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United Nations Conference on Trade and Development
10th MULTI-YEAR EXPERT MEETING ON COMMODITIES AND DEVELOPMENT
25-26 April 2018, Geneva
Recent trends and outlook on commodity markets
By
Janvier D. Nkurunziza, Commodities Branch, UNCTAD
The views expressed are those of the author and do not necessarily reflect
the views of UNCTAD.
Recent trends and outlook on commodity markets
Multi-year Expert Meeting on Commodities and Development
25-26 April 2018, Geneva
Janvier D. Nkurunziza
Commodities Branch, UNCTAD
Background….
Two out of three developing countries are commodity dependent
Commodity prices are closely related to per capita growth in developing countries
UNCTAD Non-oil Nominal Commodity Price Index and GDP per capita developing countries 1995-2016 (annual % changes)
Correlation coefficient = 0.79
Recent developments in global commodity markets
0
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Price index all commodities GDP per capita developing countries, right axis
UNCTAD non-oil Commodity price index
Recent developments in global commodity markets
ALL FOOD
- Food
Wheat
Maize
Rice
Sugar
Bovine meat
Bananas
Pepper
Soybean meal
Fish meal
- Tropical beverages
Coffee
Cocoa beans
Tea
- Vegetable oilseeds and oils
Soybeans
Soybean oil
Sunflower oil
Groundnut oil
Copra
Coconut oil
Palm kernel oil
Palm oil
AGRICULTURAL RAW MATERIALS
Linseed oil
Tobacco
Cotton
Wool
Jute
Sisal
Hides and skins
Tropical logs
Rubber
MINERALS, ORES AND METALS
Phosphate rock
Manganese ore
Iron ore
Aluminium
Copper
Nickel
Lead
Zinc
Tin
Tungsten ore
Price trends….
The big picture
• Commodity prices trended downwards during H1, 2017, bringing the upwards trend of 2016 to a halt
• From January to June 2017 the UNCTAD Non-oil Nominal Commodity Price Index decreased by 6%
• In the second half of 2017, the UNCTAD commodity price index showed an upwards trend - mainly driven by minerals, ores and metals
Recent developments in global commodity markets
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UNCTAD Non-oil Nominal Commodity Price Index(2000 = 100)
Commodity prices show a mixed picture in 2017
• Prices of agricultural raw materials decreased by 8.7% from January to December 2017
• Food prices decreased by 6.2% from January to December 2017
• Prices of Minerals, Ores and Metals trended downwards during H1, but increased steeply in H2 - up 11.1% from July to December 2017
Recent developments in global commodity markets
212 213
205198
202 201 201195
198 197 199 199
181 183177
167164
160164 164 166
162 162 165
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254250
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265268 270 271 272
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Food Agricultural raw materials Minerals, ores and metals
Commodity prices show a mixed picture in 2017
Monthly price, January 2017 vs. December 2017 (% change)
• In 2017 prices of major commodities showed no common trend
• Prices of minerals, ores and metals generally faredbetter than othercommodities
Recent developments in global commodity markets
-40 -30 -20 -10 0 10 20 30
Copper
Zinc
Aluminium
Nickel
Lead
Tropical logs
Wheat
Gold
Rice
Cotton
Soybean oil
Tea
Soybeans
Tin
Maize
Tobacco
Iron ore
Cocoa
Palm oil
Coffee
Coconut oil
Cottonseed oil
Sugar
Rubber
Commodity price developments 2016 vs. 2017Monthly price, January vs. December (% change)
Recent developments in global commodity markets
-60 -40 -20 0 20 40 60 80 100
CopperZinc
Aluminium
NickelLead
Tropical logs
WheatGold
Rice
Cotton
Soybean oilTea
Soybeans
TinMaize
Tobacco
Iron oreCocoa
Palm oil
CoffeeCoconut oil
Cottonseed oil
Sugar
Rubber
Jan-Dec 2016 Jan-Dec 2017
Food and agricultural commodities
Price indices of food and agricultural commodity groups July 2010 – December 2017 (2000=100)
• Tropical beverages showed the steepest decrease losing 12.8 % from January to December 2017
• Prices of vegetable oilseeds and oils decreased by 11.9%
• Prices of food commodities and agricultural raw materials dropped by 4.6% and 8.7%, respectively.
Recent developments in global commodity markets
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Food Tropical beverages
Vegetable oilseeds and oils Agricultural raw materials
Prices of most food commodities dropped in 2017
• 2016 sugar price hike triggered an expansion of supply:– brought price down to 14.4 c/lb in December 2017 (-29.3% since
January)
– price increase unlikely for the upcoming season unless adverse weather
• Price of rice rallied in May and June due to strong demand– adjusted downward to 394 $/t in December (+7.1% Y-o-Y)
– Output for 2017/18 projected higher than demand; price increase unlikely
• Price of maize reached its lowest in more than a decade at 156 $/t in November (157 $/t in August)– strong demand forecast projected to lead to a reduction of stocks
– mild price increase possible
Recent developments in global commodity markets
Vegetable Oilseeds and Oils
• Prices of all individual oilseeds and oils trended downwards in 2017– Cottonseed oil (-28.4%)
– Palm kernel oil (-25.9%)
– Copra (-21.8%)
– Coconut oil (-19.8%)
– Palm oil (-16.9%)
• Forecasts predict abundant supply for major oilseeds, soprices are likely to remain low.
Recent developments in global commodity markets
Tropical beverages
• Tea: price averaged 350 c/kg in December, down 5.5% from January– Expected to remain volatile as weather-related risks in main growing regions
make supply forecasts difficult
• Cocoa: in December price of beans stood at 87 c/lb, its lowest level in more than a decade– Negative price development fuelled by significant production increases in
West Africa and a record supply surplus
• Coffee: in December 2017, coffee price averaged 114 c/lb, down 13.4% yoy– Forecasts of healthy production for 2017/18– Price increase unlikely over the medium-term unless unfavourable weather
Recent developments in global commodity markets
Agricultural raw materials
• Prices showed a mixed picture in 2017
• Rubber: after a brief surge at the beginning of the year due to floods in Thailand and Malaysia, the rubber price dropped to 169 c/kg in December 2017 (-33.9% from January)– Demand growth expected to outpace production increases, hence
mild price increases seem likely
• Cotton: the cotton price stood at 85 c/lb in December, 3.5% higher than in January– Price could increase in 2018 due to strong demand forecasts and
falling inventories
Recent developments in global commodity markets
Minerals, ores and metalsPrices of selected minerals, ores and metals
January 2011 - December 2017• UNCTAD Minerals, Ores
and Metals Price Index was down 5.5% in H1 2017
• From June 2017 to December 2017 the Price Index increased by 17.2%
Recent developments in global commodity markets
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Copper Nickel
Aluminium, right axis Zinc, right axis
Minerals, ores and metals index
Minerals, ores and metals• Nickel: price surged 27.8% between June and December 2018
– Further price increases likely in 2018 due to continued demand growth
• Iron ore: concerns over oversupply caused a drop to 62 $/t in August– Prices expected to remain low due to favorable supply
conditions
• Copper: price increased 18.1% from January to December 2017– Latest projections: deficit in 2017/18 so further price increases
likely
Recent developments in global commodity markets
Energy
Crude oil (petroleum), coal and natural gas prices, January 2007-December 2017
Recent developments in global commodity markets
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Crude oil, Brent ($/barrel) Coal, Australian thermal ($/ton) Natural Gas, Henry Hub ($/btu), right axis
Crude oil
• Crude oil prices highly volatile over the past decade:– Between 01/2007 and 12/2017 spot price of Brent crude
fluctuated between 133.9 and 30.8 $/barrel.
– Agreement of OPEC and non-OPEC oil exporters to cutproduction has contributed to recent rise in oil prices
Natural gas• Markets for natural gas regionalized due to physical limits to
transport and different contractual arrangements
• The Henry Hub natural gas price reached lowest level in more than 20 years in 03/2016 at 1.70 $/million btu:– Prices volatile in 2017 - $2.76 $/million btu in 12/2017– Demand forecast to outpace supply in 2017 as well as 2018 leading to lower
inventory levels– Hence, an increases of the natural gas price is possible
• Over the medium to long term:– rapid expansion of liquefied natural gas likely to lead to higher market
integration– global liquefaction capacity at 340 MTPA in 01/2017, almost double its value
in 2005– construction of over 100 MTPA on the way in 2017– in 2016, LNG accounted for 32% of global trade in natural gas; increased LNG
capacities could contribute to a convergence of natural gas prices
Coal• Coal is primary fuel for electricity generation at global level:
– responsible for 45% of energy-related carbon emissions
– however, share of coal in the power generation is on a downward trajectory and expected to drop from 41% in 2014 to 36% in 2021
• Coal prices volatile in 2017; stood at $102 per metric ton in December 2017 from $74.5 in May 2017
• Tight supply (strikes in Australia & bad weather in Indonesia) & high demand in China contributed to price increase
• In 2018, price decline resulting from ample supply capacity
• Overall, a downward movement of the coal price seems likely
Renewable energyAnnual growth rates of renewable energy consumption by type,
2000-2016• Renewables are expected to account for 60% of global power capacity growth through 2021
• Record growth in renewable electricity capacity in 2015. Solar PV with highest growth rate followed by wind
• China accounts for largest share of global renewables expansion, but renewables also growing in EU, US and India
Recent developments in global commodity markets
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Solar Wind Geothermal, biomass and other Hydro
Markets to watch….
Commodity prices: role of emerging economies
0%
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Iron ore Copper Iron ore Copper Iron ore Copper
China United States EU28
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Commodity prices: high demand from China
0% 10% 20% 30% 40% 50% 60% 70% 80%
Petroleum oils, crude
Coal
Cotton
Natural rubber
Aluminium ores
Copper ores
Nickel ores
Iron ore
2016
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1995
Volume Index and volume growth rate of merchandise imports
Recent developments in global commodity markets
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Q12013
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China
Volume Index (2005=100) Volume growth rate over corresponding period of previous year
Volume Index and volume growth rate of merchandise imports
Recent developments in global commodity markets
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%)
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Developing countries excluding China
Volume Index (2005=100) Volume growth rate over corresponding period of previous year
Conclusion….
Summary and outlook
• The general upwards trend in commodity prices that had started at the beginning of 2016 came to a halt in early 2017
• Individual commodity markets have shown a mixed pattern in 2017– Prices of food and agricultural raw materials decreased
– Prices of minerals, metals, and ores have increased
• Overall, unlikely that commodity prices will return to anywhere close to their peak levels of 2011 in the near future
Recent developments in global commodity markets
Thank you.
Contact: janvier.nkurunziza@unctad.org
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