G

lobal commodity prices are expected to tumble this year in a way unseen since the 1900s, heralding bad news for major commodity exporting countries like Indonesia.

The World Bank’s 2020 commodity outlook report projects a 40.3 percent decline in energy commodity prices from last year’s average. This is accompanied by drops in industrial metal (13.2 percent) and agricultural prices (1.1 percent).

Such observations are not new, but the report, released on April 23, provides a quantitative measure of COVID-19’s impact on commodity markets. The World Bank describes the impact as “a shock like no other” since the 1900s, including the 1980 global recession, the Sept. 11, 2001 terrorist attacks and the 2014 Ebola outbreak in Africa.

“This will add pressure for Indonesia,” economist Piter Abdullah of the Perbanas Institute told The Jakarta Post on Friday, “because falling commodity prices will strain exports, especially because Indonesia’s main products are commodities.”

Statistics Indonesia data shows that Indonesia’s top two exports last year were coal and palm oil. The two commodities alone contributed a quarter of the country’s total export value: US$154.9 billion in 2019.

The government added mining and agriculture to the list of “essential” industries exempt from mandatory workplace closures under the Health Ministry’s large-scale social restrictions (PSBB).

The World Bank writes that the sharp decline in energy prices was led by “the collapse” of oil prices followed by “sizable declines” in gas consumption and “smaller declines” in coal consumption.

Crude oil prices took the single hardest blow this year, with a double hit from falling demand and excess supply. The United States oil benchmark oil price West Texas Intermediate (WTI) fell to negative $37.63 per barrel on April 20 — a price never before seen in the industry’s history.

“Today’s first ever negative oil price displaces the previous low of $0.10 per barrel in 1931,” said Jim Burkhard, vice president and head of oil markets at consultancy IHS Markit.

Oil prices were mainly affected by the drop in transportation as cities around the world, including those in Indonesia, implemented partial lockdowns to contain the spread of COVID-19.

Indonesia’s gas consumption was affected by industry shutdowns in the country’s industrial heartland of Java, which also has the most quarantined cities.

The World Bank says the decline in metal prices would be led by zinc (25.5 percent lower than last year), followed by tin (down 15.9 percent), lead (down 14.9 percent), copper (down 13.5 percent), aluminum (down 10.8 percent) and iron ore (down 9.4 percent).

Gold prices are expected to be 14.9 percent higher this year, the strongest rise among fellow precious metals silver and platinum, driven by safe-haven buying.Indonesia is among the top 10 global producers of tin, gold and bauxite, according to the latest US Geological Survey. Bauxite is the raw form of aluminum.