Prices of coal and fertilizer—two commodities that are essential to the Philippine economy—are projected to decline this year, according to the latest report from the World Bank.
However, the World Bank said global rice prices are expected to post an average of 17 percent in 2023. Rice prices, the Washington-based lender said, has already gone up by 11 percent in the first quarter.
“For the remainder of this year, commodity prices are forecast to remain broadly unchanged. However, prices are still expected to remain above pre-pandemic levels, which will continue to weigh on affordability and food security,” the report stated.
“Upside risks to prices include possible disruptions in the supply of energy and metals (in part due to trade restrictions), intensifying geopolitical tensions, a stronger-than-anticipated recovery in China’s industrial sector, and adverse weather events. Disappointing global growth is the major downside risk,” it added.
The report stated that coal prices are expected to decline by 42 percent in 2023 and by 23 percent in 2024. This is mainly due to the expected increase in production in Australia and Indonesia as well as weaker demand in countries, offsetting higher demand for the commodity in China.
Fertilizer prices, meanwhile, are seen to decline by 37 percent in 2023 along with lower natural gas and coal prices. However, the price level of the commodity could remain high, similar to the 2008 to 2009 food crisis.
In terms of rice, the country’s staple, prices are expected to increase due to high demand which is fueled by major festivals and restocking in Asia as well as currency appreciations against the US dollar among rice producers such as India, Thailand, and Vietnam.
Further, the World Bank said there was tight supply conditions in Asia’s rice producers such as China, India, Myanmar, Thailand, and Viet Nam while Pakistan suffered from “catastrophic floods” in September 2022 which affected its harvests and exports of the commodity.
“Rice prices on average are expected to be 17 percent higher in 2023, with much of the increase already taken place. Rice prices are expected to decline in 2024, as Pakistan’s exports recover and high rice prices in 2023 encourage rice production elsewhere,” the report stated.
Meanwhile, a proposed export tax on nickel ore in the Philippines could also push nickel prices up. This proposed tax, the World Bank said, came on the heels of an export ban of the commodity in Indonesia.
The Philippines is the world’s second-largest nickel ore and accounts for 15 percent of the global nickel supply. The Department of Trade and Industry (DTI) recently said the government is mulling over the imposition of a nickel ore tax or a ban similar to Indonesia.
A local mining engineer Graciano M. Calanog Jr. told the BuinessMirror last year that building a ferro-nickel smelter will allow the Philippines to maximize the potential of its rich nickel deposits.
Calanog said if the country is able to build smelters and process nickel before exporting them, the Philippines can become an industrialized country in a decade.
“The proposed tax could further tighten supply and put upward pressure on nickel prices, although its impact is expected to be modest because the country accounts for only about 15 percent of the global mined nickel supply,” the World Bank report stated.
‘Sharp decline’
The World Bank’s Commodity Markets Outlook report said prices are expected to post the sharpest decline since the pandemic.
Food prices globally are expected to decline by 8 percent in 2023. However, prices will remain elevated with food price inflation now at 20 percent globally, the highest level over the past two decades.
“The surge in food and energy prices after Russia’s invasion of Ukraine has largely passed due to slowing economic growth, a moderate winter, and reallocations in the commodity trade,” said Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics.
“But this is of little comfort to consumers in many countries. In real terms, food prices will remain at one of the highest levels of the past five decades. Governments should avoid trade restrictions and protect their poorest citizens using targeted income-support programs rather than price controls,” Gill added.
Overall, commodity prices are expected to fall by 21 percent in 2023 relative to last year. Energy prices are projected to decline by 26 percent this year.
The price of Brent crude oil in US dollars is expected to average $84 a barrel this year— down 16 percent from the 2022 average.
European and US natural-gas prices are forecast to halve between 2022 and 2023, while coal prices are expected to decrease 42 percent in 2023.
Fertilizer prices are also projected to fall by 37 percent in 2023, which would mark the largest annual drop since 1974. However, fertilizer prices are still near their recent high last seen during the 2008-09 food crisis.
Despite the large declines expected this year, prices of all major commodity groups will remain well above their 2015-2019 average levels.
European natural gas prices will hover at almost three times the average in 2015-19. Energy and coal prices will also remain above the pre-pandemic average.