First up the press release, April 27:
But food prices remain near record highs, compounding food insecurity
WASHINGTON, April 27, 2023—Global commodity prices are expected to decline this year at the fastest clip since the onset of the COVID-19 pandemic, clouding the growth prospects of almost two-thirds of developing economies that depend on commodity exports, according to the World Bank’s latest Commodity Markets Outlook report.
The drop in prices, however, is expected to bring little relief to the nearly 350 million people across the world who face food insecurity. Although food prices are expected to fall by 8% in 2023, they will be at the second-highest level since 1975. Moreover, as of February this year, annual food price inflation is at 20% globally, the highest level over the past two decades.
“The surge in food and energy prices after Russia’s invasion of Ukraine has largely passed due to slowing economic growth, a moderate winter, and reallocations in the commodity trade,” said Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “But this is of little comfort to consumers in many countries. In real terms, food prices will remain at one of the highest levels of the past five decades. Governments should avoid trade restrictions and protect their poorest citizens using targeted income-support programs rather than price controls.”
Overall, commodity prices are expected to fall by 21% in 2023 relative to last year. Energy prices are projected to decline by 26% this year. The price of Brent crude oil in U.S. dollars is expected to average $84 a barrel this year—down 16% from the 2022 average. European and U.S. natural-gas prices are forecast to halve between 2022 and 2023, while coal prices are expected to decrease 42% in 2023. Fertilizer prices are also projected to fall by 37% in 2023, which would mark the largest annual drop since 1976. However, fertilizer prices are still near their recent high last seen during the 2008-09 food crisis.
Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of Prospects Group, said: “The decline in commodity prices over the past year has helped reduce global headline inflation. However, central bankers need to remain vigilant as a wide range of factors, including weaker-than-expected oil supply, a more commodity-intensive recovery in China, an intensification of geopolitical tensions, or unfavorable weather conditions, could push prices higher and reignite inflationary pressures.”
Despite the large declines expected this year, prices of all major commodity groups will remain well above their 2015-2019 average levels. European natural gas prices will hover at almost three times the average in 2015-19. Energy and coal prices will also remain above the pre-pandemic average.
“Metal prices, which increased slightly early in the year, are expected to fall by 8% relative to last year, primarily because of weak global demand and improved supplies,” said Valerie Mercer-Blackman, Lead Economist in the World Bank’s Prospects Group. “In the longer term, however, the energy transition could significantly lift the demand for some metals, notably lithium, copper, and nickel.”
A Special Focus section of the report evaluates the performance of a wide range of approaches used to forecast prices of seven industrial commodities (oil and six industrial metals). A key finding of the study is that futures prices, which are widely used for price forecasts, often lead to large forecast errors. Econometric models based on multiple independent variables tend to outperform other approaches as well as futures prices. The analysis suggests that augmenting model-based forecasting approaches—by incorporating the dynamics of commodity prices over time and controlling for other economic factors—enhances forecast accuracy....
....MORE
The report, "Commodity Markets Outlook: Lower Prices Little Relief" (58 page PDF):
PP26
....Metals and Minerals
The World Bank’s metals and minerals price index rose 10 percent in the first quarter of 2023, reflecting optimism for a strong recovery in China and improved global growth prospects at the start of the year. All metal prices were higher for the quarter, particularly iron ore and tin. However, this optimism waned, and most prices receded from their January highs by the end of the quarter. Only iron ore prices remained firm, due to strong demand from China’s steel sector. Metal prices are projected to fall by 8 percent in 2023, and a further 3 percent in 2024. Key upside risks to the price forecast include a stronger-than-expected recovery in China’s real estate sector and supply disruptions, including those resulting from trade restrictions. In the longer term, the energy transition could significantly lift the demand for and prices of some metals—notably aluminum, copper, and nickel.
Base metals and iron ore
The World Bank’s metals and minerals price index increased 10 percent in the first quarter of 2023 from the previous quarter (figure 15.A). The price index in 2023Q1 was 51 percent above its 2015- 19 average, with all base metals posting higher prices. The reopening of China’s economy and supply concerns have been the main factors supporting price increases, especially for copper and tin (figure 15.B). China’s reopening following its “Zero COVID-19” policy initially raised optimism regarding the demand for industrial commodities. However, China’s property sector, which accounts for an outsized share of global demand for metals, continues to face financial challenges despite policy support. The property sector remained weak in early 2023, although activity in the sector is anticipated to gradually recover throughout the year and into 2024. Spending on infrastructure projects has so far partly offset weak property investment. For the remainder of 2023 and in 2024, metal prices are forecast to decline as supply improves, and as China’s growth recovery is expected to be supported predominantly by strong consumption, particularly of services.
Iron ore
Iron ore prices rebounded 27 percent from 2022Q4 to 2023Q1. They were 80 percent higher than their 2015-19 average. The recent gains were mainly due to a seasonal rise in China’s steel output, which raised steel prices and the demand for iron ore. This effect is expected to subside over the remainder of 2023. On the supply side, although seaborne shipments of iron ore have been reduced by weather-related disruptions, they are still poised to grow moderately in the second half of the year. As a result, for 2023 as a whole, iron ore prices are forecast to be 5 percent lower than in 2022 and fall by a further 4 percent in 2024 (figure 15.C). Demand is expected to remain strong in the second quarter of this year when steel production is expected to peak, but to fade in the second half. This slowing reflects a decline in China’s steel output as the government contemplates again restricting steel production to curb pollution. Over the longer term, the outlook is for steady growth in supply from new mines in Africa, Australia, and Brazil, but more sluggish growth in demand as China transitions to activities that are less steel-intensive. These supply- demand trends are expected to push iron ore prices closer toward average production cost.Aluminum....
....MUCH MORE
If you saw the Chinese export numbers an hour ago you know there is no Chinese cavalry riding to the rescue of the Western economies. Chinese imports were flat. No uptick in demand for anything the west produces. Exports increased 8.5%, showing just how dependent China remains on the West staying out of recession., CNBC:
China’s exports rose 8.5%, continuing its growth streak at a slower pace
