The Commodities Market in 2016


The low-carbon economy poses a growing threat to Norway's oil wealth. Fish farmers can look forward to another super-profitable year, while the prospects for the steel industry and bulk shipping are grim.

While the oil price will probably be under pressure in the first half-year, it should head to 50+ by the end of 2016. This is manifested by the fact that the shale oil production is declining while demand is developing positively.

However, the Libyan peace agreement that was signed just over a week ago can put a stop to this. If both Libya and Iran return to the oil market in 2016, it will be hard to be an oil optimist.

Will the oil wealth be wiped out?

The biggest threat to Norway's oil wealth is the danger of a full-scale global commercialization of electric vehicles. Such vehicles are cheaper to maintain and refuel. They are also easier to build, but all of these benefits are currently offset by expensive batteries.

However, the price of batteries is systematically falling and may eventually come down to levels that will make electric vehicles competitive without subsidies. This, together with strong political tailwinds, increases the risk of a transport revolution that undermines the demand for oil.


Salmon and lithium are the exceptions in the commodities market. Lithium prices are supported by an insatiable demand from battery manufacturers, while the price of salmon is at record levels thanks to an inelastic supply side.

Although the bottleneck on the production side will likely be solved eventually, there is little risk that this will happen next year. This means that salmon prices will be determined by the threshold of pain for consumers. This will translate into another year of extreme profits for the aquaculture industry.

Chinese shadow

It will probably take several years before world’s consumption of steel passes the peak reached in 2014 as the infrastructure boom in China is a thing of the past. This brings a pitch-black outlook for bulk shipping, steel mills and iron ore mines.

For aluminum, the supply side is the problem. Driven by substitution of steel in cars, global consumption is increasing by over four percent a year.

However, this has helped little, because the Chinese have been building smelters very fast. The Chinese production is up twelve percent so far this year, despite the fact that two-thirds of the Chinese production capacity is unprofitable at current price levels.

With soaring inventories, it is difficult to be positive to aluminum until the Chinese shut down capacity. However all predictions that low prices would lead to the shutdown of Chinese smelters have so far been wrong.

High season for small caps

January is the best month for small caps, and we are positioning ourselves for this by including Selvaag Bolig and Biotec Pharmacon into the Dovre portfolio.

Selvaag Bolig is a bet on that the strong flow of refugees to Norway will eventually create need for more housing.

Biotec is a bet on a successful commercialization of the wound healing gel Woulgan. The company signed a distribution agreement for Scandinavia before Christmas. The next major price trigger is a similar agreement for Germany.


  • Panoro Energy
  • Det norske oljeselskap
  • PGS
  • Ganger Rolf
  • Selvaag Bolig
  • Biotec

In: Selvaag Bolig, Biotec

Out: Aker Solutions, REC