Paul Nyakazeya, Group Digital Editor 
INTERNATIONAL demand for commodities is likely to remain subdued in the first half of the year, equities research firm IH Securities says.
In an equity strategy paper for 2023 titled: An Economy at Crossroads, IH said that supply chain disruptions were likely to persist because of the continued Russia/Ukraine war.
“… demand risks are in the driving seat for now. Considering Russia and Ukraine contribute significantly to the production of wheat, fertilisers, and fuel, the Russia-Ukraine crisis resulted in supply disruptions of the aforementioned commodities thus, pushing their prices up,” IH said.
The decision by China, a key commodity consumer, last December to pivot from a stringent zero-Covid strategy was however, seen as offering some respite.
“We hope this will add a boon to demand in 2023 although there are fears of another wave of Covid-19 cases. Regardless, we believe an uptick in demand in China will not be enough to offset the impact of contractionary monetary policies across the globe,” IH said.
China’s zero-Covid policy for the most part of the year resulted in reduced demand on the market.
“China faced its largest Covid-19 outbreak in 2022 since the start of the pandemic. Additionally, the metal-intensive property market in China remained relatively weak in 2022,” IH said.
Demand was also affected by the adoption of tight monetary policies by central banks as they tried to tame soaring inflation. Consequently, commodity prices declined in 2022 although they remained elevated compared to pre-Covid levels.
According to IH, agriculture commodity prices for the year 2023 will be determined by a number of drivers including climate change, fertiliser prices, logistical issues in relation to Black Sea shipping corridors, monetary policies and the Covid-19 situation in China, among other factors.
“Given current uncertainties, forecasting the direction for global agricultural markets for the year ahead has proved to be challenging,” IH said.
“However, according to FAO (United Nations Food and Agriculture Organisation), the Food Price Index averaged 135,7 points in January 2023, virtually unchanged from October. The FAO Cereal Price Index averaged 150,4 points in November, down 1,9 points (1,3 percent) from October.”
The current trend suggests declining prices for agriculture commodities, the firm added.
Energy prices have fallen sharply from mid-year highs in the second half of 2022, with average prices for all hydrocarbons (except liquefied natural gas, or LNG) set to register double-digit declines in 2023.
“However, prices are expected to remain above pre-pandemic levels. Oil prices are expected to average about US$75 per barrel in 2023 from circa US$95 per barrel in 2022 as OPEC production (including Russia) falls by about 3 million barrels/day from its recent peak in late 2022,” IH said.
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