B.C.'s resource sector should benefit from a projected increase in the prices of the province's key commodities, according to Scotiabank's commodity outlook report released Monday.
Commodity prices should continue to rise in 2010 because of several global factors, the most important being the continued strength of the Chinese economy. China's GDP is expected to grow 9.5% next year compared with this year's estimated 8.3% growth rate.
The report noted China now accounts for 38.8% of the world's consumption of key base metals. The U.S. accounts for 10.3%. Illustrating China's impact, the report noted that the Asian country's re-stocking of copper reserves this year resulted in the metal posting the second highest commodity price increase in 2009 (126%), which was second only to lead's 146% price increase.
China's growing oil consumption should also boost crude oil prices next year. Its consumption rose 10.3% this year. The country's 2009 vehicle sales of 12.9 million, which now exceed auto sales in the U.S., should continue to drive demand.
Commodity restocking across the G7 and continued investor interest in commodities as an asset class should also boost commodity prices next year.
Patricia Mohr, Scotiabank's vice-president of economics and the bank's commodity market specialist, said prices will increase next year for hard-coking coal, crude oil, potash, copper, gold and lumber.
The annual contract for Western Canada's premium-grade per-tonne hard coking coal sold to Japanese and other Asian steel makers is expected to climb to US$169 from today's US$128.
Potash prices have been weak this year, but are expected to strengthen by 2010's second half on likely increases in overseas shipments to China, Brazil and Southeast Asia.
Mohr expects lumber prices, which have suffered from years of declines, will rise above the cash-cost of production as U.S. lumber consumption is expected to rise about 10%. But prices are projected to be volatile given the low inventory in the distribution system.