Investing
Volatile commodities prices portend a challenging 2025
Slowing growth and geopolitical risks will weigh on oil and copper although gold will continue to benefit from safe haven demand, writes Heng Koon How, head of markets strategy at Singapore-based bank UOB.
Heng Koon How, head of markets strategy at UOB. Photo courtesy of the bank.
It has been a difficult and challenging year for major commodities across 2024. Brent crude oil peaked at around $90 per barrel in the second quarter and has since retreated to around $75 per barrel.
Copper – another barometer to the health of the world economy – peaked at just under $11,000 per metric tonne in the second quarter and has fallen in tandem to struggle at $9,000 per metric tonne level in December.
Gold, on the other hand, will continue to benefit from economic and geopolitical uncertainties, and continue its strong run next year.
Slowing growth from both China and the Eurozone have weighed on oil and copper prices
Both Brent crude oil and copper’s volatile price actions are symptomatic of an increasingly challenging backdrop for the global economy.
After the initial euphoria from the latest round of stimulus, investors have come to acknowledge that China’s economic recovery remains fraught with challenges. Much still needs to be done to restructure the massive debt overhang in the domestic property sector. Both consumer and investor confidence in China have yet to recover meaningfully, and as such, retail spending growth remains weak and the money supply continues to contract.
Adding further pressure to China’s weakening economy is the daunting prospect of even higher trade tariffs next year from the second Trump administration. As such, we have downgraded China’s GDP growth forecast next year by 0.3 percentage points to 4.3%. Realistically, it is becoming increasingly difficult for China to achieve its 5% growth target.
In Europe, the growth outlook is increasingly challenging too. Amid the Russia-Ukraine conflict, Eurozone countries now need to spend much more fiscally for their collective defence. This higher indebtedness is coming at a time when growth for both Germany and France, traditionally Eurozone’s twin industrial powerhouses, are now near borderline recessionary levels. Specifically, France’s sovereign rating has been cut recently due to the worsening budget and political crisis.
As such, it is no surprise that the European Central Bank (ECB) has been actively cutting rates, dropping its benchmark refinancing rate from 4.5% at the start of 2024 to 3.15% by December. 2025 is likely to be challenging for both France and Germany. In particular, Germany’s Federal Election in February 2025 has the potential to inject even more uncertainty into the economy.
Trade tariffs provide another overhang
For Brent crude oil, the historical dynamics among the key energy producers have now been overturned. The Organisation of Petroleum Exporting Countries (OPEC) is finding it increasingly difficult to stabilize crude oil prices and maintain market share. This is because they have increasingly ceded market share and pricing power to the U.S.
With a daily production of about 13.5 million barrels per day, the U.S. is now the world’s largest producer of crude oil. U.S. energy production has jumped over the past decade under the initial expansion from the first Trump administration and the follow up expansion by the Biden administration.
In contrast, forced to maintain its production cuts, Saudi Arabia’s crude oil production is now much lower at just 9 million barrels per day. In short, the U.S. now produces about 50% more crude oil each day than Saudi Arabia.
With slowing growth from both China and Eurozone, the outlook for global energy demand has been repeatedly downgraded by OPEC. As such, the threat of oversupply keeps Brent crude oil prices depressed. We see another challenging year for Brent crude oil around its current levels of $70 to $75 per barrel. In addition, we cannot rule out the risk of Brent crude oil falling below $70 should the second Trump administration ramp up both China and global tariffs significantly in 2025.
As for copper, it has lived up to its nickname of “Dr Copper” – which refers to the ability to use the commodity’s prices to predict the health of the economy. With prices struggling just under $9,000 per metric tonne by end-2024, “Dr Copper” is signaling more weakness and pain ahead for the global economy in 2025.
In particular, copper prices are very allergic to the fears of China’s economic slowdown. With China’s industrial activity yet to pick up meaningfully, stocks of copper on major exchanges worldwide have picked up. The cash spread for copper is at a large discount, implying weak immediate demand. As such, we have a negative outlook for copper and see it sliding further to $7,500 per metric tonne by end-2025.
Upside possible for Brent crude oil and copper in the medium to long term
It is important to note that while the short-term outlook for both Brent crude oil and copper are decidedly negative, the medium- to longer-term outlook may be entirely different. For Brent crude oil, the futures curve is mostly flat and there does not seem to be much risk premium priced in. This is despite the on-going conflicts and geopolitical risks across the Middle East. Any escalation in the region could crimp the supply of crude and send prices upwards.
As for copper, it is well acknowledged that over the medium term, there is an increasing risk of supply deficits. Lower supply from aging copper mines will fail to catch up with rising demand from the green transition and the increasing global adoption of electric vehicles. As such, price takers and consumers of both Brent crude oil and copper may take advantage of the lower current prices to hedge their future needs.
Gold to continue its rally on safe haven demand
However, one particular commodity is benefitting strongly from economic and geopolitical uncertainties. Gold has had a very strong year for 2024, rallying by about one-third from $2,000 per ounce in January to the current level at around $2,600 per ounce. From a longer-term perspective, the positive drivers remain intact – including on-going Emerging Market and Asian central bank allocation into gold, and strong physical gold and jewellery demand from the retail sector.
There is a common thread running through the rising demand from central banks and the retail sector. Both are driven by the need to diversify away from rising geopolitical concerns and uncertainties around the US dollar, ahead of disruptive trade and fiscal policies from the second Trump term.
We remain confident of our positive view for gold as long-term safe haven demand needs will likely stay strong amid a further rise in geopolitical and economic risks from Trump 2.0. We see gold rising further to eventually $3,000 per ounce by the end of 2025. Immediate strength in the US dollar may trigger some near term consolidation in gold before it resumes its rally as 2025 progresses.
The year ahead will bring differing fates for Brent crude oil, copper and gold.
Both Brent crude oil and copper will likely be weighed down by the worsening economic growth outlook for China and Europe. Concerns over the disruptive impact from higher trade tariffs under the second Trump administration will also be negative for these two commodities. This is despite the generally constructive outlook for the U.S. economy.
However, gold will likely benefit from the uncertainty and continue its strong rally across 2025.
The event presented key topics including international standards and technological solutions for carbon emissions’ management, environmental, social, and governance policy evaluation based on global standards, and the application of technology in optimising operational costs.
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| ACCA event highlights technology’s role in sustainability practices |
The conference served as a platform for future-oriented businesses to share their successes and challenges while fostering collaboration among those committed to sustainability.
During the conference, Ren Varma, ACCA’s head of Mainland Southeast Asia, delivered in-depth insights into ACCA’s role in supporting businesses in building sustainable development capabilities.
Citing 2024 trade figures, Varma noted that Vietnam’s import-export turnover maintained unprecedented levels over the past 40 years, supported by the enforcement of over 17 trade agreements.
Vietnam-EU trade exceeded $67 billion, with numerous domestic enterprises integrating into European and global supply chains.
“Implementing sustainability reporting is imperative for Vietnamese firms participating in global supply chains to comply with Europe’s mandatory sustainability disclosure regulations. The key challenge is how businesses can effectively implement sustainability reporting with existing resources while meeting international standards,” said Varma.
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| Ren Varma, head of Mainland Southeast Asia, ACCA. Photo: ACCA Vietnam |
Representatives from various other organisations, such as VACPA, FPT, Unilever, HDBank, PwC, and the University of Economics in Ho Chi Minh City shared their experiences in leveraging technology for sustainability.
These real-world case studies enabled participants to gain practical insights into how best to apply technology to sustainable management, while understanding the essential competencies required for effective implementation.
At the event, experts reaffirmed their commitment to enhancing capabilities and professional expertise in achieving national sustainable development goals and the target of Net-Zero by 2050.
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| Photo: ACCA Vietnam |
ACCA pledged its continued support by launching the Professional Diploma in Sustainability (ProDipSust) across more than 180 countries, including Vietnam. This initiative aims to equip professionals with the necessary expertise to implement sustainable business practices.
ProDipSust not only provides in-depth knowledge on sustainability but also guides businesses on practical applications, from understanding international frameworks and regulations to strategic management, sustainability reporting, and assurance.
Recognised as a globally standardised knowledge framework, this diploma plays a crucial role in strengthening corporate sustainability governance, ensuring transparency, and complying with international standards.
Beyond offering training programmes, ACCA actively collaborates with leading organisations to drive sustainable development initiatives.
Beyond offering training activities, ACCA collaborates with major organisations to drive sustainability initiatives. In this seminar, ACCA Vietnam, in partnership with VACPA and PwC Vietnam, established a highly practical forum to help Vietnamese firms align with international standards and devise effective sustainability strategies.
Ren Varma underscored the critical role of finance and accounting professionals in advancing sustainable development, saying, “Financial expertise is not just about financial reporting, it plays a fundamental role in shaping sustainable strategies. Finance professionals are responsible for integrating sustainability initiatives into business models, accurately measuring their impact, and transparently communicating them to stakeholders. ACCA’s certification serves as a vital tool for businesses and individuals to enhance their expertise in this field.”
“With a strong commitment to fostering sustainability competencies, ACCA will continue to support businesses and financial professionals on their journey towards a responsible and sustainable economy,” he added.
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Ho Chi Minh City has announced plans to develop infrastructure along the Saigon River towards the East Sea. Photo: Le Toan |
Talking with VIR on March 4, Doan Manh Thang, director of water and resilience at Royal HaskoningDHV Vietnam, said the Saigon River has great potential but has not been exploited properly. The plan will map out a waterway from Cu Chi to the city centre.
Royal HaskoningDHV is the leader of a consortium that includes Boston Consulting Group, Roland Berger, the Ministry of Construction, and ACUD Consult that has been tasked with developing this plan which was approved by the prime minister on December 31, 2024.
The plan aims to develop Ho Chi Minh City into a hub of high-quality human resources, modern services, and advanced industries, pioneering in the green economy, the digital economy, and a digital society. It will also maintain its position as Vietnam’s leading centre for economy, finance, commerce, culture, education, and science and technology, with deep international integration.
“We can build service areas such as marinas and commercial centres along the river, alongside green spaces,” Thang said.
Moreover, a metro line from the city centre to Can Gio Island could act as the driving force for the city to reach double-digit growth, he confirmed.
Can Gio Port, meanwhile, is strategically located opposite Cai Mep-Thi Vai Port – the largest international port in Vietnam. However, it is only operating at 50 per cent capacity. The government has decided to upgrade Can Gio Port to become an international transit centre, with an estimated investment of $4 billion. The port is expected to handle 10 per cent of Vietnam’s imports and exports, of which 90 per cent will be international transshipment.
According to Phan Van Mai, newly appointed Chairman of the National Assembly’s Economic and Financial Committee and former Chairman of Ho Chi Minh City People’s Committee, the city will strive for regional GDP growth of 8.5-9.0 per year until 2030.
“To effectively implement the plan, the city needs to mobilise resources, attract investment, develop human resources, and apply science and technology, innovation, digital transformation, and environmental protection,” Mai said.
Meanwhile, Thang said that the biggest bottleneck in implementing this plan is the lack of mechanisms to entice capital.
“Public investment is the seed capital to stimulate investment from other economic sectors. In fact, many investors are interested, but the mechanisms for investment must be more detailed,” he said.
A resolution issued in June 2023 grants special mechanisms for the development of Ho Chi Minh City. Meanwhile, in February 2025, the National Assembly issued another resolution for Hanoi and Ho Chi Minh City to invest and develop metro systems. On that basis, Ho Chi Minh City will invest simultaneously and complete seven routes with a total length of 355km within 10 years.
“Initially, the state will have to spend money because it will be difficult to attract investment, but when it starts to take shape, private investors will be looking to spend money to build infrastructure. This would remove the bottleneck, but still requires appropriate policies,” Thang said.
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| Thu Thiem New Urban Area – the new financial and economic hub of Ho Chi Minh City. Photo: Le Toan |
In total, 11 plots covering 9.2 hectares in the Number 1 Functional Area will be used for the project in Thu Duc city.
The location was reported to the local Department of Telecommunications on March 11 to set up a plan to develop telecommunications and digital infrastructure for the centre.
Thu Thiem New Urban Area was approved in 1996 covering 930 hectares on the east bank of the Saigon River and opposite District 1. When completed, the area will have a population of 200,000 people.
The area will be divided into a central core, a northern residential area, a residential area along Mai Chi Tho Avenue, an eastern residential area, and a southern zone.
On January 4, Prime Minister Pham Minh Chinh chaired a conference to announce an action plan to implement a regional and international financial centre in Ho Chi Minh City.
At the conference, PM Chinh said that Ho Chi Minh City is located at the head of Southeast Asia, making it convenient for trade and financial connections with major markets such as China, Japan, South Korea, and ASEAN. Building a financial centre there will help reduce costs and transaction times for traders.
To accelerate the project, early this year, Ho Chi Minh City established a steering committee for the construction and development of the centre with 29 members. The establishment of the international financial centre is expected to create a foundation for the future growth of Ho Chi Minh City. This is also an opportunity for the city to attract international investors and increase foreign investment in various sectors.
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