Karachi, March 08, 2019 (PPI-OT): Pakistan Commodities: Patient growth, mounting risks buoy commodities
Amidst reported progress on US-China trade talks and the dovish tone from the US Federal Reserve, global commodity markets breathed a sigh of relief, demonstrated by the TRJ Commodities Index rising 1.7%MoM for the month of Feb’19 but still 6.7% below last year’s levels.
Energy commodities were led by rising crude prices (Arab Light/Brent was up 7.0/6.4%MoM) as OPEC output curbs were adhered to by major swing producers, while Richard’s Bay coal prices dipped 7.09%MoM with weak imports from China proving to be a major dampener.
Amongst soft commodities, the FAO food price index climbed 1.7%MoM gaining on the back of edible Oil price upswing (FAO Veg. Oil index up 1.8%MoM), with Urea prices dipping 10%MoM and Cotton prices treading lower on weak demand. Steel prices recovered from sagging demand as tight supply and improving expectations of US China trade talk outcomes lift flat/long category prices by 1-4%MoM.
Upcoming meeting of OPEC+ members (March 17-18th) to review output curbs imposed in Jan’19 (1.2mn tonnes, KSA making up ~35% of cuts) and conclusion of US China trade (US stayed punitive rise in tariffs) talks remain near term inflection points.
Commodities should remain burdened by global economic fragility, where recent macro indicators and ‘patient’ central banks stress intertwining cyclical and structural impediments. Moreover, China’s latest growth outlook of 6-6.5% (lowest in 30+yrs) is likely to be mirrored by decelerating demand from the world’s largest commodity importer (coal imports halved in Feb’19).