The continuing weak growth of the global economy affects increasing impact on commodity prices. Not only the low oil and gold prices to send the index of commodity prices to a 16-year low. A close look shows that virtually all sectors are affected. In particular, the weaker growth of Chinese economy batters the commodity markets.
Demand for metals continues to decline
The decline in prices for metals does not only affect on precious metals like gold and silver. In particular, the prices of copper and aluminum have already experienced a bitter crash, and it remains uncertain, whether it is already at rock bottom. Was the ton of copper in 2011 at about 11,000 US dollars, the price currently has more than halved with around 4,800 US dollars, and also the price of aluminum has almost halved over the past 4 years, with today 1,500 US dollars per ton. In addition to the continued drop in demand from China, the increase of the US dollar pushes more generally on the demand.
Weak demand and low prices are now showing strong effects on the price of the publicly listed mining companies. Almost all large companies are currently reporting price falls, up to historic lows. Thus, the share of the UK FTSE 100 listed Anglo American fell to its lowest value since the company went public. However, also the shares of other heavyweights from the mining sector come under significant pressure. The Australian company Glencore, for example, has lost around three quarters of its corporate value in the past four years.
In the medium term no significant increase in the oil price
After the price of the barrel of crude oil is burgled dramatically due to a high production and a the weak demand. It has leveled off at around 45 current US dollars. A stabilizing effect certainly comes from a slightly lower production of OPEC countries, that had denied this so far consistently. The official quote was however not reduced. Nevertheless, the OPEC expects a lower production of countries that do not belong to it, as the United States. They contributed significantly to the collapse of oil prices with the extraction of shale oil.
Far-reaching consequences for the oil-producing countries
The continuing low price of oil is beginning to impact on the extractive industries. Countries such as Norway, whose economy is built largely on the oil production, feel the first effects of necessary savings in the oil industry. So just Norway lost around 15,000 jobs in the sector already due to price erosion in the past 2 years. Forecasts expect even a loss of up to 100,000 jobs in Norway until 2020.
Such a large loss of jobs usually not can be compensated immediately by the rest of the economy. Therefore it is affected by a decline in the wake of domestic demand, and this could lead to further wage cuts and job losses. This applies to all countries whose economies are heavily dependent on the production of raw materials. For example, the recently released positive numbers from the Australian labor market might already already run into negative territory in the near future.