I am pleased to share a presentation I made on December 10 on recent developments and risks on commodity markets.

1. 1

2. Outline
2

3. Outline
3

4. 1.1
1.3
2.0
2.3
1.7
2.3
2.2
2.0
1.7
4.9 5.0
4.3
3.7 3.7
4.3
4.5
4.7 4.7
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017 2018F 2019F 2020F
Advanced Economies
Emerging Markets and Developing Economies
Global growth prospects
Percent
Recent developments
Global growth was projected at 3.0 and 2.9
percent in 2019 and 2020 (June 2018 edition of
World Bank’s Global Economic Prospects.)
Early indications reinforce our view of
decelerating activity in 2019 and 2020 (the next
edition of Global Economic Prospects will be
published in January 2019). Reasons for
decelerating activity include:
 Tightening of monetary policy in some
advanced economies.
 Deterioration of growth prospects in some
emerging markets.
 Growth in some advanced economies remains
above potential.
 Rising trade tensions.
4

5. 110
115
120
125
130
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18
The broad US dollar index
Source: Bloomberg
Note: Last observation is December 10, 2018. The US dollar index is measured against a major basket of currencies
US$ index
5

6. Most commodity prices have being weakening since 2018 Q2
30
60
90
120
150
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19
Index, nominal terms, 2010 = 100
Source: World Bank
Note: Last observation is November 2018.
Energy
Agriculture
Metals
6

7. Prices are much higher than the 1985-2004 average
0
40
80
120
160
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Agriculture
Metals
Energy
Index, constant US$ (2010 = 100)
Changes (%) in real prices to 2018 from:
1986-2004 1998
Agriculture: +29 +27
Energy: +97 +295
Metals: +66 +108
Source: World Bank
Note: 2018 prices are based on October 2018 forecasts. 7

8. Outline
8

9. 40
50
60
70
80
90
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
Oil price
Source: Bloomberg and World Bank
Note: Last observation is December 10, 2018
Brent
WTI
US$/bbl
9

10. 20
40
60
80
100
120
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19
The equilibrium of the oil price changed after 2004
Source: World Bank
Note: Weekly data. Volatility is defined as standard deviation of logarithmic changes times 100. Last observation is December 7, 2018.
US$/bbl
January 2011 - August 2014
Average price: $104/bbl
Volatility: 2.95
December 2014 – December 2018
Average price: $50.24/bbl
Volatility: 4.71
10

11. Oil prices are just above their long-term average
Source: World Bank
Note: World Bank average. Last observation is November 2018.
0
30
60
90
120
150
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
US$/bbl, deflated by U.S. CPI (Jan 2017 terms)
1972-2018 average: $56/bbl
Two price cycles after WWII
1972 to 1986: Supply driven-cycle associated with oil supply
disruption and major downturn in the global economy. High prices
induced production from “unconventional” sources, including Alaska,
Gulf of Mexico, and North Sea.
2003 to 2014: Demand-driven cycle with no disruption in the global
economy (during the spike) or boost to the global economy (during
the collapse). High prices induced production from “unconventional”
sources, including US shale, Canadian oil sands, and biofuels.
11

12. Energy prices are closer together
0
5
10
15
20
25
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19
US$/mmbtu
Source: World Bank
Note: Last observation is November 2018.
Coal (Australia)
Natural gas (U.S.)
Crude oil (World Bank average)
12

13. Natural gas prices are closer
Source: World Bank
Note: Last observation is November 2018.
0
5
10
15
20
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19
US$/mmbtu
Japan (LNG)
Europe
U.S.
13

14. Outline
14

15. Some metals prices weaken
30
75
120
165
210
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Jan-11 Jul-12 Jan-14 Jul-15 Jan-17 Jul-18
Copper [left] Iron ore [right]
$/mt $/mt
Source: World Bank
Note: Last observation is November 2018.
5,000
10,000
15,000
20,000
25,000
30,000
1,200
1,600
2,000
2,400
2,800
Jan-11 Jul-12 Jan-14 Jul-15 Jan-17 Jul-18
Aluminum [LHS] Nickel [right]
$/mt $/mt
15

16. -1.00
0.00
1.00
2.00
3.00
2012 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1
OECD China Other non-OECD
Signs of slowdown in metal consumption
Source: World Metal Statistics
Notes: Last observation is 2018 Q2.
mmt, year-on-year change
16

17. Outline
17

18. Agricultural prices have been stable for more than 4 years
60
80
100
120
140
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19
Index, nominal terms, 2010 = 100
Source: World Bank
Note: Last observation is November 2018.
Relatively stable agricultural
commodity prices since 2015Food
Raw materials
Beverages
18

19. Global grain and soybean production estimates
480
485
490
495
500
720
730
740
750
760
770
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Wheat Rice (RHS)
2018-19 forecast 2017-18 estimate
mmt
Source: United States Department of Agriculture
Notes: Based on the November 9, 2019 revision.
320
340
360
380
1,020
1,040
1,060
1,080
1,100
1,120
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Maize Soybeans (RHS)
2018-19 forecast 2017-18 estimate
mmt
19

20. Outline
20

21. Where are commodity prices heading?
0
40
80
120
160
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Source: World Bank
Note: The period 2018-30 refers to forecasts, as of November 2018.
Agriculture
Metals
Energy
Index, constant (2010 = 100)
Forecasts as of
October 2018
21

22. 20
30
40
50
60
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
OECD, actual Non-OECD, actual
OECD, projected in 2005 Non-OECD, projected in 2005
History of oil consumption and prospects—as envisaged in 2005
Source: International Energy Agency and World Bank.
Note: The projection was taken from the 2005 IEA World Energy Outlook.
mb/d
22

23. 50
60
70
80
90
100
110
120
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017
World World excl. China
Index, 1995=100
China has reversed the global metals intensity
Source: World Bureau of Metal Statistics and World Bank.
Note: Metals intensity is defined as the ratio pf metal consumption over GDP. 23

24. 2
4
6
8
10
12
14
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
World OECD Non-OECD
Oil and energy intensity of GDP have been declining
Source: BP Statistical Review and World Bank.
Barrels of oil per $10,000 of GDP
5
10
15
20
25
30
35
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
World OECD Non-OECD
Barrels of oil equivalent per $10,000 of GDP
Oil Energy
24

25. Oil production in Iran and Venezuela
Source: International Energy Agency
Notes: Last observation is October 2018.
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18
mb/d
Venezuela
Iran
25

26. -4.3
-5.6
-4.1
-4.3
-2.3
-1.5
-0.9
-6 -5 -4 -3 -2 -1 0
Arab oil embargo
Iranian revolution
Iran-Iraq war
Kuwait invasion
Iraq war
Libyan civil war
Sanctions on Iran
Oct 1973 – Mar 1974
Nov 1978 – Apr 1979
Oct 1980 – Jan 1981
Aug 1990 – Jan 1991
Mar – Dec 2003
Nov 2011 – Oct 2012
Conflict-driven oil supply reductions in historical context
mb/d
Source: International Energy Agency and World Bank
Feb – Oct 2011
26

27. 49%
0%
20%
40%
60%
80%
100%
1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09 2010-15 2017
Non-OPEC oil producers that agreed to the 2017 cuts
OPEC oil producers
OPEC’s role in the global oil market
Source: BP Statistical Review, International Energy Agency, and World Bank.
Notes: Columns denote 5-year averages, except the last which refers to 2017.
Shares of global oil production
OPEC today
 POWER: It is less powerful compared to
the 1970s. It asked for “assistance”
from key non-OPEC producers to make
the cuts effective.
 COHERENCE: It appears to be less
coherent compared to the past because
of: (i) political fractions within and (ii)
some members cannot “afford” supply
cuts.
 COMPETITION: Commodity agreements
have a poor record. They are successful
initially, but non-members gain market
share and eventually become efficient
suppliers. A case in point is the U.S.
shale oil industry, now acting as a
counterweight to OPEC. A historical
example is the International Coffee
Agreement.
 SUBSTITUTION: Agreement-induced
supply cuts make substitute (natural or
synthetic) products more competitive.
A telling example is the International
Tin Agreement whose supply cuts made
aluminum competitive.
27

28. US oil production exceeded its 1970 record of 10 mb/d
Source: U.S. Energy Information Administration
3.0
5.0
7.0
9.0
11.0
Jan-70 Jan-74 Jan-78 Jan-82 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-14 Jan-18
Thousands
Mb/d
U.S. shale
boom
28

29. China dominates metal consumption
Source: World Bank and World Bureau of Metal Statistics
Notes: Last observation is August 2018.
0
1
2
3
4
5
6
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
mmt
Rest of the world
China
29

30. 2.4
21.4
11.3
22.6
5.7
8.6
24.8
3.7
12.0
18.7
22.2
21.8
50.4
49.4
50.5
12.5
- 15 30 45 60
GDP
Population
Edible oils
Grains
Base metals
Iron ore
Coal
Crude oil
Share of world total (percent)
2014-16
1990-92
Could India become the next China?
Source: World Bank, BP Statistical Review of World Energy, World Bureau of Metals Statistics, U.S. Department of Agriculture
1.2
16.5
9.3
9.9
1.8
1.9
5.2
1.9
3.0
17.8
13.5
9.7
3.0
5.4
10.5
4.4
- 15 30 45 60
GDP
Population
Edible oils
Grains
Base metals
Iron ore
Coal
Crude oil
Share of world total (percent)
2014-16
1990-92
China India
30

31. Stock-to-use ratios of key grains have recovered
0.10
0.15
0.20
0.25
0.30
0.35
0.40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Maize Rice Wheat
Source: U.S. Department of Agriculture
Notes: Update based on the U.S. Department of Agriculture November 2018 data release.
Ratio
31

32. 32

33. 33

34. 34