H2: HWWI Commodity Price Index continues to rise strongly in October
- HWWI overall index rose by 18.7 % (US dollar basis)
- Crude oil prices increased by 12.5
- Natural gas prices increased by 42.6
(Hamburg, November 10, 2021) The HWWI commodity price index continued to rise sharply in October, exceeding the previous month’s value by 18.7%. Compared to the previous year’s value, the overall index recorded an increase of 120%. All three sub-indices for energy raw materials, industrial raw materials and food, beverages and tobacco rose in October. The HWWI commodity price index was driven most heavily by the continued strong increase in energy commodity prices for coal, natural gas and crude oil. The price driver continues to be rising demand for energy commodities in the wake of the recovery of the global economy, which is meeting with continued tight supply.
Energy commodities index: + 21.1 % (euro basis: + 22.8 %)
Crude oil prices continued to rise sharply in October, up an average of 12.5% on the previous month. Prices of European benchmark Brent crude rose steadily through October 26, reaching highs of $86 per barrel, before easing slightly at the end of the month. U.S. benchmark WTI peaked at $85 per barrel at the end of the month, a level not seen since 2014. On average, crude oil prices recorded an increase of over 100% compared to October of the previous year. Price drivers continue to be increased global demand in the wake of the recovery from the Corona recession. Rising demand continues to be met by tight global crude oil supplies. OPEC+ continues to rely only on a slow and gradual increase in production volumes of 400,000 barrels per day. Calls from the U.S. government have also failed to persuade OPEC+ to increase production more sharply again to counter the rise in oil prices.
Coal prices also rebounded strongly in October. Both Australian and South African coal prices rose by a further 27% compared to the previous month. In key producing regions of China, the flooding in early October led to the closure of major coal mines and resulted in a reduction in Chinese coal stocks and thus increased import demand.
Natural gas prices, which had already been at a very high level for several months, rose strongly again in October. In particular, European average natural gas prices rose heavily by 60% in comparison to the previous months average. Gas prices continue to reflect low inventory levels and rising demand for natural gas as the pandemic crisis catches up. At the end of the month, prices for European natural gas fell due to President Putin’s announcement that European gas stocks would be replenished by Russia in November.
Overall, the energy commodities subindex rose by 21.1% (euro basis: 22.8%) to 201.0 points (euro basis: 192.3 points).
Index for industrial raw materials: 2.8% (euro basis: 4.3%)
The sub-index for industrial raw materials, which is broken down into the index for agricultural raw materials, the index for non-ferrous metals and the index for iron ore and steel scrap, rose by 2.8% in October compared with the previous month.
The sub-index for iron ore and steel scrap decreased on average in October, but to a lesser extent than a month earlier. The price decline was due to a slump in Chinese demand. Chinese steel production continued to be curtailed, partly in response to the current electricity shortage in China and partly to curb emissions harmful to the climate.
By contrast, prices for nonferrous metals increased in October compared to the previous month. Prices for nonferrous metals were driven by the current robust demand and supply disruptions due to the sharp rise in gas and coal prices. As a result of the high cost of energy, mines and refineries had to curtail production. Prices for tin and zinc rose particularly strong. Zinc rose by more than 20% in October compared with the previous month and reached a level last seen 14 years ago.
Cotton prices also rose sharply in October, reaching a 10-year high. In this case, various factors were responsible for the price increase. On the supply side, heavy rainfall in key growing regions in the USA impacted the cotton harvest. Alongside China and India, the USA is a major producer of cotton. Cotton prices were also supported by the demand side. High oil prices drove up prices for synthetic fibers, which in turn increased demand for cotton. In particular, the cotton demand from the major importer China increased, and other major textile-producing countries such as Bangladesh, Indonesia, Vietnam and Pakistan are also currently experiencing high demand.
Lumber prices rebounded strongly in October after falling back to pre-crisis levels from their peak in May. Demand for lumber has increased again due to lower prices and supply is currently tight again. In Canada, some sawmills had to cut production due to cost increases. In addition, some sawmills in the USA were unable to produce as usual due to labor shortages.
Overall, the index for industrial raw materials rose by an average of 2.8% (euro basis: 4.3%) to 180.6 points (euro basis: 172.8 points) in the month.
Index for food, beverages and tobacco: 3.6% (euro basis: 5.1%)
The index for food, beverages and tobacco rose by an average of 3.6% in October compared to the previous month and thus increased by 33.4% in comparison to the corresponding years-earlier figure. All three sub-indices, the index for cereals, the index for luxury foods and the index for oils and oilseeds, rose in general in October.
In the markets for barley, corn and wheat, the positive price trend continued in October due to increased demand coupled with reduced supply. Wheat supply was further weakened by extreme weather conditions in the main growing regions. In Russia, North America and Argentina, the wheat harvest was affected by drought, and in European producing countries, heavy rainfall impacted crop yields. Wheat prices reached a high in October not exceeded since 2000. Barley prices continue to benefit from higher wheat prices, as barley is also considered an important feedstuff and thus a substitute for wheat. In addition, overall cereal prices were driven by higher fertilizer prices. Due to the current high gas prices, some fertilizer producers had to cease production, which tightened the supply of fertilizers.
Compared to the previous month, prices for vegetable oils also rose sharply in October, especially for coconut oil and palm oil, also due to a poor harvest and thus tight supply. Labor shortages in producing countries, particularly Malaysia, triggered by lockdown measures, continue to affect palm oil production. In addition, global demand for vegetable oils needed for biofuel production is currently increasing due to the rise in oil prices.
Prices for luxury foodstuffs also continued to rise in October compared to the previous month. Coffee prices in particular increased by 6.8% compared to the previous month. As a result, coffee prices were more than 70% higher on average for the month than in October last year. The impact of the extreme drought at the beginning of the season and subsequent frost on the Brazilian coffee crop continues to lead to high coffee prices.
Overall, the food and beverage index rose by an average of 3.6% for the month (euro basis: 5.1%) and stood at 136.2 points (euro basis: 130.3 points).
Source: www.hwwi.org