Commodities Update December 2025
Commodities delivered a surprisingly strong performance in 2025, with our broad index up 17%, led by a 60% rally in gold, 30% surge in copper, and a 12% gain in aluminium. Losses in LNG (–25%), crude oil (–14%) and thermal coal (–11%) only partially offset these gains, while iron ore defied expectations, rising 4% to US$105/t. This resilience underscores the potential for continued strength into 2026.
The following is based on text from the December/January Market Outlook (PDF 4MB)
For more details of our longer-term forecasts see December Commodities Forecasts
Completing a year in review we admit, some surprise in how just how robust the overall commodities market was in 2025. In the year our broad index gained 17% led by a 60% rally in gold, a 30% surge in copper and a 12% gain in aluminium. These gains were only partially offset by the 25% decline in LNG, 14% drop in crude oil and a 11% fall in thermal coal. Even iron ore, which was broadly expected to fall through 2025, rallied 4% to US$105/t. So even with significant variation in the performance of commodities, in acknowledging the outperformance through 2025 there is the potential for this to continue into 2026. We now expect the broad commodities index to fall just 5% by December 2026 led by a 20% decline in iron ore to US$83/t, a 12% fall in LNG and a 7% fall in crude oil%. Nevertheless, at 337 by end 2026, our broad commodities index is 18% higher than where we forecast it to be at the end of 2024 and gold is a prime mover behind this upgrade.
Iron ore has all the settings for a correction
Chinese steel production peaked in 2020 and has been trending down since. In October there was a further moderation in global steel production with output down 3% in the month to be down 6% in the year. Excluding China, output was flat in the month, edging the annual pace to 1%yr. Asia recorded the steepest decline, down 4% in the month/8% in the year, led by weaker production in China and South Korea. Chinese pig iron production is down almost 7% in the year to October while crude steel output is down almost 11%.
In contrast, EU and UK output slipped 3%yr with France and Spain posting the largest falls. South America was marginally lower, down 1%yr while North America bucked the trend lifting 5%yr driven by a 9%yr increase in US production as domestic mills replaced lost import volumes following the introduction of the S232 tariffs. Global utilisation rates fell 1.8 percentage points on the month to around 69%, compared to around 73% a year earlier.
In the face of declining Chinese steel production, Chinese imports of iron ore are broadly flat, being up less than 1% in the year to October, while Chinese domestic ore production is down almost 2%. As such it is not surprising that port inventories of ore have grown more than 6% in the year and are now rising back towards cyclical highs compared to the level of demand as measured by the output of crude steel and pig iron.
We also note that the cost of Australian steel making inputs in China, that is iron ore and met coal, continue to rise while Chinese steel prices continue to fall resulting in the widest gap between the two since mid-2024. Back then, this gap was corrected by a 21% fall in the price of Australian iron ore and met coal. This does gives us more confidence in our expectations a correction in iron ore prices as we move into 2026. We are forecasting a 20% fall in iron ore to US$83/t by end 2026, unchanged from our November report and little different to US$84/t we had forecast at the end of 2024.
Gold can build on a solid base
Gold has eased from its mid-October highs near US$4,400/oz, following the resolution of the US government shutdown and more constructive Trump–Xi discussions on the APEC sidelines. While prices have consolidated, gold remains one of the standout performers this year, with strength across the precious metals complex. Silver has surged an extraordinary 110% year-to-date, driven by US buyers stockpiling ahead of potential tariffs. This has pushed SFE inventories down by 41%, the lowest level in a decade, leaving silver in overbought territory and providing a supportive backdrop for gold.
Looking ahead to 2026, as noted by my colleague Kaitlyn Buhariwalla, several factors suggest gold remains well supported. The Federal Reserve faces a delicate balancing act between downside risks to the labour market and upside inflation pressures. The rate-cut path remains uncertain, but growing signs of labour market fragility and the likelihood of a more dovish, Trump-aligned FOMC tilt the bias toward easing. At the same time, the full impact of tariffs and the extended government shutdown has yet to materialise, which could structurally weaken the US dollar and underpin gold demand.
Geopolitical and market risks remain elevated. The recent spending bill only extends federal funding until January 2026, leaving the door open for another government shutdown. Russia–Ukraine peace talks continue to stall, while concerns linger over stretched valuations in AI-tech stocks. There is also the risk of a Supreme Court ruling against IEEPA tariffs, which could weigh on fiscal sustainability and the US dollar.
Against this backdrop, we expect gold to retest US$4,300/oz in early 2026, with scope to approach US$4,500/oz in the second half of the year. However, the catalyst for a decisive break higher remains unclear. A sharp rebound in US inflation driving interest rates higher would undermine gold’s appeal, while a durable Russia–Ukraine ceasefire could reduce safe-haven demand. On balance, we maintain a bullish stance on gold, supported by policy uncertainty, geopolitical risk, and structural US dollar weakness. This is a significant upgrade of +60% on our 2024 forecast for end 2026 at US$2810/oz.
Copper to shine like gold but not all are equal
Copper delivered a strong performance in 2025, supported by geopolitical uncertainty and tightening supply conditions. While rare earths and other “critical” minerals dominated headlines as Western policymakers sought to decouple supply chains from China, momentum in these sectors has stalled with policy implementation proving slow. It is worth noting that, in terms of scale, Australia’s critical minerals industry lacks the capacity to rival gold mining, let alone replace coal or iron ore as a major export driver.
The multiple supply disruptions that pushed the copper market into deficit in 2025 have laid a solid foundation for higher prices in 2026. Aluminium also appears to be well supported, with China’s 45Mt production cap expected to hold, constraining supply against a backdrop of robust demand. Meanwhile, metallurgical coal prices climbed above US$200/t following the Indian monsoon and ahead of potential supply interruptions typically associated with the Queensland wet season. However, as supply from the US and Australia lifts, we expect prices to moderate through 2026.
Thermal coal is likely to prove more resilient, with only modest downside risk as Chinese domestic supply recovers. In contrast, Brent crude and TTF gas prices are expected to soften over the year, reflecting improved supply dynamics and easing geopolitical risk premiums.
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