Not just copper. Why are metal prices soaring
Perfect storm on the prices of some commodities. The copper record and analysts' comments
Perfect storm on some commodities? Here's what's happening to copper (and not just copper).
All the details.
Copper broke the $ 10,000 per ton mark for the first time since February 2011 when it hit an all-time high of $ 10,190. Prices, up from four consecutive sessions, have risen by more than 25% since the beginning of the year. The rise is supported by strong Chinese demand and the weakening dollar, which has fallen by more than 2.5% since the beginning of April against a basket of major currencies.
According to analysts from Marex Spectron, "the trend of copper is supported by the weakness of the dollar, which favors purchases of metals denominated in US currency by those who buy in other currencies". Support also from the increase in demand in China, which alone – underlines Radiocor-Sole 24 Ore – catalyzes half of global copper production (according to estimates by the International Copper Study Group, Chinese demand rose by 13% in 2020 and the trend is destined to continue).
Not just copper, however: a sort of perfect storm is taking place on many raw materials. Before, in 2020, the closures of the extraction and production plants have decreased the availability of raw materials and semi-finished products. Then the strong economic recovery driven by China and the US caused a surge in demand for commodities, capable of bringing companies' production to its knees. “Companies are in panic because there is a lack of materials, we are already seeing cases of slowdown in production. A very worrying picture is emerging on raw materials ”. This was stated in an interview with the news agency Agi Gianclaudio Torlizzi , general manager of the financial consulting firm T-Commodity.
"Last year between March and April, in full lockdown, many thought that half an economic Armageddon would happen with the closure of the activities", which would cause a long-term collapse in consumption, reasons Torlizzi. “In reality, on the consumption front, the opposite happened, because first China, then the USA, recorded a very strong and very fast recovery”, supported by the policies set up by their respective national governments.
The result is that today all commodities record a strong increase in demand, and all a sharp rise in prices: copper appreciated by 47% compared to pre-crisis levels, wheat by 12%, soybean by 15%, wood by 6%, wood by 20%, oil, after the sharp decline recorded last year, has recovered quickly and is now at -3% of the pre-pandemic price.
But an even more precise photograph is provided by the steel. According to ANCE data – reports the Agi – the prices of raw materials have risen by 117% in recent months, as in the case of iron, and this has led to a strong increase in demand (especially from China alone absorbs about 50% of global production) and consequently of prices. Beijing was among the first to recover from the crisis caused by the pandemic, even recording a 2.3% increase in GDP in 2020. “This has meant a strong demand for semi-finished products globally, while in Europe steel production has decreased by 15% in the last year. These two elements together characterized the mega rally in raw materials ", explains Torlizzi," a picture that has worsened as regards the Old Continent due to the brake on Ilva production which recorded a 60% drop in steel production, exacerbating the shortage of semi-finished products in Italy ".
In this regard, Torlizzi highlights a paradox: "This situation in Europe is aggravated by the safeguard measures" provided for by European legislation, which require the application of duties of 25% when the limits for steel imports from non-EU countries are exceeded. , “A measure that makes no sense in an emergency situation like the one the sector is experiencing”. “There is a difference between safeguard measures that have a sense of temporariness and in the emergency and other instruments in the field against unfair practices, such as anti-dumping. So the safeguard measures were the last resort of a historical period linked to the measures of Donald Trump and the risk that the Chinese surplus would spill over into Europe. the defense of European producers is done with targeted duties on anti-dumping, not with draconian and generalist measures that are to the disadvantage of the whole continent ”. Removing these duties, explains the director of T-Commodity, would be a necessary measure in the short term, “while in the long term the reindustrialisation in Europe should be encouraged, shortening the commodity supply chains. In the US, a semiconductor production plan has already been launched to deal with the difficult moment of the microchip industry, which has interrupted the production of some companies "and which now, according to the Financial Times, risks have effects not only on automotive production, but on the entire household appliance supply chain, from toasters to washing machines. “To be ready for similar crises in the immediate future, Europe”, concludes Torlizzi, “should move in a similar way”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/non-solo-rame-perche-i-prezzi-dei-metalli-schizzano/ on Thu, 29 Apr 2021 14:14:19 +0000.