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World Bank: Commodity prices likely to rise further in 2018

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Oil prices are forecast to rise to $56 a barrel in 2018 from $53 this year as a result of steadily growing demand, agreed production cuts among oil exporters and stabilizing U.S. shale oil production, while the surge in metals prices is expected to level off next year, the World Bank said on Thursday.

Prices for energy commodities – which include oil, natural gas, and coal — are forecast to climb 4 percent in 2018 after a 28 percent leap this year, the World Bank said in its October Commodity Markets Outlook. The metals index is expected to stabilize in the coming year, after a 22 percent jump this year as a correction in iron ore prices is offset by increased prices in other base metals. Prices for agricultural commodities, including food commodities and raw materials, are anticipated to recede modestly in 2017 and edge up next year.

“Energy prices are recovering in response to steady demand and falling stocks, but much depends on whether oil producers seek to extend production cuts,” said John Baffes, Senior Economist and lead author of the Commodity Markets Outlook. “Developments in China will play an important role in the price trajectory for metals.”

The oil price forecast is a small downward revision from the April outlook and is subject to risks. Supplies from producers such as Libya, Nigeria, and Venezuela could be volatile. Members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers could agree to cut production further, maintaining upward pressure on prices.

However, failure to renew the agreement could drive prices down, as could increased production from the U.S. shale oil industry. Natural gas prices are expected to rise 3 percent in 2018, while coal prices are seen retreating following a climb of nearly 30 percent in 2017. China’s environmental policies are anticipated to be a key factor determining future trends in coal markets.

Iron ore prices are forecast to tumble 10 percent in the coming year but tight supply should push up prices for base metals including lead, nickel and zinc.  Downside risks to the forecast include slower-than-anticipated demand from China, or an easing of production restrictions on China’s heavy industries.

Gold prices are anticipated to ease next year on expectations of higher U.S. interest rates.

Agriculture prices are expected to edge up in 2018 due to reduced supplies, with grain and oils and meals prices rising marginally. Agricultural commodities markets are well-supplied and the stocks-to-use ratios (a measure of how well supplied markets are) of some grains are forecast to be at multi-year highs.

However, favorable weather patterns, well-supplied global food markets, and relatively low world prices do not necessarily imply ample food availability everywhere. Drought conditions that are by some accounts the worst in 60 years, have caused crops failures in parts of Ethiopia, Somalia and Kenya and led to severe food shortages. Conflicts in South Sudan, Yemen and Nigeria have driven millions of people from their homes and left millions more in need of emergency food.

The World Bank’s Commodity Markets Outlook provides detailed market analysis for major commodity groups, including energy, metals, agriculture, precious metals, and fertilizers. The report includes price forecasts to 2030 for more than 45 commodities. It also provides historical price data and supply, demand, and trade balances for most commodities.

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EU Politics

PES Europe Ministers call for a European Budget that rises to the challenge

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President of FEPS Maria João Rodrigues MEP, First Vice President of the European Commission Frans Timmermans, and Germans Minister of State for Europe Michael Roth photo: PES

Europe needs ambitious short- and long-term planning, the Ministers of European Affairs from the PES agreed today during their discussion of the European budget for 2021-2027.

The chair of the network, German Minister for Europe Michael Roth, called for a European budget that promotes social wellbeing, innovation and sustainability across Europe.

Roth said:“The fundamental role of the European budget is to ensure cohesion, convergence and growth. It is the main tool Europe has to invest in the future, to bring countries closer together, and to make sure our children and grandchildren have a good life. When negotiating the European Budget both the short and long term must be kept in mind. Our ambition today, shapes the Europe of tomorrow. I want a bright Europe for tomorrow.”

The Ministers continued their discussion on the state of the rule of law in Europe.

Roth added:“Democracy and the rule of law cannot be interpreted freely. All Member States have to abide to the same clear set of rules. We will continue keeping a close eye on the issue. And we will continue supporting the great work that the EU Commission’s First Vice President Frans Timmermans is carrying out.”

The meeting was attended by:

  • Michael Roth, Minister of State for Europe, Chair, Germany
  • Helena Dalli, Minister for European Affairs and Equality, Malta
  • Ana Paula Zacarias, Secretary of State for European Affairs, Portugal
  • Hans Dahlgren, Minister for EU Affairs, Sweden
  • Frans Timmermans, First Vice President of the European Commission, European Commission
  • George Katrougalos, Foreign Affairs Ministers, Greece (observer)
  • Maria Joao Rodrigues, Vice President of the S&D Group, chair of the PES FEN Network, European Parliament
  • Javier Moreno, Secretary General of the S&D Group, European Parliament
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EU Politics

Migration and asylum: EU funds to promote integration and protect borders

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MEPs backed on Tuesday increasing the EU budget for migration and asylum policies and to reinforce borders.

The Civil Liberties Committee endorsed the renewed Asylum, Migration and Integration Fund (AMIF), the 2021-2027 budget of which will increase up to €9.2 billion (€10.41 billion in current prices, 51% more than in the previous financial framework). It also backed the creation of a new Integrated Border Management Fund (IBMF) and agreed to allocate €7.1 billion (€8 billion in current prices) to it.

The AMIF should contribute to strengthen the common asylum policy, develop legal migration, in line with the member states’ economic and social needs, contribute to countering irregular migration and ensure effective, safe and dignified return, readmission and reintegration in non-EU countries.

But it should also ensure “solidarity and fair sharing of responsibility between the member states, in particular towards those most affected by migration challenges, including through practical cooperation”, MEPs state.

MEPs also want to make sure that funds can be allocated to local and regional authorities, and to international and non‑governmental organisations, working in the field of asylum and migration.

Integrated Border Management Fund to secure EU’s external borders

IBMF will provide funding to build and enhance member states’ capacities in border management and visa policy. The funding dedicated to member states (60 % of the total envelope) will reflect their needs and take into account additional pressures. Furthermore, a new EU thematic facility (40% of the total envelope) will ensure flexibility to channel emergency funding to member states and EU-level projects when urgent action is needed.

MEPs also added safeguards to ensure that actions and measures funded through the Instrument comply with the EU’s fundamental rights obligations, in particular with the principles of non-discrimination and non-refoulement.

Both funds will operate in full synergy. They will also work closely with the reinforced Internal Security Fund (ISF) focusing on tackling terrorism, organised crime and cybercrime.

Next steps

The draft proposal on the renewed AMIF passed with 31 votes to 23 and 1 abstention. The new IBMF was backed by 41 MEPs, 9 voted against and 2 abstained. The full House will have to confirm its position in the first March plenary, ahead of the negotiations with the Council of the EU.

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EU Politics

Trade negotiations with US can start under certain conditions

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The Trade Committee on Tuesday endorsed the mandate to start limited EU-US trade talks, but set conditions on the conclusion of a deal.

Starting talks is in the interest of European citizens and companies, as it would ease current tensions in EU-US trade relations, brought about by the US administration’s actions, said International Trade Committee MEPs in the report adopted by 21 votes to 17, with one abstention.

They nevertheless note that the conclusion of a trade agreement based on the current negotiating mandate can only be successful if the following conditions are met:

  • the US must lift tariffs on aluminium and steel;
  • a comprehensive consultation process with civil society and a sustainability impact assessment are carried out;
  • the EU insists on including cars and car tariffs in the talks, and on excluding agriculture;
  • talks will be suspended if the US levies another tariff;
  • more clarity on how rules of origin (which lock in how much of the value of a product must be created locally for trade preferences) are handled during the talks.

Background

The European Commission submitted its draft negotiating mandates to the Council for approval on 18 January. The mandates will authorise the Commission to negotiate with the US on eliminating tariffs on industrial goods and on harmonising conformity assessment.

Next steps

Parliament will vote on its stance on the mandates in March. EU Council of Ministers is expected to adopt the draft negotiating mandates in the same month. The Commission will start negotiations on the basis of the final mandate.

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