Market round-up: Will commodity price gains fade?

World Bank’s Commodity Markets Outlook has revised its energy price index forecast upwards to 68 for 2017, compared with the forecast from the April 2016 report


Oil prices are expected to average $55 a barrel in 2017, higher than the $53 a barrel forecast in July, accounting for Organization of the Petroleum Exporting Countries’ (Opec’s) intention to curb output. Photo: Reuters
Oil prices are expected to average $55 a barrel in 2017, higher than the $53 a barrel forecast in July, accounting for Organization of the Petroleum Exporting Countries’ (Opec’s) intention to curb output. Photo: Reuters

The benefits to India from lower commodity prices, especially that of crude oil, and even the lower prices of metals and fertilizers may start to fade.

The World Bank’s Commodity Markets Outlook (CMO)—a quarterly report—has revised its energy price index forecast upwards to 68 for 2017, compared with the forecast from the April 2016 report.

The forecasts for metals and minerals, and food have been increased, too. Oil prices are expected to average $55 a barrel in 2017, higher than the $53 a barrel forecast in July, accounting for Organization of the Petroleum Exporting Countries’ (Opec’s) intention to curb output.

But the World Bank’s CMO also says that, in the case of Opec, guiding global oil prices will be challenging in the presence of unconventional oil producers, notably the US shale oil industry. That offers some comfort.

BOT projects’ credit profile improves

The credit profile of build-operate-transfer (BOT) road projects that are operational is looking better.

An analysis of 104 BOT projects (74 toll-based and 30 annuity-based) with outstanding debt of Rs46,950 crore by Crisil showed that only 35% of the projects are at risk, which is lower than 45% last year.

Despite tepid industrial activity, a healthy pick-up in traffic was witnessed on the back of growth in the consumption-led sectors.

This traffic growth has offset the modest hike in toll rates. Therefore, there is decent traction in revenue of these projects.

If traffic growth continues to improve, which is the forecast, then road projects would be on a better wicket.

Rail freight traffic drops for third straight month

Freight traffic continues to fall at Indian Railways. It fell 2.7% in September from a year earlier. This is the third consecutive monthly drop in freight traffic.

Between April and September, freight traffic was down 1.6%, and this drop in volume underscores the weak economic trends.

Transport of notable raw materials such as coal and cement fell in September.

The total freight traffic of 86.35 million tonnes (mt) is also significantly lower than 88.75 mt transported a year ago.

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