Raw materials lie at the heart of every economy, powering industries, feeding populations, and fueling change. As we step into 2025, understanding the forces shaping these markets is essential for businesses, investors, and policymakers alike.

Introduction to Raw Material Markets

Commodities are raw materials traded globally—from oil and natural gas to metals and agricultural crops. They are foundational for industrial production and underpin nearly every product we use daily.

Beyond their physical role, commodity markets influence inflation, trade balances and global economic stability. When oil prices spike, travel and shipping costs rise. When wheat stocks tighten, food prices climb. And when metal supplies falter, manufacturing bottlenecks emerge.

Current Market Backdrop and Major Drivers

The World Bank projects overall commodity prices will fall by roughly 12% in 2024 and another 5% in 2025, ushering in a six-year low by year-end. Key structural trends include:

• Weak global economic growth, notably in China and Europe, dampening demand.
• Supply outpacing demand in oil, steel, and select agricultural products.
• Ongoing volatility from geopolitics, pandemic aftershocks, and supply chain disruptions.

Downside risks dominate: a global recession, new trade barriers, OPEC+ policy shifts, geopolitical supply shocks, or extreme weather could send prices surging or collapsing without warning.

Energy Markets

Energy remains the largest commodity segment. After four years of turbulent swings, 2025 could see prices soften further.

Oil: Brent crude is forecast to average around $70 per barrel in 2025, slipping to $60 in 2026. With OPEC+ set to lift supply cuts—adding roughly 0.3 million barrels per day—and non-OPEC output expanding, a slight surplus is likely. Meanwhile, US oil supply growth slows as marginal drilling loses profitability, even as demand growth weakens to about 0.7 mb/d thanks to rising EV adoption.

Natural Gas: Europe faces supply uncertainty after the end of the Russia-Ukraine pipeline deal, boosting global LNG demand. The US Gulf of Mexico ramp-up and robust industrial consumption will support prices, though record storage levels in key markets temper extreme spikes.

Metals & Mining

Global metals markets reflect divergent narratives: overcapacity in some sectors and looming shortages in others.

Steel: Chinese overproduction and a weak construction sector leave the world awash in steel, keeping prices depressed and trade tensions high as exports trigger tariffs abroad.

Precious Metals: Gold remains buoyant, backed by central bank buying as a hedge against volatility and inflation. Silver’s early-2025 rally may extend to copper and aluminum by 2026. Uranium is garnering bullish sentiment, with prices forecast to reach $100 per pound by late 2026 on rising nuclear energy demand and supply constraints in Africa and North America.

Battery & Critical Metals: The energy transition is driving unprecedented demand for lithium, copper, cobalt, and nickel. Africa’s resource-rich regions are crucial but face environmental and governance hurdles. Investors and governments must balance resource development with social and ecological responsibility.

Agricultural Markets

Agricultural commodities show varied trajectories as weather, trade policy, and global demand interact.

Soybeans: A record Brazilian harvest lifts stocks-to-use ratios to 17-year highs, keeping prices subdued. Maize follows a similar path, though prices remain firmer relative to soybeans. Wheat stocks are tightening modestly, suggesting potential price gains without repeating recent peaks. Rice prices are set to decline as Indian export restrictions ease.

Trade wars and tariffs, especially between the US and China, continue to reshape flows, creating regional price premiums and new sourcing strategies.

Cross-Cutting Issues and Trends

Several overarching themes are reshaping commodity markets:

• Supply Chain Restructuring: “Deglobalization” trends, sanctions, and technology disputes are driving onshore or nearshore sourcing and redundant inventories.
• Climate Risk: Extreme weather threatens crop yields and mining operations, raising food security and supply stability concerns.
• Sustainability & Energy Transition: Demand for low-carbon “green” commodities—green hydrogen precursors, battery metals, and biofuels—is surging. The EU Emissions Trading System is forecast to see carbon prices hit €95 per ton by end-2025.
• Monetary Dynamics: US dollar strength, inflation trends, and central bank policies profoundly influence commodity valuations and investment flows.

Market Structure, Investor Strategies & Outlook

Heightened volatility has spurred financial innovation: inventory finance, prepayment models, and supply chain financing solutions are more prevalent. Corporates and traders are diversifying into new commodities—lithium, renewable electricity, biofuels—to hedge against sector-specific risks.

Macro factors and geopolitics are expected to drive short-term price swings more than traditional supply-demand fundamentals. Smart money will position for both cyclical downturns and structural upswings, especially in green transition metals.

Numbers & Forecast Table

Conclusion

As the commodity cycle turns, a confluence of economic, political, technological, and environmental factors will shape winners and losers. The path forward demands agility, foresight, and a commitment to sustainability.

By understanding the volatile, regional divergence, strategic reshuffling unfolding across raw material markets, stakeholders can navigate challenges and seize opportunities in this era of transformation.