2021 has been a great year for many commodity players, with several commodities experiencing sharp price increases. Whether it is metals or energy commodities, many have reached their all-time highs or their highest in several years. For example, lumber prices rose dramatically in the United States over the year, pushing the cost of homes up. Few commodity prices have corrected sharply, but the price action has been brutal in 2021.

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The onset of the pandemic has reduced demand for most commodities in 2020. The world has struggled to emerge from the depression induced by COVID-19. However, with the roll-out of vaccines and the phased lifting of lockdowns, demand began to rise sharply and supply could not keep up with the sudden surge in demand, pushing prices to higher levels.

However, the prices of a few commodities in the international market have fallen over the past two months. WTI oil prices fell from the US $ 80 / bbl level, with more supplies expected in the coming days. Moreover, with the new variant, Omicron, which is spreading at a rapid pace, the commodities market is expected to remain volatile in the short to medium term.

Energy commodity, coal steals the show!

In the second half of 2021, China and Europe faced a severe energy crisis. The crisis hampered industrial production as there were severe power shortages in the country. Thanks to this, the price of fossil fuels, including coal, crude oil and natural gas, increased significantly during the period.

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Coal started the year 2021 at US $ 69.3 / t. At the height of the energy crisis, prices reached over US $ 274 / t in May 2021, an increase of around 300% in prices in just five months. Coal prices have corrected from the peak and are currently trading above $ 140 / t, a gain of 100% on a current year basis.

Crude oil and natural gas saw a strong comeback in demand after the initial stages of the pandemic collapsed. Crude Oil (WTI) was trading around US $ 48 / bbl in early January 2021 and amid strong demand and controlled supply from OPEC +, prices jumped above $ 83 US / b in October 2021. Natural gas prices crossed US $ 6 / MMbtu in October 2021, the first time since 2014.

Crude oil price movement (Image source: Refinitiv, Analysis: Kalkine Media®)

Industrial metals, the rise and fall of iron ore

Iron ore, copper, aluminum, lithium and others, the list is quite long when it comes to industrial metals. As in the case of energy commodities, when industrial activities started to accelerate, demand increased significantly, pushing prices up.

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Iron ore hit a new high of US $ 220 / t in the June quarter, driven by strong demand from the Chinese steel industry. When the Chinese economy began to face turmoil, demand faded and prices fell almost 80% from their peak, and currently iron ore is trading at US $ 111 / t on the international market.

Iron ore price movement (Image source: Refinitiv, analysis: Kalkine Media)

Lithium: the metal serving the electric vehicle revolution

Lithium has become the product of choice for investors. Companies involved in the exploration and development of battery metal have given multiple returns to their shareholders in 2021. The price of lithium carbonate has risen nearly four times in 2021. Lithium is currently trading at 230,500 CNY / t. At the start of the year in January 2021, the metal was trading at 46,480 CNY / t.

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Copper: the transition metal

Copper has been designated as the transition metal for the new electric age. Copper finds application in almost all electrical devices. Therefore, its demand remains stable throughout the year. From US $ 3.55 / lb, the red metal jumped to US $ 4.775 / lb amid a strong commodity supercycle during the year 2021. Copper is currently trading at US $ 4.30 / lb.

At the end of the line

From the available data, it can be seen that charcoal, a product that has been used for centuries, performed well in the year 2021. Although charcoal is referred to as a sunset product, it has appeared as a big winner when it comes to price action.

In the industrial metals segment, demand for lithium is expected to remain strong with the EV sector booming. However, the price may stabilize once the gap between supply and demand is balanced.

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