Commodity Price Watch: December 2025

For globally traded industrial commodities, prices appear flat to up in 2026, with crude oil the major exception. Trade barriers will continue to increase, mainly outside the US in the upcoming year. Any upside pressure to pricing is more likely to come from supply disruptions or trade policies than from demand.

As measured by the Materials Price Index (MPI) by S&P Global Market Intelligence, industrial materials prices increased 2.3% in the third quarter of 2025. We expect another increase in the fourth quarter and the first quarter of 2026. The year-over-year percent change in the MPI finally turns positive by the second quarter of 2026 after being in the red since the fourth quarter of 2024.

The key for 2026 is a divergence in the price outlook between metals, which we expect to be higher in 2026, and the energy and chemicals side as well as the different regional environments. 

Crude oil remains oversupplied, and we expect this to drive prices lower across 2026. This has come from OPEC+ members unwinding production cuts over the course of 2025. December will mark the final production increase before a pause for at least the first quarter. 

US natural gas prices are beginning to feel the market tightness owing to export capacity growth. Early December saw Henry Hub prices spike above $5/MMBtu. Prices in 2026 and 2027 will be higher than in 2025. 

Natural gas prices outside of the US will also move lower as liquefied natural gas exports from the US lift domestic pricing but increase supply to the major LNG-importing regions of Europe and northeast Asia. These cheaper energy products will keep costs down for chemicals and plastic manufacturing.

The petrochemicals sector also faces strong supply, and we have a nearly flat outlook for chemicals and plastics pricing as a result. 

Our forecast this month compared with last time for chemicals and resins has been lowered mostly across the board, with recent monthly spot prices plunging even lower from already low levels. The industry is in a deep hole, with fundamental oversupply placing heavy downward pressure on prices for an extended period.

Still, because of rising natural gas prices in North America, petrochemical prices will begin turning higher in that region but the potential for pricing growth will be limited by ongoing unbalanced supply and demand conditions.

Steel will be a weak market through 2026, as prices are generally soft and supply is ample. The only exceptions are electrical steel and niche aircraft steel grades such as 4140.

There is a low-odds/high-impact risk of deep production cuts in mainland China in 2026. Market speculation over such cuts caused the price spike in July 2025 that took several months to unwind. We will monitor developments closely but will not revise our weak outlook until we see strong evidence that it is policy rather than rumor.

Demand will remain subdued well into 2026. Expect demand for most end markets to be weak enough it will not alone cause upward price pressure in the European Union, the United States, and mainland China. The stronger markets in the world are India and Southeast Asia, but their expansion is insufficient to offset the wider weakness elsewhere. 

Other than trade barriers, there is no support for substantive price increases anywhere in the world. Prices have limited room to decline because they are near or below input costs in many regions. Prices have limited room to rise because buyers cannot or will not pay increases.

That said, steel protectionism is spreading, with Europe significantly strengthening its tariff-rate quota (TRQ) and Asian markets cross-filing antidumping cases.

Aluminum prices remain supported by the production outages in October. With few unexpected changes in output over November and the end-of-year slowdown, prices have been relatively static. Low expectations for a lift in construction over 2026 and increased uncertainty about demand from other sectors see price forecasts moderating in the first quarter of 2026 and then experiencing a flat profile through the remainder of the year.

We reaffirm our belief that the effective Section 232 tariff on aluminum will drop over 2026 and through 2027 but have deferred the implementation of the fall. We had previously surmised that progress on an agreement would already have been made.

However, after talks between the United States and Canada were suspended in October, we pushed back the timeline for an agreement. We now expect that these tariffs will feature during the United States-Mexico-Canada Agreement (USMCA) renegotiations that start in June 2026. 

Copper prices have continued to rise over the last quarter. A combination of already tight supply, production outages and enhanced speculation drove them up to all-time highs. Supply tightness is more than offsetting an anemic near-term demand picture. These drivers are still working today; although there have been few unexpected outages, miners continue to downgrade output expectations for 2026.

Lower-than-expected demand for nickel from the EV battery sector also remains a contributing factor to the global oversupply conditions and weak pricing environment. Much of this new nickel capacity was added to meet the expected strong demand growth from the EV battery sector and demand has underperformed expectations.

Lithium iron phosphate (LFP) batteries, which contain no nickel and are cheaper to produce, have grown to dominate the mainland Chinese electric vehicle market. In addition, Europe and North America, where nickel battery chemistries were expected to dominate, have seen much slower EV adoption rates amid high costs, subsidy cuts and weak consumer sentiment.

—With contributions from Keyla Goodno