JAKARTA: Indonesia is unlikely to enjoy a 2022-level commodity boom despite China’s recovering growth and geopolitical tensions.

Ahmad Zuhdi Dwi Kusuma, an industry and area analyst at state-owned Bank Mandiri, did not rule out the possibility of a potential widespread commodity price hike as long as geopolitical turmoil, especially the Iran-Israel conflict, continued to escalate.

But a 2022-level commodity boom was unlikely as price hikes were limited to just a few types of commodities like crude oil and gold, Zuhdi said.

“It’s different from 2022, when all commodities rose significantly, driven by the lifting of mobility restrictions and economic recovery,” he told The Jakarta Post.

Gold prices rose to an all-time high above US$2,400 per ounce on April 12 and are up around 13% since the start of the year amid growing geopolitical tensions and strong purchases by central banks.

Josua Pardede, chief economist at publicly listed lender Bank Permata, said he expects the Iran-Israel conflict to send crude oil prices skyrocketing considering that Iran, one of the world’s largest oil producers, produces around 3.9 million barrels of oil per day and exports 1.29 million barrels of oil per day, as per 2023 data.

Josua said he expected gold prices to rally further as investors look for safe-haven assets amid increasing uncertainty in the global economy and financial markets spurred by the escalating conflict in the Middle East.

“War will not only disrupt production but also distribution channels. This situation is expected to trigger a spike in oil prices.

“The price of Brent crude oil reached around US$90 per barrel,” he said, and that coal and crude palm oil (CPO) prices remained unaffected.

As of April 12, the CPO price was at US$1,060 per tonne, up 13.4% year-to-date (y-t-d), as the dry season caused by the ongoing El Nino weather phenomenon drove a seasonal production decline, he said.

The World Bank’s commodity price data released on April 2 showed that the average price of world CPO reached US$943 per tonne in March 2024, up from the 2023 average of US$886.

The coal price, on the other hand, was recorded at US$129.3 per tonne on April 12, marking an 11.7% decline y-t-d that has been attributed to stagnant or weakening imports from China, the world’s largest coal consumer.

China’s economy grew faster than expected in the first quarter, Reuters reported, but a raft of March indicators released alongside the gross domestic product (GDP) data, including property investment, retail sales and industrial output, showed that demand at home remained frail.

China’s GDP grew 5.3% in the first quarter from a year earlier, data released by the National Bureau of Statistics showed, handily beating analysts’ expectations in a Reuters poll for a 4.6% increase and a tad faster than the 5.2% growth in the previous three months.

“The sentiment about China’s economic recovery is expected to push commodity prices higher, including oil, CPO and metals, but they still would not reach the 2022 level,” Bank Mandiri’s Zuhdi said.

He went on to say that the sentiment was also expected to affect coal prices to some extent, but noted that the potential increase in demand from China may not be able to directly offset a potentially significant increase in coal supply.

- ANN