Many commodity prices set to dip in Q4, Macquarie says

Macquarie raised its one-year forward commodity price forecasts on the largest number of commodities since the start of 2011, telling clients metals and bulk commodity markets were in the midst of a mini-renaissance.

The trigger had been the release of data confirming that Chinese construction sector activity remained in a positive trend, together with signs of a nascent global industrial production recovery, analysts at Macquarie said in a research report sent to clients.

Critically, the Australian broker expected officials in Beijing to prolong the more commodity-intensive phase of the economic expansion through the next political transition in Asia's largest economy, in 2017.

That did not mean that long-term challenges such as overcapacity and industrial demand growth below previous historical averages had disappeared, the broker said. They were still very much in place, it added.

Indeed, even after the upwards revisions to the paths forecast for demand growth, they remained "sub-trend".

Nonetheless, "confidence that January 2016 marked a price bottom continues to grow," its analysts said in a research report published on Tuesday but dated 19 September.

Worth noting, China was behaving more and more like a typical northern hemisphere industrial economy both in terms of demand patterms and working capital moves.

That, Macquarie explained, meant that: "November and December are now weak months globally. Moreover, with many Chinese property developers well ahead of targets YTD, our analysts expect them to reserve some resources for next year. As such, from current price levels we expect most to be lower by year-end, with the non-exchange traded commodities still at risk of a whiplash lower during this process."

On an 18-month view, the broker liked exposure to nickel, zinc, gold and silver. It also believed iron ore prices could hold up better through 2017 than many expected - albeit below then current levels.

The analysts had penciled in calendar year 2017 price targets of $11,625 per tonne and $2,425 per tonne for nickel and zinc, respectively.

Gold and silver were seen at $1,381 and $20 each per ounce.

Macquarie also forecast that steel and the bulk commodities would underperform in the fourth quarter and upside also existed in nickel and alumina, notwithstanding the structural headwinds in the latter.