2023-2024: Global economy and commodity prices
Exxaro says global inflation rates continued to trend down, enabling central banks to consider cutting interest rates. The expectation is for the Federal Reserve, the European Central Bank, the Bank of England, and the South African Reserve Bank, amongst others, to start lowering official policy interest rates during the remainder of this year.
The initial policy rate cuts will mark the end of the most aggressive rate hiking cycle in four decades. With inflation rates retreating and interest rates easing imminent, the global economy is expected to maintain its momentum during 2024. After a 2.7% increase in 2023, world real GDP is expected to expand at the same pace in 2024.
Seaborne thermal coal prices started the year under pressure due to weak demand in Asia and Europe and lower natural gas prices. As 1H24 progressed, prices strengthened due to concerns around the impact on tightening sanctions on Russia, ongoing geopolitical tensions in the Middle East, disruptions to US coal exports to India following the collapse of the Baltimore bridge as well as disruptions to rail operations on South Africa’s main coal export line, resulting in higher European natural gas prices.
The volatility in steel demand continued to be the key driver for the iron ore market and pricing. Fading optimism and rising concerns for China’s steel demand weighed on sentiment towards the end of 1H24.
The indication from the Chinese government regarding steel production curbs this year has dampened market sentiment.
