The World Bank has lowered its 2016 price forecast for 37 of the 46 commodities it monitors and has warned that low prices for oil and other commodities are “likely to be with us for some time”.
The bank’s latest ‘Commodity Markets Outlook’ cut its price outlook for oil this year to $37/bl, from a forecast of $51/bl in October.
For non-energy commodities, the largest decline is expected in iron-ore prices, with the report forecasting a 25% decline in 2016, owing to reduced imports from China’s steel producers and new capacity in Australia and Brazil.
Iron-ore prices fell from an average of $96.9/t in 2014 to $41/t in December 2015 and the bank is forecasting an average price of $42/t for 2016. It is also only projecting a modest recovery to $51/t by 2020.
Besides iron-ore, other non-energy commodity prices fell 4% in the fourth quarter of 2015, to a level almost 40% below their early 2011 highs. Metal prices fell 8% on softening growth prospects in China and continued increases in supply due to earlier investments, while agriculture prices fell 2.3%, marking the seventh consecutive quarterly decline.
The report forecasts that most agricultural commodity prices will fall in 2016, with grains expected to decline 3.4%, oils and meals by 2.2%, and raw material and beverage prices by 1%.
Most metals prices are expected to fall in 2016. Precious metals are also expected to remain under pressure, with gold prices reaching $1 105/oz in the fourth quarter of 2015 – a drop of one-third since its quarterly peak of $1 718/oz in the fourth quarter of 2012.
Platinum prices are expected to continue to fall in 2016, despite having declined more steeply last year than other precious metals, as South African mine production ramped back to full capacity following labour unrest in 2014.
The bank will next update its commodity outlook in April.
