about 2 months ago

World Bank Signals Commodity Market Reset as Global Growth Slows

The World Bank has issued a sobering forecast for global commodity markets, projecting a significant decline in real prices over the next two years. According to its latest Commodity Markets Outlook, prices for raw materials are expected to fall by 12% in 2025 and a further 5% in 2026—reaching their lowest inflation-adjusted levels since the early 2020s. This shift comes amid a broader economic deceleration, in part triggered by protracted trade tensions and geopolitical uncertainty.

The End of the Pandemic-Era Commodity Rally

Following the pandemic and the supply shocks linked to Russia’s 2022 invasion of Ukraine, commodity prices soared, driven by disrupted supply chains and a rapid rebound in global demand. However, this cycle appears to be reversing. The World Bank notes that inflation-adjusted prices are on track to revert to their 2015–2019 average levels, signaling a structural normalization in commodity markets.

What once was a surge in demand for energy, metals, and food is now giving way to a more measured global environment characterized by:

Weakened industrial output in major economies
Sluggish trade volumes affected by tariff regimes
Stabilizing agricultural yields following earlier climate disruptions

Three Core Trends Shaping the Outlook

Global economic deceleration: Growth in major economies has lost momentum amid tighter monetary policy and ongoing trade friction, particularly between the U.S. and China.
Stabilized supply chains: After years of bottlenecks, supply-side dynamics have improved, contributing to softer price pressures across energy and metals.
Reduced speculative demand: Investors are showing reduced appetite for commodities as inflation expectations moderate and risk-off sentiment grows.

Key Dynamics at a Glance

Energy: Oil and natural gas prices are expected to see the steepest declines, particularly as demand from industrial sectors softens and alternative energy capacity grows.
Metals: Copper, aluminum, and nickel prices are forecasted to ease as construction activity cools in China and inventories normalize.
Agricultural commodities: Food prices are projected to remain under pressure due to improving harvests and lower fertilizer costs, though regional weather shocks may still cause volatility.

Watching the Road Ahead

Several variables could influence how the forecast unfolds:

Escalation of trade restrictions or new sanctions
Major weather-related disruptions impacting agriculture
Volatility in energy markets due to geopolitical conflict
Sudden shifts in monetary policy direction by major central banks

The World Bank underscores that the outlook is subject to significant downside risks, especially if global growth slows more than currently anticipated.

Trade wars World Bank Raw material prices Commodity prices forecast Global economic slowdown