Commodities Update July 2025
Over the past month, markets settled down somewhat as the risk of extreme tariff scenarios receded in the run-up to the July 9 deadline. The Westpac Commodity Export Price Index was flat through the month but this masks greater volatility in the various individual commodities.
The following is based on text from the July Market Outlook (PDF 3MB)
For more details of our longer-term forecasts see July Commodity Forecasts
Gold fell around 1%, thermal coal rallied around 11%, Brent rose 12% while aluminium declined almost 8%. The most extreme move was copper, where after the announcement of a 50% tariff on copper imports into the US, COMEX futures rallied to be up 13% while LME futures are up just 3%. US buyers are stocking up ahead of the introduction to the copper tariff and COMEX futures have surged to a 25% premium over LME futures. Our commodity forecasts are unchanged.
This month we also include some thoughts on the agri/softs commodity markets.
Trump tariffs divide the copper market
Just as we are going to press, US President Trump made a surprise announcement that sent shockwaves through the copper market, stating: “We’re going to make [the tariff on copper] 50%.” In response, the COMEX copper contract surged 13% on the day, following a 17% rally compared to the previous day close. As a result, the COMEX futures trading premium over LME copper widened to ~25% from ~10% before the announcement. While this action also pulled LME prices higher, as inventories are shipped across the Atlantic, there still appears to be room for a further lift in the COMEX premium before the full impact of the tariff is priced in. Current indications suggest the tariff could be implemented as early as August 1.
It remains unclear whether the tariff will apply solely to refined copper – as was the case with aluminium – or if it will extend to copper products and scrap. Notably, aluminium scrap was excluded from previous tariffs, leading to a surge in imports. With a 3-4 week window before implementation, a rush to import refined copper and copper products into the US is expected and is likely to drive prices even higher. However, once enacted, the tariff is expected to trigger a sharp drop in US demand, making the near-term outlook for copper highly uncertain. It is quite likely that prices will correct lower as we move to year end.
Gold appears to be running out of steam
With US President Trump’s ‘one big, beautiful bill’ now law, the size of the US fiscal deficit is set to rise, calling into question US debt sustainability. With the President again threatening steep ‘reciprocal’ tariffs even as he granted a three-week reprieve for countries to negotiate trade deals, it is easy to argue why you could expect gold to push up through US$3,400/oz. However, the flow into gold ETFs slowed into the end of June while early indications of central bank purchases suggest something similar is occurring in this market. We also note there was little addition to speculative gold positioning, as you would normal expect, with an event such as the recent Israel/US-Iran conflict. As such, the risk to gold is not all one way and we expect gold to hold around current levels at least for the near term.
Iron ore has been incredibly stable
A good example of why to stay calm has been the relative lack of volatility in iron ore prices. This comes despite the ongoing uncertainty over tariff policies and their impact on global trade and economic growth. There is also uncertainty over the strength of China, which purchases about 75% of global seaborne iron ore volumes.
Overall, we are in a slightly surreal situation for iron ore where the demand fundamentals are clearly deteriorating but it appears that traders are waiting for additional policy stimulus at the next Politburo meeting, likely to be in the 3rd week of July.
Chinese steel production has been supported by a record amount of steel being exported to the rest of the world through the first five months of this year. Nevertheless, CISA data suggests the weakness seen in steel production in April and May has continued into June. When you also consider that steel production in the Hebei, Shanxi, Yunnan and Guizhou provinces is being actively curtailed, along with robust supply from the seaborne trade, we continue to expect the price of 62%fe to drop below US$90/t and be down to around US$86/t by year end.
Crude oil finding its top side limit
Houthi rebels attacked two ships in the Red Sea with the IDF carrying out retaliatory air strikes but the US yet to respond. A US response seems inevitable, which would be why Brent jumped back above US$70/bbl. Given the permanent loss of Venezuelan crude, the temporary loss of Canadian supplies and the renewed tension in the Red Sea, a near term push higher is very likely. Add to this an increase in demand from soaring temperatures across the Americas, Europe, Asia and the Middle East driving up energy demand for cooling. So it is not surprising to see US exports of distillate close to 5yr seasonal highs while US distillate inventory is down to a 25yr seasonal low. This is why the market was able to absorb the additional OPEC+ barrels.
However, the approaching peak season for demand (northern hemisphere summer) will limit any near term move higher. As seasonal demand wanes an increase in OPEC production will hit the market and inventories are likely to start rising again. Already there are early signs of this happening with the API reporting a hefty build in US crude inventory last week. Hence, we hold that as we move through September increasing downside risks will see Brent falling back to US$60/bbl by year end.
Grains supported by dry conditions
At this time of year, the Australian grains market often finds itself at a crossroads of competing forces. This year seems even more complex than usual. Weather developments over the next few weeks will play a key role in shaping price direction both internationally and domestically. Domestic grain prices are currently trading above export parity, making the market very sensitive to any shifts in sentiment with a growing divide between export competitiveness and strong, demand-driven domestic pricing.
Recent rainfall in NSW and WA improved yield and production estimates in those states, weakening local market prices, and while Vic and SA did see some recent rain, they continue to face challenging dry conditions resulting in local markets with tight supply conditions. We also need to note that despite the rain in WA, it was such a dry and late start to the season total production will be somewhat less than the last few years. Overall, the forecast for rainfall through July and August, if realised, would bring some relief to those regions.
The global wheat market is under pressure from improved U.S. crop outlooks and increased EU production, which have been weighing on prices However, Russian export quotas and South American weather risks are potential threats to global supply.
Given we don’t see a lot of upside in global prices, and with Westpac forecasting the AUD to strengthen against the USD, Australian Standard White prices are likely to hold around current levels before softening as we move through 2026.
Dry condition in the Canadian Prairies, particularly Saskatchewan, have been supportive of canola prices but in the past week forecasts for near term rainfall has seen prices soften. If the rain falls the prices can correct lower but should conditions become drier, then prices can jump higher. Our forecast has Canadian canola prices tracking sideways to years end before we expect them to drift lower through 2026. With the AUD strengthening thought that horizon then this is pointing to a modest downward drift in Australian prices. However, we would not that the risk appears to be a bit asymmetric with a greater risk of dry conditions in Canada, and thus higher prices, than an increase in rainfall and thus lower prices.
Cotton plantings expected to be less this year
The global cotton market is tightening with production this year expected fall by 2.5% due to lower yields and reduced planting in major regions including China, India, the U.S. and Australia. Meanwhile, mill use is rising, driven by restocking and modest economic growth, pushing global consumption to a five-year high.
As demand outpaces supply, global stocks are set to decline slightly, and trade is rebounding—especially from Brazil and the U.S. Prices are expected to remain steady through this year, reflecting a balanced but cautious market outlook, but again a stronger AUD is likely to weigh on domestic prices.
Cattle demand remains robust
The outlook for cattle prices is more supportive but, in a national as large as Australia, we can have very diverse seasonal conditions. Southern Australia is experiencing dry conditions, prompting destocking and increased supply of slaughter-ready cattle. Meanwhile, northern Australia has benefited from better than average rainfall, supporting herd growth and the demand for lighter cattle from southern regions. We don’t see the 10% tariffs the Trump Administration has imposed on Australian imports having a significant impact on demand for Australian beef, seasonal conditions and changes in underlying demand are far more critical to our export prices. However, given we are in peak restocking demand from the north, and we are facing a stronger AUD we are looking for cattle prices to drift south as we move into 2026.
Lamb prices will remain well supported
Australian lamb producers are entering 2025 with renewed confidence, supported by strong early-season prices and improved seasonal conditions. While the national flock is forecast to decline by 7.4% as older breeding ewes are turned off, lamb slaughter is expected to remain high—second only to 2023—due to growing share of more productive meat breeds in the flock. Export demand remains strong, with growing interest from Europe and North America, and potential upside if Chinese demand recovers, and this will continue to support domestic prices.
Dairy facing shifting demand patterns
Global dairy prices remain elevated, though recent auction results suggest a softening trend. Despite high prices, global milk supply has remained broadly flat. Production in the European Union and Australia has declined, while New Zealand’s output has normalized following dry weather. However, global milk production is expected to lift modestly in the coming months, with the major exporting regions projected to grow at their strongest pace since early 2021.
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