(MENAFN- ProactiveInvestors) A year ago there was still talk of the potential for strengthening commodity prices in 2014 but the reality has been different.
Dwindling demand a firmer US dollar and a lacklustre Chinese economy has contributed to a dismal performance from the bulks this year perhaps most noticeably in oil which has crashed over recent months due to oversupply with seemingly no obvious sign of it reaching the bottom.
Iron ore has also performed very badly slipping to a new five year low last month to below US$70 a tonne on surging supplies and lower demand (to make steel) from China's property sector.
Meanwhile copper which has been a lesser evil has also fallen around 12% in the year so far though some analysts and mining giant Glencore () are predicting an improving picture - namely a deficit rather than a surplus of the red metal next year.
Coal has also taken a bashing. In 2014 the price of thermal coal from the world's biggest export hub in Australia has tumbled 25% and in the beginning of December hit a five year low.
So will 2015 be as bleak for bulks It looks likely.
In October the World Bank said that a "broad-based expansion" in commodity supply is coinciding with weakness in global growth especially in emerging economies and looks set to continue next year.
Broker Liberum recently told clients it was "confident" that bulk prices would remain “depressed” adding it had been "blindsided" by the oil slide following the oil exporting nations' cartel OPEC's - inaction.
"Iron ore price should fall even further as weak Chinese demand and lack of capacity cuts fail to offset the second tsunami of seaborne iron ore supply” it said.
"Thermal coal and coking coal show little chance of improvement and remain challenged on any timescale” said analyst Richard Knights.
On copper he believes prices will stay largely range bound between $2.80 and $3.20 a pound in for 2015 despite Glencore’s bullishness on recent supply cuts.
The analyst is “broadly positive” however on base metals zinc nickel and aluminium” but highlights how China's supply of these will impact the markets and is bullish on platinum though notes the US dollar will be the determining factor.
On oil it is not clear how long the freefall will last but at US$60 a tonne drilling for new reserves in most cases will stop.
There will be countries that will be losers and there will be winners (the UK is a net importer of crude) but the knock-on effect to other industries such as engineering and the wider global economy looks sure to be huge.
For investors the commodity slide has meant a rocky ride.
The FTSE mining sector has fallen almost 12% over 2014.
City broker Liberum expects the blue chip diggers to continue next year attempting to strengthen their balance sheets.
Their bulk asset giants even are not "winning out" even though it is they that have created the major oversupply it noted.
It has upgraded the sector overall to 'hold'. Rio () Glencore () and () are all lifted to 'hold' from 'sell' but largely due to share price falls.
Meanwhile the team at Deutsche Bank still see value in the mining sector longer term.
They think the majority of base metals have shown resilience against the dollar strength while the bulks have been weaker.
Deutsche says the strengthening on the US dollar this year has been a clear headwind against mining shares' performance.
But the flipside of this - namely weaker producer currencies - will get behind momentum to drive cost control and free cash flow in 2015.
As well as lowering its rating on Glencore to 'hold' from 'buy' Deutsche has lowered target prices on: () copper giant Antofagasta () and () though it is a gold miner and marches to a different drum.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.