London, 31 December 2009

Bloomberg: Commodities headed for their best year since at least 1970, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the steepest slump in the global economy since World War II.

The S&P GSCI Index of 24 raw materials rose 51%, its best annual gain according to data on Bloomberg going back to 1971, as of 8:57 a.m. in New York. That outpaced the 28% gain in the MSCI World Index of stocks in 23 developed nations and 3.5% decline in Treasuries, according to Bank of America Merrill Lynch indexes. The S&P GSCI Total Return Index climbed 14% this year.

China, the biggest consumer of commodities such as copper and iron ore, expanded 9% this year, according to the median estimate of economists surveyed by Bloomberg. The nation imported record amounts of both raw materials this year, making up for weaker demand from countries such as the U.S., whose economy is forecast to contract 2.5 percent, and the euro zone, with a projected 4.1% drop. Commodities drew record investment of $60 billion this year, Barclays Capital estimates.

“If you look at the theoretical or global portfolio of assets that are out there, the percentage of commodities allocation is tiny, less than 1%,” said Kevin Norrish, a commodities analyst at Barclays Capital in London. “If you look at what investors think that they should have, clearly that would suggest there’s a lot of potential for growth.”

The Reuters/Jefferies CRB Index of 19 commodities has advanced 24% this year, heading for the biggest jump since 1973.

Lead Price Surges

Lead was the best performer among the main industrial metals traded on the London Metal Exchange this year, advancing 142%. The metal rose 387% this decade, making it the winner according to calculations by Bloomberg on Dec. 30 for 36 exchange-traded raw materials. Copper added 140% this year and 290% over the decade.

Lead for delivery in three months recently added $4, or 0.2%, to $2,415 a metric ton on the LME. Copper gained 0.6% to $7,375 a ton, paring a climb to the highest price in almost 16 months.

A report due tomorrow will probably signal the fastest expansion in Chinese manufacturing since April 2008, based on the median forecast in a Bloomberg survey of economists. The nation’s central bank will maintain a “moderately loose” monetary policy because 2010 will be a crucial year for strengthening the recovery, Governor Zhou Xiaochuan said today.

Among precious metals, gold rose 25% and headed for its ninth consecutive annual gain, the longest winning streak since at least 1949. The metal strengthened as a weaker dollar spurred investor demand for a hedge against the currency. The U.S. Dollar Index, a gauge against six counterparts, declined 4.6% this year.

Platinum, Oil Prices

Gold for immediate delivery was 1% higher at $1,104.23 an ounce. Platinum added 57% and palladium jumped 116% in 2009 as investors anticipated improving consumption of the metals used in autocatalysts.

Crude oil advanced 78% this year and 210% for the decade. The Organization of Petroleum Exporting Countries (OPEC), accounting for 40% of global oil supply, reduced output in response to the worldwide economic slump.

The fuel for February delivery gained 0.2% to $79.41 a barrel on the New York Mercantile Exchange (NYMEX).

U.S. crude-oil inventories dropped 1.54 million barrels to 326 million barrels in the week to Dec. 25, Energy Department data showed yesterday. Distillate fuel and gasoline supplies also declined.

Raw sugar traded in New York gained 129% on expectations that harvests in Brazil and India, the biggest producers, would be damaged by excess rain or drought. Sugar was the decade’s second-best performer, rising 341%. Wheat retreated 10% and corn added 2.3% this year.

Ends --

By Stuart Wallace and Chanyaporn Chanjaroen, Bloomberg