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Brighton Gumbo, Business Reporter
International commodity prices are expected to remain on the downside this year as combination of oversupply and weak demand dominate the natural resources industry.
According to a latest World Economic Forum report, the commodities had a tough 2015 as their prices ranging from crude oil to industrial metals such as iron ore and copper, plummeted even further at the close of last year.
It said the commodities sector was contending with the lowest prices since the global financial crisis experienced in 2008.
“The growth slowdown in China and other emerging economies such as Brazil has reduced demand for natural resources like steel, iron ore and crude oil.
“Meanwhile, on the supply side, cheap borrowing costs and a failure to predict China’s slowdown led producers to expand too much in recent years.
Now there is a glut that analysts say might continue well into 2016, with prices unable to pick up until global supplies decrease.”
WEF said at the close of last year the situation was so dire that the Bloomberg Commodity Index, which covers a wide range of natural resources, dropped to its lowest level since June 1999.
It said countries which principally rely on metal exports like Zimbabwe had been grossly affected.
“The market capitalisation of the top 40 global mining companies fell by nearly $300 billion in 2015.
“The crash is particularly devastating for economies that rely on export earnings from commodities.
“The oil-producing states of the Middle East, Russia, Brazil and a number of African nations have all been badly affected,” said WEF.
The economic overseer said due to the prevailing situation, the world’s mining giants have since been forced to restructure their businesses in order to stay afloat as they battle declining profits.
WEF indicated that gold slipped nine percent in 2015 and was on track for its third year of losses.
“Traditionally, gold has been viewed as a safe haven for investors, but analysts are watching carefully to see how prices will react to a predicted rise in US interest rates,” it said.
derick.khumalo