Inventories of some of the world's most important commodities have declined in an unprecedented way, while booming demand and a shortage of supply threaten to exacerbate inflationary pressures around the world.
In a report published in the British Financial Times, authors Neil Hume and Emiko Terazuno said that this "unprecedented" shortage of essential minerals coincides with the rush to acquire raw materials and basic foodstuffs.
The rush towards raw materials and basic foodstuffs is reflected in the futures markets in the fields of industrial metals, energy and agriculture, at a time when contracts for many commodities are witnessing a so-called “delivery delay” situation;
It is a pricing method that indicates scarcity.
The authors note that the problems are more acute in the mineral sector;
Spot prices for many contracts on the London Metal Exchange are trading at higher prices than those to be delivered, while traders pay large premiums to secure spot supply. caused by the Corona pandemic.
Last month, US consumer prices increased at the fastest annual pace in 4 decades, at 7.5%.
Copper stocks on commodity exchanges amount to just over 400,000 tons, which is equivalent to the amount of global consumption for a period not exceeding a week, and aluminum stocks are also suffering a decline due to smelters in Europe and China reducing their production capacity due to the great financial pressure caused by high energy costs.
According to analyst at Bank of America Michael Widmer, stocks are low in warehouses and throughout the supply chain, citing limited security measures.
The price of aluminum reached its highest level in 13 years, exceeding $3,200 per ton last week;
Goldman Sachs said it could run out of stock by 2023.
The authors pointed out that production cuts represent only one of the factors causing the shortage of supplies, which has led to the Bloomberg Commodity Index (a major measure of raw materials) rising more than 10 times since the beginning of the year, setting a record this month, and other reasons for the shortage of supplies include lack of investment. In new mines and oil fields, bad weather and supply chain restrictions due to the Corona pandemic.
And the International Energy Agency warned last week that crude oil prices - which exceeded $ 90 a barrel - may rise further in light of the faltering attempts of OPEC and its allies to revive production after the crisis of the Covid-19 pandemic, and according to the International Energy Agency, “If the gap between OPEC production and the desired levels continues, supply disruptions will worsen, which increases the possibility of more volatility and upward pressure on prices.”
Gas prices also remained high in Europe, amid rising geopolitical tensions over the fate of Ukraine and reduced flows from Russia.
Across the continent, gas storage levels have fallen to 35%, below average, according to commodity consultancy ICIS.
As noted by analyst Thomas Rodgers of ICIS, “The risk of a stock shortage by the end of winter is remote at this point, but the market will still need to secure significant supplies during the summer in order to prevent this type of concern from emerging in the next winter."
In agricultural markets, reserves of Arabica (the high-quality coffee of espresso lovers' favorite) have fallen to their lowest level in 22 years, as supply disruptions and declining exports from Central American producers pushed stocks of Arabica beans on the InterContinental Exchange futures exchange to Its lowest level in more than two decades, as buyers race to secure supplies.
Carlos Mira, chief analyst at Rabobank, said the decline in coffee stocks so far in 2022 was "enormous", and a continuation of that could increase the "potential for an uncontrolled rise in prices".
A supply crunch looms in other markets as well, and Citigroup believes that demand for lithium (a key raw material in the battery industry) will outpace supply by 6% this year due to higher sales of electric cars.
With stocks limited, analysts at Citigroup believe that the adoption of "maximum" prices will be necessary to "destroy demand" and balance the market.Keywords: