New commodity boom: experts see no end to the price surge | message

FRANKFURT (dpa-AFX) –

 The  raw material prices are currently not stopping. Whether copper, platinum, iron ore or tin – the prices of many industrial metals are rising rapidly.

 The  situation is similar with agricultural crops such as corn or soy. What makes large raw material suppliers such as the mega-corporations BHP or Rio Tinto happy makes buyers and consumers think.

 The  development ensures rising production costs and consumer prices. Especially since an end to the price boom is not in sight: Experts from large US banks such as Citigroup or JP Morgan are already talking of a new “super cycle” on the commodities market, a sustained rise in prices.

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Most recently, raw material prices have risen particularly significantly for metals.

 The  price of copper, which is regarded as an economic barometer due to its diverse uses, has roughly doubled within a year and is at its highest level in around nine years.

 The  precious metal platinum, known for its use in the production of automotive catalytic converters, has shown similarly strong price increases.

 The  price of iron ore, from which steel is extracted, has also risen sharply in recent months.

 The re are many reasons for the price boom.

 The  supply of many raw materials is relatively scarce. This has not only to do with the sustained great hunger for raw materials in the second largest economy, China, which has long drawn a considerable part of the supply. Many mine operators have also cut their production in the pandemic. This has meant that stocks have become scarce – especially since the supply in the raw materials sector is typically inflexible and cannot be expanded quickly.

At least as important for the price increase is demand.

 The  corona pandemic also plays a key role here. It is generally expected that the sluggish economy in many places will pick up with progressive vaccinations and fewer restrictions.

 The  demand for raw materials should also benefit from this, which is already being reflected in rising prices. “Added to this is the immense glut of money caused by many countries and central banks in the Corona crisis,” says Eugen Weinberg, Commerzbank’s chief raw materials analyst. This course has splashed a lot of money into the commodity markets and also fueled prices.

 The  situation is similar to that of industrial metals in what is probably the most important raw material on earth: raw material. During the first Corona wave in spring 2020, prices fell so sharply that buyers of American crude oil were temporarily paid – instead of paying for the raw material as usual.

 The  Rohl has now recovered from this historic crash. At around 60 US dollars, a barrel (159 liters) costs as much as it did shortly before the pandemic broke out. “

 The  hope of an economic improvement and rising demand is also providing a boost on the oil market,” says chief analyst Weinberg. In addition, the supply is kept tight by well-known producers such as Saudi Arabia.

As broad as the price surge may appear, there are exceptions on the raw materials market that do not benefit from the hope of a “post-corona period”. This includes the precious and crisis metal gold, whose price increase has stalled considerably in the past few weeks. One important reason is rising capital market rates in the USA, which are making interest-free gold a little less shiny.

 The  recent rise in the US dollar, which arithmetically makes the precious metal traded in the American currency more expensive for many buyers, has the same effect.

What consequences could the new boom in raw material prices have? In the short term, rising commodity prices are likely to fuel the already expected rise in inflation.

 The  analysts of the Frankfurt private bank Metzler speak of an “inflation cocktail” with reference to other price-driving factors. Because higher raw material prices cause production costs to rise at the company level. This, in turn, could be felt by consumers if the companies pass the increases on to consumers.

Experts can imagine that the price boom will continue for a long time. Analysts around the raw materials specialist Max Layton from the large US bank Citigroup are already talking about a new “super cycle”.

 The re was last such a thing at the beginning of the millennium – mainly due to the steep economic rise of China. Even now there are reasons that speak in favor of further increases in raw material prices. This includes the immense demand from emerging countries such as India or the conversion of the economy to green technologies, which is being sought by many industrialized countries, which also requires a lot of raw materials.

 The  supercycle hypothesis is controversial. “I doubt there will be a new super cycle,” says Weinberg. At most he wants to speak of a temporary, albeit strong, price increase. Weinberg points out that there is also great uncertainty about the progress of the Corona crisis.

 The  question of how quickly and strongly the global economy will recover is as uncertain as the future strength of the demand for raw materials. In the oil sector, which is important for the global economy, there is also the fact that the electrification of the economy, which is being sought in many places, for example through electric cars, is more likely to lead to a weakening of demand./bgf/DP/eas

— By Bernhard Funck, dpa-AFX —