(CPV) – Although international prices of food, energy, metals, minerals and raw materials have fluctuated dramatically over the past five years with major social and economic impact in Asia and the Pacific, the volatility has tended to conceal the longer-term trend of rising commodity prices which has even deeper consequences.
Since the late 1990s, prices of food, beverage, energy, raw materials, metals and minerals have been rising, ending the long-term trend of declining prices during much of the second half of the 20th century, according to the ESCAP Economic and Social Survey for Asia and the Pacific 2012. The average annual growth rates for prices of commodities since the turn of the century have ranged from 1.8 percent for beverages to 17.4 percent for metals and minerals.
The commodity market boom has been driven mainly by the surge in Asia’s manufacturing-led economic growth which has fuelled the demand for a broad range of primary products.
The price of crude petroleum rose twelve-fold from 11 USD per barrel in December 1998 to a peak of 1332 USD per barrel in 2008, plunging to 41 USD per barrel in the aftermath of the global economic crisis before rising again to 125 USD per barrel in early 2012.
Although oil prices fell again following the eurozone crisis, forecasters predict oil prices of 100 USD per barrel or higher in the near future. Industrial metals too have become much costlier with copper prices rising more than five-fold from 1,900 per metric ton in 2000 to 9,860 per ton by early 2011 and lead prices climbing from 50 USD to 240 kilogram between 1999 and late 2011.
Likewise, food prices have risen since 200, with cereal prices soaring to record highs in 2007-2008. The renewed spike in food prices in the second half of 2010 kept an additional 19.4 million people in poverty in the Asia-Pacific region, according to ESCAP estimates.
The surge in commodity prices has led to big gains in the terms of trade for exporters of energy, metals and minerals. Energy exporting Asia-Pacific nations have seen the biggest annual increase in their terms of trade, led by Turkmenistan (12.7 percent), Brunei Darussalam (12.5 percent), the Russian Federation (11.5 percent), Kazakhstan (10.2 percent), Azerbaijan (8.2 percent) and the Islamic Republic of Iran (8.1 percent). They are followed by exporters of metals and minerals – Mongolia (7.8 percent), Australia (7.2 percent), Papua New Guinea (6.3 percent), Bhutan (5.3 percent) and Uzbekistan (5.2 percent).
On the other hand, countries relying mainly on exports of manufactures have seen their terms of trade worsening as commodity prices and prices for their products decline with Bangladesh seeing the biggest annual decline of 6.7 percent during the past decade, followed by Pakistan (6.6 percent), and Japan and the Republic of Korea (5.8 percent each).
Although Thailand and Vietnam too are major exporters of manufactured products, their terms of trade did not decline much as they are also net exporters of commodities – rice in the case of Thailand, rice and crude oil for Vietnam.
The ESCAP Survey cautions that over-reliance on natural resource exports risks delaying economic diversification and tends to leave rural areas with surplus labour, raising both income inequality and social tensions.
Countries mainly exporting manufactures should reduce reliance on a few labour-intensive industries and diversify into new and sophisticated products that face less competition and give higher returns.
“The impact of the commodity boom on the growth trajectory of countries depends on the extend that price shifts for both manufactures and commodities change incentives within each economy either towards or away from increasing diversification and modernization.”