ANZ Cuts Commodity Price Forecasts on Slowing Chinese Growth

Australia & New Zealand Banking Group Ltd. trimmed its price projections for commodities including oil, iron ore and nickel next year on slowing growth in China and rising inventories.

The bank cut its forecasts by an average 5.1 percent for next year and 3.8 percent for 2016, analysts including Mark Pervan wrote in a report today. The lender reduced its 2015 iron ore estimate by 22 percent to $78 a metric ton and its Brent crude outlook by 8.2 percent to $92 a barrel.

“A big factor for the downgrades has been slower than expected growth in China ranging below the government target of 7.5 percent GDP growth this year,” ANZ wrote in the report. “The combination of government reform, a weak housing market, and tight domestic credit conditions have also held back the traditional commodity restocking cycle.”

China, the biggest consumer of industrial metals and iron ore and the largest oil user after the U.S., is heading for its slowest full-year growth since 1990. Leaders discussed lowering the 2015 economic-growth target from this year’s 7.5 percent projection, according to a person with knowledge of the matter.

China’s power demand is expected to grow by as little as 3.5 percent this year, down from last year’s 7.5 percent expansion, ANZ said in the report.

Commodity prices next year will “mildly” rise by an average 1 percent, according to ANZ. That’s down from its earlier forecast for a 4 percent increase. Prices this year will fall 6.5 percent, the bank said. The Bloomberg Commodity Index has dropped 6.7 percent so far in 2014.

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