29 Apr 2020
With about one-third of the world’s population in lockdown at the time of writing and a barrel of Brent crude selling for prices not seen in many years, the coronavirus has led to an economic shock as fast and hard as the world has ever seen.
Clearly, the outlook for commodity markets will depend on the economic impacts of the virus, but the extent and duration of the pandemic remain uncertain. There is a scenario in which China’s efforts to control the virus prove effective enough to enable a China-led global demand recovery. We would expect this to be most immediately beneficial for metals & mining, especially base metals & bulks. However, at this stage — with the virus far from contained, governments still formulating their responses, and central banks beginning massive stimulus programmes to try to limit the economic damage — the range of potential outcomes remains wide.
In the Natural Resources Indicator, we assess the risks, opportunities and investment outlook across a broad range of commodity markets and environmental sectors. We include deeper dives on the following:
Penning this from our respective homes, normality still seems some way off. But the pandemic has not altered the fact that the world still requires every one of the commodities we invest in, as well as companies that produce them. Moreover, there remains a huge task ahead of us all to put the global economy on a more sustainable footing, and we expect the energy transition will continue across industries, notwithstanding a near-term hiatus.
Not every commodity and environmental company will get through this unscathed. But it is worth remembering that those that do will have a tremendous opportunity to grow and gain market share. In the meantime, there will be opportunities to buy into some good businesses at prices we have not seen for a long while.