TOKYO -- The Nikkei Commodity Indexes in November saw their biggest year-on-year declines since the autumn of 2009, when the global economy was still suffering from the collapse of U.S. investment bank Lehman Brothers a year earlier. The sharp downturn is casting a dark shadow over the global economy.
The Nikkei provides two commodity indexes. One tracks wholesale prices of 42 major materials -- including crude oil, metals and foodstuffs -- sensitive to economic trends; the other follows 17.
Monitoring year-on-year changes in the readings allows for better global economic forecasts.
That said, year-on-year falls are not necessarily bad omens. Smaller losses than those of a year earlier, in fact, show economic improvement.
Steelmakers are seen gradually lowering their excess inventory levels, at least in Japan.
The number of cars produced in Japan is expected to rise by 300,000 in both 2016 and 2017, according to an estimate by Nomura Securities. Supported by the weak yen, Japan Inc. is boosting domestic production.
Yet Yuji Matsumoto, an analyst at Nomura Securities, said he cannot be bullish on the outlook for the domestic steel market. The main reason is overseas steel markets have significantly worsened from a year earlier and are showing no signs of recovering.
According to Nomura Securities, hot-rolled coil prices in Japan are $200 per ton higher than China's export prices and remain at their highest level in three years. It takes about two to three months for Japan's export prices to reflect China's export prices, so the downward price pressure on steel for both the domestic and export markets is strong.
Plus, some large steel-making plants began operating in the second half of 2015 and more are on the way next year. Matsumoto said price movements will be slow even if the Asian market turns higher.
The yen's fall against the greenback was supposed to keep steel imports at bay and increase the nation's exports. However, prices for steel and other commodities have been trending down, preventing Japanese exporters from benefiting from the yen's sharp depreciation.
Three-month copper futures briefly traded at around $4,400 per ton on the London Metal Exchange, their lowest point since May 2009.
Growing speculation over a U.S. interest rate hike and worries about emerging economies are causing outflows of money from once-fast-growing countries.
As capital flees, the currencies of Chile and other resource-rich countries are able to buy fewer dollars. The trend is mitigating the negative impact on resource producers' profitability, when measured in terms of their own currencies. This has left many producers hesitant to trim their output.
A strong dollar usually pushes down international commodities prices. To this point, the dollar's current rally could keep the global supply of and demand for commodities out of balance.
Given that emerging countries had been driving global economic growth, the slowing of their economies means less growth in demand for commodities.
The Mizuho Research Institute, a Mizuho Financial Group think tank, predicts that crude oil prices will continue to stay low in 2016.