Preface
We often say that "a wave is not settled, and a wave is rising", and this phrase is especially apt in today's commodity market. In 2024, the global economy has just recovered from the haze of the epidemic, and people are expecting a breath of "calm" air, but the reality is that commodity prices are running wild all the way. Gold, iron ore, crude oil, etc., almost everything you can think of are rising in price. It begs the question, what's going on, what's driving all this?
In recent years, the global political landscape has fluctuated, with ongoing conflicts in Eastern Europe and occasional tensions in the Middle East, all of which have directly affected the global situation. For example, due to the reduction of oil production in some countries and the sanctions imposed by the West on some large oil-producing countries, the crude oil market is in short supply, and the price is naturally rising. On the demand side, the recovery of the global economy has led to a large amount of demand for manufacturing and infrastructure, from steel to copper and aluminum, with a surge in demand and a consequent increase in prices.
Tight supply and strong demand are enough to push prices up, but there are more problems that we have to face behind them. For example, the speculation of some large institutional investors in the market, who buy safe-haven assets such as gold aggressively to hedge against imminent financial risks, is undoubtedly adding fuel to the fire. So, what are the consequences of this surge in commodity prices, and what challenges will ordinary people face in their lives? These questions are worth pondering.
body
In this year's commodity markets, the sharp rise in prices is not only reflected in the numbers, but also reflects the tension and turmoil in many aspects of the world. First of all, there are significant geopolitical influences. Today's international situation is like a series of falling dominoes, and turmoil in one region can quickly spread to the whole world. For example, the conflict in Eastern Europe has led to the instability of energy supplies, which affects not only Europe, but also us in other countries. The rise in oil prices has inevitably led to an increase in transportation and production costs, and the impact is all-encompassing.
However, the sharp increase in demand is also a key factor driving prices higher. As the global economy gradually recovers from the impact of the pandemic, countries have scaled up investments in infrastructure and manufacturing, from high-rise buildings to roads and bridges, which are in huge demand for materials such as steel, copper and aluminum. For example, the increase in demand for steel, which is a core material for infrastructure, has directly led to a surge in iron ore prices. In addition, with the rapid development of new energy vehicles and 5G technology, the demand for metals such as lithium and nickel has also increased significantly, and the development of these emerging industries has further driven up the price of related commodities.
The supply-side issues should also not be overlooked. Due to the policy adjustment of some countries and the impact of natural disasters, the export of minerals in many parts of the world has been blocked, resulting in a shortage of raw material supply. For example, some major aluminum-producing countries have reduced the amount of bauxite mined due to environmental policy adjustments, which has directly led to an increase in aluminum prices. To make matters worse, as supply chains tighten, some small-scale producers were unable to withstand cost pressures and were forced to cut or stop production, further reducing supply in the market.
Under this double attack of supply and demand, the price of the commodity market will naturally rise. But the impact behind this is much more than just an increase in prices. First of all, the rise in costs is directly transmitted to consumers. From daily necessities to travel expenses, the cost of living for the average household has increased dramatically, which is especially detrimental to low- and middle-income groups. Secondly, the increase in the operating costs of enterprises has also put many small and medium-sized enterprises under great pressure to survive. These companies often have insufficient capital to cope with the high cost of raw materials, which can eventually lead to layoffs or closures, which not only affects the job market, but may also cause broader economic problems.
In addition, the surge in commodity prices has triggered a series of ripple effects. For example, inflation has risen in some countries due to the rising cost of raw materials. This inflation not only erodes people's purchasing power, but it may also force central banks to raise interest rates to curb inflation, further impacting economic growth. At the same time, the volatility of commodity prices has also attracted a large amount of speculative capital, and the inflow and outflow of this capital have increased market volatility and increased market instability.
Not only that, but high commodity prices can also lead to imbalances in foreign trade in some countries. While countries that export raw materials will be more profitable in the short term, import-dependent countries will have to bear higher import costs, which could lead to further tensions in global trade relations. And this tension often affects geopolitical stability in turn, forming a vicious circle.
epilogue
Against this complex backdrop, we have to ask: how long will these market conditions last, and more importantly, how should we deal with this seemingly endless price increase? Clearly, market self-regulation alone is not enough. It is necessary for the governments of various countries to cooperate with international organizations to fundamentally solve the problems of insufficient supply and geopolitical tension. At the same time, enhancing the transparency and forecasting ability of the market and reducing unnecessary speculation are also the keys to stabilizing the market.
In addition, as ordinary people, we need to learn to be flexible and adaptable in a changing economic environment. Whether it is household consumption or personal investment, more attention should be paid to risk management and cost control. Remember the old saying, "Be prepared for danger in times of peace", and there are always hidden storms under the seemingly calm surface of the market.