The 90-year-old Sage of Omaha sees the US economy in full swing
WASHINGTON: Global commodity prices are rising thanks to a boom in demand due to the recovery from the COVID-19 downturn coupled with logistical bottlenecks.
Copper hit a 10-year high last week. Bloomberg’s agricultural commodity price index is up 22 percent this year, to its highest level since 2016, while crude oil is up 30 percent last year.
Wood has tripled in the past 12 months, and the National Association of Homebuilders said the cost of a new home increased by $ 36,000.
Tin, used in electronic circuits, automotive components, and batteries, also reached its highest level since 2011, when the price doubled last year. The reasons for these increases are varied.
For sugar, a shortage of shipping containers and bottlenecks in the ports lead to a price increase, while for corn, soybeans and wheat there are also delivery problems.
Global demand for oil is accelerating as economies reopen after the pandemic shutdown. The price of gasoline at the pump in the US has risen from $ 1.77 last year to $ 2.89 per gallon, according to the AAA. TD Securities’ Bart Melek said the price of Brent crude was “unstoppable” as the market expects a massive surge in demand and a further decline in stocks in the second half of the year. “US consumers are a major reason the markets remain bullish,” said Björnar Tonhaugen of Rystad Energy in an analysis.
The Chinese and US “locomotives” far outweigh the effects of the slowdown in India, which has been overwhelmed by the resurgence of COVID-19 infections, he said. “DR. Copper” – so named because it often provides an accurate diagnosis of the global economy due to its widespread use – made headlines this week when it topped $ 10,000 per ton.
Profits were driven by strong Chinese demand as well as labor protests in Chile that affected mines and ports. The weak US dollar also means it will take more American greenbacks to buy the same amount of metal.
The red metal price is also benefiting from a transition to clean energy technologies that use more copper, said Elijah Oliveros-Rosen of S&P Global Ratings.
“When you see strong growth expectations driven by infrastructure and decarbonization, that’s great for copper,” he told AFP.
Another factor is that investors see commodity futures contracts as an attractive alternative given the very low interest rates and modest profitability of Treasury bills, analysts say.
“There’s a lot of extra money going into the market,” said Michael Zuzolo of Global Commodity Analytics and Consulting.
The imponderables of the climate with drought in Latin America and the late frosts in Europe have also contributed to the increase in agriculture.
Among the most spectacular, pork rose 51 percent in one year, the U.S. Department of Agriculture said in its April report.
Soaring prices have already started to reach consumers: The Fed’s preferred PCE inflation index rose 2.3 percent yoy, according to government data from Friday in March.
And big consumer goods manufacturers like Procter and Gamble, Kimberly-Clark and Coca-Cola have announced plans to increase prices.