Citigroup says commodities rout is finally over

 
Jessica Morris
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Citi says virtually all commodities have bottomed (Source: Getty)

Citigroup has called an end to the commodities rout which has sent shockwaves through the global economy, and pummelled the balance sheets of mining giants.

"There is growing evidence that virtually all commodities have stared at a price bottom and are groping for a return to normal," Citigroup analysts wrote in a note received today.

Read more: Are commodity prices at a low point for investors? Wait until 2017

They said a lot of this will depend on the growth prospects of China, which is the world's biggest consumer of raw materials. While the end of the year looks "constructive", they flagged significant obstacles on its road to recovery.

"It’s not clear that a real estate bubble isn’t being followed by a financial bubble. Continuing capital flight and further renminbi depreciation also remain headwinds to stability," they said.

"But for now infrastructure and consumer spending combined with the government’s still huge financial holdings give rise to greater complacency if not optimism, especially for industrial metals."

Read more: After a turbulent two days for Glencore, could its troubles trigger a Lehman moment for miners?

Petroleum and US natural gas markets are also recovering, after nearly two years of relentless stock builds.

Citi raised its 2016 predictions for copper, zinc and aluminium. The bank also increased its forecast for West Texas Intermediate oil from $39 to $42 per barrel this year. But they expect iron ore to be hurt by more output and low steel prices.

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