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.
Multi-year Expert Meeting on Commodities and Development 25-26 April 2018, Geneva Recent trends and outlook on commodity markets Janvier D. Nkurunziza Commodities Branch, UNCTAD
Background.
Two out of three developing countries are commodity dependent
40 Recent developments in global commodity markets 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) 7 30 6 20 10 0-10 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 5 4 3 2 1-20 0 Price index all commodities GDP per capita developing countries, right axis Correlation coefficient = 0.79
Recent developments in global commodity markets UNCTAD non-oil Commodity price index 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.
Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 The big picture Recent developments in global commodity markets Commodity prices trended downwards during H1, 2017, bringing the upwards trend of 2016 to a halt 350 300 UNCTAD Non-oil Nominal Commodity Price Index (2000 = 100) 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 250 200 150 100 50 0
Recent developments in global commodity markets 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 290 270 250 230 210 190 170 150 268 270 271 272 265 254 250 246 245 240 233 232 212 213 205 202 198 201 201 198 195 197 199 199 181 183 177 167 164 164 164 166 160 162 162 165 Food Agricultural raw materials Minerals, ores and metals
Recent developments in global commodity markets Commodity prices show a mixed picture in 2017 In 2017 prices of major commodities showed no common trend Prices of minerals, ores and metals generally fared better than other commodities Monthly price, January 2017 vs. December 2017 (% change) Rubber Sugar Cottonseed oil Coconut oil Coffee Palm oil Cocoa Iron ore Tobacco Maize Tin Soybeans Tea Soybean oil Cotton Rice Gold Wheat Tropical logs Lead Nickel Aluminium Zinc Copper -40-30 -20-10 0 10 20 30
Commodity price developments 2016 vs. 2017 Monthly price, January vs. December (% change) Rubber Sugar Cottonseed oil Coconut oil Coffee Palm oil Cocoa Iron ore Tobacco Maize Tin Soybeans Tea Soybean oil Cotton Rice Gold Wheat Tropical logs Lead Nickel Aluminium Zinc Copper Recent developments in global commodity markets -60-40 -20 0 20 40 60 80 100 Jan-Dec 2016 Jan-Dec 2017
Recent developments in global commodity markets Food and agricultural commodities Tropical beverages showed the steepest decrease losing 12.8 % from January to December 2017 Prices of vegetable oilseeds and oils decreased by 11.9% 400 350 300 250 200 150 100 50 Price indices of food and agricultural commodity groups July 2010 December 2017 (2000=100) Prices of food commodities and agricultural raw materials dropped by 4.6% and 8.7%, respectively. 0 Food Vegetable oilseeds and oils Tropical beverages Agricultural raw materials
Recent developments in global commodity markets 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, so prices are likely to remain low.
Tropical beverages Recent developments in global commodity markets 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
Agricultural raw materials Prices showed a mixed picture in 2017 Recent developments in global commodity markets 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
Jan2011 Apr2011 Jul2011 Oct2011 Jan2012 Apr2012 Jul2012 Oct2012 Jan2013 Apr2013 Jul2013 Oct2013 Jan2014 Apr2014 Jul2014 Oct2014 Jan2015 Apr2015 Jul2015 Oct2015 Jan2016 Apr2016 Jul2016 Oct2016 Jan2017 Apr2017 Jul2017 Oct2017 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% Minerals, ores and metals 30000 25000 20000 15000 10000 Recent developments in global commodity markets Prices of selected minerals, ores and metals January 2011 - December 2017 3500 3000 2500 2000 1500 1000 5000 500 0 0 Copper Aluminium, right axis Minerals, ores and metals index Nickel Zinc, right axis
Minerals, ores and metals Recent developments in global commodity markets 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 $/t in August Prices expected to remain low due to favorable supply conditions Copper: price increased 18.1% from January to December 2017 Latest projections: deficit in 2017/18 so further price increases likely
Jan2007 Apr2007 Jul2007 Oct2007 Jan2008 Apr2008 Jul2008 Oct2008 Jan2009 Apr2009 Jul2009 Oct2009 Jan2010 Apr2010 Jul2010 Oct2010 Jan2011 Apr2011 Jul2011 Oct2011 Jan2012 Apr2012 Jul2012 Oct2012 Jan2013 Apr2013 Jul2013 Oct2013 Jan2014 Apr2014 Jul2014 Oct2014 Jan2015 Apr2015 Jul2015 Oct2015 Jan2016 Apr2016 Jul2016 Oct2016 Jan2017 Apr2017 Jul2017 Oct2017 Energy Recent developments in global commodity markets Crude oil (petroleum), coal and natural gas prices, January 2007-December 2017 200 180 160 140 120 100 80 60 40 20 0 14 12 10 8 6 4 2 0 Crude oil, Brent ($/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 cut production 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 energy Recent developments in global commodity markets Renewables are expected to account for 60% of global power capacity growth through 2021 100 80 Annual growth rates of renewable energy consumption by type, 2000-2016 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 60 40 20 0-20 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 80% 70% 60% 50% 40% 30% 1995 2005 2016 20% 10% 0% Iron ore Copper Iron ore Copper Iron ore Copper China United States EU28
Commodity prices: high demand from China Iron ore Nickel ores Copper ores Aluminium ores Natural rubber 2016 2005 1995 Cotton Coal Petroleum oils, crude 0% 10% 20% 30% 40% 50% 60% 70% 80%
Volume Index (2005=100) Growth rate (%) Recent developments in global commodity markets Volume Index and volume growth rate of merchandise imports China 350 20 300 15 250 200 150 100 10 5 0 50-5 0 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017-10 Volume Index (2005=100) Volume growth rate over corresponding period of previous year
Volume Index (2005=100) Growth rate (%) Recent developments in global commodity markets Volume Index and volume growth rate of merchandise imports Developing countries excluding China 250 12 10 200 150 100 50 8 6 4 2 0-2 0 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017-4 -6 Volume Index (2005=100) Volume growth rate over corresponding period of previous year
Conclusion.
Summary and outlook Recent developments in global commodity markets 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
Thank you. Contact: janvier.nkurunziza@unctad.org