Translation from Arabic (albayan newspaper)

According to a number of experts gathered during the «Global Commodity Outlook Conference IV» in Dubai, February 12, the Arab region has succeeded in coping with economic difficulties.

Dr. Noazisc Mirza, associate professor at the Department of Financial Studies, SP Jain School of Global Management, has confirmed that the region's economies were able to cope with the difficulties of the global economy. Though UAE and Bahrain have succeeded in achieving stability in their balance sheet, Saudi Arabia may face some challenges. The value-added tax, to be introduced  by the United Arab Emirates and other Gulf states in January 2018, will help drive growth in the short term but it is not a source of additional reliable income in the long run.

Mirza stressed that governments need to diversify their sources of income and spend more on infrastructure projects.

These declarations came during a meeting of commodities experts from all over the world at the « Global Commodity Outlook Conference IV» hosted by «Richcomm Global Services» and «Dubai Multi Commodities Centre» in cooperation with « Dubai Gold & Commodities Exchange (DGCX) » and «Thomson Reuters».

The conference was held under the title «Changing the style», and attracted more than 400 people from trade experts and representatives of regulatory bodies and government officials, to discuss the main motivations and barriers in the global commodity market.

Keeping pace with change

Omar Khan, Foreign Office director at Dubai Chamber said; “Dubai as a city is keen on cooperation with its partners, including special communities, to consolidate its position and keep up with the changes in difficult times. It’s main objective is to not only avoid losses, but to achieve gains in the appropriate time and place.

Effects

Sanjeev Dutta, director of the Tea Center and platform Tradeflow in «Dubai Multi Commodities Centre», stated that; “global markets in 2017 are slow in economic growth, and the results of unstable geopolitical conditions and changing regulatory environments are seeing volatile effects. It is up to us now as an industry, to meet these challenges by wisely dealing with them. We need to know how to benefit from our collective expertise so that we can create opportunities. It is our responsibility to play a leadership role in finding the best ways to move forward in opening the door to new opportunities, to thereby enhance confidence in the markets.”

Gaurang Desai, CEO of the Dubai Gold and Commodities Exchange added; “This annual conference on goods is one of the ideas of the company «Richcomm», the strategic partner of the Dubai Gold and Commodities Exchange from 10 years ago. We are firmly convinced that this event represents an excellent platform to promote and deepen communication and meaningful discussions between traders, investors and policy makers, as well as providing important insights and expectations about the performance of the commodities sector and the overall economy during the current year”.

Performance

He further articulated; “We have noted how the commodity sector recorded during the past year has been the best performance among the various asset classes, thanks to the overwhelming participation of international investors to outperform the performance of other more common asset classes, such as stocks.”

The importance of the global commodity market is therefore indisputable, hence the importance of this conference, which included very useful discussion sessions. They helped major players in the market by providing them with the best previsions of the market, especially in the current context of continued economic instability in the world.

On the other hand, Paresh L. Kotecha, General Manager of «Richcomm Global Services» announced that “on the back of Donald Trump’s election as the president of the United States, this year is full of challenges. The global commodity markets are expected to see an unprecedented volatility. The collapse of trade agreements ranging from «the Free Trade Agreement of North America» (NAFTA) through to «partnership agreement across the Pacific» and even the European Union, as well as high economic level of inflation, and low interest rates, a strong dollar, and the expenses of infrastructure, are all of which foreshadows significant tensions between the countries concerned.

Sessions
The conference included the organization of five panel discussions dealing with the outlook for the overall economy, including; energy and agriculture sectors as well as basic and precious metals, in addition to the role of digital technology transactions (blockchain) in the commodities market.

Macroeconomic forecasts

During the panel discussion, Eric Norland, «CMI» Group, highlighted that the global economy is currently in transition, in which markets witnessed a state of optimism since the announcement of Trump’s victory in the American presidential elections in November 2016, as the stock and commodity prices rose until mid-January. But the situation changed when Trump started to effectively exercise his functions. Market indices fell as doubts appeared about the applicability of Trump's agenda on the ground. However ideological differences and his position on specific issues, are two main influences that would make Trump’s mission more difficult than what he thought in the beginning.

Energy sector

Robin Mills, CEO of «moon energy», recalled the historical agreement reached by «OPEC», in relation to the recently announced cost-cutting; “With respect to the «OPEC» agreement, we see that compliance is good at this stage, but the difficulty will increase when the agreement, which lasts for six months, will approach its end. Markets have recovered quickly, while banks have left the door open to take advantage of the available opportunities. Currently the focus is mainly on the Permian basin region in the state of Texas. In the case of high oil prices and the return of shale oil markets again, there will be high ascending limited in overall prices.”

Mustafa Ansari, an analyst in energy research at the Arab Petroleum Investments Corporation (APICORP), said “One of the main goals behind the willing «OPEC» members to cut production, is to reduce oil inventory size, and thus rein in turn oil’s future prices, which will deter shale oil producers from entering the markets again, because of their inability to hedge against future supplies. The geopolitical factor will have a greater impact at time being, especially with regard to the interruption of supplies. In case of failure of the «OPEC» to apply an additional reduction in production after the period of six months, prices may decline slightly.”

The agricultural sector

During the panel discussion on the agricultural sector, James Wilde, president of the company «Louis Dreyfus Commodities» for the Middle East and North Africa, on the soybean market, argued “there is gap in the United States between soybean producers and the US Department of Agriculture, and we expect that exports will fall as a result of the pressure on prices”. Adding to his point of view about Trump's policy and its impact on the agricultural sector, he said: “the fate of the North American Free trade Agreement (NAFTA) and the idea of ​​taxing Mexico’s exports, will be the major challenges, especially since Mexico is a huge market for the United States. The willing of Trump to apply a protectionist economic policy will affect negatively on the US farmers and the agricultural sector, as it would cause an increase in prices, especially if China would apply its own ban plan.

It is possible that the South American countries will contribute to compensate a specific part of the production volume, and thus protectionist policy will be the biggest enemy of trade flows in the United States.”

Basic and precious metals

Two panels discussed a wide range of important issues, including Trump’s impact on infrastructure spending plans. They also raised concerns for its impact on prices and the balance of supply and demand; as well as the classification of gold as a metal or currency, in light of the success of the digital currency «Bitcoin».

The panels included a major talk on the base metal, which is expected to rise, starting from the fourth quarter of 2016, with continued improvement in investor sentiments. Analysts believe that the continued expansion of the Chinese economy, coupled with the desire of President Trump to increase civil spending in all parts of the United States, may have the greatest impact on base metals. However, there are still significant risks due to the growing political tensions and weak private investment, amongst other factors as well.

Optimism

The speakers expressed their optimism during the two discussion sessions about the precious metal's performance in 2017. Currently, the market is witnessing a positive impact of Trump’s victory, where prices rose between 4-10% since the beginning of January. However, there are still high levels of uncertainty at the global macroeconomic level due to political instability and the major upcoming elections in Europe, which is expected to spur higher gold prices, after falling to its lowest level in 12 months in December 2016.

Source: translated from Arabic www.albayan.ae.