Energy & Commodities, No. 10 - December 14, 2011

1. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department
by Jörgen Kennemar No. 10 • 14 December 2011
High crude oil prices despite global economic uncertainty
 A weaker global economy and the fiscal crisis in the EMU countries are pushing
metal and food prices broadly lower. Growth has also slowed in emerging
economies, led by China, but from a high level.
 Nickel, iron ore and lead posted the biggest declines in Swedbank’s Commodity
Price Index in September-November. In addition to lower demand for commodities,
investor interest has fallen as liquidity in the financial market is held in check by
higher capital requirements and economic uncertainty. Oil prices remain stuck at a
high level, however, partly due to shrinking inventories and increased consumption
in emerging economies.
Swedbank’s Total Commodity Price Index rose by OPEC summit on December 14 will therefore be a
2.5% in USD in November, driven by rising crude oil test whether member countries can agree on
prices. On average, crude prices climbed by 5.3%, production levels for the next half-year. But OPEC
making the price level 36% higher than the same is sharply divided: countries such as Iran,
period last year, despite that global growth Venezuela and Algeria want to limit production and
prospects have worsened during the fall. At the are warning that increased extraction in Libya and
same time the high price of crude – USD 113 on Iraq will eventually lead to lower prices. In other
average for the first 11 months of the year – is OPEC countries, led by Saudi Arabia, there are
weighing on an already fragile global economy. growing concerns that the high price of oil and
fragile global conditions could lead to an even
greater economic slowdown, which makes a
There are several reasons why oil prices have production volume of 30 million barrels necessary.
stubbornly stayed above the USD 100 level. For On the other hand, growing oil revenues have made
one thing, extraction has not kept pace with global
it possible for the Saudis to significantly increase
consumption growth in the last year, so inventories public spending and ease social tensions.
have shrunk. An increase in oil production of 0.4
million barrels per day in 2011, to 87.2 million, Oil consumption in the world, million barrels per day
hasn’t been enough to meet consumption growth,
which is expected to rise by 1 million barrels to 87.7
million. Rapidly emerging countries outside the
OECD, which make up about half of the global
economy – are consuming more oil when adjusted
for purchasing power parity. Since 2000 average oil
consumption has risen by 3.6% per year, but has
declined by 0.3% in OECD countries. As a result,
countries outside the OECD now account for about
half of global consumption, up from 37%.
Geopolitical uncertainty in the Middle East, which
poses a risk to production, is helping to maintain the
risk premium on oil. At the same time there is
disagreement among OPEC countries about
quotas, which has led to higher oil production than
official quotas would indicate. Saudi Arabia has
been criticised for raising its production to offset
what was lost in Libya, not least by Iran, which has
the second largest reserves in the region. The
Economic Research Department. Swedbank AB. SE-105 34 Stockholm. Phone +46-8-5859 1000.
E-mail: ek.sekr@swedbank.se www.swedbank.se
Legally responsible publisher: Cecilia Hermansson. +46-8-5859 7720.
Magnus Alvesson. +46-8-5859 3341. Jörgen Kennemar. +46-8-5859 7730.

2. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continued
No. 10 • 14 December 2011
Substantially lower capacity utilisation at Japan’s conditions are not as tight as for crude, especially
nuclear power plants after the tremendous damage now that the impact of last year's major flooding in
caused by last spring’s earthquake has led to higher Australia, one of the world's largest coal producers,
oil consumption. Before the earthquake nuclear has faded. Still, higher long-term energy
power accounted for 30% of the country's total consumption in emerging economies, where coal
energy production, and was expected to rise to 40% still represents a significant share of energy
by 2017. Lower nuclear power production should production, points to strong underlying demand for
also have an effect on the price of oil, especially coal and upward pressure on prices.
since Japan is the world's second largest consumer
after the US. In the wake of the nuclear disaster in
Fukushima, safety requirements have been Excluding energy commodities, Swedbank’s
tightened around the world at the same time that Commodity Price Index fell by 4.6%, marking the
seventh consecutive month the index has fallen and
several older nuclear power plants have been shut
down. Despite that global nuclear power production the first time it is lower than the same month last
fell in 2011 to 366 gigawatts (GW), it is still year. The price drop for non-ferrous metals
continued in November (1.9% in USD), but at a
expected to account for a growing share of
electricity production in coming decades. slower rate than the last two months. Prices rose for
zinc, copper and lead after declining since last
summer. The price of nickel fell during last month,
Trading in oil contracts for delivery in late 2012 and however, to just under USD 18 000 per ton, the
2013 indicates that crude prices will remain high lowest level in two years. The price of nickel is
despite the possibility of a slight decline on the trending lower at the same time that iron ore and
market. At the time of writing the price of crude for steel prices are also falling in pace with weaker
delivery at the end of next year was USD 106 per industrial activity. The latter noted the largest price
barrel, but it is expected to fall to just over USD 100 drop between October November, by 7.2% in USD.
by the end of 2013. Prices could quickly move, This means that iron ore and scrap prices have lost
however, if real economic conditions change nearly 20% in the last three months. This is a bigger
significantly, as they did during the second half of drop than for industrial metals that are priced daily
2008. The slowdown in the Brazilian economy on the global financial markets, which is probably
during the third quarter and in several Asian due more to speculative flows than in the case of
countries shows that emerging economies are iron ore and steel.
being affected by weaker demand from mature
industrial countries. Swedbank’s Commodity Price Index, USD
World crude oil stocks
Declining indicators for global industrial activity
suggest that metal prices will continue lower in
coming quarters, especially as the growth rate
weakens in the EU with a risk of spreading to
The price of coal has dropped in 2011, but from a emerging economies in 2012. Several Asian
high level, and since January has given back countries saw their growth rates decline this fall. In
12.6%. From a fundamental perspective, supply China, industrial production rose by 12.4% on an
2 (5)

3. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continued
No. 10 • 14 December 2011
annual basis in November, the lowest increase The price index for food commodities fell by 2.3% in
since 2009. At the same time Chinese housing USD in November, which means prices have fallen
prices have eased off significantly. cumulatively by nearly 12% in the last three-month
period (September-November). Lower imbalances
thanks to higher food production, which is expected
Since last summer global pulp prices have trended to exceed global demand, are contributing to till
lower, falling in November by an average of 4.6% in lower food prices. The UN’s Food and Agriculture
USD or 3.3% in SEK. A weaker global economy, Organization (FAO) estimates that grain production
falling prices and profit pressures have led to will grow in volume by 3.7% in 2011, compared with
production cutbacks in the forestry industry. Pulp
a consumption increase of just under 2%. As a
futures point to a further price decline in coming result, inventories have improved after having
quarters. Among agricultural commodities, cotton shrunk in 2010. Volatility in food prices suggests
has seen the biggest price change in the last year,
considerable price sensitivity, however, in the event
driven by both fundamental factors and speculation. of production disruptions or changes in the global
The price of cotton has been nearly cut in half since economy. The financial crisis in the EMU, which
last spring, when it reached record-high levels and
carries the risk of spreading to the global financial
a shortage was apparent. Conditions changed markets and hurting growth, is also driving food
during the summer and fall. In addition to increased prices downward. Lower food prices this past fall
supplies, prices have been hurt by lower investor
are expected to ease inflation pressures, especially
interest due to growing concerns about the fiscal in countries where food commodities weigh heavily
crisis in the EMU and its effect on the global in the consumer price index.
financial market.
Pulp and cotton prices in USD, monthly averages
Jörgen Kennemar
3 (5)

4. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department
by Jörgen Kennemar No. 10 • 14 December 2011
Swedbank Commodity Index - US$ - Swedbank Commodity Index - SKr -
Basis 2000 = 1oo 14-12-11 Basis 2000 = 1oo 14-12-11
9.2011 10.2011 11.2011 9.2011 10.2011 11.2011
T otal index 368,0 356,1 365,0 T otal index 265,6 257,4 267,4
Per cent change month ago 6,1 -3,2 2,5 Per cent change month ago 10,1 -3,1 3,9
Per cent change year ago 34,7 23,5 22,8 Per cent change year ago 26,9 23,2 21,4
T otal index exclusive energy 308,4 282,5 269,5 T otal index exclusive energy 222,6 204,2 197,4
Per cent change month ago -2,6 -8,4 -4,6 Per cent change month ago 1,0 -8,3 -3,3
Per cent change year ago 12,6 1,1 -5,0 Per cent change year ago 6,1 0,8 -6,2
Food, tropical beverages 298,3 275,0 268,6 Food, tropical beverages 215,3 198,8 196,8
Per cent change month ago -1,6 -7,8 -2,3 Per cent change month ago 2,1 -7,7 -1,0
Per cent change year ago 21,3 7,1 -0,6 Per cent change year ago 14,3 6,8 -1,7
Cereals 306,1 281,8 277,2 Cereals 220,9 203,7 203,1
Per cent change month ago -1,0 -7,9 -1,6 Per cent change month ago 2,7 -7,8 -0,3
Per cent change year ago 27,5 11,6 7,8 Per cent change year ago 20,1 11,3 6,6
T ropical beverages and tobacco 317,4 293,8 286,5 T ropical beverages and tobacco 229,1 212,4 209,9
Per cent change month ago -1,5 -7,4 -2,5 Per cent change month ago 2,2 -7,3 -1,2
Per cent change year ago 20,0 8,5 0,5 Per cent change year ago 13,1 8,1 -0,7
Coffee 212,2 193,3 192,9 Coffee 153,2 139,7 141,3
Per cent change month ago 0,4 -8,9 -0,2 Per cent change month ago 4,1 -8,8 1,1
Per cent change year ago 29,7 19,6 10,9 Per cent change year ago 22,2 19,3 9,6
Oilseeds and oil 251,9 229,8 224,2 Oilseeds and oil 181,8 166,1 164,3
Per cent change month ago -2,3 -8,8 -2,4 Per cent change month ago 1,4 -8,6 -1,1
Per cent change year ago 20,1 0,5 -8,9 Per cent change year ago 13,1 0,2 -10,0
Industrial raw materials 311,3 284,6 269,8 Industrial raw materials 224,7 205,7 197,6
Per cent change month ago -2,9 -8,6 -5,2 Per cent change month ago 0,8 -8,4 -3,9
Per cent change year ago 10,5 -0,5 -6,3 Per cent change year ago 4,0 -0,8 -7,4
Agricultural raw materials 195,6 186,9 173,7 Agricultural raw materials 141,2 135,1 127,3
Per cent change month ago -3,1 -4,4 -7,1 Per cent change month ago 0,6 -4,3 -5,8
Per cent change year ago 11,8 0,6 -8,9 Per cent change year ago 5,3 0,3 -10,0
Cotton 105,3 101,2 96,2 Cotton 76,0 73,2 70,5
Per cent change month ago 1,6 -3,9 -4,9 Per cent change month ago 5,5 -3,7 -3,7
Per cent change year ago 8,8 -10,0 -27,1 Per cent change year ago 2,5 -10,3 -28,0
Softwood 148,6 144,7 138,3 Softwood 107,3 104,6 101,3
Per cent change month ago -3,4 -2,6 -4,4 Per cent change month ago 0,2 -2,5 -3,1
Per cent change year ago -0,4 -5,7 -7,4 Per cent change year ago -6,2 -6,0 -8,5
W oodpulp 967,2 930,3 887,3 W oodpulp 698,1 672,4 650,0
Per cent change month ago -2,7 -3,8 -4,6 Per cent change month ago 0,9 -3,7 -3,3
Per cent change year ago -0,5 -3,7 -7,3 Per cent change year ago -6,3 -4,0 -8,4
Non-ferrous metals 257,2 236,7 232,3 Non-ferrous metals 185,6 171,1 170,2
Per cent change month ago -6,0 -8,0 -1,9 Per cent change month ago -2,4 -7,8 -0,5
Per cent change year ago 5,5 -10,2 -12,0 Per cent change year ago -0,7 -10,5 -13,0
Copper 8314,3 7370,9 7551,4 Copper 6000,8 5327,9 5532,2
Per cent change month ago -8,1 -11,3 2,4 Per cent change month ago -4,6 -11,2 3,8
Per cent change year ago 7,9 -11,1 -10,8 Per cent change year ago 1,6 -11,4 -11,9
Aluminium 2296,3 2174,5 2073,2 Aluminium 1657,3 1571,8 1518,8
Per cent change month ago -3,9 -5,3 -4,7 Per cent change month ago -0,3 -5,2 -3,4
Per cent change year ago 6,2 -7,3 -11,1 Per cent change year ago 0,0 -7,6 -12,2
Lead 2297,9 1946,4 1981,6 Lead 1658,5 1406,9 1451,7
Per cent change month ago -4,5 -15,3 1,8 Per cent change month ago -1,0 -15,2 3,2
Per cent change year ago 5,2 -18,2 -16,6 Per cent change year ago -0,9 -18,4 -17,6
Z inc 2076,4 1859,6 1915,7 Z inc 1498,6 1344,2 1403,5
Per cent change month ago -6,1 -10,4 3,0 Per cent change month ago -2,6 -10,3 4,4
Per cent change year ago -3,5 -21,6 -16,4 Per cent change year ago -9,1 -21,8 -17,4
Nickel 20388,5 18919,9 17879,4 Nickel 14715,2 13675,8 13098,6
Per cent change month ago -7,5 -7,2 -5,5 Per cent change month ago -4,0 -7,1 -4,2
Per cent change year ago -9,9 -20,5 -21,9 Per cent change year ago -15,2 -20,7 -22,9
Iron ore, steel scrap 759,8 669,4 620,9 Iron ore, steel scrap 548,4 483,9 454,9
Per cent change month ago 0,4 -11,9 -7,2 Per cent change month ago 4,1 -11,8 -6,0
Per cent change year ago 14,8 10,6 3,0 Per cent change year ago 8,1 10,3 1,8
Energy raw materials 394,5 388,7 407,4 Energy raw materials 284,7 281,0 298,4
Per cent change month ago 9,5 -1,4 4,8 Per cent change month ago 13,6 -1,3 6,2
Per cent change year ago 44,6 33,1 34,4 Per cent change year ago 36,2 32,7 32,8
Coking coal 465,7 448,9 428,4 Coking coal 336,1 324,5 313,8
Per cent change month ago 1,0 -3,6 -4,6 Per cent change month ago 4,8 -3,5 -3,3
Per cent change year ago 31,3 21,6 5,3 Per cent change year ago 23,6 21,2 4,1
Crude oil 391,2 386,0 406,4 Crude oil 282,3 279,0 297,7
Per cent change month ago 10,0 -1,3 5,3 Per cent change month ago 14,1 -1,2 6,7
Per cent change year ago 45,4 33,7 36,2 Per cent change year ago 36,9 33,3 34,6
Source : SW EDBANK and HW W A-Institute for Economic Research Hamburg Source : SW EDBANK and HW W A-Institute for Economic Research Hamburg
Swedbank
Economic Research Department Swedbank’s monthly Energy & Commodities newsletter is published as a service to our
customers. We believe that we have used reliable sources and methods in the preparation
SE-105 34 Stockholm, Sweden of the analyses reported in this publication. However, we cannot guarantee the accuracy or
Phone +46-8-5859 7740 completeness of the report and cannot be held responsible for any error or omission in the
ek.sekr@swedbank.se underlying material or its use. Readers are encouraged to base any (investment) decisions
www.swedbank.se on other material as well. Neither Swedbank nor its employees may be held responsible for
Legally responsible publisher losses or damages, direct or indirect, owing to any errors or omissions in Swedbank’s
Cecilia Hermansson, +46-88-5859 7720 monthly Energy & Commodities newsletter.
Magnus Alvesson, +46-8-5859 3341
Jörgen Kennemar, +46-8-5859 7730
Economic Research Department. Swedbank AB. SE-105 34 Stockholm. Phone +46-8-5859 1000.
E-mail: ek.sekr@swedbank.se www.swedbank.se
Legally responsible publisher: Cecilia Hermansson. +46-8-5859 7720.
Magnus Alvesson. +46-8-5859 3341. Jörgen Kennemar. +46-8-5859 7730.