The global commodities landscape is undergoing a profound transformation. After the China-driven supercycle of the 2000s, markets now face a “low-price, high-risk” environment, shaped by weak aggregate demand, ample supply in many sectors, and strategic shortages in critical materials.
Producers, investors, and policymakers must navigate a world of persistent geopolitical shocks and climate events, adjusting strategies to an era of fragmented trade and evolving energy needs.
Big Picture: From Supercycle to “Low-Price, High-Risk” World
In 2025 and 2026, commodity prices are projected to fall sharply. The World Bank forecasts a near 12% drop in 2025 and a further 5% in 2026, reaching a six-year low in real terms. While precious metals show pockets of strength, most bulk commodities—from oil to agricultural staples—face downward price pressure.
This transition reflects a shift from the synchronized boom of earlier decades to a more measured phase driven by population growth, middle-class expansion in Asia, and the energy transition. Demand remains robust but more modest, with non-OECD markets playing the leading role.
Meanwhile, supply investments made during the boom years are maturing. New capex is restrained by higher interest rates and trade tensions, but existing capacity continues to inject volumes into markets, maintaining overall availability even as strategic materials tighten.
Macro Drivers: Growth, Inflation, Dollar, and Trade Policy
Weakening global growth is the primary headwind for commodity demand. Industrial activity has faltered, and quarters with negative per-capita growth historically trigger steep index drawdowns. Europe’s slow manufacturing and high inventories contrast sharply with Asia’s ongoing expansion.
- Inflation stuck around 3%, influencing how commodities serve as an inflation hedge.
- A strong US dollar makes dollar-priced goods cheaper for US buyers but pricier for emerging markets.
- Local supply dynamics—surpluses versus shortages—determine price resilience.
Trade policy adds uncertainty. A surge in new tariffs and export controls on industrial and food commodities threatens to undercut volumes. In agriculture, US–China tensions risk retaliatory levies on grain, further squeezing an already subdued agribulk market.
Energy: Oil, Gas, Coal, and the Transition
Oil markets are “comfortably supplied” but exposed to geopolitical volatility. Forecasts place Brent crude around $74/bbl in 2025 and $66/bbl in 2026. OPEC+ has delayed and extended output increases, moderating surpluses, but non-OPEC+ supply from the US, Canada, Guyana, and Brazil continues to outstrip demand growth.
Demand for liquid fuels is led by non-OECD Asia, particularly India, while OECD regions see flat or declining consumption amid efficiency gains and EV adoption. Upside price risks stem from Middle East tensions or new sanctions, even as rerouted Russian exports and Asia-bound discount buying reshape trade flows.
Natural gas and LNG markets are tightening. As US export terminals expand, domestic prices are set to rise, narrowing historic price gaps. Gas demand benefits from coal-to-gas switching in power generation, growing electrification, and surging data-center consumption driven by AI.
- Expanding LNG export capacity transforming global interdependence
- Europe reducing pipeline reliance but facing shipping risks
- Asian demand growth outpacing supply additions in peak seasons
Coal faces a paradox. Prices are forecast to drop by 27% in 2025, yet consumption hit record highs in 2023 and 2024. In emerging economies, coal remains indispensable for reliability and affordability, creating a clash between climate commitments and immediate energy security.
Metals & Mining: From Surplus Risk to Strategic Scarcity
Industrial metals are under pressure. Copper, aluminum, nickel, and others face projected price declines of around 10% in 2025. Oversupply emerges as EV adoption slows and new projects in nickel, cobalt, uranium, and rare earths come online, challenging earlier shortage forecasts.
China’s construction slowdown and Europe’s weak orders have swollen inventories, capping consumption. Yet beneath the surface, the shift to clean energy ensures that “green metals”—lithium, cobalt, nickel, and rare earth elements—retain long-term demand growth through 2035.
Navigating the Future: Strategies for Stakeholders
In an era of fragmenting trade and geopolitics, agility and foresight are vital. No single playbook fits all markets, but clear actions can position stakeholders for resilience and growth.
- Diversify supply sources to mitigate regional disruptions and policy shifts.
- Invest in critical minerals and energy-transition infrastructure for long-term value.
- Monitor macro signals—growth, inflation, and currency trends—to adjust exposures.
Producers should balance cost discipline with selective capacity expansion in high-growth regions. Consumers and traders must refine risk models to account for climate shocks and shifting trade corridors. Governments and multilateral bodies can facilitate stable investment climates through transparent policies and strategic reserves.
While commodity markets may look subdued in the near term, the underlying forces of demographic growth, decarbonization, and geopolitical realignment promise dynamic change ahead. By understanding interlinked drivers and embracing adaptive strategies, stakeholders can turn the commodities conundrum into an opportunity for sustainable prosperity.
