NZ: Constructive outlook for commodity prices - ANZ

In view of the analysts at ANZ, in recent week’s markets seem to have got New Zealand’s commodity prices mixed up with Australia’s and others and while iron ore (-6.1%) and oil (-13%) are down since the start of 2017; dairy is little changed (-2%) and non-dairy prices (+6.2%) – a significant larger proportion of exports – are up.

Key Quotes

“Combined with NZDTWI weakness (-2.8%) this is making for healthier NZD returns for local exporters. While there is no doubt increased buying activity from China and broader Asia has been influential, as well as the more generally buoyant global trade conditions many of New Zealand exports are benefiting from other non-global factors. This is demonstrated by the price action at the individual sector level.”

“While this doesn’t buy absolute immunity from global factors, or China’s economic performance, we think it does provide some durability in many cases. Combined a deepening in trading ties that is now occurring via more formal partnerships and two-way direct investment between supply chain partners this has us constructive on the outlook for New Zealand commodity prices.”