2002 a bumper year for commodities

  • Business
  • Thursday, 02 Jan 2003


LAST year was a bumper year for world commodity markets, unlike those for equities. 

The Reuters Commodity Research Bureau Index, which tracks the performance of commodities, rose 24% last year – the biggest jump since 1973. 

Prices of commodities such as crude oil, crude palm oil (CPO), rubber and cocoa surged more than 40% during the year.  

Being a major crude oil and CPO producing country, Malaysia was a beneficiary of the buoyant commodity price trend.  

Economists described this as a “blessing” for the country’s economy. Higher revenue from commodities helped to make up for the shortfall in export earnings in other industrial sectors which were affected by the weak global economy, they said. 

Malaysia’s Tapis crude climbed in tandem with the recent uptrend seen in other benchmark crudes, touching US$33.55 per barrel on Dec 24 – the highest level reached since November 2000.  

However, it slipped back to close the year at US$32.10 following news that the Organisation of Petroleum Exporting Countries (Opec) was set to pump more oil in mid-January to ease the world supply shortage. 

Growing prospects of war between America and Iraq that might disrupt oil supply in the Middle East, and the anti-government strike in Venezuela (the world’s fifth largest oil producer), now in its fifth week, had propelled crude oil prices higher.  

Crude oil prices gained 59% last year, which in turn jacked up energy costs, particularly for net oil importers. 

The “gold rush” by investment fund managers amid uncertainties in the world geopolitical scene also lifted the price of the precious metal. 

This traditional safe haven commodity gained 24% last year to finish 2002 at US$346.70 per ounce, compared with only US$278.70 a year earlier. Gold was traded on the spot market at a five-year high of US$349.25 on Dec 26.  

Dry weather conditions in major production areas of the world tightened the supply of certain agricultural commodities and this in turn boosted their prices. 

The El Nino weather phenomenon has affected output of edible oils in the major supplying countries such as India, Canada and Australia. Oil World, the influential industrial publication, projects tight supply conditions in the edible oils market to persist this year if rainfall is below expectations.  

The CPO price leaped 44% to US$1,644 per tonne last year compared with the previous year’s close of US$1,139 per tonne. The commodity reached the year’s high of US$1,690 on Dec 27. 

Cocoa planters also enjoyed good profits, with the commodity’s price soaring 52% to US$2,043 per tonne from the previous year’s close of US$1,342.  

Low rainfall and political unrest in the Ivory Coast – the world’s largest cocoa producer – has affected supply since the 2nd half of 2001. 

The commodity touched a 17-year high of US$2,400 per tonne in mid-October, and was traded at US$2,043 per tonne at the close of the year. 

The higher commodity and crude oil prices helped to spur growth of Malaysia’s mining and agricultural sectors by 7.3% and 5.4% respectively in the third quarter of last year. 

The government expects export earnings from the agricultural commodities sector to achieve a 22.9% increase to RM40bil for 2002. 

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