Prices to stay high for longer

The war in Ukraine and its negative impact on commodities supply has prompted us to revise up our forecasts for the prices of most commodities in 2022. Regardless of the outcome of the war, we think energy prices will remain historically high this year as Western countries, particularly in Europe, reduce imports from Russia. Alternative sources of supply will prove more costly, not least because they will come from further afield with higher transport costs. High energy prices will in turn raise the cost of production of most other commodities and act as a floor under prices. That said, we expect slower growth in global economic activity, particularly in China, to weigh on the prices of industrial metals later this year. We also expect the prices of most agriculturals to fall back from their current highs as supply chains adjust and high prices incentivise planting and exports, but again prices will remain elevated for much of this year.