Table Global Trade Dynamics (% vs. the preceding year) 2005 2006 2007 2008 2009 20101 Global trade of goods and services 107.5 109.2 107.2 102.8 87.7 105.8 106.Import Industrially advanced economies 106.1 107.5 104.5 100.5 87.8 105.5 105.Developing economies and emerging markets 112.1 114.7 114.5 108.9 86.5 106.5 107.Export Industrially advanced economies 105.8 108.4 105.9 101.8 87.9 105.9 105.Developing economies and emerging markets 111.1 111.0 109.6 104.4 88.3 105.4 107. Forecast Source: http://www.imf.org/external/russian/pubs/ft/weo/2010/update/01/pdf/0110r.pdf 3.6.2. Russian Foreign Trade Outlook: Market Prices Trends for Key Items of Russian Export The global crisis has led to sharp variations of global prices for the key items of Russian export. At the same time, following the abrupt slide of late 2008 – early 2009 the global markets price dynamics for these commodities started to improve gradually. Oil prices started their rise on a global scale. The average Brent price in December 2009 was reported to gain 79% versus December 2008. The most vigorous growth pf prices fell on the spring months – from mid-February to mid-June, when the level of 70 USD/bbl was reached. During the summer and early fall the prices were fluctuating around 67 USD/bbl, and at the end of the year the new level of 75 USD/bbl was observed.
2009 oil prices growth was driven by the expectations of economic recovery after financial and economic crisis. Information about commencing recovery of some leading economies and about sustainable economic growth in China underpinned the increase in demand for oil world-wide. The USA currency dynamics had its effect on the oil prices as well: weakening of the US Dollar versus the leading global currencies resulted in the dollar-nominated commodities growing more expensive, as well as in the venture capitals partially overflowing from the currency market to the commodities markets. On top of that, OPEC countries were trying to observe the oil production quotas established back in 2008.
The average global price for Russian crude (Urals) in 2009 fell to the lowest level for the preceding four years and made 60.94 USD/bbl being 35.3% below the 2008 level (94.USD/bbl). The highest price for Urals in 2009 was registered on November 18 – 78.USD/bbl). The lowest price for 2009 was registered as of January 2– 39.39 USD/bbl. Thus, the Urals price practically doubled during the year.
Similar trends were observed at the petroleum products markets, though the growth rates were different by types of products. Thus, in the 3rd quarter of 2009 versus the 2nd quarter fuel oil demonstrated the most dramatic growth by 25%, diesel fuel price grew by 15%, and automotive gasoline – by 11%. As per the overall results of 2009, both crude and oil products Section The Real Sector prices were 2 times lower compared to the preceding year. Diesel fuel prices showed the most obvious decline in 2009 – by 52%, automotive gasoline – by 37.8%, and fuel oil – by 40%.
The decrease of natural gas prices at the European market started in late 2008 and continued until August 2009. In August the Western European market showed first signs of growing prices, however, the growth rates were very low (and in the US market natural gas prices continued to decline until September 2009). In the 3rd quarter of 2009 natural gas prices in Europe were 15.6% lower compared to the preceding quarter (during 1st and the 2nd quarters the decline was respectively by 24.2% and 31.5%), and they were 52.8% lower versus the 3rd quarter of 2008. It was not until the 4th quarter of 2009 when natural gas prices demonstrated some growth – 13% versus the preceding quarter. As per the overall results of 2009, natural gas prices in Europe were 30.8% lower versus 2008 prices.
In September-December 2008 abrupt decline of metal products prices was observed in the global markets making 40–50% on the average. In early 2009 this downward trend continued, and only starting from June-July 2009 some positive dynamics of global prices for metal products and raw materials was witnessed. Thus, by the end of 2009 global prices remained at the same low level.
For example, the scrap steel price after reaching its peak of 700 USD/t in June 2008 fell down and made 300 USD/t in December 2009 (43% decline). The prices for hot-rolled coil fell down from 1,200 USD/t in July 2008 and by December 2009 made 560 USD/t (47% decline).
Table Average Annual Global Prices 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Oil (Brent), USD/bbl 15.9 28.19 24.843 25.022 28.83 37.4 54.38 65.15 72.32 99.53 62.Natural gas, European 2.1876 4.3442 3.9764 3.23 3.86 4.4 6.6 9.03 8.93 12.61 8.market, USD/ 1 mln BTU Gasoline, $/gallon 0.529 0.887 0.7922 0.755 0.891 1.197 1.508 1.81 2.06 2.703 1.Copper, $/t 1539.9 1863.9 1613.6 1592.9 1785.6 2808.2 3606 6851 7119 6970 Aluminum, $/t 1318.0 1550.0 1444.7 1350.7 1424.7 1693.2 1871 2619 2639 2576 Nickel, $/t 5239.5 8624.0 5966.0 6175.1 9580.8 13757 14692 22038 37230 21108 Source: calculated as per data by London Metal Exchange (London, UK), Intercontinental Crude Exchange (ICE, London), International Monetary Fund (IMF).
The financial crisis evolution in the fall of 2008 led to a sharp decline of major consumers’ demand for basic metals. In its turn, it provoked a major fall in prices despite some artificial production-limiting programs. However, signs of global economic recovery facilitated global advance in prices at the global non-ferrous metal market. YTD prices have gone up 1.5 times for nickel and aluminum, and more than 2 times for copper.
Still global non-ferrous metals prices remained at the low lever throughout 2009 as per the LME spot quotations making as of the end of December: 2,182 USD/t or 71.1% vs. July price (historic peak) for aluminum, 6,970 USD/t or 82.6% vs. March 2008 price for copper, 17,003 USD/t or 54.3% vs. March 2008 price for Nickel.
Global macroeconomics and the overall commodity market environment also had their impact on the price dynamics for other commodities exported from Russia. In 2009 the prices for mineral fertilizers, chemical feedstock and some other commodities were 1/3 below the level of 2008.
The global markets price dynamics for food products and agricultural raw materials were multidirectional throughout 2009. Sugar prices were growing rapidly, meat and vegetable oil RUSSIAN ECONOMY IN trends and outlooks prices were mainly growing, while as grain prices were declining. Reduction of global wheat production is expected in 2009/2010 farming year, however, the level of wheat stock in major wheat-producing countries (Argentine, Australia, EU, Kazakhstan, Canada, Russia, the USA and Ukraine) will remain high. The key reason is global demand decline versus its record level in 2008/2009 farming year.
Table Average Annual Global Prices Dynamics for Selected Agricultural Goods 2006 2007 2008 I quarter II quarter III quarter IV quarter Wheat, USD/t Canadian, CWRS 216.8 300.4 454.6 321.9 325.5 271.3 283.American, HRW 192.0 255.2 326.0 231.6 250.3 208.7 205.American, SRW 159.0 238.6 271.5 187.4 195.6 165.2 195.American corn, USD/t 122.9 163.0 223.1 166.9 176.0 151.3 167.Barley, USD/t 117.0 172.0 200.5 116.2 129.4 122.0 145.Soya beans, USD/t 268.4 384.0 523.0 393.7 460.3 455.3 439.Soya bean oil, USD/t 598.6 881.0 1,258 754.7 862.7 857.7 920.Thai rice, USD/t 304.9 326.4 650.1 586.4 552.4 540.1 542.Crude sugar in the USA, import 48.76 45.77 46.86 43.8 47.9 57.3 70.price, CIF New York, c/kilo Source: World Bank.
The main reason for sugar prices surge was crop failure in Brazil and India – the major sugar producers in the world. It resulted in dramatic reduction of sugar stock across the globe, and India becoming the net-importer. Meanwhile the estimated export of sugar out of Brazil is expected to decrease versus the previous year, while as it domestic demand for ethanol will be growing. Eventually, the global sugar prices rocketed up to the highest level during the last 29 years.
3.6.3. Key Russian Foreign Trade Indicators In 2009 Russian foreign trade indicators (Fig. 2) were forming in the wake of abrupt slide of prices for the key items of Russian export early in the year, volatile international trade outlook and shrinking of domestic demand predominantly affecting the import dynamics. Overall, 2009 Russian foreign trade dynamics was significantly worse compared to 2008 indicators. The accounts balance based foreign trade turnover made 495.8 bn. USD being 35.15% below the YOY value. The “far-abroad” trade turnover shrank by 35.15% down to 423.7 bn.
USD, CIS trade turnover – by 34.5% down to 72.1 bn. USD. Foreign trade turnover imbalance index (export surplus to foreign trade turnover) decreased to 22.6% in 2009 vs. 23.5% in 2008.
However, after an abrupt slide early in the year Russian foreign trade demonstrated some recovery and even growth in 2009. Monthly foreign trade turnover dynamics stayed positive versus the preceding month throughout the whole year due to a certain rise in prices for Russian export items and due to recovery of both domestic and global demand. Thus, the average export prices index for 9 months of 2009 made 62.9%, and during the 4-th quarter of 2009 it amounted to 76.0%, (76.9% in December). Physical export volumes were also growing, the index in the above listed periods making 92.3, 111.9 and 112.7% respectively (Table 4).
Section The Real Sector 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 amount of balance export import Source: Central Bank of the Russian Federation.
Fig. 2. Key Russian Foreign Trade Indicators (mln USD) Table Commodities Export Index January-September 2009, % of Janu- December 2009, % to Decem2009 as % to ary-September 2008 ber Physical vol- Average Average Physical volumes Average prices Physical volumes umes prices prices Total export, 92.3 62.9 112.7 76.9 97.0 66.including: 94.1 61.4 108.2 77.8 98.6 65.“far abroad” countries CIS countries 82.3 72.2 143.6 72.2 87.9 76.Source: the RF Ministry of Economic Development.
Overall the commodities export in 2009 decreased by 35.5% versus 2008 making 303.bn. USD. With that the decrease of export in the 4th quarter of 2008 versus the peak numbers of the preceding quarter made 28.3%; in the 1st quarter of 2009 export decreased by 41.4% versus the preceding quarter. The overall export decline (crisis minimum numbers in the 1st quarter of 2009 compared to the pre-crisis peak in the 3rd quarter of 2008) made 58%. However, the following improvement of the situation resulted in 65% increase of export monetary values in the 4th quarter of 2009 (balance of payments estimate) versus the 1st quarter.
Import demonstrated similar dynamics. Its monetary values showed twofold decline during the 1st quarter of 2009 compared to the 3rd quarter of 2008 (from 82.9 bn. USD down to 38.bn. USD). However, during the next three quarters import was recovering rapidly. It increased by 59% in the 4th quarter versus the crisis minimum level in the 1st quarter of 2009 (preliminary payments balance based estimate). It resulted in 83% of the level of the 4th quarter of 2008 level and in 74% of the pre-crisis maximum of the 3rd quarter of 2008.
RUSSIAN ECONOMY IN trends and outlooks As a result, the trade balance surplus in 2009 made 112.1 bn. USD (vs. 179.7 bn. USD in 2008). Early in the year there was some concern about the trade balance fluctuating around zero level or becoming negative. However due to the rapid export prices growth, recovery of physical export volumes and quite significant decrease of import in physical terms, material trade balance surplus was successfully maintained. At the same time, it’s worth noting: during the 2nd and the 3rd quarters the pace of export monetary values recovery (versus preceding quarters) was outstripping import values recovery pace, but then in the 4th quarter the situation changed: Russian export values grew 15.3% versus the preceding quarter, while as the import values grew by 24%.
Thus, the key outcome of Russian foreign trade development throughout 2009 was maintaining the trade balance surplus. And in neither month it got below the minimal level of 4.bn. USD, which was registered in December 2008.
Russian foreign trade turnover decreased in 2009 in terms of most of its partner countries, except for India, Cuba, Singapore, Philippines, New Zealand and Turkmen Republic (Fig. 3).
In 2009 trade balance deficit was registered in terms of 20 partner countries (in 2008 it was with 23 partner countries), and their share in the overall Russian foreign trade turnover increased from 22.7 to 24.8%. The countries whose contribution in forming this deficit was the most prominent were China (–6171.7 mln USD), Brazil (–2426.7 mln USD), and Germany (– 2520.8 mln USD).
2007 2008 EU APEC CIS others Source: Federal Customs Service of the Russian Federation.
Fig. 3. Geographical Profile of Russian Foreign Trade (bn USD) Section The Real Sector 160,140,120,100,80,60,40,20,0,“Far Abroad” Countries CIS Countries Source: RF Ministry of Economics.
Fig. 4. Terms of Foreign Trade Foreign Trade environment (the ratio of export prices index to import prices index) started to deteriorate in 2008 and significantly worsened in 2009. This was particularly valid for trade with the “far abroad” countries. In July and August of 2009 this environment started to improve, and trade with CIS countries even demonstrated positive dynamics.
Overall, throughout the year the foreign trade environment was unfavorable for Russia due to a deeper slide of export prices versus import prices. Terms of trade index made 67.1 (the base [the respective period of the same year] being 100), while as in 2008 it made 116.0.
3.6.4. Export Profile and Dynamics Fuel-and-energy commodities are still the basis of Russian export despite the fact that their share decreased from 72.6% in 2008 down to 69.5% in 2009 due to the global energy prices slide. The monetary value of such commodities decreased by 38.6% in 2008.
According to the RF Customs, physical volumes of exported crude increased by 1.9% – from 221.6 mln t in 2008 up to 225.9 mln t in 2009. With that the monetary value of crude export from Russia in 2009 decreased by 38.4% versus 2008 and made 93.5 bn. USD, which is related with the crude prices slide at the global market (Table 5).
Physical volumes of petroleum products export in 2009 exceeded the preceding year by 4.5% (120.577 mln t), their monetary value making 46.795 bn. USD versus 78.325 bn. USD in 2008.
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