Deutsche Bank: Commodities Enter a New Repricing Cycle
Miles Bennett
As of July 14, commodities are splitting sharply — European natural gas rose 13.2% on the month while WTI crude fell 6.5% and aluminum dropped 10.1%. Deutsche Bank sees four forces — geopolitics, the dollar, positioning, and macro — reshaping commodity pricing simultaneously.
Why are commodities suddenly moving in opposite directions?
The month's best performers were European natural gas (+13.2%) and palladium (+1.6%); the worst were coal (-10.3%), silver (-13.7%), and aluminum (-10.1%).
This means → the "commodities" basket has fractured internally — its components no longer move as a single asset class.
Deutsche Bank traces the divergence to four drivers: geopolitics, the dollar, positioning, and macro — each pulling different commodities in opposite directions, producing the extreme spread.
What is geopolitics actually changing?
Middle East conflict risks re-escalation; US-Iran talks will likely overshoot their initial 60-day window. Ukraine trilateral talks have stalled, with ceasefire prospects tied to the Middle East outcome.
In plain terms = the global answer to "where can you source reliably?" is being rewritten — countries are racing to sign critical-minerals agreements.
Agreements that landed in the first half of this year include US pacts with Japan, Australia, Malaysia and others, plus the US Critical Minerals Reserve Plan, the US-EU Critical Minerals Plan, and the Quad Critical Minerals Framework.
This reflects a shift from rhetoric to signed commitments on supply-chain diversification — over time this will reset the pricing baseline for mineral commodities.
Can the dollar keep rallying?
The Bloomberg Dollar Spot Index hit a one-year high, but Deutsche Bank argues the market's repricing of a hawkish Fed path has already run far enough relative to core CPI — sustained gains are hard to justify.
Net long dollar positioning is near January 2025 levels, yet the dollar index back then was 6%-7% higher than today. This means → the long-dollar trade is crowded, but the price hasn't matched the earlier peak — the risk-reward is deteriorating.
On the reserve-manager side, an OMFIF survey shows 24% plan to cut dollar exposure over 10 years, 16% plan to add, and 60% will hold steady. In plain terms = large-scale de-dollarization is not happening, but the marginal intent to reduce exposure is real.
What drives copper from here?
Copper rallied from roughly $12,000/t in March to a $14,000/t peak in early June, then pulled back on dollar strength and a retreat in AI-capex-linked equities.
Deutsche Bank expects range-bound trading near term, a return to roughly $13,600/t in Q4, and a decline to roughly $12,500/t by 2027 as disrupted global mine supply gradually normalizes.
The biggest variable is US copper tariff policy — the Commerce Department must issue a final decision by June 30, 2026. Three paths: phased tariffs (15% in 2027, 30% in 2028 — the base case, short-term copper-positive); immediate tariffs (effectively shutting US import flows, pressing LME copper lower); no tariffs (high US inventories could trigger a selloff).
How do aluminum and iron ore differ?
Aluminum hit roughly $3,850/t in early June after a Middle East supply shock temporarily removed about 2.5-3 million tonnes/year of primary capacity — 3%-4% of global supply. After the Strait of Hormuz reopened, the price fell to roughly $3,100/t as Gulf smelters restarted faster than expected.
Deutsche Bank forecasts a modest recovery to roughly $3,300/t in Q4, normalizing to roughly $3,000/t by 2027; the market deficit narrows from over 2 million tonnes toward balance in 2027.
Iron ore has pulled back to roughly $100/t, where Deutsche Bank sees the high-cost curve providing a floor. But China's steel inventories are rising, mill margins remain weak, and the Simandou project's ramp-up has lifted shipment rates significantly — adding supply-side pressure. Q3 average forecast: roughly $98/t; Q4: roughly $100/t.
What is the most important signal in crude oil?
After the US-Iran memorandum lapsed in early July, Strait of Hormuz transit contracted sharply: outbound tanker volumes fell from a 7-day average of roughly 13 million bpd to under 4 million bpd; inbound ballast tanker capacity dropped in tandem from roughly 15 million bpd to 4 million bpd.
Yet Brent was pushed only to $85/bbl — below the $90/bbl implied by price-fundamentals reversion. This means → three forces are capping the rally: China's crude inventories swung from a 0.5 million bpd build to a 1 million bpd draw, coordinated global strategic reserves released an estimated 1.5 million bpd in June, and global refinery runs are 4.8 million bpd below 2025 levels.
The tightness has migrated downstream: European refining crack spreads remain elevated, and US cracks are even higher. In plain terms = crude itself is being held down, but downstream product margins are screaming — that divergence cannot persist indefinitely.
Content is for reference only, not financial advice.