Commodity prices, after slumping the most in at least a half century, have probably reached the bottom and should rebound over the next several years as demand outpaces supply, Credit Suisse said.
The Reuters/Jefferies CRB Index of 19 commodities fell 4 per cent in the first quarter, extending last year’s 36 per cent decline. Demand for everything from copper to oil shrank, with the global growth likely to contract for the first time since World War II and trade declined the most in 80 years, the World Bank said last month.
“There are some signs of stabilisation and we are becoming more optimistic that we have seen the lows for the cycle,” Adam Knight, head of the Credit Suisse Glencore Commodities Alliance, said in an interview in London.
The slump in prices has spurred the mining companies including Melbourne-based BHP Billiton and London-based Anglo American to curb production and shelve new projects.
That may mean that when economies recover, supply may not be able to keep up with consumption, Knight said.
“A number of commodity markets could find the supply side unable to respond,” said Knight, a former head of metals at New York-based Goldman Sachs Group. His bank’s alliance with Glencore International, the biggest commodity-trading company, covers oil and other energy products, industrial and precious metals, cobalt, iron ore, emissions and freight.
“It’s a structure whereby Glencore gives us access to the latest information, for example; physical flows, inventories, the industry cost structure,” said Knight, who joined Credit Suisse in 2007. Glencore gets a share of the revenue in return, he said.
Credit Suisse’s value at risk in commodities, a measure of how much the firm estimates it could lose in a single day, rose to 36 million Swiss francs ($31.4 million) last year, compared with 17 million francs a year earlier, according to a report from the bank. Goldman Sachs’s value at risk in commodities was $44 million last year.
