Bloomberg citing UBS AG reported that commodities will be under pressure for as long as 18 months, with lower prices expected in 2009 for all bar four of the 28 raw materials it forecasts following a collapse in credit for industry.
Mr Dan Brebner a UBS analyst wrote in its quarterly report that “Credit is now incredibly scarce and capital is being hoarded by commercial lenders. We find it difficult to envision that the contraction in credit availability and associated demand correction will be a short lived process.""
Mr Brebner also said that “The demand environment has deteriorated at an unprecedented rate as producers and consumers of materials and energy struggle to find financing. International trade appears to be freezing up."" He added that a reversal of the decline will most likely be a drawn out process of unwinding the credit excesses which have been effectively building for over 20 years.
Commodities are headed for their worst annual drop in more than a quarter century. The US has fallen into a recession, followed by the UK, Japan, Germany and the 15 European nations that use the euro. A slump in consumption of steel, a benchmark for industrial demand of raw materials is feeding through to markets including iron ore and shipping.