Open a newspaper these days and chances are you'll read about the price of one commodity or other just having set a new record. Most analysts will point to growing demand from large emerging markets such as China and India. An aspect less commented on in this commodity crunch is the supply side of the equation.
Trade efficiency may matter, as large commodity exporter rankings on the Doing Business Trading Across Borders indicator suggest. Kazakhstan, a commodity superpower, comes in at 178 out of 178; the Democratic Republic of the Congo lingers at 154; and Brazil, a mining giant, is at 93. Even Australia, a top 10 country in the overall ease of doing business, only manages 34th place when it comes to trade.
Bureaucracy and inadequate transportation infrastructure mean supply may not always be as responsive to increases in demand as it could be. Poor roads, delays at borders and port congestion all constitute serious obstacles to export growth. Add to that the power shortages in countries such as South Africa (see a recent blog post) - through which a sizable part of commodity exports from southern Africa passes - and you could argue we are also going through something of a supply crunch.
Luckily, help just may be on the way. The commodity boom has itself engendered an infrastructure boom - the scale of infrastructure projects in Africa these days is maybe greater than ever before. China alone is building two dozen railways in Sub-Saharan Africa and plans have recently been unveiled to build a railway traversing southern Africa from Angola to the port of Dar-es-Salaam in Tanzania. This should facilitate the export of commodities from Angola, the DRC and Zambia, and facilitate intra-regional trade.
The African infrastructure boom is encouraging and might gradually allow supply to respond more quickly as projects are completed. I am not aware of any research exploring to what extent commodity prices are actually affected by inadequate transportation infrastructure in commodity-exporting countries. But it might be worth betting that as countries address these issues, and this is reflected in their Doing Business trade ranking, commodity prices might well start heading south again.
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