The prices of commodities are up in the global market and their volatility – both oil and non-oil products – will continue to remain while consumers are concerned worldwide this year.
Bangladesh's consumers have already started feeling the heat of global price hike, prompting importers to book for higher amounts and the government to fix the maximum retail prices of common kitchen items.
Food prices are expected to rise in 2021 by the fastest rate in a decade, driven by a surge in the prices of grains, oilseeds and sugar, according to a forecast of the Economist Intelligence Unit, a research and analysis division of The Economist Group.
Overall commodity prices will continue its upward trend throughout 2021 before starting to ease in 2022, the analyst team said in their forecast based on data till 15 February.
Fuel oil prices, which rose to $60 a barrel from as low as $16 early last year, will fall next year while the price of oilseeds will continue to rally for two more years, said the world leader in global business intelligence in its latest market forecast for five years.
Commodity prices surged in late 2020 and early 2021 mostly due to rapid economic recovery in China.
A surge in demand for commodities in China – for manufacturing, construction and other industrial activities – fuelled prices of industrial raw materials such as steel, aluminum and copper.
Vaccine enthusiasm and speculation of global economic recovery in 2021 also influenced the price hike of products across the board, including industrial goods, crude oil and food staples.
The food, feedstuff and beverage price index rebounded in 2020 from its losses in 2019 in part as food demand remained resilient even in the face of the pandemic.
"In 2021, we expect food, feedstuff and beverage price index to rise by the fastest rate in a decade and forecast more modest growth in their prices in 2022," The Economic Intelligence Unit said, hoping that overall demand will ease back from its surge in 2021.
"We expect most commodity prices to ease back from their January-February peaks in the coming months, but an overall outlook for prices is positive for 2021-22 – particularly for some metals, such as copper."
Crude oil surpassed $60/barrel for the first time since January 2020 and it suddenly jumped to $65 on Thursday after bad weather in Texas caused significant production loss in the US.
The research and analysis division of The Economist Group expects oil market volatility to ease slightly in 2021.
Commodity price hike during Ramadan is commonplace in Bangladesh and global volatility has made the heat palpable much earlier this year.
Prices of essential food items such as rice and edible oil have been rising over the last two months. Sugar, grams, lentils and grass-peas – items that see a surge in demand during Ramadan – have already become pricier.
With Ramadan still months away, importers are in a hurry to build their stocks, sensing a further rise in price in the international market.
Mohammad Alamgir, a leading commodity importer based in port city Chattogram, told The Business Standard that global price hike is impacting local price.
The government has taken preparations to offset some impact of price hike on consumers. The National Price Monitoring and Determination Committee has already started working to fix local selling prices and pricing systems of 17 essential products.
The products include soybean oil, palm oil, sugar, onion, garlic, ginger, pulses, gram, kitchen salt, etc.
The committee was constituted as per the Essential Products Marketing and Distributor Recruitment Order 2011.
The national committee will inspect the activities of the distributors on the spot every month and review the nature of the price movement of each essential product.
At the same time, it will directly and indirectly monitor and supervise all activities from production, refining and import to retailing and will advise the government if there is any problem in the product supply chain.
The Ministry of Commerce has already requested the National Board of Revenue to fix the VAT levied on crude soybean and palm oil imports at a more reasonable rate considering the consumer's interest in the context of rising soybean oil prices in the international market.
Due to instability in the prices of crude soybean and palm oil in the international market, the national committee will meet every month to take decision in the interest of the country's refining mills and the general public.
Consumers Association of Bangladesh president Golam Rahman told TBS: "It is very natural that if the price of oil and sugar rises in the international market, it will have an impact on the local market."
However, if the government wants, it can reduce the impact on consumers, and for that, import tax can be reduced, he said.
Besides, the government has to work to keep the supply chain normal so none can make an extra profit at the local level on the pretext of price hike on the international market, suggested Golam Rahman.
Tariff Commission Chairman Munshi Shahabuddin Ahmed said, "Letters have been sent to all district commissioners to appoint distributors across the country as per the Essential Products Marketing and Distributor Recruitment Order, 2011."
According to the law, DCs will form a district committee with a chairman, he said, adding that the committee would regularly collect information on the stock and supply situation in each district and send it to the national committee.
AHM Safiquzzaman, additional secretary at the Import and Domestic Trade Division at the commerce ministry, said, "To keep the market situation stable, we are meeting with traders to keep the supply chain normal, trying to find out where the problems are."
On the other hand, preparations are being made to sell a double quantity of products through TCB, he added.
The industrial raw material index of The Economist Intelligence Unit had recorded a dismal start in 2020 as the coronavirus pandemic forced factory closures and curbed consumer demand.
Again, the growing demand from China in the second half of 2020 lifted prices of several industrial metals including copper, aluminum, zinc and tin.
"Although the prices of industrial raw materials are forecast to grow strongly in year-on-year terms in 2021, we expect the prices of most metals to ease back from their January-February peaks," according to the analysis
It forecasts that in 2022 the prices of some metals and industrial materials will ease back as the pace of the economic rebound levels off.
Others, such as copper, will continue to rise, supported by a surge in investment into electric vehicles and other green industries.
A report in The Economist suggests that prices of battery metals – cobalt, lithium, copper, nickel – were also spurred by China's electric vehicle industry.
The industries using imported materials are not apprehensive of any immediate impact as they have stocks in hand imported previously.
When contacted, Mohammad Mohsin, vice-chairman of PHP Family – one of the leading producers of corrugated iron sheets, told The Business Standard, "The price hike of zinc, corrugated iron sheets and aluminium on the international market will not impact the local market immediately."
"It is not ethical for us to increase prices now," Mohsin said.
Fuel price volatility and production shortfall caused by Texas weather will not have any immediate impact on supplies and price of fuel oils in Bangladesh, according to officials concerned.
Bangladesh Petroleum Corporation Director Syed Mehdi Hasan said: "Our import cost will go up though supply will not be affected due to our long-term contracts with the Middle East."
The report is written with inputs from Shawkat Ali, Eyamin Sajid and Mohsin Bhuiyan in Dhaka and Shamsuddin Illius in Chattogram