The raw materials market has become one of the main protagonists this year, having been the trigger for one of the most delicate macroeconomic situations in recent decades: the increase in inflation.
It is no longer news to anyone that the rebound in demand after Covid has generated bottlenecks, and these have triggered the prices of basic resources. In addition, the war in Ukraine and the energy crisis have contributed to further worsening the inflationary context.
After months in this situation, some voices have begun to emerge that anticipate that the worst is over. The peak of inflation has already been reached, and although there will still be months of rates above the average of recent years, prices will gradually decrease. This argument is based on a reaction that has already been taking place for months in the basic resources market: the prices of the most traded raw materials seem to have reached the maximum of the year in June, since, since then, the correction is generalized in almost all listed commodities.
Of the list of 34 most traded raw materials, there are only four that have not been corrected since June 7: palladium, live cattle, rice and soybeans for feed, with increases of 19.3%, 7 .9%, 4.7% and 3.8%, respectively. On that date, the Bloomberg basket of raw materials began to fall, in a correction that has already taken 14% of the selective.
The ones that fall the most
With the permission of tin, which has fallen 41.5% on the London Metal Exchange (LME) since June 7, and is the material that has yielded the most since that date, it is oil and its derivatives that are leading the falls in this period. The European Brent barrel has become cheaper by almost 23% since then, and the West Texas by almost 27%.
Cotton, copper and wheat are down nearly 20%, while other industrial metals, such as aluminum and nickel, are down nearly 18% in this period.
The decline that is taking place is leading some analysts to think that inflation may have already peaked . “There are many signs that inflation has peaked,” explains Pramod Atluri, manager of Capital Group, citing the fall in gasoline prices since mid-June, as well as in the prices of wheat, corn and other raw materials. from mid-May. “Maybe the Fed has the cover it needs to support economic growth while still taking inflation seriously,” he says.
It is precisely the Federal Reserve, and other major central banks on the planet, such as the European Central Bank (ECB), which, with their policies, are making many managers and analysts fear the arrival of a recession . The latest survey of Bank of America managers, conducted during the first week of September, confirms that most managers believe that there will be a global recession in the coming months as most likely.
The fear of a drop in demand if this finally materializes is what is leading many investors to sell commodities on the market, anticipating further price declines in the coming months.
The slowdown in demand
This fall in raw materials since June, in fact, is above all related to the outlook for demand. Oil is the best example : despite the fact that the Organization of the Petroleum Exporting Countries (OPEC) and its external partners have decided to change the direction of their policy and start reducing supply to try to boost prices, for the moment their efforts are not being sufficient to counteract the falls that are taking place in the energy resource.
The latest report on the oil market from the International Energy Agency (IEA) makes it clear: the organization has cut the growth rate of oil demand for this year, due to a slowdown in consumption, and already forecasts that 2022 will be the first year in which China’s demand for oil is going to decline , something that did not happen in the Covid crisis, in 2020, or in the Great Financial Crisis of 2008. In fact, it is the first time that it will happen , if IEA forecasts are met, since 1990, more than 3 decades ago.