Scotiabank predicts challenging year to come for commodity producers

TORONTO, O.N. — Scotiabank Economics is predicting next year will remain challenging for most commodity producers, with global growth expected to remain lackluster at best.

Patricia Mohr is Scotiabank Vice-President of Economics, and Commodity Market Specialist, and she says, “In particular, competition in oil markets could intensify in the first half of 2016 as sanctions on Iran are lifted.”

She’s referring to a key provision of the much ballyhooed, but highly controversial, Iran nuclear deal reached earlier this year in Switzerland.

However, she also says, “The gradual tightening of supplies of many commodities — linked to production curtailments and a sharp slowdown in capacity expansion — in the face of rising demand should start to boost prices across a broad front by 2017.”

The year-end review and 2016 outlook predicts a number of commodities will outperform in the coming year and among Ms. Mohr’s top picks for investors in 2016 is oriented strand board.

The Scotiabank report says the panel board used in residential construction was the top performing industrial commodity this year.

It also says OSB prices should strengthen further by the second half of next year, as U.S. housing starts gradually recover in the face of limited supply.

On the downside the Scotiabank Commodity Price Index — after rallying in October — lost ground again last month, declining 5.4 per cent and on a year-over-year basis will end 2015 down more than 30 per cent.

The report also says while many commodity prices remain well above the 2008-2009 recessionary lows, today’s weakness is broader based, extending to ferrous metals, propane and natural gas, which opened this week still below $2/1,000 cubic feet.