Commodities at the crossroads – World Bank

Africa’s commodity boom has come to an end, and both mining companies and governments will need to plan around lower prices for the next 20 years, according to the World Bank’s Global Economic Prospects for 2009 report, which has the theme “commodities at the crossroads”. “Like earlier commodity booms, this one has come to an end,” says the report, pointing out that prices in all commodity markets started falling sharply in July 2008, reflecting slower GDP growth, increased supplies and revised expectations. “Because commodity prices reflect forwardlooking expectations, the sharp slowing of growth that is expected over the next year has caused prices to decline rapidly even though the underlying supply and demand tensions are little changed from just a few months ago when these prices were close to all-time highs,” says the report. The good news is that, “while much weaker GDP growth is projected to cause commodity prices to ease further in the short run, they should nevertheless remain higher than they were during the 1990s. Producers may have to wait a while for the next boom: “Over the next two decades, slower population growth and weaker (though still strong) income growth are projected to cause global GDP growth to ease and, with it, the demand for commodities,” says the report.