Market News CITIC: 2022 or the year when commodities peak, the price center will remain high
CITIC: 2022 or the year when commodities peak, the price center will remain high
In 2022, or the year when commodities peak, the price center of commodities may remain high, and the main export commodities of Russia and Ukraine, including crude oil, grains, fertilizers, aluminum, etc., may have strong anti-fall properties. Entering 2023, commodity prices are expected to gradually fall, but compared with the level before the outbreak in 2019, the absolute value of their prices may still be high.
2022-05-27
9210
After the outbreak of the global epidemic in 2020, the global commodity market ushered in an overall rise. The fundamental reason is that the contradiction between supply and demand is prominent, that is, demand rebounds rapidly and supply repairs slowly. In addition, the Russian-Ukrainian conflict as a catalyst has exacerbated the mismatch between supply and demand, and the linkage effect of price increases has also been formed between commodities through the "input-output" relationship. Looking ahead, in the short term, the uncertainty from the Russian-Ukrainian conflict is still the main upside risk in the commodity market, while from a medium and long-term perspective, the global economic recession has become a downside risk in the commodity market. To sum up, in 2022 or the year when commodities peak, the price center of commodities may remain high, and the main export commodities of Russia and Ukraine, including crude oil, grains, fertilizers, aluminum, etc., may have strong anti-fall properties. . Entering 2023, commodity prices are expected to gradually fall, but compared with the level before the outbreak in 2019, the absolute value of their prices may still be high.
Commodity markets since the post-pandemic period.
After the middle of 2020, the commodity market showed an overall upward trend, and the prices of most commodities, including energy products, industrial metals, and agricultural products, rose sharply. The reasons mainly include the following four points:
1) The fundamental reason is that the contradiction between supply and demand is prominent, that is, the demand rebounds rapidly and the supply repairs slowly;
2) The conflict between Russia and Ukraine is the catalyst for the further rise of commodity prices in this round. Factors including the objective impact of the war itself, sanctions against Russia by Western countries, and Russia’s counter-sanctions have all exacerbated the contradiction between supply and demand of commodities;
3) The production of some commodities requires another/multiple commodities as inputs, which makes the price increase of some commodities have a linkage effect;
4) The driving force behind the price rise of various commodities is also unique. For example, the insufficient scale of upstream investment in oil and gas resources has dragged down the repair of the supply side, and the abnormal weather has disrupted the production activities of some crops, which has also boosted the market's bullish sentiment.
How sustainable are the highs in the commodity market?
In the short term, the Russia-Ukraine conflict remains the biggest upside risk for major commodities due to the greater uncertainty over the duration of the Russia-Ukraine conflict and the coverage and extent of sanctions and counter-sanctions between Western countries and Russia.
In the medium and long term, the downside risk to the commodity market comes from the expectation of a global economic recession. In 2022, or the year when commodities peak, the commodity price center may remain high, and the main export commodities of Russia and Ukraine, including crude oil, grains, fertilizers, aluminum, etc., may have strong anti-fall properties.
From a long-term perspective, entering 2023, with the successive implementation of tightening policies in major overseas economies around the world, the global economic recession is expected to become stronger, and commodity prices are expected to gradually fall. However, compared with the level before the outbreak in 2019, Its price may remain high in absolute value for longer than expected.
Risk factors:
There is uncertainty about the epidemic, uncertainty about geopolitical conflicts, and the monetary policies of major overseas economies exceed expectations.
Article source: CITIC Securities
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