Commodity Prices Market Trends

The recent contraction in demand for some raw materials, accompanied by a reduction in energy costs, is generating a drop in prices. Nevertheless, the current period continues to be characterised by high inflation, high-interest rates, exchange rate volatility and difficulties in finding labour, hampering the reduction in market prices of finished goods.

• In 2022, global agricultural production was repeatedly affected by rising energy prices, increased production costs, the war in Ukraine, and food inflation. In addition, the highest temperatures in history were recorded, significantly affecting harvests throughout the year.

• The Russia-Ukraine conflict aggravated the imbalance between supply and demand. The EU has been more affected than other parts of the world. Its energy dependence on Russia, coupled with high inflation and gradual depreciation of the euro, further exposed EU markets to volatility and increased the differentials between international and European prices.

• The FAO Food Price Index noted that December 2022 was the ninth consecutive month that brought a further decline in prices to an even lower value than declared precisely one year earlier. Nevertheless, increased production costs for packaging and logistics did not always offset the decrease in raw material at source.

• Overall energy prices are expected to fall in 2023 after reaching record levels in mid-2022. Despite declining, Russian gas supplies to Europe, reduced global demand has forced prices down. Similarly, fears of a global recession are affecting oil demand expectations despite the latest batch of EU sanctions on Russian oil. The easing of natural gas and crude oil markets is expected to reduce pressure on inflation in energy-intensive industries.

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