ABN Amro has forecast a weak year for oil and steel prices in 2013.The overall outlook in the bank’s Q4 2012 Commodity Outlook is one of general stability, with cyclical precious metals, natural gas, base metals and corn expected to rise.

ABN Amro expects US commodities markets to perform strongly in line with economic recovery, while the ongoing eurozone crisis will continue to have a drag on the European market.

China, with growth levels of 8% forecast, will experience slower growth in its commodities sector, as the transformation from investment-led growth to consumer demand-led growth continues.

Casper Burgering, vice- president and senior sector economist in ABN Amro’s sector and commodity research team, tells GTR that prices for oil, steel and steel-making raw materials will decline until 2014 due to structural overcapacity.

Burgering says oil prices will fall in line with the predicted easing in geopolitical tensions over the forecast period. For steel, the reasoning is twofold: overproduction and lack of demand.

“In China,” he explains, “you have a lot of inefficient steel mills and their capacity is too high. That’s also the case in Europe – at this moment there’s too much capacity for steel and you’re seeing all sorts of movement, like ArcelorMittal closing some mills because demand is too low. It simply costs too much.”

Lack of European demand is likely to have a big impact on steel prices. Construction demand will remain weak, while demand for household appliances is unlikely to rise.

The bank expects resource-rich Mongolia to increase its global standing in 2013. Burgering explains: “Mongolia has vast resources of commodities like coke, coking coal and hard coking coal. They’re the top supplier to China and that will only increase, so that’s a real growth area for coal at least.”

With both Japan and Germany due to begin decommissioning their nuclear facilities, there could be another boon on the horizon for coal. But such initiatives, Burgering points out, will take a long time to take effect.