On the commodity markets, the copper price hit $ 10,200 per ton on Friday, a record. The previous record dated from the beginning of 2011.
An important factor is the economy turning green. Windmill parks and electric cars contain a lot of copper (wire). The supply cannot keep up, as ever heavier investments are required to excavate the metal.
In a conversation with the British business newspaper Financial Times, Ivan Glasenberg, the chief executive of the commodities trader Glencore, says that the copper price must go to $ 15,000 per ton to balance supply and demand.
— Neil Hume (@humenm) May 7, 2021
The speed of the climb, in particular, is astonishing. With an increase of the copper price more than 30% since the beginning of the year. This is not really surprising because copper with its many industrial applications – including in the construction, energy and automotive sectors – is regarded as a kind of barometer of the world economy…
And that world is booming. The investment bank JPMorgan predicts that the world economy will recover 6.5% this year, led by China and the United States, after the pandemic contraction of 3.6% in 2020. The American is sitting thanks to the rapid roll-out of the vaccination and the enormous stimulus from President Joe Biden is already close to providing levels.
This strong recovery translates into a high demand for all kinds of raw materials, from iron ore to basic chemistry to wood. We see the cost of all raw materials, including energy and CO2 climb.
Banks & Wallstreet
These signs of inflation make central bankers (very) reluctant to question their extremely flexible money policy. The Bank of England was the first Western central bank to dampen its bulk purchases of debt paper yesterday. The Norwegian central bank said interest rates will rise later this year.
Things are definitely not going that fast in the eurozone, especially now that in Germany with conspicuously ‘soft’ trade unions there are still no signs of a wage-price signal. Nevertheless, Luis de Guindos, the Vice-President of the European Central Bank, already gave a shot this week. “Once the pandemic is over and the economy normalizes, monetary policy should logically follow,” said the Italian daily La Repubblica.
In the United States, central bankers say that inflation can safely ‘overshoot’ for a while before putting the brakes on. But in the meantime, tension is growing on Wall Street. A logical statement by the Minister of Finance Janet Yellen.