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Commodity Markets Outlook: World Bank

  • 24 Apr 2020
  • 3 min read

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.
  • 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

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