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Scotiabank Economics’ Year-End Review and Outlook for Commodities in 2016

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Scotiabank Economics’ Year-End Review and Outlook for Commodities in 2016






After rallying in October, Scotiabank’s Commodity Price Index lost ground again in November, declining 5.4% month-over-month (m/m), and will end 2015 down more than 30% from a year ago. While many commodity prices — including base metals (excepting nickel) — remain well above the 2008-09 recessionary lows, today’s weakness is broader based, extending to ferrous metals, natural gas & propane and, to a lesser extent, potash.



“The coming year 2016 will remain challenging for most commodity producers — with global growth expected to remain lackluster at best,” said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. “In particular, competition in oil markets could intensify in the first half of 2016, as sanctions on Iran are lifted. On a more positive note, 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.”



According to the report, a number of commodities will outperform in the coming year. Ms. Mohr’s ‘top picks’ for investors in 2016 include:


  1. Oriented strand board (OSB) – a panel board used in residential construction and the ‘top’ performing industrial commodity of 2015. OSB prices should strengthen further by the second half of 2016, as U.S. housing starts gradually recover in the face of limited supply.
  2. Zinc – concentrate supplies will tighten due to mine depletion at Century & Lisheen in the second half of 2015, already announced mine production cuts in 2016 and extremely limited new mine development over the balance of the decade. Zinc is an important commodity in Canada.
  3. Lithium – used in lithium-ion batteries for hybrid and electric cars, is of interest to mitigate climate change. Lithium prices have climbed about 15% in 2015 to US$7,500 per tonne, with strong demand in China.



    Read the full Scotiabank Commodity Price Index online at:,,3112,00.html.



    Scotiabank provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.



    About Scotiabank



    Scotiabank is Canada’s international bank and a leading financial services provider in North America, Latin America, the Caribbean and Central America, and parts of Asia. We are dedicated to helping our 23 million customers become better off through a broad range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. With a team of approximately 90,000 employees and assets of $856 billion (as at October 31, 2015), Scotiabank trades on the Toronto (TSX: BNS) and New York Exchanges (NYSE: BNS).


Posted December 21, 2015

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