters.com/gfx/ce/gdvzykrxypw/TopEnergy2021.png)

ENERGY

Record prices for coal and natural gas led to severe electricity shortages from Europe to India and China in 2021.

Asian LNG gained more than 200% while Asia’s benchmark coal prices doubled.

“Global LNG demand increased by 20 million tons per year in 2021, with Asia accounting for virtually all of the growth,” said Valery Chow, director of Asia gas and LNG research at Wood Mackenzie, adding that demand has risen from China by more than 20% has made it the world’s leading importer and overtaken J -an.

“However, the persistently high spot prices for LNG are likely to dampen general demand growth, particularly in the more price-sensitive markets of South Asia and Southeast Asia,” he said.

Global oil prices also recovered by 50 to 55% in 2021, with Brent hovering at USD 77.78 per barrel and WTI at USD 75.21 per barrel and rising further https://www.reuters.com/markets/commodities / global-oils -comeback-year-presages-more-strength-2022-2021-12-23 next year as the demand for jet fuel catches up. [nL1N2TG03Y]

In China, coal prices have more than halved from a record high in October after the largest producer and consumer increased production https://www.reuters.com/world/china/china-nov-coal-output-strikes-new – high-safe-winter-supply-2021-12-15 and tamed prices.

METALS

Electricity shortages in China and Europe hit aluminum production, driving prices up over 40% for a second year of profits. However, it also affected the demand for iron ore as the world’s largest steel producer, China, cuts its production.

Iron ore prices, which hit record highs in May, coll -sed in the second half of the year amid strict production restrictions in China. Dalian iron ore futures fell more than 10% after a massive rally over the past two years.

Base metals are expected to outperform as the energy transition will boost demand, analysts say, while supply chain bottlenecks may persist.

LME copper rose about 25% for a third year in 2021.

“Copper demand is expected to enter its second year of expansion, particularly after the recently concluded COP26 showed an increasing willingness by governments to prioritize clean energy,” said OCBC economist Howie Lee. (Gr -hic: China’s most important metal markets in 2021, https://fingfx.thomsonreuters.com/gfx/ce/zgpomaworpd/TopMetals2021.png)

AGRICULTURAL MARKETS RALLY

Chicago soybeans rose for the third year in a row, corn by 22% and wheat by more than 20%.

Supply bottlenecks due to adverse weather conditions and strong demand spurred agricultural markets in general.

Both Malaysian palm oil and soybean oil contributed more than 30%, recording a third year each.

In beverages, arabica coffee rose nearly 80%, bringing gains in a second year, and robustas rose 70%, making up for three years of losses as supply chain problems increased  -petite. (Gr -hic: Top Global Agricultural Futures Markets 2021, https://fingfx.thomsonreuters.com/gfx/ce/byvrjmogqve/TopAgs2021.png)

Raw sugar rose more than 20% and rallied for a third year, and white sugar posted similar gains as production declined in top producer Brazil due to drought and frost.

Precious metals prices could cool off, dragged down by strong risk  -petite in stocks and other markets, analysts say.

Gold remained broadly unchanged after falling last year and silver is expected to end the year in the red after two strong years.

(Reporting by Naveen Thukral and Florence Tan in Sing -ore; additional reporting by Yuka Obayashi in Tokyo, Enrico Dela Cruz, Manila, Muyu Xu and Emily Chow in Beijing; gr -hics by Gavin Maguire; editing by Richard Pullin)

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