Commodity prices, from energy and minerals to agricultural products, rose strongly in 2021, and electricity generation fuels led the rise, supported by tight supplies and a strong economic recovery, with the easing of closures aimed at combating the pandemic around the world after intensifying vaccination campaigns.
Analysts and traders expect global demand for primary commodities to remain strong in 2022 and support prices with the continued recovery of the global economy, although similar price jumps are unlikely.
“2021 has been marked by a massive rally on a broad scale,” said Jeffrey Haley, an analyst at brokerage Oanda.
“Although I think commodity prices will remain strong, I think the recovery in 2020 and the rise in 2021 are exceptional, and therefore I do not expect the same level of gains next year,” he added.
Energy and food prices have increased this year, negatively affecting utilities and consumers from Beijing to Brussels and fueling inflationary pressures. Higher prices encouraged producers to increase production, but some analysts expect supplies such as oil and liquefied natural gas to remain in short supply, given that these projects take years to start production.
Record rises in coal and natural gas prices led to a severe energy crisis spreading from Europe to India and China in 2021.
LNG prices in Asia increased more than 200 percent, while coal prices in Asia doubled.
International oil prices also rose between 50 and 60 percent in 2021, and it is expected that they will continue to rise next year, supported by the increased demand for jet fuel.
In China, coal prices more than halved from a record high reached in October after producers raised production, which led to prices falling.
The electricity crisis in China and Europe affected aluminum production, which raised prices by more than 40 percent, recording gains for the second year. But that also affected the demand for iron ore, given the reduction in steel production in China, the world’s largest producer.
Analysts say base metals are expected to do well as the energy transition will boost demand, while supply chain crises may persist.
Chicago soybean prices have increased for the third year in a row, while corn has increased by about 25 percent and wheat by more than 20 percent.
Agricultural commodity markets were supported by supply constraints due to bad weather and strong demand in general.
Raw sugar prices rose more than 20 percent, recording gains for a third year, and white sugar achieved similar gains, with production reduced in Brazil, the largest global producer, due to drought and frost. Analysts say that precious metals prices may fall due to the strength of risk appetite in stock markets and others.
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