CHARTS: Here's Some Great Context For The Recent Fall In Commodity Prices

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Despite commodity prices taking a downward trajectory this year, falling off the 2011 peaks, they remain structurally high, HSBC says.

HSBC chief economist, Paul Bloxham has attempted to put the big falls, including iron ore which is currently teetering about $80 a tonne down from more than $100 a tonne earlier this year, into perspective.

He said commodity prices are 115% above the 1990 average and with a number of emerging economies entering into a “commodity-intensive stage of development, prices should stay high”.

“Although metals prices have fallen, partly due to rising supply, they remain high: we expect energy prices to remain high and see upside potential to higher-grade agricultural and metals prices,” Bloxham said in the report.

Making an historical price comparison, Bloxham reveals, “commodity prices are not exceptionally high right now, but rather, they were historically low in the 1980s and 1990s.”

The chart below demonstrates Bloxham’s point.

Some have argued oversupply, especially in the wake of the mining boom, is an issue producers will have to contend with but Bloxham said he sees “little risk of significant oversupply”.

“We expect that the strongest potential upside should be in demand for higher-grade commodities, such as zinc, nickel, aluminium, gas, meat, edible oils, dairy and sugar,” he said.

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