World Bank has released “Commodity Markets Outlook April 2020“. In its recent report, the World Bank stated that the global economic shock of the COVID-19 pandemic has driven most commodity prices down and is expected to result in substantially lower prices over 2020. It has also indicated that the energy and metals commodities are the most affected by the sudden stop to economic activity.
What is “Commodity Markets Outlook”?
“Commodity Markets Outlook” is a report published by the World Bank twice a year i.e. in April and October. The report is a compilation of detailed market analysis for major commodity groups done by the staff of the World Bank with external contributions. These major commodity groups comprises of energy, agriculture, fertilizers, metals, and precious metals. This report also projects the prices of 46 commodities upto year 2030 along with historical price data. This report also consiss of statistics related to production, consumption, and trade of major commodities.
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Commodity Markets Outlook April 2020:
The World Bank has released the April, 2020 edition of “Commodity Markets Outlook”. It constitutes the detailed market analysis for major commodity groups which have been impacted deeply by the economic shock caused by the COVID-19 pandemic. The April 2020 edition of the Commodity Markets Outlook also featured a Special Focus on the implications of COVID-19 for commodity markets as well as a “Box” on the impact of commodity production agreements particularly focusing on OPEC.
Key takeaways from the World Bank’s “Commodity Markets Outlook April 2020”:
The report states that during the past three months, almost all the commodity prices saw sharp declines as the COVID-19 pandemic worsened. Various countries took the protective measures to contain the novel coronavirus outspread. These mitigation measures led to reduced transport, giving rise to an unprecedented decline in demand for oil. These daunting situations will be supported by the weaker economic growth which is expected to further reduce the overall commodity demand. The report also suggests that the impact of COVID-19 pandemic may lead to long-term shifts in global commodity demand and supply. It shows that since January 2020, the prices of most of the commodities have fallen, especially those related to the transportation industry.
Commodity Market: Recent trends & Outlook
Commodity markets have been striked badly by the COVID-19 pandemic, causing a historical sudden stop in economic activity. Here are the recent trends & outlook stated in the report:
- Energy Prices: The energy prices suffered a fall of 18.4% in Q1 of 2020. But, these are expected to average 40% lower in 2020 than in 2019. Most of the non-energy prices also faced a fall in 2020 Q1, and are expected to decline further 5% in 2020.
- Oil Prices: The oil prices has reached a historic low in April with some benchmarks trading at negative levels, as the oil demand has collapsed due to COVID-19 mitigation measures. The oil prices are expected to recover very gradually from their current low levels, citing the weakest recovery from a price collapse in history.
- Natural Gas Prices: The natural gas prices have also faced sizeable declines.
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- Coal Prices: The coal prices have also seen smaller declines partly as the demand for heating and electricity was less affected by the mitigation measures.
- Metals and Minerals Price Index: The metals and minerals price index suffered a fall of 5% on the quarter. The metal prices are expected to fall by 13% in 2020 before its modest recovery in 2021.
- Agricultural Commodity Prices: The agricultural commodity prices have indicated a minor declines during the first quarter reflecting their indirect relationship to economic growth, and are expected to remain broadly stable in 2020.
The outlook provided by the World Bank’s “Commodity Markets Outlook April 2020” is exceptionally uncertain and highly depends on the duration as well as the severity of the pandemic, and how quickly mitigation measures can be lifted.