Commodity prices likely to climb this year: IMF

Jan 03, 2010, 11:27 IST | PTI

The price of many commodities are expected to rise this year primarily fuelled by increased demand worldwide, the International Monetary Fund has said.

The demand for commodities is anticipated to grow as the global economy is improving, after witnessing one of the worst financial meltdowns in 2009.

"Looking ahead into 2010, prices of many commodities are likely to increase further. The demand side should generally be the main source of upward pressure, as global activity is widely expected to expand at a faster pace," the IMF said in a recent report. However, the multilateral lending agency noted that another commodity price spike would be remote in near term.

According to the report, commodity price prospects also depend on global macroeconomic conditions. "Information about expected future spot prices derived from key commodity futures options confirms that investors anticipate higher prices in 2010, but the probability of another commodity price spike would seem remote over the near term," it added.

As per the agency, the demand is expected to continue rising at a solid pace as industrialisation continues in emerging and developing economies.

The report added that in 2009, the relatively favourable economic performance in many emerging and developing economies had a strong impact on commodity prices, "... the magnitudes of price increases in 2009 have varied considerably across commodities. Fuel and metals prices rose by much more than prices of food or agricultural raw materials," the IMF noted.

Going by the report, towards the end of last year, prices rebounded relatively soon and staged a strong rally from the second quarter of 2009. "(This was)... despite generally high inventories after the weakening of demand in the global recession of 2008-09," the report pointed out.

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