Industrial metals, liquefied natural gas and steel are set to finish 2017 on top of the world as a crackdown on pollution in China, the world's no.2 economy, boosts demand for cleaner fossil fuels and raw materials vital to clean-tech industries. For 2018, analysts predict more of the same: accelerating growth in major economies and increased infrastructure spending will drive price rises for industrial commodities and energy sources beyond the multi-year highs they're now touching.
"I think we have seen the end of low commodity prices as funds are expected to focus on commodities in 2018, with strong economic growth," said Terry Reilly, senior commodities analyst with Chicago-based Futures International. Metals used in the booming renewable energy sector, including copper for transmission lines and solar panel wiring, have seen strong demand and price rises, as have materials like aluminium used in electric vehicles.
Copper and aluminium have risen by almost a third this year to four-year highs in the last trading week of 2017 of $7,259 and $2,270 a tonne respectively. Pan Pacific Copper, Japan's biggest copper smelter, expects copper prices to rise more than a quarter over the next two years as global demand continues to grow and out paces supply.
Shanghai rebar futures have climbed almost 45 percent this year, to over 3,815 yuan ($585.62) per tonne, driven by the closure of low-quality Chinese steelmaking plants and production curbs - to fight pollution. High construction activity also supported steel. Liquefied natural gas (LNG) went from loser to winner, in part for seasonal factors.
Asian spot prices for liquefied natural gas have doubled since June, to the highest level since late 2014 of over $11 per million British thermal units. Until the last quarter of the year, LNG had been one of 2017's worst performing commodities.
The late rally has been driven by a huge gasification programme in China which this year alone moved millions of households and industry from coal to gas for heating, just as a cold winter bites. China's gasification is aimed squarely at reducing coal use amid a determined effort to roll back pollution that has plagued cities for years.
"We have seen some serious crackdown on pollution in China, that will boost demand for metals and gas," Reilly said. As part of this policy, China is making huge investments into renewable power generation.
World solar power capacity has ballooned to around 300 gigawatts (GW) from just 1 GW in 2000, according to International Renewable Energy Agency (Irena) data, a number set to double by 2020. Growth is largely driven by China, approaching 100 GW of capacity. Irena says China alone can add 50 GW a year of capacity.
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