The commodity traders rubbed their eyes last April: WTI oil suddenly cost nothing, and saleswomen even had to pay for someone to buy the oil. Too much oil in supply and hardly any demand due to the pandemic caused prices to collapse.
Nine months later, a completely different picture emerges: Not only are the prices for oil higher than they have been for a long time. Iron ore, the raw material for steel for machines and structures, costs more than it has for years, as does soybeans and copper.
Features of a super cycle
Are these signs of a new super cycle? That would mean that the demand for raw materials increases sustainably because the economy grows again, more raw materials are processed and the prices for the products climb up. Analysts in the USA assume that the global economy will now regain sustained strength after the pandemic. The new US administration is also bringing life to trade.
However, European market observers are more cautious. Eugen Weinberg is the head of raw materials analysis at Commerzbank. The positive mood on the stock markets, the negative interest rates and the hope that the economy will strengthen, he says, are primarily responsible for the price increases in recent months. The US government will continue to pump a lot of money into the economy, which will further boost prices. Nevertheless, he states: “ The evaluation of many raw materials is no longer comprehensible.” That means: The y are too expensive.
Probably not a sustainable price increase
Norbert Rücker, raw materials specialist at Bank Julius Baer, shares the same footing. The situation will normalize by the middle of the year. In his opinion, the price increases should be treated with caution.
Especially with agricultural commodities such as wheat, soy or maize, capricious weather drove the price boom: “ The re were crop failures, transport options on ships were scarce and there were trade restrictions.” China, as one of the largest importers of agricultural raw materials, has bought more. But none of this is enough to speak of a super cycle.
Eugen Weinberg from Commerzbank does the math: In the next few months, global consumption will increase because people are spending the money they have saved after the pandemic. That’ll give you a boost. The analyst is convinced, however, that this is not enough for permanently high raw material prices: prices for metals, but also for crude oil, will fall significantly this year: “ The boom of recent months is not a one-way street.”
Climate discussion lowers demand
The climate debate also has an impact on raw material prices. On the one hand, the demand – and the price – for so-called climate raw materials such as nickel or cobalt is increasing. At the same time, this discussion will inevitably lead to a decline in the wasteful demand for many raw materials, Weinberg is convinced. This means that the very high price of iron ore will hardly be able to last.