Commodities Update August 2025
Through July and into August a broad strengthening in commodity prices unfolded. Iron ore and coal prices rose, partly offset by falls in oil and LNG prices. Copper is in a tizz over tariffs, iron ore is facing Chinese steel mill closures, supply is rising faster than demand for crude oil while there are reasons to suspect that coal demand could peak later than 2026. We also update our thinking on gold and take a look at everyone’s’ favourite sweetener, sugar.
The following is based on text from the August Market Outlook (PDF 3MB)
For more details of our longer-term forecasts see August Commodities Forecasts
A broad strengthening in commodity prices has unfolded. The Westpac Commodities Export Price Index lifted 3.0% since the last report. This was driven by a solid 6.0% gain in iron ore, a 3.4% gain in met coal and a 1.8% gain in thermal coal which were only partly offset by a 4.1% fall in crude oil and a 1.5% decline in LNG. This has led us to mark to market our near-term forecast for iron ore: at December 2025 we now have US$90/t, it was US$86/t.
Trump ‘bait and switch’ on copper
The copper market is experiencing heightened volatility, driven by a mix of tariff shocks, inventory distortions and shifting demand dynamics. In early July, US President Trump shocked markets by stating, “We’re going to make [the tariff on copper] 50%.” In response, COMEX copper surged 13% on the day, following a 17% rally compared to the previous day. Then as we were pulling together this report, President Trump confirmed that refined copper would be exempt, with tariffs applying to semi-finished products (e.g., pipes, wires, rods, tubes) effectively removing tariffs on the bulk of US imports.
Markets reacted swiftly: COMEX prices dropped over 20%, and spot premiums collapsed, reflecting the loss of arbitrage opportunities. Westpac uses the globally relevant LME prices for analysis, but US market moves still influence global trends.
US copper output is declining, down 6% in 2024, and has limited refining capacity – just two smelters. The US relies on imports for nearly half of its refined copper demand, with China the dominant destination for US copper concentrate. China’s rapid expansion in smelting (now 53% of global capacity) drove treatment and refining charges (TC/RCs) to record lows. In July, spot TC/RCs fell to ~$65.80/ton, making refining uneconomical for most Western firms. While all smelters are supported by by-product revenues (e.g. sulphuric acid, silver, gold), subsidised Chinese smelters have a clear advantage.
We maintain a constructive view on copper but are cautious for the near term. The physical market was distorted by the US tariffs threat, so subsequent exemptions weighed on prices. The US accounts for less than 10% of global copper demand but the tariff threat drove a surge in imports, tightening supply in key markets like China (~55%) and Europe (~15%).
Iron ore holds the high ground, for now
Independent steel mills in Hebei and Tangshan are facing intermittent production halts from August followed by mandatory suspensions from August 25 to September. These measures are in preparation for the military parade in Beijing commemorating the 80th anniversary of WWII victory with restrictions applying to 35 independent mills and should reduce daily steel output by around 90k tonnes. However, these suspensions are unlikely to be as widespread as those in 2015, when over 10k factories and power plants were temporarily shut and all steel mills within 100km of Beijing suspended operations. This more targeted approach has resulted in a firmer tone in iron ore prices, which rose to $101.22/t on August 8, up 6.2% over the past month. Prices have been further supported by the 90-day extension of the US–China tariff truce, which delays tariff hikes until November 10 and provides short-term relief for supply chains.
Despite the recent price strength, we do not expect iron ore to sustain gains above the $103–105 range. Rising inventories of steel products and extreme weather conditions are likely to dampen construction activity and demand. We maintain our view that iron ore prices will fall back below $100/t as we move toward year-end.
Crude oil facing some headwinds
Crude oil markets remain under pressure amid rising supply and softening demand. Brent crude is trading around US$67-69/bbl, down from over $71 in July. The decline reflects a combination of OPEC+ production increases, muted demand growth, and rising inventories. OPEC+ has accelerated its unwinding of voluntary output cuts, with eight key producers – including Saudi Arabia, Russia, and the UAE – raising production by 548kbpd in August, exceeding expectations. This move is part of a broader strategy to phase out the 2.2mbpd cuts agreed in late 2023, with full reversal expected by September 3.
On the other side of the equation, global demand is softening. The IEA is projecting a 680kbpd increase in 2025, with most of the growth coming from non-OECD countries. Demand in China, India, and Brazil has underperformed, while OECD consumption remains flat. In China, petrochemical demand is rising but transport fuel consumption is declining due to EV adoption and LNG usage for heavy haulage.
Westpac is forecasting Brent to be down around US$60/bbl at end 2025 and in early 2026. We have US$67/bbl pencilled in for end 2027 but see downside risks to this estimate.
Will peak coal turn out like peak oil?
Wood Mackenzie forecast global coal demand to peak in 2026. In its base-case Energy Transition Outlook, global coal-fired power generation is projected to decline by around 70% between 2025 and 2050. This shift is driven by the increasingly competitive costs of renewable energy, advances in battery storage, a potential nuclear resurgence, and the expansion of dispatchable natural gas-fired capacity – all of which reduce the utilisation of coal assets worldwide. The most significant contraction is expected in Asia, particularly China, which accounts for 78% of global consumption.
However, many will recall the narrative of ‘peak oil’ – the idea that the world would run out of oil as demand continued to rise. Economists, including ourselves, challenged that view noting that markets adjust with prices balancing supply and demand. That’s exactly what happened.
While ‘peak coal’ refers to peak demand, market principles still apply. Despite major international climate agreements – the 1997 Kyoto Protocol, the 2015 Paris Accord, and the 2021 COP26 agreement – global coal demand has continued to rise. Between 2013 and 2025, China’s coal-fired power output increased by more than 36%, even as its economy doubled in size. Today, coal remains the largest single source of electricity generation globally.
This underscores a key reality: coal demand has proven more resilient than many expected. While we continue to see 2026 as the most likely year for peak coal demand, Wood Mackenzie developed a high coal demand scenario, in which demand remains more robust due to three key factors:
· Energy security and affordability: For many of Asia’s largest and fastest-growing economies, coal is a strategic domestic resource that supports energy security and affordability.
· Power demand growth: The rapid rise in electricity demand – driven by data centres, artificial intelligence, and broader electrification – may lead governments and companies to extend the life of existing coal assets.
· Technological improvements: Advances in flexible coal plant operations, carbon capture, utilisation and storage (CCUS), and hydrogen co-firing could improve the emissions profile, potentially extending the life of these assets.
Gold remains range bound, for now
In his latest update, Robert Rennie notes that gold continues to oscillate within a tight US$3,275–3,440/oz range, a pattern in place since late April. Prices briefly spiked above US$3,450/oz on July 22 amid investor anxiety over the August 1 tariff deadline. However, subsequent announcements of trade deals with the EU and Japan, along with a de-escalation of threats from President Trump regarding Fed Chair Powell, saw prices revert to their two-month range.
A sustained breakout from this range will likely require a more potent catalyst—such as a significant escalation in US–Russia tensions or Powell’s removal. Absent such shocks, we expect that secular downside risks to the US economy will eventually drive a break higher above US$3,450/oz.
Gold remains a top-performing safe haven asset in 2025. With US policy still erratic and the full impact of tariffs and immigration crackdowns yet to be felt, the case for a breakout remains intact. However, momentum has slowed, with assets like Bitcoin and other precious metals encroaching on gold’s rally. COMEX inventories have flattened into August and remain well below previous highs.
According to the World Gold Council, gold-backed ETFs added 170.5 tonnes in Q2, driven by trade policy uncertainty and inflation concerns. North American ETFs led the way with 73 tonnes, closely followed by Asian-listed funds at 70 tonnes—a notable figure given their smaller base.
Central bank demand fell 33% quarter-on-quarter, marking two consecutive quarters of decline. The WGC attributes this to higher prices deterring purchases. However, their 2025 Central Bank Survey shows that 95% of respondents expect global holdings to rise over the next year, and 43% anticipate increasing their own reserves, particularly among emerging market central banks.
Importantly, Q1 and Q2 purchases remained above historical averages, and seasonal patterns suggest Q3 could be stronger for gold demand. With monetary policy expected to ease further and inflation risks persisting, the outlook for gold remains constructive.
Sugar supply is solid but so to is demand
Sugar prices have settled at their lowest levels since early 2021, with NY raw sugar futures averaging 16.6 US¢/lb. The FAO Sugar Price Index has now declined for five consecutive months, falling 4.7% in August alone, driven by improved production prospects in key growing regions and a shift in sugarcane allocation toward sugar rather than ethanol.
In Brazil, dry weather has accelerated harvesting and crushing, while in India and Thailand, above-average monsoon rainfall has boosted expectations for the 2025/26 crop. According to the USDA, global sugar production is forecast to rise by 8.6 million tonnes to a record 189.3 million tonnes in 2025/26, led by bumper crops in Brazil (44.7 Mt) and India (35.3 Mt).
Despite this bearish supply backdrop, demand-side factors could offer some price support:
· China’s sugar imports surged 1,435% year-on-year in June, reaching 420,000 metric tonnes.
· Pakistan has approved the urgent import of 200,000 metric tonnes to stabilise domestic prices amid a sharp rise in retail costs.
· Coca-Cola has announced a new U.S. product made with real cane sugar, aligning with its offerings in other markets and responding to political pressure for cleaner ingredients.
Additionally, elevated oil prices and extreme heat in top-producing regions may incentivise mills to divert more cane toward ethanol production, potentially limiting sugar output and tightening supply.
On the policy front, India is expected to relax its sugar export restrictions in the 2025/26 season, following an 18% rise in output to 34.9 million tonnes. The Indian Sugar and Bio-energy Manufacturers Association (ISMA) is seeking a 2 million tonne export quota, which could ease global supply concerns if approved.
Meanwhile, Australian production is forecast to decline by 50,000 tonnes to 3.8 million tonnes due to a wet 2024/25 harvest, which delayed replanting and crop development for the upcoming season.
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.