Indian and Chinese commodity exchanges are becoming major players in global markets, which are becoming more volatile due to greater participation of investors, the United Nations Conference on Trade and Development (UNCTAD) said in a report on Wednesday.

“Increased participation of financial investors in commodity investment has added an element of volatility to commodity markets,” UNCTAD said in its ‘Trade and Development Report’ released here. The report said investment in commodities was high in 2006 as soaring prices aroused the interest of investors and speculators. Even though the magnitude of investments in commodities as a financial asset is difficult to measure, there are indications that it has been huge.

The report mentioned that commodity exchanges in India and China are becoming key players in global commodity trade. “The outlook is for commodity prices to remain high for some years on account of solid demand for commodities in rapidly growing developing countries, even though global economic growth is expected to slow somewhat,” UNCTAD said.

Slowdown
However, the growth rate of commodity prices may slowdown as new supplies enter the markets, it added. UNCTAD also said commodity prices continued to rise this year since February and it was still uncertain whether there would be an end to the trend as predicted by some analysts.

In 2006 and early 2007, producers benefited from the boom in commodity markets which began in 2002. UNCTAD said the growth in India, China and US provided the push for the strong demand for commodities. It said commodities prices in total (except crude oil) increased by 89 per cent in 2006.