ANKARA
Even though pandemic-driven global supply chain disruptions subsided in 2023, commodity markets struggled with strong headwinds such as heightened geopolitical tensions, China’s weaker-than-expected reopening, monetary tightening, a stronger US dollar and an oil supply cut by OPEC+.
As commodities followed a downward course since the beginning of 2023, the World Bank projected a 23.5% year-on-year decline in commodity prices.
Speaking to Anadolu, Sant Manukyan, head of the Investment International Markets Department with Türkiye's biggest private lender, Is Bank, said both the US Federal Reserve's rate hike and the greenback's gaining ground dampened the upward momentum of commodities, especially precious metals.
The Fed has delivered a total of 11 rate hikes so far since March 2022 to curb persistent inflation, which hit its highest level in more than 40 years.
Having ended its rate hike cycle as of September, it left its policy rate unchanged for the third consecutive meeting at a 22-year-high range of 5.25%-5.50% in December.
The dollar index, which measures the value of the American dollar against a basket of currencies, rose 2.5% in the first nine months of last year on the back of the Fed’s monetary tightening policy.
The price of gold saw an all-time high of $2,150 per ounce in December as the dollar weakened sharply on estimates that the Fed would start cutting rates in the new year.
Gold gained 14.2% to over $2,080 and silver rose 2.2% last year to $24.60 as of Dec. 28.
Manukyan highlighted that China's reopening story failed to meet expectations of a robust economic recovery and a rise in base metals and oil prices.
"I would not be wrong to say that China withdraw its support on commodity market or (its impact) remained limited," Manukyan said.
Besides, since the Chinese government seemed reluctant to intervene in significant ways to address the economic slowdown and weakness in the property market continued, demand for base metals was limited, he explained.
Manukyan added that the growing market share of electric vehicles also affected some commodity prices.
Since the beginning of last year, copper gained 3.16% to $3.90 per pound, lead lost 9.27% to $2,080, zinc dropped 10.80% to $2,650 and aluminum edged down by 0.4% to $2,368 as of Dec. 28
According to the latest data from the World Steel Association, global crude steel output rose 0.5% from a year ago to 1.7 billion tons in January-November.
Steel rose above 3,960 Chinese yuan ($557) on Dec. 28 but was down 2.16% since the beginning of 2023.
Manukyan stressed that price hikes due to OPEC’s strategy to extend oil output cuts was offset by weak demand from the world's second-largest oil consumer China, surging production in the US and growing geopolitical tensions.
According to OPEC's most recent monthly oil market report, oil demand will grow by 2.2 million barrels per day in 2023 to reach 101.8 million bpd.
Crude oil prices have risen nearly 8% after hitting a low in December due to Houthi attacks on commercial vessels in the Red Sea, which is forcing logistics firms to use alternative routes, increasing shipping rates and delaying deliveries.
Iran-backed Houthi rebels in Yemen significantly stepped up their involvement in the ongoing Israel-Hamas conflict in the Gaza Strip, which has been devasted by weeks of Israeli attacks, by targeting vessels in the southern Red Sea.
The group has warned that it will attack all Israel-bound ships in the Red Sea, one of the world's most frequently used sea routes for oil and fuel shipments, in a bid to support Palestinians as they face Israel's "aggression and siege" in Gaza.
Suspending their Red Sea operations, many firms have had to redirect their vessels south, adding at least 10 days of sailing and extra costs as they navigate the Cape of Good Hope, where shipping rates have increased by 15% around Africa's southern tip.
Brent crude oil dropped 8.35% to $78.74, while natural gas traded on the New York Mercantile Exchange plunged 43.55% last year to $2.50 per million British thermal units on Dec. 28.
Russia’s withdrawal from the Black Sea Grain Initiative on July 17, brokered by Türkiye and the UN to resume grain exports from three Ukrainian Black Sea ports that were paused after Moscow's "special military operation" in February 2022, spurred concerns over grain supply.
Chicago wheat futures dove 20.2% to $6.30 per bushel through the end of December and corn prices plummeted 29.7% to $6.80 per bushel.
