Commodity prices sink to 10-year low

Scotiabank commodity price index falls below 2009 recession low

Scotiabank commodities specialist Patricia Mohr said China's demand still significant, despite fears of weakening economy.

Commodity prices have sunk to a 10-year low, thanks in part to fears of a weakening Chinese economy, according to Scotiabank.

The Scotiabank commodities index dropped 10.5% in August. That’s 13.9% lower than their lowest point of the 2009 recession, and their lowest since 2005.

“While many commodity prices, including key base metals, remain well above the 2008-09 recessionary lows, current commodity market weakness is broader based,” said Scotiabank commodities specialist Patricia Mohr.

“The financial market turbulence in China touched off fears of a hard landing in August and opened up questions over the medium-term outlook for China as a growth market for raw materials – especially for oil and metals.”

The good news is that China’s economy is expected to grow at 6.8% this year, thanks to monetary and fiscal policies. However, China’s economy is expected to grow at slower rate in 2016 – at about 6.4%.

“Medium-term, China’s potential to significantly lift world raw material demand will remain intact, even as it transitions to a consumer-and service-led economy,” Mohr said.

For B.C., key commodities include metals and forestry, both of which continue to fall in price. Scotiabank’s metal and mineral index fell 1.6% in August; the forestry index fell 3.5%.