The last two days' recovery in commodity prices has done little to ease all-round fears of a global recession following the sharp dip in prices over the past three months. Nor are things likely to improve soon.

Crude oil, one of the biggest contributors to inflation last year and most of this year, has seen the most prominent fall, from $143 a barrel in the second week of July to $80.22 (a fall of 44 per cent).

Rubber is another commodity that lost the most in the recent fall. Natural Rubber (RSS-4 grade), mostly used for producing automobile tyres, has fallen the most as cheaper crude oil prices will result in lower prices of its alternative � synthetic rubber. Rubber reached its high of Rs 140 a kg at the end of August; today it is traded at Rs 85 a kg in the Kochi market.

Overall, Reuters' 19-commodity CRB Index has lost 34.89 per cent over the last three months against a 19.6 per cent rise in the second quarter of 2008.

"This was one of the steepest falls in recent memories. The only silver lining was that despite the fall, trading volumes were not affected," said Jayant Manglik, head (commodities) Religare. 

All metals have lost 20 to 40 per cent in the last three months � some touching 30-month lows. On the London Metals Exchange, aluminium is down 32 per cent, tin 39 per cent, nickel 40 per cent, lead 22 per cent, zinc 27 per cent and copper 40 per cent.

As Biren Vakil, director, Paradigm Commodities, an Ahmadabad-based risk advisory firm, pointed out: "Metal prices are trading 15 to 25 per cent below their production costs."

The repercussions are being felt as far as Australia, where the past couple of months have seen some 10 medium and many smaller mines and mining companies opting for closures or production cuts.

Elsewhere, governments are beginning to react. To halt fall in palm oil prices, Indonesia and Malaysia, the world's two largest producers, have announced export incentives. Indonesia is considering incentivising exports by reducing export cess and Malaysia is raising the limit on the amount of unprocessed palm oil that may be exported in a bid to cut rising stockpiles and boost prices.

In India, the price fall in these commodities in the same period has not brought relief because the weakening rupee against the dollar has kept import costs high. The rupee has fallen nearly 12 per cent during the period.

This secular fall in prices is also distorting trade finance. Over the past two weeks, financiers have been wary of accepting commodities as collateral against loans.

"In the last few weeks, those who have lent against commodities as collateral have started selling these stocks wherever borrowers were not in a position to pay the mark-to-market margins or repay the loans," said T Gyanshekhar, director, Comtrenz, a commodity research and advisory firm.

"Prices have fallen due to fears that recession will lead to a fall in demand. Now, even if the financial situation stabilises, demand for commodities cannot be regenerated so easily, so all commodity prices except gold are expected to have a downward bias," said Manglik.