Summary of Key Commodities Market Themes for 2020

We expect three main macro themes to impact commodities in 2020: 1) Phase 2 of US-China trade talks 2) the upcoming US elections and 3) the continued deceleration of the Chinese economy. Secondary themes include an improvement in the European economy and slightly weaker dollar. Longer term, a broader trend of decarbonisation will continue to impact both the metals and energy markets, resulting in structural change in both sectors. Metals specific: - A potentially faster return of Vale’s iron ore output. - Palladium having the strongest downside risk within the metals complex. - Potential reduction in aluminium production as prices remain stubbornly below cash costs. - Market focus and investments in power storage related commodities. Oil specific: - A slowdown in US tight oil production growth to ~0.7mn b/d as operators focus on balance sheet management rather than ‘growth at any cost’. - A requirement for additional OPEC oil production in 2H20, with a need for a coherent exit strategy for the group vital for market stability. - A stabilisation in macro conditions may encourage a sustained increase of generalist flows back into the oil complex after a very light 2019 from a positioning perspective. This will add another layer of price support. Gas specific: - Europe’s role as the global gas market’s balancer in 2020 to be constrained by a high storage carry out following winter 19-20 , amidst a robust increase in LNG capacity through 2020. - The result will likely be brutal summer TTF prices, with short-run marginal costs of key suppliers likely to be tested. Gazprom’s volumetric flexibility will determine the lows – a move to maintain market share via flexible ESP sales would see TTF prices below $3/ MMbtu . - Henry Hub to outperform the global gas complex (read: not decline as much) given a tightening supply side and a structural increase in export demand.