Emerging Markets Commodity Consumption: Trends and Insights

Commodity Crossroads 2025: Navigating Opportunities in a Shifting Global Landscape

As we look ahead to 2025, are global financial markets truly headed for a bearish run, or are there hidden opportunities waiting to be discovered? While many investment banks have painted a cautious picture for commodities following a challenging 2024, marked by subdued demand and robust supply, a closer examination reveals a more complex and nuanced reality. In this article, we’ll explore the major trends shaping **global commodity markets**, from the shifting dynamics of oil and natural gas to the enduring appeal of gold and the challenges facing industrial metals like steel. Beyond commodities, we’ll also delve into the compelling **investment opportunities in emerging markets**, highlighting specific regions poised for growth, and analyze the broader macroeconomic factors, such as tariffs and the US dollar’s trajectory, that are influencing these vital sectors. Our goal is to equip you with a clearer understanding of the potential paths forward.

Commodity Markets in Flux: A Nuanced Outlook for 2025

The year 2024 saw significant price plunges across many commodity sectors, largely driven by weaker global demand, particularly from China, coupled with strong supply. This led many financial institutions to issue bearish forecasts for 2025. However, a deeper dive into individual commodities reveals a more varied picture, where some sectors are poised for recovery or continued strength, while others face persistent headwinds. Understanding these individual stories is crucial for any investor.

Here is a summary of the varied outlook for key commodities:

Commodity	2024 Performance	2025 Outlook	Key Drivers
Oil (Brent Crude)	Subdued, prices falling	Cautious, potential further falls	OPEC+ decisions, China demand, EV transition
Natural Gas (US)	Subdued, strong production	Boom year, strong support	Russia-Ukraine pipeline deal expiration, Europe LNG demand, US export capacity
Steel	Bearish, overcapacity	Persistent headwinds, slow improvement late 2025	China property sector, increased Chinese exports, interest rate cuts
Gold	Shining brightly, bullish	Bullish, continued strength	Anticipated Fed rate cuts, falling Treasury yields, EM central bank diversification

For example, let’s consider the **oil market dynamics**. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) faces a critical decision: maintain production cuts and risk losing market share, or increase supply and potentially depress prices further. We anticipate increased production in 2025 if prices don’t deteriorate significantly. While global oil demand remains solid, it’s not spectacular, with China’s economy being a key area of weakness. Furthermore, developed countries are seeing a long-term decline in vehicle fuel demand due to the transition towards **Electric Vehicles (EVs)**. This sentiment could lead to further falls in Brent crude prices, suggesting a cautious outlook for oil.

Several factors contribute to the cautious outlook for oil prices:

OPEC+ production decisions will significantly impact global supply.
China’s economic performance remains a critical determinant of demand.
The long-term shift towards Electric Vehicles (EVs) in developed nations is reducing fuel consumption.
Potential for increased supply from non-OPEC+ producers could further depress prices.

In stark contrast, the **natural gas market** appears set for a boom year in 2025. Prices were subdued in 2024 thanks to strong production and high storage levels. However, a significant shift is on the horizon: the expiration of the Russia-Ukraine pipeline deal by the end of 2024. This event is expected to dramatically increase Europe’s demand for **Liquified Natural Gas (LNG)**. The US, with new LNG export capacity coming online from the Gulf of Mexico, is positioned to become a main source market. Coupled with surging industrial demand and piped exports to Mexico, these factors are expected to provide strong support for US natural gas prices. This is a clear example of how geopolitical events and infrastructure developments can rapidly reshape commodity fortunes.

Not all metals share the same fate. The **steel market**, for instance, is grappling with severe **overcapacity**. Subdued demand, particularly from China’s contracting property sector, combined with increased exports from Chinese mills (even despite tariffs), has kept prices bearish. New capacity additions are expected to worsen this oversupply. However, there’s a glimmer of hope: global metal demand outside of China is projected to slowly improve in late 2025 as central banks in advanced economies begin to reduce interest rates, which typically encourages spending in capital-intensive sectors. This highlights the importance of distinguishing between regional and global demand trends.

Gold’s Enduring Appeal and the Reshaping of Reserves

Amidst the varied performance of other commodities, **gold** has been a notable outlier, shining brightly in 2024 and maintaining a bullish outlook for 2025. What makes this precious metal so resilient? We believe several powerful factors are at play, making gold an attractive asset in uncertain times.

One of the primary drivers is the anticipated shift in global monetary policy. The Federal Reserve’s projected rate cuts, such as the 50 basis points expected in September 2024, will likely lead to **falling Treasury yields**. For investors, this significantly decreases the **opportunity cost** of holding non-yielding assets like gold, making it more appealing. When you can earn less from traditional bonds, the stability and potential appreciation of gold become more attractive, stimulating investment demand, often seen through **Exchange Traded Funds (ETFs)**.

Beyond individual investors, **emerging market central banks** are playing a crucial role in gold’s ascent. Nations like China are significantly increasing their gold purchases as part of a strategic effort to diversify their foreign exchange reserves away from the US dollar. This trend isn’t just about hedging against currency fluctuations; it reflects a broader geopolitical move towards reducing reliance on a single reserve currency. China, for instance, has been the largest buyer, acquiring over 180 tonnes in the last two years. This robust demand from official institutions, combined with tight market fundamentals and falling yields, paints a very bullish picture for gold prices in the coming year. It’s a clear signal that gold is not just an inflation hedge, but also a tool for geopolitical diversification.

Emerging market central banks are diversifying their reserves for several strategic reasons:

To reduce dependence on the US dollar, mitigating geopolitical risks.
As a hedge against currency fluctuations and potential inflation.
To enhance the stability and security of their national reserves.
To signal a shift in global financial power dynamics.

Even in the agricultural sector, there’s a nuanced story. After sharp declines in 2024 due to strong supply and high stocks-to-use ratios for crops like soybean and maize, **grain prices** are showing signs of bottoming out. We expect maize and wheat prices to rise from current levels, though they are likely to remain below their 2021-2023 peaks. However, rice prices plunged after India lifted its export restrictions and are set to decline annually in 2025. Interestingly, rising **fertilizer prices** are expected to put a floor under other agricultural commodities, preventing a complete collapse. This demonstrates how interconnected various commodity markets can be.

Emerging Markets: Unlocking Selective Growth Opportunities

While commodity markets present a mixed bag, **emerging markets (EMs)** have, in many respects, stolen the spotlight. Year-to-date in 2025, EM equities have significantly outperformed global benchmarks like the MSCI World and S&P 500. This outperformance underscores the importance of a selective, active management approach, as not all EMs are created equal. So, what exactly are the key drivers of returns in these dynamic economies?

We’ve identified several factors that contribute to strong performance in emerging markets:

Currency stability and appreciation: A strong local currency can significantly boost returns for foreign investors.
Robust GDP growth: Economies expanding rapidly offer more opportunities for corporate earnings.
Political stability: Predictable governance reduces investment risk.
Exposure to global themes: Economies benefiting from trends like **Artificial Intelligence (AI)** or the **energy transition** are well-positioned.
Attractive risk-adjusted valuations: Finding companies that are undervalued relative to their growth prospects.
Positive growth prospects and momentum: Identifying markets on an upward trajectory.
Quality of companies: Strong balance sheets and good management.

Let’s look at a few specific examples that highlight these drivers:

China: Despite global skepticism, China remains a core focus for EM investors. Its government is implementing pro-growth policies, targeting a 5% GDP growth for 2025, supported by an accommodative policy mix. We are particularly constructive on sectors like software and consumer discretionary (including travel, local services, AI, and gaming) due to attractive valuations, strong earnings momentum, and policy tailwinds like “Digital China” and support for “home-grown” technology.
Greece: This European emerging market has demonstrated a strong risk-adjusted return profile, especially after its recent investment-grade upgrade. Greece is anticipated to achieve above-consensus GDP growth of 2.5% in 2025. We see positive potential in Greek banks, which are poised for significant capital return to shareholders.
Argentina: This South American nation presents a compelling macro recovery story. Since December 2023, Argentina has embarked on bold reforms, including deregulation, privatization, and fiscal discipline. These efforts have led to a dramatic drop in annual inflation, from 211% to 47% by April 2025, with projections of 37% for the full year 2025. This stabilization creates significant upside in its banking sector as private credit begins to expand.

These specific examples demonstrate the diverse opportunities within emerging markets:

Country	Key Drivers of Growth	Investment Focus	2025 Outlook
China	Pro-growth policies, accommodative policy mix, “Digital China”	Software, consumer discretionary (travel, AI, gaming)	Targeting 5% GDP growth
Greece	Investment-grade upgrade, strong risk-adjusted return profile	Greek banks (capital return)	Above-consensus GDP growth of 2.5%
Argentina	Bold reforms (deregulation, privatization, fiscal discipline), inflation drop	Banking sector (private credit expansion)	Inflation projected at 37% for full year 2025

The Macroeconomic Headwinds and Tailwinds: Tariffs, the Dollar, and Demand Dynamics

The global economic landscape is constantly shifting, and several macroeconomic factors are creating both headwinds and tailwinds for commodity markets and emerging economies. Understanding these broader forces is essential for making informed investment decisions.

Tariffs, for instance, continue to increase trade pressure globally. However, their impact is far from uniform. Emerging markets primarily driven by domestic demand, such as India and Brazil, tend to be more insulated from these trade barriers. China, while a major exporter, has responded to tariff pressures with internal stimulus and a strategic shift towards higher-value sectors. Interestingly, tariffs often accelerate a divergence between EM and developed market growth trajectories, sometimes benefiting EMs by encouraging greater self-sufficiency and regional trade. This demonstrates the resilience and adaptability of these economies.

Another crucial factor is the anticipated weakening of the **US dollar**. Historically, a weaker US dollar has provided significant support for EM asset returns through several mechanisms:

The anticipated depreciation of the US dollar is driven by several underlying macroeconomic trends:

Ongoing US fiscal stimulus measures contributing to increased national debt.
Evolving inflation expectations which might prompt Federal Reserve policy adjustments.
Growing concerns over the long-term sustainability of US fiscal policy.
Potential for other major central banks to begin tightening monetary policy, reducing the dollar’s relative attractiveness.

It makes foreign capital inflows more attractive, as investors can get more local currency for their dollars.
It reduces the burden of dollar-denominated debt for many EM governments and corporations.
It tends to boost commodity prices, as many commodities are priced in dollars, and many EMs are commodity exporters.
It provides EM central banks with greater policy flexibility, as they face less pressure to defend their currencies.

We anticipate further US dollar depreciation due to factors like ongoing US fiscal stimulus, evolving inflation expectations, and growing concerns over US fiscal sustainability. This could provide a significant tailwind for emerging markets in the coming year.

Finally, global demand dynamics remain a key determinant for commodity prices. While China’s property sector faces challenges, its massive investments in **renewable energy** (adding 1,100 GW) and **Electric Vehicles (EVs)** (adding 22 million) have created new pockets of intense demand for specific materials. This shift is reshaping resource consumption patterns globally.

Deep Dive: Copper and Uranium – Contrasting Fortunes in the Resource Sector

To further illustrate the diverse nature of commodity markets, let’s take a closer look at two critical resources with contrasting outlooks: copper and uranium. These examples demonstrate how supply constraints and demand shifts create unique opportunities and risks.

The **copper market** presents a fascinating paradox. Despite modeled market deficits since late 2019, we’ve seen a surge in exchange inventories, which tripled after a short squeeze in April/May, though they are now edging downward. Global copper demand remains robust, outpacing supply with 4% growth year-to-date through August 2024, driven by developed economies (3.2% growth) and non-OECD nations (8.3% growth).

However, a critical factor is **China’s copper consumption**. After a 13% surge in 2023, China’s consumption growth decelerated to 3% year-to-date in 2024. More significantly, China has transitioned from under-consuming to **overconsuming copper** since 2018. This overconsumption, driven by massive investments in renewable energy and EVs, has led to an additional 15 million tonnes consumed in just six years. While this signals strong near-term demand, it also suggests a potentially less favorable long-term outlook if China’s growth in these sectors moderates. Meanwhile, mine supply growth, particularly from the Democratic Republic of Congo (DRC), has moderated to 3% year-over-year.

In stark contrast, the **uranium market** faces significant **supply challenges**, creating a decidedly bullish outlook. Kazatomprom, the world’s largest uranium producer, has announced that its production guidance for 2024-2025 is impossible to meet due to a sulfuric acid shortage and construction delays. Similarly, Cameco, the second-largest producer, is also expected to face shortfalls. Both companies may find themselves committed to selling more uranium than they can produce, potentially forcing them to buy on the spot market to fulfill contracts. This tight supply is meeting consistently increasing demand, fueled by new nuclear reactor builds, restarts, and extensions globally. The combination of constrained supply and rising demand strongly suggests higher uranium prices in the near future, making it a compelling, albeit specialized, segment of the commodity market.

A quick comparison highlights the differing market dynamics for copper and uranium:

Resource	Supply Situation	Demand Drivers	2025 Outlook
Copper	Mine supply growth moderated, China overconsumption	Global robust (developed & non-OECD), China’s renewables/EVs	Robust demand, but long-term caution on China’s overconsumption
Uranium	Significant supply challenges (production shortfalls, delays)	New nuclear builds, reactor restarts, extensions globally	Decidedly bullish due to tight supply and rising demand

Conclusion: Navigating a Complex Yet Opportunity-Rich Landscape

The year 2025, as we’ve explored, presents a complex yet opportunity-rich landscape for investors willing to look beyond broad bearish sentiments. While traditional commodity markets face diverse pressures, strategic shifts in global monetary policy, geopolitical realignments, and robust growth in specific emerging economies are creating distinct avenues for value creation. Gold’s continued strength, driven by central bank diversification and falling yields, stands out as a reliable performer. The anticipated boom in natural gas, fueled by European demand and US export capacity, highlights how specific market shifts can create significant upside. Furthermore, the selective outperformance of key emerging markets like China, Greece, and Argentina underscores the importance of disciplined, insight-driven investment in navigating the evolving global financial ecosystem.

Understanding these macro trends and micro-level dynamics is crucial. The anticipated weakening of the US dollar provides a significant tailwind for emerging markets, easing debt burdens and attracting capital. Meanwhile, tariffs, while creating trade pressures, are also fostering self-sufficiency and driving divergent growth trajectories that can benefit nimble EM economies. By paying attention to these nuanced signals and focusing on areas of fundamental strength and strategic importance, you can better position yourself to navigate the opportunities and challenges of the year ahead.

Disclaimer: This article is intended for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security or commodity. Investment in financial markets involves risks, and you should consult with a qualified financial professional before making any investment decisions.

Frequently Asked Questions (FAQ)

Q: What are the primary drivers for gold’s bullish outlook in 2025?

A: Gold’s bullish outlook is largely driven by anticipated Federal Reserve rate cuts leading to falling Treasury yields, which reduces the opportunity cost of holding gold. Additionally, emerging market central banks are significantly increasing gold purchases to diversify reserves away from the US dollar, providing strong institutional demand.

Q: Why is the natural gas market expected to boom in 2025?

A: The natural gas market is poised for a boom primarily due to the expiration of the Russia-Ukraine pipeline deal by the end of 2024, which will dramatically increase Europe’s demand for Liquified Natural Gas (LNG). New US LNG export capacity and surging industrial demand also contribute to this positive outlook.

Q: How might a weakening US dollar impact emerging markets?

A: A weaker US dollar historically supports emerging market asset returns by making foreign capital inflows more attractive, reducing the burden of dollar-denominated debt for EM entities, boosting commodity prices (as many are dollar-priced), and providing EM central banks with greater policy flexibility.