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Commodities prices are expected to stay muted for the coming quarter, according to a new report.

ABN Amro’s Quarterly Commodity Outlook predicts that the decline in oil prices that started in February will continue for the next few months. Hans Van Cleef, energy economist at the bank, tells GTR that as the heating season ends, oil prices could drop by 10% over the next few weeks.

On the political front, June’s Iranian elections could have an inflationary effect on oil prices. It’s likely that any fallout from the ballot will be based on rhetoric, with bellicose statements on the Strait of Hormuz expected. But with Iranian oil exports already down 50%, it’s unlikely that any action that would further impact the Persian purse will be taken.

On the ferrous and base metals side, various macroeconomic factors continue to have a lag on pricing. There’s a huge amount of over-capacity in global production of aluminium, steel and nickel. While the construction and automotive industries in America have enjoyed some recovery, those in the eurozone continue to struggle.

Supply is far outstripping demand and, says Momchil Ivanov, head of structured metals and energy finance at ING, “we can expect some volatility in the short term explained by seasonal factors in aluminium and nickel, and additional pressure from unusually high stocks”.

Over-capacity is particularly apparent in the aluminium and steel industries in China, where the Chinese government has begun to take action. Casper Burgering, senior sector economist at ABN Amro tells GTR that China has started eliminating obsolete steel and aluminium plants and to consolidate the industry, which would provide buoyancy to the ferrous metals market.

“By the end of 2015, the top 10 aluminium smelters must account for 90% of the country’s total production capacity,” he explains. “The question remains whether this is feasible: the sector is very fragmented, with a few big smelters and many small smelters.”

Plans are also afoot to restructure the steelmaking sector, where China has “few large mills and many small mills”. The country plans to bring 60% of all steelmaking capacity under the control of the top 10 mills by 2015, something Burgering describes as “a very ambitious plan, with a chance of resistance from local governments”.

The fact remains, though, that with the slowdown in Chinese production, there is no economy on earth positioned to take up the slack. India is too service-orientated, while growing countries such as Indonesia and Vietnam are still much too underdeveloped to make a serious dent. This, it is expected, will continue to have a negative effect on ferrous metal prices for the foreseeable future.