JOHANNESBURG (miningweekly.com) – It is too early to expect the start of a new sustaining upcycle for commodities, Macquarie states in its latest quarterly outlook for global commodity markets.

In a nigh 100-page commodities compendium, the commodity trading group states that despite a narrative of under-investment, underlying production is not currently constrained and the expectation is that most markets will be in physical surplus for 2024, amid individual commodity outlooks being increasingly nuanced.

Another key point is that the taming of inflation should set the scene for strong cyclical commodities price performance, along with significant demand divergence between those commodities which are beneficiaries of the energy transition and those that are not.

Among the medium-term winners cited are electrification metals, driven by the energy transition, led by battery electric vehicle penetration and the build-out of solar generation capacity.

Palladium is among the medium-term strugglers cited, owing to its falling internal combustion engine market share.

Bearishness on iron-ore is put down to the likelihood of fourth-quarter commercial or policy-driven steel production cuts, while bearishness on lead is based on apparent long investor positioning not being supported by fundamentals.

Most preferred in the next six to nine months are precious metals and lithium – precious metals owing to slower global growth setting the scene for a return of financial inflows, and lithium on the basis of the destocking cycle having run its course.

California carbon bullishness was expressed, based on the view that policy reform should support expectations for a tighter market outlook.

The combination of moderating core inflation, struggling growth, and softening labour markets likely mean that central bank hiking cycles are drawing to a close. Despite this, still-elevated core inflation is likely to keep policy constrained in coming months and limit the chance of rate cuts until 2024, the report to Mining Weekly states.