the iron ore price reached an all-time high on Monday in the latest sign of the surge in commodity markets, which have come into overdrive in recent weeks as major economies recover from the pandemic.
The steel ingredient, a major source of revenue for the mining industry, rose 8.5% to a record high of nearly $ 230 per tonne fueled by strong demand from China where factories increased their production.
Other commodities also rose sharply, including copper, which hit an all-time high of $ 10,747 a tonne before squeezing gains. The increases are part of a large surge in commodity costs that has lasted for over a year and is fueling talk of another supercycle – an extended period where prices remain significantly above their long-term trend.
the wood price also hit an all-time high as US sawmills struggled to keep pace with demand as the peak summer residential construction season approached.
“Product demand signals are pulling on all cylinders amid a synchronized recovery across economic powerhouses around the world,” said Bart Melek, head of commodities strategy at TD Securities.
Strong demand from China, the world’s largest consumer of raw materials, international spending on post-pandemic stimulus programs, supply disruptions and big bets on the green energy transition explain the surge in commodity prices.
Commodities were also boosted by a weaker US dollar and investors decided to stock up on assets that can act as a hedge against inflation.
The S&P GSCI Spot Index, which tracks price movements for 24 commodities, is up 26% this year.
Strong investor demand pushed commodity assets held by fund managers to a new record high of $ 648 billion in April, according to Citigroup. All sectors posted monthly gains with agriculture and precious metals leading the way, the bank said.
Agricultural products experienced particularly strong growth due to rising demand from China and fears of a drought in Brazil. Drought in the United States, where planting for this year is underway, is also contributing to the price hike. Corn, which is trading at $ 7.60 a bushel and soybeans at $ 16.22, are at levels not seen since 2013.
“From a macroeconomic environment to high demand and production issues, the ingredients are all there for the supercycle,” said Dave Whitcomb of commodities specialist Peak Trading Research.
Rising copper and iron ore prices are a boon for large miners, who are on track to achieve record profits that will surpass the records set during China’s commodity boom in the early 2000s.
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JPMorgan estimates that Rio Tinto and BHP will be the biggest dividend contributors in Europe this year, paying out nearly $ 40 billion to shareholders. Shares of Rio, the world’s largest iron ore producer, hit a record high above £ 67 on Monday.
Brent, the international oil benchmark, has regained
around $ 70 a barrel, which it exceeded in March for the first time in
more than a year, recovering the ground lost by the pandemic
reduces demand from rough and troubled markets.
Supply reductions from major oil producers have helped support the market
as consumption has started to pick up around the world.
While some Wall Street banks have hailed the start of a new supercycle, some traders citing a return to $ 100 a barrel of oil, others are less convinced. The International Energy Agency has said oil supplies still remain plentiful, which means any discussion of a supercycle is premature.
