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Commodity markets appeeear to be going through a consolidation phase, regaining ground lost during the course of the year in price terms, with positives being factored into commodity prices – such as a likely weakening of the US dollar, and an eventual China recovery. We’ve seen our big miners up between 20% and 30% in price terms. However, these positives are being counteracted by the reality of further rate rises, the possibility of a global recession, and major bumps along the road with respect to China’s economic recovery.

Iron Ore

Iron ore has consolidated solidly above $100 per tonne in price terms, but is finding it tough going cracking the $110 per tonne level. Prices have recovered strongly from below $80 a tonne just a month ago on the back of China optimism, but the reality is that China’s economic recovery is going to be a difficult process, and iron ore prices will remain volatile. Having said that, there’s been encouraging news this week with China Evergrande Group resuming work on some property projects to offer relief to a market worried about Chinese demand. The overall outlook for 2023 suggests further price upside, as seasonal restocking and greater industrial demand means greater Chinese appetite for steel – and thus iron ore.


Gold has been held captive by the Federal Reserve and recent contradictory sentiment with respect to the trajectory of interest rates, which like iron ore means that the path to recovery will be a volatile one. Nonetheless, 2023 looks set to be a promising year for gold. It looks like we have seen the worst as far as ETF gold sales are concerned (refer to attached graphic), gold has performed well in terms of other currencies, and investor and central bank buying remains sound.  Prices are holding firm above the psychologically important $1800 per ounce level, with the potential to push higher towards the $2000 level during 2023.

For China, the need to find an alternative to dollars, which dominate its reserves, has rarely been greater. Tensions with the US have been high since measures taken against its semiconductor firms, while Russia’s invasion of Ukraine has demonstrated Washington’s willingness to sanction central bank reserves. China recently reported an increase in its gold reserves for the first time in more than three years, shedding some light on the identity of the mystery buyers in the bullion market. China’s total gold holding is now 1,980 tons, the sixth-biggest central bank bullion hoard in the world.

Base Metals

Base metals are benefiting from low inventory levels on world metal exchanges, as well as a weakening dollar, however underlying demand remains tepid. The outlook for 2023 will depend a lot on the strength of China’s recovery. Copper and nickel remain the best bets in 2023, as the supply side could see disruptions, and in the case of copper, fund short positions could be turning (refer to graphic). Copper supply looks especially critical over the coming years. Glencore estimates that if the world is going to meet its net zero emissions targets, it will be cumulatively short of copper to the tune of 50 million tonnes by 2030 as the global pivot towards green energy transition boosts copper usage in grid upgrades, solar panels and electric vehicles. New mines can’t be built and commissioned that fast, even if the will is there.

Perth Basin Corporate Action

Just how important energy is in the current environment is reflected in the ongoing battle for control of Perth Basin gas play, Warrego Energy (ASX: WGO). This is also positively impacting the performance of our coverage stock, Strike Energy (ASX: STX), which also has major exposure to the Perth Basin and is a project partner with WGO. What was initially a takeover battle between Strike Energy and Beach Energy for control of Warrego has now seen Gina Rinehart’s Hancock Energy enter the fray, along with Mineral Resources’ Chris Ellison. The attached graphic shows the price performances of STX and WGO over the past year.

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