Commodity prices offer some comfort amid the global crisis

A ‘brutal’ year in the most severe economic crisis since the 1930s set the scene for a keynote session during BIR’s series of webinars that are replacing the usual Autumn convention.

Stefan Schilbe, chief economist at HSBC Germany and Philippe Chalmin, professor of economic history at Paris-Dauphine University, were responding to the theme: ‘The global economy: how rocky will be the road to recovery?’ Both warned the road could well be a long one with only China of the major countries returning positive growth figures.

Schilbe felt most countries would probably fail to return to pre-Covid activity until 2022 while Chalmin feared ‘Not before 2022 – or even 2023 – that we will be back at the levels we were last year.’

Uncertainty rules

It was BIR director general Arnaud Brunet who described 2020 as ‘an exceptionally turbulent if not brutal year’ and warned the next six to 12 months were likely to be very uncertain. He noted that both the International Monetary Fund and the Organisation for Economic Co-operation and Development were ‘pessimistic about the short-term and medium-term future’.

Not all doom and gloom

Both presentations indicated that recyclers could take some comfort that the impact of Covid-19 pandemic on commodities had been less severe. Prices of the leading non-ferrous metals quoted on the LME are currently levels above those recorded in January this year. Gold had been above US$ 2 000 an ounce in August but was now nearer US$ 1 900 while iron ore was around US$ 120 per tone.

Infrastructure boost

According to Schilbe, commodity prices would be driven by China’s expected growth of 7% next year boosted a national emphasis on infrastructure. ‘One of the factors, aside of any monetary policy, is the economic recovery we’ve seen in China and the fact that infrastructure has seen an improvement and this typically involves a lot of commodities.’
Chalmin said all other precious metals had followed gold – silver, palladium and rhodium (‘the most expensive metal on earth now’). He expected iron ore prices to dip below US$ 100 per tonne with a slight downward movement in ferrous scrap values. He believed that China’s recovery had already been factored into values, adding: ‘I don’t see much scope for a rise in prices’.

A world without Chinese imports?

Plastic recyclers will take note of Chalmin’s anticipation of a decline in oil prices from around US$ 40 per barrel to nearer US$ 30 although – as with the fibre sector – the plastic scrap industry had to adapt to a world without Chinese imports.
Schilbe expected monetary policy in the US to remain ‘ultra-loose’ while a stronger Euro was likely to dampen an export recovery in Europe. He identified a series of downside risks to recovery: prolonged pandemic, protectionism, high levels of indebtedness and the undermining of confidence through bankruptcies and unemployment.