World Bank: commodity prices are expected to remain strong in 2021. Metals are expected to rise by another 30%.

Global commodity prices recovered in the first quarter on the back of strong economic growth and are expected to remain near current levels in 2021, the World Bank (World Bank) said on Tuesday.

Energy prices this year are expected to be more than 1/3 higher than in 2020, and the average price of oil is expected to be $56 a barrel, the report said. By 2022, oil prices will rise to $60 a barrel, "roughly the same as the average price in 2017-19". In addition, metal prices are expected to rise 30 per cent and agricultural products are expected to rise nearly 14 per cent.

Nonetheless, the World Bank says its outlook depends largely on progress in curbing the novel coronavirus pandemic and policy support measures in developed economies.

Ayhan Kose, acting vice president and director of the World Bank's Bureau of Equitable growth, Financial and Institutional Affairs, said that global growth so far has been better than expected and vaccination programmes are under way, which have boosted commodity prices. But the durability of the recovery is highly uncertain.

"emerging markets and developing economies, both commodity exporters and importers, should increase their short-term resilience and prepare for the possibility of growth losing momentum." He added.

Crude oil has rebounded from its historic lows in the first few months of the pandemic. The rapid recovery of the global economy and continued production cuts by the Organization of Petroleum Exporting countries ((OPEC)) and its allies have supported oil prices, the report said. Brent crude futures and US crude (WTI) futures have risen more than 30 per cent so far this year.

Metal

In addition, as stimulus-driven growth fades in 2022, metal prices are likely to give up some of this year's gains. However, copper prices are expected to rise by an average of 38 per cent this year due to strong demand for construction and consumer goods, although "the rise in copper prices is expected to slow by 2022 as new supplies are in place."

The report also noted that some major emerging market economies withdrew stimulus measures faster than expected and could pose downside risks to metal prices, but increased US infrastructure spending could support some metals such as aluminium, copper and iron ore.

"Metal price shocks are mainly driven by external demand factors, such as the global recession and recovery," said John Baffes, a senior economist at the World Bank. During a recession, metal exporters are likely to be affected by a broader recession and plummeting prices. The loss of output associated with falling prices is greater than the benefits of rising prices, and policy makers should be prepared accordingly. "

Agricultural market

The World Bank says the agricultural market has rebounded due to strong demand from China and harvest problems in South America. Benchmark corn and soyabean prices in Chicago are close to multi-year highs, pushed up by food safety concerns and bad weather in Brazil. In addition, food prices in Latin America, the Middle East and Africa rose by an average of nearly 9 per cent from January to February 2021, and may expand if the recent rise in international food prices is "transmitted to the domestic market".

Fortunately, however, the bank points out that most of the world's food commodity markets are still in ample supply from a historical point of view, and prices are expected to stabilize by 2022.

Although global food commodity prices have recently remained stable, new evidence continues to confirm that the impact of the novel coronavirus epidemic on food insecurity is expected to last until 2021 and 2022. More and more countries are facing growing food insecurity, reversing the development gains achieved over the years.

Despite the ample supply of global food commodity markets, COVID-19 has severely affected local labour and food markets around the world, reducing incomes, disrupting supply chains and exacerbating food and nutritional security problems that existed even before the pandemic, "said Kose. It is time for policy makers to address the root causes of food insecurity. "