It seems the World Bank has only bearish opinions on commodity prices for this year. In its Q1 2016 Commodity Markets Outlook, it highlighted weak growth in emerging economies and commodity markets. None of what the bank predicted gives the mining industry much reason for optimism.
Here are some examples: Oil prices were down 13% during Q4 2015 and 45% from the previous year. Non-energy commodity prices fell 4% in Q4 to a level almost 40% below their early 2011 highs. Metals prices dropped 8% in the quarter. Precious metals and fertilizer prices each fell 2%.
Gold prices have declined during 10 of the past 12 quarters due to weak investment demand, noted the World Bank. With the recent rise in the U.S. Federal Reserve rate and a strong U.S. dollar, gold has little chance of changing course. Precious metals prices are expected to decline a further 8% in 2016.
Oversupply in most markets put pressure on other metals, and they fell 21% overall for the 2015 year compared to a year earlier. Consumption remains weak, and producers have begun to close the highest cost projects. More closures are expected, but the World Bank is predicting a further 10% drop by the end of this year.
The World Bank’s quarterly report can be read in its entirety at WorldBank.org/pubdocs/CMO-Jan-2016-Full-Report.pdf. It deserves a detailed look.
On the other hand, one of the beauties of the internet age is that for every pessimistic report there is bound to be an optimistic one out there somewhere. The opinions of analysts and bloggers, like the weather in the foothills of the Rocky Mountains, change every five minutes. Knowing who to believe is more difficult than ever.