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1. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department
by Jörgen Kennemar No. 8 • 17 September 2010
Economic Research Department. Swedbank AB. SE-105 34 Stockholm. Phone +46-8-5859 1000.
E-mail: ek.sekr@swedbank.se www.swedbank.se
Legally responsible publisher: Cecilia Hermansson. +46-8-5859 7720.
Magnus Alvesson. +46-8-5859 3341. Jörgen Kennemar. +46-8-5859 7730.
Commodity prices defy fears of a weaker global economy
• Swedbank’s Total Commodity Price Index rose for the second consecutive
month. This means that the index has risen by slightly over 3% this year in
US dollars. Metal prices increased broadly in August, which shows that
global industry is still maintaining a fairly good growth rate.
• Although global growth prospects have been downgraded for 2011, emerging
economies will still need industrial metals, though at a slower rate. The prices
of copper and lead, which are in fairly tight supply, could rise further. For
industrial metals, where there is excess supply, prices will stabilise or fall,
especially since the global inventory build-up is expected to taper off.
• Record-high gold prices are an indication of growing uncertainty about the
strength of the global economy. Large public deficits and fears of another
slowdown have caused more investors to turn to gold. We do not believe that
gold prices have peaked, and that this will remain true as long as global
imbalances remain unresolved.
• Unfavourable weather conditions and lower production contributed to a rise in
the food price index for the third consecutive month. Grain prices have risen
by 23% in two months. The risk of a new global food crisis after several years
of good harvests and expanded production capacity is unlikely, however.
Swedbank´s Total Commodity Prices Index, USD, index 2000=100
Källa: Swedbank
05 06 07 08 09 10
Index
100
150
200
250
300
350
400
450
500
Total Index excl Energy
commodities
Total index
Energy
commodities
Food
Swedbank’s Total Commodity Price Index rose by
1.9% in August compared with July, measured in
dollars. This marks the second consecutive month
that the index has risen, but it still has not returned
to the levels of April, before the Greek crisis
intensified. The index has been driven by
substantial, broad-based price gains for industrial
metals, which in August climbed an average of
8.2%. Lead and zinc accounted for the biggest price
increases at 12.6% and 10.8%, respectively,
followed by nickel and copper.
Declining metal inventories indicate that global
demand remains strong at the same time that there

2. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continued
No. 8 • 17 September 2010
2 (4)
are signs of supply restrictions. This is especially
true of copper, where production has been limited in
2010 due to technical problems, strikes and lower
capacity utilisation than expected. A further
slowdown in the Chinese economy increases the
likelihood that any increase in the price of copper
will be held in check, though this is not yet reflected
in the physical market. Copper inventories have
fallen by 30% in four months and are at the lowest
level since the autumn of last year. Supply
conditions are not as tight as in 2007-2008,
however.
Signs of weaker growth in steel production grew
during the summer. This is particularly true of
China, which currently accounts for nearly half of
global production. In July Chinese steel production
rose by a modest 2% on an annual basis, its lowest
growth rate since early 2009. It should be noted,
however, that slowdown was from high levels after
last year’s big stimulus package, which drove up
production. Lower Chinese growth is the result of
the credit constraints that have been put in place to
avoid a future overheating, especially in the housing
market.
Steel production in China and metal prices
Source: Reuters EcoWin
00 01 02 03 04 05 06 07 08 09 10
%-change
-75
-50
-25
0
25
50
75
100
125
%-change
-20
-10
0
10
20
30
40
50
60
Chines steel production, %-annual
rate, left scale
Prices on non-ferrous
metals, %-annual rate, ri
Weaker steel production in China will affect the
price of other raw materials such as iron ore, nickel
and coal, which are key inputs in steel production.
In August Chinese imports of iron ore fell to the
lowest level since 2009. A lower spot price for iron
ore will create price pressure when contractual ore
prices are set, which is now done quarterly rather
than annually. Nickel, which is used in the
production of stainless steel, has not yet been
affected by lower steel production, but the risk of
lower prices still remains. The market for
aluminium is still facing an oversupply, partly due
to higher aluminium production in China. Although
aluminium has had a weaker price trend in 2010
than other metals, there is a risk of a sizable
correction unless the global economy strengthens.
Zinc and lead are other industrial metals with
growing inventories due to increased mineral
production.
Our forecast of a slowdown in global growth during
the second half year, when the temporary inventory
build-up gradually subsides at the same time that
economic policies are tightened in several
countries, also assumes a slower price rise for
metals. This is especially true of those that are in
oversupply. For copper and tin, where supply is
relatively limited, prices may continue to rise,
despite that emerging economies are expected to
grow at a slightly slower pace.
Stock levels, base metals, million tons
Source: LME, Reuters EcoWin
00 01 02 03 04 05 06 07 08 09 10
Ton(metric)
-25000
0
25000
50000
75000
100000
125000
150000
175000
200000
225000
Ton(metric)(millions)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Copper
Zink
Lead
Nickel, right scale
Energy prices turned higher in August after three
months of decline. The price of oil has fluctuated in
the range of 70-80 dollars a barrel in 2010. This is a
level that OPEC feels will not sabotage the
economic recovery while at the same time
stimulating new production. The global oil market
is facing an oversupply with inventories still higher
than the average for the last five years. Continued
high oil consumption in emerging economies, led by
Asia, has been more than compensated by
increased crude production within and outside
OPEC. We expect global demand to rise in the year
ahead, though at a slower pace. The International
Energy Agency (IEA) is predicting that global oil
consumption will grow by 1.5% in 2011, in pace
with the long-term growth trend. Our oil price
projections of USD 78.50 for 2010 and USD 82 next
year remain firm.
Within Swedbank’s Total Commodity Price Index,
the price index for food rose by 3.7% in dollar
terms in August compared with the previous month.
The biggest price gain was for grain, at nearly 25%
in two months. In SEK, that figure was lower
(14.5%) due to the krona’s appreciation against the
dollar. Unfavourable weather conditions were the
main reason for the increase in food prices. After
this summer's wildfires, Russian wheat production
is expected to shrink by a third in 2010.
The risk of a new global food crisis is lower than in
2008. A fragile global economy and well-filled
inventories reduce the risk of any major price
increases. The export embargo of Russian wheat
has contributed to greater uncertainty about food
supplies, however. This was also the case with the

3. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continued
No. 8 • 17 September 2010
3 (4)
global food crisis in 2007-2008, which probably
accelerated the price increases. To ensure future
food supplies, the easing of trading restrictions on
foodstuffs will be extremely important.
Economic worries are driving up the price
of gold
Gold is increasingly considered a safe alternative
among financial investors. Several Asian central
banks have also begun buy up gold to a great
extent, partly in order to diversify their currency
reserves. The price of gold has repeatedly broken
new records in recent years. Higher gold demand is
also driving up the prices of silver, probably to a
lesser extent because industrial use of silver has
increased. So far this year gold has risen by nearly
9% to USD 1 260 per ounce, while metal prices
have fallen by 2%. Since the beginning of the
2000’s the price of gold has increased nearly five
times over, faster than many of the world’s stock
markets. Silver has also traded substantially higher
during the same period after having mainly
accelerated in the last two years.
Gold and Silver in USD, Index 2000=100
Gold Silver
Source: Reuters EcoWin
00 01 02 03 04 05 06 07 08 09 10
Index
50
100
150
200
250
300
350
400
450
500
2000=100
The continued rise in the price of gold indicates that
the global economic recovery rests on shaky
ground and that economic imbalances still remain.
In addition to weaker growth signals in the US,
there is great uncertainty about the fiscal situation
in several European countries. During the summer
and fall credit spreads in Greece, Ireland and Spain
have risen to the levels of last spring. Against the
backdrop of the underlying imbalances in the global
economy and the risk of a double-dip recession, we
feel it is likely that the price of gold could continue
to rise in the short term. In a more long-term
perspective, changing economic conditions could
lead to a relatively fast shift to investments other
than gold. Higher interest rates and a visible rise in
the dollar would likely reduce interest in gold as a
financial investment.
Jörgen Kennemar

4. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continued
No. 8 • 17 September 2010
4 (4)
Swedbank Commodity Index - US$ -
Basis 2000 = 1oo 16-09-10
6.2010 7.2010 8.2010
Total index 259,9 264,8 270,0
Per cent change month ago -1,3 1,9 1,9
Per cent change year ago 14,8 22,3 13,6
Total index exclusive energy 239,2 256,3 265,6
Per cent change month ago -1,4 7,1 3,6
Per cent change year ago 31,2 38,6 32,5
Food, tropical beverages 212,4 225,8 234,1
Per cent change month ago 3,9 6,3 3,7
Per cent change year ago -0,7 11,5 10,9
Cereals 174,3 193,4 215,5
Per cent change month ago -3,6 11,0 11,4
Per cent change year ago -18,6 3,1 19,3
Tropical beverages and tobacco 235,1 249,0 253,6
Per cent change month ago 7,0 5,9 1,8
Per cent change year ago 15,6 21,0 14,5
Coffee 142,2 153,4 157,5
Per cent change month ago 10,9 7,9 2,7
Per cent change year ago 20,0 35,9 34,0
Oilseeds and oil 188,2 196,8 204,2
Per cent change month ago 0,7 4,6 3,8
Per cent change year ago -20,4 -4,0 -2,1
Industrial raw materials 247,0 265,1 274,7
Per cent change month ago -2,6 7,3 3,6
Per cent change year ago 42,5 47,5 39,1
Agricultural raw materials 163,4 166,8 170,7
Per cent change month ago -0,3 2,1 2,3
Per cent change year ago 40,0 36,1 29,8
Cotton 81,4 79,0 86,6
Per cent change month ago 0,0 -2,9 9,6
Per cent change year ago 51,0 33,4 47,8
Softwood 144,1 149,1 150,0
Per cent change month ago -0,6 3,5 0,6
Per cent change year ago 28,8 27,7 21,7
Woodpulp 969,4 978,6 976,6
Per cent change month ago 2,5 0,9 -0,2
Per cent change year ago 59,3 53,4 46,3
Non-ferrous metals 207,7 214,8 232,5
Per cent change month ago -6,6 3,4 8,2
Per cent change year ago 24,3 23,6 14,1
Copper 6498,7 6734,6 7283,2
Per cent change month ago -5,3 3,6 8,1
Per cent change year ago 29,6 29,1 17,8
Aluminium 1931,0 1987,8 2112,1
Per cent change month ago -5,6 2,9 6,3
Per cent change year ago 22,2 19,2 9,4
Lead 1703,4 1836,4 2071,8
Per cent change month ago -10,0 7,8 12,8
Per cent change year ago 1,7 9,4 8,5
Zinc 1742,5 1843,4 2042,6
Per cent change month ago -11,9 5,8 10,8
Per cent change year ago 11,9 16,8 12,2
Nickel 19382,7 19512,8 21370,0
Per cent change month ago -12,5 0,7 9,5
Per cent change year ago 29,3 22,1 8,8
Iron ore, steel scrap 571,5 658,0 659,3
Per cent change month ago 0,1 15,1 0,2
Per cent change year ago 70,4 92,1 89,3
Energy raw materials 269,0 268,6 271,9
Per cent change month ago -1,2 -0,2 1,2
Per cent change year ago 9,4 16,4 7,0
Coking coal 372,2 362,5 341,9
Per cent change month ago -1,4 -2,6 -5,7
Per cent change year ago 40,1 31,3 26,0
Crude oil 264,3 264,3 268,7
Per cent change month ago -1,2 0,0 1,7
Per cent change year ago 7,9 15,6 6,0
Source : SWEDBANK and HWWA-Institute for Economic Research Hamburg
Swedbank Commodity Index - SKr -
Basis 2000 = 1oo 16-09-10
6.2010 7.2010 8.2010
Total index 221,5 213,3 213,9
Per cent change month ago 0,6 -3,7 0,3
Per cent change year ago 16,0 18,0 15,8
Total index exclusive energy 203,9 206,4 210,4
Per cent change month ago 0,5 1,2 2,0
Per cent change year ago 32,5 33,8 35,1
Food, tropical beverages 181,0 181,8 185,5
Per cent change month ago 5,9 0,5 2,0
Per cent change year ago 0,3 7,6 13,1
Cereals 148,5 155,8 170,8
Per cent change month ago -1,7 4,9 9,6
Per cent change year ago -17,8 -0,5 21,7
Tropical beverages and tobacco 200,3 200,6 201,0
Per cent change month ago 9,0 0,1 0,2
Per cent change year ago 16,8 16,7 16,7
Coffee 121,2 123,6 124,8
Per cent change month ago 13,1 2,0 1,0
Per cent change year ago 21,2 31,1 36,7
Oilseeds and oil 160,4 158,5 161,8
Per cent change month ago 2,7 -1,2 2,1
Per cent change year ago -19,6 -7,4 -0,1
Industrial raw materials 210,5 213,5 217,6
Per cent change month ago -0,7 1,4 1,9
Per cent change year ago 44,0 42,3 41,8
Agricultural raw materials 139,2 134,3 135,3
Per cent change month ago 1,6 -3,5 0,7
Per cent change year ago 41,5 31,3 32,4
Cotton 69,4 63,6 68,6
Per cent change month ago 2,0 -8,3 7,8
Per cent change year ago 52,6 28,8 50,7
Softwood 122,8 120,1 118,9
Per cent change month ago 1,3 -2,2 -1,0
Per cent change year ago 30,1 23,2 24,0
Woodpulp 826,1 788,2 773,8
Per cent change month ago 4,5 -4,6 -1,8
Per cent change year ago 60,9 48,0 49,2
Non-ferrous metals 177,0 173,0 184,2
Per cent change month ago -4,8 -2,3 6,5
Per cent change year ago 25,6 19,2 16,4
Copper 5538,0 5424,3 5771,1
Per cent change month ago -3,5 -2,1 6,4
Per cent change year ago 30,9 24,6 20,2
Aluminium 1645,5 1601,0 1673,6
Per cent change month ago -3,7 -2,7 4,5
Per cent change year ago 23,4 15,0 11,5
Lead 1451,6 1479,1 1641,7
Per cent change month ago -8,3 1,9 11,0
Per cent change year ago 2,7 5,6 10,6
Zinc 1484,9 1484,7 1618,5
Per cent change month ago -10,2 0,0 9,0
Per cent change year ago 13,1 12,7 14,4
Nickel 16517,4 15716,3 16933,4
Per cent change month ago -10,8 -4,9 7,7
Per cent change year ago 30,7 17,8 11,0
Iron ore, steel scrap 487,0 530,0 522,4
Per cent change month ago 2,1 8,8 -1,4
Per cent change year ago 72,2 85,4 93,0
Energy raw materials 229,2 216,3 215,5
Per cent change month ago 0,7 -5,6 -0,4
Per cent change year ago 10,6 12,3 9,1
Coking coal 317,2 292,0 270,9
Per cent change month ago 0,5 -7,9 -7,2
Per cent change year ago 41,5 26,7 28,4
Crude oil 225,2 212,9 212,9
Per cent change month ago 0,7 -5,5 0,0
Per cent change year ago 9,0 11,6 8,1
Source : SWEDBANK and HWWA-Institute for Economic Research Hamburg
Swedbank
Economic Research Department
SE-105 34 Stockholm, Sweden
Phone +46-8-5859 7740
ek.sekr@swedbank.se
www.swedbank.se
Legally responsible publisher
Cecilia Hermansson, +46-88-5859 7720
Magnus Alvesson, +46-8-5859 3341
Jörgen Kennemar, +46-8-5859 7730
Swedbank’s monthly Energy & Commodities newsletter is published as a service to our
customers. We believe that we have used reliable sources and methods in the preparation
of the analyses reported in this publication. However, we cannot guarantee the accuracy or
completeness of the report and cannot be held responsible for any error or omission in the
underlying material or its use. Readers are encouraged to base any (investment) decisions
on other material as well. Neither Swedbank nor its employees may be held responsible for
losses or damages, direct or indirect, owing to any errors or omissions in Swedbank’s
monthly Energy & Commodities newsletter.