2021 the year of records for raw materials: copper at $ 10,000, oil at $ 70, iron at $ 200
When crude futures broke above $ 70 a barrel on Tuesday, it was just the latest milestone in a record year for commodities.
From copper to iron ore and oil, prices have recovered significantly in 2021, as the global economy emerges from the depths of the coronavirus pandemic and stimulates demand. The Bloomberg Commodity Spot Index, which tracks a broad basket of commodities, is up 21% since January, putting it on track for the best year since 2016.
Copper hit an all-time high this month, exceeding $ 10,000 per tonne. Iron ore also hit a record high recently with the surge in steel raw material as China produces more alloy than ever before. Oil is joining now, with Brent surpassing $ 70 a barrel and retail gasoline prices above $ 3 a gallon in the United States.
Together, these are the last signs of a global economy starting to see inflationary forces at work. The prices of raw materials used to do everything from houses to coffee shops are skyrocketing, underlining the giant reflation trade that has gripped global markets this year.
“He is driven by fears of inflation and demand,” said Giovanni Staunovo, commodities analyst at UBS Group AG. “Commodities are reopening and reflation operations.”
Beyond commodities, broader booms are underway in commodity markets. The Argentine government is limiting exports of beef, a staple in the country, in an attempt to contain soaring inflation that is approaching 50% per year. Wheat, corn and sugar all hit multi-year highs recently, while palm oil hit a record high and soybean oil is trading at a record high.
Gold hit its highest level in more than three months, emerging from a downtrend since August, amid mounting inflation concerns and monetary policy assurances.
Economic recovery
Copper has been a major beneficiary of a broad economic recovery and sweeping stimulus packages across the globe, but investors are also excited about the longer-term outlook.
The metal is crucial for almost all of the technology and infrastructure needed to decarbonise the global economy, with supply struggling to keep pace with consumption. The lack of mining investment and the scarcity of new projects have led to forecasts of shortages.
Oil bulls are optimistic that the crude market will continue to function through the summer as well. Ongoing restrictions on flights are likely to force people to get into their cars when they go on vacation, which could prove to be a boon to demand for on-road fuels. Meanwhile, airlines are increasingly optimistic about the possibility of some regions opening their borders as vaccinations progress.
As a result, the big banks have deployed a multitude of bullish perspectives on the sector. Goldman Sachs Group Inc. says a golden loop scenario is forming for the commodities sector, with inflation starting to rise but monetary policy not tightening yet. The main trader Trafigura Group spoke about the chances of copper reaching $ 15,000 per tonne in the coming decade.
