High demand from emerging markets looks set to push commodity prices up this coming year, according to Columbia Threadneedle.
Commodity prices are presently “bouncing along the bottom”, says Columbia Threadneedle head of commodities David Donora who notes that the Bloomberg Commodities Index rose only 11.8 per cent in 2016.
“That does not signal a bull market. In my view, a commodity bull market is when we experience a doubling or tripling of commodity prices,” Mr Donora said.
“In the bull market of 2000-2008, the index tripled in value, that was a full commodity bull market.”
Mr Donora said the commodity supply side was not presently positioned to respond to “significant demand growth”, something likely to occur in 2017 as demand from emerging markets, especially those in Asia, looks likely to exceed market expectations.
“China has been going through economic restructuring for a number of years,” he said.
“We believe that it is coming through that and there will be stronger consumer-led demand from China and all Asian emerging markets.”
Increasing prices is likely to be a widespread trend, with base metals and oil leading demand, and could signal the start of a new commodity bull market, Mr Donora said.
“We have had the end of the bear market, after which there is normally a period of bouncing along the bottom,” he said.
“While this historically has persisted for two to five years, we think that a focus on improving the lot of consumers could bring this forward to 2017.”