Asia in Global Commodity Markets

A new working paper from ADB- Asia’s imprint on Global Commodity Markets. Parts of conclusion excerpted below;

Strong growth in Asian demand has already been a major contributor to growth of world demand for fuels and industrial inputs and signals a long-term structural shift on the demand side for other soft agricultural commodities. The patterns of economic development have been also deeply intertwined with the increasing use of resources, which is driven by commodity-intensive industrialization and urbanization typically in the early stage of development. Per unit output of GDP, the consumption of energy and mineral ores is growing at an alarming pace. For countries in developing Asia that seek supply outside their borders as their commodity needs increasingly exceed domestic production capacity, changing dynamics in global commodity prices have important implications for their economic management and policies.

The positive development in demand will affect generally all commodity groups going forward. By 2015, developing Asia’s commodity demand will reach 43% of world demand for agricultural commodities, 27% of world energy demand, and 50% of world demand for mineral ores. So far, the impact of rapid growth in the PRC and India has been most pronounced in the energy and metals sectors, reflecting the growing intensity of their use in the process of industrialization. Fast demand growth in the past several years has also created strains on current production capacity in the energy and metal sectors. Over the medium term as capacity constraints soften, both energy and metal prices are expected to drift lower from current highs. However, they are unlikely to revert to lower historical averages. Given the long-term nature of necessary investment and infrastructure let alone other noneconomic hurdles, crude oil prices will likely be sustained at much higher levels than the earlier average. Along with higher oil prices to exert upward pressures on production costs, other discernible structural factors, such as changes in market structure, regulatory environment, and financial deepening, will also help support metal prices at higher than historic averages. Agricultural food commodities have entertained comparatively less price booms in the past years. However, rapid income growth is expected to bring about changes in dietary patterns, and when coupled with dense population it will affect the demand for agricultural food commodities drastically in the years ahead.

However, these global trends are certainly not preordained. Prospects for commodity prices may also be influenced by conscious policy choices. In view of these resource-intensive patterns of growth in developing Asia and potential strains on natural resources and the environment, some policy issues warrant serious consideration….

Third, developing Asia’s growing demand for agricultural food commodities presents a significant challenge to the achievement of the Millennium Development Goals. Even today, many millions of Asians are malnourished, while pressures on food supply are increasing with a growing population and shrinking arable land resources. With declining agricultural resources and their quality, pollution and climate change also remain a significant threat to future food supply. The outlook for adequate food supply depends critically on continued agricultural productivity growth. The impact of faltering productivity due to depleting resources and deteriorating environment tends to be felt more significantly in the less fortunate economies and the poor that are often bypassed by the growth process. Hence, it is important to continue to support necessary agricultural research and development for future productivity gains. The prospect of dwindling self-sufficiency in food supply also suggests that developing Asia has an interest in pursuing further liberalization in agricultural trade. Availability of food is still less of a problem than accessibility to food, as an open trade system with a broad spectrum of potential suppliers would help reduce the risk of insufficient food availability.

Related;
United Nations Commodity Trade Statistics Database
Key Economic Developments and Prospects in the Asia-Pacific Region 2007