Raw material prices decline amid global demand concerns

This blog post is part of a special series based on the April 2025 Commodity Markets Outlook, a flagship report published by the World Bank. This series features concise summaries of commodity-specific sections extracted from the report. Explore the full report here.

After reaching a three-year high in March, the World Bank’s agricultural raw materials price index declined in April and May, led by falling natural rubber prices and an earlier drop in cotton prices. The downturn reflects softening demand due to a weakening global economy, along with strong supply prospects. The index is projected to fall by just over 2 percent in 2025 (y/y) before stabilizing in 2026. A sharper-than-expected slowdown in global growth remains a key downside risk to this outlook.

Cotton prices have remained relatively stable during the first five months of 2025, but they are still more than 15 percent lower than during the same period last year. This decline reflects strong supply growth during the current (2024-25) crop season, which saw a record 6.2 percent increase in global production. At the same time, subdued demand has added downward pressure. Global cotton output is expected to decline by nearly 2.5 percent in the upcoming season (starting in August 2025), according to the U.S. Department of Agriculture’s May report, with sharp reductions expected in several major producers: Australia (-26.8 percent), China (-6.3 percent), India (-2.1 percent), Türkiye (-8.9 percent), and the United States (-2.9 percent)—together, these countries account for 65 percent of global output. Meanwhile, global cotton consumption is projected to rise by about 1 percent in the upcoming season, lowering the stock-to-use ratio to just over 65 percent, down slightly from the 66 percent projected for the current season. Cotton prices are forecast to fall 14 percent in 2025 (year-over-year), before rebounding by 3 percent in 2026 as supply growth moderates. Key risks to this outlook include weaker-than-expected global economic activity, which could further dampen prices, and adverse weather in key growing regions, which could tighten supply and push prices higher.

Natural rubber prices fell sharply in April and May, declining 14 percent from the first quarter of 2025, after briefly surpassing US$2/kg for the first time in eight years. The decline reflects growing concerns about trade and weakening demand in the global automotive sector, which consumes nearly two-thirds of the world’s natural rubber—mainly for tire production. Ample supplies also contributed to the downturn: global output rose nearly 4 percent in the 12 months ending in May 2025, led by Thailand, Indonesia, and Côte d’Ivoire. These three countries, which collectively account for two-thirds of global supply, increased production by around 9 percent each. On the demand side, tire production remained soft in early 2025, falling 0.6 percent for light vehicles and 2.3 percent for heavy vehicles in the first quarter compared with the previous one. Still, overall demand for natural rubber rose by nearly 2 percent year-on-year, driven by modest gains in China and India, the world’s top consumers. Looking ahead, prices are expected to rise modestly in 2025 before easing in 2026. However, risks to the outlook remain tilted to the downside, particularly if global auto production slows more sharply than expected. Persistent overcapacity in China’s auto sector could further dampen demand.