Instability in primary commodity markets

The two principal objectives of this paper are, first, to consider the behaviour of primary commodity prices on world markets. In particular, the degree of price instability in each of 19 primary commodity markets in the period 1953–1974, and the long-run behaviour of primary commodity prices relative to the price of manufactures (‘the terms of trade’) are analysed. Secondly, measures of export earnings instability are presented which determine its degree and geographical extent. The importance of world primary commodity trade both for the developed countries as major importers and exporters and for the less developed countries as large exporters is also pointed out.     

World copper market, 1973–1982, and international stabilization policies

This article critically examines international price stabilization policy in relation to the main features of the world copper market and the structural changes that have affected the industry in the decade up to 1982. The first section summarizes the main features of the world copper market, briefly discussing the principal structural changes; the second part examines the recent pattern of investment in copper and changes in ownership of some copper producing companies resulting from the need for improved cash flows due to the adverse effects of the recession; and the third part analyses the practical and theoretical issues relating to the question of price instability. A number of formidable problems are likely to arise from such price stabilization policies and it is concluded that it is because of these difficulties that the policies have not been implemented. Consequently, international commodity agreements designed to minimize or avoid price instability have proved difficult to conclude. New questions on which consensus is likely should be examined to promote intergovernmental co-operation, and hence market stability. With that end in view, this article lists some new questions that could form the basis of an agenda for exploratory intergovernmental discussions on copper.     

EVALUATING DIRECT BENEFIT ESTIMATION PROCEDURES FOR IRRIGATION PROJECTS: A SIMPLIFIED APPROACH1

ABSTRACT: An integral part of evaluating the net benefits generated by an existing or proposed irrigation project is the assessment of the associated impacts in commodity markets. Traditionally, these impacts have been measured by either assuming no change in commodity prices and calculating net returns to project farmers, or by allowing commodity prices to fall in accordance with a given elasticity of demand and subtracting commodity production costs from the associated area under the commodity demand curve. In either case, it is implicitly assumed that supply is perfectly inelastic. This article establishes that traditional approaches to measuring direct benefits are biased. Formulae are presented for calculating the maximum absolute and relative error which may result from using these techniques as a function of project size. Direct benefit estimates are then evaluated for three irrigation projects in Nebraska, illustrating how these results can be used to improve project evaluation procedures.     

Study Groups Versus Commodity Agreements: An Appraisal*

Since World War II there have been several attempts to establish intergovernmental mineral commodity arrangements involving both the producing and consuming countries. Two different forms have been used, the consultative forum and the commodity agreement (with binding economic provisions). The two different approaches are compared using as examples the six post-World War II International Tin Agreements and the International Lead and Zinc Study Group. The study group or consultative forum appears to work better.     

The international natural rubber agreement 1979

The International Natural Rubber Agreement (INRA) 1979 is the first, and so far the only, commodity agreement to emerge from the negotiations under the Integrated Programme for Commodities (IPC). The agreement is examined in the context of the issues relating to international stock and as an indicator for future development. The author concludes that while the principle of joint responsibility for financing international stock has been for the first time accepted in INRA, this has been achieved at the cost of reducing the scope of the regulatory mechanism, and that the single-instrument pattern that the agreement has adopted may not be suitable or acceptable in other commodities.     

The anatomy of three commodity booms

Three major commodity booms since the second world war are identified and analyzed. In all three, demand shocks predominated as triggers to the commodity price rises. The first boom, in 1950–51, was caused by the massive inventory buildup in response to the Korean war. The second, in 1973–74, was accentuated by widespread harvest failures and by OPEC's market management, which tripled the price of oil. The third boom started in 2004 and has not yet run its course. This time, the explosive growth of China's and India's raw materials demand has played a key role. The first two booms collapsed as the world economy went into recession and excessive inventories were sold out. The third boom may prove more durable since the world economy continues to expand briskly and commodity inventories have remained small.     

An empirical approach to determine specific weights of driving factors for the price of commodities—A contribution to the measurement of the economic scarcity of minerals and metals

In recent years, commodity markets show a large amount of volatility and substantial price jumps, indicating an increasing economic scarcity in many cases. As this scarcity makes commodity procurement a critical issue for national economies, industry sectors and manufacturing companies, a number of criticality indices have been presented and utilized in science as well as in practice. These indices are mostly based on an aggregation of different key figures, both qualitative and quantitative. However, the weighting of the different factors is in most cases arbitrary or based on rough estimates.     

The impact of commodity price risk management on the profits of a company

It is well recognized that for the producing companies hedging the commodity price using financial products like forwards or futures has become an important part of the company's production process. But apart from the direct impacts of hedging on the production and hedging costs the use of financial products affects the financing of the company: hedging the volatile commodity prices leads to a reduction of the risk premium the company has to pay for its debt capital, since hedging contributes to more confidence of the investors in the redemption of the debt. In this paper we therefore analyze this dependency of hedging and financing and derive optimal hedging extents for companies in different market situations based on a long-term model. By hedging the commodity price, companies can realize a surplus in profits. Thereby, the optimal hedging extent for a monopolist is often up to 100%, whereas for companies in a polypolistic market the optimum is always less than 100%. These results are illustrated by examples for a producing company.     

International commodity transactions : The role of the commodity futures trading commission

The creation of so-called ‘financial’ futures contracts in the USA has spurred the growth of futures trading by other countries, including the UK. The increased expansion of commodity futures trading has also led to heightened regulatory concerns throughout the world. The USA has been especially aggressive in asserting jurisdiction and establishing regulatory controls over persons dealing in the US markets. The complexity of the regulations adopted is compounded by the fact that they are often directed at specific instruments, while similar instruments are not given comparable regulatory treatment. This article discusses the growth of futures trading worldwide, as well as regulatory concerns and requirements existing in the USA.     

旅游商品的模糊综合评价

旅游商品是旅游市场经济效益产出中非常重要的一个方面。面对市场上旅游商品良莠不齐和缺少旅游商品相关评价标准的状况,采用模糊数学方法对旅游商品进行综合评价。在提出四层评价体系实施方案的同时,将该评价方法应用于旅游实践,从而为旅游商品开发者、生产者、经销者或旅游景区的旅游商品开发管理提供参考。     

Minerals policy in Europe: Some recent developments

The importance of a secured supply of raw materials for the European economy is evident. However, securing the supply of raw materials based on an appropriate EU minerals policy has been scarcely treated by the decision-makers in the last decades. Solely the impact of price development of international commodity markets in the last years induces a re-thinking of this field. The EU Raw Materials Initiative, which was published by the European Commission in November 2008, establishes an EU raw materials strategy including a list of actions.     

Agreement about commodity agreements?

In spite of the shifts in global economic power the scope for increased intervention in commodity markets remains restricted. We have witnessed the beginnings of some changes with the increased willingness of the richer countries to discuss the commodity issue. The interest in individual commodity agreements is likely to be extended as consumers place a higher valuation on security of supplies but commodity agreements can only secure moderate and limited objectives. They represent only one of a number of tools which are available in the attempt to secure a new world economic order and they will need to be used in conjunction with increased flows of foreign aid, trade liberalisation, and schemes of compensatory finance. The integrated approach to commodities seems fraught with difficulties as does any realistic scheme for the indexation of commodity prices.     

A review on tertiary recycling of high-density polyethylene to fuel

Plastics have become an indispensable ingredient of human life. They are non-biodegradable polymers of mostly containing carbon, hydrogen, and few other elements such as chlorine, nitrogen etc. Rapid growth of the world population led to increased demand of commodity plastics. High density poly ethylene is one of the largest used commodity plastics due to its vast applications in many fields. Due to its non bio degradability and low life, HDPE contributes significantly to the problem of Municipal Waste Management. To avert environment pollution of HDPE wastes, they must be recycled and recovered. On the other hand, steady depletion of fossil fuel and increased energy demand, motivated the researchers and technologists to search and develop different energy sources. Waste to energy has been a significant way to utilize the waste sustainably, simultaneously add to meet the energy demand. Plastics being petrochemical origin have inherently high calorific value. Thus they can be converted back to useful energy. Many researches have been carried out to convert the waste plastics into liquid fuel by thermal and catalytic pyrolysis and this has led to establishment of a number of successful firms converting waste plastics to liquid fuels. This paper reviews the production and consumption HDPE, different methods of recycling of plastic with special reference to chemical degradation of HDPE to fuel. This also focuses on different factors that affect these degradations, the kinetics and mechanism of this reaction.     

Evaluating a small deposit next to an economically viable gold mine in West Africa from the points of view of the mining company,the government and the local community

This paper addresses the question of evaluating how much the different stakeholders stand to gain from a mining project. By carefully analysing the breakdown of the cash-flows generated, we were able to estimate the amounts received by the local community and by the national community (outside the mining area), the taxes and royalties received by the government and the profits made by the mining company. A real options framework was used to take account of the inherent uncertainty on the commodity price and the reserves, and the operating flexibility (that is, the possibility for the company to stop mining if the commodity price drops and/or the reserves prove to be lower than that had been envisaged). A synthetic case-study of a gold mine in West Africa was used to illustrate how this procedure could be applied in practice. By using the real option framework we were able to envisage scenarios for developing an extension to a deposit as a function of future values of the commodity price. The procedure proposed should provide governments and NGOs with more objective data for making policy decisions.     

Would commodity market stabilization agreements redistribute economic resources to developing countries?: The case of copper

There has been strong pressure, particularly within UNCTAD, for international stabilization agreements for the major commodity markets, in order to stabilize prices and to redistribute resources towards the developing country producers. However, no empirical evidence on the feasibility or desirability of these proposals has appeared. As an illustration of the possibilities, this paper makes estimates of the stabilizing power and costs of buffer stock interventions in the world copper market. We find that price and revenue stabilization is technically possible; but that to generate income transfers to the developing countries is prohibitively expensive and creates a further problem of redistribution among developing country producers.     

Future markets: An alternative for stabilizing secondary materials markets?

The authors present an economic justification for extramarket intervention in the markets for secondary materials and briefly discuss the possible impacts of futures trading on the cash market for a commodity. These impacts are applied to the markets for secondary materials and the potential effects are assessed. They conclude with a rationale for public participation in initiating a scrap futures market.     

UNCTAD's integrated programme for commodities: Economic implications and Europe's response

This paper discusses some major economic problems raised by proposals towards a new international commodity policy. The author analyses the economic implications of commodity price stabilization and price raising, and focuses on the questions of operationality of the IPC and on the alleged merits of a common financing of individual buffer stocks. He discusses financing schemes compensating for fluctuations of export earnings, and finally points to a number of areas in which Europe could make a constructive contribution to mitigate the commodity problem.     

Using the cumulative availability curve to assess the threat of mineral depletion: The case of lithium

The cumulative availability curve shows the quantities of a mineral commodity that can be recovered under current conditions from existing resources at various prices. The future availability of a mineral commodity depends on the shape of its cumulative availability curve (determined by geologic considerations, such as the nature and incidence of the available mineral deposits), the speed at which society moves up the curve (determined by future demand and the extent to which this demand is satisfied by recycling), and shifts in the curve (determined by cost-reducing technological change and other factors). While the shape of the curve for any given mineral commodity may or may not be known, it is knowable since the geologic processes responsible for the curve's shape took place many years ago. In contrast, the factors governing how fast society moves up the curve and how the curve shifts over time are not only unknown but also unknowable.Using lithium as an example, this article shows that knowledge about the shape of the cumulative availability curve can by itself provide useful insights for some mineral commodities regarding the potential future threat of shortages due to depletion. Despite the inherent uncertainties surrounding the future growth in lithium demand as well as the uncertainties regarding the future cost-reducing effects of new production technologies, the shape of the lithium cumulative availability curve indicates that depletion is not likely to pose a serious problem over the rest of this century and well beyond.     

Effects of a dollar appreciation on dollar prices in international commodity markets

The dollar-based commodity price index prepared by UNCTAD declined by 30% in the five-year period ending in January 1985. A variety of factors explains this fall. Most important among these is probably the phenomenal appreciation of the US currency. For instance, the dollar rose against the Deutschmark by 84% during that time, and UNCTAD's commodity price index shows a rise of about 30% when measured in West German money. Surely, the dollar commodity prices would have fallen far less or possibly even increased in the absence of the exchange rate shifts that were actually recorded.