Boom in demand, logistical bottlenecks, weak dollar: the prices of raw materials are soaring, from copper, to a ten-year high, to pork, tasted more than ever for its bacon at the breakfast of Americans working from home.
According to the Bloomberg Commodity Price Index, grain prices climbed 22% year-on-year, the highest since 2016.
The price of crude oil has risen 30% over the past year.
That of lumber has tripled over the past twelve months. The US Builders Federation has even warned that it now costs $ 36,000 more on average to build the frame of a house.
The price of copper, whose demand reflects the health of the global economy, this week broke a ten-year record, driven by Chinese appetite and the weakness of the dollar.
Tin, prized for electronic circuits, automotive components, batteries, is also at its highest since 2011, having doubled its price in one year.
The reasons for these increases are varied.
For oil, global demand is accelerating with the reopening of economies, “China and the American locomotive far exceeding the scale of the slowdown in India”, overwhelmed by the Covid-19 epidemic, notes Bjornar Tonhaugen of Rystad Energy.
“Crude seems unstoppable,” writes Bart Melek of TD Securities, as the price of a barrel of Brent this week has approached the threshold of 70 dollars. At the pump, the price of gasoline in the United States has fallen from $ 1.77 per gallon (3.8 liters) a year ago, to $ 2.89 today, according to the AAA Automobile Association. .
Shortage of containers
For sugar, it is the shortage of containers and bottlenecks at ports that are pushing prices up, while corn, soybeans and wheat are also experiencing delivery problems.
As for copper, it is increasingly used in energy infrastructure in transition, says Elijah Oliveros-Rosen of S&P Global Ratings.
In the markets, futures contracts on these products are also very attractive financial instruments for investors, in a context of very low interest rates and modest profitability of Treasury bills, analysts say.
“There is a lot of money in the market, and when the Fed indicated in August that it would not be raising rates anytime soon, it allowed inflation to form,” said Michael Zuzolo of Global Commodity Analytics and Consulting.
“This historic change in monetary policy has attracted investors, in addition to the problems of restricted supply, logistics and surge in demand,” adds the agricultural markets analyst. He also underlines that “the weak dollar and the strengthening of the currencies of emerging producer countries are attracting investment flows”.
The vagaries of the climate with drought in Latin America and late frost in Europe also have an influence.
Among the most spectacular price increases, pork holds the upper hand (+ 51% in one year), according to the US Department of Agriculture in a report released in April.
While the strong Chinese demand for this meat is often cited, the ministry reports here “a doubling of the price of pork belly” since the pandemic because “American consumers eat their breakfast more at home”.
In these tense market conditions, companies tend to stock these raw materials in advance, pushing prices further up.
Some manufacturers are starting to buy “too much”, due to “shortages of raw materials,” the ISM manufacturing activity index for the highly industrial Chicago region reported on Friday.
These shortages “continue to weigh on the costs of businesses,” said the press release.
This cost surge is on track to reach consumers in the United States, as inflation accelerated in March.
Between the rise in plastics, paper and sugar, big manufacturers like Procter and Gamble, Kimberly-Clark and Coca-Cola have all announced they will raise their prices.