Commodity Markets Outlook: World Bank

• 24 Apr 2020

Why in News

According to the World Bank’s April 2020 Commodity Markets Outlook, Covid-19 is expected to bring most commodity prices down substantially in 2020.

• However, it also says that the outlooks are “exceptionally uncertain” and depend on the severity and duration of the pandemic and when mitigation measures are taken.

Key Points

• Worst Hit
  
  • Energy and metals commodities are the most affected by the sudden stop to economic activity and the serious global slowdown that is anticipated.
  • Commodities associated with transportation, including oil, have experienced the steepest declines.
• Agricultural prices are likely to stay broadly stable in 2020 because of relatively stable demand and all-time high levels of staple production and stock.
  
  • However, supply chain disruptions and government steps to restrict exports or stockpile commodities raise concerns that food security may be at risk in places.
• Gold prices were up 6.9% in the last quarter (January- March,2020) – its sixth consecutive quarterly rise.
  
  • The strong investor demand propped gold up despite weak jewelry demand in India and China.
• Oil Prices: These are expected to average at $35 per barrel in 2020.
  • The decline in crude oil prices has been exacerbated by uncertainty around production agreements among the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers.
• Impact on Importers and Exporters: They are likely to see some long-term shifts in their markets due to the pandemic. These include
  
  • Increasing transport costs due to enhanced border checks and thus impact on supply chains.
  • Substituting for imports with domestic goods: Companies might prefer to source from closer by for instance.
• Other Observations: Changing consumer behaviour, for instance, people may choose to work remotely, travel less, and this could impact permanent drops in demand for oil, favourably impacting the accounts for oil importers.
  
  • The reduction in emissions of the harmful gases caused by the restrictions may also increase public pressure for greener transport and lowered fossil fuel use.

Commodity Markets Outlook

• It provides market analysis for major commodity groups - energy, metals, agriculture, precious metals, and fertilizers.
• The report forecasts prices for 46 key commodities, including oil.
• It is published by the World Bank in April and October.

Source: TH