Date: 2016-08-12

World Bank Projects Global Commodity Prices to Fall

Carson Jones

The World Bank, an international lender to many developing nations, recently released its quarterly Commodity Markets Outlook. In the report, that includes projections for the rest of 2016, the agency lowered its forecasts for most global commodities. The bank warns that an oversupply of commodities, which caused prices to fall in 2015, will continue into and throughout 2016.

The previous projected price of crude oil for 2016 was $51 a barrel, but has since been cut down to $37 in the World Bank’s October report. The report cites that the price cut was due to the anticipated resumption of exports by Iran and from strong production in the United States. The agency claims that oil prices are expected to fall another 27 percent, on an annual average, throughout 2016. The report also claims that iron ore prices would see the biggest declines as the cheap supply continues to exceed demand. Iron ore prices could drop by 25 percent to $42 a metric ton by the end of 2016, the bank said. Nickel may fall 16 percent and copper 9 percent, in comparison.

The report also projects that prices for 37 of the 46 internationally traded commodities would decline in 2016 because of lower demand from emerging economies. “Emerging market economies have been the main sources of commodity demand growth since 2000. As a result, weakening growth prospects in these economies are weighing on commodity prices,” the report stated.

The bank also said there was a chance that commodity prices could rise somewhat over the next two years but added that the global economy could face significant risks of a deeper slowdown. The agency amended its growth forecast for emerging and developing economies to 4 percent this year, down from a projected 4.6 percent previously. Although many emerging market economies have been slowing, the World Bank projected global growth to increase in 2016.  Global growth for 2016 is projected at 2.9 percent, a .5 percent increase from 2015’s growth.

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