Artisan Canvas Header Background
Artisan Canvas
Your reply has been posted successfully!

Supply/Demand: Revenge Spending in Commodities

18 June 2021   |  

Supply/Demand is a semi-regular feature of the Artisan Canvas rounding up interesting and quirky subjects from across the Internet with a focus on economic and business trends. A good rule of thumb among the Artisan Canvas editorial staff is “never reason from a price change.” With that in mind, our latest edition of Supply/Demand.

The price tags for (seemingly) everything have gone up, from electronics to cars to food—partly because commodities prices have also jumped. Some are related to pandemic recovery, particularly in China. For others, geopolitics are at play—again, also frequently related to China. Here are the commodities trends that caught our collective eye:

Carmakers’ growing angst over manganese
Manganese processors in China have united in a state-supported effort to form the “manganese innovation alliance.” Car manufacturers, who use manganese in steel-strengthening products and batteries, fear this alliance is just another term for a cartel and a way to control manganese prices, given China supplies 90% of the global total. Through April 2021, tightening supply contributed to a 70% increase in manganese prices in Europe.

China signals commodities price concerns
Globally rising commodities prices have also reached local companies in China, where industrial profits grew by 57% YoY in April. That’s down from March’s 92.3% and is skewed by 2020’s pandemic-related slowdowns. Nevertheless, the government has warned producers against price manipulation or speculation, to protect small businesses whose margins have been squeezed by record highs in copper and iron. Given local businesses still account for the majority of China’s GDP and tax revenue growth, hardly a surprising response.

Milk experiences an utter surge
Fonterra, the world’s largest dairy exporter, raised the midpoint price per kilogram expected next year to NZ$8.00, up from NZ$7.55 amid increased demand from China’s food sector, which is also contributing to rising corn prices. US milk supplies have been less impacted, partly due to more milk cows producing.

A decades-long head start in rare earths
China controls between 70% and 80% of the rare earths market, which includes some 17 metals ranging from neodymium, dysprosium and yttrium. The US, which has only one operational rare earths mine, has sought to secure its supply chain, given the metals are vital to technologies and chips in phones, electric cars and wind turbines, among many other uses. When the China-US trade battle escalated in 2019, China threatened to cease rare earths exports to the US, prompting the current US effort. The Biden administration’s infrastructure proposal includes millions of dollars to improve the rare earths supply chain—an effort in which the US has allies, including Europe and Australia. But it remains early days—it could take decades before the effort impacts China’s dominance. Meanwhile, increasing demand for electric vehicles and other technologies requiring rare earths has caused demand-driven price boosts similar to more industrial commodities.

Tin prices melt up
For the past two years, tin demand has fallen—partly as semiconductor demand declined (hard to imagine today) and partly because the pandemic forced factory closures. Now, rising demand for electronics, like laptops and smartphones, has pushed tin demand up again, just as production has declined—a combination resulting in (drum roll …) rising tin prices, which have surpassed decade-long highs, climbing beyond 2011’s $33,250 per ton price tag.

  • News

Contact the Editorial Staff

Have a question or comment? We welcome your feedback. Comments will not be made public, but will be read by a member of our editorial staff.