This is how 2019 will be for commodities in Latin America

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Because of the uncertainty of the international market, the price of raw materials has been volatile in recent years and this year may not be different

The Latin American continent has depended on raw materials for decades, which has made its economies peculiarly fragile before the international market in recent years. Organizations such as the Economic Commission for Latin America and the Caribbean (ECLAC) and the World Bank have made predictions about the value of these commodities.

Leer en español: ¿Qué les espera a los 'commodities' en América Latina en el 2019?

The growing demand for commodities, including metals, minerals, energy sources, and agricultural products, had its boom at the beginning of the 21st century due to the growing demand of growing markets such as China. However, the need for this giant has been falling, especially since the economic tensions between the US and the Asian country began.

ECLAC, in a report published at the end of 2018, predicted that the Latin American economy would grow by only 1.5% this year. This figure is mainly due to the complex and uncertain international scenario, which will continue to impact the price of raw materials.

On the other hand, Robert Rave, the editor of CNN en Español, highlights his concern regarding the low levels of foreign investment due to the decrease in demand for raw materials.

Trade disputes between the economic giants, the US and China, are affecting the region and endangering its growth since commodities are one of the primary inputs for Latin American exports.

Also read: What will be the oil prices for 2019?

As the newspaper El País clarifies, the combination of low prices and lower sales will further complicate the regional scenario, where economies depend on agricultural, mining and hydrocarbon exports. They also mention that this impact will be felt most strongly in South America.

Argentina, which has been submerged in an economic crisis from which it has not managed to leave, has suffered a devaluation of its currency that has lost half of its value since January of last year. This, in addition to a severe drought, has led to a loss of 31% of agricultural production.

According to a report from ECLAC, 'State of the mining situation in Latin America and the Caribbean', the region has a significant participation in the world reserves of the main metallic minerals such as iron (15%), tin (25%), nickel (32%), copper (39%), silver (32%) and, above all, lithium, with 61%.

However, the picture is varied, because the value of commodities is different depending on the type.

Iron
Of the world's iron stock in the world, Brazil is responsible for 14%. According to Luciano Siani, chief financial officer of Vale, the Brazilian mining giant, China's demand for iron ore should remain strong despite economic tensions. Reuters clarified that this demand should support prices above USD 90 this year.

Copper
One of the products that have brought forward the Chilean growth has been the export of copper. According to the Ministry of Mining of the country, the common destiny of this metallic mineral has been to industrialized countries and in the process of industrialization, specifically like China.

The Chilean Copper Commission (Cochilco), said that the average price of this metal would exceed $ 3 per pound. This is supported by the growing demand for copper, plus a deficit of this. Besides, they also clarified that if the negotiations between China and the US continue on the right track, the country's exports will increase significantly.

These predictions were made public in the last days of December 2018, where the price of copper closed at 2.73 USD per pound.

Carbon
According to an article in Portfolio, coal represented a mini-bonanza to Colombia at the end of 2018, as Chinese imports of this mineral reached 29 million tons, the highest level registered since 2014. Besides, according to Shane Stephan, spokesman for New Hope Corp, in Europe is also growing the import of coal, so it is becoming a source of competitive energy.

Petroleum
The commitment made by the members of the Organization of Petroleum Exporting Countries (OPEC) to cut its production of 1.2 million barrels per day, would be helping to raise oil prices. According to the newspaper El Mercurio, a few days after entering into force the decline, the barrel of Brent scored a rise of 9.07% to 55 USD.

On the other hand, according to the portal The Balance, oil prices would be averaging between USD 61 per barrel this year. However, after the announcement of the OPEC plan, JP Morgan forecast about USD 73 per barrel for November.

LatinAmerican Post | Valentina Moya

Translated from "¿Qué les espera a los 'commodities' en América Latina en el 2019?"