Commodity exporters should brace for lower prices: IMF

WASHINGTON Tue Apr 10, 2012 2:25pm EDT

A shipment of copper is seen in the port of Valparaiso city, about 121 km (75 miles) northwest of Santiago, June 29, 2009. REUTERS/Eliseo Fernandez

A shipment of copper is seen in the port of Valparaiso city, about 121 km (75 miles) northwest of Santiago, June 29, 2009.

Credit: Reuters/Eliseo Fernandez

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WASHINGTON (Reuters) - Commodity-exporting countries should prepare for lower prices given weaker global economic activity and lower demand, the International Monetary Fund said on Tuesday.

The IMF said some commodity-exporting nations should save their windfalls from current higher prices to protect their economies in the event of a price downswing. Other exporting countries should use commodities profits to reduce their debt, the IMF said in analytical chapters of its World Economic Outlook report.

"Given weak global activity and heightened downside risks to the near-term outlook, commodity exporters may be in for a downturn," the IMF said.

"If downside risks to global economic growth materialize, there could be even greater challenges facing commodity exporters, most of which are emerging and developing economies," the IMF said.

It said weaker global growth suggested that commodity prices are unlikely to increase at the pace of the past decade.

The IMF said baseline projections foresee a decline in commodity prices during 2012-13. "Sizable downside risks to global growth also pose risks of further downward adjustment in commodity prices," it added.

Economic data on Tuesday showed that China's imports of major commodities are down. Still, data released so far shows that China's appetite for commodities is likely to grow although at a slower pace as companies stockpile. L3E8FA3AX

March imports of crude oil by China, a major diver of global commodity prices and the world's No. 2 oil consumer, in March were off the previous month but still at their third highest ever.

"Emerging market and developing countries have so far been remarkably resilient to the global crisis ... and we find commodity prices to be a large factor behind it," said Rupa Duttagupta, lead researcher for the report.

"Commodity prices are still strong so this is an opportunity to use those strong prices to build up all those institutions and buffers needed in case the situation becomes worse," she added.

The IMF has previously warned that oil prices will rise as much as 30 percent if Iran halts oil exports because of U.S. and European sanctions.

The IMF report said if there was a disruption in oil supplies, crude prices would rise temporarily, but the ensuing slowdown in global growth could push down prices of other commodities.

(Reporting by Lesley Wroughton; Editing by James Dalgleish and David Gregorio)

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