February 12, 2021(MLN): Global commodity prices have returned to pre-pandemic levels, inflated by vaccine-bolstered expectations of economic recovery, supply disruptions with countries such as Argentina and Russia imposing taxes and restrictions on grain exports and US economic stimulus package with commodity future price index TRJ gaining 3.8% MoM in January’21.
So far, in FYTD, the TRJ index return has been 26.3%.
Commodities have enjoyed the bull run in recent months, sweeping higher since pandemic lows, on the back of higher demand from China, the world's largest buyer of natural resources.
According to a research report on Commodities by AKD securities, crude prices continued their upsurge, with Arab Light averaging at US$54.2/bbl, up 11%MoM, but still down 20% from the levels witnessed in the same period last year.
The higher prices in Jan’21 were a reflection of Saudi Arabia’s announcement to unilaterally cut 1.0mn bpd of crude oil production in Feb and Mar 2021 in addition to the agreement reached in the previous OPEC meeting, lowering its crude production to 8.1mn bpd . The move was the result of the second wave of COVID-19 that threatened to revive global crude oil demand.
Global consumption of petroleum products is expected to average 97.7mn bpd in 2021, against 92.3mn bpd in 2020, still below the pre-pandemic level of 101.2mn bpd in 2019. Meanwhile, OPEC is expected to meet monthly to adjust their production after assessing the global demand levels.
Amid a global shortage of commodity, DAP prices have averaged at US$411/MT in Jan’21, up 48%YoY and 10%MoM, translating into a local DAP price of PkR4,200/bag. the continued upsurge in local DAP prices is the result of regional supply chain disruption wherein 60% of DAP consumption is imported.
The research highlighted that FFBL, the only local DAP producer may continue to capitalize on the supply shock in upcoming months, given the gas availability situation improves. To underline, phosphoric acid prices have remained stable MoM in Jan’21. Meanwhile, urea prices have also climbed up by 6% MoM, averaging at US$245/MT, translating into a local urea price of PkR2,654 at a 60% premium to the local price. Fertilizer players have increased urea prices PkR70-75/bag in the last 6 months, after passing on the benefit of GIDC elimination early last year, the research said.
China being the biggest consumer of coal has again been found dominating the market as inventory build-up before New Year uplifted coal prices to an average of USD90/ton for Jan'21 against an average of USD87/ton for Dec'20. However, as the Chinese New Year approached, demand seems to have cooled down a bit and the same is being reflected in prices. Moving forward, recommencement of economic activities in China will put steam back into coal prices as per AKD research, however, as the winter ends, the seasonality effect will wade off with lower power demand across the major economies and consequently, expecting coal prices to remain near current levels in the near term.
FAO's Food Price Index averaged 113.3 points in January, marking a 4.3 % increase from December 2020 and reaching its highest level since July 2014, the Food and Agriculture Organization (FAO) of the United Nations reported. Global food prices rise in January was led by cereals, vegetable oils and sugar.
The FAO Vegetable Oil Price Index increased by 5.8 % in the month to its highest level since May 2012.
“Drivers included lower-than-expected palm oil production in Indonesia and Malaysia due to excessive rainfall and ongoing shortages in the migrant labor force, and prolonged strikes in Argentina reducing export availability for soy oil”, the organization said.
Copyright Mettis Link News
39685
