Natural gas leads 2022 commodities rally

Natural gas markets were expected on Friday to end 2022 with strong gains after a global energy crisis triggered by the Russia-Ukraine war stoked prices, and tighter supplies expected in 2023 could fuel more gains.

On the other hand, industrial metals, iron ore and rubber are edging lower and expected to finish in the red territory as they were pushed down in 2022 by China’s strict zero-COVID policy in addition to world recession-linked concerns.

Agricultural markets, including grains and palm oil, jumped to all-time highs in March on adverse weather and pandemic-related supply disruptions, triggering extra food inflation, but those commodities gave up much of their gains in the second half.

Despite the recent price declines, commodities will still likely finish the year as the best performing asset class,” Goldman Sachs said in its 2023 commodity outlook.

Global gas markets were roiled this year after Russia cut supplies to Europe and a major pipeline was damaged amid the war in Ukraine, leading European countries to import record volumes of non-Russian gas to ensure winter supplies.

Nickel is the best performer among metals in 2022 while China’s zero-COVID measures dampened demand for other industrial metals. Nickel is also on course for a 45% rise, its largest since 2010, partly because of a shortage of metal that can be delivered against the LME contract and partly because of volatility created by low volumes and liquidity after a trading fiasco in March.


Spot prices of iron ore bound for China, which consumes about two-thirds of global supply, have fallen about 5% this year, ending near $115 per tonne.

Citi analysts are bearish on nickel and zinc for the next six to 12 months, seeing strong supply growth, and bullish on iron ore and aluminum.

Raw iron is expected to remain strong in the near term and could follow through in the bull case of a major China credit easing. China’s U-turn on COVID policy and its pledge to increase support for the real estate sector helped to support ferrous and non-ferrous metals in December.

Still, optimism has been tempered by the country’s surging COVID infections and risks of global recession in 2023 if central banks, as expected, keep hiking rates.