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Kiyapili Sibanda, Business Reporter
THE World Bank (WB) has projected a rise in commodity prices this year citing tightening of global supply and strengthening demand.
The development could set the basis for improved economies in developing countries that often rely on primary industries and raw commodity exports.
In its report for January 2017 the global bank projected strong gains for metals and commodities. It said metal prices were projected to increase by 11 percent due to tightening markets, especially those facing imminent resource constraints.
“Coal prices are expected to average $70 per tonne in 2017 due to supply additions and weakening import demand. Prices for thermal coal, used for electricity generation, soared 38 percent in the fourth quarter due to strong demand and continued supply tightness in China resulting from government restrictions to reduce coal capacity,” reads part of the report.
“Upside risks to prices include stronger global demand, slower ramp-up of new capacity, tighter environmental constraints, and policy action that limits supply.”
The report says while the agricultural price index declined nearly two percent in the fourth quarter of 2016, led by steep declines in its beverage and food components, prices in the sector were expected to increase modestly in 2017, with considerable variation across commodities.
The WB said energy prices would affect most agricultural crop prices directly through fuels and other energy costs and indirectly through chemicals and fertilisers some fertilizers made directly from natural gas and coal. “If energy prices increase more than anticipated, they could push agricultural prices up especially grains and oilseeds, which are most sensitive to energy prices,” it said.
“Fertilizer markets continue to face weak global demand, low crop prices, and weak currencies of key importing countries. Markets remain well supplied with high stocks, but production capacity continues to increase, in part because of falling costs and low feedstock prices.”
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