EU wants market-based answer to commodities surge

LONDON, March 9 Wed Mar 9, 2011 6:42am EST

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LONDON, March 9 (Reuters) - Commodity prices have surged largely due to supply and demand bottlenecks and the European Union response should be "considered and market based" rather than rely on mandatory curbs, governments are set to agree.

Some European Union states such as France want curbs on what they see as speculators such as hedge funds making quick gains in commodities markets at the expense of consumers.

The tone of the statement, due to be endorsed by the bloc's industry ministers on Thursday, is cautious on blaming the financial sector, however, and does not call for any radical measures such as position limits being introduced in the United States.

The draft statement says volatility in energy, metal and food commodity prices have been exacerbated by various structural problems in the supply and distribution chains rather than pinning all the blame on the financial sector.

A rising long-term trend in prices and volatility is "mainly due to a steady increase in the global demand for raw materials and commodities", the draft statement, which has already been approved by EU member state representatives and published on the Internet, adds.

Integrity and transparency of commodity derivatives markets should be improved as part of a "considered, market-based EU response" to deal with the twin challenges of excessive price volatility and risks of interruptions of supplies.

Ministers are set to ask the EU's executive European Commission to find ways to recycle resources better and analyse the feasibility of stockpiling "critical raw materials".

The ministers will also ask the Commission to help the Group of 20 leading economies in the world (G20) in its work on food market volatility and excessive price swings on energy markets.

The ministers put forward the basis for a broad strategy that looks at external relations, trade, competition, industrial and environmental policies and agriculture and forest policy, saying an international response is also needed.

The Commission will be asked to present initiatives on the disclosure of financial information by mining companies, including the possible adoption of country-by-country reporting requirements.

For a copy of the draft statement click on:

here

For G20 plans on commodities, energy [ID:nLDE71I0GF] (Reporting by Huw Jones, editing by Anthony Barker)

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