What supercycle? The raw bulls have taken a bruise this month Business and Economic News

The rise in raw materials has taken a hit this month, and yet there are plenty of reasons to opt for the so-called superkilo, which is unlikely to be a normal sail.

Huge amounts of stimulus, a reopened economy since the pandemic and strong demand from China have led to rising commodity prices this year, some of which have been the highest. However, they have been down for the past two weeks – eliminating annual gains – in a more wonderful tone of U.S. monetary policy to cool China’s inflationary pressures and get better weather for crops.

Although it sparks some speculation from the market, the main question is whether the recent bullfighting of the commodity has passed the final peak or is breathing.

In any case, the direction may not be broad-based, with each market pushing and pulling its individual levers. Copper traders need to balance a short-term cooling in China with long-term green energy forecasts. Oil sinking could be reduced by reduced storage and supply concerns, iron ore is undergoing Chinese policies, and gold will largely be when the Federal Reserve’s reduction begins.

“I still see a lot of inflationary pressure in the supply chain, and the reality is that it’s going up,” said Michael Widmer, head of metals research at the Merrill Lynch Bank of America in London. “From a commodity price perspective, I still see structural arguments for prices to go up or go higher in the future.”

Copper

The record-breaking one-year rally in May was driven by high demand from China, but there are reports that demand from manufacturers has begun to decline.

The bulls are confident that the rest of the world will be reassured that investments in renewable energy and electric vehicles will change the pace of demand in Europe and North America. However, it could take some time to get the cost to get the factory order books, and in the meantime, a softer order could drive the bears away from saying that the current high prices are not justified as basic.

Iron

It might be particularly difficult to predict the trajectory of the present iron ore, which is now the most volatile of raw materials. It became a record, fell into a bear market, and then returned to the bull market within a few weeks with a bleak view of traders ’demand for China’s largest consumer.

Both bulls and bears are watching China’s simultaneous targets to keep up with inflationary pressures caused by high commodity prices and make the broader steel sector greener. The country’s steel production is on track to break another record this year, which could see more action by the authorities to reduce production and crush iron ore.

Agriculture

Rainstorms in the U.S. corn belt and uncertainty over biofuel policy have helped the crop markets collapse recently, but much more rain will be needed to ensure a warm harvest at one of the world’s best suppliers. More than a third of America’s corn and soybean area has been hit by droughts after a record heat wave hit.

It’s a Chinese story about demand, with large imports from the nation sending up future crops and pigs. Cargill Inc. and major retailers like Viterra say they are on a “mini-supercycle” that could last half a decade in the crop market, due to increased demand for biofuels and continued purchasing in China.

Oil

The focus is already on how demand will recover in the summer. While there are signs that the U.S. is reopening Western economies, the spread of the delta variant of the coronavirus, first identified in India, is raising new concerns about the way it is consumed in some parts of Asia.

For now, it looks like the market will need additional supply in the second half of the year. The OPEC + team has yet to confirm production plans from July, while U.S. shale producers continue to preach discipline while making money. More reasons then, when the attention is very intense when the market will return to Iranian supply as talks with the US continue.

Gold

The actions of the Bullion Federal Reserve may be more tolerant than any other product. It fell to a minimum since early May when the U.S. central bank indicated it could start tightening monetary policy earlier than expected and the dollar jumped.

Although the precious metal is often bought as a hedge against inflation, the Fed said this week that it will not let unexpected inflation continue, opening the door to faster stimulus cuts. It weighs on the attractiveness of uninteresting gold. UBS Group AG forecasts prices at $ 1,600 an ounce by the end of the year, compared to about $ 1,780.

-With the help of Annie Lee, Alex Longley, Megan Durisin and Eddie Spence.