• An expected increase in mill-use and continuing distribution of vaccines are offering some hope for a recovery
• However, there are multiple warning signs that could derail the progress:
– Vaccine deployment varies dramatically by country
– Pent up demand for services may impact demand for goods as economies reopen
– Tightening supplies could push prices higher
A continuing escalation of trade tensions between some of the world’s top producers and consumers
Tighter Supplies Add Uncertainty to Hopes for RecoveryAlthough several recent developments are providing hope for a post-pandemic recovery, other factors add uncertainty to those expectations. On the positive side, mill use is expected to increase by 8% in the 2020/21 season and vaccines have slowly been making their way around the globe. However, vaccine deployment varies widely from one region to the next, with many countries having provided no vaccinations at all. In addition, consumer spending on goods has improved more than it has for services to date, so once people can return to travelling and going out for dinner or a movie, a potential shift in spending could reduce demand for durable goods. Furthermore, while the global consumption estimate has increased from the previous month, the global production estimate has decreased, so lower stock levels could provide future support for prices, which set a season high at the end of February.
Finally, uncertainty abounds regarding the relationships between major buyers and sellers. There has been no progress made since the Phase One trade agreement between the USA and China went into effect last year with tensions also between China and Australia. The Secretariat’s current price projection for the year-end 2020/21 average of the A Index is 78.5 cents per pound this month
