By Naveen Thukral, Henning Gloystein and Jan Harvey
LONDON/SINGAPORE (Reuters) - Industrial metals, liquefied natural gas and steel finished 2017 in stunning fashion as a crackdown on pollution in China, the world's no. 2 economy, boosts demand for cleaner fossil fuels and raw materials vital to clean-tech industries.
The world's most traded commodity, oil, rallied to finish the year at levels not seen in more than two years on increased demand and efforts by major producers to cut supply.
For 2018, analysts predict more of the same: accelerating growth in major economies and increased infrastructure spending driving prices for industrial commodities and energy sources above current multi-year highs.
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"I think we have seen the end of low commodity prices as funds are expected to focus on commodities in 2018, with strong economic growth," said Terry Reilly, senior commodities analyst with Chicago-based Futures International.
Metals used in the booming renewable energy sector, including copper for transmission lines and solar panel wiring, have seen strong demand and price rises, as have materials like aluminum used in electric vehicles.
This year's best performing metal, palladium, is chiefly used as a component in catalytic converters, which clean vehicle exhaust fumes. Buoyant car sales in China and Europe, plus tightening emissions standards, have stoked fears over metal availability after years of market deficit.
Palladium has gained 57 percent this year, hitting its highest since early 2001 on Thursday at $1,072 an ounce and outstripping a buoyant year in fellow precious metal gold, up 13 percent in its biggest annual rise since 2010.
"$1,000/oz is the new support and while it stays above this level, technically speaking the forecast is still bullish," Italpreziosi's head of finance Filippo Finocchi told the Reuters Global Gold Forum this month.
"Growing gasoline and hybrid vehicle worldwide sales, which represent around 75 percent of palladium demand, should again boost prices."
Copper and aluminum have risen by almost a third this year to four-year highs in the last trading week of 2017 of $7,312.50 and $2,284.75 a tonne, respectively.
Pan Pacific Copper, Japan's biggest copper smelter, expects copper prices to rise by more than a quarter over the next two years as global demand continues to grow and outpaces supply.
Shanghai rebar futures climbed 46 percent this year, driven by the closure of low-quality Chinese steelmaking plants and production curbs to fight pollution. High construction activity also supported steel.
CHINA DRIVES GAS, OPEC CUTS OIL
Brent crude oil broke through $67 per barrel for the first time since mid-2015 in the last week of 2017, ending up 17 percent for the year amid record trading volumes.
Oil has benefited from efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold production in order to prop up prices.
U.S. West Texas crude futures gained more than 12 percent on the year, closing above $60 a barrel on the final day of trading for the first time since mid-2015.
Preventing further price rises has been U.S. oil production, which has soared more than 16 percent since mid-2016 thanks to a rebound in major shale patches in Texas, and is approaching 10 million barrels per day. Only OPEC kingpin Saudi Arabia and Russia produce more. [O/R]
"The U.S. shale impact is now encroaching on uncharted territory," wrote RBC Capital Markets analyst Michael Tran earlier this month, saying that U.S. production has "redrawn the global crude flow map."
Liquefied natural gas (LNG) went from loser to winner, in part due to seasonal factors.
Asian spot prices for liquefied natural gas have doubled since June, to the highest level since late 2014 of more than $11 per million British thermal units.
Until the last quarter of the year, LNG had been one of 2017's worst-performing commodities.
The late rally has been driven by a huge gasification program in China which this year alone moved millions of households and industry from coal to gas for heating, just as a winter bites.
China's gasification is aimed at reducing coal use to help address pollution that has plagued cities for years.
"We have seen some serious crackdown on pollution in China, that will boost demand for metals and gas," Reilly said.
China is making huge investments into renewable power generation.
World solar power capacity has ballooned to around 300 gigawatts (GW) from just 1 GW in 2000, according to International Renewable Energy Agency (Irena) data, a number set to double by 2020.
Growth is largely driven by China, approaching 100 GW of capacity. Irena says China can add 50 GW a year of capacity.
Still, coal prices did relatively well in 2017.
Australian coal prices rose 10 percent to over $100 a tonne, as China ordered the closure of several domestic mines, forcing utilities to import more.
RECORD CROP YIELDS, LOW PRICES
Most agricultural products will finish 2017 with lower prices, squeezed by record output.
Raw sugar lost 22 percent, with the International Sugar Organization forecasting a global sugar surplus of 5 million tonnes in 2017/18 compared with a deficit of 3.1 million in 2016/17.
London cocoa ended down 20 percent, a second successive slump after a 23 percent fall in 2016, with prices depressed following a record global surplus in the 2016/17 season.
World corn production has hit a record high for eight of the past 10 years. Soybean production has climbed to all-time highs in four of the last five years, according to the U.S. Department of Agriculture. This led to a 5 percent decline in prices.
Wheat is on track for a modest 5 percent gain in 2017, after losing ground for four years, as world supplies of high-protein wheat tighten due to crop losses in the United States and Australia, in part related to La Niña weather occurrence.
Malaysian palm oil dropped 10 percent in 2017 with production in Southeast Asia outpacing demand from top importers China and Europe.
Tokyo rubber has fallen 18 percent in 2017 after being one of the best performing commodities in 2016.
(Reporting by Naveen Thukral, Henning Gloystein and Jan Harvey; additional reporting by Pratima Desai and Nigel Hunt in London and David Gaffen in New York; Editing by Kenneth Maxwell, Veronica Brown and David Evans)