Scotiabank says commodity prices up in November, rise will continue into in 2010

TORONTO - Oil and gas led a surge in commodity prices in November and the trend is likely to continue into 2010 as the appetite of the Chinese "juggernaut" continues to increase for metals, according to Scotiabank's monthly commodity price index report.

The bank's index, which measures price trends in 32 major exports, grew 5.3 per cent over October.

"The rally in commodity prices in 2009 has been extraordinary - faster than normal and from a higher base," Scotiabank vice-president Patricia Mohr said in a statement.

Mohr, who is also the bank's commodity market specialist, said China is largely responsible as "elements of the Asian-led 'super-cycle' have returned, with the China juggernaut leading the way."

"The revving up of China's industrial activity from a low of only 3.8 per cent year-over-year in January and February to 8.3 per cent in March and then 19.2 per cent in November has catapulted base metals into four of the top five best performing commodities of 2009."

On Monday, China's industry minister said the Chinese government is targeting eight per cent growth next year as the global economy recovers.

"Based on the economic growth target of about eight per cent, set by the central government, we aim for industrial output growth at about 11 per cent," said Li Yizhong in a webcast on his ministry's site.

Li's comment was the first indication of Beijing's 2010 growth target, a figure that usually is released after the start of the year. The annual target has been set at eight per cent for several years, though growth has exceeded that.

Forecasts by private sector economists for China's economic growth next year range from nine per cent to 11.9 per cent, well above the government target.

In the Scotiabank report, Mohr noted that oil and gas prices were up 10.4 per cent month-over-month, forest products rose 5.6 per cent, metals and minerals rose 2.5 per cent and agricultural products were up 2.5 per cent.

November's gains have advance the bank's all items index 17.3 per cent from the lows of April 2009.

China now accounts for 38.8 per cent of world consumption of the four key base metals, the report stated, and its hunger for resources will drive up prices for coking coal and iron ore in 2010, Scotiabank said. Potash prices should also start to rebound, Mohr added.

The bank is predicting China's economy to grow 9.5 per cent next year, up from an estimated 8.3 per cent in 2009.